Internal Revenue Bulletin 1997-31 (PDF rendition): IRS Revenue Rulings

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INCOME TAX
Rev. Rul. 97–30, page 12.
Federal rates; adjusted federal rates; adjusted feder-
al long-term rate, and the long-term exempt rate.For
purposes of sections 1274, 1288, 382, and other sections
of the Code, tables set forth the rates for August 1997.
Ct.D. 2061, page 5.
Punitive damages for personal injuries. Petitioners’ puni-
tive damages were not received “on account of” personal
injuries; therefore, the gross-income-exclusion provision
does not apply and the damages are taxable. O’Gilvie et
al., Minors v. United States.
EMPLOYEE PLANS
Notice 97–44, page 15.
Weighted average interest rate update. Guidelines are
set forth for determining for July 1997, the weighted aver-
age interest rate and the resulting permissible range of inter-
est rates used to calculate current liability for purposes of
the full funding limitation of section 412(c)(7) of the Code as
amended by the Omnibus Budget Reconciliation Act of 1987
and by the Uruguay Round Agreements Act (GATT).
EXEMPT ORGANIZATIONS
Announcement 97–74, page 16.
A list is given of organizations now classified as private foun-
dations.
Internal Revenue
bbuulllleettiinn
Bulletin No. 1997–31
August 4, 1997
Finding Lists begin on page 18.
Announcement Relating to Decisions of the Tax Court begins on page 4.
Index for July begins on page 20.
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service

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2
Statement of Principles
of Internal Revenue
Tax Administration
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ter the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
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fraud.

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of the Commissioner of Internal Revenue for announcing offi-
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The Bulletin is divided into four parts as follows:
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This part includes rulings and decisions based on provisions
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To the extent practicable, pertinent cross references to
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3
Introduction
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The Commissioner ACQUIESCESin
the following decision:
The May Department Stores Co. v.
United States,
1
36 Fed. Cl. 680 (1996).
August 4, 199741997–31 I.R.B.
Announcement Relating to Court Decisions
1
Acquiescence relating to whether interest accrued on the taxpayers’underpayments of tax for 1983 and 1984 from the due date of the first or third estimated tax
payment for the next succeeding years.

1997–31 I.R.B.5August 4, 1997
Section 42. — Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, page 12.
Section 104. — Compensation
for Injuries or Sickness
Ct.D. 2061
SUPREME COURT
OFTHE UNITED STATES
No. 95–966*
O’GILVIE ETAL., MINORS V. UNITED
STATES
519 U.S.
CERTIORARITOTHEUNITEDSTATESCOURT
OFAPPEALSFORTHETENTHCIRCUIT
December 10, 1996*
Syllabus
Petitioners, the husband and two chil-
dren of a woman who died of toxic shock
syndrome, received a jury award of
$1,525,000 actual damages and $10 mil-
lion punitive damages in a tort suit based
on Kansas law against the maker of the
product that caused decedent’s death.
They paid federal income tax insofar as
the award’s proceeds represented punitive
damages, but immediately sought a re-
fund. Procedurally speaking, this litiga-
tion represents the consolidation of two
cases brought in the same Federal District
Court: the husband’s suit against the Gov-
ernment for a refund, and the Govern-
ment’s suit against the children to recover
the refund that the Government had made
to the children earlier. The District Court
found for petitioners under 26 U.S.C.
§104(a)(2), which, as it read in 1988, ex-
cluded from “gross income,” the “amount
of any damages received . . . on account
of personal injuries or sickness.” (Em-
phasis added.) The court held on the mer-
its that the italicized language includes
punitive damages, thereby excluding such
damages from gross income. The Tenth
Circuit reversed, holding that the exclu-
sionary provision does not cover punitive
damages.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Held:
1. Petitioners’punitive damages were
not received “on account of” personal in-
juries; hence the gross-income-exclusion
provision does not apply and the damages
are taxable. Pp. 2–11.
(a) Although the phrase “on account of”
does not unambiguously define itself, sev-
eral factors prompt this Court to agree with
the Government when it interprets the ex-
clusionary provision to apply to those per-
sonal injury lawsuit damages that were
awarded by reason of, or because of, the
personal injuries, and not to punitive dam-
ages that do not compensate injury, but are
private fines levied by civil juries to punish
reprehensible conduct and to deter its fu-
ture occurrence. For one thing, the Govern-
ment’s interpretation gives the phrase “on
account of” a meaning consistent with the
dictionary definition. More important, in
Commissioner v. Schleier, 515 U.S.
,
this Court came close to resolving the
statute’s ambiguity in the Government’s
favor when it said that the statute covers
pain and suffering damages, medical ex-
penses, and lost wages in an ordinary tort
case because they are “designed to com-
pensate . . . victims” id., at
, n. 5, but
does not apply to elements of damages that
are “punitive in nature,” id., at
. The
Government’s reading also is more faithful
to the statutory provision’s history and
basic tax-related purpose of excluding
compensatory damages that restore a vic-
tim’s lost, nontaxable “capital.” Petitioners
suggest no very good reason why Congress
might have wanted the exclusion to have
covered these punitive damages, which are
not a substitute for any normally untaxed
personal (or financial) quality, good, or
“asset” and do not compensate for any kind
of loss. Pp. 2–8.
(b) Petitioners’three arguments to the
contrary—that certain words or phrases in
the original, or current, version of the
statute work in their favor; that the exclu-
sion of punitive damages from gross in-
come may be justified by Congress’desire
to be generous to tort victims and to avoid
such administrative problems as separat-
ing punitive from compensatory portions
of a global settlement or determining the
extent to which a punitive damages award
is itself intended to compensate; and that
their position is supported by a 1989
statutory amendment that specifically
says that the gross income exclusion does
not apply to any punitive damages in con-
nection with a case not involving physical
injury or sickness—are not sufficiently
persuasive to overcome the Govern-
ment’s interpretation. Pp. 8–11.
2. Petitioners’two case-specific proce-
dural arguments—that the Government’s
lawsuit was untimely and that its original
notice of appeal was filed a few days
late—are rejected. Pp. 12–14.
66 F. 3d 1550, affirmed.
B
REYER, J., delivered the opinion of the
Court, in which REHNQUIST,C. J., and
STEVENS, KENNEDY, SOUTER, and GINS-
BURG, JJ., joined. SCALIA, J., filed a dis-
senting opinion, in which O’C
ONNORand
THOMAS, JJ., joined.
* * * * *
SUPREME COURT
OF THE UNITED STATES
Nos. 95–966
AND95–977
KEVIN M. O’GILVIE AND
STEPHANIE L. O’GILVIE,
MINORS, PETITIONERS
95-966v.
UNITED STATES
KELLYM. O’GILVIE, PETITIONER
95-977v.
UNITED STATES
ONWRITSOFCERTIORARITOTHEUNITED
STATESCOURTOFAPPEALSFORTHETENTH
CIRCUIT
[December 10, 1996]
JUSTICEBRYERdelivered the opinion of
the Court.
Internal Revenue Code §104(a)(2), as
it read in 1988, excluded from “gross in-
come,” the
“amount of anydamages received
(whether by suit or agreement and
whether as lump sums or as periodic
payments) on account of personal in-
juries or sickness.”26 U.S.C. §104
(a)(2) (1988 ed.) (emphasis added).
The issue before us is whether this provi-
sion applies to (and thereby makes non-
taxable) punitive damages received by a
* Together with No. 95–977, O’Gilviev. United
States,also on certiorari to the same court.

