Internal Revenue Bulletin 2008-9 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 200
8-9
March 3, 2008
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
Notice 2008–25, page 484.
This notice explains how the GO Zone bonus depreciation re-
capture provision of section 1400N(d)(5) of the Code applies
to GO Zone property transferred in a like-kind exchange or as
a result of an involuntary conversion. Notice 2006–77 clarified
and amplified.
Notice 2008–26, page 487.
This notice updates and amplifies the qualifying advanced coal
project program of section 48A of the Code by announcing an
immediate beginning of a special allocation round to the pool
of investment credits available for integrated gasification com-
bined cycle (IGCC) projects using bituminous coal as primary
feedstock.
Rev. Proc. 2008–15, page 489.
This document provides procedures under section 9037 of
the Code for making payments from the Presidential Primary
Matching Payment Account.
Announcement 2008–15, page 511.
This announcement contains corrections to Rev. Proc.
2008–13, 2008–6 I.R.B. 407, relating to maximum vehicle
values for use with the special valuation rules under regulations
section 1.61–21(d) and (e).
Announcement 2008–17, page 512.
This announcement invites comments from the public regard-
ing transfer tax issues expected to be addressed in forthcom-
ing proposed regulations (REG–127127–05). The document
also requests comments on several income tax issues and on
rules relating to the election to treat contributions to a Quali-
fied Tuition Program (QTP) as being made over a 5-year period.
Comments must be submitted by March 18, 2008.
EMPLOYEE PLANS
REG–139236–07, page 491.
Proposed regulations under section 430 of the Code provide
guidance on the valuation of plan assets and the determination
of benefit liabilities for purposes of the funding requirements
that apply to single employer defined benefit plans pursuant to
changes made by the Pension Protection Act of 2006. This
guidance covers the determination of the plan’s funding target
and normal cost, rules regarding the plan’s valuation date, the
determination of the actuarial value of plan assets, rules re-
garding interest rates applied for minimum funding purposes,
and special rules for at-risk plans.
ESTATE TAX
Announcement 2008–17, page 512.
This announcement invites comments from the public regard-
ing transfer tax issues expected to be addressed in forthcom-
ing proposed regulations (REG–127127–05). The document
also requests comments on several income tax issues and on
rules relating to the election to treat contributions to a Quali-
fied Tuition Program (QTP) as being made over a 5-year period.
Comments must be submitted by March 18, 2008.
(Continued on the next page)
Actions Relating to Court Decisions is on the page following the Introduction.
Finding Lists begin on page ii.

GIFT TAX
Announcement 2008–17, page 512.
This announcement invites comments from the public regard-
ing transfer tax issues expected to be addressed in forthcom-
ing proposed regulations (REG–127127–05). The document
also requests comments on several income tax issues and on
rules relating to the election to treat contributions to a Quali-
fied Tuition Program (QTP) as being made over a 5-year period.
Comments must be submitted by March 18, 2008.
ADMINISTRATIVE
T.D. 9382, page 482.
REG–149475–07, page 510.
Final, temporary, and proposed regulations under section 9037
of the Code change the procedures for making payments from
the Presidential Primary Matching Payment Account.
Announcement 2008–15, page 511.
This announcement contains corrections to Rev. Proc.
2008–13, 2008–6 I.R.B. 407, relating to maximum vehicle
values for use with the special valuation rules under regulations
section 1.61–21(d) and (e).
Announcement 2008–16, page 511.
This document contains corrections to final regulations (T.D.
9375, 2008–5 I.R.B. 344) regarding the disclosure and use of
tax return information by tax return preparers.
March 3, 20082008–9 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.
2008–9 I.R.B.March 3, 2008

Actions Relati
ng to Decisions of the Tax Court
It is the policy
of the Internal Rev-
enue Service t
o announce at an early date
whether it wil
l follow the holdings in cer-
tain cases. An
Action on Decision is the
document maki
ng such an announcement.
An Action on De
cision will be issued at
the discreti
on of the Service only on unap-
pealed issue
s decided adverse to the gov-
ernment. Gen
erally, an Action on Decision
is issued whe
re its guidance would be help-
ful to Servi
ce personnel working with the
same or simi
lar issues. Unlike a Treasury
Regulation
or a Revenue Ruling, an Action
on Decision
is not an affirmative statement
of Service
position. It is not intended to
serve as pu
blic guidance and may not be
cited as pr
ecedent.
Actions on
Decisions shall be relied
upon withi
n the Service only as conclu-
sions appl
ying the law to the facts in the
particul
ar case at the time the Action on
Decision
was issued. Caution should be
exercise
d in extending the recommenda-
tion of th
e Action on Decision to similar
cases whe
re the facts are different. More-
over, th
e recommendation in the Action on
Decisio
n may be superseded by new legis-
lation,
regulations, rulings, cases, or Ac-
tions on
Decisions.
Prior to
1991, the Service published
acquies
cence or nonacquiescence only in
certain regula
r Tax Court opinions. The
Service has ex
panded its acquiescence
program to inc
lude other civil tax cases
where guidanc
e is determined to be help-
ful. Accordin
gly, the Service now may
acquiesce or n
onacquiesce in the holdings
of memorandu
m Tax Court opinions, as
well as those
of the United States District
Courts, Clai
ms Court, and Circuit Courts
of Appeal. Re
gardless of the court decid-
ing the case
, the recommendation of any
ActiononDe
cision will be published in
the Interna
l Revenue Bulletin.
