Internal Revenue Bulletin 2008-47 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 200
8-47
November 24, 200
8
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.
INCOME TAX
Rev. Rul. 2008–51, page 1171.
2008 base period T-bill rate.The “base period T-bill rate”
for the period ending September 30, 2008, is published as
required by section 995(f) of the Code.
T.D. 9428, page 1174.
Final regulations under section 1367 of the Code provide rules
regarding the definition of open account debt and the adjust-
ments in basis of any indebtedness of an S corporation to a
shareholder for shareholder advances and repayments on ad-
vances of open account debt. The regulations affect sharehold-
ers of S corporations and are necessary to provide guidance
needed to comply with the applicable tax law.
T.D. 9429, page 1167.
Final regulations under section 141 of the Code provide guid-
ance relating to the standards for treating payments in lieu of
taxes as generally applicable taxes for purposes of the private
security or payment test.
Notice 2008–99, page 1194.
This notice identifies a transaction, and substantially similar
transactions, as transactions of interest for purposes of reg-
ulations section 1.6011–4(b)(6) and sections 6111 and 6112
of the Code. In the transaction, a sale or other disposition of all
the interests in a charitable remainder trust (subsequent to the
contribution of appreciated assets to and their reinvestment by
the trust) results in the grantor or other noncharitable recipient
receiving the value of the grantor or other noncharitable recipi-
ent’s trust interest and claiming to recognize little or no taxable
gain.
Rev. Proc. 2008–64, page 1195.
This procedure provides guidance under section 301 of the
Emergency Economic Stabilization Act of 2008, Pub. L. No.
110–343, 122 Stat. 3765 (EESA). EESA section 301 provides
thatthetreatmentofgainorlossfromthesaleorexchangeof
any applicable preferred stock by any applicable financial insti-
tution is treated as ordinary income or loss, where applicable
preferred stock refers to certain preferred stock in Fannie Mae
or Freddie Mac. This procedure primarily addresses transac-
tions in which the applicable financial institution is a partner in
a partnership which held the applicable preferred stock.
EMPLOYEE PLANS
T.D. 9427, page 1179.
Final regulations under section 9811 of the Code provide guid-
ance on the requirements for group health plans offering ben-
efits for hospital stays in connection with childbirth to provide
benefits for at least a 48-hour stay for vaginal deliveries and
for at least a 96-hour stay for deliveries by cesarean section.
EXCISE TAX
T.D. 9427, page 1179.
Final regulations under section 9811 of the Code provide guid-
ance on the requirements for group health plans offering ben-
efits for hospital stays in connection with childbirth to provide
benefits for at least a 48-hour stay for vaginal deliveries and
for at least a 96-hour stay for deliveries by cesarean section.
(Continued on the next page)
Announcement of Declaratory Judgment Proceedings Under Section 7428 begins on page 1199.
Ann
ouncements of Disbarments and Suspensions begin on page 1199.
Finding Lists begin on page ii.
Index for July through November begins on page vi.

ADMINISTRATIVE
Notice 2008–99, page 1194.
This notice identifies a transaction, and substantially similar
transactions, as transactions of interest for purposes of reg-
ulations section 1.6011–4(b)(6) and sections 6111 and 6112
of the Code. In the transaction, a sale or other disposition of all
the interests in a charitable remainder trust (subsequent to the
contribution of appreciated assets to and their reinvestment by
the trust) results in the grantor or other noncharitable recipient
receiving the value of the grantor or other noncharitable recipi-
ent’s trust interest and claiming to recognize little or no taxable
gain.
November 24, 20082008–47 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–47 I.R.B.November 24, 2008

November 24, 20082008–47 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 141.—
Private
Activity Bond
; Qualified
Bond
26 CFR 1.141–4: Private security or payment test.
T.D. 9429
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Treatment of Payments in Lieu
of Taxes Under Section 141
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains final
regulations which modify the standards for
treating certain payments in lieu of taxes or
other tax equivalency payments (PILOTs)
as generally applicable taxes for purposes
of the private security or payment test un-
der section 141 of the Internal Revenue
Code (Code). This action is being taken
in order to provide issuers of tax-exempt
bonds with guidance on whether PILOTs
are eligible to be treated as generally ap-
plicable taxes for this purpose. The regu-
lations affect State and local governmental
issuers of tax-exempt bonds.
DATES:Effective Date:These regulations
are effective on October 24, 2008.
Applicabilitys Dates:For dates of ap-
plicability, see §1.141–15(k).
FOR FURTHER INFORMATION
CONTACT: Carla Young at (202)
622–3980 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document amends the Income Tax
Regulations (26 CFR part 1) under section
141tomodifyandclarifythestandards
for treating PILOTs as generally applicable
taxes for purposes of the private security or
payment test under section 141.
Final regulat
ions under section 141
were publishe
dintheFederal Registeron
January 16, 19
97 (T.D. 8712, 1997–1 C.B.
15 [62 FR 2275
]) (1997 Regulations), to
provide comp
rehensive guidance on most
aspects of th
e private activity bond restric-
tions. On Oct
ober 19, 2006, the IRS pub-
lished a not
ice of proposed rulemaking in
theFederal
Register(REG–136806–06,
2006–2 C.B.
950 [71 FR 61693]) (Pro-
posed Regul
ations) regarding the stan-
dards for tr
eating PILOTs as generally
applicabl
e taxes for purposes of the private
security o
r payment test under section 141.
In the Prop
osed Regulations, the Treasury
Departmen
t and the IRS solicited public
comments
and invited interested parties to
a public h
earing scheduled for February
13, 2007.
On January 30, 2007, the Trea-
sury Depa
rtment and the IRS cancelled
the publi
c hearing because no requests to
speak at
the hearing were received, and
publish
ed a notice of such cancellation in
theFede
ral Register(Published in the
IRB as An
nouncement 2007–19, 2007–7
I.R.B.
521 [72 FR 4220]).
The Trea
sury Department and the IRS
receiv
ed a number of written comments on
the Pro
posed Regulations. After consid-
eratio
n of the written comments, the Pro-
posed R
egulations are adopted, with re-
vision
s, as final regulations by this Trea-
sury d
ecision (Final Regulations). The re-
visio
ns are discussed in the preamble.
Explanation of Provisions
I.Intro
duction
In general, interest on State and local
governmental bonds is excludable from
gross income under section 103 of the
Code. Interest on a private activity bond,
other than a qualified bond under section
141(e), is not excludable from gross in-
come. Section 141(a) classifies a bond as
a private activity bond if it is part of an
issue that meets both the private business
use test under section 141(b)(1) (private
business use test) and the private security
or payment test under section 141(b)(2)
(private payment test). In addition, sec-
tion 141(a) independently treats a bond as
a private activity bond if it is part of an
issue that mee
ts the private loan test under
section 141(c
).
Section 141(b
)(2) provides generally
that an issue m
eets the private payment
test if the pay
ment of the debt service on
more than 10 p
ercent of the proceeds of
such issue is
(under the terms of such issue
or any underl
ying arrangement) directly
or indirectl
y(1)securedbyanyinterestin
property us
ed or to be used for a private
business us
e, or payments in respect of
such proper
ty, or (2) to be derived from
payments (w
hether or not to the issuer) in
respect of
property, or borrowed money,
used or to b
e used for a private business
use.
II.Private Payment Test in General
Sections 1.141–4(c) and 1.141–4(d) of
the 1997 Regulations provide general rules
for purposes of application of the private
payment test. Private payments generally
include any payments made, directly or
indirectly, by any nongovernmental per-
son that is a private business user of pro-
ceeds during a period ofprivate business
use and any payments made with respect to
property financed with proceeds of an is-
sue during a period of private business use,
whether or not made by a private business
user. In addition, private payments include
property and payments in respect of prop-
erty that are used or to be used for private
business use to the extent that any interest
in that property or payments serves as se-
curity for the payment of debt service on
an issue.
III.Generally Applicable Taxes Exception
Section 1.141–4(e) of the 1997 Reg-
ulations provides an exception to the
otherwise broad scope of payments taken
into account under the private payment
test in the case of generally applicable
taxes. Thus, §1.141–4(e)(1) provides that
for purposes of the private security or
payment test, generally applicable taxes
are not taken into account (that is, are
not payments from a nongovernmental
person and are not payments in respect of
property used for a private business use).
In general, the purpose of the generally
2008–47 I.R.B.1167November 24, 2008

applicable taxes exception is to allow el-
igible tax payments made with respect
to property or services to be used to pay
debt service on an issue without caus-
ing private payments. For this purpose,
§1.141–4(e)(2) of the 1997 Regulations
defines a generally applicable tax to mean
an enforced contribution exacted pursuant
to legislative authority in the exercise of
the taxing power that is imposed and col-
lected for the purpose of raising revenue
to be used for governmental purposes. To
qualify as a generally applicable tax, a tax
must have a uniform rate that is applied
to all persons of the same classification
in the appropriate jurisdiction, and the tax
must have a generally applicable manner
of determination and collection.
Section 1.141–4(e)(4)(i) provides that
a tax does not have a generally applica-
ble manner of determination and collection
to the extent that one or more taxpayers
make any impermissible agreements relat-
ing to the payment of those taxes. Section
1.141–4(e)(4)(ii) and (iii) of the 1997 Reg-
ulations set forth permissible and imper-
missible agreements for this purpose. An
example of a permissible agreement that
does not cause a tax to fail to have a gen-
erally applicable manner of determination
and collection includes an agreement to re-
duce or limit the amount of taxes collected
to further abona fidegovernmental pur-
pose. For example, an agreement to abate
taxes to encourage a property owner to re-
habilitate property in a distressed area is a
permissible agreement.
Section 1.141–4(e)(3) of the 1997 Reg-
ulations provides that a payment does not
qualify as a generally applicable tax if it
is a special charge for a special privilege
granted or service rendered. This provi-
sion further provides that special assess-
ments paid by property owners benefiting
from financed improvements are not gen-
erally applicable taxes. This provision in-
cludes an example that a tax or PILOT that
is limited to the property or persons bene-
fited by an improvement is not a generally
applicable tax.
The Proposed Regulations generally
did not address the special charge limita-
tion on generally applicable taxes. Com-
mentators suggested clarifying the scope
of this special charge limitation and its
application in the context of PILOTs.
The Final Regulations clarify and il-
lustrate the scope of the special charge
limitation on generally applicable taxes.
The Final Regulations provide that a spe-
cial charge includes a payment for a spe-
cial privilege grantedor regulatory func-
tion (for example, a license fee), a ser-
vice rendered (for example, a sanitation
services fee), a use of property (for exam-
ple, rent), or a payment in the nature of a
special assessment to finance capital im-
provements that is imposed on a limited
class of persons based on benefits received
from the capital improvements financed
with the assessment. The Final Regula-
tions illustrate that a special assessment
to finance infrastructure improvements in
a new industrial park (such as sidewalks,
streets, streetlights, and utility infrastruc-
ture improvements) that is imposed on a
limited class of persons composed of prop-
erty owners within the industrial park who
benefit from those improvements is a spe-
cial charge. The Final Regulations also
illustrate that, by contrast, an otherwise-
qualified generally applicable tax (for ex-
ample, a generally applicablead valorem
tax on all real property within a govern-
mental taxing jurisdiction) or an eligible
PILOT that is based on such a generally
applicable tax is not treated as a special
charge merely because the taxes or PILOTs
received are used for governmental or pub-
lic purposes in a manner that benefits par-
ticular property owners.
IV.Certain Payments in Lieu of Taxes
Treated asGenerally Applicable Taxes
Section 1.141–4(e)(5) of the 1997 Reg-
ulations treats PILOTs as generally appli-
cable taxes if: (1) The payments are com-
mensurate with and not greater than the
amounts imposed by the statute for a tax
of general application; and (2) The pay-
ments are designated for a public purpose
and are not special charges (as described in
§1.141–4(e)(3)). Section 1.141–4(e)(5) of
the 1997 Regulations further provides an
example which states that a PILOT made
in consideration for the use of property fi-
nanced with tax-exempt bonds is treated as
a special charge.
The Proposed Regulations proposed
to clarify and to tighten the commensu-
rate standard for PILOTs to better ensure
a reasonably close relationship between
eligible PILOTs and generally applica-
ble taxes. In particular, the Proposed
Regulations proposed to define the com-
mensurate standard to provide generally
that an eligible PILOT payment must rep-
resent a fixed percentage of, or reflect a
fixed adjustment to, the amount of gener-
ally applicable taxes in each year, based
on comparable current valuation assess-
ments. Commentators suggested that the
proposed commensurate standard was un-
duly restrictive and suggested allowing
fixed-payment PILOTs. The Treasury
Department and the IRS decline to adopt
this suggestion to allow fixed-payment
PILOTs. The Final Regulations generally
continue the approach to the commensu-
rate standard in the Proposed Regulations
because the Treasury Department and the
IRS continue to believe that this approach
will better ensure a reasonably close re-
lationship between eligible PILOTs and
generally applicable taxes.
The Final Regulations refine the com-
mensurate standard in certain technical
respects in response to public comments.
The Proposed Regulations proposed to
permit only a single change in the measure
of a PILOT in relation to an underlying
generally applicable tax following com-
pletion of the development of the subject
property. Commentators suggested allow-
ing broader flexibility for phased adjust-
ments to PILOTs during the development,
construction, or initial start-up period of
the property. The Final Regulations adopt
this comment.
The Proposed Regulations also pro-
posed to treat any payment based in
anywayondebtserviceonanissueas
impermissible under the commensurate
standard. Commentators suggested that
this limitation is overly broad and could
prohibit any use of PILOTs to pay debt
service on an issue. The Final Regula-
tions do not prohibit any use of PILOTs to
pay debt service on an issue, but provide
that a PILOT is not commensurate with a
generally applicable tax if the PILOT is
set at a fixed dollar amount (for example,
fixed debt service on a bond issue) that
cannot vary with changes in the level of
the generally applicable tax on which it is
based.
Section 1.141–4(e)(5) of the 1997
Regulations and the Proposed Regula-
tions require designation of PILOTs for a
“public purpose.” Section 1.141–4(e)(2)
of the 1997 Regulations requires use of
generally applicable taxes for “govern-
mental purposes.” These references to
November 24, 200811682008–47 I.R.B.

the designation of PILOTs for a pub-
lic purpose and to the use of generally
applicable taxes for governmental pur-
poses were intended to refer to the same
standard. In this regard, longstanding
Revenue Rulings on the definition of gen-
erally applicable taxes under section 164
on which the section 141 definition was
based have consistently required the use
of generally applicable taxes for “public
or governmental purposes.” See, for ex-
ample, Rev. Rul. 71–49, 1971–1 C.B.
103; Rev. Rul. 61–152, 1961–2 C.B. 42
(see §601.601(d)(2)(ii)(b)). To clarify the
intended uniform standard for the use of
generally applicable taxes and eligible
PILOTs, the Final Regulations adopt con-
sistent terminology to state this uniform
standard.
The 1997 Regulations and the Pro-
posed Regulations require “designation”
of eligible PILOTs for public purposes.
Commentators suggested clarifying this
designation principle to require “applica-
tion” of PILOTs for public purposes or
to deem PILOTs as duly designated upon
commingling with other governmental
taxes or revenues. In response to this com-
ment, the Final Regulations require use
of an eligible PILOT for governmental or
public purposes for which the underlying
generally applicable tax on which it is
based may be used.
The Proposed Regulations proposed to
eliminate the example in the last sentence
of §1.141–4(e)(5)(ii) of the 1997 Regula-
tions, which illustrated that a PILOT made
in consideration of the use of property
financed with tax-exempt bonds is treated
as a special charge. Most commentators
supported this proposed change and one
commentator objected to this proposed
change. The Final Regulations remove
this example, but address the issue raised
in this example separately in clarifying
guidance on the “special charge” limita-
tion on generally applicable taxes under
§1.141–4(e)(3). A payment made “in
consideration for the use of property” is
more properly characterized as rent or an
installment sale payment for the use of
property. The Final Regulations clarify
that, among other special charges, a pay-
ment for the use of property (for example,
rent) is treated as a special charge under
§1.141–4(e)(3). Further, the reference to
tax-exempt bond financing in the refer-
enced example caused confusion because
the presence or absence of tax-exempt
bond financing properly is irrelevant to
the determination of whether a payment,
in substance, is in the nature of a special
charge for the use of property or a gener-
ally applicable tax.The above-described
revision with respect to the referenced ex-
ample represents a technical clarification
rather than a substantive change.
Effective/Applicability Dates
The Proposed Regulations were pub-
lished on October 19, 2006, and were pro-
posed to apply to bonds sold on or af-
ter February 16, 2007. This proposed ef-
fective date was intended to accommo-
date completion of bond issues for projects
in progress under the 1997 Regulations.
Commentators indicated that the proposed
effective date of the Proposed Regulations
was insufficient to accommodate comple-
tion of bond issues for projects substan-
tially in progress. Commentators also re-
quested transitional relief for refundings of
bonds issued before the effective date of
the Proposed Regulations.
The Final Regulations generally apply
to bonds sold on or after October 24, 2008.
In response to public comments, the
Final Regulations provide a transitional
rule for refundings. Under this transitional
rule, the 1997 Regulations may continue to
be applied to certain refundings of bonds
that were sold before the dates of applica-
bility of the Final Regulations if they meet
a prescribed weighted average maturity
test set forth in the Final Regulations.
In addition, in response to public com-
ments, the Final Regulations also provide
a transitional rule for certain bonds for
projects substantially in progress at the
time of the promulgation of the Proposed
Regulations. Under this transitional rule,
the 1997 Regulations may continue to be
applied to certain bonds issued within a
prescribed time to finance certain projects
that meet prescribed conditions set forth in
the Final Regulations.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedures Act (5 U.S.C. chapter
5) does not apply to these regulations, and
because the regulations do not impose a
collection of information on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to sec-
tion 7805(f) of the Code, the proposed reg-
ulations preceding these regulations were
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on its impact on small busi-
ness.
Drafting Information
The principal authors of these regula-
tions are Carla Young and James Polfer,
Office of Chief Counsel (Financial Insti-
tutions and Products). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAX
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.141–0 is amended
by adding a new entry for §1.141–15(k) to
read as follows:
§1.141–0 Table of contents.
*****
§1.141–15 Effective dates.
*****
(k) Effective/applicability dates for cer-
tain regulations relating to generally appli-
cable taxes and payments in lieu of tax.
*****
Par. 3. Section 1.141–4 is amended by:
1. Paragraph (e)(2) the first sentence is
revised.
2. Paragraphs (e)(3), (e)(5), (e)(5)(i),
(e)(5)(ii) are revised and adding new para-
graphs (e)(5)(iii) and (e)(5)(iv).
The revisions and additions read as fol-
lows:
2008–47 I.R.B.1169November 24, 2008

§1.141–4 Private Security or Payment
Test.
*****
(e) * * *
(2) * * * A generally applicable tax is an
enforced contribution exacted pursuant to
legislative authority in the exercise of the
taxing power that is imposed and collected
for the purpose of raising revenue to be
used for governmental or public purposes.
***
(3)Special charges. A special charge
(as defined in this paragraph (e)(3)) is
not a generally applicable tax. For this
purpose, a special charge means a pay-
ment for a special privilege granted or
regulatory function (for example, a license
fee), a service rendered (for example, a
sanitation services fee), a use of property
(for example, rent), or a payment in the
nature of a special assessment to finance
capital improvements that is imposed on a
limited class of persons based on benefits
received from the capital improvements
financed with the assessment. Thus, a spe-
cial assessment to finance infrastructure
improvements in a new industrial park
(such as sidewalks, streets, streetlights,
and utility infrastructure improvements)
that is imposed on a limited class of per-
sons composed of property owners within
the industrial park who benefit from those
improvements is a special charge. By
contrast, an otherwisequalified generally
applicable tax (such as a generally appli-
cablead valoremtax on all real property
within a governmental taxing jurisdiction)
or an eligible PILOT under paragraph
(e)(5) of this section that is based on such
a generally applicable tax is not treated as
a special charge merely because the taxes
or PILOTs received are used for govern-
mental or public purposes in a manner
which benefits particular property owners.
*****
(5)Payments in lieu of taxes.Atax
equivalency payment or other payment in
lieu of a tax (“PILOT”) is treated as a gen-
erally applicable tax if it meets the require-
ments of paragraphs (e)(5)(i) through (iv)
of this section—
(i)Maximum amount limited by under-
lying generally applicable tax.ThePILOT
is not greater than the amount imposed by
a statute for a generally applicable tax in
each year.
(ii)Commensurate with a generally ap-
plicable tax. The PILOT is commensurate
with the amount imposed by a statute for
a generally applicable tax in each year
under the commensurate standard set forth
in this paragraph (e)(5)(ii). For this pur-
pose, except as otherwise provided in this
paragraph (e)(5)(ii), a PILOT is commen-
surate with a generally applicable tax only
if it is equal to a fixed percentage of the
generally applicable tax that would oth-
erwise apply in each year or it reflects a
fixed adjustment to the generally applica-
ble tax that would otherwise apply in each
year. A PILOT based on a property tax
does not fail to be commensurate with the
property tax as a result of changes in the
level of the percentage of or adjustment
to that property tax for a reasonable
phase-in period ending when the subject
property is placed in service (as defined
in §1.150–2(c)). A PILOT based on a
property tax must take into account the
current assessed value of the property for
property tax purposes for each year in
which the PILOT is paid and that assessed
valuemustbedeterminedinthesame
manner and with the same frequency
as property subject to the property tax.
A PILOT is not commensurate with a
generally applicable tax, however, if the
PILOT is set at a fixed dollar amount (for
example, fixed debt service on a bond
issue) that cannot vary with changes in
the level of the generally applicable tax on
which it is based.
(iii)Use of PILOTs for governmental
or public purposes.ThePILOTistobe
used for governmental or public purposes
for which the generally applicable tax on
which it is based may be used.
(iv)No special charges.ThePILOTis
not a special charge under paragraph (e)(3)
of this section.
*****
Par. 4. Section 1.141–15 is amended by
adding paragraph (k) to read as follows:
§1.14
1–15 Effective Dates.
*****
(k)Effective/applicability dates for
certain regulations relating to generally
applicable taxes and payments in lieu of
tax—(1)In general. Except as otherwise
provided in paragraphs (k)(2) and (k)(3)
of this section, revised §§1.141–4(e)(2),
1.141–4(e)(3) and 1.141–4(e)(5) apply to
bonds sold on or after October 24, 2008,
that are otherwise subject to the 1997 Reg-
ulations (defined in paragraph (b)(1) of
this section).
(2)Transitional rule for certain refund-
ings. Paragraph (k)(1) does not apply to
bonds that are issued to refund bonds if—
(i) Either—
(A) The refunded bonds (or the original
bonds in a series of refundings) were sold
before October 24, 2008, or
(B) The refunded bonds (or the original
bonds in a series of refundings) satisfied
the transitional rule for projects substan-
tially in progress under paragraph (k)(3) of
this section; and
(ii) The weighted average maturity of
the refunding bonds does not exceed the
remaining weighted average maturity of
the refunded bonds.
(3)Transitional rule for certain projects
substantially in progress. Paragraph (k)(1)
of this section does not apply to bonds is-
sued for projects for which all of the fol-
lowing requirements are met:
(i) A governmental person (as defined
in §1.141–1) took official action evidenc-
ing its preliminary approval of the project
before October 19, 2006, and the plan of
finance for the project in place at that time
contemplated financing the project with
tax-exempt bonds to be paid or secured by
PILOTs.
(ii) Before October 19, 2006, signifi-
cant expenditures were paid or incurred
with respect to the project or a contract was
entered into to pay or incur significant ex-
penditures with respect to the project.
(iii) The bonds for the project (exclud-
ing refunding bonds) are issued on or be-
fore December 31, 2009.
Steven Miller,
Deputy Commissioner for
Services and Enforcement.
Approved October 16, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on October 20,
2008, 4:15 p.m., and published in the issue of the Federal
Register for October 24, 2008, 73 F.R. 63372)
November 24, 200811702008–47 I.R.B.

Section 582.—Bad Debts,
Losses, and Gains With
Respect to Se
curities Held
by Financial Institutions
Application of section 301 of the Emergency
Economic Stabilization Act of 2008, Pub. L. No.
110–343, 122 Stat. 3765, in situations where the
applicable financial institution is a partner in a part-
nership which held the applicable preferred stock.
See Rev. Proc. 2008-64, page 1195.
Section 702.—Income and
Credits of Partner
Application of section 301 of the Emergency
Economic Stabilization Act of 2008, Pub. L. No.
110–343, 122 Stat. 3765, in situations where the
applicable financial institution is a partner in a part-
nership which held the applicable preferred stock.
See Rev. Proc. 2008-64, page 1195.
Section 995.—Taxation
of DISC Income to
Shareholders
2008 base period T-bill rate.The
“base period T-bill rate” for the period
ending September 30, 2008, is published
as required by section 995(f) of the Code.
Rev. Rul. 2008–51
Section 995(f)(1) of the Internal Rev-
enue Code provides that a shareholder of a
DISC shall pay interest each taxable year
in an amount equal to the product of the
shareholder’s DISC-related deferred tax li-
ability for the year and the “base period
T-bill rate.” Under section 995(f)(4), the
base period T-bill rate is the annual rate
of interest determined by the Secretary to
be equivalent to the average of the 1-year
constant maturity Treasury yields, as pub-
lished by the Board of Governors of the
Federal Reserve System, for the 1-year pe-
riod ending on September 30 of the calen-
dar year ending with (or of the most recent
calendar year ending before) the close of
the taxable year of the shareholder. The
base period T-bill rate for the period end-
ing September 30, 2008, is 2.48 percent.
Pursuant to section 6222 of the Code,
interest must be compounded daily. The
table below provides factors for com-
pounding the base period T-bill rate daily
for any number of days in the share-
holder’s taxable year (including a 52–53
week accounting period) for the 2008 base
period T-bill rate. To compute the amount
of the interest charge for the shareholder’s
taxable year, multiply the amount of the
shareholder’s DISC-related deferred tax
liability (as defined in section 995(f)(2))
for that year by the base period T-bill rate
factor corresponding to the number of
days in the shareholder’s taxable year for
which the interest charge is being com-
puted. Generally, one would use the factor
for 365 days. One would use a different
factor only if the shareholder’s taxable
year for which the interest charge being
determined is a short taxable year, if the
shareholder uses the 52–53 week taxable
year, or if the shareholder’s taxable year is
a leap year.
For the base period T-bill rates for the
periods ending in prior years, see Rev.
Rul. 2007–64, 2007–45 I.R.B. 953; Rev.
Rul. 2006–54, 2006–2 C.B. 834; Rev.
Rul. 2005–70, 2005–2 C.B. 919; Rev.
Rul. 2004–99, 2004–2 C.B. 720; Rev.
Rul. 2003–2, 2003–1 C.B. 251; Rev. Rul.
2002–68, 2002–2 C.B. 808; Rev. Rul.
2001–56, 2001–2 C.B. 500; and Rev. Rul.
2000–52, 2000–2 C.B. 516.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Teresa B. Hughes of the Office of
Associate Chief Counsel (International).
For further information regarding this rev-
enue ruling, contact Teresa B. Hughes at
(202) 622–3850 (not a toll-free call).
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
1.000067760
2
.000135
524
3.000203292
4.000271
066
5
.000338844
6.000406626
7.000474413
8
.000542205
9.0006
10001
10.000677802
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
11
.000745608
12.000813418
13.000881233
14
.000949052
15
.001016876
16.001084704
17
.001152537
18
.001220375
19.001288217
20
.001356064
21
.001423915
22.001491771
23
.001559632
24.001627497
25.001695367
26.001763242
27.001831121
28.001899004
29.001966893
30
.002034785
31.002102683
32
.002170585
33.002238492
34.002306403
35
.002374319
36.002442239
37
.002510164
38
.002578094
39.002646028
40.002713967
41.002781910
42
.002849858
43.002917811
44
.002985768
45.003053730
46.003121697
47.003189668
48
.003257643
49
.003325624
50
.003393609
2008–47 I.R.B.1171November 24, 2008

2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
51.003461598
52.003529592
53.003597591
54.003665594
55
.003733602
56.003801615
57
.003869632
58.003937654
59.004005680
60.004073711
61.004141747
62.004209787
63.004277832
64
.0043458
81
65.004413935
66.004481994
67
.004550057
68
.004618125
69.004686197
70
.004754275
71
.004822356
72.004890443
73
.004958534
74
.00
5026629
75.005094729
76
.005162834
77
.005230943
78
.005299057
79
.
005367176
80
.005435299
81
.005503427
82
.005571560
83
.005639697
84
.005707838
85.005775985
86
.005844136
87
.005912291
88
.005980451
89.006048616
90.006116786
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
91.006184960
92
.006253138
93.006321322
94
.006389510
95.006457702
96
.006525899
97
.006594101
98.006662307
99
.006730518
100.006798734
101
.006866954
102
.006935179
103.007003408
104.007071643
105
.007139881
106
.007208125
107.007276373
108
.007344625
109.007412883
110.007481144
111
.007549411
112.007617682
113
.007685958
114
.00
7754238
115.007822523
116.007890813
117
.007959107
118.008027406
119
.
008095709
120.008164017
121.008232330
122.008300648
123.008368970
124.008437296
125.008505627
126
.008573963
127.008642304
128.008710649
129.008778999
130
.008847353
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
131
.008915712
132.008984076
133
.009052444
134.009120817
135.009189195
136
.009257577
137
.009325964
138
.009394355
139
.009462752
140
.009531152
141
.009599558
142.009667968
143.009736382
144.009804802
145
.009873226
146
.009941654
147.010010087
148
.010078525
149.010146968
150.010215415
151
.010283867
152.010352323
153
.010420784
154.01
0489250
155.010557720
156.010626195
157
.010694674
158.010763159
1
59
.010831648
160.010900141
161.010968639
162.011037142
163
.011105649
164.011174162
165
.011242678
166.011311200
167.011379726
168
.011448256
169
.011516792
170
.011585332
November 24, 200811722008–47 I.R.B.