plaintiff in a tort suit for personal injuries.
We conclude that the punitive damages
received here were not received “on ac-
count of”personal injuries; hence the pro-
vision does not apply and the damages are
taxable.
I
Petitioners in this litigation are the hus-
band and two children of Betty O’Gilvie,
who died in 1983 of toxic shock syn-
drome. Her husband, Kelly, brought a tort
suit (on his own behalf and that of her es-
tate) based on Kansas law against the
maker of the product that caused Betty
O’Gilvie’s death. Eventually, he and the
two children received the net proceeds of
a jury award of $1,525,000 actual dam-
ages and $10 million punitive damages.
Insofar as the proceeds represented puni-
tive damages, petitioners paid income tax
on the proceeds but immediately sought a
refund.
The litigation before us concerns peti-
tioners’legal entitlement to that refund.
Procedurally speaking, the litigation rep-
resents the consolidation of two cases
brought in the same Federal District
Court: Kelly’s suit against the Govern-
ment for a refund, and the Government’s
suit against the children to recover the re-
fund that the Government had made to the
children earlier. 26 U.S.C. §7405(b) (au-
thorizing suits by the United States to re-
cover refunds erroneously made). The
Federal District Court held on the merits
that the statutory phrase “damages . . . on
account of personal injury or sickness,”
includes punitive damages, thereby ex-
cluding punitive damages from gross in-
come and entitling Kelly to obtain, and
the children to keep, their refund. The
Court of Appeals for the Tenth Circuit,
however, reversed the District Court.
Along with the Fourth, Ninth and Federal
Circuits, it held that the exclusionary pro-
vision does not cover punitive damages.
Because the Sixth Circuit has held the
contrary, the Circuits are divided about
the proper interpretation of the provision.
We granted certiorari to resolve this con-
flict.
II
Petitioners received the punitive dam-
ages at issue here “by suit,”—indeed “by”
an ordinary “suit” for “personal injuries.”
Contrast United States v. Burke, 504 U.S.
229 (1992) (§104(a)(2) exclusion not ap-
plicable to backpay awarded under Title
VII of the Civil Rights Act of 1964 be-
cause the claim was not based upon “‘tort
or tort type rights,’” id., at 233);Commis-
sioner v. Schleier, 515 U.S.
(1995)
(alternative holding) (Age Discrimination
in Employment Act of 1967 (ADEA)
claim is similar to Title VII claim in
Burke in this respect). These legal circum-
stances bring those damages within the
gross-income-exclusion provision, how-
ever, only if the petitioners also “re-
ceived” those damages “on account of”
the “personal injuries.” And the phrase
“on account of” does not unambiguously
define itself.
On one linguistic interpretation of
those words, that of petitioners, they re-
quire no more than a “but-for” connection
between “any” damages and a lawsuit for
personal injuries. They would thereby
bring virtually all personal injury lawsuit
damages within the scope of the provi-
sion, since: “but for the personal injury,
there would be no lawsuit, and but for the
lawsuit, there would be no damages.”
On the Government’s alternative inter-
pretation, however, those words impose a
stronger causal connection, making the
provision applicable only to those per-
sonal injury lawsuit damages that were
awarded by reason of, or because of, the
personal injuries. To put the matter more
specifically, they would make the section
inapplicable to punitive damages, where
those damages
“‘are not compensation for injury [but]
[i]nstead . . . are private fines levied by
civil juries to punish reprehensible
conduct and to deter its future occur-
rence.’” Electrical Workersv. Foust,
442 U.S. 42, 48 (1979), quoting Gertz
v. Robert Welch, Inc.,418 U.S. 323,
350 (1974) (footnote omitted).
The Government says that such damages
were not “received . . . on account of” the
personal injuries, but rather were awarded
“on account of” a defendant’s reprehensi-
ble conduct and the jury’s need to punish
and to deter it. Hence, despite some his-
torical uncertainty about the matter, see
Rev. Rul. 75–45, 1975–1 Cum. Bull. 47,
revoked by Rev. Rul. 84–108, 1984–2
Cum. Bull. 32, the Government now con-
cludes that these punitive damages fall
outside the statute’s coverage.
We agree with the Government’s inter-
pretation of the statute. For one thing, its
interpretation gives the phrase “on ac-
count of” a meaning consistent with the
dictionary definition. See, e.g., Webster’s
Third New International Dictionary 13
(1981) (“for the sake of: by reason of: be-
cause of”).
More important, in Schleier, supra, we
came close to resolving the statute’s am-
biguity in the Government’s favor. That
case did not involve damages received in
an ordinary tort suit; it involved liqui-
dated damages and backpay received in a
settlement of a lawsuit charging a viola-
tion of the Age Discrimination in Em-
ployment Act. Nonetheless, in deciding
one of the issues there presented (whether
the provision now before us covered
ADEAliquidated damages), we con-
trasted the elements of an ordinary tort re-
covery with ADEAliquidated damages.
We said that pain and suffering damages,
medical expenses, and lost wages in an
ordinary tort case are covered by the
statute and hence excluded from income
“not simply because the taxpayer re-
ceived a tort settlement, but rather be-
cause each element . . . satisfies the re-
quirement . . . that the damages were
received ‘on account of personal in-
juries or sickness.’” Id., at
(slip
op., at 6–7).
In holding that ADEAliquidated damages
are not covered, we said that they are not
“designed to compensate ADEAvictims,”
id., at
, n. 5 (slip op., at 9, n. 5); in-
stead, they are “‘punitive in nature,’” id.,
at (slip op., at 8) (quoting Trans
World Airlines, Inc.v. Thurston, 469 U.S.
111, 125 (1985)).
Applying the same reasoning here
would lead to the conclusion that the
punitive damages are not covered because
they are an element of damages not “de-
signed to compensate . . . victims,”
Schleier, 515 U.S., at
(slip op., at 9,
n. 5); rather they are “‘punitive in na-
ture.’” Ibid. Although we gave other rea-
sons for our holding in Schleier as well,
we explicitly labeled this reason an “in-
dependent” ground in support of our deci-
sion, id., at
(slip op., at 11). We can-
not accept petitioners’claim that it was
simply a dictum.
We also find the Government’s reading
more faithful to the history of the statu-
tory provision as well as the basic tax-re-
lated purpose that the history reveals.
That history begins in approximately
1918. At that time, this Court had recently
August 4, 199761997–31 I.R.B.