The recomme
ndation in every Action
on Decision
will be summarized as ac-
quiescence
, acquiescence in result only,
or nonacqu
iescence. Both “acquiescence”
and “acqui
escence in result only” mean
that the Se
rvice accepts the holding of
the court i
n a case and that the Service
will foll
ow it in disposing of cases with
thesamec
ontrolling facts. However, “ac-
quiescen
ce” indicates neither approval
nor disap
proval of the reasons assigned
by the cou
rt for its conclusions; whereas,
“acquie
scence in result only” indicates
disagre
ement or concern with some or all
of those
reasons. “Nonacquiescence” sig-
nifies t
hat, although no further review was
sought,
the Service does not agree with
the hol
ding of the court and, generally,
will not follow
the decision in disposing
of cases invol
ving other taxpayers. In
reference to a
n opinion of a circuit court
of appeals, a “
nonacquiescence” indicates
that the Servi
ce will not follow the hold-
ingonanation
wide basis. However, the
Service will
recognize the precedential
impact of the
opinion on cases arising
within the ve
nue of the deciding circuit.
The Actions o
n Decisions published in
the weekly In
ternal Revenue Bulletin are
consolidate
d semiannually and appear in
the first Bu
lletin for July and the Cumula-
tive Bullet
in for the first half of the year. A
semiannual
consolidation also appears in
the first Bu
lletin for the following January
andintheC
umulative Bulletin for the last
half of the
year.
The Commis
sioner does NOT ACQUI-
ESCE in the
following decision:
Herbert V.
Kohler, Jr. et al. v.
Commissio
ner,
1
T.C. Memo.
2006–152;
92 T.C.M (C
CH) 48;
T.C. Dkt. N
os. 4621–03, 4622–03,
4646–03, 4
649–03
1
Nonacquiescence relating to whether I.R.C. section 2032 allows a discount for transfer restrictions and a purchase option imposed on closely-held corporate stock pursuant to a post-death
tax-free reorganization in determining the fair market value of the decedent’s stock on the alternate valuation date.
March 3, 20082008–9 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Secti
on 9037.—Payments
to Eligible Candidates
26 CFR 702.9037–2T: Payments from the Presiden-
tial Primary Matching Payment Account (temporary).
T.D. 9382
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 702
Payments From the
Presidential Primary Matching
Payment Account
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains fi-
nal and temporary regulations relating
to the financing of presidential primary
campaigns. The temporary regulations
relate to Treasury procedures for making
payments from the Presidential Primary
Matching Payment Account (Primary Ac-
count). These temporary regulations affect
all candidates eligible to receive pay-
ments from the Primary Account. The text
of the temporary regulations also serves
as the text for the proposed regulations
(REG–149475–07) set forth in the notice
of proposed rulemaking on this subject in
this issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on February 14, 2008.
Applicability Date:For dates of
applicability, see §§702.9037–1(b),
702.9037–1T(b), 702.9037–2(e) and
702.9037–2T(c).
FOR FURTHER INFORMATION
CONTACT: Karla M. Meola at (202)
622–4930 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Under section 6096 of the Internal
Revenue Code (Code), individuals whose
incom
e tax liability for the taxable year is
$3 or m
ore may designate $3 for the Pres-
ident
ial Election Campaign Fund (Fund)
on the
ir tax returns. Section 9006(a) estab-
lish
es the Fund and requires the Treasury
Secr
etary (Treasury) to transfer amounts
desi
gnated under section 6096 to the Fund.
Thre
e types of payments are made from
the
Fund: (1) payments to the national
com
mittee of each major and minor party,
(2)
payments to the eligible candidates of
apo
litical party for President and Vice
Pre
sident, and (3) payments to eligible
ca
ndidates seeking nomination for election
to
be President. See sections 9008(b)(3),
90
06(b) and 9037(b).
Se
ction 9008 requires the Treasury to
ma
intain a separateaccount in the Fund
fo
r payments to the national committee
of
each major and minor party for their
p
residential nominating conventions, to be
m
ade upon receipt of certification by the
F
ederal Election Commission (Commis-
s
ion). Section 9008(a)directs the Treasury
t
o fund this account before making pay-
m
ents under section 9006(b) to eligible
candidates for President and Vice Presi-
dent. Section 9037(a) directs the Treasury
to establish within the Fund an additional
separate account, the Primary Account.
Section 9037(a) also directs the Treasury
to make deposits to the Primary Account
only after funds “are available” for pay-
ments for the nominating conventions
under section 9008 and the general elec-
tion under section 9006. Section 9037(b)
requires the Treasury to transfer amounts
certified by the Commission from the
Primary Account to candidates seeking
nomination for President. Section 9037(b)
also provides that in making such trans-
fers to candidates of the same political
party, the Treasury will seek to achieve an
equitable distribution of available funds,
and will take into account, in seeking to
achieve an equitable distribution, the se-
quence in which certifications from the
Commission are received. Under section
9032(6), primary candidates may receive
payments under section 9037(b) beginning
on the first day of the calendar year of the
presidential general election.
Section 702.9037–2(c) establishes a
“shortfall rule,” which provides that if the
amoun
t certified by the Commission for
prima
ry candidates in a calendar month
excee
ds the balance in the Primary Ac-
count
on the last day of the calendar
mont
h, the amount paid to a candidate
for t
hat month from the Primary Account
is de
termined by multiplying the amount
cert
ified by the Commission for the can-
did
ate during that month by the ratio of
the
balance in the Primary Account on the
las
t day of the calendar month over the
tot
al amount certified by the Commission
for
all the candidates during that month.
An
y amount certified by the Commission,
bu
t not paid to a candidate because of the
op
eration of this shortfall rule, is treated
as
an amount certified by the Commission
fo
r that candidate during the succeeding
c
alendar month.
No
tice 96–13, 1996–1 C.B. 366, an-
n
ounced a change in the payment proce-
d
ures contained in §702.9037–2(c). The
n
otice stated that when the Primary Ac-
c
ount is in a shortfall position, the Trea-
s
ury may make an additional payment be-
t
ween regular payment dates promptly af-
ter funds are available. Such payment is
determined by multiplying the amount cer-
tified by the Commission for the candidate
in month 1 by the ratio of the balance in
the Primary Account (but not to exceed
the shortfall) on the 15th day of month 2
(or the first business day thereafter if the
15th is not a business day) over the to-
tal amount certified by the Commission
for all the candidates in month 1. Notice
96–13 stated that the regulations would
be amplified to reflect these changed pro-
cedures and that the revised regulations
would have an effective date of February
2, 1996. See §601.601(d)(2)(ii)(b).