2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
171
.011653876
172
.011722425
173.011790979
174
.011859538
175
.011928101
176.011996669
177
.012065241
178.012133818
179.012202400
180.012270986
181
.012339577
182.012408173
183.012476773
184
.0125453
78
185
.012613988
186.012682602
187
.012751221
188
.012819845
189.012888473
190
.012957106
191
.013025743
192.013094386
193.013163032
194.013231684
195
.013300340
196.013369001
197.013437666
198
.013506336
199
.
013575011
200.013643691
201
.013712375
202.013781063
203
.013849757
204
.013918455
205.013987157
206
.014055865
207
.014124577
208.014193293
209
.014262015
210.014330741
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
211.014399471
212.014468206
213
.014536946
214
.014605691
215
.014674440
216.014743194
217
.014811953
218.014880716
219.014949484
220
.015018256
221
.015087033
222
.015155815
223
.015224602
224
.0152933
93
225.015362189
226
.015430989
227
.015499794
228
.015568604
229
.01563
7419
230
.015706238
231
.015775062
232
.015843890
233
.015912723
234
.01
5981561
235.016050404
236
.016119251
237.016188103
238
.016256959
239
.
016325820
240.016394686
241
.016463556
242
.016532432
243.016601311
244.016670196
245.016739085
246.016807979
247.016876877
248
.016945780
249.017014688
250
.017083601
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
251.017152518
252
.017221440
253
.017290366
254.017359297
255
.017428233
256
.017497173
257.017566119
258.017635068
259
.017704023
260.017772982
261.017841946
262
.017910915
263.017979888
264.018048866
265
.018117848
266
.018186835
267
.018255827
268.018324824
269
.01839
3825
270.018462831
271
.018531842
272
.018600857
273.018669877
274.018738901
275
.018807931
276
.018876965
277.018946003
278
.019015047
279
.
019084095
280
.019153147
281
.019222205
282.019291267
283.019360334
284
.019429405
285
.019498481
286
.019567562
287.019636647
288
.019705737
289.019774832
290.019843932
2008–47 I.R.B.1173November 24, 2008

2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
291.019913036
292
.019982145
293
.020051258
294.020120377
295
.020189499
296
.020258627
297
.020327759
298.020396896
299.020466038
300
.020535184
301
.020604335
302.020673491
303
.020742651
304.020811816
305
.020880986
306
.020950161
307.021019340
308
.021088524
309
.02115
7712
310
.021226905
311.021296103
312
.021365306
313
.021434513
314
.02
1503725
315.021572942
316.021642163
317.021711389
318.021780620
319
.
021849855
320
.021919095
321.021988340
322
.022057590
323.022126844
324.022196103
325.022265366
326.022334634
327.022403907
328
.022473185
329
.022542467
330
.022611754
2008 ANNUAL RATE,
COMPOUNDED DAILY
2.480 PERCENT
DAYSFACTOR
331.022681046
332
.022750343
333.022819644
334.022888949
335.022958260
336
.023027575
337
.023096895
338.023166220
339
.023235549
340.023304883
341.023374222
342
.023443565
343
.023512913
344
.0235822
66
345.023651623
346.023720986
347
.023790352
348
.023859724
349.023929100
350
.023998481
351
.024067867
352.024137257
353.024206653
354.02
4276052
355.024345457
356
.024414866
357
.024484280
358.024553699
3
59
.024623122
360
.024692550
361.024761983
362.024831420
363.024900862
364.024970309
365.025039760
366
.025109217
367
.025178678
368
.025248143
369
.025317614
370
.025387089
371
.025456569
Section 1367.—Adjust-
ments to Basis of Stock of
Shareholders, etc.
26 CFR 1.1367–2: Adjustments to basis of indebted-
ness to shareholder.
T.D. 9428
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Section 1367 Regarding Open
Account Debt
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to the treatment of
open account debt between S corporations
and their shareholders. These final reg-
ulations provide rules regarding the def-
inition of open account debt and the ad-
justments in basis of any indebtedness of
an S corporation to a shareholder under
section 1367(b)(2) of the Internal Revenue
Code (Code) for shareholder advances and
repayments on advances of open account
debt. The regulations affect shareholders
of S corporations and are necessary to pro-
vide guidance neededto comply with the
applicable tax law.
DATES:Effective Date:These regulations
are effective on October 20, 2008.
Applicability Date:For dates of appli-
cability, see §1.1367–3.
FOR FURTHER INFORMATION
CONTACT: Stacy L. Short or
Deane M. Burke, (202) 622–3070 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document amends §1.1367–2 of
the Income Tax Regulations (26 CFR part
1) regarding the definition of open account
debt and adjustments in basis of indebted-
ness for shareholder advances and repay-
ments on advances of open account debt.
Section 1367(a)(1) provides that the
basis of each shareholder’s stock in an
November 24, 200811742008–47 I.R.B.

S corporation is increased by the share-
holder’spro ratashare of the S corpo-
ration’s income (separately and nonsep-
arately computed items of income) and
the excess of the deductions for depletion
over the basis of the property subject to
depletion. Section 1367(a)(2) provides
that the basis of each shareholder’s stock
in the S corporation is decreased by the
shareholder’s distributions not includible
in income of the shareholder by reason of
section 1368 (nontaxable distributions),
and the shareholder’spro ratashare of
the losses and deductions (separately
and nonseparately computed losses), any
expense of the corporation that is not de-
ductible and not properly chargeable to
capital account, and certain deductions
for depletion for any oil and gas property
held by the S corporation. Under section
1367(b)(2)(A), if for any taxable year the
amounts specified insection 1367(a)(2)
(other than distributions) exceed the
amount which reduces the shareholder’s
basis to zero, such excess losses and
deductions shall be applied to reduce (but
not below zero) the shareholder’s basis
in any indebtedness of the S corporation
to the shareholder. Section 1367(b)(2)(B)
provides that if a shareholder’s basis in
indebtedness is reduced for any taxable
year, any net increase (the amount by
which the items described in section
1367(a)(1) exceed the items described in
section 1367(a)(2)) for any subsequent
taxable year is applied to restore the
reduction in basis in indebtedness before
any of the excess is used to increase basis
in stock.
On January 3, 1994, the Treasury De-
partment and the IRS published final
regulations under section 1367 of the Code
(T.D. 8508, 1994–1 C.B. 219 [59 FR 12],
amended on December 22, 1999 (T.D.
8852, 2000–1 C.B. 253 [64 FR 71641])).
Those final regulations relate, in part, to
adjustments to basis in both stock of share-
holders and indebtedness of an S corpora-
tion to its shareholders. Section 1.1367–2
of the Income Tax Regulations provides
specific rules for required adjustments
(reductions and restorations) to basis in
any indebtedness of an S corporation to
a shareholder. Section 1.1367–2(a) also
provides that for purposes of adjustments
to basis of indebtedness to shareholders,
shareholder advances not evidenced by
separate written instruments and repay-
ments on the advances (open account
debt) are treated as a single indebted-
ness. The basis adjustment rules under
the final regulations apply to all indebted-
ness of an S corporation to a shareholder,
whether the indebtedness is evidenced by
a written instrument or is open account
debt. Taxpayers should also remember
that all advances to an S corporation by a
shareholder are subject to the general tax
principles for debt, whether evidenced by
a written instrument or not.
On August 25, 2005, the Tax Court is-
sued its decision inBrooks v. Commis-
sioner, TC Memo. 2005–204, involving
open account debt. Under its interpreta-
tion of §1.1367–2, the court inBrooksheld
“that the basis of the open account indebt-
edness is properly computed by netting at
the close of the year advances of open ac-
count debt during the year and repayments
of open account debt during the year.” This
allowed the taxpayer inBrooksto defer
indefinitely the recognition of income on
any repayment of his open account debt
over the several years during which the
taxpayer and the S corporation made ad-
vances and repayments, respectively.
On April 12, 2007, the Treasury De-
partment and the IRS published a notice of
proposed rulemaking and a notice of pub-
lic hearing (REG–144859–04, 2007–20
I.R.B. 1245) in theFederal Register
(72 FR 18417) proposing amendments to
the regulations relating to the treatment of
open account debt between S corporations
and their shareholders. A public hearing
on the proposed regulations was scheduled
for July 31, 2007, but was cancelled
because no one requested to speak.
However, comments responding to the
proposed regulations were received.
After consideration of these comments,
the proposed regulations are adopted as
revised by this Treasury decision. These
final regulations generally retain the
provisions of the proposed regulations
with the modifications discussed in the
preamble.
Summary of Comments and
Explanation of Revisions
1.Need for Regulatory Change
All of the comments received in re-
sponse to the proposed regulations sug-
gested that the regulations were overly
broad and should be withdrawn. Two
commentators suggested that amending
the regulations for open account debt is
not an appropriate approach for the Trea-
sury Department and the IRS to address
concerns regarding transactions similar
to that inBrooks. Instead, the commen-
tators asserted, such concerns should be
addressed through established judicial
doctrines such as substance over form,
business purpose, sham transaction, and
economic substance. One commentator
alternatively recommended a narrowly
tailored anti-abuse rule targeting open ac-
count debt instead of broader rules that
would apply to all such debt.
The Treasury Department and the IRS
continue to believe that regulatory guid-
ance on open account debt is necessary.
The Treasury Department and the IRS
believe that the treatment of open account
debt as interpreted inBrookspermits tax
consequences that are inconsistent with
the original purpose of §1.1367–2 and is
not conducive to sound tax administra-
tion. Neither established judicial doctrines
alone nor a narrowly tailored anti-abuse
rule suggested by the commentators would
adequately address these concerns, though
the Treasury Department and the IRS con-
tinue to recognize the applicability of the
judicial doctrines inappropriate cases in
addition to these final regulations.
2.Aggregate Principal Threshold Amount
The proposed regulations defined open
account debt as shareholder advances not
evidenced by separate written instruments
for which the principal amount of the
aggregate advances (net of repayments
on advances) did not exceed $10,000
per shareholder at the close of any day
during the S corporation’s taxable year.
Shareholders were required to determine
for open account debt purposes whether
shareholder advances and repayments on
the advances exceeded the $10,000 aggre-
gate principal threshold on any day during
the S corporation’s taxable year. To make
such a determination, shareholders were
required to maintain a “running balance”
of shareholder advances and repayments
on advances, and the outstanding principal
amount of the open account debt. If the re-
sulting aggregate principal of the running
balance exceeded $10,000 at the close of
any day during the S corporation’s taxable
2008–47 I.R.B.1175November 24, 2008

year, the entire principal amount of the
indebtedness would no longer constitute
open account debt effective at the close of
that day.
Commentators suggested that the pro-
posed regulations’ aggregate principal
threshold of $10,000 was too low for most
businesses. One commentator asserted
that establishing any aggregate principal
threshold dollar amount for open account
debt in final regulations would be arbitrary
and would impose a certain compliance
burden on smaller businesses. However,
that commentator also suggested that in-
creasing the aggregate principal threshold
dollar amount would mitigate the compli-
ance burden. The commentators suggested
that if the final regulations adopt any
threshold dollar amount for open account
debt, such a threshold amount should
be increased to an amount ranging from
$100,000 to $1 million.
After considering the comments on
the aggregate principal threshold dollar
amount, and on recognizing customary
business practices as noted by the com-
mentators, the Treasury Department and
the IRS have concluded that the aggregate
principal threshold dollar amount for open
account debt should be increased and that
other changes are necessary. Therefore,
the final regulations adopt a $25,000 ag-
gregate principal threshold amount per
shareholder for open account debt. For
example, an S corporation with ten share-
holders could receive up to $250,000 of
open account debt as long as no single
shareholder advanced more than $25,000.
The Treasury Department and the IRS be-
lieve that the $25,000 threshold, together
with certain other changes noted below,
balances concerns over deferral potential
with normal business practices. Under
the final regulations, for any particular
shareholder advances and repayments on
those advances for which, as of the spec-
ified determination date, the aggregate
principal balance exceeds the $25,000 ag-
gregate principal threshold amount will no
longer constitute open account debt, but
instead will be treated as debt evidenced
by a separate written instrument subject
to the basis adjustment and repayment ac-
counting rules applicable to S corporation
shareholder debt generally.
As noted in the preamble to the pro-
posed regulations, the $10,000 aggregate
principal threshold amount for open ac-
count debt for purposes of §1.1367–2
was modeled after section 7872(c)(3) and
thede minimisexception for corpora-
tion-shareholder loans in §1.7872–9 of
the proposed regulations. However, the
Treasury Department and the IRS do not
believe it is necessary that the thresh-
old amount for open account debt be
modeled after the rules under §1.7872–9
regarding corporate-shareholder loans.
Nevertheless, despite the $25,000 thresh-
old amount for open account debt in these
final regulations, the provisions under
section 7872 and related regulations for
corporate-shareholder loans in excess of
$10,000 separately apply to open account
debt in excess of $10,000 for each advance
if the corporation is not obligated to pay a
market rate of interest on the advances.
3.Monitoring the Aggregate Principal
Threshold Amount
The proposed regulations effectively
required day-to-day monitoring of open
account debt. For purposes of deter-
mining compliance with the aggregate
principal threshold amount for open ac-
count debt, the shareholder was required
to maintain a daily running balance of
shareholder advances and repayments on
such advances, and the outstanding prin-
cipal amount of the open account debt.
Some of the commentators suggested
that the daily monitoring requirement
would impose an unreasonable burden
on shareholders and recommended that
the running balance requirement be tested
quarterly, annually or when the corpo-
ration maintains and updates its other
books and records. One commentator de-
scribed the practice by many closely held
corporations of reconciling and account-
ing only once a year and noted that only
then would such an S corporation and its
shareholder(s) know what payments are
legitimately charged to the corporation as
opposed to those appropriately charged to
the shareholder(s).
Another commentator suggested that
with daily monitoring, a maximum thresh-
old rule for open account debt is too harsh
for shareholders insofar as it immediately
changes the treatment of such debt the
principal balance of which exceeds the
thresholdbyasinglecentonanyday,
resulting in a “cliff” effect. The commen-
tator suggested that in order to mitigate
this “cliff” effect, the final regulations
should adopt a second prong to the ag-
gregate principal threshold amount test
so that advances would fail to meet the
definition of open account debt only if
both the aggregate principal of the running
balance exceeded the applicable aggregate
principal threshold dollar amount on any
given day of the year and the balance at
the end of the year exceeded the average
of the daily balances throughout the year.
The commentator provided examples of
intended beneficiaries of such an “averag-
ing” rule, for example, shareholders who
need to advance their S corporation more
funds on a short-time basis but end the
year with an outstanding principal amount
of the open account debt below the thresh-
old level.
After careful consideration of these
comments, the Treasury Department and
the IRS have concluded that extending
the period for which a shareholder deter-
mines whether shareholder advances and
repayments exceed the aggregate principal
threshold dollar amount for open account
debt would reduce both the complex-
ity of the regulations and any perceived
burden on shareholders in making such
determinations. In addition, such a mod-
ified rule should alleviate concerns over
any potential “cliff” effect resulting from
a day-to-day determination of threshold
amount as required in the proposed reg-
ulations. The Treasury Department and
the IRS also recognize that shareholder
advances made to an S corporation and
subsequently repaid during the same tax-
able year of the S corporation are not
available for inclusion in the shareholder’s
basis in the indebtedness for purposes of
passing through additional losses to the
shareholder at the end of the taxable year.
Therefore, the finalregulations do not
adopt a daily determination of whether
shareholder advances and repayments on
the advances exceed the $25,000 threshold
amount. Instead, the final regulations pro-
vide that a determination of whether the
threshold balance of $25,000 is exceeded
will be made at the end of the taxable year
of the S corporation. Under these final
regulations, however, if open account debt
is disposed of in whole or in part before the
end of the S corporation’s taxable year, the
determination of whether the advances and
repayments have exceeded the designated
aggregate principal threshold amount must
November 24, 200811762008–47 I.R.B.

be made immediately before the disposi-
tion of the debt during that taxable year.
Moreover, if a shareholder with open ac-
count debt is no longer a shareholder at the
end of the S corporation’s taxable year, the
determination must be made immediately
before the shareholder’s interest in the
S corporation is terminated.
4.Character of Income/Gain Recognition
One of the commentators suggested that
the final regulations address the issue of
how to characterize any income or gain
that is recognized upon repayment of both
open account debt and indebtedness evi-
denced by a written instrument. While rec-
ognizing the commentators’ concerns, the
Treasury Department and the IRS believe
that the characterization issue is beyond
the scope of these final regulations. How-
ever, the Treasury Department and the IRS
intend to continue considering the charac-
terization issue.
5.Effective Date Operation
The effective date in the proposed reg-
ulations provided that the proposed rules
for open account debt applied to any share-
holder advances to the S corporation made
on or after the date the regulations were
published as final regulations and repay-
ments on those advances by the S corpo-
ration. Thus, all open account debt (net
of repayments) prior to the publication of
the final regulation was outside the scope
of the proposed regulations, irrespective of
the outstanding principal amount.
One of the commentators believed that
the effective date language in the proposed
regulations was subject to two interpreta-
tions. Under the first interpretation, the
rules under these final regulations (New
Rules) would apply only to open account
debt created on or after the effective date,
that is, shareholder advances made on or
after the effective date and repayments on
those same advances. The rules under
the prior final regulations (as contained in
the 26 CFR edition revised April 1, 2007)
(Old Rules) would apply to open account
debt created before the effective date, that
is, shareholder advances with respect to
pre-effective date open account debt and
repayments on those prior advances. Ac-
cordingly, a shareholder could have open
account debt, subject to the Old Rules,
and open account debt, subject to the New
Rules, to which new shareholder advances
and repayments on those advances could
be made after the effective date.
Under the second interpretation, a
shareholder could not make additional ad-
vances with respect to open account debt
created before the effective date but could
receive repayments on that debt under the
Old Rules. Accordingly, the New Rules
would apply to all shareholder advances
on and after the effective date, as well as
repayments on those advances, and the
Old Rules would apply only to repayments
on pre-effective date open account debt.
The Treasury Department and the IRS
intend that the rules under these final reg-
ulations (New Rules) apply to any and all
shareholder advances made on and after
the effective date. The rules under these
final regulations (New Rules) also apply
to repayments on such advances. How-
ever, if a shareholder has open account
debt (net of prior repayments in the taxable
year) outstanding prior to the effective date
of these final regulations, the rules under
the prior final regulations (Old Rules) ap-
ply to any repayments on such pre-effec-
tive date open account debt. Accordingly,
that pre-effective date open account debt
will not be subject to any aggregate prin-
cipal threshold dollar amount. The share-
holder may not make additional advances
with respect to the pre-effective date open
account debt (because all shareholder ad-
vances made on or after the effective date
of these final regulations constitute new
open account debt subject to these final
regulations).
For instance, assume that the effective
date of these final regulations falls within
the taxable year of shareholder A’s S cor-
poration. Also assume that, at the begin-
ning of the S corporation’s taxable year,
A will have existing open account debt
with an outstanding principal balance of
$12,000. Assume further that A will make
an additional advance of $3,000 to and will
receive a $2,000 repayment from his S cor-
poration prior to the effective date. Thus,
as of the effective date, A will have exist-
ing open account debt with an outstanding
principal balance of $13,000 (A would net
the pre-effective date advance and repay-
ment for the taxable year and combine that
net advance of $1,000 with the $12,000
outstanding aggregate principal balance of
the then existing open account debt). This
$13,000 pre-effective date open account
debt would not be subject to these final
regulations and, thus, would not be subject
to any aggregate principal threshold dol-
lar amount and would be repaid under the
rules of the prior final regulations. If, on or
after the effective date of these final regu-
lations, A were to both make an advance
of $5,000 to his S corporation and receive
a $1,000 repayment on that advance, the
advance and repayment would constitute
separate new open account debt subject to
the rules under these final regulations.
Shareholders also have the option to ap-
ply these rules to shareholder advances to
the S corporation and repayments on those
advances by the S corporation made be-
fore the effective date of these regulations.
Using the example above, A would have
the option to net the $5,000 advance and
$1,000 repayment.
Effective/Applicability Date
The regulations apply to any and all
shareholder advances to the S corporation
made on or after October 20, 2008, and re-
payments on those advances by the S cor-
poration.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. Because
these regulations do not impose a collec-
tion of information on small entities, the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) does not apply. Pursuant to section
7805(f) of the Code, the notice of proposed
rulemaking that preceded these regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Drafting Information
The principal authors of these fi-
nal regulations are Stacy L. Short and
Deane M. Burke of the Office of the
Associate Chief Counsel (Passthroughs
and Special Industries).However,
other personnel from the IRS and the
2008–47 I.R.B.1177November 24, 2008

Treasury Department participated in their
development.
*****
Adoption of A
mendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1367–2 also issued under
26 U.S.C. 1367(b)(2).* * *
Par. 2. Section 1.1367–2 is amended as
follows:
1. Paragraph (a) is revised.
2. Paragraphs (c)(2) and (d)(1) are re-
vised.
3. Paragraph (d)(2) is redesignated as
paragraph (d)(3) and new paragraph (d)(2)
is added.
4. Paragraph (e) is amended by adding
Examples 6, 7and8.
The revisions and additions read as fol-
lows:
§1.1367–2 Adjustments to basis of
indebtedness to shareholder.
(a)In general—(1)Adjustments un-
der section 1367. This section provides
rules relating to adjustments required by
subchapter S to the basis of indebtedness
(including open account debt as described
in paragraph (a)(2) of this section) of an
S corporation to a shareholder. The basis
of indebtedness of the S corporation to
a shareholder is reduced as provided in
paragraph (b) of this section and restored
as provided in paragraph (c) of this section
in accordance with the timing rules in
paragraph (d) of this section.
(2)Open Account Debt—(i)Gen-
eral rule.Thetermopen account debt
means shareholder advances not evi-
denced by separate written instruments
and repayments on the advances, the ag-
gregate outstanding principal of which
does not exceed $25,000 of indebtedness
of the S corporation to the shareholder at
the close of the S corporation’s taxable
year. Advances and repayments on
open account debt are treated as a single
indebtedness.
(ii)Exception. If the shareholder ad-
vances not evidenced by a separate written
instrument, net of repayments, exceeds an
aggregate outstanding principal amount of
$25,000 at the close of the S corporation’s
taxable year, for any subsequent taxable
year the aggregate principal amount of that
indebtedness is treated in the same man-
ner as indebtedness evidenced by a sep-
arate written instrument for purposes of
this section. For any subsequent taxable
year, that indebtedness is not open account
debt and is subject to all basis adjustment
rules applicable to basis of indebtedness of
an S corporation to a shareholder in this
section.
*****
(c) * * *
(2)Multiple indebtedness. If a share-
holder holds more than one indebtedness
(including any open account debt and any
debt treated as a single indebtedness un-
der paragraph (a)(2)(ii) of this section) as
of the beginning of an S corporation’s tax-
able year, any net increase is applied first
to restore the reduction of basis in any
indebtedness repaid (in whole or in part)
in that taxable year to the extent neces-
sary to offset any gain that would other-
wise be realized on the repayment. Any
remaining net increase is applied to restore
each outstanding indebtedness (including
any open account debt and any debt treated
as a single indebtedness under paragraph
(a)(2)(ii) of this section) in proportion to
the amount that the basis of each outstand-
ing indebtedness has been reduced under
section 1367(b)(2)(A) and paragraph (b) of
this section and not restored under section
1367(b)(2)(B) and this paragraph (c).
(d)Time at which adjustments to ba-
sis of indebtedness are effective—(1)
In general. The amounts of the adjust-
ments to basis of indebtedness (including
open account debt) provided in section
1367(b)(2) and this section are determined
as of the close of the S corporation’s
taxable year, and the adjustments are
generally effective as of the close of the
S corporation’s taxable year. However,
if the shareholder is not a shareholder
in the S corporation at that time, these
adjustments are effective immediately
before the shareholder terminates his or
her interest in the S corporation. Except
as provided in paragraph (d)(2) of this
section, if a debt is disposed of or repaid
in whole or in part before the close of the
taxable year, the basis of that indebtedness
is restored under paragraph (c) of this
section, effective immediately before the
disposition or the first repayment on the
debt during the taxable year. To the extent
any indebtedness of the S corporation to
the shareholder is disposed of or repaid
(in whole or in part) during the taxable
year and the shareholder’s basis in that
indebtedness has been reduced under
paragraph (b) of this section and is not
restored completely under paragraph
(c) of this section, the disposition or
repayment is a recognition event effective
immediately before the indebtedness is
disposed of or repaid (in whole or in part).
(2)Open account debt—(i)In gen-
eral. All advances and repayments on
open account debt (as described in para-
graph (a)(2)(i) of this section) during the
S corporation’s taxable year are netted at
the close of the S corporation’s taxable
year to determine the amount of any net
advance or net repayment. The net ad-
vance or net repayment is combined with
the outstanding aggregate principal bal-
ance of the existing open account debt
and that amount is carried forward to the
beginning of the subsequent taxable year
as the outstanding aggregate principal
amount of the open account debt (unless
the aggregate principal amount meets the
exception defined in paragraph (a)(2)(ii)
of this section at the close of the taxable
year). However, if the shareholder in the
S corporation is not a shareholder of the
S corporation at the close of the S cor-
poration’s taxable year, such advances
and repayments on open account debt are
netted, and the basis of that indebtedness
is restored under paragraph (c) of this
section, effective immediately before the
shareholder terminates his or her interest
in the S corporation. If any open account
debt is disposed of before or upon the
close of the taxable year, the disposition
is effective at the close of the S corpora-
tion’s taxable year, and all advances and
repayments are netted immediately prior
to the disposition and the basis of that
indebtedness is restored under paragraph
(c) of this section, effective at the close of
the S corporation’s taxable year.
(ii)Exception. Shareholder indebted-
ness that is open account debt at the begin-
ning of the taxable year but meets the ex-
ception defined in paragraph (a)(2)(ii) of
November 24, 200811782008–47 I.R.B.