1997–31 I.R.B.7August 4, 1997
decided several cases based on the princi-
ple that a restoration of capital was not in-
come; hence it fell outside the definition
of “income” upon which the law imposed
a tax. E.g., Doyle v. Mitchell Brothers
Co., 247 U.S. 179, 187 (1918); Southern
Pacific Co.v. Lowe, 247 U.S. 330, 335
(1918). The Attorney General then ad-
vised the Secretary of the Treasury that
proceeds of an accident insurance policy
should be treated as nontaxable because
they primarily
“substitute . . . capital which is the
source of future periodical income . . .
merely tak[ing] the place of capital in
human ability which was destroyed by
the accident. They are therefore [non-
taxable] ‘capital’as distinguished from
‘income’receipts.” 31 Op. Atty. Gen.
304, 308 (1918).
The Treasury Department added that
“upon similar principles . . . an amount
received by an individual as the result
of a suit or compromise for personal
injuries sustained by him through ac-
cident is not income [that is] taxable
. . . .” T. D. 2747, 20 Treas. Dec. Int.
Rev. 457 (1918).
Soon thereafter, Congress enacted the
first predecessor of the provision before
us. That provision excluded from income
“[a]mounts received, through accident
or health insurance or under work-
men’s compensation acts, as compen-
sation for personal injuries or sickness,
plus the amount of any damages re-
ceived whether by suit or agreement
on account of such injuries or sick-
ness.” Revenue Act of 1918, ch. 18,
§213(b)(6), 40 Stat. 1066.
The provision is similar to the cited
materials from the Attorney General and
the Secretary of the Treasury in language
and structure, all of which suggests that
Congress sought, in enacting the statute,
to codify the Treasury’s basic approach. A
contemporaneous House Report, insofar
as relevant, confirms this similarity of ap-
proach, for it says:
“Under the present law it is doubtful
whether amounts received through ac-
cident or health insurance, or under
workmen’s compensation acts, as com-
pensation for personal injury or sick-
ness, and damages received on account
of such injuries or sickness, are re-
quired to be included in gross income.
The proposed bill provides that such
amounts shall not be included in gross
income.” H. R. Rep. No. 767, pp. 9–10
(1918).
This history and the approach it reflects
suggest there is no strong reason for try-
ing to interpret the statute’s language to
reach beyond those damages that, making
up for a loss, seek to make a victim
whole, or, speaking very loosely, “return
the victim’s personal or financial capital.”
We concede that the original provi-
sion’s language does go beyond what one
might expect a purely tax-policy-related
“human capital” rationale to justify. That
is because the language excludes from
taxation not only those damages that aim
to substitute for a victim’s physical or per-
sonal well-being—personal assets that the
Government does not tax and would not
have taxed had the victim not lost them. It
also excludes from taxation those dam-
ages that substitute, say, for lost wages,
which would have been taxed had the vic-
tim earned them. To that extent, the provi-
sion can make the compensated taxpayer
better off from a tax perspective than had
the personal injury not taken place.
But to say this is not to support cutting
the statute totally free from its original
moorings in victim loss. The statute’s fail-
ure to separate those compensatory ele-
ments of damages (or accident insurance
proceeds) one from the other does not
change its original focus upon damages
that restore a loss, that seek to make a vic-
tim whole, with a tax-equality objective
providing an important part of, even if not
the entirety of, the statute’s rationale. All
this is to say that the Government’s inter-
pretation of the current provision (the
wording of which has not changed signif-
icantly from the original) is more consist-
ent than is petitioners’with the statute’s
original focus.
Finally, we have asked why Congress
might have wanted the exclusion to have
covered these punitive damages, and we
have found no very good answer. Those
damages are not a substitute for any nor-
mally untaxed personal (or financial)
quality, good, or “asset.” They do not
compensate for any kind of loss. The stat-
ute’s language does not require, or
strongly suggest, their exclusion from in-
come. And we can find no evidence that
congressional generosity or concern for
administrative convenience stretched be-
yond the bounds of an interpretation that
would distinguish compensatory from
noncompensatory damages.
Of course, as we have just said, from
the perspective of tax policy one might
argue that noncompensatory punitive
damages and, for example, compensatory
lost wages are much the same thing. That
is, in both instances, exclusion from gross
income provides the taxpayer with a
windfall. This circumstance alone, how-
ever, does not argue strongly for an inter-
pretation that covers punitive damages,
for coverage of compensatory damages
has both language and history in its favor
to a degree that coverage of noncompen-
satory punitive damages does not. More-
over, this policy argument assumes that
coverage of lost wages is something of an
anomaly; if so, that circumstance would
not justify the extension of the anomaly or
the creation of another. See Wolfman,
Current Issues of Federal Tax Policy, 16
U. Ark. Little Rock L. J. 543, 549–550
(1994) (“[T]o build upon” what is, from a
tax policy perspective, the less easily ex-
plained portion “of the otherwise rational
exemption for personal injury,” simply
“does not make sense”).
Petitioners make three sorts of argu-
ments to the contrary. First, they empha-
size certain words or phrases in the origi-
nal, or current, provision that work in
their favor. For example, they stress the
word “any” in the phrase “any damages.”
And they note that in both original and
current versions Congress referred to cer-
tain amounts of money received (from
workmen’s compensation, for example)
as “amounts received . . . as compen-
sation,” while here they refer only to
“damages received” without adding the
limiting phrase “as compensation.” 26
U.S.C. §104(a); Revenue Act of 1918,
§213(b)(6), 40 Stat. 1066. They add that
in the original version, the words “on ac-
count of personal injuries” might have re-
ferred to, and modified, the kind of law-
suit, not the kind of damages. And they
find support for this view in the second
sentence of the Treasury Regulation first
adopted in 1958 which says:
“The term ‘damages received (whether
by suit or agreement’means an amount
received (other than workmen’s com-
pensation) through prosecution of a
legal suit or action based upon tort or