Notice 2007–96, 2007–49 I.R.B. 1091,
superseded Notice 96–13 and announced
that the procedures for making payments
from the Primary Account would be
changed. The notice also announced that
theTreasuryintendedtomodifythereg-
ulations under section 9037 to reflect the
changed procedures. In compliance with
section7805(b)(1)(C),andasstatedinNo-
tice 2007–96, pursuant to Notice 96–13,
the effective date of these amendments
to the regulations would be February 2,
1996.
2008–9 I.R.B.482March 3, 2008

Explanation of Provisions
The regulations under section 9037
were promulgated in 1991 and provide
procedures for administering the Primary
Account. The procedures specified in
these regulations have not kept pace with
technological changes that allow the Pri-
mary Account to be administered and
operated more efficiently. For example,
the regulations do not provide for more
than monthly payments in the event of a
shortfall as contemplated by Notice 96–13.
Accordingly, the temporary regulations
remove these outdated administrative pro-
cedures. Concurrently with the issuance
of these temporary regulations the Internal
Revenue Service is publishing a revenue
procedure specifying revised procedures
for administering the Primary Account.
These revised procedures allow weekly
payments from the Primary Account to
candidates.
Effective/Applicability Date
These temporary regulations apply to
payments from the Primary Account on or
after February 2, 1996.
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 Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. For
the applicability of the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) refer to the
Special Analysis section of the preamble
to the cross-reference notice of proposed
rulemaking published in this issue of the
Bulletin. Pursuant to section 7805(f) of
the Code, these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of the Small BusinessAdministration for
comment on their impact on small busi-
ness.
Drafting Information
The principal author of these regula-
tions is Karla M. Meola, Office of the As-
sociate Chief Counsel (Income Tax and
Accounting), IRS. However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 702 is
amended as follows:
PART 702—PRESIDENTIAL PRIMARY
MATCHING PAYMENT ACCOUNT
Paragraph 1. The authority citation for
part 702 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 702.9037–1 is amended
as follows:
1. The undesignated text is designated
as paragraph (a).
2. Paragraph (b) is added.
The revision reads as follows:
§702.9037–1 Transfer of amounts to the
Presidential Primary Matching Payment
Account.
*****
(b)Effective/applicability date.These
regulations apply to the Primary Account
before February 2, 1996.
Par. 3. Section 702.9037–1T is added
to read as follows:
§702.9037–1T Transfer of amounts to the
Presidential Primary Matching Payment
Account (temporary).
(a)In general. The Secretary will
deposit amounts into the Presidential
Primary Matching Payment Account (Pri-
mary Account) only to the extent that there
are amounts in the Presidential Election
Campaign Fund (Fund) after the trans-
fers prescribed by §701.9006–1(c) and
(d). The Secretary will make this deposit
promptly from amounts that have actu-
ally been transferred to the Fund under
§701.9006–1(a). Any amounts in the Pri-
mary Account after October 31 following
a presidential election will be returned to
the Fund for the purpose of making the
transfers prescribed by §701.9006–1(c),
(d), and (f) for the next presidential elec-
tion.
(b)Effective/applicability date.(1)
These regulations apply to the Primary
Account on or after February 2, 1996.
(2)Expiration Date. This section ex-
pires on February 11, 2011.
Par. 4. Section 702.9037–2 is amended
by adding paragraph (e) to read as follows:
§702.9037–2 Payments from the
Presidential Primary Matching Payment
Account.
*****
(e)Effective/applicability date.These
regulations apply to the Primary Account
before February 2, 1996.
Par. 5. Section 702.9037–2T is added
to read as follows:
§702.9037–2T Payments from the
Presidential Primary Matching Payment
Account (temporary).
(a)In general. Pursuant to section
9036, the Federal Election Commission
(Commission) will certify to the Secretary
the full amount of payment to which a
candidate is entitled under section 9034.
The Secretary will pay promptly, but not
before the start of the matching payment
period under section 9032(6), the amounts
certified by the Commission from the
Presidential Primary Matching Payment
Account (Primary Account) to the candi-
date.
(b)Additional guidance.TheInter-
nal Revenue Service may publish guid-
ance in the Internal Revenue Bulletin (see
§601.601(d)(2)(ii)(b) of this chapter) pre-
scribing additional rules and procedures
for the Primary Account.
(c)Effective/applicability date.(1)
These regulations apply to the Primary
Account on or after February 2, 1996.
(2)Expiration Date. This section ex-
pires on February 11, 2011.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved February 1, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on February 11,
2008, 12:09 p.m., and published in the issue of the Federal
Register for February 14, 2008, 73 F.R. 8608)
March 3, 20084832008–9 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
GO Zone Bonus Depreciation
Recapture
Notice 2008–25
SECTION 1. PURPOSE
This notice provides guidance with re-
spect to the recapture of the 50-percent ad-
ditional first year depreciation deduction
provided by § 1400N(d) of the Internal
Revenue Code (GO Zone additional first
year depreciation deduction) for qualified
Gulf Opportunity Zone property (GO Zone
property), including specified Gulf Oppor-
tunity Zone extension property (GO Zone
extension property). Specifically, this no-
tice explains how the recapture rules de-
scribed in section 6 of Notice 2006–77,
2006–40 I.R.B. 590, apply to GO Zone
property that is relinquished in a like-kind
exchange or as a result of an involuntary
conversion.