this section at the close of the taxable year,
adjustments to the basis of the indebted-
ness for that taxable year follow the pro-
visions for open account debt. The result-
ing aggregate principal amount of indebt-
edness is treated as the principal amount of
a debt evidenced by a separate written in-
strument for any subsequent taxable year,
and is no longer subject to the open ac-
count debt provisions of this section.
*****
(e) * * *
Example 6.The $25,000 aggregate principal
amount applies to each shareholder. (i) A and B
have been the two shareholders in Corporation S
since 2000. As of the end of the 2008 taxable year,
the bases of A’s and B’s stock are both zero. On
June 1, 2009, A advances S $16,000, which is not
evidenced by a written instrument. On August 1,
2009, B advances S $22,000, which is not evidenced
by a written instrument. Both the $16,000 advance
and the $22,000 advance are open account debt and
remain outstanding at those amounts during 2009.
There is no net increase under paragraph (c) of this
section in year 2009.
(ii) At the close of the 2009 taxable year, A’s open
account debt does not exceed $25,000. A therefore
carries forward to the beginning of the 2010 taxable
year the $16,000 as open account debt.
(iii) At the close of the 2009 taxable year, B’s
open account debt does not exceed $25,000. B there-
fore carries forward to the beginning of the 2010 tax-
able year the $22,000 as open account debt.
Example 7.Treatment of open account debt.(i)
ThefactsarethesameasinExample 6,inaddi-
tion to which, on December 31, 2009, A’s basis in
the open account debt is reduced under paragraph
(b) of this section to $8,000. On April 1, 2010, S
repays A $4,000 of the open account indebtedness.
On September 1, 2010, A advances S an additional
$1,000, which is not evidenced by a written instru-
ment. There is no net increase under paragraph (c) of
this section in year 2010.
(ii) The $4,000 April repayment S makes to A
and A’s $1,000 September advance are netted to result
in a net repayment of $3,000 for the taxable year on
A’s $16,000 open account debt carried forward from
2009. Because there is no net increase in 2010, no
basis of indebtedness is restored for the 2010 taxable
year, and A realizes $1,500 of income on the $3,000
net repayment at the close of the 2010 taxable year.
(iii) At close of the 2010 taxable year, A’s open
account debt does not exceed $25,000. The net re-
payment of $3,000 for the taxable year on A’s $16,000
open account debt carried forward from 2009, leaves
A with an open account debt of $13,000 to carry for-
ward as open account debt to the beginning of the
2011 taxable year.
Example 8.Treatment of shareholder indebted-
ness not evidenced by a written instrument which ex-
ceeds $25,000.(i)ThefactsarethesameasinExam-
ple 7, in addition to which, on February 1, 2011, S re-
pays $5,000 of the open account debt and on March 1,
2011, A advances S $20,000, which is not evidenced
by a written instrument.
(ii) At the close of the 2010 taxable year, A has
an open account debt of $13,000 to carry forward as
open account debt to the beginning of the 2011 tax-
able year.
(iii) The 2011 advances and repayments are netted
to result in a net advance of $15,000 on A’s $13,000
open account debt carried forward from 2010, in-
creasing A’s open account debt to $28,000 as of the
close of the 2011 taxable year. Because A’s open ac-
count debt exceeds $25,000, for any subsequent tax-
able year the $28,000 indebtedness will be treated in
the same manner as indebtedness evidenced by a sep-
arate written instrument for the purposes of this sec-
tion. Because there is no net increase in 2011, no ba-
sis of indebtedness is restored for the 2011 taxable
year.
Par. 3. Section 1.1367–3 is revised to
read as follows:
§1.1367–3 Effective/Applicability date.
Section 1.1367–2(a), (c)(2), (d)(2), and
(e)Example 6,Example 7,andExample 8
apply to any shareholder advances to the
S corporation made on or after October 20,
2008, and repayments on those advances
by the S corporation. The rules that apply
with respect to shareholder advances to
the S corporation made before October
20, 2008, are contained in §1.1367–3 in
effect prior to October 20, 2008. (See 26
CFR part 1 revised as of April 1, 2007.)
Shareholders have the option to apply
these rules to shareholder advances to the
S corporation made before October 20,
2008, and repayments on those advances
by the S corporation.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved September 25, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on October 17,
2008, 8:45 a.m., and published in the issue of the Federal
Register for October 20, 2008, 73 F.R. 62199)
Section 6011.—General
Requirement of Return,
Statement, or List
The Internal Revenue Service and the Treasury
Department are aware of a type of transaction, identi-
fied in this notice as a transaction of interest, in which
a sale or other disposition of all interests in a chari-
table remainder trust (subsequent to the contribution
of appreciated assets to and their reinvestment by the
trust), results in the grantor or other noncharitable re-
cipient receiving the value of that person’s trust in-
terest while claiming to recognize little or no taxable
gain. See Notice 2008-99, page 1194.
Section 6111.—Disclosure
of Reportable Transactions
The Internal Revenue Service and the Treasury
Department are aware of a type of transaction, identi-
fied in this notice as a transaction of interest, in which
a sale or other disposition of all interests in a chari-
table remainder trust (subsequent to the contribution
of appreciated assets to and their reinvestment by the
trust), results in the grantor or other noncharitable re-
cipient receiving the value of that person’s trust in-
terest while claiming to recognize little or no taxable
gain. See Notice 2008-99, page 1194.
Section 6112.—Material
Advisors of Reportable
Transaction
sMustKeep
Lists of Advisees, etc.
The Internal Revenue Service and the Treasury
Department are aware of a type of transaction, identi-
fied in this notice as a transaction of interest, in which
a sale or other disposition of all interests in a chari-
table remainder trust (subsequent to the contribution
of appreciated assets to and their reinvestment by the
trust), results in the grantor or other noncharitable re-
cipient receiving the value of that person’s trust in-
terest while claiming to recognize little or no taxable
gain. See Notice 2008-99, page 1194.
Section 9811.—Standards
Relating to Benefits for
Mothers and Newborns
26 CFR 54.9811–1: Standards relating to benefits for
mothers and newborns.
T.D. 9427
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH
AND HUMAN SERVICES
45 CFR Parts 146 and 148
2008–47 I.R.B.1179November 24, 2008

Final Rules for Group
Health Plans and Health
Insurance Issuers Under
the Newborns’ and Mothers’
Health Protection Act
AGENCIES:Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration, Depart-
ment of Labor; Centers for Medicare &
Medicaid Services, Department of Health
and Human Services.
ACTION:Final rules.
SUMMARY:This document contains fi-
nal rules for group health plans and health
insurance issuers concerning hospital
lengths of stay for mothers and newborns
following childbirth pursuant to the New-
borns’ and Mothers’ Health Protection
Act of 1996 and the Taxpayer Relief Act
of 1997.
DATES:Effective Date:These final regu-
lations are effective December 19, 2008.
Applicability Dates: Group market
rules.These final regulations for the group
market apply to group health plans and
group health insurance issuers for plan
years beginning on or after January 1,
2009.
Individual market rules.These final
regulations for the individual market apply
with respect to health insurance coverage
offered, sold, issued, renewed, in effect, or
operated in the individual market on or af-
ter January 1, 2009.
FOR FURTHER INFORMATION
CONTACT:Amy Turner or Beth Baum,
Employee Benefits Security Adminis-
tration, Department of Labor, at (202)
693–8335; Russ Weinheimer, Internal
Revenue Service, Department of the Trea-
sury, at (202) 622–6080; or Adam Shaw,
Centers for Medicare & Medicaid Ser-
vices, Department of Health and Human
Services, at (877) 267–2323 extension
61091.
CUSTOMER SERVICE INFORMA-
TION:Individuals interested in
obtaining copies of Department of
Labor publications concerning health
care laws may request copies by
calling the EBSA Toll-Free Hotline
at 1–866–444–EBSA (3272) or may
request a copy of CMS’s publication
entitled “Protecting Your Health Insurance
Coverage” by calling 1–800–633–4227.
These regulations as well as other
information on the Newborns’ and
Mothers’ Health Protection Act and
other health care laws are also available
on the Department of Labor’s website
(http://www.dol.gov/ebsa), including the
interactive web pages, HealthElaws.
SUPPLEMENTARY INFORMATION:
I. Background
The Newborns’ and Mothers’ Health
Protection Act of 1996 (Newborns’ Act),
Public Law 104–204, was enacted on
September 26, 1996. The rules contained
in this document implement changes made
to the Employee Retirement Income Secu-
rity Act of 1974 (ERISA) and the Public
Health Service Act (PHS Act) made by the
Newborns’ Act, and parallel changes to
the Internal Revenue Code of 1986 (Code)
enacted as part of the Taxpayer Relief
Act of 1997 (TRA ’97). The Newborns’
Act was enacted to provide protections
for mothers and their newborn children
with regard to hospital lengths of stay
following childbirth. Interim final rules
implementing the group and individual
market provisions of the Newborns’ Act
were published in theFederal Register
on October 27, 1998 (63 FR 57546) (the
interim final rules).
These regulations being published to-
dayintheFederal Registerfinalize the
interim final rules. The final regulations
implementing the group market provisions
of the Newborns’ Act are issued jointly by
the Secretaries of the Treasury, Labor, and
HHS.
1
The individual market final regula-
tions are issued solely by HHS.
2
II. Overview of the Regulations
Section 9811 of the Code, section 711
of ERISA, and sections 2704 and 2751 of
the PHS Act (the Newborns’ Act provi-
sions) provide a general rule under which
a group health plan and a health insurance
issuer may not restrict mothers’ and new-
borns’ benefits for a hospital length of stay
in connection with childbirth to less than
48 hours following a vaginal delivery or
96 hours following a delivery by cesarean
section. The interim final rule—
•Provided that the attending provider
makes the determination that an admis-
sion is in connection with childbirth;
•Determined when the hospital stay be-
gins for purposes of application of the
general rule;
•Provided an exception to the 48-hour
(or 96-hour) general rule if the attend-
ing provider decides, in consultation
with the mother, to discharge the
mother or her newborn earlier;
•Clarified the application of autho-
rization and precertification require-
ments with respect to the 48-hour (or
96-hour) stay;
•Explained the application of benefit
restrictions and cost-sharing rules with
respect to the 48-hour (or 96-hour)
stay;
•Clarified the prohibitions with respect
to a plan or issuer offering mothers in-
centives or disincentives to encourage
less than the 48-hour (or 96-hour) stay;
•Clarified the prohibitions against in-
centives and penalties with respect to
attending providers; and
•Included the statutory notice provi-
sions under ERISA and the PHS Act.
In general, these final regulations do not
change the interim final rules. However,
the text of these final regulations incorpo-
rates a clarifying statement from the pre-
amble of the interim final rules that the def-
inition of attending provider does not in-
clude a plan, hospital, managed care or-
ganization, or other issuer. The text also
makes a small clarification with respect to
state law applicability.
In addition, these final regulations
make minor clarifications to the notice
requirements for nonfederal governmental
plans. The interim final rules specified that
the notice of post-childbirth hospitaliza-
tion benefits must be included in the plan
1
26 CFR §54.9811–1, 29 CFR §2590.711, 45 CFR §146.130.
2
45 CFR §148.170.
November 24, 200811802008–47 I.R.B.

document that described plan benefits to
participants and beneficiaries. These final
regulations specify that any notice a non-
federal governmental plan must provide
under these regulations can be included
either in the plan document that describes
benefits, or in the type of document the
plan generally uses to inform participants
and beneficiaries of plan benefit changes.
These final regulations also specify that
any time a plan distributes one or both of
these documents after providing the ini-
tial notice, the applicable statement must
appear in one or both of these documents.
Hospital Length of Stay
The interim final rules and these final
regulations provide that when a delivery
occurs in the hospital, the stay begins at
the time of delivery (or, in the case of mul-
tiple births, at the time of the last deliv-
ery) rather than at the time of admission
or onset of labor. Also, the interim fi-
nal rules and these final regulations pro-
vide that when a delivery occurs outside of
the hospital, the stay begins at the time the
mother or newborn is admitted (rather than
at the time of delivery).
Some comments expressed concern that
this rule somehow required birthing cen-
ters or other non-hospital facilities to ex-
tend the right to stay to more than 24 hours.
These comments noted that such extended
stays may violate local regulations or oth-
erwise conflict with the operations of such
facilities. The statute and these final regu-
lations do not require hospitals or other fa-
cilities to provide particular lengths of stay,
but instead require group health plans and
health insurance issuers to provide benefits
for particular hospital lengths of stay.
A comment recommended that if a de-
livery was planned for outside of a hospi-
tal, any following admission in response
to complications resulting from that de-
livery should be excluded from the pro-
visions providing for particular lengths of
stay. These final regulations do not distin-
guish between a delivery that was planned
for outside of the hospital and other deliv-
eries occurring outside of a hospital.
Definition of Attending Provider
The mandatory coverage period pro-
visions are not violated if the attending
provider, in consultation with the mother,
decides to discharge the mother or new-
born earlier. Under the interim final rules
and these final regulations, the attending
provider is defined by a functional analy-
sis of state licensure rules and the actual
performance of care. Under this defini-
tion, the attending provider is restricted to
an individual who is licensed under appli-
cable state law to provide maternal or pe-
diatric care and who is directly responsi-
ble for providing such care to a mother or
newborn child. While the preamble to the
interim final rules noted that this definition
could include a nurse midwife or physician
assistant, the regulation itself does not pro-
vide a list of titles or positions that qualify
as attending providers.
Some comments requested that addi-
tional titles, such as pediatric nurse prac-
titioners, or nurse practitioners, be specif-
ically mentioned in the definition. While
positions with these titles may meet the
definition in many cases, as noted above,
the language of the regulation takes a func-
tional approach and does not provide a list
of titles or positions that qualify as attend-
ing providers. This functional approach
is more useful in addressing who the at-
tending provider is on an ongoing basis, as
specific position titles and responsibilities
may vary from location to location as well
as over time.
It was also suggested that the text of the
final regulations incorporate a clarifying
statement from the preamble of the interim
final rules that the definition of attending
provider does not include a plan, hospital,
managed care organization, or other issuer.
These final regulations adopt this sugges-
tion.
Compensation of Attending Provider
Several comments addressed the provi-
sions in the interim final rules that relate to
the compensation of physicians and other
attending providers. These provisions pro-
hibit plans and issuers from penalizing at-
tending providers who provide care in ac-
cordance with the regulations, and prohibit
plans and issuers from inducing attending
providers to provide care in a manner that
is inconsistent with the regulations. At the
same time, the statute specifies that plans
and issuers are still free to negotiate with
attending providers the level and type of
compensation for care furnished in accor-
dance with the regulations.
The comments requested greater speci-
ficity in the final regulations for distin-
guishing between the types of compen-
sation arrangements that are permissible
under the negotiation provision and those
that are impermissible under the prohibi-
tions against penalties and inducements.
One comment suggested that it is clear that
a bonus arrangement for obstetricians and
gynecologists contingent on the percent-
age of discharges within 24 hours would
not be permitted. The comment requested
confirmation that arrangements with a
more general focus would be permitted,
such as a global payment for prenatal care
and childbirth, or a bonus for a multi-spe-
cialty group including obstetricians and
gynecologists based on the utilization for
all patients served by the group. An-
other comment expressed a concern about
whether capitated arrangements are con-
sistent with the hospital length-of-stay
requirements.
The Departments devoted consider-
able resources over a sustained period of
time to develop rules that provide greater
specificity for distinguishing between
negotiated compensation arrangements
that would give attending providers an
incentive to deliver health care services
efficiently and arrangements that could
give providers an incentive to discharge
patients in contravention of the statute and
regulations. The great variety, complex-
ity, and mutability of such arrangements
3
would have required extensive rules that
at best were likely to impose heavy ad-
ministrative costs and yet were still of
only marginal value in clarifying what
arrangements would be permissible. For
this reason, the rules on compensation
arrangements for attending providers are
adopted unchanged from the interim final
rules.
3
Broad classes of examples include fee-for-service, capitation, productivity-based salary, incentive contracting, blended systems, prospective versus post-service payment, etc. Seee.g.,
Theory and Practice in the Designof Physician Payment Incentives, James C. Robinson (University of California, Berkley), The Milbank Quarterly, Vol. 79, No. 2, 2001;Regulation of
Managed Care Incentive Payments to Physicians, Stephen Latham (Boston University School of Law), 22 Am. J.L. & Med. 399;Blended Payment Methods in Physician Organizations
Under Managed Care, James C. Robinson, JAMA 1999;282:1258–1263;The Alignment and Blending of Payment Incentives Within Physician Organizations, JC Robinson, SM Shortell,
R Li, LP Casalino, T Rundall, Health Services Research Vol. 39, Issue 5, pages 1589–1606, Oct. 2004.
2008–47 I.R.B.1181November 24, 2008

The final regulations do not attempt to
provide guidance on this issue through ex-
amples. Certainly the bonus arrangement
describedinonecomment,basedonthe
percentage of discharges within 24 hours,
violates the prohibition against providing
inducements for early discharge. Such an
example is not included in the final regu-
lations to avoid the inference that anything
less blatant would be permissible. Exam-
ples of less blatant arrangements could be
similarly misleading, whether the conclu-
sion was that the arrangement was per-
missible or impermissible, since there are
bound to be differences between arrange-
ments that would have been described in
the regulations and any actual arrangement
foranattendingprovider,andinsome
cases even minor differences could change
the result.
Authorization and Precertification
The interim final rules and these final
regulations provide, under paragraph (a),
that a group health plan or a health insur-
ance issuer may not require a physician or
other health care provider to obtain autho-
rization from the plan or issuer to prescribe
a hospital length of stay that is subject to
the general rule.
Under paragraph (b) of the interim fi-
nal rules and these final regulations, a plan
or issuer may not restrict benefits for part
of a stay that is subject to the general rule
in a way that is less favorable than a prior
portion of the stay. An example in the in-
terim final rules and these final regulations
illustrates that a plan or issuer is precluded
from requiring a covered individual to ob-
tain precertification for any portion of a
hospital stay that is subject to the general
rule if precertification is not required for
any preceding portion of the stay. How-
ever, the interim final rules do not prevent
a plan or issuer from requiring precertifica-
tion for any portion of a stay after 48 hours
(or 96 hours), or from requiring precertifi-
cation for an entire stay.
Under paragraph (c) of the interim final
rules and these final regulations, a plan
or issuer may not increase an individual’s
coinsurance for any later portion of a
48-hour (or 96-hour) hospital stay. An ex-
ample in the interim final rules and these
final regulations illustrates that plans and
issuers may vary cost-sharing in certain
circumstances, provided the cost-sharing
rate is consistent throughout the 48-hour
(or 96-hour) hospital length of stay.
One comment asked whether less fa-
vorable cost sharing for the 48-hour (or
96-hour) stay can be applied to covered in-
dividuals who fail to give advance notice
or notice upon admission for the services
or providers related to the stay, if such a
penalty applies in other hospitalization sit-
uations. This issue was addressed in Ex-
ample 2 of paragraph (c)(3) of the interim
final rules. This example is repeated in
the final regulations and illustrates that a
plan may require advance notice for ser-
vices or providers related to hospital length
of stay in connection with childbirth, in
order for a covered individual to obtain
more favorable cost sharing under the plan
or coverage. Such requirements may not
be used to deny an individual benefits for
any portion of the 48-hour (or 96-hour)
stay based on a determination of medical
necessity or appropriateness. Any vari-
ance in cost-sharing related to compliance
with a plan’s or an issuer’s advance no-
tice requirements must be applied consis-
tently throughout the 48-hour (or 96-hour)
stay. Under the principles set forth in the
rule and illustrated in this example, a plan
or issuer could generally apply less fa-
vorable cost sharing towards the hospital
lengthofstayinconnectionwithchild-
birth of an individual who failed to satisfy
the plan’s advance notice requirements, to
the extent permissible under the preexist-
ing condition rules in 26 CFR 54.9801–3,
29 CFR 2590.701–3, and 45 CFR 146.111
and 148.120.
4
Notice Requirements under ERISA and
the PHS Act
This section of the final regulations ad-
dresses the Newborns’ Act notice require-
ments under ERISA and the PHS Act. The
interim final rules, and these final regula-
tions, contain different notice provisions
for ERISA-covered group health plans,
nonfederal governmental plans, and health
insurance issuers in the individual market.
ERISA-covered group health plans are
required to comply with the ERISA notice
regulations, whether insured or self-in-
sured. Nonfederal governmental plans and
health insurance issuers in the individual
market are required to comply with the
PHS Act notice regulations. Because there
are fundamental differences between the
types of entities regulated under ERISA
as compared to the PHS Act, and in the
structure of the two acts, the notice re-
quirements in the ERISA regulations and
PHS Act regulations differ.
Notice Requirements under ERISA.The
interim final rules and these final regula-
tions require group health plans that are
subjecttoERISAtocomplywithsum-
mary plan description (SPD) disclosure re-
quirements at 29 CFR 2520.102–3(u). The
SPD rules generally require that partici-
pants and beneficiaries in a group health
plan be furnished an SPD to apprise them
of their rights and obligations. The rules
also prescribe the content of the SPD and
the manner and timing in which partici-
pants and beneficiaries are to be notified
of any material modification to the terms
of the plan or any change in the informa-
tion required to be included in the SPD.
In November 2000, the Department of
Labor finalized the SPD content regula-
tion (65 FR 70241) requiring that all group
health plans (including insured plans not
subject to the federal Newborns’ Act) pro-
vide language in the SPD that describes
the federal or state law requirements ap-
plicable to the plan or any health insur-
ance coverage offered under the plan relat-
ing to hospital lengths of stay in connec-
tion with childbirth for the mother or new-
born child. If federal law applies in some
areas in which the plan operates and state
law applies in other areas, the SPD should
describe the different areas and the fed-
eral or state law requirements applicable in
each. Model language for plans subject to
the federal Newborns’ Act’s requirements
is included in the SPD content regulation.
This change became applicable as of the
first day of the second plan year beginning
on or after January 22, 2001.
Some comments asked for clarification
about whether the notice can be provided
through electronic media, as an alterna-
tive to traditional paper disclosure. Un-
der ERISA, the notice can be provided
through electronic media if the plan com-
4
In order to avoid imposing an impermissible preexisting condition exclusion, plans and group health insurance issuers that require individuals to notify the plan or issuer of pregnancy within
a certain amount of time (for example, within the first trimester) must waive or modify the notice requirement for individuals who enroll in the plan after the time notice was required. This
also applies to individual market issuers with respect to federally eligible individuals they are required to enroll.
November 24, 200811822008–47 I.R.B.

plies with ERISA’s electronic disclosure
rules in 29 CFR 2520.104b–1.
Some comments requested that the
rules require plans to provide information
to patients and providers regarding who
has legal oversight with respect to the
Newborns’ Act and who to contact in the
event of a violation. However, this con-
cernisalreadyaddressedbycurrentreg-
ulation. Under 29 CFR 2520.102–3(t)(1)
of the SPD content rules, ERISA plans are
required to provide astatement of ERISA
rights in the SPD. Among other things, this
provision requires ERISA-covered plans
to provide information on the enforcement
of a participant or beneficiary’s rights and
who to contact if there are any questions
about the plan.
Notice Requirements under the PHS
Act.Nonfederal governmental plans.
The Newborns’ Act requires nonfederal
governmental plans to comply with the
Newborns’ Act notice requirements un-
der section 711(d) of ERISA as if section
711(d) applied to such plans.
The interim final rules and these final
regulations require plans that are subject to
the federal Newborns’ Act requirements to
provide a notice with specific language de-
scribing the federal requirements. Under
the interim final rules and these final reg-
ulations, if federal law applies in some ar-
eas in which the plan operates and state law
applies in others, the plan must provide the
appropriate notice toeach participant and
beneficiary who is covered by federal law.
Several comments on the interim fi-
nal rules objected that specific language
was required for the disclosure statement,
and suggested that the regulation instead
should have provided guidelines for plans
to base their own language on (such as lan-
guage that comports with the Department
of Labor’s sample language). However,
requiring specific language ensures the
substantive adequacy of the notices. Addi-
tionally, because many plans presumably
have already incorporated that mandatory
language into their documents since the
effective date of the interim final rules,
continuing to require that language is the
simplest approach.
As in the interim final rules, these final
regulations require nonfederal govern-
mental plans to provide notice not later
than 60 days after the first day of the
plan year following the effective date, re-
gardless of whether the plan had already
provided notice underthe Department of
Labor standards. This takes into account
the fundamental differences between the
nonfederal governmental plans regulated
under the PHS Act and the types of en-
tities regulated under ERISA. However,
with respect to the requirement that notice
be provided within that 60-day period,
the final regulationsinclude an exception
for plans with regard to participants and
beneficiaries for whom the plan has al-
ready provided notices in accordance with
the interim final regulations that are con-
sistent with these final regulations (such
as self-insured nonfederal governmental
plans that are subject to the federal New-
borns’ Act requirements and that have
already provided such notices).
Health insurance issuers in the indi-
vidual market.The Newborns’ Act re-
quires health insurance issuers in the in-
dividual market to comply with the New-
borns’ Act notice requirements under sec-
tion 711(d) of ERISA as if section 711(d)
appliedtosuchissuers. Thus,theinterim
final rules and these final regulations re-
quire individual market health insurance
issuers that provide benefits for hospital
lengths of stay in connection with child-
birth to include, in the insurance contract, a
rider, or equivalent amendment to the con-
tract, specific language that notifies poli-
cyholders of their rights under the New-
borns’ Act. The interim final rules and
these final regulations also require such is-
suers to provide this notice not later than
a specific time frame that is within a few
months after the effective date of the regu-
lations.
Several comments on the interim final
rules objected that specific language was
required for the disclosure statement and
suggested instead there should be guide-
lines for issuers to base their own lan-
guage on. However, requiring specific lan-
guage ensures the substantive adequacy of
the notices. Additionally, because issuers
presumably have already incorporated that
language into their documents since the ef-
fective date of the interim final rules, con-
tinuing to require that same language is the
simplest approach.
These final regulations retain the notice
exception in the interim final rules for is-
suers that are subject only to state insur-
ance law requirements regarding hospital
lengths of stay following childbirth.
Applicability in States
The statute and the interim final rules
include an exception to the Newborns’
Act requirements for health insurance
coverage in certain states. Specifically,
the Newborns’ Act and the interim final
rules do not apply with respect to health
insurance coverage if there is a state law
that meets any of the criteria
5
that follow:
•The state law requires health insurance
coverage to provide at least a 48-hour
(or 96-hour) hospital length of stay in
connection with childbirth;
•The state law requires health insur-
ance coverage to provide for maternity
and pediatric care in accordance with
guidelines established by the Ameri-
can College of Obstetricians and Gy-
necologists, the American Academy
of Pediatrics, or any other established
professional medical association; or
•The state law requires that decisions
regarding the appropriate hospital
length of stay in connection with child-
birth be left to the attending provider
in consultation with the mother. The
interim final rules and these final reg-
ulations clarify that state laws that
require the decision to be made by the
attending provider with the consent of
the mother satisfy this criterion.
Although this exception applies with re-
spect to insured group health plans, it does
not apply with respect to a group health
plan to the extent the plan provides ben-
efits for hospital lengths of stay in con-
nection with childbirth other than through
health insurance coverage. Accordingly,
self-insured plans in all states generally
arerequiredtocomplywiththefederalre-
quirements (except those nonfederal gov-
ernmental plans that have opted out of the
PHS Act requirements).
These final regulations repeat the
statute and the interim final rules with one
5
HHS has the responsibility to enforce the federal Newborns’ Act with regard to issuers in states that do not have one of the three types of state laws described in the Newborns’ Act. As of
the publication of these final regulations, the only state in which HHSis enforcing the Newborns’ Act with respect to issuers is Wisconsin.
2008–47 I.R.B.1183November 24, 2008