tort type rights, or through a settlement
agreement entered into in lieu of such
prosecution.” 26 CFR §1.104–1(c)
(1996).
These arguments, however, show only
that one can reasonably read the statute’s
language in different ways—the very as-
sumption upon which our analysis rests.
They do not overcome our interpretation
of the provision in Schleier, nor do they
change the provision’s history. The help
that the Treasury Regulation’s second
sentence gives the petitioners is offset by
its first sentence, which says that the ex-
clusion applies to damages received “on
account of personal injuries or sickness,”
and which we have held sets forth an in-
dependent requirement. Schleier, 515
U.S., at
(slip op., at 14). See Appen-
dix, infra, at 16.
Second, petitioners argue that to some
extent the purposes that might have led
Congress to exclude, say, lost wages from
income would also have led Congress to
exclude punitive damages, for doing so is
both generous to victims and avoids such
administrative problems as separating
punitive from compensatory portions of a
global settlement or determining the ex-
tent to which a punitive damages award is
itself intended to compensate.
Our problem with these arguments is
one of degree. Tax generosity presumably
has its limits. The administrative problem
of distinguishing punitive from compen-
satory elements is likely to be less serious
than, say, distinguishing among the com-
pensatory elements of a settlement (which
difficulty might account for the statute’s
treatment of, say, lost wages). Cf. supra p.
8. And, of course, the problem of identify-
ing the elements of an ostensibly punitive
award does not exist where, as here, rele-
vant state law makes clear that the dam-
ages at issue are not at all compensatory,
but entirely punitive. Brewer v.
Home-Stake Production Co., 200 Kan.
96, 100, 434 P. 2d 828, 831 (1967)
(“[E]xemplary damages are not regarded
as compensatory in any degree”); accord,
Smith v. Printup, 254 Kan. 315, 866 P. 2d
985 (1993); Folksv. Kansas Power &
Light Co., 243 Kan. 57, 755 P. 2d 1319
(1988); Nordstrom v. Miller, 227 Kan. 59,
605 P. 2d 545 (1980).
Third, petitioners rely upon a later en-
acted law. In 1989, Congress amended the
law so that it now specifically says the
personal injury exclusion from gross in-
come
“shall not apply to any punitive dam-
ages in connection with a case not in-
volving physical injury or physical
sickness.” 26 U.S.C. §104(a) (1994).
Why, petitioners ask, would Congress
have enacted this amendment removing
punitive damages (in nonphysical injury
cases) unless Congress believed that, in
the amendment’s absence, punitive dam-
ages did fall within the provision’s cover-
age?
The short answer to this question is that
Congress might simply have thought that
the then-current law about the provision’s
treatment of punitive damages—in cases
of physical and nonphysical injuries—
was unclear, that it wanted to clarify the
matter in respect to nonphysical injuries,
but it wanted to leave the law where it
found it in respect to physical injuries.
The fact that the law was indeed uncertain
at the time supports this view. Compare
Rev. Rul. 84–108, 1984–2 Cum. Bull. 32,
with e.g., Roemer v. Commissioner, 716 F.
2d 693 (CA9 1983); Miller v. Commis-
sioner, 93 T. C. 330 (1989), rev’d 914 F.
2d 586 (CA4 1990).
The 1989 amendment’s legislative his-
tory, insofar as relevant, offers further
support. The amendment grew out of the
Senate’s refusal to agree to a House bill
that would have made all damages in non-
physical personal injury cases taxable.
The Senate was willing to specify only
that the Government could tax punitive
damages in such cases. Compare H. R.
Rep. No. 101–247, p. 1355 (1989), with
H. R. Conf. Rep. No. 101–386, pp.
622–623 (1989). Congress’primary
focus, in other words, was upon what to
do about nonphysical personal injuries,
not upon the provision’s coverage of
punitive damages under pre-existing law.
We add that, in any event, the view of a
later Congress cannot control the interpre-
tation of an earlier enacted statute. United
States v. Price, 361 U.S. 304 (1960); Hig-
gins v. Smith, 308 U.S. 473 (1940). But
cf. Burke, 504 U.S., at 235, n. 6 (includ-
ing a passing reference to the 1989
amendment, in dicta, as support for a
view somewhat like that of petitioners).
(Although neither party has argued that
it is relevant, we note in passing that
§1605 of the Small Business Job Protec-
tion Act of 1996, Pub. L. 104–188, 110
Stat. 1838, explicitly excepts most puni-
tive damages from the exclusion provided
by §104(a)(2). Because it is of prospec-
tive application, the section does not
apply here. The Conference Report on the
new law says that “[n]o inference is in-
tended” as to the proper interpretation of
section 104(a)(2) prior to amendment. H.
R. Conf. Rep. No. 104–737, p. 301
(1996).)
The upshot is that we do not find peti-
tioners’arguments sufficiently persua-
sive. And, for the reasons set out above,
supra, at 3–8, we agree with the Govern-
ment’s interpretation of the statute.
III
Petitioners have raised two further is-
sues, specific to the procedural posture of
this litigation. First, the O’Gilvie children
point out that the Government had in-
itially accepted their claim for a refund
and wrote those checks on July 6, 1990.
The Government later changed its mind
and, on July 9, 1992, two years plus three
days later, filed suit against them seeking
the return of a refund erroneously made.
26 U.S.C. §7405(b) (authorizing a “civil
action brought in the name of the United
States” to recover any “portion of a tax
. . . which has been erroneously re-
funded”). They add that the relevant
statute of limitations specifies that recov-
ery of the refund “shall be allowed only if
such suit is begun within 2 years after the
making of such refund.” §6532(b).
The children concede that they re-
ceived the refund checks on July 9, 1990,
and they agree that if the limitation period
runs from the date of receipt—if, as the
Government argues, that is the date of the
“making of” the refund—the Govern-
ment’s suit was timely. But the children
say that the refund was made on, and the
limitations period runs from, the date the
Government mailed the checks (presum-
ably July 6, 7, or 8) in which case the
Government brought this suit one or two
or three days too late.
In our view, the Government is correct
in its claim that its lawsuit was timely.
The language of the statute admits of both
interpretations. But the law ordinarily
provides that an action to recover mis-
taken payments of money “accrues upon
the receipt of payment,” New Bedford v.
Lloyd Investment Associates, Inc., 363
Mass. 112, 119, 292 N. E. 2d 688, 692
(1973); accord Sizemore v. E. T. Barwick
August 4, 199781997–31 I.R.B.

Industries, Inc., 225 Tenn. 226, 233, 465
S. W. 2d 873, 876 (1971) (“‘the time of
making the . . . payment . . . was the date
of actual receipt’”), unless, as in some
States and in some cases, it accrues upon
the still later date of the mistake’s discov-
ery, see Allen & Lamkin, When Statute of
Limitations Begins to Run Against Action
to Recover Money Paid By Mistake, 79
A.L.R. 3d 754, 766–769 (1977). We are
not aware of any good reason why Con-
gress would have intended a different re-
sult where the nature of the claim is so
similar to a traditional action for money
paid by mistake—an action the roots of
which can be found in the old
common-law claim of “assumpsit” or
“money had and received.” New Bedford,
supra, at 118. The lower courts and com-
mentators have reached a similar conclu-
sion. United States v. Carter, 906 F. 2d
1375 (CA9 1990); Akers v. United States,
541 F. Supp. 65, 67 (M. D. Tenn. 1981);
United States v. Woodmansee, 388 F.
Supp. 36, 46 (N. D. Cal. 1975), rev’d on
other grounds, 578 F. 2d 1302 (CA9
1978); 14 J. Mertens Law of Federal In-
come Taxation §54A.69 (1995); Kafka &
Cavanagh, Litigation of Federal Civil Tax
Controversies §20.03, p. 20–15 (2d ed.
1995). That conclusion is consistent with
dicta in an earlier case from this Court,
United States v. Wurts, 303 U.S. 414,
417–418 (1938), as well as with this
Court’s normal practice of construing am-
biguous statutes of limitations in Govern-
ment action in the Government’s favor.
E.g., Badaracco v. Commissioner, 464
U.S. 386, 391 (1984).
We concede the children’s argument
that a “date of mailing” interpretation pro-
duces marginally greater certainty, for
such a rule normally would refer the court
to the postmark to establish the date. But
there is no indication that a “date of re-
ceipt” rule has proved difficult to admin-
ister in ordinary state or common-law ac-
tions for money paid erroneously. The
date the check clears, after all, sets an
outer bound.
Second, Kelly O’Gilvie says that the
Court of Appeals should not have consid-
ered the Government’s original appeal
from the District Court’s judgment in his
favor because, in his view, the Govern-
ment filed its notice of appeal a few days
too late. The Court of Appeals describes
the circumstances underlying this
case-specific issue in its opinion. We
agree with its determination of the matter
for the reasons it has there set forth.
The judgment of the Court of Appeals
is
affirmed.
APPENDIX
TO OPINION OF THE COURT
Section 104(a), in 1988, read as follows:
“Compensation for injuries or sickness
“(a) In general.—Except in the case of
amounts attributable to (and not in ex-
cess of) deductions allowed under sec-
tion 213 (relating to medical, etc., ex-
penses) for any prior taxable year,
gross income does not include—
“(1) amounts received under work-
men’s compensation acts as compensa-
tion for personal injuries or sickness;
“(2) the amount of any damages re-
ceived (whether by suite or agreement
and whether as lump sums or as peri-
odic payments) on account of personal
injuries or sickness;
“(3) amounts received through accident
or health insurance for personal injuries
or sickness (other than amounts re-
ceived by an employee, to the extent
such amounts (A) are attributable to
contributions by the employer which
were not includible in the gross income
of the employee, or (B) are paid by the
employer);
“(4) amounts received as a pension, an-
nuity, or similar allowance for personal
injuries or sickness resulting from ac-
tive service in the armed forces of any
country or in the Coast and Geodetic
Survey or the Public Health Service, or
as a disability annuity payable under
the provisions of section 808 of the
Foreign Service Act of 1980; and
“(5) amounts received by an individual
as disability income attributable to in-
juries incurred as a direct result of a vi-
olent attack which the Secretary of
State determines to be a terrorist attack
and which occurred while such individ-
ual was an employee of the United
States engaged in the performance of
hisofficial duties outside the United
States.” 26 U.S.C. §104 (1988 ed.).
In 1989, §104(a) was amended, adding,
among other things, the following lan-
guage:
“Paragraph (2) shall not apply to any
punitive damages in connection with a
case not involving physical injury or
physical sickness.” 26 U. S. C. §104(a)
(1994).
Treasury Regulation §1.104-l(c) provides:
“Section 104(a)(2) excludes from
gross income the amount of any dam-
ages received (whether by suit or
agreement) on account of personal in-
juries or sickness. The term ‘damages
received (whether by suit or agree-
ment)’means an amount received
(other than workmen’s compensation)
through prosecution of a legal suit or
action based upon tort or tort type
rights, or through a settlement agree-
ment entered into in lieu of such prose-
cution.” 26 CFR §1.104-1(c) (1996).
JUSTICESCALIA, with whom JUSTICE
O’CONNORand JUSTICETHOMASjoin, dis-
senting.
Section 104(a)(2), as it stood at the
time relevant to these cases, provided an
exclusion from income for “any damages
received . . . on account of personal in-
juries or sickness.” 26 U.S.C. §104(a)(2)
(1988 ed.). The Court is of the view that
this phrase, in isolation, is just as suscep-
tible of a meaning that includes only
compensatory damages as it is of a
broader meaning that includes punitive
damages as well. Ante, at 3–4. I do not
agree. The Court greatly understates the
connection between an award of punitive
damages and the personal injury com-
plained of, describing it as nothing more
than “but for” causality, ante, at 3. It
seems to me that the personal injury is as
proximate a cause of the punitive dam-
ages as it is of the compensatory dam-
ages; in both cases it is the reason the
damages are awarded. That is why puni-
tive damages are called damages. To be
sure, punitive damages require inten-
tional, blameworthy conduct, which can
be said to be a coequal reason they are
awarded. But negligent (or intentional)
conduct occupies the same role of coequal
causality with regard to compensatory
damages. Both types of damages are “re-
ceived on account of” the personal injury.
The nub of the matter, it seems to me,
is this: If one were to be asked, by a
1997–31 I.R.B.9August 4, 1997