SECTION 2. BACKGROUND AND GO
ZONE PROPERTY
.01 Section 1400N(d) generally allows
a 50-percent additional first year deprecia-
tion deduction for GO Zone property. The
GO Zone additional first year depreciation
deduction is allowable in the taxable year
in which the GO Zone property is placed
in service by the taxpayer. The computa-
tion of the allowable GO Zone additional
first year depreciation deduction and the
otherwise allowable depreciation deduc-
tion for GO Zone property (including GO
Zone extension property) is made in ac-
cordance with rules similar to the rules
for 50-percent bonus depreciation prop-
erty in § 1.168(k)–1(d)(1)(i), (1)(iii), and
(2) of the Income Tax Regulations. Fur-
ther, rules similar to the special rules in
§ 1.168(k)–1(f) apply for purposes of the
GO Zone additional first year depreciation
deduction.
.02 GO Zone property is depreciable
property that meets all of the requirements
in § 1400N(d)(2) and in section 2.02 of
Notice 2006–77, as clarified, modified,
and amplified by section 5 of Notice
2007–36, 2007–17 I.R.B. 1000. GO Zone
extension property is depreciable prop-
erty that meets all of the requirements in
§1400N(d)(6)(B)andinsection4ofNo-
tice 2007–36. One of the requirements of
GO Zone property and GO Zone extension
property is that substantially all of the use
of the property must be in the GO Zone
and in the active conduct of a trade or
business by the taxpayer in the GO Zone.
Section 3.01 of Notice 2006–77 defines
the term “substantially all” as meaning
80 percent or more during each taxable
year. Depreciable property described in
§ 1400N(d)(2)(B) and in section 2.03 of
Notice 2006–77 is not eligible for the GO
Zone additional first year depreciation
deduction.
.03 The counties and parishes in
Alabama, Louisiana, and Mississippi that
comprise the GO Zone are listed on page 2
ofIRS Publication 4492, Information for
Taxpayers Affected by Hurricanes Katrina,
Rita, and Wilma, under Gulf Opportunity
(GO) Zone (Core Disaster Area).
.04 Section 1400N(d)(5) provides that
for purposes of § 1400N(d), rules similar
to the recapture rules under § 179(d)(10)
apply with respect to any GO Zone prop-
erty that ceases to be GO Zone property.
Section 6 of Notice 2006–77 provides the
rules for applying the recapture require-
ment described in § 1400N(d)(5). The
Treasury Department and the Internal Rev-
enue Service have learned that taxpayers
are uncertain how to apply these recapture
rules to GO Zone property (including GO
Zone extension property) relinquished by
a taxpayer in a like-kind exchange under
§ 1031 or as a result of an involuntary con-
version under § 1033. This notice clari-
fies the application of the recapture rule in
§ 1400N(d)(5) to such property.
SECTION 3. RECAPTURE RULES
UNDER § 1400N(d)(5)
.01In General. Section 1400N(d)(5)
provides that for purposes of § 1400N(d),
rules similar to the recapture rules un-
der § 179(d)(10) and § 1.179–1(e) apply
with respect to any GO Zone property
that ceases to be GO Zone property. For
example, GO Zone property will cease to
be GO Zone property when the property
is no longer substantially used in the GO
Zone or in the active conduct of a trade or
business by the taxpayer in the GO Zone.
Forpurposesofthissection3,GOZone
property also includes GO Zone extension
property.
.02Application.
(1)In general. Except as provided in
section 3.02(2) or (3) of this notice, if GO
Zone property is no longer GO Zone prop-
erty in the hands of the same taxpayer at
any time before the end of the GO Zone
property’s recovery period as determined
under § 167(f)(1) or § 168, as applica-
ble, then the taxpayer must recapture in the
taxable year in which the GO Zone prop-
erty is no longer GO Zone property (the
recapture year) the benefit derived from
claiming the GO Zone additional first year
depreciation deduction for such property.
The benefit derived from claiming the GO
Zone additional first year depreciation de-
duction for the property is equal to the ex-
cess of the total depreciation claimed (in-
cluding the GO Zone additional first year
depreciation deduction) for the property
for the taxable years before the recapture
year over the total depreciation that would
have been allowable for the taxable years
before the recapture year as a deduction
under § 167(f)(1) or § 168, as applicable,
had the GO Zone additional first year de-
preciation deduction not been claimed (re-
gardless of whether such excess reduced
the taxpayer’s tax liability). The amount
to be recaptured is treated as ordinary in-
come for the recapture year. For the recap-
ture year and subsequent taxable years, the
taxpayer’s deductions under § 167(f)(1) or
§ 168, as applicable, are determined as if
no GO Zone additional first year depreci-
ation deduction was claimed with respect
to the property. If, subsequent to the re-
capture year, a change in the use of the
property results in the property again being
GO Zone property, then the GO Zone ad-
ditional first year depreciation deduction is
not allowable for the property.
(2)Coordination of recapture rules with
§1245and§1250. Except as provided in
section 3.02(3) of this notice, there is no
recapture under this section 3 if § 1245(a)
or § 1250(a) applies to the disposition of
the property.
(3)Application of recapture rules in a
like-kind exchange or involuntary conver-
sion.
2008–9 I.R.B.484March 3, 2008

(a) If GO Zone property is transferred
by a taxpayer in a like-kind exchange or
as a result of an involuntary conversion
(relinquished property) and the property
acquired by the taxpayer in the like-kind
exchange or involuntary conversion (re-
placement property) is GO Zone property
in the hands of the taxpayer, there is no
recapture under section 3.02(1) of this no-
tice.
(b) If GO Zone property is transferred
by a taxpayer in a like-kind exchange or as
a result of an involuntary conversion (re-
linquished property) and the replacement
property is not GO Zone property in the
hands of the taxpayer and is not substan-
tially used in the GO Zone or in the active
conduct of a trade or business by the tax-
payer in the GO Zone, there is recapture
under section 3.02(1) of this notice. The
amount to be recaptured and the resulting
increase in basis under section 3.02(1) of
this notice are determined before the appli-
cation of § 1031, § 1033, § 1245, or § 1250.