clarification. With respect to the second
criterion above (professional guidelines),
the statute only addresses the period fol-
lowing a vaginal delivery or a caesarean
section. Accordingly,although guidelines
issued by professional medical associa-
tions such as the American College of
Obstetricians and Gynecologists (ACOG)
cover a spectrum of care both before and
after childbirth, the only relevant guide-
lines for this purpose are those pertaining
to care following childbirth. Therefore,
the final rules include an express clari-
fication that State law need only require
coverage in accordance with professional
guidelines that deal with care following
childbirth. Guidelines relating to other
issues are not relevant for this purpose.
One comment to the interim final rules
supported the criteria used in those rules
for determining whether the federal New-
borns’ Act applies in a given state. How-
ever, another comment objected to the fact
that issuers in states that have enacted one
of the three types of state laws described
in the federal Newborns’ Act would ar-
guably be exempt from several of the fed-
eral Act’s requirements, such as the prohi-
bitions on offering incentives to providers
to induce them to provide care in a manner
inconsistent with the Act. This comment
asked us to reconsider whether the regula-
tions should provide such a broad excep-
tion from the federal Act’s requirements in
such states. The statutory language does
not require state law toinclude all the fed-
eral provisions, such as the anti-incentive
provisions, in order for health insurance
coverage in that statetobeexceptedfrom
the federal requirements. In light of this
flexibility, these final regulations retain the
exception from the interim final rules.
Applicability Date
These final rules apply to group health
plans, and health insurance issuers offer-
ing group health insurance coverage, for
plan years beginning on or after January
1, 2009. The final rules for the individ-
ual market apply with respect to health in-
surance coverage offered, sold, issued, re-
newed, in effect, or operated in the individ-
ual market on or after January 1, 2009. Un-
til the applicability date for this regulation,
plans and issuers are required to continue
to comply with the corresponding sections
of the regulations previously published in
theFederal Register(63 FR 57546) and
other applicable regulations.
III. Economic Impact and Paperwork
Burden
Summary — Department of Labor and
Department of Health and Human
Services
The Newborns’ Act provisions gener-
ally prohibit group health plans and group
health insurance issuers from limiting hos-
pital lengths of stay in connection with
childbirthtolessthan48hoursforvagi-
nal deliveries and 96 hours for cesarean
sections and from requiring a health care
practitioner to obtain preauthorization for
such stays. For insured coverage, the New-
borns’ Act allows any state law, meet-
ing one of three criteria, to take its place.
The Departments have crafted these regu-
lations to secure the Act’s protections in as
economically efficient a manner as possi-
ble, and believe that the economic benefits
of the regulations justify their costs.
6
The primary economic benefits associ-
ated with securing these minimum lengths
of stay derive from the reduction in com-
plications linked to premature discharge
of mothers and newborns. Complications
that are easily treated and readily identi-
fiable, like excessive bleeding and infec-
tion in new mothers and dehydration and
hyperbilirubinemia in their newborns, are
common causes for readmission following
a premature discharge. These complica-
tions and the subsequent readmissions are
expensive and cause avoidable suffering
for mothers and their newborns.
By eliminating the need to obtain
preauthorization for affected stays, the
Act provides affectedindividuals with in-
creased access to the health care system.
Increased access fosters timelier and fuller
medical care, better health outcomes, and
improved quality of life. This is especially
true for certain individuals affected by the
Newborns’ Act provisions. For example,
lower-income individuals, when denied
coverage for the full length of stay, are
more likely to forego care for financial
reasons. When adverse health outcomes
result, costs for the individual and the plan
are high. For these individuals especially,
this requirement is more likely to mean
receiving timely, quality postnatal care,
and living healthier lives.
Any mandate to increase the richness
of health benefits, however, adds to the
cost of health coverage. Plans can miti-
gate costs by increasing cost-sharing or by
reducing non-mandated benefits. This in
turn shifts the economic burden of the reg-
ulation to plan participants, and may in-
duce some employers and employees, as
well as those in the individual insurance
market, to drop coverage. The cost of en-
acting federal minimum stay regulation is
estimated to fall between $139 and $279
million annually.
7
However, as this consti-
tutes a small fraction of one percent of to-
tal health care expenditures, it would most
likely be a small, possibly negligible, fac-
tor in most employers’ decisions to offer
health coverage and individuals’ decisions
to enroll.
While the interim final regulations clar-
ified several provisions within the statute,
this action serves primarily to provide
the certainty associated with a final rule
for the regulated community, as well as
update the cost of the regulation, adjust-
ing for changes in the landscape of the
community. Because these regulations
are being published several years after the
Newborns’ Act’s passage and minimal in-
terpretation of the statutory language was
required, the regulatory implementation
costs should be negligible. Costs of the
final regulation are detailed below in the
section entitled “Unified Analysis of Costs
and Benefits.” Benefits of the regulation
are also discussed in that section at length,
although because the benefits primarily
involve quality of life improvements, the
Departments have not attempted to quan-
tify them. They do, however, believe them
to be sufficiently large so as to justify the
cost of the regulation.
6
The Newborns’ Act still requires that insured plans disclose a notice outlining participants’ rights regardinghospital lengths of stay related to childbirth. Nonetheless, final regulations related
to that notice were published separately (see 65 FR 70266, Nov. 21, 2000) and so those costs are not included herein.
7
The vast majority of this cost is attributable to the impact of the statute. ($14 million is the upper bound cost attributable to the exercise of regulatory discretion.) Moreover, there are no
increased costs attributable to any new exercise of regulatory discretion in the final rule. Instead, the final rule repeats the interpretations of the interim final rule. Any increased costs over the
1998 estimate in the interim final rules are attributable to economic factors, such as increased cost of care (from 1996 to 2007 dollars), increased number of births, and increased number of
participants and beneficiaries covered by self-insured plans to which the regulations apply.
November 24, 200811842008–47 I.R.B.

Executive Order 12866 — Department
of Labor and Department of Health and
Human Services
Under Executive Order 12866, the De-
partments must determine whether a regu-
latory action is “significant” and therefore
subject to the requirements of the Execu-
tive Order and subject to review by the Of-
fice of Management and Budget (OMB).
Under section 3(f), the order defines a “sig-
nificant regulatory action” as an action that
is likely to result in a rule (1) having an
annual effect on the economy of $100 mil-
lion or more, or adversely and materially
affecting a sector of the economy, produc-
tivity, competition, jobs, the environment,
public health or safety, or state, local or
tribal governments or communities (also
referred to as “economically significant”);
(2) creating serious inconsistency or oth-
erwise interfering with an action taken or
planned by another agency; (3) materially
altering the budgetary impacts of entitle-
ment grants, user fees, or loan programs
or the rights and obligations of recipients
thereof; or (4) raising novel legal or pol-
icy issues arising out of legal mandates, the
President’s priorities, or the principles set
forth in the Executive Order.
Pursuant to the terms of the Executive
Order, it has been determined that this
action is “economically significant” and
is subject to OMB review under Section
3(f) of the Executive Order. Consistent
with the Executive Order, the Departments
have assessed the costs and benefits of this
action. The Departments’ assessment, and
the analysis underlying the assessment,
is detailed below. The Departments per-
formed a comprehensive, unified analysis
to estimate the costs and benefits attrib-
utable to the regulations for purposes of
compliance with Executive Order 12866,
the Regulatory Flexibility Act, and the
Paperwork Reduction Act.
These final regulations are needed to
provide certainty for the affected commu-
nity, as well as clarify the economic bur-
den that the Newborns’ Act will place on
health plans and their participants. The
Departments believe that this regulation’s
benefits will justify its costs. This belief
is grounded in the assessment of costs and
benefits that is summarized earlier and de-
tailed below.
Regulatory Flexibility Act — Department
of Labor and Department of Health and
Human Services
The Regulatory Flexibility Act
(5 U.S.C. 601et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the notice
and comment requirements of section
553(b) of the Administrative Procedure
Act (5 U.S.C. 551et seq.) and likely to
have a significant economic impact on
a substantial number of small entities.
Unless an agency certifies that a final
rule will not have a significant economic
impact on a substantial number of small
entities, section 604 of the RFA requires
that the agency present a final regulatory
flexibility analysis (FRFA) at the time
of the publication of the notice of final
rulemaking describing the impact of the
rule on small entities. Small entities
include small businesses, organizations,
and governmental jurisdictions.
Because the 1998 rules were issued as
interim final rules and not as a notice of
proposed rulemaking, the RFA did not ap-
ply and the Departments were not required
to either certify that the rule would not
have a significant impact on a substan-
tial number of small entities or conduct
a regulatory flexibility analysis. The De-
partments nonetheless crafted those regu-
lations in careful consideration of effects
on small entities, and conducted an analy-
sis of the likely impact of the rules on small
entities. This analysis was detailed in the
preamble to the interim final rule.
For purposes of this discussion, the
Departments consider a small entity to
be an employee benefit plan with fewer
than 100 participants. Pursuant to the
authority of section 104(a)(3) of ERISA,
the Department of Labor has previ-
ously issued at 29 CFR 2520.104–20,
2520.104–21, 2520.104–41. 2520.104–46
and 2520.104b–10, certain simplified re-
porting provisions and limited exemptions
from reporting and disclosure require-
ments for small plans, including unfunded
or insured welfare plans covering fewer
than 100 participants and which satisfy
certain other requirements.
Further,whilesomesmallplansare
maintained by large employers, most are
maintained by small employers. Both
small and large plans may enlist small
third party service providers to perform
administrative functions, but it is gener-
ally understood that third party service
providers shift their costs to their plan
clients in the form of fees. Thus, the
Departments believe that assessing the
impact of this final rule on small plans is
an appropriate substitute for evaluating
the effect on small entities. The defini-
tion of small entity considered appropriate
for this purpose differs, however, from
a definition of small business based on
size standards promulgated by the Small
Business Administration (SBA) (13 CFR
121.201) pursuant to the Small Business
Act (5 U.S.C. 631et seq.). The Depart-
ment of Labor solicited comments on the
use of this standard for evaluating the im-
pact of the proposed regulations on small
entities. No comments were received with
respect to this standard.
The Departments believe that the final
regulation will not have a significant eco-
nomic impact on a substantial number of
small entities. The direct costs of restrict-
ing short stay policies is estimated to fall
between $15 million and $31 million for
small plans which amount to a per-partic-
ipant cost of between nine and nineteen
dollars for those plans affected, or a small
fraction of one percent of total small plan
expenditures.
8
The Departments estimate that prior
to the Act, 115,000 small plans with 1.6
million participants would have restricted
lengths of stay in connection with child-
birth or required preauthorization for such
stays.
9
While this represents just 5 percent
of all small plans, the Departments believe
8
Departments’ estimates using the 2005 Medical Expenditures Panel Survey Household Component (MEPS-HC), the 2006 Medical Expenditures Panel Survey Insurance Component
(MEPS-IC) and the National Centers for Disease Control and Prevention (CDC) National Hospital Discharge Survey: 2005 Annual Summary with Detailed Diagnosis and Procedure Data
determined that of participants affected by the regulation, 11 percent were enrolled in small plans. Costs born by small plans were 11 percent of all costs.
9
Estimates are based on the 2006 MEPS-IC. It should be noted, however, that thePregnancy Discrimination Act of 1978 allows firms with less than 15 employees that offer health insurance
to exclude maternity care. The 2000 Mercer/Foster Higgins National Survey of Employer Sponsored Health Plans found that 7 percent of firms with 10–24employees did not offer such
benefits, but the survey did not examine smaller firms. Rough estimates by the Departments suggest that the share of firms with 9 or fewer employees that offer health benefits but exclude
maternity benefits is 21 percent. As the cost of these benefits rises, this share is likely to increase which, while having a small effect on the number of participants affected by the regulation,
might significantly decrease the number of small plans affected by the regulation.
2008–47 I.R.B.1185November 24, 2008

it may represent a substantial number of
small entities.
Paperwork Reduction Act — Department
of Labor and Department of Health and
Human Services
1. Department of Labor
These rules contain no new information
collection requirements that are subject to
review and approval by OMB under the
Paperwork Reduction Act of 1995 (Public
Law 104–13, 44 U.S.C. Chapter 35). The
Department of Labor reported the infor-
mation collection burdens associated with
the Newborns’ Act in the interim rules (In-
terim Rules Amending ERISA Disclosure
Requirements for Group Health Plans) im-
plementing section 711(d) of ERISA that
were published in the Federal Register on
April 8, 1997 (62 FR 16979). OMB ap-
proved the information collection under
OMB Control Number 1210–0039, expir-
ing on March 31, 2010.
2. Department of Health and Human
Services
These rules contain no new information
collection requirements that are subject to
review and approval by OMB under the
Paperwork Reduction Act of 1995 (Public
Law 104–13, 44 U.S.C. Chapter 35). HHS
reported the information collection bur-
dens associated with the Newborns’ Act
in the interim rules (Information Collec-
tion Requirements Referenced in HIPAA
for the Group Market, Supporting Regula-
tions 45 CFR 146), published in theFed-
eral Registeron April 8, 1997. These col-
lection requirements were approved under
OMB Control Number 0938–0702, expir-
ing on August 31, 2009.
Special Analyses — Department of the
Treasury
Notwithstanding the determinations of
the Departments of Labor and of Health
and Human Services, for purposes of the
Department of the Treasury it has been de-
termined that this Treasury decision is not
a significant regulatory action. Therefore,
a regulatory assessment is not required.
It has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply to
these Treasury regulations, and, because
these regulations do not impose a col-
lection of information on small entities,
a Regulatory Flexibility Analysis under
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to
section 7805(f) of the Code, the notice
of proposed rulemaking preceding these
regulations was submitted to the Small
Business Administration for comment on
its impact on small business.
Congressional Review Act
These regulations are subject to the
Congressional Review Act provisions of
the Small Business Regulatory Enforce-
ment Fairness Act of 1996 (5 U.S.C. 801
et seq.) and have been transmitted to
Congress and the Comptroller General for
review. These regulations, however, are
considered a “major rule,” as that term is
defined in 5 U.S.C. 804, because they are
likely to result in an annual effect on the
economy of $100 million or more.
Unfunded Mandates Reform Act
For purposes of the Unfunded Man-
dates Reform Act of 1995 (Public Law
104–4), as well as Executive Order 12875,
these regulations do not include any fed-
eral mandate that may result in expen-
ditures by state, local, or tribal govern-
ments,
10
however, they include mandates
which may impose an annual burden of
$100 million or more on the private sec-
tor, updated annually for inflation. After
applying the most current gross domestic
product implicit price deflator in 2008, that
threshold is approximately $130 million.
Federalism Statement Under Executive
Order 13132 — Department of Labor
and Department of Health and Human
Services
Executive Order 13132 outlines funda-
mental principles of federalism. It requires
adherence to specific criteria by federal
agencies in formulating and implementing
policies that have “substantial direct ef-
fects” on the States, the relationship be-
tween the national government and States,
or on the distribution of power and re-
sponsibilities among the various levels of
government. Federal agencies promulgat-
ing regulations that have these federalism
implications must consult with State and
local officials, and describe the extent of
their consultation and the nature of the
concerns of State andlocal officials in the
preamble to the regulation.
In the Departments’ view, these final
regulations have federalism implications
because they may have substantial direct
effects on the States, the relationship be-
tween the national government and States,
or on the distribution of power and re-
sponsibilities among the various levels
of government. However, in the Depart-
ments’ view, the federalism implications
of these final regulations are substantially
mitigated because, with respect to health
insurance issuers, all but one of the States
have requirements that prescribe benefits
for hospital lengths of stay in connection
with childbirth that satisfy the Newborns’
Act hospital length of stay requirements.
In general, through section 514, ERISA
supersedes State laws to the extent that
they relate to any covered employee bene-
fit plan, but preserves State laws that regu-
late insurance. At the same time, however,
ERISA prohibits States from regulating
a plan as an insurance company. HIPAA
addedanewsectiontoERISA(aswellas
to the PHS Act and the Code) narrowly
preempting State requirements for issuers
of group health insurance coverage.
11
HIPAA’s conference report states that the
conferees intended only the narrowest pre-
emption of State laws with regard to health
insurance issuers. H.R. Conf. Rep. No.
736, 104
th
Cong. 2d Session 205 (1996).
The Newborns’ Act also added a new
sectiontoERISA(andtothePHSAct
and the Code) which provides that the
federal requirements applicable to group
health plans and health insurance issuers
concerning hospital lengths of stay for
mothers and newborns following child-
birth do not apply if State law meets one
10
Nonfederal governmental plans can opt-out of these requirements and it was assumed that those States that had rules in place that supplanted the Newborns’ Act (that is, all States except
one) would.
11
The Newborns’ Act was incorporated into the administrative framework established by HIPAA.
November 24, 200811862008–47 I.R.B.

or more of three specific criteria in the
statute.
12
The accompanying conference
report states that it is the intent of the
conferees that States may impose more fa-
vorable requirements for the treatment of
maternity coverage under health insurance
coverage than required by the Newborns’
Act. H.R. Conf. Rep. No. 104–812, 104
th
Cong. 2d Session 88 (1996).
Guidance conveying the Newborns’
Act hospital length of stay requirements
was published in theFederal Registeron
October 27, 1998 (63 FR 57546). These
final regulations clarify and implement the
statute’s minimum standards and do not
significantly reduce the discretion given
the States by the statute. Moreover, the
Departments understand that all but one
State have requirements that prescribe
benefits for hospital lengths of stay in
connection with childbirth that satisfy the
Newborns’ Act requirements.
The Newborns’ Act modified HIPAA’s
framework to provide that the States have
primary responsibility for enforcement of
the provisions of the Newborns’ Act as
they pertain to issuers, but that the Secre-
tary of Health and Human Services must
enforce any provision that a State fails to
substantially enforce. To date, CMS en-
forces the Newborns’ Act hospital length
of stay requirements in only one State.
When exercising its responsibility to en-
force the Newborns’ Act provisions, CMS
works cooperatively with the State for the
purpose of addressing the State’s concerns
and avoiding conflicts with the exercise
of State authority. CMS has developed
procedures to implement its enforcement
responsibilities, and to afford the States
the maximum opportunity to enforce the
Newborns’ Act requirements in the first in-
stance. CMS procedures address the han-
dling of reports that States may not be en-
forcing the Newborns’ Act requirements,
and the mechanism for allocating respon-
sibility between the States and CMS. In
compliance with Executive Order 13132’s
requirement that agencies examine closely
any policies that may have federalism im-
plications or limit the policymaking dis-
cretion of the States, the Department of La-
bor and CMS have consulted and worked
cooperatively with affected State and local
officials.
For example, the Departments sought
and received input from State insurance
regulators and the National Association
of Insurance Commissioners (NAIC). The
NAIC is a non-profit corporation estab-
lished by the insurance commissioners of
the 50 States, the District of Columbia,
and the four U.S. territories. In most States
the insurance commissioner is appointed
by the governor; in approximately 14
States, the insurance commissioner is an
elected official. Among other activities,
it provides a forum for the development
of uniform policy when uniformity is ap-
propriate. Its members meet, discuss and
offer solutions to mutual problems. The
NAIC sponsors quarterly meetings to pro-
vide a forum for the exchange of ideas and
in-depth consideration of insurance issues
by regulators, industryrepresentatives and
consumers. CMS and Department of La-
bor staff have consistently attended these
quarterly meetings to listen to the views of
the State insurance departments.
In addition, the Departments informally
consulted with the NAIC in developing
the interim final regulations. Through
the NAIC, the Departments sought and
received the input of State insurance de-
partments regarding preemption of State
laws, applicability of the Newborns’ Act
provisions, and certain insurance indus-
try definitions (e.g., attending provider).
In general, these final regulations do not
change the interim final rules. Signif-
icantly, the Departments received only
eleven formal comment letters on the in-
terim final regulation, none of which were
from or on behalf of the NAIC or any of
the States.
The Departments have also cooperated
with the States in several ongoing outreach
initiatives, through which information is
shared among federal regulators, State
regulators and the regulated community.
In particular, the Department of Labor has
established a Health Benefits Education
Campaign with more than 70 partners,
including CMS, NAIC and many business
and consumer groups. CMS has spon-
sored conferences with the States — the
Consumer Outreach and Advocacy con-
ferences in March 1999 and June 2000,
and the Implementation and Enforcement
of HIPAA National State-Federal Con-
ferences in August 1999, 2000, 2001,
2002, and 2003. Furthermore, both the
Department of Labor and CMS websites
offer links to important State websites and
other resources, facilitating coordination
between the State and federal regulators
and the regulated community.
Throughout the process of developing
these regulations, to the extent feasible
within the specific preemption provisions
of HIPAA and the Newborns’ Act, the De-
partments have attempted to balance the
States’ interests in regulating health insur-
ance issuers, and Congress’ intent to pro-
vide uniform minimum protections to con-
sumers in every State. By doing so, it is
the Departments’ view that they have com-
plied with the requirements of Executive
Order 13132.
Pursuant to the requirements set forth
in Section 8(a) of Executive Order 13132,
and by the signatures affixed to these
final regulations, the Departments cer-
tify that the Employee Benefits Security
Administration and the Centers for Medi-
care & Medicaid Services have complied
with the requirements of Executive Order
13132 for the attached Final Regulations
for Group Health Plans and Health In-
surance Issuers Under the Newborns’
and Mothers’ Health Protection Act (RIN
1210–AA63 and RIN 0938–AI17), in a
meaningful and timely manner.
Unified Analysis of Costs and Benefits
1. Introduction
The Newborns’ Act’s provisions gener-
ally prohibit group health plans and health
insurance issuers from: 1) limiting hospi-
tal lengths of stay in connection with child-
birthtolessthan48hoursforvaginalde-
liveries and 96 hours for cesarean sections,
and 2) requiring preauthorization for the
48/96 hour stays. The primary effect and
intent of the provision is to reduce postpar-
tum complications associated with prema-
ture discharge.
12
The federal requirements concerning hospital lengths of stay in connection with childbirth do not apply with respect to health insurance coverage ifstate law requires (1) such coverage to
provide for at least a 48 hour hospital length of stay following a vaginal delivery and at least a 96 hour length of stay following a delivery by cesarean section, (2) such coverage to provide for
maternity and pediatric care in accordance with guidelines established by the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, or other established
professional medical associations, or (3) in connection with such coverage for maternitycare, that the hospital length of stay for such care is left to the decision of (or is required to be made
by) the attending provider in consultation with the mother.
2008–47 I.R.B.1187November 24, 2008

These regulations draw on the Depart-
ments’ authority to clarify and interpret
the Newborns’ Act’s statutory provisions
in order to secure the protections intended
by Congress for newborns and mothers.
The Departments crafted them to satisfy
this mandate in as economically efficient
a manner as possible, and believe that the
economic benefits of the regulations jus-
tify their costs. This conclusion takes into
account both the effect of the statute and
the impact of the discretion exercised in
the regulations.
This regulation is needed to clarify and
interpret the Newborns’ Act provisions un-
der section 711 of ERISA, sections 2704
and 2751 of the PHS Act, and section 9811
of the Internal Revenue Code and to ensure
that group health plans and health insur-
ance issuers subject to these rules do not
impermissibly restrict benefits or require
preauthorization for 48-hour or 96-hour
hospital lengths of stay in connection with
childbirth.
2. Costs and Benefits of the Statute
The Departments provide qualitative
assessments of the nature of the costs and
benefits that are expected to derive from
the statutory provisions of the Newborns’
Act. In addition, the Departments provide
summaries of any credible, empirical esti-
mates of these effects that are available.
In order to determine how many plan
participants could benefit from the New-
borns’ Act provision, the Departments
considered the estimated 2.8 million births
in 2005 by women with private health
insurance.
13
Of these, approximately
55.0 percent are assumed to be normal,
healthy deliveries, and therefore eligible
for early discharge.
14
Because legisla-
tion has been passed in every state but
Wisconsin, the Departments limited their
analysis to participants in self-insured
group health plans throughout the country
and all health plans within Wisconsin.
Finally, because Health Maintenance Or-
ganizations (HMOs) have traditionally
had more aggressive short-stay policies,
the share of workers enrolled in HMOs
versus commercial plans was taken into
account as were the share of those plans
with short-stay policies.
15
Based on these assumptions, approx-
imately 328,000 births or roughly 22
percent of healthy births by privately in-
sured women would be affected by the
provision.
16
If each woman then stayed the
maximum period outlined in the statute,
approximately 348,000 additional days
of hospital care would be required.
17
As-
suming hospitals charge $800 per day for
postpartum care, the annual cost of the
provision would be $279 million: $1.7
million of which would be attributable to
the individual market in Wisconsin; the
remaining $276.9 million would be attrib-
utable to the group market in Wisconsin
and self-funded plans throughout the coun-
try. However, because the statute does not
require a 48 or 96-hour stay, but instead
gives the decision-making authority to the
attending physician in consultation with
the mother, it is expected that not all of
these births will result in additional hos-
pital time. If only one-half of affected
mothers had their stays extended by the
full amount, the annual cost of the provi-
sion would be $139 million, less than $1
million of which would be attributable to
the individual market of Wisconsin.
18
While the Departments estimate that
the cost of the NMHPA is as much as
$279 million annually, health plans are
estimated to have spent more than $775
billion in 2007 to cover approximately
201.7 million privately insured individu-
als.
19
Therefore, the upper estimate of the
costs under the Newborns’ Act’s provi-
sions represent a very small fraction of one
percent of total health plan expenditures.
Moreover, the cost of this provision is
likely to decline in the future, despite in-
creases in overall health care spending.
Since the statute was passed, there has
been a significant increase in the number
of cesarean births, compared to vaginal
births. While traditionally cesarean births
are associated with higher risk, an increas-
ing number of women are now electing to
have the procedure.
20
Women who elect to
have a cesarean would presumably have a
lower risk than those for whom the proce-
dure is required and therefore may not re-
13
D
epartments’ estimate based on the 2005 MEPS-HC and the 2005 CDC Survey.
14
The CDC reported that of the 4.0 million births in 2005, 2.2 million, or 55.0 percent of those newborns were categorized as without any illness or risk-related diagnosis (e.g., jaundice,
respiratory distress, disorders relating to short gestation and low birth weight). No data are available on whether health of newborns varies by mothers’ insurance status, although insured
mothers are more likely to receive prenatal care and this would be expected to positively affect the share of “healthy” births (see Susan Egerteret al, “Timing of Insurance Coverage and Use
of Prenatal Care Among Low-Income Women,”American Journal of Public Health, v. 92(3): 423–427).
15
Julie A. Gazmararian & Jeffrey Koplan found in, “Length-of-Stay After Delivery: Managed Care versus Fee for Service,”Health Affairs, v. 15(4): 74–80, that 35.9 percent of enrollees
in commercial plans were discharged within one day after delivery compared to 57.7 percent from commercial HMOs. The shares of individuals enrolled in HMOs at self-insured and
fully-insured plans were taken from the 2007 Kaiser Family Foundation’s Survey of Employer Sponsored Insurance.
16
The number of women age 10–54 with private insurance was estimated using the 2005 MEPS-HC. Fertility rates for different age brackets were taken from the 2005 CDC National Hospital
D
ischarge Survey and were interacted with the number of privately insured women to ascertain the number of births by insured women. This was then interacted with the share of infants that
w
ere born healthy, as reported in the 2005 CDC report, to determine the number of healthy births to privately-insured women.
T
o restrict the number of privately-insured woman having healthy births to those with ESI, the share of all privately insured women, age 10–54, that hadESI was taken from the 2007 March
C
PS and interacted with the above number. To then discern the number of births that would be covered by the regulation, the 2006 MEPS-IC was used to ascertain the share of employees
in ESI that were in self-insured plans that had maternal coverage. This number was further interacted by the share of employees in the share of those employees in HMO versus non-HMO
health plans as provided by the 2007 Kaiser Family Foundation’s Employer Health Benefits Survey.
Interacting all of these numbers results in the 328,000 number cited in the text.
17
Based on 1995 discharge rates, approximately 94 percent of the 328,000 births required one additional day to meet the maximum period outlined by the statute; 6 percent required two
additional days.
18
The Congressional Budget Office (CBO) analyzed Senate proposal S.969, which was an earlier version of the Newborns’ Act. CBO estimated 900,000 insured births had stays shorter than
the minimum specified in the bill, which would result in 400,000 additional inpatient days and an additional 200,000 additional out-patient visits at an annual cost of $360 million in 2007
dollars (or $800 for each additional day of inpatient care; $200 for outpatient care). The Departments’ estimate is significantly less, primarily due to: 1) a large number of states either clarifying
existing policies for short-stay deliveries or enacting new ones which supersede the federal statute for all but self-insured plans; and 2) the CBO estimates included costs for follow-up visits,
a requirement that was dropped from the federal statute.
19
The Departments’ estimate is based on the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) projected measure of total personal health expenditures by private
health insurance in 2007.
20
The share of all births that are cesarean rose from 20.7 percent in 1996 to an estimated 31.3 percent in 2005 (CDC (2005). “National Hospital Discharge Survey”Vital and Health Statistics,
Series 13 (162)). A study by Health Grades Inc. found a 36.6 percent increase in the number of “patient choice” cesarean sections between 2001 and 2003.
November 24, 200811882008–47 I.R.B.