lawyer from another legal system, “What
damages can be received on account of
personal injuries in the United States?”
surely the correct answer would be “Com-
pensatory damages and punitive damages
—the former to compensate for the in-
flicting of the personal injuries, and the
latter to punish for the inflicting of them.”
If, as the Court asserts, the phrase “dam-
ages received on account of personal in-
juries” can be used to refer only to the
former category, that is only because peo-
ple sometimes can be imprecise. The no-
tion that Congress carefully and precisely
used the phrase “damages received on ac-
count of personal injuries” to segregate
out compensatory damages seems to me
entirely fanciful. That is neither the exact
nor the ordinary meaning of the phrase,
and hence not the one that the statute
should be understood to intend.
What I think to be the fair meaning of
the phrase in isolation becomes even
clearer when the phrase is considered in
its statutory context. The Court proceeds
too quickly from its erroneous premise of
ambiguity to analysis of the history and
policy behind §104(a)(2). Ante, at 5–8.
Ambiguity in isolation, even if it existed,
would not end the textual inquiry. Statu-
tory construction, we have said, is a
“holistic endeavor.” United Sav. Assn. of
Tex. v.Timbers of Inwood Forest Associ-
ates, Ltd., 484 U.S. 365, 371 (1988). “A
provision that may seem ambiguous in
isolation is often clarified by the remain-
der of the statutory scheme.” Ibid.
Section 104(a)(2) appears immediately
after another provision, §104(a)(1), which
parallels §104(a)(2) in several respects
but does not use the critical phrase “on ac-
count of”:
“(a) [G]ross income does not include—
“(1) amounts received under work-
men’s compensation acts as compen-
sation for personal injuries or sick-
ness;
“(2) the amount of any damages re-
ceived . . .on account of personal in-
juries or sickness.” (Emphasis added.)
Although §104(a)(1) excludes amounts
received “as compensation for” personal
injuries or sickness, while §104(a)(2) ex-
cludes amounts received “on account of”
personal injuries or sickness, the Court
reads the two phrases to mean precisely
the same thing. That is not sound textual
interpretation. “[W]hen the legislature
uses certain language in one part of the
statute and different language in another,
the court assumes different meanings
were intended.” 2AN. Singer, Sutherland
on Statutory Construction §46.07 (5th ed.
1992 and Supp. 1996). See, e.g., Russello
v. United States, 464 U.S. 16, 23 (1983).
This principle of construction has its lim-
its, of course: Use of different terminol-
ogy in differing contexts might have little
significance. But here the contrasting
phrases appear in adjoining provisions
that address precisely the same subject
matter and that even have identical gram-
matical structure.
The contrast between the two usages is
even more striking in the original statute
that enacted them. The Revenue Act of
1918 combined subsections (a)(1) and
(a)(2) of §104, together with (a)(3)
(which provides an exclusion from in-
come for amounts received through acci-
dent or health insurance for personal in-
juries or sickness), into a single
subsection, which provided:
“‘Gross income’. . . [d]oes not
include . . .:
“(6) Amounts received, through acci-
dent or health insurance or under work-
men’s compensation acts, as compen-
sation for personal injuries or sickness,
plus the amount of any damages re-
ceived . . . on account ofsuch injuries
or sickness.” §213(b)(6) of the Rev-
enue Act of 1918, 40 Stat. 1065–66
(emphasis added).
The contrast between the first exclusion
and the second could not be more clear.
Had Congress intended the latter provi-
sion to cover only damages received “as
compensation for” personal injuries or
sickness, it could have written “amounts
received, through accident or health in-
surance, under workmen’s compensation
acts, or in damages, as compensation for
personal injuries or sickness.” Instead, it
tacked on an additional phrase “plus the
amount of, etc.” with no apparent purpose
except to make clear that not only com-
pensatory damages were covered by the
exclusion.
The Court maintains, however, that the
Government’s reading of §104(a)(2) is
“more faithful to [its] history.” Ante, at 5.
The “history” to which the Court refers is
not statutory history of the sort just dis-
cussed—prior enactments approved by
earlier Congresses and revised or
amended by later ones to produce the cur-
rent text. Indeed, it is not “history” from
within even a small portion of Congress,
since the House Committee Report the
Court cites, standing by itself, is uninfor-
mative, saying only that “[u]nder the pre-
sent law it is doubtful whether . . . dam-
ages received on account of [personal]
injuries or sickness are required to be in-
cluded in gross income.” H. R. Rep. No.
767, 65th Cong., 2d Sess., 9–10 (1918).
The Court makes this snippet of legisla-
tive history relevant by citing as pertinent
an antecedent Treasury Department deci-
sion, which concludes on the basis of re-
cent judicial decisions that amounts re-
ceived from prosecution or compromise
of a personal-injury suit are not taxable
because they are a return of capital. Ante,
at 5–6 (citing T. D. 2747, 20 Treas. Dec.
Int. Rev. 457 (1918)).
One might expect the Court to con-
clude from this that the Members of Con-
gress (on the unrealistic assumption that
they knew about the Executive-Branch
opinion) meant the statutory language to
cover only return of capital, the source of
the “doubt” to which the Committee Re-
port referred. But of course the Court can-
not draw that logical conclusion, since
even if it is applied only to compensatory
damages the statute obviously and unde-
niably covers more than mere return of
“human capital,” namely, reimbursement
for lost income, which would be a large
proportion (indeed perhaps the majority)
of any damages award. The Court con-
cedes this is so, but asserts that this incon-
sistency is not enough “to support cutting
the statute totally free from its original
moorings,” ante, at 7, by which I assume
it means the Treasury Decision, however
erroneous it might have been as to the
“capital” nature of compensatory dam-
ages. But the Treasury Decision was no
more explicitly limited to compensatory
damages than is the statute before us. It
exempted from taxation “an amount re-
ceived by an individual as the result of a
suit or compromise for personal injuries.”
T. D. 2747, 20 Treas. Dec. Int. Rev. 457
(1918). The Court’s entire thesis of taxa-
bility rests upon the proposition that this
Treasury Decision, which overlooked the
obvious fact that “an amount received . . .
as the result of a suit or compromise for
personal injuries” almost always includes
compensation for lost future income, did
August 4, 1997101997–31 I.R.B.