For purposes of this section 3.02(3), the
term “substantially” means 80 percent or
more during each taxable year.
(c) If GO Zone property is transferred
by a taxpayer in a like-kind exchange or as
a result of an involuntary conversion (re-
linquished property) and the replacement
property is not GO Zone property in the
hands of the taxpayer but is substantially
usedintheGOZoneandintheactivecon-
duct of a trade or business by the taxpayer
in the GO Zone, there is no recapture un-
der section 3.02(1) of this notice. How-
ever, if after the acquisition of the replace-
ment property, that property ceases to be
substantially used in the GO Zone or in the
active conduct of a trade or business by the
taxpayer in the GO Zone, there is recap-
ture under section 3.02(1) of this notice.
Similarly, there is recapture under section
3.02(1) of this notice if, after the acquisi-
tion of the replacement property, that prop-
erty is transferred by the taxpayer in an-
other like-kind exchange or another invol-
untary conversion and the subsequent re-
placement property is not GO Zone prop-
erty in the hands of the taxpayer and is not
substantially used in the GO Zone or in the
active conduct of a trade or business by the
taxpayer in the GO Zone.
If there is recapture under section
3.02(1) of the notice pursuant to this sec-
tion 3.02(3)(c), therecapture year is the
first taxable year in which the replace-
ment property (or subsequent replacement
property) ceases to be substantially used
in the GO Zone or in the active conduct
of a trade or business by the taxpayer in
the GO Zone. In determining the benefit
derived from claiming the GO Zone ad-
ditional first year depreciation deduction,
the depreciation of both the relinquished
property and replacement property is taken
into account.
.03Examples. The following examples
illustrate the provisions of this section 3.
(a)Example 1.H, a calendar-year taxpayer, owns
and operates a furniture store in the GO Zone. In De-
cember 2006,Hpurchases a new delivery truck for
$50,000 and places it in service for use inH’s busi-
ness. For 2006, this delivery truck is GO Zone prop-
erty and is 5-year property under § 168(e).Hdepre-
ciates its 5-year property placed in service in 2006
using the optional depreciation table that corresponds
with the general depreciation system, the 200-percent
declining balance method, a 5-year recovery period,
and the half-year convention. During 2007, the deliv-
ery truck is used less than 80 percent in the GO Zone.
(i) For 2006,His allowed the GO Zone addi-
tional first year depreciation deduction of $25,000 for
the delivery truck (unadjusted depreciable basis of
$50,000 multiplied by .50). In addition,H’s depreci-
ation deduction allowable in 2006 for the remaining
adjusted depreciable basis of $25,000 for the delivery
truck (the unadjusted depreciable basis of $50,000 re-
duced by the GO Zone additional first year depreci-
ation deduction of $25,000) is $5,000 (the remaining
adjusted depreciable basis of $25,000 multiplied by
the annual depreciation rate of .20 for recovery year
1). Thus,H’s depreciation deduction allowable in
2006 for the delivery truck totals $30,000.
(ii) For 2007, because the delivery truck does not
meet the substantially all (80 percent) requirement
described in section 3.01 of Notice 2006–77, the de-
livery truck is no longer GO Zone property. Accord-
ingly, for 2007,Hmust recapture as ordinary income
$20,000 ($30,000 depreciation claimed byHfor the
truck before 2007 less the $10,000 depreciation that
would have been allowable for the truck before 2007
had the GO Zone additional first year depreciation
deduction not been claimed (unadjusted depreciable
basis of $50,000 multiplied by the cumulative annual
depreciation rate of .20 before 2007)). In addition,
H’s depreciation deduction allowable in 2007 for the
delivery truck is $16,000 (unadjusted depreciable ba-
sis of $50,000 multiplied by the annual depreciation
rate of .32 for recovery year 2) (determined as if no
GO Zone additional first year depreciation deduction
was claimed for the truck).
(b)Example 2. Assume the same facts as inEx-
ample 1, except that during 2008, the delivery truck
is used 80 percent or more in the GO Zone. The GO
Zone additional first year depreciation deduction is
not allowable for the delivery truck even though the
truck is GO Zone property in the hands ofHin 2008.
Thus,H’s depreciation deduction allowable in 2008
for the delivery truck is $9,600 (unadjusted deprecia-
ble basis of $50,000 multiplied by the annual depre-
ciation rate of .1920 for recovery year 3) (determined
as if no GO Zone additional first year depreciation
deduction was claimed for the truck).
(c)Example 3.J, a calendar-year taxpayer,
owns and operates a manufacturing plant in the GO
Zone. In January 2007,Jpurchases new equipment
for $100,000 and places it in service for use inJ’s
business. The equipment is GO Zone property and
is 5-year property under § 168(e).Jdepreciates its
5-year property placed inservice in 2007 using the
optional depreciation table that corresponds with
the general depreciation system, the 200-percent
declining balance method of depreciation, a 5-year
recovery period, and the half-year convention. Dur-
ing 2008,Jsells the equipment for $65,000.
(i) For 2007,Jis allowed the GO Zone additional
first year depreciation deduction of $50,000 for the
equipment (unadjusted depreciable basis of $100,000
multiplied by .50). In addition,J’s depreciation de-
duction allowable in 2007 for the remaining adjusted
depreciable basis of $50,000 for the equipment (the
unadjusted depreciable basis of $100,000 reduced by
the GO Zone additional first year depreciation deduc-
tion of $50,000) is $10,000 (the remaining adjusted
depreciable basis of $50,000 multiplied by the annual
depreciation rate of .20 for recovery year 1). Thus,
J’s depreciation deduction allowable in 2007 for the
equipment totals $60,000.