quire the prescribed 96-hour recovery pe-
riod detailed in the statute.
21
If this trend
continues, the burden of this statute should
lessen.
The primary statutory economic bene-
fits associated with the Newborns’ Act’s
provisions derive from an increase in ac-
cess to health plan coverage for postpar-
tum care and monitoring of mothers and
their newborns. Individuals without cov-
erage for this care and monitoring are less
likely to remain in the hospital for fear of
incurring expenses that must be paid for
‘out-of-pocket.’ Lower-income individu-
als are more likely to forego care not cov-
ered by their insurance. Foregoing this
care and monitoring increases the risk of
adverse health outcomes, which in turn
generates higher medical costs. Much of
these costs may be shifted to public fund-
ing sources (and therefore to taxpayers) or
to other payers.
22
Foregoing appropriate care can also
negatively affect the quality of life. Im-
proved access to health coverage for
mothers and newborns will lead to more
appropriate medical care and monitoring,
better health outcomes, and improved
quality of life.
23
Denied coverage, indi-
viduals must choose whether to pay for the
extra day(s) in the hospital and potentially
suffer economic hardship or forego the
care and monitoring, creating a risk of an
adverse health outcome. Gaining cover-
age will sometimes mean receiving high
quality care and living healthier lives.
24
The provisions of the Newborns’ Act
and its regulation generally apply to both
group health plans and health insurance is-
suers. While the costs of the Newborns’
Act are substantial, economic theory pre-
dicts that issuers will pass their costs of
compliance back to plans, and that plans
may shift some or all of issuers’ and their
own costs of compliance to participants
either through increases in premiums, in-
creased cost-sharing, or reducing the rich-
ness of non-mandated health benefits.
25
While 74 million individuals are en-
rolled in group or private health plans,
only 15 million individuals are enrolled
in plans that had policies affected by the
Newborns’ Act. Of these, only 328,000
individuals are expected to be annually
directly impacted and receive additional
coverage they were previously denied or
restricted for 48 or 96-hour hospital stays
following childbirth. Though these bene-
fits are received by a small number of plan
enrollees, the costs aredistributed broadly
among all plan participants. As a result,
the cost of the Newborns’ Act per individ-
ual enrollee is expected to be minimal —
between 9 and 19 dollars per person for
those enrolled in affected plans.
26
While it
is possible that some enrollees on the mar-
gin will decline coverage in response to
cost increases, the number of those acting
in such a manner is expected to be negli-
gible. As such, the benefits of this statute
are believed to justify its costs.
3. Costs and Benefits of the Rules
Applicable to the Newborns’ Act
The interim final rule clarified when
a stay begins under the Newborns’ Act.
Prior to this, private health plans could use
the expectant mother’s admittance time to
determine the required stay, an assump-
tion that consistently reduced the num-
ber of women experiencing stays less than
thoseprescribedbythestatuteby5per-
21
Most research comparing complication rates of cesarean to vaginal births focus on those women who previously had a cesarean section, as insufficientdata are available to compare initial
vaginal versus initial elected cesarean deliveries. As such, it is difficult to discern how the medically advisable stay of an elected cesarean section compares to that of anuncomplicated vaginal
birth. However, there is much agreement that emergency cesarean sections, which typically follow a lengthy labor, are far more dangerous to mother and child than the elected variety. Given
the Newborns’ Act’s prescribed 96-hour stays forcesarean births when elected cesareans comprised a smaller share of all cesareans, it would be reasonable to expect that the stays for elected
cesareans may fall over time.
22
For m
ore information on health choices of lower-income individuals, see: Trude, Sally (2003). “Patient Cost Sharing: How Much is Too Much,”Health System Change Issue Brief, no. 72
(Dece
mber).
23
For more detailed information, see: O’Brien, Ellen (2003). “Employer Benefits from Workers’ Health Insurance,”Milbank Quarterly, Vol. 1 No. 1. O’Brien provides an extensive analysis
of the literature on benefits accruing to employers from offering health benefits and the costs to employers of unhealthy employees, as well as information on studies demonstrating that poor
health may be related to lower productivity. In particular, she discusses studies that have examined the effects on workplace productivity of specific health conditions and shows that poor
health reduces workers’ productivity at work, and that effective health care treatments can reduce productivitylosses and may even pay for themselves in terms of increased productivity.
24
Research on the benefits of longer stays has been somewhat mixed. Some studies show short-stays to be correlated with decreased follow-up care and increased re-hospitalization, particu-
larly for low-income families, which will ultimately increase societal costs (for further discussion, see: Galbraith, Alison A.et al.(2003) “Newborn Early Discharge Revisited: Are California
Newborns Receiving Recommended Postnatal Services?”Pediatrics, vol. 111 (2): p. 364–371; Lock, Michael & Joel G. Ray. (1999) “Higher Neonatal Morbidity after Routine Hospital
Discharge: Are We Sending Newborns Home Too Early?”Canadian Medical Association Journal, vol. 161 (3): p. 249–253; Malkin, Jesse D.et al.(2003) “Postpartum Length of Stay and
Newborn Health: A Cost-Effectiveness Analysis,”Pediatrics, vol. 111 (4): p. 316–322).
Since the statutes have been in place, other studies have argued that higher re-hospitalization rates found in short-stay newborns are due to more frequent post-stay evaluations in the four
days following birth, considered the critical window for ascertaining newborn health, as mandated in health plans. Once new regulations were passedextending stays, health plans reduced
their follow-up care policies and newborns were less likely to be examined in the days following discharge. This could result in an increase in costs. (For further discussion, see: Hyman,
David A. (2001) “What Lessons Should We Learn from Drive-Through Deliveries?”Pediatrics, vol. 107 (2): 406–408; Madden, Jeanne M.et al. (2002) “Effects of a Law Against Early
Postpartum Discharges on Newborn Follow-up, Adverse Events, and HMO Expenditures,”New England Journal of Medicine, vol. 347 (25): p. 2031–2038; Madden, Jeanne M.et al.(2004)
“Length-of-Stay Policies and Ascertainment of Postdischarge Problems in Newborns,”Pediatrics, vol. 113 (1): p. 42–49.)
The Departments believe, however, that because most of the complications ofnewborns manifest themselves within the immediate 48 hours following birth, special protection much be
given to that period. Moreover, since the decision to discharge the patientswill be made by the doctor, in consultation with the mother, many of the concerns posed by those who oppose
extended stays will be factored into that decision. As such, the Departments believe that the Newborns’ Act will improve the health and welfare of mothers and newborns.
25
The voluntary nature of the employment-based health benefit system in conjunction with the open anddynamic character of labor markets make explicitas well as implicit negotiations
o
n compensation a key determinant of the prevalence of employee benefits coverage. It is likely that 80% to 100% of the cost of employee benefits is borneby workers through reduced
w
ages (See for example: Jonathan Gruber and Alan B. Krueger, “The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers Compensation Insurance,”Tax Policy and
E
conomy(1991); Jonathan Gruber, “The Incidence of Mandated Maternity Benefits,”American Economic Review, Vol. 84 (June 1994), pp. 622–641; Lawrence H. Summers, “Some Simple
Economics of Mandated Benefits,”American Economic Review, Vol. 79, No. 2 (May 1989); Louise Sheiner, “Health Care Costs, Wages, and Aging,” Federal Reserve Board of Governors
working paper, April 1999; and Edward Montgomery,Kathryn Shaw, and Mary Ellen Benedict, “Pensions and Wages: An Hedonic Price Theory Approach,”International Economic Review,
Vol. 33 No. 1, Feb. 1992). The prevalence of benefits is therefore largely dependent on the efficacy of this exchange. If workers perceive that there isthe potential for inappropriate denial of
benefits they will discount their value to adjust for this risk. This discount drives a wedge in the compensation negotiation, limiting its efficiency. With workers unwilling to bear the full cost
of the benefit, fewer benefits will be provided. The extent to which workersperceive a federal regulation supported by enforcement authority to improve the security and quality of benefits,
the differential between the employers’ costs and workers’ willingness to accept wage offsets is minimized.
26
The total cost of the regulation was calculated by estimating the number of additional days in the hospital that short-stay deliveries would require under the statute. This number was then
multiplied by $800, to reflect the per day hospitalization cost of a mother (this was a CBO number indexed to 2007 dollars). Having calculated the totalcost of the regulation at $279 million
(and a lower bound of $139 million), these numbers were then divided by the number of participants in affected health plans (a total of 15 million) to getan upper ($19) and lower bound ($9)
of the per-participant cost of the regulation.
2008–47 I.R.B.1189November 24, 2008

cent.
27
By clarifying this assumption in
the interim final rule, the number of stays
that would have been shorter than 48/96
hours increased by approximately 16,000
for all plans, and by approximately 2,000
for small plans. This in turn raised the
direct costs to health plans by 5 percent
(from$265to$279millionfortheupper
bound for all plans and from $29 to $31
million for small plans). However, be-
cause it can take several hours for certain
conditions to present themselves, such as
jaundice and dehydration, the additional
hours of hospital supervision — gained by
generally not using an expectant mother’s
admittance time as the start of a stay — can
be critical. Therefore, the benefits of this
clarification should justify this additional
cost.
The regulation also defines that for
births occurring outside of a hospital,
stays begin once the mother or newborn
is admitted as a hospital inpatient in con-
nection with childbirth, as defined by the
attending provider.The Departments lack
any firm basis for quantifying the num-
ber of individuals likely to be affected by
this provision, and therefore are unable to
quantify the increase in costs and benefits.
However, given the special and narrow
circumstances to which this provision ap-
plies, costs and benefits are expected to be
small.
Statutory Authority
The Department of the Treasury final
rule is adopted pursuant to the authority
contained in sections 7805 and 9833 of the
Code (26 U.S.C. 7805, 9833).
The Department of Labor final rule
is adopted pursuant to the authority con-
tained in 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1191, 1191a, 1191b,
and 1191c, sec. 101(g), Public Law
104–191, 110 Stat. 1936; sec. 401(b),
Public Law 105–200, 112 Stat. 645
(42 U.S.C. 651 note); Secretary of Labor’s
Order 1–2003, 68 FR 5374 (Feb. 3, 2003).
The Department of Heath and Human
Services final rule is adopted pursuant to
the authority contained in sections 2701
through 2763, 2791, and 2792 of the PHS
Act (42 U.S.C. 300gg through 300gg–63,
300gg–91, and 300gg–92), as amended by
Public Law 104–191, 110 Stat. 1936, Pub-
lic Law 104–204, 110 Stat. 2935 and Pub-
lic Law 105–277, 112 Stat. 2681–436.
Accounting Statement
In accordance with OMB Circular
A–4 (available athttp://www.white-
house.gov/omb/circulars/a004/a–4.pdf),
in the table below, we have prepared an
accounting statement showing the classifi-
cation of the expenditures associated with
the provisions of this final rule. This table
provides our best estimate for the annual
costs associated with enacting the federal
minimum stay final regulation.
Accounting Statement: Classification of Estimated Expenditures, CY2008 (in Millions)
CategoryCost Estimates
Annualized Monetized Costs
Low
$139.30
High
$278.50
*****
Adoption of Amendments to the
Regulations
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR Part 54 is
amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation for
part 54 is amended by adding an entry for
§54.9811–1 in numerical order and by re-
moving the entry for §54.9811–1T to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 54.9811–1 also issued under
26 U.S.C. 9833. * * *
§54.9801–1 [Amended]
Par. 2. Section 54.9801–1(a) is
amended by removing the language
“54.9811–1T” and adding “54.9811–1” in
its place.
§54.9801–2 [Amended]
Par. 3. In §54.9801–2, the intro-
ductory paragraph before the definitions
is amended by removing the language
“54.9811–1T” and adding “54.9811–1” in
its place.
Par. 4. Section 54.9811–1 is added to
read as follows:
§54.9811–1 Standards relating to benefits
for mothers and newborns.
(a)Hospital length of stay—(1)Gen-
eral rule. Except as provided in paragraph
(a)(5) of this section, a group health plan
that provides benefits for a hospital length
of stay in connection with childbirth for
a mother or her newborn may not restrict
benefits for the stay to less than—
(i) 48 hours following a vaginal deliv-
ery; or
(ii) 96 hours following a delivery by
cesarean section.
(2)When stay begins—(i)Delivery in a
hospital. If delivery occurs in a hospital,
the hospital length of stay for the mother
or newborn child begins at the time of de-
livery (or in the case of multiple births, at
the time of the last delivery).
(ii)Delivery outside a hospital.Ifde-
livery occurs outside a hospital, the hos-
pital length of stay begins at the time the
mother or newborn is admitted as a hospi-
tal inpatient in connection with childbirth.
The determination of whether an admis-
sion is in connection with childbirth is a
medical decision to be made by the attend-
ing provider.
27
Departments’ estimate based on the CDC’s 2005 Survey, Tables 37 and 42. The Departments looked at the share of stays that would be labeled “short” for both mothers and newborns in
1995 (before any part of the statute was enforced) and found that the share of newborns with a “short stay” was 5 percent higher. It was therefore assumedthat starting the clock at the birth
of a child would increase the number of “short stays” by 5 percent.
November 24, 200811902008–47 I.R.B.

(3)Examples. The rules of paragraphs
(a)(1) and (2) of this section are illustrated
by the following examples. In each exam-
ple, the group health plan provides bene-
fits for hospital lengths of stay in connec-
tion with childbirth and is subject to the re-
quirements of this section, as follows:
Example 1.(i)Facts. A pregnant woman cov-
ered under a group health plan goes into labor and is
admitted to the hospital at 10 p.m. on June 11. She
gives birth by vaginal delivery at 6 a.m. on June 12.
(ii)Conclusion. In thisExample 1, the 48-hour
period described in paragraph (a)(1)(i) of this section
ends at 6 a.m. on June 14.
Example 2.(i)Facts. A woman covered under a
group health plan gives birth at home by vaginal de-
livery. After the delivery, the woman begins bleed-
ing excessively in connection with the childbirth and
is admitted to the hospital for treatment of the exces-
sive bleeding at 7 p.m. on October 1.
(ii)Conclusion. In thisExample 2, the 48-hour
period described in paragraph (a)(1)(i) of this section
ends at 7 p.m. on October 3.
Example 3.(i)Facts. A woman covered under
a group health plan gives birth by vaginal delivery
at home. The child later develops pneumonia and
is admitted to the hospital. The attending provider
determines that the admission is not in connection
with childbirth.
(ii)Conclusion.InthisExample 3, the hospital
length-of-stay requirements of this section do not ap-
ply to the child’s admission to the hospital because
the admission is not in connection with childbirth.
(4)Authorization not required—(i)In
general. A plan may not require that a
physician or other health care provider ob-
tain authorization from the plan, or from a
health insurance issuer offering health in-
surance coverage under the plan, for pre-
scribing the hospital length of stay spec-
ified in paragraph (a)(1) of this section.
(See also paragraphs (b)(2) and (c)(3) of
this section for rules and examples regard-
ing other authorization and certain notice
requirements.)
(ii)Example. The rule of this paragraph
(a)(4) is illustrated by the following exam-
ple:
Example.(i)Facts. In the case of a delivery by
cesarean section, a group health plan subject to the
requirements of this section automatically provides
benefits for any hospital length of stay of up to 72
hours. For any longer stay, the plan requires an at-
tending provider to complete a certificate of medi-
cal necessity. The plan then makes a determination,
based on the certificate of medical necessity, whether
a longer stay is medically necessary.
(ii)Conclusion. In thisExample, the requirement
that an attending provider complete a certificate of
medical necessity to obtain authorization for the pe-
riod between 72 hours and 96 hours following a de-
livery by cesarean section is prohibited by this para-
graph (a)(4).
(5)Exceptions—(i)Discharge of
mother. If a decision to discharge a mother
earlier than the period specified in para-
graph (a)(1) of this section is made by an
attending provider, in consultation with
the mother, the requirements of paragraph
(a)(1) of this section do not apply for any
period after the discharge.
(ii)Discharge of newborn.Ifade-
cision to discharge a newborn child ear-
lier than the period specified in paragraph
(a)(1) of this section is made by an at-
tending provider, in consultation with the
mother (or the newborn’s authorized rep-
resentative), the requirements of paragraph
(a)(1) of this section do not apply for any
period after the discharge.
(iii)Attending provider defined.For
purposes of this section, attending provider
means an individual who is licensed un-
der applicable state law to provide mater-
nity or pediatric care and who is directly
responsible for providing maternity or pe-
diatric care to a mother or newborn child.
Therefore, a plan, hospital, managed care
organization, or other issuer is not an at-
tending provider.
(iv)Example. Therulesofthispara-
graph (a)(5) are illustrated by the follow-
ing example:
Example.(i)Facts. A pregnant woman covered
under a group health plan subject to the requirements
of this section goes into labor and is admitted to a
hospital. She gives birth by cesarean section. On the
third day after the delivery, the attending provider for
the mother consults with the mother, and the attend-
ing provider for the newborn consults with the mother
regarding the newborn. The attending providers au-
thorize the early discharge of both the mother and
the newborn. Both are discharged approximately 72
hours after the delivery. The plan pays for the 72-hour
hospital stays.
(ii)Conclusion.InthisExample, the require-
ments of this paragraph (a) have been satisfied with
respect to the mother and the newborn. If either is
readmitted, the hospital stay for the readmission is not
subject to this section.
(b)Prohibitions—(1)With respect to
mothers—(i)In general. A group health
plan may not—
(A) Deny a mother or her newborn child
eligibility or continued eligibility to enroll
or renew coverage under the terms of the
plan solely to avoid the requirements of
this section; or
(B) Provide payments (including pay-
ments-in-kind) or rebates to a mother to
encourage her to accept less than the min-
imum protections available under this sec-
tion.
(ii)Examples. The rules of this para-
graph (b)(1) are illustrated by the follow-
ing examples. In each example, the group
health plan is subjectto the requirements
of this section, as follows:
Example 1.(i)Facts. A group health plan pro-
vides benefits for at least a 48-hour hospital length
of stay following a vaginal delivery. If a mother
and newborn covered under the plan are discharged
within 24 hours after the delivery, the plan will waive
the copayment and deductible.
(ii)Conclusion.InthisExample 1, because
waiver of the copayment and deductible is in the
nature of a rebate that the mother would not receive
if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the
plan violates paragraph (b)(2) of this section because,
in effect, no copayment or deductible is required for
the first portion of the stayand a double copayment
and a deductible are required for the second portion
of the stay.)
Example 2.(i)Facts. A group health plan pro-
vides benefits for at least a 48-hour hospital length of
stay following a vaginal delivery. In the event that a
mother and her newborn are discharged earlier than
48 hours and the discharges occur after consultation
with the mother in accordance with the requirements
of paragraph (a)(5) of this section, the plan provides
for a follow-up visit by a nurse within 48 hours af-
ter the discharges to provide certain services that the
mother and her newborn would otherwise receive in
the hospital.
(ii)Conclusion.InthisExample 2, because the
follow-up visit does not provide any services beyond
what the mother and her newborn would receive in
the hospital, coverage for the follow-up visit is not
prohibited by this paragraph (b)(1).
(2)With respect to benefit restric-
tions—(i)In general. Subject to paragraph
(c)(3) of this section, a group health plan
may not restrict the benefits for any por-
tion of a hospital length of stay specified
in paragraph (a) of this section in a man-
ner that is less favorable than the benefits
provided for any preceding portion of the
stay.
(ii)Example. Therulesofthispara-
graph (b)(2) are illustrated by the follow-
ing example:
Example.(i)Facts. A group health plan subject to
the requirements of this section provides benefits for
hospital lengths of stay in connection with childbirth.
In the case of a delivery by cesarean section, the plan
automatically pays for the first 48 hours. With respect
to each succeeding 24-hour period, the participant or
beneficiary must call the plan to obtain precertifica-
tion from a utilization reviewer, who determines if an
additional 24-hour period is medically necessary. If
this approval is not obtained, the plan will not provide
benefits for any succeeding 24-hour period.
(ii)Conclusion.InthisExample, the requirement
to obtain precertification for the two 24-hour periods
immediately following the initial 48-hour stay is pro-
hibited by this paragraph(b)(2) because benefits for
the latter part of the stay are restricted in a manner that
is less favorable than benefits for a preceding portion
2008–47 I.R.B.1191November 24, 2008

of the stay. (However, this section does not prohibit
a plan from requiring precertification for any period
after the first 96 hours.) In addition, the requirement
to obtain precertification from the plan based on med-
ical necessity for a hospital length of stay within the
96-hour period would also violate paragraph (a) of
this section.
(3)With respect to attending providers.
A group health plan may not directly or
indirectly—
(i) Penalize (for example, take disci-
plinary action against or retaliate against),
or otherwise reduce or limit the compen-
sation of, an attending provider because
the provider furnished care to a participant
or beneficiary in accordance with this sec-
tion; or
(ii) Provide monetary or other incen-
tives to an attending provider to induce
the provider to furnish care to a partici-
pant or beneficiary in a manner inconsis-
tent with this section, including providing
any incentive that could induce an attend-
ing provider to discharge a mother or new-
born earlier than 48 hours (or 96 hours) af-
ter delivery.
(c)Construction. With respect to this
section, the following rules of construction
apply:
(1)Hospital stays not mandatory.This
section does not require a mother to—
(i) Give birth in a hospital; or
(ii) Stay in the hospital for a fixed pe-
riod of time following the birth of her
child.
(2)Hospital stay benefits not mandated.
This section does not apply to any group
health plan that does not provide benefits
for hospital lengths of stay in connection
with childbirth for a mother or her new-
born child.
(3)Cost-sharing rules—(i)In general.
This section does not prevent a group
health plan from imposing deductibles,
coinsurance, or other cost-sharing in rela-
tion to benefits for hospital lengths of stay
in connection with childbirth for a mother
or a newborn under the plan or cover-
age, except that the coinsurance or other
cost-sharing for any portion of the hospital
length of stay specified in paragraph (a) of
this section may not be greater than that
for any preceding portion of the stay.
(ii)Examples. The rules of this para-
graph (c)(3) are illustrated by the follow-
ing examples. In each example, the group
health plan is subject to the requirements
of this section, as follows:
Example 1.(i)Facts. A group health plan pro-
vides benefits for at least a 48-hour hospital length of
stay in connection with vaginal deliveries. The plan
covers 80 percent of the cost of the stay for the first
24-hour period and 50 percent of the cost of the stay
for the second 24-hour period. Thus, the coinsurance
paid by the patient increases from 20 percent to 50
percent after 24 hours.
(ii)Conclusion. In thisExample 1, the plan vio-
lates the rules of this paragraph (c)(3) because coin-
surance for the second 24-hour period of the 48-hour
stay is greater than that for the preceding portion of
the stay. (In addition, the plan also violates the simi-
lar rule in paragraph (b)(2) of this section.)
Example 2.(i)Facts. A group health plan gener-
ally covers 70 percent of the cost of a hospital length
of stay in connection with childbirth. However, the
plan will cover 80 percent of the cost of the stay if
the participant or beneficiary notifies the plan of the
pregnancy in advance of admission and uses what-
ever hospital the plan may designate.
(ii)Conclusion.InthisExample 2, the plan
does not violate the rules of this paragraph (c)(3)
because the level of benefits provided (70 percent
or 80 percent) is consistent throughout the 48-hour
(or 96-hour) hospital length of stay required under
paragraph (a) of this section. (In addition, the plan
does not violate the rules in paragraph (a)(4) or (b)(2)
of this section.)
(4)Compensation of attending
provider. This section does not prevent a
group health plan from negotiating with
an attending provider the level and type
of compensation for care furnished in
accordance with this section (including
paragraph (b) of this section).
(d)Notice requirement.See29CFR
2520.102–3(u) for rules relating to a dis-
closure requirement imposed under sec-
tion 711(d) of ERISA (29 U.S.C. 1181)
on certain group health plans that provide
benefits for hospital lengths of stay in con-
nection with childbirth.
(e)Applicability in certain states—(1)
Health insurance coverage.Therequire-
ments of section 9811 and this section do
not apply with respect to health insurance
coverage offered in connection with a
group health plan if there is a state law
regulating the coverage that meets any of
the following criteria:
(i) The state law requires the coverage
to provide for at least a 48-hour hospital
length of stay following a vaginal deliv-
ery and at least a 96-hour hospital length of
stay following a delivery by cesarean sec-
tion.
(ii) The state law requires the coverage
to provide for maternity and pediatric care
in accordance with guidelines that relate
to care following childbirth established by
the American College of Obstetricians and
Gynecologists, the American Academy of
Pediatrics, or any other established profes-
sional medical association.
(iii) The state law requires, in connec-
tion with the coverage for maternity care,
that the hospital length of stay for such care
is left to the decision of (or is required to
be made by) the attending provider in con-
sultation with the mother. State laws that
require the decision to be made by the at-
tending provider with the consent of the
mother satisfy the criterion of this para-
graph (e)(1)(iii).
(2)Grouphealthplans—(i)Fully-in-
sured plans. For a group health plan that
provides benefits solely through health in-
surance coverage, if the state law regulat-
ing the health insurance coverage meets
any of the criteria in paragraph (e)(1) of
this section, then the requirements of sec-
tion 9811 and this section do not apply.
(ii)Self-insured plans.Foragroup
health plan that provides all benefits for
hospital lengths of stay in connection with
childbirth other than through health insur-
ance coverage, the requirements of section
9811 and this section apply.
(iii)Partially-insured plans.Fora
group health plan that provides some ben-
efits through health insurance coverage,
if the state law regulating the health in-
surance coverage meets any of the criteria
in paragraph (e)(1) of this section, then
the requirements of section 9811 and this
sectionapplyonlytotheextenttheplan
provides benefits for hospital lengths of
stay in connection with childbirth other
than through health insurance coverage.
(3)Preemption provisions under sec-
tion 731(a) of ERISA.See29CFR
2590.711(e)(3) for a rule providing that
the preemption provisions contained in
section 731(a)(1) of ERISA and 29 CFR
2590.731(a) do not supersede a state law
if the state law is described in paragraph
(e)(1) of 29 CFR 2590.711 (which is sub-
stantially similar to paragraph (e)(1) of
this section).
(4)Examples. The rules of this para-
graph (e) are illustrated by the following
examples:
Example 1.(i)Facts. A group health plan buys
group health insurance coverage in a state that re-
quires that the coverage provide for at least a 48-hour
hospital length of stay following a vaginal delivery
and at least a 96-hour hospital length of stay follow-
ing a delivery by cesarean section.
November 24, 200811922008–47 I.R.B.