not overlook the obvious fact that such an
amount sometimes includes “smart-
money.”
So, to trace the Court’s reasoning: The
statute must exclude punitive damages be-
cause the Committee Report must have
had in mind a 1918 Treasury Decision,
whose text no more supports exclusion of
punitive damages than does the text of the
statute itself, but which must have meant
to exclude punitive damages since it was
based on the “return-of-capital” theory,
though, inconsistently with that theory, it
did not exclude the much more common
category of compensation for lost income.
Congress supposedly knew all of this, and
a reasonably diligent lawyer could figure
it out by mistrusting the inclusive lan-
guage of the statute, consulting the
Committee Report, surmising that the
Treasury Decision of 1918 underlay that
Report, mistrusting the inclusive language
of the Treasury Decision, and discerning
that Treasury could have overlooked
lost-income compensatories, but could not
have overlooked punitives. I think not.
The sure and proper guide, it seems to me,
is the language of the statute, inclusive by
nature and doubly inclusive by contrast
with surrounding provisions.
The Court poses the question, ante, at
7, “why Congress might have wanted the
exclusion [in §104(a)(2)] to have covered
. . . punitive damages.” If an answer is
needed (and the text being as clear as it is,
I think it is not), surely it suffices to sur-
mise that Congress was following the
Treasury Decision, which had inadver-
tently embraced punitive damages just as
it had inadvertently embraced future-in-
come compensatory damages. Or if some
reason free of human error must be found,
I see nothing wrong with what the Court
itself suggests but rejects out of hand: Ex-
cluding punitive as well as compensatory
damages from gross income “avoids such
administrative problems as separating
punitive from compensatory portions of a
global settlement.” Ante, at 9. How sub-
stantial that particular problem is is sug-
gested by the statistics which show that
73 percent of tort cases in state court are
disposed of by settlement, and between
92 and 99 percent of tort cases in federal
court are disposed of by either settlement
or some other means (such as summary
judgment) prior to trial. See B. Ostrom &
N. Kauder, Examining the Work of State
Courts, 1994, p. 34 (1996); Administra-
tive Office of the United States, L.
Mecham, Judicial Business of the United
States Courts: 1995 Report of the Director
162–164. What is at issue, of course, is
not just imposing on the parties the neces-
sity of allocating the settlement between
compensatory and punitive damages
(with the concomitant suggestion of in-
tentional wrongdoing that any allocation
to punitive damages entails), but also im-
posing on the Internal Revenue Service
the necessity of reviewing that allocation,
since there would always be strong incen-
tive to inflate the tax-free compensatory
portion. The Court’s only response to the
suggestion that this is an adequate reason
(if one is required) for including punitive
damages in the exemption is that “[t]he
administrative problem of distinguishing
punitive from compensatory elements is
likely to be less serious than, say, distin-
guishing among the compensatory ele-
ments of a settlement.” Ante, at 9–10. Per-
haps so; and it may also be more simple
than splitting the atom; but that in no way
refutes the point that it is complicated
enough to explain the inclusion of puni-
tive damages in an exemption that has al-
ready abandoned the purity of a
“return-of-capital” rationale.
The remaining argument offered by the
Court is that our decision inCommis-
sionerv. Schleier,515 U. S.
(1995),
came “close to resolving”—in the Gov-
ernment’s favor—the question whether
§104(a)(2) permits the exclusion of puni-
tive damages. Ante, at 4. I disagree. In
Schleier we were faced with the question
whether backpay and liquidated damages
under the Age Discrimination in Employ-
ment Act of 1967 (ADEA) were “dam-
ages received . . . on account of personal
injuries or sickness” for purposes of
§104(a)(2)’s exclusion. As the dissent ac-
curately observed, 515 U. S., at
(slip
op., at 6) (opinion of O’CONNOR, J.), “the
key to the Court’s analysis” was the deter-
mination that an ADEAcause of action
did not necessarily entail “personal injury
or sickness,” so that the damages awarded
for that cause of action could hardly be
awarded “on account of personal injuries
or sickness.” See id., at
(slip op., at
7). In the case at hand, we said, “respon-
dent’s unlawful termination may have
caused some psychological or ‘personal’
injury comparable to the intangible pain
and suffering caused by an automobile ac-
cident,” but “it is clear that no part of re-
spondent’s recovery of back wages is at-
tributable to that injury.” Ibid. The
respondent countered that at least “the liq-
uidated damages portion of his settle-
ment” could be linked to that psychologi-
cal injury. Ibid. And it was in response to
that argument that we made the statement
which the Court seek. to press into service
for today’s opinion. ADEAliquidated
damages, we said, were punitive in na-
ture, rather than compensatory. Id.,
at
, and n. 5 (slip op., at 8–9, and n.
5).
The Court recites this statement as
though the point of it was that punitive
damages could not be received “on ac-
count of” personal injuries, whereas in
fact the point was quite different: Since
the damages were punishment for the con-
duct that gave rise to the (non-
personal-injury) cause of action, they
could not be “linked to” the incidental
psychological injury. In the present cases,
of course, there is no question that a per-
sonal injury occurred and that this per-
sonal injury is what entitled petitioners to
compensatory and punitive damages. We
neither decided nor intimated in Schleier
whether punitive damages that are indis-
putably “linked to” personal injuries or
sickness are received “on account of” such
injuries or sickness. Indeed, it would have
been odd for us to resolve that question (or
even come “close to resolving” it) without
any discussion of the numerous considera-
tions of text, history and policy high-
lighted by today’s opinion. If one were to
search our opinions for a dictum bearing
upon the present issue, much closer is the
statement in United States v. Burke, 504
U.S. 229 (1992), that a statute confers
“tort or tort type rights” (qualifying a
plaintiff’s recovery for the §104(a)(2) ex-
emption) if it entitles the plaintiff to “a
jury trial at which ‘both equitable and
legal relief, including compensatory and,
under certain circumstances, punitive
damages’may be awarded.” Id., at 240
(quoting Johnsonv. Railway Express
Agency, Inc., 421 U.S. 454, 460 (1975)).
But all of this is really by the way. Be-
cause the statutory text unambiguously
covers punitive damages that are awarded
on account of personal injuries, I conclude
that petitioners were entitled to deduct the
amounts at issue here. This makes it un-
1997–31 I.R.B.11August 4, 1997