(ii) For 2008, because the equipment is sold and
§ 1245(a) applies to this sale, there is no recapture
under section 3.02(1) of this notice pursuant to sec-
tion 3.02(2) of this notice.In addition, because the
half-year convention applies to the equipment,Jis
entitled to
1
/2of the depreciation deduction allowable
for 2008. Thus,J’s depreciation deduction allowable
in 2008 for the equipment is $8,000 (one half of the
remaining adjusted depreciable basis of $50,000 mul-
tiplied by the annual depreciation rate of .32 for re-
covery year 2). Consequently, the adjusted basis of
the equipment for determining gain or loss is $32,000
(the unadjusted depreciable basis of $100,000 less the
depreciation deduction allowable for 2007 and 2008
totaling $68,000). Accordingly,Jrecognizes gain
of $33,000 from the sale of the equipment. All of
this recognized gain is ordinary income pursuant to
§ 1245(a).
(d)Example 4.K, a calendar-year taxpayer, owns
and operates restaurants. In February 2007,Kcom-
pleted construction of a new building in New Orleans
(New Orleans building) and placed it in service for
use inK’s business. The total cost of the building
is $4,000,000. For 2007, the New Orleans build-
ing is GO Zone property and is nonresidential real
property under § 168(e).Kdepreciates its nonres-
idential real property placed in service in 2007 us-
ing the optional depreciation table that corresponds
with the general depreciation system, the straight-line
method of depreciation, a 39-year recovery period,
and the mid-month convention. In March 2008,Kex-
changes the New Orleans building for a new building
in Hancock County, Mississippi (Hancock building),
in a transaction described in § 1031(a). The Han-
cock building is placed in service byKin March 2008
for use inK’s business, is GO Zone property in the
hands ofK, and is nonresidential real property under
§ 168(e).
(i) For 2007,Kis allowed the GO Zone addi-
tional first year depreciation deduction for the New
Orleans building in the amount of $2,000,000 (unad-
justed depreciable basis of $4,000,000 multiplied by
.50). In addition,K’s depreciation deduction allow-
able in 2007 for the remaining adjusted depreciable
March 3, 20084852008–9 I.R.B.

basis of $2,000,000 (the unadjusted depreciable ba-
sis of $4,000,000 reduced by the GO Zone additional
first year depreciation deduction of $2,000,000) is
$44,940 (the remaining adjusted depreciable basis of
$2,000,000 multiplied by the annual depreciation rate
of .02247 for the 2
nd
month in recovery year 1). Thus,
K’s depreciation deduction allowable in 2007 for the
New Orleans building totals $2,044,940.
(ii) For 2008, becauseKexchanged GO Zone
property for GO Zone property, there is no recap-
ture under section 3.02(1) of this notice pursuant
to section 3.02(3)(a) of this notice. Thus, for 2008,
pursuant to § 1.168(i)–6(e)(2)(i), the depreciation
deduction allowable for the New Orleans building
is $10,683 (the remaining adjusted depreciable basis
of $2,000,000 multiplied by the annual depreciation
rate of .02564 for the recovery year 2, multiplied
by 2.5/12). Consequently, the adjusted depreciable
basis of the New Orleans building at the time of
the like-kind exchange is $1,944,377 (unadjusted
depreciable basis of $4,000,000, less the deprecia-
tion deduction allowable of $2,044,940 in 2007, less
the depreciation deduction allowable of $10,683 in
2008).
(iii) For 2008, because the Hancock building is
GO Zone property in the hands ofK,Kis allowed the
GO Zone additional first year depreciation deduction
for the Hancock building in the amount of $972,189
(depreciable exchanged basis of $1,944,377 multi-
plied by .50).Kdecides to use the optional depreci-
ation table to calculate depreciation on the deprecia-
ble exchanged basis of the Hancock building. Conse-
quently, pursuant to § 1.168(i)–6(e)(2)(ii),K’s depre-
ciation deduction allowable in 2008 for the remaining
depreciable exchanged basis of $972,188 (the depre-
ciable exchanged basis of $1,944,377 reduced by the
GO Zone additional first year depreciation deduction
of $972,189) is $20,188 (the remaining depreciable
exchanged basis of $972,188 multiplied by the annual
depreciation rate of .02564 for the recovery year 2 as
modified by the transaction coefficient of 1.0230 [1 /
(1 - .02247)], multiplied by 9.5/12). Thus,K’s depre-
ciation deduction allowable in 2008 for the Hancock
building totals $992,377.
(e)Example 5. Assume the same facts as inEx-
ample 4, except that in March 2008,Kexchanges the
New Orleans building for a new building in Mary-
land (Maryland building), in a transaction described
in § 1031(a). The Maryland building is placed in ser-
vice byKin March 2008 for use inK’s business and
is nonresidential real property under § 168(e).
(i) Because Maryland is not in the GO Zone, the
Maryland building is not GO Zone property and is
not substantially used in the GO Zone and in the
active conduct of a trade or business byKin the GO
Zone. Thus, pursuant to section 3.02(3)(b) of this
notice, there is recaptureunder section 3.02(1) of
this notice of the benefit derived from claiming the
GO Zone additional first year depreciation deduc-
tion for the New Orleans building. Consequently,
for 2008,Kmust recapture as ordinary income
$1,955,060 ($2,044,940 depreciation claimed byK
for the New Orleans building before 2008 less the
$89,880 depreciation that would have been allowable
for the New Orleans building before 2008 had the
GO Zone additional first year depreciation deduction
not been claimed (unadjusted depreciable basis of
$4,000,000 multiplied by the cumulative annual de-
preciation rate of .02247 before 2008)). In addition,
pursuant to § 1.168(i)–6(e)(2)(i),K’s depreciation
deduction allowable in 2008 for the New Orleans
building is $21,367 (the unadjusted depreciable basis
of $4,000,000 multiplied by the annual depreciation
rate of .02564 for the recovery year 2, multiplied by
2.5/12) (determined as if no GO Zone additional first
year depreciation deduction was claimed for the New
Orleans building). The adjusted depreciable basis of
the New Orleans building at the time of the like-kind
exchange is $3,888,753 (unadjusted depreciable
basis of $4,000,000, less the depreciation deduction
allowable of $2,044,940 in2007, plus the recapture
amount of $1,955,060 in 2008, less the depreciation
deduction allowable of $21,367 in 2008).