(ii)Conclusion. In thisExample 1, the coverage
is subject to state law, and the requirements of section
9811 and this section do not apply.
Example 2.(i)Facts. A self-insured group health
plan covers hospital lengths of stay in connection
with childbirth in a state that requires health insur-
ance coverage to provide for maternity and pediatric
care in accordance with guidelines that relate to care
following childbirth established by the American
College of Obstetricians and Gynecologists and the
American Academy of Pediatrics.
(ii)Conclusion. In thisExample 2, even though
the state law satisfies the criterion of paragraph
(e)(1)(ii) of this section,because the plan provides
benefits for hospital lengths of stay in connection
with childbirth other than through health insurance
coverage, the plan is subject to the requirements of
section 9811 and this section.
(f)Effective/applicability date.This
section applies to group health plans for
plan years beginning on or after January 1,
2009.
§54.9811–1T [Removed]
Par. 5. Section 54.9811–1T is removed.
§54.9831–1 [Amended]
Par. 6. Section 54.9831–1(b) is
amended by removing the language
“54.9811–1T” and adding “54.9811–1” in
its place.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement,
Internal Revenue Service.
Approved September 23, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on October 17,
2008, 8:45 a.m., and published in the issue of the Federal
Register for October 20, 2008, 73 F.R. 62409)
2008–47 I.R.B.1193November 24, 2008

Part III. Administrative, Procedural, and Miscellaneous
Transaction of
Interest—Potential for
Avoidance of Tax Through
Sale of Charitable Remainder
Trust Interests
Notice 2008–99
The Internal Revenue Service and the
Treasury Department are aware of a type
of transaction, described below, in which
a sale or other disposition of all interests
in a charitable remainder trust (subsequent
to the contribution of appreciated assets
to and their reinvestment by the trust), re-
sults in the grantor or other noncharitable
recipient receiving the value of that per-
son’s trust interest while claiming to recog-
nize little or no taxable gain. The IRS and
Treasury Department believe this transac-
tion has the potential for tax avoidance or
evasion, but lack enough information to
determine whether the transaction should
be identified specifically as a tax avoid-
ance transaction. This notice identifies this
transaction and substantially similar trans-
actions as transactions of interest for pur-
poses of § 1.6011–4(b)(6) of the Income
Tax Regulations and §§ 6111 and 6112 of
the Internal Revenue Code. This notice
also alerts persons involved in these trans-
actions to certain responsibilities that may
arise from their involvement.
FACTS
In one variation of the transaction,
Grantor creates a charitable remainder
trust (Trust) and contributes appreci-
ated assets (Appreciated Assets) to Trust.
Grantor retains an annuity or unitrust inter-
est (term interest) in Trust and designates
an organization described in §§ 170(c),
2055(a) and 2522(a) (Charity) as the
remainder beneficiary. Charity may,
but need not, be controlled by Grantor;
Grantor may, but need not, reserve the
right to change the Charity designated as
the remainder beneficiary. Next, Trust
sells or liquidates the Appreciated Assets
and reinvests the net proceeds in other
assets (New Assets) such as money mar-
ket funds, marketable securities, and/or
other assets, often to acquire a diversified
portfolio. Because a charitable remain-
der trust generally is a tax-exempt entity
under § 664, Trust’s sale of the Appreci-
ated Assets is exempt from income tax,
andTrust’sbasisintheNewAssetsisthe
price Trust pays for those New Assets.
Some portion of Trust’s ordinary income
and capital gains may become taxable to
Grantor as the periodic annuity or unitrust
payments are made by Trust in accordance
with the rules of § 664 and the regulations
thereunder. Next, Grantor and Charity, in
a transaction they claim is described in
§ 1001(e)(3), sell or otherwise dispose of
their respective interests in Trust to X, an
unrelated third party, for an amount that
approximates the fair market value of the
assets of the trust, including the New As-
sets. Trust then terminates, and the assets
of Trust, including the New Assets, are
distributedtoX.
Grantor takes the following positions
regarding the tax consequences of this
transaction. Grantor claims a charitable
deduction for the portion of the fair mar-
ket value of the Appreciated Assets as
of the date of their contribution to Trust
that is attributable to the remainder in-
terest. Grantor claims to recognize no
gain from the Trust’s sale or liquidation
of the Appreciated Assets. When Grantor
and Charity sell their respective interests
in Trust to X, Grantor and Charity take
the position that they have sold the entire
interest in Trust within the meaning of
§ 1001(e)(3). Because the entire inter-
est in Trust is sold, Grantor claims that
§ 1001(e)(1), which disregards basis in
the case of a sale of a term interest, does
not apply to the transaction. Grantor also
takes the position that, under § 1001(a)
and related provisions, the gain on the sale
of Grantor’s term interest is computed by
taking into account the portion of uniform
basis allocable to Grantor’s term interest
under §1.1014–5 and § 1.1015–1(b), and
that this uniform basis is derived from the
basis of the New Assets rather than the
basis of the Appreciated Assets.
The transaction may use trusts with cir-
cumstances that vary from the situation de-
scribed in the facts of this notice. In some
variations, a net income with make-up
provision charitable remainder unitrust
(NIMCRUT) may be used as Trust, Trust
may have been in existence for some
time prior to the sale of Trust interests,
the Appreciated Assets already may be
in Trust prior to the commencement of
the transaction, the recipient and seller
of the term interest may be the Grantor
and/or another person, or Grantor may
contribute the Appreciated Assets to a
partnership or other passthrough entity and
then contribute the interest in the entity to
Trust.
A result of the claimed tax treatment
of the transaction is that the gain on the
sale of the Appreciated Assets is never
taxed, even though the Grantor receives
the Grantor’s share of the appreciated fair
market value of those assets. The IRS and
Treasury Department are not concerned
about the mere creation and funding of a
charitable remainder trust and/or the trust’s
reinvestment of the contributed appreci-
ated property, and such events alone do
not constitute the transaction subject to this
notice.
However, the IRS and Treasury Depart-
ment are concerned about the manipula-
tion of the uniform basis rules to avoid
tax on gain from the sale or other dispo-
sition of appreciatedassets. Accordingly,
the type of transaction described in this no-
tice includes a coordinated sale or other co-
ordinated disposition of the respective in-
terests of the Grantor or other noncharita-
ble recipient and the Charity in a charitable
remainder trust in a transaction claimed to
be described in § 1001(e)(3), subsequent to
the contribution of appreciated assets and
the trust’s reinvestment of those assets. In
particular, the IRS and Treasury Depart-
ment are concerned about Grantor’s claim
to an increased basis in the term interest
coupled with the termination of the Trust
in a single coordinated transaction under
§ 1001(e) to avoid tax on gain from the sale
or other disposition of the Appreciated As-
sets.
TRANSACTION OF INTEREST
Effective Date
Transactions that are the same as, or
substantially similar to, the transaction
described in this notice are identified as
transactions of interest for purposes of
§ 1.6011–4(b)(6) and §§ 6111 and 6112
effective October 31, 2008, the date this
November 24, 200811942008–47 I.R.B.

notice was released to the public. Persons
entering into these transactions on or af-
ter November 2, 2006, must disclose the
transaction as described in § 1.6011–4.
Material advisors who make a tax state-
ment on or after November 2, 2006, with
respect to transactions entered into on or
after November 2, 2006, have disclosure
and list maintenance obligations under
§§ 6111 and 6112. See § 1.6011–4(h) and
§§ 301.6111–3(i) and 301.6112–1(g) of
the Procedure and Administration Regula-
tions.
Independent of their classification as
transactions of interest, transactions that
are the same as, or substantially similar to,
the transaction described in this notice al-
ready may be subject to the requirements
of §§ 6011, 6111, or 6112, or the regula-
tions thereunder. When the IRS and Trea-
sury Department have gathered enough in-
formation to make an informed decision as
to whether this transaction is a tax avoid-
ance type of transaction, the IRS and Trea-
sury Department may take one or more
actions, including removing the transac-
tion from the transactions of interest cat-
egory in published guidance, designating
the transaction as a listed transaction, or
providing a new category of reportable
transaction.
Participation
Under § 1.6011–4(c)(3)(i)(E), each re-
cipient of the term interest and Trust are
participants in this transaction for each
year in which their respective tax returns
reflect tax consequences or a tax strategy
described in this notice. Charity is not
a participant if it sold or otherwise dis-
posed of its interest in Trust on or prior
to October 31, 2008. For interests sold
or otherwise disposed of after October
31, 2008, under § 1.6011–4(c)(3)(i)(E),
Charity is a participant for the first year
for which Charity’s tax return reflects
or is required to reflect the sale or other
disposition of Charity’s interest in Trust.
In general, Charity is required to report
the sale or other disposition of its interest
in Trust on its return for the year of the
sale or other disposition. See § 6033 and
§ 1.6033–2(a)(ii). Therefore, in general,
Charity will be a participant for the year in
which charity sells or otherwise disposes
of its interest in Trust.
Time for Disclosure
See §1.6011–4(e) and § 301.6111–3(e).
Material Advisor Threshold Amount
Thethresholdamountsin
§ 301.6111–3(b)(3)(i)(B) are reduced to
$5,000.
Penalties
Persons required to disclose these trans-
actions under § 1.6011–4 who fail to do
so may be subject to the penalty under
§ 6707A. Persons required to disclose
these transactions under § 6111 who fail to
do so may be subject to the penalty under
§ 6707(a). Persons required to maintain
lists of advisees under § 6112 who fail to
do so (or who fail to provide such lists
when requested by the IRS) may be subject
to the penalty under § 6708(a). In addi-
tion, the IRS may impose other penalties
on parties involved in these transactions
or substantially similar transactions, in-
cluding the accuracy-related penalty under
§ 6662 or § 6662A.
REQUESTING COMMENTS
The IRS and Treasury Department are
aware of concerns expressed by commen-
tators regarding this transaction of interest.
The IRS and Treasury Department share
these concerns and are requesting written
comments on how the transaction might
be addressed in published guidance. One
approach might involve issuing regula-
tions under the authority of § 643(a)(7)
to address the uniform basis rules under
§§ 1014 and 1015 and the regulations
thereunder.
Comments should be submitted by
January 31, 2009, to: Internal Rev-
enue Service, CC:PA:LPD:PR (Notice
2008–99), Room 5203, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20224. Alternatively, comments may
be hand delivered Monday through Fri-
day between the hours of 8:00 a.m. to
4:00 p.m. to: CC:PA:LPD:PR (No-
tice 2008–99), Courier’s Desk, Inter-
nal Revenue Service, 1111 Constitution
Avenue, N.W., Washington, DC. Com-
ments also may be submitted electron-
ically via the following email address:
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2008–99” in the
subject line of any electronic submissions.
All comments received will be open to
public inspection and copying.
DRAFTING INFORMATION
The principal author of this notice
is Allison Carmody of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries). For further
information regarding this notice, contact
Ms. Carmody at (202) 622–3070 (not a
toll-free call).
26 CFR 601.601: Rules and regulations.
(Also Part I, §§ 582, 702, 1221.)
Rev. Proc. 2008–64
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance under section 301 of the Emergency
Economic Stabilization Act of 2008,
Pub. L. No. 110–343, Division A § 301,
122 Stat. 3765 (EESA
1
). EESA § 301
treats as ordinary income or loss certain
gain or loss recognized by banks and
certain other financial institutions on the
sale or exchange of preferred stock of the
Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac).
EESA § 301 also grants the Secretary of
the Treasury authority to issue guidance
as necessary to carry out the purposes of
that section.
SECTION 2. BACKGROUND
.01 Before September 2008, many
banks and bank holding companies in-
vested in the preferred stock of Fannie
Mae and Freddie Mac. Many institutions
invested directly in the preferred stock.
Others invested indirectly—for example,
through corporate subsidiaries that are not
banks or through adjustable rate preferred
interests in certain trusts designed to be
1
Only the first of the statute’s three divisions is the Emergency Economic Stabilization Act of 2008. Each of the other two divisions has its own section301, both of which are unrelated to
EESA § 301.
2008–47 I.R.B.1195November 24, 2008

treated as partnerships for federal income
tax purposes.
.02 Generally, under section 582(c)(1)
of the Internal Revenue Code, the sale or
exchange of a bond, debenture, note, and
other evidence of indebtedness by banks
and certain other financial institutions is
not considered a sale or exchange of a cap-
ital asset. Common stock and preferred
stock are not evidences of indebtedness for
federal income tax purposes and, there-
fore, banks and these other financial in-
stitutions generally treat gain or loss from
these instruments as capital.
.03 Under section 702(a) and (b) of the
Code, gain and loss from sales of capital
assets are separately stated by a partner-
ship, and the character of gain or loss in-
cluded in a partner’s distributive share is
determined as if the item were realized di-
rectly from the source from which realized
by the partnership, or incurred in the same
manner as incurred by the partnership. The
partnership tax rules, however, do not gen-
erally treat partners as holding the assets
held by their partnerships.
.04 EESA § 301(a) provides, “[G]ain or
loss from the sale or exchange of anyap-
plicable preferred stockby anyapplicable
financial institutionshall be treated as or-
dinary income or loss” (emphasis added).
Applicable preferred stock and applicable
financial institution are defined in EESA
§ 301(b) and (c).
.05 EESA § 301(b) defines “applicable
preferred stock” as—
any stock—
(1) which is preferred stock in—
(A) the Federal National Mortgage As-
sociation, establishedpursuanttotheFed-
eral National Mortgage Association Char-
ter Act (12 U.S.C. 1716et seq.), or
(B) the Federal Home Loan Mortgage
Corporation, established pursuant to the
Federal Home Loan Mortgage Corpora-
tion Act (12 U.S.C. 1451et seq.), and
(2) which—
(A) was held by the applicable financial
institution on September 6, 2008, or
(B) was sold or exchanged by the appli-
cable financial institution on or after Jan-
uary 1, 2008, and before September 7,
2008.
.06 For purposes of this revenue proce-
dure, the term “qualified preferred stock”
(QPS) means any stock that is described in
EESA § 301(b)(1), regardless of whether
the stock satisfies EESA § 301(b)(2).
.07 EESA § 301(c) provides—
For purposes of [EESA § 301]:
(1) IN GENERAL.—Except as pro-
vided in [EESA § 301(c)(2)], the term
“applicable financial institution” means—
(A) a financial institution referred to in
section 582(c)(2) of the Internal Revenue
Code of 1986, or
(B) a depository institution holding
company (as defined in section 3(w)(1)
of the Federal Deposit Insurance Act
(12 U.S.C. 1813(w)(1))).
(2) SPECIAL RULES FOR CERTAIN
SALES.—In the case of—
(A) a sale or exchange described in
[EESA § 301(b)(2)(B)], an entity shall be
treated as an applicable financial institu-
tion only if it was an entity described in
[EESA § 301(c)(1)(A) or (B)] at the time
of the sale or exchange, and
(B) a sale or exchange after Septem-
ber 6, 2008, of preferred stock described
in [EESA § 301(b)(2)(A)], an entity shall
be treated as an applicable financial insti-
tution only if it was an entity described in
[EESA § 301(c)(1)(A) or (B)] at all times
during the period beginning on September
6, 2008, and ending on the date of the sale
or exchange of the preferred stock.
.08 EESA § 301(d) authorizes admin-
istrative extensionof the application of
EESA § 301 to all, or a portion, of the gain
or loss from certain transactions. In addi-
tion, under EESA § 301(e), “The Secre-
tary of the Treasury or the Secretary’s del-
egate may prescribe such guidance, rules,
or regulations as are necessary to carry out
the purposes of [EESA § 301].” Sections 3
through 7 of this revenue procedure exer-
cise the authority that is granted by EESA
§ 301(d) and (e).
SECTION 3. SALE OR EXCHANGE
OF QUALIFIED PREFERRED STOCK
BY A PARTNERSHIP IN WHICH
AN APPLICABLE FINANCIAL
INSTITUTION IS A PARTNER
.01Scope. This section applies if either
all of the requirements in Paragraph (1) of
this Subsection, or all of the requirements
in Paragraph (2) of this Subsection, are
satisfied.
(1)Sale or exchange on or after Jan-
uary 1, 2008, and before September 7,
2008.
(a) A partnership sold or exchanged
QPS on or after January 1, 2008, and be-
fore September 7, 2008 (the Transaction);
(b) The taxpayer was a partner in the
partnership on the date of the Transaction;
and
(c) The taxpayer was an applicable
financial institution (or a Subsidiary de-
scribed in Section 6.01(1)(b)–(d) of this
revenue procedure) on the date of the
Transaction and at all times thereafter
through the earlier of—
(i) The closing of the partnership’s tax
year in which the Transaction occurred; or
(ii) The date on which the partnership’s
tax year in which the Transaction occurred
closed with respect to the taxpayer.
(2)Sale or exchange after September 6,
2008.
(a) A partnership sold or exchanged
QPS after September 6, 2008 (the Trans-
action);
(b) The partnership held the QPS on
September 6, 2008, and at all times there-
after until the Transaction;
(c) The taxpayer was a partner in the
partnership on September 6, 2008, and at
all times thereafter through the date of the
Transaction;and
(d) The taxpayer was an applicable
financial institution (or a Subsidiary de-
scribedinSection6.01(2)(b)–(e)ofthis
revenue procedure) on September 6, 2008,
and at all times thereafter through the ear-
lier of—
(i) The closing of the partnership’s tax
year in which the Transaction occurred; or
(ii) The date on which the partnership’s
tax year in which the Transaction occurred
closed with respect to the taxpayer.
.02Application.
(1) The taxpayer’s distributive share
of the gain or loss on the Transaction is
treated by EESA § 301 as ordinary income
or loss.
(2) Section 3.02(1) of this revenue pro-
cedure does not apply to the extent that the
taxpayer’s interest in gain or loss on the
sale or exchange of the QPS that was sold
or exchanged in the Transaction increased
after September 6, 2008, including as a re-
sult of—
(a) The taxpayer’s acquisition of addi-
tional partnership interests;
(b) Changes in the manner in which
partners share in such gains and losses; or
November 24, 200811962008–47 I.R.B.

(c) Disproportionate distributions of
cash or other property to other partners by
the partnership.
(3) The limitation in Section 3.02(2)(a)
of this revenue procedure does not apply
to the extent the taxpayer acquired an ad-
ditional partnership interest as transferred
basis property within the meaning of sec-
tion 7701(a)(43) of the Code from a person
that—
(a) Held the partnership interest on
September 6, 2008, and at all times there-
after until the transfer of the partnership
interest to the taxpayer; and
(b) Was an applicable financial institu-
tion for this entire period.
.03Reporting Requirements.In ac-
cordance with existing requirements, the
partnership must separately state on its
information returns gain or loss attrib-
utable to the sale or exchange of QPS.
See§ 1.702–1(a)(8)(ii) of the Income Tax
Regulations.
SECTION 4. SALE OR EXCHANGE
BY AN APPLICABLE FINANCIAL
INSTITUTION OF AN INTEREST IN
CERTAIN PARTNERSHIPS
.01Scope. This section applies if either
all of the requirements in Paragraph (1) of
this Subsection, or all of the requirements
in Paragraph (2) of this Subsection, are
satisfied.
(1)Sale or exchange on or after Jan-
uary 1, 2008, and before September 7,
2008.
(a) A partner (the taxpayer) sold or ex-
changed a partnership interest on or after
January 1, 2008, and before September 7,
2008 (the Transaction);
(b) The taxpayer was an applicable
financial institution (or a Subsidiary de-
scribed in Section 6.01(1)(b)–(d) of this
revenue procedure) on the date of the
Transaction; and
(c) At the time of the Transaction, at
least 95 percent in value of the partner-
ship’s assets consisted of QPS and cash or
cash equivalents.
(2)Sale or exchange after September 6,
2008.
(a) A partner (the taxpayer) sold or
exchanged a partnership interest after
September 6, 2008 (the Transaction);
(b) On September 6, 2008, and at all
times thereafter through the date of the
Transaction, the taxpayer was an applica-
ble financial institution (or a Subsidiary
described in Section 6.01(2)(b)–(e) of this
revenue procedure) and a partner in the
partnership; and
(c) On September 6, 2008, and at all
times thereafter through the date of the
Transaction, at least 95 percent in value of
the partnership’s assets consisted of QPS
and cash or cash equivalents.
.02Application.
(1) Gain or loss on the Transaction is
treated by EESA § 301 as ordinary in-
come or loss. (Neither EESA § 301 nor
this revenue procedure causes QPS to be
described in section 751(c) or (d) of the
Code.)
(2) Section 4.02(1) of this revenue pro-
cedure does not apply to the extent that
there was an increase after September 6,
2008, in the taxpayer’s indirect interest in
QPS, including as a result of—
(a) The taxpayer’s acquisition of addi-
tional partnership interests;
(b) Changes in the taxpayer’s interest in
partnership income, loss or capital;
(c) The acquisition by the partnership of
additional QPS; or
(d) Disproportionate distributions of
other property or cash to other partners by
the partnership.
(3) The limitation in Section 4.02(2)(a)
of this revenue procedure does not apply
to the extent the taxpayer acquired an ad-
ditional partnership interest as transferred
basispropertywithinthemeaningofsec-
tion 7701(a)(43) of the Code from a person
that—
(a) Held the partnership interest on
September 6, 2008, and at all times there-
after until the transfer of the partnership
interest to the taxpayer; and
(b) Was an applicable financial institu-
tion for this entire period.
SECTION 5. DISTRIBUTION OF
QUALIFIED PREFERRED STOCK
BYCERTAINPARTNERSHIPSTOA
PARTNER THAT IS AN APPLICABLE
FINANCIAL INSTITUTION
.01Scope. This section applies if all of
the following are satisfied:
(1) After September 6, 2008, a partner
(the taxpayer) acquired QPS as a result of
a distribution from a partnership (the Ac-
quisition);
(2) The partnership held the QPS on
September 6, 2008, and at all times there-
after until the distribution to the taxpayer;
(3) On September 6, 2008, and at all
times thereafter until the partnership made
the distribution to the taxpayer, at least 95
percent in value of the partnership’s assets
consisted of QPS and cash or cash equiva-
lents; and
(4) On September 6, 2008, and at all
times thereafter until the Acquisition, the
taxpayer was an applicable financial insti-
tution (or a Subsidiary described in Section
6.01(2)(b)–(e) of this revenue procedure)
and was a partner of the partnership.
.02Application.
(1) Solely for purposes of EESA § 301,
the taxpayer is treated as having held on
September 6, 2008, the QPS described in
Section 5.01(1) of this revenue procedure.
(Neither EESA § 301 nor this revenue pro-
cedure causes QPS to be described in sec-
tion 751(c) or (d) of the Code.)
(2) Section 5.02(1) of this revenue pro-
cedure does not apply to QPS that is re-
ceived by the taxpayer from the partner-
ship after September 6, 2008, to the ex-
tent that receipt of the QPS is as a result
of a change or increase after September 6,
2008, in the taxpayer’s partnership inter-
est, including as a result of—
(a) The taxpayer’s acquisition of addi-
tional partnership interests;
(b) Changes in the manner in which
partners share in rights to distributions of
QPS; or
(c) Disproportionate distributions to
other partners by the partnership of other
property or cash.
(3) The limitation in Section 5.02(2)(a)
of this revenue procedure does not apply
to the extent the taxpayer acquired addi-
tional partnership interests as transferred
basis property within the meaning of sec-
tion 7701(a)(43) of the Code from a person
that—
(a) Held the partnership interest on
September 6, 2008, and at all times there-
after until the transfer of the partnership
interest to the taxpayer and
(b) Was an applicable financial institu-
tion for this entire period.
2008–47 I.R.B.1197November 24, 2008

SECTION 6. SALE OR EXCHANGE
OF QUALIFIED PREFERRED STOCK
BY CERTAIN SUBSIDIARIES
OF APPLICABLE FINANCIAL
INSTITUTIONS
.01Scope. This section applies if either
all of the requirements in Paragraph (1) of
this Subsection, or all of the requirements
in Paragraph (2) of this Subsection, are
satisfied.
(1)Sale or exchange on or after Jan-
uary 1, 2008, and before September 7,
2008.
(a) A corporation for state law or fed-
eral tax law purposes (the Subsidiary) sold
or exchanged QPS on or after January 1,
2008, and before September 7, 2008 (the
Transaction);
(b) At the time of the Transaction, the
Subsidiary was owned (in whole or in part,
directly or indirectly) by another corpora-
tion that was a financial institution referred
to in section 582(c)(2)(A)(i) or (ii) (Finan-
cial Institution);
(c) In the calendar quarter in which
the Transaction occurred, the assets of
the Subsidiary were consolidated with
the assets of the Financial Institution on
a line-by-line basis on the Consolidated
Reports of Condition and Income and their
supporting schedules(the call report) that
the Financial Institution filed with its fed-
eral bank supervisory authorities; and
(d) The Subsidiary and the Financial In-
stitution joined in the filing of a federal in-
come tax return on which gain or loss from
the Transaction was reported.
(2)Sale or exchange after September 6,
2008.
(a) A corporation for state law or federal
tax law purposes (the Subsidiary) sold or
exchanged QPS after September 6, 2008
(the Transaction);
(b) On September 6, 2008, and at all
times thereafter until the Transaction, the
Subsidiary held the QPS that was the sub-
ject of the Transaction;
(c) On September 6, 2008, and at all
times thereafter until immediately af-
ter the Transaction, the Subsidiary was
owned (in whole or in part, directly or
indirectly) by another corporation that
was a financial institution referred to in
section 582(c)(2)(A)(i) or (ii) (Financial
Institution);
(d) In every calendar quarter that both
ends after September 6, 2008, and begins
on or before the date of the Transaction, the
assets of the Subsidiary were consolidated
with the assets of the Financial Institution
on a line-by-line basis on the Consolidated
Reports of Condition and Income and their
supporting schedules (the call report) that
the Financial Institution filed with its fed-
eral bank supervisory authorities; and
(e) The Subsidiary and the Financial In-
stitution joined in filing the same federal
income tax return(s) for each taxable year
of the Subsidiary and the Financial Institu-
tion that included all, or any portion, of the
period beginning on September 7, 2008,
and extending through and including the
date of the Transaction.
.02Application. EESA § 301 treats the
Subsidiary’s gain or loss on the Transac-
tion as ordinary income or loss.
SECTION 7. SALE OR EXCHANGE
BY A TAXPAYER OF QUALIFIED
PREFERRED STOCK THE BASIS OF
WHICH IN THE TAXPAYER’S HANDS
IS DETERMINED BY REFERENCE
TO THE BASIS OF THAT STOCK IN
THE HANDS OF THE PERSON THAT
HAD TRANSFERRED IT TO THE
TAXPAYER
.01Scope. This section applies if all of
the following are satisfied:
(1) The taxpayer acquired QPS after
September 6, 2008 (the Acquisition);
(2) The Acquisition was a transaction in
which the taxpayer’s basis in the QPS was
determined by reference to the basis of the
QPS in the hands of the person (the Trans-
feror) that transferred the QPS to the tax-
payer (that is, the QPS is “transferred ba-
sis property” within the meaning of section
7701(a)(43) of the Code);
(3) The Transferor held the QPS on
September 6, 2008; and
(4) On September 6, 2008, and at all
times thereafter until the QPS was trans-
ferred to the taxpayer, if the Transferor
had sold the QPS, the character of gain or
loss on the sale would have been governed
by EESA § 301, either because the Trans-
feror was an applicablefinancial institu-
tion for that entire time period or because
the sale would have been described in Sec-
tion 6.01(2) of this revenue procedure.
.02Application. Solely for purposes
of EESA § 301, the taxpayer is treated
as having held on September 6, 2008, the
QPS that it acquired in the Acquisition.
SECTION 8. EFFECTIVE DATE
.01 This revenue procedure is effective
for Transactions (as defined in Sections 3,
4, and 6 of this revenue procedure), and
Acquisitions (as defined in Sections 5 and
7 of this revenue procedure), that occur
after October 29, 2008.
.02 In addition, a taxpayer may apply
this revenue procedure to Transactions (as
defined in Sections 3, 4, and 6 of this rev-
enue procedure) that occur on or after Jan-
uary 1, 2008, and on or before October
29, 2008, and to Acquisitions (as defined
in Sections 5 and 7 of this revenue proce-
dure) that occur after September 6, 2008,
and on or before October 29, 2008, but
only if the taxpayer applies this revenue
procedure consistently to all Transactions
and Acquisitions described in this Section
8.02.
SECTION 9. CONTACT
INFORMATION
For further information regarding this
revenue procedure, contact Ms. Stacy L.
Short of the Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries) at (202) 622–3070 (not a toll-free
call).
SECTION 10. REQUEST FOR
COMMENTS
Comments should be submitted by De-
cember 15, 2008, to: Internal Revenue
Service, CC:PA:LPD:PR (Revenue Pro-
cedure 2008–64), Room 5203, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20224. Alternatively, comments may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m. to:
Internal Revenue Service, CC:PA:LPD:PR
(Revenue Procedure 2008–64), Courier’s
Desk, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally, via the following email address:
Notice.Comments@irscounsel.treas.gov.
Please include “Revenue Procedure
2008–64” in the subject line of any
electronic submissions. All comments
received will be open to public inspection
and copying.
November 24, 200811982008–47 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Disposition of
Declaratory Judgment
Proceedings Under Section
7428
Announcement 2008–112
This announcement serves notice to
donors that on October 30, 2008, the
United States Tax Court entered an or-
der dismissing the case involving the
below-referenced organization with preju-
dice. The organization listed below is not
recognized as an organization described in
section 501(c)(3) and is not exempt from
tax under section 501(a) and is not an or-
ganization described in section 170(c)(2).
Family Home Providers, Inc.
Cumming, GA
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2008-113
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—Inlieuofa
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
2008–47 I.R.B.1199November 24, 2008

proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
the effective date of amendments to the
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., § 10.51) refer to the regulations.
City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Arizona
TempeLarson, Lowell T.CPASuspended by consent
for admitted violations
of § 10.51 (failure to
make Federal income tax
returns)
Indefinite from
May 1, 2008
TucsonRiley, Jr., Joseph H.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 22,
2008
GlendaleWare, Dion C.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 22,
2008
California
AlamedaHove, Richard E.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
July 28, 2008
OaklandSilva, David A.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 12,
2008
Colorado
DenverChamberlain, Sarah C. Enrolled AgentSuspended by consent
for admitted violations
of § 10.51 (failure to file
timely Federal income tax
returns)
Indefinite from
June 1, 2008
November 24, 200812002008–47 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Florida
ClearwaterDa Fonte, Richard J.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 22,
2008
Daytona BeachEllis, Jr., Armistead W.AttorneySuspended by ALJ default
decision for violation of
§ 10.51 (failure to timely
file Federal income tax
returns)
Indefinite from
July 14, 2008
Flagler BeachMancino, Christoph
er T.
AttorneySuspended by defaul
t
decision in expedit
ed
proceeding under § 1
0.82
(suspension of atto
rney
license)
Indefinite from
September 22,
2008
Delray BeachMills, Gary M.AttorneySuspended by decision
in expedited proceeding
under § 10.82 (conviction
under 18 U.S.C. § 1349,
conspiracy to commit
bank fraud)
Indefinite from
September 12,
2008
Georgia
OxfordPope, Russell W.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 22,
2008
Illinois
Highland ParkGrosky, David S.AttorneySuspended by decision
in expedited proceeding
under § 10.82 (conviction
under 18 U.S.C. § 1341,
mail fraud, and 18 U.S.C.
§ 1343, wire fraud)
Indefinite from
April 1, 2008
Kansas
OakleyStewart, Charles G.AttorneySuspended by ALJ default
decision for violation of
§ 10.51 (failure to timely
file Federal income tax
returns)
Indefinite from
September 19,
2008
Kentucky
MoreheadQuesinberry,
Dana Lea B.
AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 19,
2008
2008–47 I.R.B.1201November 24, 2008

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Massachusetts
OxfordDesautels, III,
Raymond A.
AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 19,
2008
MaldenWilliams, LewdorseyAttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 19,
2008
SpringfieldWinniman, Steven L.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 19,
2008
Michigan
Beverly HillsKashef, Cyrus R.AttorneySuspended by consent
for admitted violations
of § 10.51 (failure to file
timely Federal income tax
returns)
Indefinite from
October 21, 2008
East LansingMcComb, Karen B.CPASuspended by consent
for admitted violations
of § 10.51 (failure to file
timely Federal income tax
returns)
Indefinite from
September 9, 2008
DearbornNunu, Abraham N.CPASuspended by default
decision in expedited
proceeding under § 10.82
(conviction under
26 U.S.C. § 7206(1),
filing false income tax
return)
Indefinite from
September 17,
2008
New Jersey
LakewoodCheek, Russell G.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 19,
2008
Levy, Roger A.,
See New York
November 24, 200812022008–47 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
New York
East HamptonGittleson, JuneEnrolled AgentSuspended by ALJ default
decision for violation of
§ 10.51 (failure to timely
file Federal income tax
returns)
Indefinite from
September 19,
2008
HillsdaleLevy, Roger A.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license in New Jersey)
Indefinite from
September 19,
2008
East NorthportShaw, Gary S.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 19,
2008
MedfordVernoia, DouglasCPASuspended by decision
in expedited proceeding
under § 10.82 (conviction
under 18 U.S.C. § 371,
conspiracy to commit
bank frand and make
false statements in
loan applications to
financial institutions; and,
18 U.S.C. § 1344, bank
fraud)
Indefinite from
September 17,
2008
North Carolina
CharlotteGreene, Daniel E.CPASuspended by default
decision in expedited
proceeding under § 10.82
(revocation of CPA
license)
Indefinite from
September 19,
2008
FayettevillePatterson, Carl P.CPASuspended by default
decision in expedited
proceeding under § 10.82
(revocation of CPA
license)
Indefinite from
September 19,
2008
HillsboroughWhitling, Dennis A.CPASuspended by decision
in expedited proceeding
under § 10.82 (revocation
of CPA license)
Indefinite from
October 6, 2008
2008–47 I.R.B.1203November 24, 2008

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Pennsylvania
SpringfieldMarinelli, NicholasEnrolled AgentSuspended by default
decision in expedited
proceeding under § 10.82
(conviction under
18 U.S.C. § 287 & 2
(filing false claims and
aiding and abetting)
Indefinite from
September 19,
2008
November 24, 200812042008–47 I.R.B.