necessary for me to reach the question,
discussed ante, at 12–13, whether the gov-
ernment’s refund action against the
O’Gilvie children was commenced within
the two-year period specified by 26 U.S.C.
§6532(b). I note, however, that the Court’s
resolution of these cases also does not de-
mand that this issue be addressed, except
to the extent of rejecting the proposition
that the statutory period begins to run with
the mailing of a refund check. So long as
that is not the trigger, there is no need to
decide whether the proper trigger is re-
ceipt of the check or some later event,
such as the check’s clearance.
For the reasons stated, I respectfully
dissent from the judgment of the Court.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of August 1997. See Rev.
Rul. 97–30, this page.
Section 382.—Limitation on Net
Operating Loss Carryforwards
and Certain Built-In Losses
Following Ownership Change
The adjusted federal long-term rate is set forth for
the month of August 1997. See Rev. Rul. 97–30, this
page.
Section 412.—Minimum Funding
Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 467.—Certain Payments
for the Use of Property or
Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 468.—Special Rules for
Mining and Solid Waste
Reclamation and Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 807.—Rules for Certain
Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, this page.
Section 1274.—Determination
of Issue Price in the Case of
Certain Debt Instruments Issued
for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates; ad-
justed federal long-term rate, and the
long-term exempt rate.For purposes of
sections 1274, 1288, 382, and other sec-
tions of the Code, tables set forth the rates
for August 1997.
Rev. Rul. 97–30
This revenue ruling provides various
prescribed rates for federal income tax pur-
poses for August 1997 (the current month.)
Table 1 contains the short-term, mid-term,
and long-term applicable federal rates
(AFR) for the current month for purposes
of section 1274(d) of the Internal Revenue
Code. Table 2 contains the short-term,
mid-term, and long-term adjusted applica-
ble federal rates (adjusted AFR) for the cur-
rent month for purposes of section 1288(b).
Table 3 sets forth the adjusted federal long-
term rate and the long-term tax-exempt rate
described in section 382(f). Table 4 con-
tains the appropriate percentages for deter-
mining the low-income housing credit de-
scribed in section 42(b)(2) for buildings
placed in service during the current month.
Finally, Table 5 contains the federal rate for
determining the present value of an annuity,
an interest for life or for a term of years, or
a remainder or a reversionary interest for
purposes of section 7520.
August 4, 1997121997–31 I.R.B.
REV. RUL. 97–30 TABLE 1
Applicable Federal Rates (AFR) for August 1997
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-Term
AFR5.87%5.79%5.75%5.72%
110% AFR6.47%6.37%6.32%6.29%
120% AFR7.07%6.95%6.89%6.85%
130% AFR7.67%7.53%7.46%7.41%
Mid-Term
AFR6.39%6.29%6.24%6.21%
110% AFR7.04%6.92%6.86%6.82%
120% AFR7.69%7.55%7.48%7.43%
130% AFR8.35%8.18%8.10%8.04%

1997–31 I.R.B.13August 4, 1997
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Mid-Term (continued)
150% AFR9.66%9.44%9.33%9.26%
175% AFR11.31%11.01%10.86%10.77%
Long-Term
AFR6.73%6.62%6.57%6.53%
110% AFR7.41%7.28%7.21%7.17%
120% AFR8.10%7.94%7.86%7.81%
130% AFR8.80%8.61%8.52%8.46%
REV. RUL. 97–30 TABLE 2
Adjusted AFR for August 1997
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
adjusted AFR4.01%3.97%3.95%3.94%
Mid-term
adjusted AFR4.54%4.49%4.47%4.45%
Long-term
adjusted AFR5.33%5.26%5.23%5.20%
REV. RUL. 97–30 TABLE 5
Rate Under Section 7520 for August 1997
Applicable federal rate for determining the present
value of an annuity, an interest for life or a term
of years, or a remainder or reversionary interest7.6%
REV. RUL. 97–30 TABLE 3
Rates Under Section 382 for August 1997
Adjusted federal long-term rate for the current month5.33%
Long-term tax-exempt rate for ownership changes
during the current month (the highest of the adjusted
federal long-term rates for the current month and the
prior two months.)5.64%
REV. RUL. 97–30 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for August 1997
Appropriate percentage for the 70% present
value low-income housing credit8.54%
Appropriate percentage for the 30% present
value low-income housing credit3.66%

Section 1288.—Treatment of
Original Issue Discount on Tax-
Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, page 12.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term,
mid-term, and long-term rates are set forth for the
month of August 1997. See Rev. Rul. 97–30, page
12.
Section 7872.—Treatment of
Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 1997. See Rev. Rul. 97–30, page 12.
August 4, 1997141997–31 I.R.B.

Weighted Average Interest Rate
Update
Notice 97–44
Notice 88–73 provides guidelines for
determining the weighted average inter-
est rate and the resulting permissible
range of interest rates used to calculate
current liability for the purpose of the
full funding limitation of §412(c)(7) of
the Internal Revenue Code as amended
by the Omnibus Budget Reconciliation
Act of 1987 and as further amended by
the Uruguay Round Agreements Act,
Pub. L. 103–465 (GATT).
The average yield on the 30-year Trea-
sury Constant Maturities for June 1997 is
6.77 percent.
The following rates were determined
for the plan years beginning in the month
shown below.
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans Divi-
sion. For further information regarding this
notice, call (202) 622-6076 between 2:30
and 4:00 p.m. Eastern time (not a toll-free
number). Ms. Prestia’s number is (202)
622-7377 (also not a toll-free number).
1997–31 I.R.B.15August 4, 1997
Part III. Administrative, Procedural, and Miscellaneous
90% to 107%90% to 110%
WeightedPermissiblePermissible
MonthYearAverageRangeRange
July19976.866.18 to 7.346.18 to 7.55

Foundations Status of Certain
Organizations
Announcement 97–74
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
organizations (which have been treated as
organizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private founda-
tions:
An Achievable Dream, Inc.,
Newport News, VA
AEH Community Development
Corporation, Los Angeles, CA
Affiliated Charities Ltd., Beachwood, OH
Affordable Housing Initiative, Chicago,
IL
African Voice of Peace, Inc., New York,
NY
All Nations Benefit Ministry, Berkeley,
CA
Al Murf George Memorial Foundation,
Inc., New York, NY
ALS Recovery Foundation, Inc., Miami,
FL
Argos Research Institute, Inc., Medford,
MA
Arlington Park Civic Association,
Columbus, OH
Associated Family Care, Inc., Marquette,
MI
Bodies of Christ Churches United
Homeless Families & Needy Children,
Chicago, IL
Building Better Communities, Inc.,
Miami, FL
Calquhoun Foundation, Inc., Massapequa,
NY
Cascade Corporation, Erdenheim, PA
Center for Education Training and
Employment, Blue Bell, PA
The Children’s Education Foundation,
Inc., Atlanta, GA
Clarion Area Presbyterian Homes, Inc.,
Clarion, PA
Dane County Welfare Rights Alliance,
Madison, WI
Digby Group, Inc., New York, NY
Education in Living Foundation, Dallas, TX
Heros Touch, Washington, DC
International Centre for Family
Enterprises, Inc., Southborough, MA
Inter-Tribal Indians of New Jersey, Inc.,
Cliffwood Beach, NJ
Investment in Aptitude Management by
Action Building Lasting Enterprise,
Chicago, IL
Kentucky Foundation, Inc., Louisville, KY
Kids in Motion, Great Falls, MT
Lacordaire Academy Endowment Fund,
Inc., Rutherford, NJ
Ladies in Action Care, Inc., Groveton, TX
Lafarga Catalogue Raisonne, Inc.,
New Canaan, CT
Mangum House, Inc., Newark, NJ
March of Pennies, Inc., Rock Falls, IL
Mark Twain Institute, Chevy Chase, MD
Martin Luther King Jr Memorial
Foundation, San Antonio, TX
Maximum Independent Living-Lake,
Cleveland, OH
Massachusetts State Conference of Young
People in Alcoholics Anonymous,
Dedham, MA
Mesa CO Business Education Foundation,
Grand Junction, CO
Messages From Mary/Mary’s Guest
House, Inc., Gordon, WI
National Center for Chromosome
Inversions, Des Moines, IA
National Center for Patients Rights, Inc.,
Douglaston Manor, NY
National Foundation Dagas Redeemed,
New York, NY
107-109 Avenue Housing Development
Fund Corporation, New York, NY
Partners for Success, Inc., Chicago, IL
Polemical Success International, Inc.,
Boca Raton, FL
Portsmouth Museums Foundation, Inc.,
Portsmouth, VA
Shabil Associates, Capitola, CA
Shen Ten Ling Bon Teaching Association,
Brentwood, NH
Society for the Preservation of Arts
Customs & Environments, Las Vegas,
NV
Stradivari Society, Chicago, IL
Tatra Foundation, Philadelphia, PA
Texas Association of Cajun Decendants,
Inc., Angleton, TX
Third Stream Foundation, Inc., Brookline,
MA
Tied to the Tracks, Inc., Boston, MA
Totus Tuus, Winnetka, IL
Transit Workers for Christ, Inc.,
Staten Island, NY
Troy Local Development Corporation,
Troy, NY
Turkish American Medical Association,
New York, NY
258 East 4th Street Housing Development
Fund Corporation, New York, NY
Universal Institute Corporation,
Philadelphia, PA
Urban Human Services, San Francisco,
CA
Visitor Industry Human Resource
Development Council, Inc., Miami, FL
Venezuelean American Endowment for
the Arts, Inc., New York, NY
Washington Square Services Corporation,
Newport, RI
Western Michigans Cherry County
Playhouse, Inc., Muskegon, MI
Western Upper Peninsula Assessment
Services, Inc., Hancock, MI
West Sacramento Christmas Basket
Project, Broderick, CA
William Blount High School Alumni
Association, Inc., Maryville, TN
Women’s Help Centers, Dallas, TX
Worthington Valley Swim Team, Owings
Mills, MD
Youth Enterprises & Associates, Inc.,
Jamaica, NY
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classifi-
cation as to foundation status. Grantors and
contributors may thereafter rely upon such
ruling or determination letter as provided
in section 1.509(a)-7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classifi-
cation of foundation status in the Internal
Revenue Bulletin.
August 4, 1997161997–31 I.R.B.
Part IV. Items of General Interest