(ii) For 2008, because the Maryland building is
not GO Zone property,Kis not allowed the GO Zone
additional first year depreciation deduction for the
Maryland building.Kdecides to use the optional de-
preciation table to calculate depreciation on the de-
preciable exchanged basis of the Maryland building.
Thus, pursuant to § 1.168(i)–6(e)(2)(ii),K’s depreci-
ation deduction allowable in 2008 for the deprecia-
ble exchanged basis of $3,888,753 for the Maryland
building is $80,751 (the depreciable exchanged basis
of $3,888,753 multiplied by the annual depreciation
rate of .02564 for the recovery year 2 as modified by
the transaction coefficient of 1.0230 [1 / (1 - .02247)],
multiplied by 9.5/12).
(f)Example 6. Assume the same facts as inEx-
ample 4, except the Hancock building is not a new
building, but a building that has been used by another
taxpayer in its business since 2003. As a result, the
Hancock building is not GO Zone property.
(i) Even though the Hancock building is not GO
Zone property, the Hancock building is substantially
used in the GO Zone and in the active conduct of
a trade or business byKin the GO Zone. Conse-
quently, pursuant to section 3.02(3)(c) of this notice,
there is no recapture under section 3.02(1) of this no-
tice with respect to the New Orleans building. Thus,
for 2008, pursuant to § 1.168(i)–6(e)(2)(i), the de-
preciation deduction allowable for the New Orleans
building is $10,683 (the remaining adjusted deprecia-
ble basis of $2,000,000 multiplied by the annual de-
preciation rate of .02564 for the recovery year 2, mul-
tiplied by 2.5/12). Consequently, the adjusted depre-
ciable basis of the New Orleans building at the time
of the like-kind exchange is $1,944,377 (unadjusted
depreciable basis of $4,000,000, less the deprecia-
tion deduction allowable of $2,044,940 in 2007, less
the depreciation deduction allowable of $10,683 in
2008).
(ii) For 2008, because the Hancock building is not
GO Zone property,Kis not allowed the GO Zone ad-
ditional first year depreciation deduction for the Han-
cock building.Kdecides to use the optional deprecia-
tion table to calculate depreciation on the depreciable
exchanged basis of the Hancock building. Thus, pur-
suant to § 1.168(i)–6(e)(2)(ii),K’s depreciation de-
duction allowable for 2008 for the depreciable ex-
changed basis of $1,944,377 is $40,375 (the depre-
ciable exchanged basis of $1,944,377 multiplied by
the annual depreciation rate of .02564 for the recov-
ery year 2 as modified by the transaction coefficient
of 1.0230 [1 / (1 - .02247)], multiplied by 9.5/12).
(g)Example 7. Assume the same facts as inEx-
ample 6, except that in March 2009,Kexchanges the
Hancock building for a new building in Texas (Texas
building), in a transaction described in § 1031(a). The
Texas building is placed in service byKin March
2009 for use inK’s business and is nonresidential real
property under § 168(e).
(i) Because Texas is not in the GO Zone, the Texas
building is not GO Zone property and is not substan-
tially used in the GO Zone and in the active conduct
of a trade or business byKin the GO Zone. Con-
sequently, pursuant to section 3.02(3)(c) of this no-
tice,K’s exchange of the Hancock building (the re-
placement property) for the Texas building (subse-
quent replacement property) causesKto recapture
the benefit derived from claiming the GO Zone ad-
ditional first year depreciation deduction for the New
Orleans building under section 3.02(1) of this notice.
Thus, for 2009,Kmust recapture as ordinary income
$1,904,000 ($2,095,998 depreciation claimed byK
for the New Orleans and Hancock buildings before
2009 less the $191,998 depreciation that would have
been allowable for the New Orleans and Hancock
buildings before 2009 had the GO Zone additional
first year depreciation deduction not been claimed,
which is the total of the amounts as determined in (a)
and (b) below ($89,880 for the 2007 depreciation al-
lowable for the New Orleans building, plus $21,367
for the 2008 depreciation allowable for the New Or-
leans building, plus $80,751 for the 2008 depreciation
allowable for the Hancock building)):
(a) For the New Orleans building, the deprecia-
tion that would have been allowable for the New Or-
leans building in 2007 had the GO Zone additional
first year depreciation deduction not been claimed is
$89,880 (unadjusted depreciable basis of $4,000,000
multiplied by the annual depreciation rate of .02247
for the 2
nd
month for recovery year 1). In addi-
tion, pursuant to § 1.168(i)–6(e)(2)(i),K’s deprecia-
tion that would have been allowable for the New Or-
leans building in 2008 had the GO Zone additional
first year depreciation deduction not been claimed
in 2007 is $21,367 (the unadjusted depreciable basis
of $4,000,000 multiplied by the annual depreciation
rate of .02564 for the recovery year 2, multiplied by
2.5/12). The adjusted depreciable basis of the New
Orleans building at the time of the like-kind exchange
(determined as if no GO Zone additional first year
depreciation deduction was claimed for the New Or-
leans building) is $3,888,753 (unadjusted depreciable
basis of $4,000,000, less the depreciation deduction
allowable of $89,880 in 2007, less the depreciation
deduction allowable of $21,367 in 2008).