Definition of Terms
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 ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes 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 rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published 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 pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis 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 rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis 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 fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
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—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2008–47 I.R.B.iNovember 24, 2008

Numerical Finding List
1
Bulletins 2008–27 through 2008–47
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
2008-73, 2008-33 I.R.B.391
2008-74, 2008-33 I.R.B.392
2008-75, 2008-33 I.R.B.392
2008-76, 2008-33 I.R.B.393
2008-77, 2008-33 I.R.B.394
2008-78, 2008-34 I.R.B.453
2008-79, 2008-35 I.R.B.568
2008-80, 2008-37 I.R.B.706
2008-81, 2008-37 I.R.B.706
2008-82, 2008-37 I.R.B.708
2008-83, 2008-37 I.R.B.709
2008-84, 2008-38 I.R.B.748
2008-85, 2008-38 I.R.B.749
2008-86, 2008-40 I.R.B.843
2008-87, 2008-40 I.R.B.843
2008-88, 2008-40 I.R.B.843
2008-89, 2008-40 I.R.B.844
2008-90, 2008-41 I.R.B.896
2008-91, 2008-42 I.R.B.963
2008-92, 2008-42 I.R.B.963
2008-93, 2008-41 I.R.B.896
2008-94, 2008-42 I.R.B.964
2008-95, 2008-42 I.R.B.964
2008-96, 2008-43 I.R.B.1010
2008-97, 2008-43 I.R.B.1010
2008-98, 2008-44 I.R.B.1087
2008-99, 2008-44 I.R.B.1089
2008-100, 2008-44 I.R.B.1090
2008-101, 2008-44 I.R.B.1090
2008-102, 2008-43 I.R.B.1011
2008-103, 2008-46 I.R.B.1161
2008-104, 2008-45 I.R.B.1136
2008-106, 2008-45 I.R.B.1137
2008-107, 2008-46 I.R.B.1162
2008-108, 2008-46 I.R.B.1165
2008-109, 2008-46 I.R.B.1166
2008-112, 2008-47 I.R.B.1199
2008-113, 2008-47 I.R.B.1199
Court Decisions:
2087, 2008-41 I.R.B.845
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
2008-68, 2008-34 I.R.B.418
2008-69, 2008-34 I.R.B.419
2008-70, 2008-36 I.R.B.575
2008-71, 2008-35 I.R.B.462
2008-72, 2008-43 I.R.B.998
2008-73, 2008-38 I.R.B.717
2008-74, 2008-38 I.R.B.718
2008-75, 2008-38 I.R.B.719
2008-76, 2008-39 I.R.B.768
2008-77, 2008-40 I.R.B.814
2008-78, 2008-41 I.R.B.851
2008-79, 2008-40 I.R.B.815
2008-80, 2008-40 I.R.B.820
2008-81, 2008-41 I.R.B.852
2008-82, 2008-41 I.R.B.853
2008-83, 2008-42 I.R.B.905
2008-84, 2008-41 I.R.B.855
2008-85, 2008-42 I.R.B.905
2008-86, 2008-42 I.R.B.925
2008-87, 2008-42 I.R.B.930
2008-88, 2008-42 I.R.B.933
2008-89, 2008-43 I.R.B.999
2008-90, 2008-43 I.R.B.1000
2008-91, 2008-43 I.R.B.1001
2008-92, 2008-43 I.R.B.1001
2008-93, 2008-43 I.R.B.1002
2008-94, 2008-44 I.R.B.1070
2008-95, 2008-44 I.R.B.1076
2008-96, 2008-44 I.R.B.1077
2008-97, 2008-44 I.R.B.1080
2008-98, 2008-44 I.R.B.1080
2008-99, 2008-47 I.R.B.1194
2008-100, 2008-44 I.R.B.1081
2008-101, 2008-44 I.R.B.1082
2008-102, 2008-45 I.R.B.1106
2008-103, 2008-46 I.R.B.1156
Proposed Regulations:
REG-209006-89, 2008-41 I.R.B.867
REG-157711-02, 2008-44 I.R.B.1087
REG-143544-04, 2008-42 I.R.B.947
REG-160868-04, 2008-45 I.R.B.1115
REG-161695-04, 2008-37 I.R.B.699
REG-164965-04, 2008-34 I.R.B.450
REG-142339-05, 2008-45 I.R.B.1116
REG-143453-05, 2008-32 I.R.B.310
REG-146895-05, 2008-37 I.R.B.700
REG-155087-05, 2008-38 I.R.B.726
REG-164370-05, 2008-46 I.R.B.1157
REG-142680-06, 2008-35 I.R.B.565
REG-156779-06, 2008-46 I.R.B.1160
REG-120476-07, 2008-36 I.R.B.679
REG-120844-07, 2008-39 I.R.B.770
REG-128841-07, 2008-45 I.R.B.1124
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
REG-140029-07, 2008-40 I.R.B.828
REG-142040-07, 2008-34 I.R.B.451
REG-142333-07, 2008-43 I.R.B.1008
REG-149404-07, 2008-40 I.R.B.839
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-102822-08, 2008-38 I.R.B.744
REG-103146-08, 2008-37 I.R.B.701
REG-106251-08, 2008-39 I.R.B.774
REG-107318-08, 2008-45 I.R.B.1131
REG-115457-08, 2008-33 I.R.B.390
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-36, 2008-33 I.R.B.340
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
2008-48, 2008-36 I.R.B.586
2008-49, 2008-34 I.R.B.423
2008-50, 2008-35 I.R.B.464
2008-51, 2008-35 I.R.B.562
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
November 24, 2008ii2008–47 I.R.B.

Revenue Procedures— Continued:
2008-52, 2008-36 I.R.B.587
2008-53, 2008-36 I.R.B.678
2008-54, 2008-38 I.R.B.722
2008-55, 2008-39 I.R.B.768
2008-56, 2008-40 I.R.B.826
2008-57, 2008-41 I.R.B.855
2008-58, 2008-41 I.R.B.856
2008-59, 2008-41 I.R.B.857
2008-60, 2008-43 I.R.B.1006
2008-61, 2008-42 I.R.B.934
2008-62, 2008-42 I.R.B.935
2008-63, 2008-42 I.R.B.946
2008-64, 2008-47 I.R.B.1195
2008-65, 2008-44 I.R.B.1082
2008-66, 2008-45 I.R.B.1107
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
2008-45, 2008-34 I.R.B.403
2008-46, 2008-36 I.R.B.572
2008-47, 2008-39 I.R.B.760
2008-48, 2008-38 I.R.B.713
2008-49, 2008-40 I.R.B.811
2008-50, 2008-45 I.R.B.1098
2008-51, 2008-47 I.R.B.1171
Social Security Contribution and Benefit
Base; Domestic Employee Coverage
Threshold:
2008-103, 2008-46 I.R.B.1156
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9407, 2008-33 I.R.B.330
9408, 2008-33 I.R.B.323
9409, 2008-29 I.R.B.118
9410, 2008-34 I.R.B.414
9411, 2008-34 I.R.B.398
9412, 2008-37 I.R.B.687
9413, 2008-34 I.R.B.404
9414, 2008-35 I.R.B.454
Treasury Decisions— Continued:
9415, 2008-36 I.R.B.570
9416, 2008-46 I.R.B.1142
9417, 2008-37 I.R.B.693
9418, 2008-38 I.R.B.713
9419, 2008-40 I.R.B.790
9420, 2008-39 I.R.B.750
9421, 2008-39 I.R.B.755
9422, 2008-42 I.R.B.898
9423, 2008-43 I.R.B.966
9424, 2008-44 I.R.B.1012
9425, 2008-45 I.R.B.1100
9426, 2008-46 I.R.B.1153
9427, 2008-47 I.R.B.1179
9428, 2008-47 I.R.B.1174
9429, 2008-47 I.R.B.1167
2008–47 I.R.B.iiiNovember 24, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–47
Announcements:
2008-19
Superseded by
Ann. 2008-95, 2008-42 I.R.B.964
2008-64
Corrected by
Ann. 2008-71, 2008-32 I.R.B.321
2008-72
Corrected by
Ann. 2008-78, 2008-34 I.R.B.453
Notices:
88-80
Modified by
Notice 2008-79, 2008-40 I.R.B.815
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2005-11
Superseded by
T.D. 9425, 2008-45 I.R.B.1100
2005-91
Obsoleted by
T.D. 9422, 2008-42 I.R.B.898
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2007-36
Clarified, modified, and amplified by
Rev. Proc. 2008-54, 2008-38 I.R.B.722
2007-52
Updated and amplified by
Notice 2008-96, 2008-44 I.R.B.1077
2007-53
Updated by
Notice 2008-97, 2008-44 I.R.B.1080
Notices— Continued:
2008-41
Amended and supplemented by
Notice 2008-88, 2008-42 I.R.B.933
Proposed Regulations:
REG-161695-04
Corrected by
Ann. 2008-92, 2008-42 I.R.B.963
REG-143453-05
Hearing cancelled by
Ann. 2008-96, 2008-43 I.R.B.1010
REG-129243-07
Corrected by
Ann. 2008-75, 2008-33 I.R.B.392
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
REG-101258-08
Corrected by
Ann. 2008-73, 2008-33 I.R.B.391
REG-103146-08
Hearing scheduled by
Ann. 2008-102, 2008-43 I.R.B.1011
REG-115457-08
Hearing scheduled by
Ann. 2008-108, 2008-46 I.R.B.1165
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-10
Section 6.02(1)(a) modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2002-9
Clarified, modified, amplified, and superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2002-28
Section 7.02(1)(a) modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2002-64
Superseded by
Rev. Proc. 2008-55, 2008-39 I.R.B.768
Revenue Procedures— Continued:
2005-29
Superseded by
Rev. Proc. 2008-49, 2008-34 I.R.B.423
2006-27
Modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
2007-14
Superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-37
Updated by
Rev. Proc. 2008-62, 2008-42 I.R.B.935
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-44
Modified by
Rev. Proc. 2008-56, 2008-40 I.R.B.826
2007-49
Section 3 modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2007-50
Superseded by
Rev. Proc. 2008-36, 2008-33 I.R.B.340
2007-63
Superseded by
Rev. Proc. 2008-59, 2008-41 I.R.B.857
2007-66
Modified and superseded by
Rev. Proc. 2008-54, 2008-38 I.R.B.722
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
November 24, 2008iv2008–47 I.R.B.

Revenue Procedures— Continued:
2008-3
Modified and amplified by
Rev. Proc. 2008-61, 2008-42 I.R.B.934
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
2008-43
Modified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2008-52
Modified by
Ann. 2008-84, 2008-38 I.R.B.748
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
76-273
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
82-105
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2006-57
Modified by
Notice 2008-74, 2008-38 I.R.B.718
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
Treasury Decisions:
8073
Corrected by
Ann. 2008-99, 2008-44 I.R.B.1089
Treasury Decisions— Continued:
9391
Corrected by
Ann. 2008-74, 2008-33 I.R.B.392
9417
Corrected by
Ann. 2008-91, 2008-42 I.R.B.963
2008–47 I.R.B.vNovember 24, 2008

INDEX
Internal Revenue Bulletins 2008–27 through
2008–47
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Accrual rule for defined benefit plans under section 411(b)(1)(B),
application (REG–100464–08) 32,313
Application of section 457(f) tocertain arrangements regarding
part-year compensation (Notice 62) 29,130
Closing agreements, Employee Plans Compliance Resolution
System (EPCRS) (RP 50) 35,464
Contributions, limitations on benefits and contributions, cost-of-
living adjustments (Notice 102) 45,1106
Definition of “outside director” (RR 32) 27,6
Determination letters, staggered remedial amendment period (RP
56) 40,826
Disaster relief, Hurricane Ike (Notice 87) 42,930
Employee stock purchase plans, rules (REG–106251–08) 39,
774
Executive compensation, guidance for sections 162(m)(5) and
280G(e) (Notice 94) 44,1070
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2008 (Notice 65) 30,182
August 2008 (Notice 69) 34,419
September 2008 (Notice 75) 38,719
October 2008 (Notice 93) 43,1002
Individual Retirement Accounts (IRAs), converting amounts to
Roth IRAs (TD 9418) 38,713
Letter rulings, nonqualified deferred compensation, no-rule areas
(RP 61) 42,934
Minimum hospital length-of-stay for mothers and newborns (TD
9427) 47,1179
Mortality tables:
Determining present value (TD 9419) 40,790
Procedures for obtaining approval to use plan-specific substi-
tute mortality tables (RP 62) 42,935
EMPLOYEE PLANS—Cont.
Updated static mortality tables for the years 2009 through
2013 (Notice 85) 42,905
Multiemployer plan funding guidance, hearing scheduled for
REG–151135–07 (Ann 64) 28,114;correction(Ann71)32,
321
Prohibition against discrimination under group health plan based
on genetic information, request for comments (Ann 107) 46,
1162
Proposed Regulations:
26 CFR 1.401(a)(9)–1, –6, amended; 1.403(b)–6,
amended; reasonable good faith interpretation of re-
quired minimum distribution rules by governmental plans
(REG–142040–07) 34,451
26 CFR 1.401(a)–13, –20, amended; 1.402(f)–1, amended;
1.411(a)–11, amended; 1.417(e)–1, amended; notice to par-
ticipants of consequences of failing to defer receipt of qual-
ified retirement plan distributions, expansion of applicable
election period and period for notices (REG–107318–08)
45,1131
26 CFR 1.411(b)–1, amended; accrual rules for defined ben-
efit plans (REG–100464–08) 32,313
26 CFR 1.421–1, amended; 1.422–2, –5, amended; 1.423–1,
–2, revised; employee stock purchase plans under section
423 (REG–106251–08) 39,774
26 CFR 1.432; multiemployer plan funding guidance, hearing
scheduled for REG–151135–07 (Ann 64) 28,114; correc-
tion (Ann 71) 32,321
26 CFR 1.6039–1, revised; 1.6039–2, added; infor-
mation reporting requirements under section 6039
(REG–103146–08) 37,701; hearing scheduled (Ann 102)
43,1011
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Qualified retirement plans:
Distributions for governmental plans, normal retirement age
(Notice 98) 44,1080
Notice to participants of consequences of failing to defer re-
ceipt of distributions (REG–107318–08) 45,1131
Qualification, plan sponsorship (RR 45) 34,403
Reasonable good faith interpretation of required minimum dis-
tribution rules by governmental plans (REG–142040–07) 34,
451
Regulations:
26 CFR 1.408A–4, amended; 1.408–4T, removed; converting
an IRA annuity to a Roth IRA (TD 9418) 38,713
26 CFR 1.430(h)(3)–1, –2, added; 1.431(c)(6)–1, added; mor-
tality tables for determiningpresent value (TD 9419) 40,
790
November 24, 2008vi2008–47 I.R.B.

EMPLOYEE PLANS—Cont.
26 CFR 54.9801–1, –2, amended; 54.9811–1, added;
54.9811–1T, removed; 54.9831–1, amended; final rules for
group health plans and health insurance issuers under the
Newborns’ and Mothers’ Health Protection Act (TD 9427)
47,1179
Stocks, information reporting requirements for statutory stock
options (REG–103146–08) 37,701; hearing scheduled (Ann
102) 43,1011
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Transition relief, funding, expanding availability (Notice 73) 38,
717
Trusts, qualification, Puerto Rico (RR 40) 30,166
EMPLOYMENT TAX
Interest-free adjustments and claims for refund of employment
taxes (TD 9405) 32,293
Proposed Regulations:
26 CFR 31.6060–1, added; 31.6107–1, added; 31.6109–2,
added; 31.6694–1 thru –4, added; 31.6695–1, added;
31.6696–1, added; 31.7701–1, added; tax return preparer
penalties under sections 6694 and 6695 (REG–129243–07)
27,32
Publications:
1141, General Rules and Specifications for Substitute Forms
W-2 and W-3, revised (RP 33) 28,93
4436, General Rules and Specifications for Substitute Form
941 and Schedule B (Form 941), revised (RP 32) 28,82
Regulations:
26 CFR 31.6011(a)–1, –4, –5, amended; 31.6205–1,
amended; 31.6302–0, –1, amended; 31.6402(a)–1,
–2, amended; 31.6413(a)–1, –2, amended; 31.6414–1,
amended; 602.101, amended; employment tax adjustments
(TD 9405) 32,293
Social security contribution and benefit base; domestic employee
coverage threshold, 2009 (Notice 103) 46,1156
Substitute forms:
W-2 and W-3, general rules and specifications (RP 33) 28,93
941 and Schedule B (Form 941), general rules and specifica-
tions (RP 32) 28,82
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
ESTATE TAX
Annuities, effective dates and other issues under employee ben-
efit provisions of Tax Reform Act of 1984, correction to TD
8073 (Ann 99) 44,1089
Charitable lead unitrust (CLUT):
Inter vivos, sample forms (RP 45) 30,225
Testamentary, sample form (RP 46) 30,238
Cost-of-living adjustments for inflation for 2009 (RP 66) 45,
1107
ESTATE TAX—Cont.
Interest rates for 2008, farm real property, special use value (RR
44) 32,292
Proposed Regulations:
26 CFR 20.6060–1, added; 20.6107–1, added; 20.6109–1,
added; 20.6694–1 thru –4, added; 20.6695–1, added;
20.6696–1, added; 20.7701–1, added; tax return preparer
penalties under sections 6694 and 6695 (REG–129243–07)
27,32
Regulations:
26 CFR 1.512(a)–5T, amended; effective dates and other is-
sues arising under the employee benefit provisions of the
Tax Reform Act of 1984; correction to TD 8073 (Ann 99)
44,1089
26 CFR 20.2036–1, amended; 20.2039–1, amended; grantor
retained interest trusts, application of sections 2036 and
2039 (TD 9414) 35,454
26 CFR 26.2600–1, amended; 26.2642–6, amended;
26.2654–1, amended; severance of a trust for genera-
tion-skipping transfer (GST) tax purposes (TD 9421) 39,
755
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Transfer tax valuation of interest in a restricted management ac-
count (RMA) (RR 35) 29,116
Trusts:
Grantor retained interest trusts, application of sections 2036
and 2039 (TD 9414) 35,454
Private trust company (Notice 63) 31,261
Severance of a trust for GST tax purposes (TD 9421) 39,755
EXCISE TAX
Annuities, effective dates and other issues under employee ben-
efit provisions of Tax Reform Act of 1984, correction to TD
8073 (Ann 99) 44,1089
Charitable remainder trusts (CRTs), division into two or more
separate and equal CRTs (RR 41) 30,170
Cost-of-living adjustments for inflation for 2009 (RP 66) 45,
1107
Credits, alcohol fuel, biodiesel, alternative fuel
(REG–155087–05) 38,726
Exported coal tax refund (Ann 103) 46,1161
Health Savings Accounts (HSAs), employer comparable contri-
butions to HSAs under section 4980G and excise tax under sec-
tions 4980B, 4980D, 4980E, and 4980G (REG–120476–07)
36,680
Minimum hospital length-of-stay for mothers and newborns (TD
9427) 47,1179
Prohibition against discrimination under group health plan based
on genetic information, request for comments (Ann 107) 46,
1162
2008–47 I.R.B.viiNovember 24, 2008

EXCISE TAX—Cont.
Proposed Regulations:
26 CFR 1.40–1, revised; 1.40–2, added; 1.40A–1,
added; 40.0–1, amended; 40.6302(c)–1, amended;
48.0–1, amended; 48.0–4, added; 48.4041–0, amended;
48.4041–18, –20, removed and reserved; 48.4041–19,
revised; 48.4081–1, –2, –3, amended; 48.4081–6, re-
moved and reserved; 48.4082–4, amended; 48.4101–1,
amended; 48.6426–1 thru –7, added; 48.6427–8, amended;
48.6427–12, added; alcohol fuel and biodiesel, renewable
diesel, alternative fuel, diesel-water fuel emulsion, taxable
fuel definitions, excise tax returns (REG–155087–05) 38,
726
26 CFR 40.6060–1, added; 40.6107–1, added; 40.6109–1,
added; 40.6694–1 thru –4, added; 40.6695–1, added;
40.6696–1, added; 40.7701–1, added; 41.6060–1, added;
41.6107–1, added; 41.6109–2, added; 41.6694–1 thru –4,
added; 41.6695–1, added; 41.6696–1, added; 41.7701–1,
added; 44.6060–1, added; 44.6107–1, added; 44.6109–1,
added; 44.6694–1 thru –4, added; 44.6695–1, added;
44.6696–1, added; 44.7701–1, added; 53.6060–1, added;
53.6107–1, added; 53.6109–1, added; 53.6694–1 thru –4,
added; 53.6695–1, added; 53.6696–1, added; 53.7701–1,
added; 54.6060–1, added; 54.6107–1, added; 54.6109–1,
added; 54.6694–1 thru –4, added; 54.6695–1, added;
54.6696–1, added; 54.7701–1, added; 55.6060–1, added;
55.6107–1, added; 55.6109–1, added; 55.6694–1 thru –4,
added; 55.6695–1, added; 55.6696–1, added; 55.7701–1,
added; 56.6060–1, added; 56.6107–1, added; 56.6109–1,
added; 56.6694–1 thru –4, added; 56.6695–1, added;
56.6696–1, added; 56.7701–1, added; 156.6060–1, added;
156.6107–1, added; 156.6109–1, added; 156.6694–1
thru –4, added; 156.6695–1, added; 156.6696–1, added;
156.7701–1, added; 157.6060–1, added; 157.6107–1,
added; 157.6109–1, added; 157.6694–1 thru –4, added;
157.6695–1, added; 157.6696–1, added; 157.7701–1,
added; 301.7701–15, amended; tax return preparer penal-
ties under sections 6694 and 6695 (REG–129243–07) 27,
32
26 CFR 54.4980B–0, B–2, G–1, G–3, G–4, amended;
54.4980D–1, E–1, G–6, G–7, added; employer com-
parable contributions to health savings accounts under
section 4980G, and requirement of return for filing the
excise tax under section 4980B, 4980D, 4980E or 4980G
(REG–120476–07) 36,680
Regulations:
26 CFR 1.512(a)–5T, amended; effective dates and other is-
sues arising under the employee benefit provisions of the
Tax Reform Act of 1984; correction to TD 8073 (Ann 99)
44,1089
26 CFR 54.9801–1, –2, amended; 54.9811–1, added;
54.9811–1T, removed; 54.9831–1, amended; final rules for
group health plans and health insurance issuers under the
Newborns’ and Mothers’ Health Protection Act (TD 9427)
47,1179
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
EXEMPT ORGANIZATIONS
Declaratory judgment suits (Ann 67)29, 164;(Ann72)32,321;
correction (Ann 78) 34,453; (Ann 82) 37,708; (Ann 85) 38,
749; (Ann 89) 40,844; (Ann 93) 41,896; (Ann 109) 46,1166;
(Ann 112) 47,1199
Form 990, implementation of redesigned form (TD 9423) 43,
966; (REG–142333–07) 43,1008
Indian tribal governments treated as states (RP 55) 39,768
List of organizations classifiedas private foundations (Ann 70)
32,318;(Ann81)37,706; (Ann 104) 45,1136
Proposed Regulations:
26 CFR 1.170A–9, amended; 1.507–2, revised; 1.509(a)–3,
amended; 1.6033–2, amended; 1.6043–3, amended; imple-
mentation of redesigned Form 990 (REG–142333–07) 43,
1008
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Regulations
26 CFR 1.170A–9, amended; 1.170A–9T, added; 1.507–2,
amended; 1.507–2T, added; 1.509(a)–3, amended;
1.509(a)–3T, added; 1.6033–2, amended; 1.6033–2T,
added; 1.6043–3, amended; 1.6043–3T, added; 602.101,
amended; implementation of redesigned Form 990 (TD
9423) 43,966
26 CFR 1.664–1, amended; 602.101, amended; guidance un-
der section 664 regarding the effect of unrelated business
taxable income on charitable remainder trusts (TD 9403)
32,285
Revocations (Ann 62) 27,74; (Ann 66) 29,164; (Ann 69) 32,
318;(Ann76)33,393; (Ann 79) 35,568; (Ann 80) 37,706;
(Ann 86) 40,843; (Ann 88) 40,843; (Ann 90) 41,896;(Ann
97) 43,1010; (Ann 100) 44,1090
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Trusts:
Charitable remainder trusts (CRTs):
Calculation of excise tax on unrelated business taxable in-
come (UBTI) (TD 9403) 32,285
Division into two or more separate and equal CRTs (RR
41) 30,170
GIFT TAX
Annuities, effective dates and other issues under employee ben-
efit provisions of Tax Reform Act of 1984, correction to TD
8073 (Ann 99) 44,1089
Charitable lead unitrust (CLUT), inter vivos, sample forms (RP
45) 30,225
Cost-of-living adjustments for inflation for 2009 (RP 66) 45,
1107
November 24, 2008viii2008–47 I.R.B.