1997–31 I.R.B.17August 4, 1997
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to Abut not
to B, and the new ruling holds that it ap-
plies to both Aand B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. Aruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

August 4, 1997181997–31 I.R.B.
Numerical Finding List
1
Bulletins 1997–27 through 1997–30
Announcements:
97–61, 1997–29 I.R.B. 13
97–67, 1997–27 I.R.B. 37
97–68, 1997–28 I.R.B. 13
97–69, 1997–28 I.R.B. 13
97–70, 1997–29 I.R.B. 14
97–71, 1997–29 I.R.B. 15
97–72, 1997–29 I.R.B. 15
97–73, 1997–30 I.R.B. 86
Delegation Orders:
172 (Rev. 5), 1997–28 I.R.B. 6
Notices:
97–37, 1997–27 I.R.B. 4
97–38, 1997–27 I.R.B. 8
97–39, 1997–27 I.R.B. 8
97–40, 1997–28 I.R.B. 6
97–41, 1997–28 I.R.B. 6
97–42, 1997–29 I.R.B. 12
97–43, 1997–30 I.R.B. 9
Railroad Retirement Quarterly Rate:
1997–28 I.R.B. 5
Proposed Regulations:
REG–104893–97, 1997–29 I.R.B. 13
Revenue Procedures:
97–32, 1997–27 I.R.B. 9
97–33, 1997–30 I.R.B. 10
97–34, 1997–30 I.R.B.14
Revenue Rulings:
97–27, 1997–27 I.R.B. 4
97–28, 1997–28 I.R.B. 4
97–29, 1997–28 I.R.B. 4
Treasury Decisions:
8722, 1997–29 I.R.B. 4
8723, 1997–30 I.R.B. 4
1
Acumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1997–1 through 1997–26
will be found in Internal Revenue Bulletin 1997–27,
dated July 7, 1997.

Finding List of Current Action on
Previously Published Items
1
Bulletins 1997–27 through 1997–30
*Denotes entry since last publication
Revenue Procedures:
96–36
Superseded by
97–34, 1997–30 I.R.B. 14
96–42
Superseded by
97–27, 1997–27 I.R.B. 9
1997–31 I.R.B.19August 4, 1997
1
Acumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1997–1 through 1997–26 will be found in Internal
Revenue Bulletin 1997–27, dated July 7, 1997.

August 4, 1997201997–31 I.R.B.
Index
Internal Revenue Bulletins
1997–27 Through 1997–30
For the index of items published during
the first six months of 1997, see I.R.B.
1997–27, dated July 7, 1997.
The abbreviation and number in paren-
thesis following the index entry refer to
the specific item; numbers in roman and
italic type following the parenthesis refer
to the Internal Revenue Bulletin in which
the item may be found and the page
number on which it appears.
Key to Abbreviations:
RRRevenue Ruling
RPRevenue Procedure
TDTreasury Decision
CDCourt Decision
PLPublic Law
EOExecutive Order
DODelegation Order
TDOTreasury Department Order
TCTax Convention
SPRStatement of Procedural
Rules
PTEProhibited Transaction
Exemption
EMPLOYMENT TAX
Penalty:
Guidance regarding waiver of failure to
deposit penalty for certain taxpayers
required to begin using electronic
funds transfer on or after July 1,
1997 (Notice 43) 30, 86
Railroad retirement:
Rate determination; quarterly (July 1,
1997) 28, 5
Regulations:
26 CFR 31.0–1(a), 31.0–3(f), amended;
31.6302–1(h), added; 31.6302–1(i),
redesignated; 31.6302–1T, removed;
31.6302(c)–3, amended; 31.6302–3T,
removed; federal tax deposits by elec-
tronic funds transfer (TD 8723) 30, 4
EXCISE TAX
Group health plans; access, portability,
and renewability requirements; correc-
tion (Notice 41) 28, 6
Regulations:
26 CFR 40.6302(c)–1, amended;
40.6302(c)–1T, removed; federal tax
deposits by electronic funds transfer
(TD 8723) 30, 4
INCOMETAX
Depreciation:
Retail motor fuels outlet (RR29) 28, 4
Elections into mark-to-market account-
ing (Notice 37) 27, 8
Electronic or magnetic media filing:
Specifications for 1997 Forms 1098,
1099, 5498, and W–2G (RP34) 30, 14
Employee plans:
Organizations, functions, and authority
delegations; director, Employee Plans
Division (DO 172(Rev. 5)) 28, 6
Enhanced oil recovery credit for 1997
(Notice 39) 27, 8
Extension of time to file, Form 926 (No-
tice 42) 29, 12
Forms 1096, 1098, 1099 series, 5498,
W–2G Requirements for reproducing
paper substitutes (RP27) 27, 9
Interest:
Investment:
Federal short-term, mid-term, and
long-term rates for July 1997 (RR 27)
27, 4
Inventories:
LIFO:
Price indexes, department stores,
May 1997 (RR 28) 28, 4
Marginal production rates for 1997 (Notice
38) 27, 8
Proposed regulations:
26 CFR 1.894–1(d), added; guidance re-
garding claims for certain income tax
convention (REG–104893–97) 29, 13
Regulations:
26 CFR 1.894–1T(a) through (c), added;
guidance regarding claims for certain
income tax convention (TD 8722)
29, 4
26 CFR 1.6302–1, –2, amended;
1.6302–1T, –2T, –3T, –4T, removed;
1.6302–3(c), revised; 1.6302–4,
added; federal tax deposits by elec-
tronic funds transfer (TD 8723) 30, 4
Tax forms and instructions:
Electronic Federal Tax Payment System
(EFTPS); electronic remittance sys-
tem for federal tax deposits and pay-
ments (RP33) 30, 10
Treatment of Hong Kong and China (No-
tice 40) 28, 6

Notes
1997–31 I.R.B.21August 4, 1997

Notes
August 4, 1997221997–31 I.R.B.

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INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold
on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of
Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the week-
ly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
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