GIFT TAX—Cont.
Proposed Regulations:
26 CFR 25.6060–1, added; 25.6107–1, added; 25.6109–1,
added; 25.6694–1 thru –4, added; 25.6695–1, added;
25.6696–1, added; 25.7701–1, added; 26.6060–1, added;
26.6107–1, added; 26.6109–1, added; 26.6694–1 thru –4,
added; 26.6695–1, added; 26.6696–1, added; 26.7701–1,
added; tax return preparer penalties under sections 6694
and 6695 (REG–129243–07) 27,32
Regulations:
26 CFR 1.512(a)–5T, amended; effective dates and other is-
sues arising under the employee benefit provisions of the
Tax Reform Act of 1984; correction to TD 8073 (Ann 99)
44,1089
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32
Transfer tax valuation of interest in a restricted management ac-
count (RMA) (RR 35) 29,116
Trust, private trust company (Notice 63) 31,261
INCOME TAX
Accounting methods:
Automatic changes in methods of accounting (RP 52) 36,587
Consent procedures, changesin method of accounting (Ann
84) 38,748
Rolling average inventory (RP 43) 30,186
Acquisitions, application of section 382 in the case of certain ac-
quisitions made pursuant to the Housing and Economic Recov-
ery Act of 2008 (Notice 76) 39,768
Annuities, effective dates and other issues under employee ben-
efit provisions of Tax Reform Act of 1984, correction to TD
8073 (Ann 99) 44,1089
Balanced system for measuring organizational and employee
performance (TD 9426) 46,1153
Base period T-Bill rate, 2008 (RR 51) 47,1171
Bonds:
Election involving repeal of bonding requirement under sec-
tion 42(j)(6) (RP 60) 43,1006
Expanded temporary rule allowing governmental issuers to
purchase their own tax-exempt bonds (Notice 88) 42,933
Procedures for requesting a refund of arbitrage rebate and sim-
ilar payments on tax-exempt bonds (RP 37) 29,137
Solicitation of applications from qualified issuers for alloca-
tion of qualified forestry conservation bonds (QFCBs) lim-
itation and application requirements (Notice 70) 36,575
Tax-exempt bonds:
Federal guarantee, money market funds (Notice 81) 41,
852
Volume cap, mortgage credit certificates (Notice 79) 40,
815
Bonus depreciation for the Kansas disaster area (Notice 67) 32,
307
Capital costs incurred to comply with EPA sulfur regulations (TD
9404) 32,280; (REG–143453–05) 32,310; hearing cancelled
(Ann 96) 43,1010
INCOME TAX—Cont.
Certain financing commitments and applicable high yield dis-
count obligations (RP 51) 35,562
Change to office to which notices of nonjudicial sale and re-
quests for return of wrongfully levied property must be sent
(TD 9410) 34,414
Charitable contributions:
Cash and noncash, substantiation and reporting requirements
under section 170 (REG–140029–07) 40,828
Computation of deduction for inventory contributions (Notice
90) 43,1000
Charitable lead unitrust (CLUT):
Inter vivos, sample forms (RP 45) 30,225
Testamentary, sample form (RP 46) 30,238
Charitable remainder trusts (CRTs), division into two or more
separate and equal CRTs (RR 41) 30,170
Child of parents who are divorced, separated or living apart as
the dependent of both parents (RP 48) 36,586
Corporations:
Accumulated adjustments account (AAA) and key-man life
insurance (RR 42) 30,175
Enabling elections for certaintransactions under section
336(e) (REG–143544–04) 42,947
S corporation rules, updates (TD 9422) 42,898
Section 108 reduction of tax attributes for S corporations
(REG–102822–08) 38,744
Section 1367 regarding open account debt (TD 9428) 47,1174
Transfers by domestic corporations to foreign corporations
under section 361(a) or (b) (REG–209006–89) 41,867
Cost-of-living adjustments for inflation for 2009 (RP 66) 45,
1107
Credits:
Alcohol fuel, biodiesel, alternative fuel (REG–155087–05)
38,726
Allocation under:
Qualifying advanced coal project program for 2008-09
(Notice 96) 44,1077
Qualifying gasification project program (Notice 97) 44,
1080
Amendments to new markets tax credit regulations
(REG–149404–07) 40,839
Electricity produced from certain renewable resources, sec-
tion 45 tax credit (Notice 60) 30,178
Enhanced oil recovery credit, 2008 inflation adjustment (No-
tice 72) 43,998
Foreign tax credit, determining the amount of taxes
paid for purposes of section 901 (TD 9416) 46,1142;
(REG–156779–06) 46,1160
Increasing research activities (TD 9401) 27,1;
(REG–149405–07) 27,73
Low-income housing credit:
Carryovers to qualified states, 2008 National Pool (RP 57)
41,855
Emergency housing relief, Wisconsin severe storms, tor-
nadoes, and flooding (Notice 61) 30,180
Indiana severe storms and flooding (Notice 56) 28,79
2008–47 I.R.B.ixNovember 24, 2008

INCOME TAX—Cont.
Iowa severe storms, tornadoes, and flooding (Notice 58)
28,81
Missouri severe storms and flooding, disaster relief (Notice
66) 31,270
Satisfactory bond, “bond factor” amounts for the period:
January through September 2008 (RR 36) 30,165
Utility allowance, new options for estimating (TD 9420)
39,750
New markets tax credit, targeted populations
(REG–142339–05) 45,1116
Section 48 tax credit for qualifying fuel cell property and qual-
ifying microturbine property (Notice 68) 34,418
Declaratory judgment suits (Ann 67)29, 164;(Ann72)32,321;
correction (Ann 78) 34,453; (Ann 82) 37,708; (Ann 85) 38,
749;(Ann89)40,844;(Ann93)41,896; (Ann 109) 46,1166;
(Ann 112) 47,1199
Definition of “outside director” (RR 32) 27,6
Dependent child of divorced or separated parents or parents who
live apart (TD 9408) 33,323
Depreciation, election to forgo additional first year depreciation
deduction (RP 65) 44,1082
Disaster relief, China earthquake, qualified disaster (Notice 57)
28,80
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 68) 30,245;
(Ann 77) 33,394; (Ann 83) 37,709; (Ann 101) 44,1090;(Ann
113) 47,1199
Disclosure of taxpayer groupings for purposes of the passive ac-
tivity loss provisions under section 469 (Notice 64) 31,268
Disclosure or use of information by preparers of returns (TD
9409) 29,118; (REG–121698–08) 29,163
Economic Stimulus Act of 2008, bonus depreciation, section 179
expensing (RP 54) 38,722
E-file, request for applications for participation in the 2009 IRS
Individual e-file Partnership Program (Ann 106) 45,1137
Election to expense certain refineries (TD 9412) 37,687;
(REG–146895–05) 37,700
Employee stock purchase plans, rules (REG–106251–08) 39,
774
Escrow accounts used in like-kind exchanges (TD 9413) 34,404
Executive compensation, guidance for sections 162(m)(5) and
280G(e) (Notice 94) 44,1070
Expenses:
Elections regarding start-up expenditures, corporation orga-
nizational expenditures, and partnership organizational ex-
penses (TD 9411) 34,
398; (REG–164965–04) 34,450
Optional standard mileage rates, update (Ann 63) 28,114
Extension of replacement period for livestock sold on account of
drought in specified counties (Notice 86) 42,925
Extension of time for filing returns (TD 9407) 33,330;
(REG–115457–08) 33,390; hearing scheduled (Ann 108) 46,
1165
Farmer and fisherman income averaging (TD 9417) 37,693;cor-
rection(Ann91)42,963; (REG–161695–04) 37,699; correc-
tion (Ann 92) 42,963
INCOME TAX—Cont.
Forms:
1042-S, Foreign Person’s U.S. Source Income Subject to
Withholding, specifications for filing electronically (RP
44) 30,187; update of Publication 1187 (Ann 95) 42,964
1096, 1098, 1099, 5498, W-2G, and 1042-S, substitute form
specifications (RP 36) 33,340
8027, Employer’s Annual Information Return of Tip Income
and Allocated Tips, specifications for filing electronically
(RP 34) 27,13
8596, Information Return for Federal Contracts, specifica-
tions for filing electronically (RP 49) 34,423
Guidance to tax return preparers:
Consents to disclose and consents to use tax return in-
formation in the Form 1040 series (TD 9409) 29,118;
(REG–121698–08) 29,163
Consents to disclose and consents to use tax return informa-
tion in the Form 1040 series, update to Rev. Proc. 2008-12
(RP 35) 29,132
Guidance under section 956 for determining the basis of property
acquired in certain nonrecognition transactions (TD 9402) 31,
254; (REG–102122–08) 31,278
Guidance with respect to issues arising from section 6707A
penalty (TD 9425) 45,1100; (REG–160868–04) 45,1115
Health Flexible Spending Arrangement (FSA), distributions of
unused amounts to reservists called up to active duty (Notice
82) 41,853
Health Savings Accounts (HSAs), additional guidance (Notice
59) 29,123
Institute on Current Issues in International Taxation (Ann 94) 42,
964
Insurance companies:
Effectively connected income (RP 53) 36,678
Life insurance contracts:
Automatic waiver (RP 42) 29,160
Closing agreement (RP 40) 29,151
Modified endowment contracts (MECs), closing agree-
ments (RP 39) 29,143
Qualified additional benefits (QABs), closing agreement
(RP 38) 29,139
Variable contracts, closing agreement (RP 41) 29,155
Segregated asset accounts, diversification (Notice 92) 43,
1001
Interest:
Characterization of management fees paid by an upper tier
investment partnership and lower tier trader partnerships
(RR 39) 31,252
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2008 (RR 33) 27,8
August 2008 (RR 43) 31,258
September 2008 (RR 46) 36,572
October 2008 (RR 49) 40,811
November 2008 (RR 50) 45,1098
Of earnings in United States property (Notice 91) 43,1001
November 24, 2008x2008–47 I.R.B.

INCOME TAX—Cont.
Rates:
Underpayments and overpayments, quarter beginning:
October 1, 2008 (RR 47) 39,760
Treatment of interest expense attributable to indebtedness al-
locable to property held for investment described in section
163(d)(5)(A)(ii):
Investment interest deduction (RR 38) 31,249
Trader partnership (Ann 65) 31,279
Law school Loan Repayment Assistance Program (LRAP), ex-
clusion from gross income (RR 34) 28,76
Legislative Cumulative Bulletins, discontinuation of publication
(Ann 87) 40,843
Letter rulings, nonqualified deferred compensation, no-rule areas
(RP 61) 42,934
Liens, return of wrongfully levied property and discharge of
liens, special rules (TD 9410) 34,414
Life insurance:
Premiums by S corporation, effect on accumulated adjust-
ments account (AAA) (RR 42) 30,175
Statutory reserves, meaning formulti-state taxpayers (RR 37)
28,77
Losses, hurricane-related casualty losses and subsequent grants
(Notice 95) 44,1076
Marginal production rates, 2008 (Notice 89) 43,999
Partnerships:
Discharge of indebtedness income for transfers of partner-
ship interest in satisfaction of partnership indebtedness
(REG–164370–05) 46,1157
Election that enables partners of tax-exempt bond partnership
to take into account monthly the inclusions required under
sections 702 and 707(c) (Notice 80) 40,820
EESA section 301 application to partners in partnerships (RP
64) 47,1195
Per diem allowances (RP 59) 41,857
Presidentially declared disaster or terroristic or military
actions, postponement of certain tax-related deadlines
(REG–142680–06) 35,565
Private foundations, organizations now classified as (Ann 70) 32,
318; (Ann 81) 37,706; (Ann 104) 45,1136
Proposed Regulations:
26 CFR 1.40–1, revised; 1.40–2, added; 1.40A–1,
added; 40.0–1, amended; 40.6302(c)–1, amended;
48.0–1, amended; 48.0–4, added; 48.4041–0, amended;
48.4041–18, –20, removed and reserved; 48.4041–19,
revised; 48.4081–1, –2, –3, amended; 48.4081–6, re-
moved and reserved; 48.4082–4, amended; 48.4101–1,
amended; 48.6426–1 thru –7, added; 48.6427–8, amended;
48.6427–12, added; alcohol fuel and biodiesel, renewable
diesel, alternative fuel, diesel-water fuel emulsion, taxable
fuel definitions, excise tax returns (REG–155087–05) 38,
726
26 CFR 1.41–6, –8, amended; 1.41–9, added; alternative sim-
plified credit under section 41(c)(5) (REG–149405–07) 27,
73
26 CFR 1.45D–1, amended; amendments to new markets tax
credit regulations (REG–149404–07) 40,839
INCOME TAX—Cont.
26 CFR 1.45D–1, amended; targeted populations under sec-
tion 45D(e)(2) (REG–142339–05) 45,1116
26 CFR 1.108–7, amended; section 108 reduction of tax at-
tributes for S corporations (REG–102822–08) 38,744
26 CFR 1.108–8, added; 1.721–1, amended; section 108(e)(8)
application to partnerships (REG–164370–05) 46,1157
26 CFR 1.147(f)–1; public approval guidance for tax-exempt
bonds (REG–128841–07) 45,1124
26 CFR 1.170–0, –2, removed; 1.170A–13, amended;
1.170A–15 thru –18, added; substantiation and reporting
requirements for cash and noncash charitable contribution
deductions (REG–140029–07) 40,828
26 CFR 1.179B–1, added; capital costs incurred to comply
with EPA sulfur regulations (REG–143453–05) 32,310;
hearing cancelled (Ann 96) 43,1010
26 CFR 1.179C–1, added; election to expense certain refiner-
ies (REG–146895–05) 37,700
26 CFR 1.195–1, revised; 1.248–1, amended; 1.709–1,
amended; elections regarding start-up expenditures, cor-
poration organizational expenditures, and partnership
organizational expenses (REG–164965–04) 34,450
26 CFR 1.336–0 thru –5, added; 1.338–0, –1, –5, amended;
regulations enabling elections for certain transactions under
section 336(e) (REG–143544–04) 42,947
26 CFR 1.358–6, amended; 1.367(a)–1T, (a)–3, (b)–4, (b)–6,
amended; 1.367(a)–7, added; 1.1248–1, –6, –8, amended;
1.1248(f)–1, –2, –3, added; 1.6038B–1, amended; trans-
fers by domestic corporations that are subject to section
367(a)(5), distributions by domestic corporations that are
subject to section 1248(f) (REG–209006–89) 41,867
26 CFR 1.367(a)–2, –4, –5, added; 1.954–2(c), revised;
1.956–2(b), –2(e), revised, modifications to subpart
F treatment of aircraft and vessel leasing income
(REG–138355–07) 32,311
26 CFR 1.401(a)–13, –20, amended; 1.402(f)–1, amended;
1.411(a)–11, amended; 1.417(e)–1, amended; notice to par-
ticipants of consequences of failing to defer receipt of qual-
ified retirement plan distributions, expansion of applicable
election period and period for notices (REG–107318–08)
45,1131
26 CFR 1.401(a)(9)–1, –6, amended; 1.403(b)–6,
amended; reasonable good faith interpretation of re-
quired minimum distribution rules by governmental plans
(REG–142040–07) 34,451
26 CFR 1.421–1, amended; 1.422–2, –5, amended; 1.423–1,
–2, revised; employee stock purchase plans under section
423 (REG–106251–08) 39,774
26 CFR 1.460–3 thru –6, amended; rules for home construc-
tion contracts (REG–120844–07) 39,770
26 CFR 1.642(c)–3, amended; 1.643(a)–5, amended; guid-
ance under sections 642 and 643 (income ordering rules)
(REG–101258–08) 28,111; correction (Ann 73) 33,391
26 CFR 1.901–1, –2, amended; determining the amount of
taxes paid for purposes of section 901 (REG–156779–06)
46,1160
2008–47 I.R.B.xiNovember 24, 2008

INCOME TAX—Cont.
26 CFR 1.956–1, amended; guidance under section 956 for
determining the basis of property acquired in certain non-
recognition transactions (REG–102122–08) 31,278
26 CFR 1.1301–1, amended; farmer and fisherman income
averaging (REG–161695–04) 37,699;correction(Ann92)
42,963
26 CFR 1.1502–13(e)(4), withdrawn; 1.1502–32(c)(1)(ii),
withdrawn; unified rule for loss on subsidiary stock
(REG–157711–02) 44,1087
26 CFR 1.6039–1, revised; 1.6039–2, added; infor-
mation reporting requirements under section 6039
(REG–103146–08) 37,701; hearing scheduled (Ann 102)
43,1011
26 CFR 1.6060–1, amended; 1.6107–1, revised; 1.6109–2,
amended; 1.6694–0, –1, –2, revised; 1.6694–3, –4,
amended; 1.6695–1, revised; 1.6695–2, amended;
1.6696–1, revised; 301.7701–15, amended; tax re-
turn preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32; corrections (Ann 75) 33,392
26 CFR 1.6081–2, –6, added; 54.6081–1, added; extension of
time for filing returns (REG–115457–08) 33,390; hearing
scheduled (Ann 108) 46,1165
26 CFR 301.6707A–1, added; section 6707A and the failure
to include on any return or statement any information re-
quired to be disclosed under section 6011 with respect to a
reportable transaction (REG–160868–04) 45,1115
26 CFR 301.7216–3, amended; disclosure or use of informa-
tion by preparers of returns (REG–121698–08) 29,163
26 CFR 301.7508A–1, amended; postponement of certain
tax-related deadlines by reasonof Presidentially declared
disaster or terroristic or military actions (REG–142680–06)
35,565
Public approval guidance for tax-exempt bonds
(REG–128841–07) 45,1124
Publications:
1141, General Rules and Specifications for Substitute Forms
W-2 and W-3, revised (RP 33) 28,93
1179, General Rules and Specifications for Substitute Forms
1096, 1098, 1099, 5498, W-2G, and 1042-S, update (RP
36) 33,340
1187, Specifications for Filing Form 1042-S, Foreign Per-
son’s U.S. Source Income Subject to Withholding, Elec-
tronically, revised (RP 44) 30,187; update (Ann 95) 42,
964
1239, Specifications for Filing Form 8027, Employer’s An-
nual Information Return of Tip Income and Allocated Tips,
Electronically (RP 34) 27,13
1516, Specifications for Filing Form 8596, Information Re-
turn for Federal Contracts,Electronically (RP 49) 34,423
4436, General Rules and Specifications for Substitute Form
941 and Schedule B (Form 941), revised (RP 32) 28,82
Qualified intermediaries (QIs), amendments to QI agreement and
QI audit guidance for external auditors of QIs (Ann 98) 44,
1087
INCOME TAX—Cont.
Qualified retirement plans,notice to participants of con-
sequences of failing to defer receipt of distributions
(REG–107318–08) 45,1131
Real Estate Mortgage Investment Conduit (REMIC), allocation
of income to foreign persons by certain entites (TD 9415) 36,
570
Reasonable good faith interpretation of required minimum dis-
tribution rules by governmental plans (REG–142040–07) 34,
451
Refund of taxes unlawfully assessed, administrative claim (CD
2087) 41,845
Regulations:
26 CFR 1.41–0, –1, –6, –8, amended; 1.41–0T, –6T, –8T,
–9, –9T added; alternative simplified credit under section
41(c)(5) (TD 9401) 27,1
26 CFR 1.42–10, –12, amended; section 42 utility allowance
regulations update (TD 9420) 39,750
26 CFR 1.141–0, –4, –15, amended; treatment of payments in
lieu of taxes under section 141 (TD 9429) 47,1167
26 CFR 1.152–4, revised; 1.152–4T, removed; dependent
child of divorced or separated parents or parents who live
apart (TD 9408) 33,323
26 CFR 1.179B–1T, added; 602.101, amended; capital costs
incurred to comply with EPA sulfur regulations (TD 9404)
32,280
26 CFR 1.179C–1T, added; 602.101, amended; election to
expense certain refineries (TD 9412) 37,687
26 CFR 1.195–1, revised; 1.195–1T, added; 1.248–1,
amended; 1.248–1T, added; 1.709–1, amended; 1.709–1T,
added; elections regarding start-up expenditures, cor-
poration organizational expenditures, and partnership
organizational expenses (TD 9411) 34,398
26 CFR 1.337(d)–1, –2, amended; 1.358–6, amended;
1.362–4, added; 1.1502–13, –19, –21, –30, thru –33,
–35, –75, –80, –91, –95, –96, –99, amended; 1.1502–20,
–20T, –32T, –35T, removed; 1.1502–36, added; 602.101,
amended; unified rule for loss on subsidiary stock (TD
9424) 44,1012
26 CFR 1.367(a)–2T, –4T, –5T, amended; 1.954–2, amended;
1.954–2T, added; 1.956–2, –2T, amended; modifications to
subpart F treatment of aircraft and vessel leasing income
(TD 9406) 32,287
26 CFR 1.468B–0, amended; 1.468B–6, added; 1.1031(k)–1,
amended; 1.7872–5, –16, added; escrow accounts, trusts,
and other funds used during deferred exchanges of like-kind
property (TD 9413) 34,404
26 CFR 1.512(a)–5T, amended; effective dates and other is-
sues arising under the employee benefit provisions of the
Tax Reform Act of 1984; correction to TD 8073 (Ann 99)
44,1089
26 CFR 1.664–1, amended; 602.101, amended; guidance un-
der section 664 regarding the effect of unrelated business
taxable income on charitable remainder trusts (TD 9403)
32,285
November 24, 2008xii2008–47 I.R.B.

INCOME TAX—Cont.
26 CFR 1.860A–0, –1, amended; 1.860A–1T, removed;
1.860G–3, amended; 1.860G–3T, removed; 1.863–0, –1,
amended; 1.863–1T, removed; 1.1441–0, –2, amended;
1.1441–2T, removed; REMIC residual interests–ac-
counting for REMIC net income (including any excess
inclusions) (foreign holders) (TD 9415) 36,570
26CFR1.881–5T,removed;correctiontoTD9391(Ann74)
33,392
26 CFR 1.901–1, –2, amended; 1.901–1T, –2T, added; deter-
mining the amount of taxes paid for purposes of section 901
(TD 9416) 46,1142
26 CFR 1.911–7, amended; 1.6081–1, –3, –5, amended;
1.6081–2T, –6T, revised; 1.6081–3T, –4T, –5T, –7T,
–10T, –11T, removed; 1.6081–4, –7, –10, –11, added;
25.6081–1, added; 25.6081–1T, removed; 26.6081–1,
added; 26.6081–1T, removed; 53.6081–1, added;
53.6081–1T, removed; 55.6081–1, added; 55.6081–1T,
removed; 156.6081–1, added; 156.6081–1T, removed;
157.6081–1, added; 157.6081–1T, removed; 301.6081–2,
added; 301.6081–2T, removed; extension of time for filing
returns (TD 9407) 33,330
26 CFR 1.956–1, –1T, amended; guidance under section 956
for determining the basis ofproperty acquired in certain
nonrecognition transactions (TD 9402) 31,254
26 CFR 1.1301–1, amended; 1.1301–1T, added; farmer and
fisherman income averaging (TD 9417) 37,693; correction
(Ann 91) 42,963
26 CFR 1.1361–0, –1, –4, –6, amended; 1.1362–0, –4,
amended; 1.1366–0, –2, –5, amended; 602.101, amended;
S corporation guidance under AJCA of 2004 and GOZA of
2005 (TD 9422) 42,898
26 CFR 1.1367–2, amended; 1.1367–3, revised; section 1367
regarding open account debt (TD 9428) 47,1174
26 CFR 301.6343–2, amended; 301.6343–2T, removed;
301.7425–3, amended; 301.7425–3T, removed; change to
office to which notices of nonjudicial sale and requests
for return of wrongfully levied property must be sent (TD
9410) 34,414
26 CFR 301.6707A–1T, added; section 6707A and the failure
to include on any return or statement any information re-
quired to be disclosed under section 6011 with respect to a
reportable transaction (TD 9425) 45,1100
26 CFR 301.7216–3, amended; 301.7216–3T, added; disclo-
sure or use of information by preparers of returns (TD 9409)
29,118
26 CFR 801.1 thru .7, removed; 801.1T thru .8T, redesignated
as 801.1 thru .8; 801.1(a), 801.2, .3, .7, .8, amended; bal-
anced system for measuring organizational and employee
performance within the Internal Revenue Service (TD
9426) 46,1153
Revocations, exempt organizations (Ann 62) 27,74;(Ann66)
29,164;(Ann69)32,318; (Ann 76) 33,393;(Ann79)35,
568; (Ann 80) 37,706;(Ann86)40,843;(Ann88)40,843;
(Ann 90) 41,896; (Ann 97) 43,1010; (Ann 100) 44,1090
Rules for certain long-term construction contracts
(REG–120844–07) 39,770
INCOME TAX—Cont.
Section 382 limitation:
Application of section 382(h) to banks, ownership changes,
pre-change losses (Notice 83) 42,905
Capital contributions, ownership changes, pre-change losses
(Notice 78) 41,851
Capital Purchase Program (CPP), ownership changes, pre-
change losses (Notice 100) 44,1081
Ownership changes, pre-change losses (Notice 84) 41,855
Securities loans and bankruptcy of borrower (RP 63) 42,946
Settlement offers, auction rate securities (RP 58) 41,856
Smartcards, debit cards, etc., used to provide qualified trans-
portation fringes under section 132(f), delayed effective date
of Rev. Rul. 2006–57 (Notice 74) 38,718
Standard Industry Fare Level (SIFL) formula (RR 48) 38,713
Stocks:
Auction rate preferred stock, regulated investment companies
RICs), debt instruments (Notice 55) 27,11
Information reporting requirements for statutory stock options
(REG–103146–08) 37,701; hearing scheduled (Ann 102)
43,1011
Partial withdrawal of proposedregulations on unified rule for
loss on subsidiary stock (REG–157711–02) 44,1087
Unified rule for loss on subsidiary stock (TD 9424) 44,1012
Subprime mortgage loans, modifications held by certain securi-
tization vehicles (RP 47) 31,272
Substitute forms:
W-2 and W-3, general rules and specifications (RP 33) 28,93
941 and Schedule B (Form 941), general rules and specifica-
tions (RP 32) 28,82
1096, 1098, 1099, 5498, W-2G, and 1042-S, rules and speci-
fications (RP 36) 33,340
Targeted populations under section 45D(e)(2), low-income com-
munity business (REG–142339–05) 45,1116
Tax return preparer penalties under sections 6694 and 6695
(REG–129243–07) 27,32; corrections (Ann 75) 33,392
Treatment of aircraft and vessel leasing income (TD 9406) 32,
287; (REG–138355–07) 32,311
Treatment of payments in lieu of taxes under section 141 (TD
9429) 47,1167
Troubled Asset Relief Program (TARP) and federal financial as-
sistance (Notice 101) 44,1082
Trusts:
Charitable remainder trust, calculation of excise tax on unre-
lated business taxable income (UBTI) (TD 9403) 32,285
Guidance regarding reportingfor widely held fixed invest-
ment trusts (WHFITs) (Notice 77) 40,814
Ordering of distributions from charitable lead trusts
(REG–101258–08) 28,111; correction (Ann 73) 33,391
Private trust company (Notice 63) 31,261
Transaction of interest, sale orother disposition of charitable
remainder trust interests (Notice 99) 47,1194
U.S. territories, American Samoa, Guam, The Northern Mariana
Islands, Puerto Rico, U.S. Virgin Islands, source of income,
filing requirements; correction to TD 9391 (Ann 74) 33,392
Valuation safe harbor under section 475 (Notice 71) 35,462
2008–47 I.R.B.xiiiNovember 24, 2008

November 24, 20082008–47 I.R.B.

2008–47 I.R.B.November 24, 2008

November 24, 20082008–47 I.R.B.

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