(b) For the Hancock building,K’s depreciable
exchanged basis would have been $3,888,753 if the
GO Zone additional first year depreciation deduction
was not claimed for the New Orleans building. Thus,
pursuant to § 1.168(i)–6(e)(2)(ii),K’s depreciation
deduction allowable in 2008 for the depreciable
exchanged basis of $3,888,753 for the Hancock
building is $80,751 (the depreciable exchanged basis
of $3,888,753 multiplied by the annual depreciation
rate of .02564 for the recovery year 2 as modified
by the transaction coefficient of 1.0230 [1 / (1 -
.02247)], multiplied by 9.5/12) (determined as if no
GO Zone additional first year depreciation deduction
was claimed for the New Orleans building).
(ii) For 2009,K’s depreciation deduction al-
lowable for the Hancock building, pursuant to
§ 1.168(i)–6(e)(2)(i), is $21,250 (the depreciable ex-
changed basis of $3,888,753 multiplied by the annual
depreciation rate of .02564 for the recovery year 3
as modified by the transaction coefficient of 1.0230
2008–9 I.R.B.486March 3, 2008

[1/ (1 - .02247)], multiplied by 2.5/12) (determined
as if no GO Zone additional first year depreciation
deduction was claimed for the New Orleans
building). Thus, the adjusted depreciable basis of
the Hancock building at the time of the like-kind
exchange for the Texas building is $3,786,752
(depreciable exchanged basis of $3,888,753, less the
depreciation deduction allowable of $80,751 in 2008,
less the depreciation deduction allowable of $21,250
in 2009) (determined as if no GO Zone additional
first year depreciation deduction was claimed for the
New Orleans building).
(iii) For 2009,Kdecides to use the optional
depreciation table to calculate depreciation on the
depreciable exchanged basis of the Texas building.
Thus, pursuant to § 1.168(i)–6(e)(2)(ii),K’s depreci-
ation deduction allowable in 2009 for the depreciable
exchanged basis of $3,786,752 for the Texas build-
ing is $80,746 (the depreciable exchanged basis of
$3,786,752 multiplied by the annual depreciation
rate of .02564 for the recovery year 3 as modified
by the transaction coefficient of 1.0505 [1 / (1 -
.02247+.02564)], multiplied by 9.5/12).
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Section 6 of Notice 2006–77, 2006–40
I.R.B. 590, is clarified and amplified to
read as provided in section 3 of this notice.
SECTION 5. EFFECTIVE DATE
This notice is effective February 11,
2008.
SECTION 6. DRAFTING
INFORMATION
The principal author of this notice is
Ruba Nasrallah of the Office of Associate
Chief Counsel (Income Tax & Account-
ing). For further information regarding
this notice, contact Ms. Nasrallah or
Douglas Kim at (202) 622–4930 (not a
toll-free call).
Qualifying Advanced Coal
Project Program—Special
Allocation Round
Notice 2008–26
SECTION 1. PURPOSE
This notice updates and amplifies the
procedures for the allocation of credits
under the qualifying advanced coal pro-
gram of § 48A of the Internal Revenue
Code by announcing the immediate begin-
ning of a special allocation round. This
special allocation round applies only to
the pool of investment credits available
for integrated gasification combined cycle
(IGCC) projects using bituminous coal as
primary feedstock. This notice provides
that, except as specifically provided in
this notice, this special allocation round
will be conducted in the same manner and
under the same procedures as provided
under Notice 2007–52 (including Appen-
dices A, B, and C), 2007–26 I.R.B. 1456,
which updated and modified the advanced
coal project program established under
Notice 2006–24, 2006–1 C.B. 595. To
be considered in thisspecial allocation
round, applications must be submitted to
the Department of Energy (DOE) on or
before May 2, 2008, and to the Internal
Revenue Service before June 3, 2008. See
section 3 of this notice for additional rules
regarding applications for § 48A and DOE
certification.
SECTION 2. BACKGROUND
.01 Section 46 provides that the amount
of the investment credit for any taxable
year is the sum of the credits listed in § 46.
This list includes the qualifying advanced
coal project credit.
.02 Section 48A(a) provides that the
qualifying advancedcoal project credit
for any taxable year includes 20 percent
of the qualified investment (as defined
in § 48A(b)) for that taxable year in cer-
tified qualifying advanced coal projects
(as defined in § 48A(c)(1) and § 48A(e))
using an integrated gasification combined
cycle (as defined in § 48A(c)(7)). Sec-
tion 48A(d)(3) provides that $800 million
of credits are to be allocated to IGCC
projects. Section 48A(e)(3)(A) provides
that the credits for IGCC projects must
be allocated in accordance with the pro-
cedures set forth in § 48A(d), and in
relatively equal amounts to (i) projects
using bituminous coal as a primary feed-
stock, (ii) projects using subbituminous
coal as a primary feedstock, and (iii)
projects using lignite as a primary feed-
stock. Further, § 48A(e)(3)(B) provides
that IGCC projects that include (i) green-
house gas capture capability (as defined
in § 48A(c)(5)), (ii) increased by-product
utilization, and (iii) other benefits must
be given high priority in the allocation of
credits for IGCC projects.
.03 Section 48A(d)(1) provides that the
Secretary, in consultation with the Secre-
tary of Energy, shall establish a qualifying
advanced coal project program for the de-
ployment of advanced coal-based genera-
tion technologies. The Treasury Depart-
ment and the Service established this pro-
gram in Notice 2006–24. Under section
4.02(2)(b) of Notice 2006–24, $267 mil-
lion of qualifying advanced coal project
credit was available for allocation from the
pool for IGCC projects using bituminous
coal as a primary feedstock and the max-
imum amount that could be allocated to
such a project was $133.5 million.
.04 Section 4.02(2)(b) of Notice
2007–52 provides that no allocation round
will be conducted in 2007–08 for IGCC
projects using bituminous coal as a pri-
mary feedstock.
.05 At this time, $133.5 million of
credit is available for allocation from the
pool for IGCC projects using bituminous
coal as a primary feedstock. Under No-
tice 2007–52, the allocation of the credit
for this pool would not occur before the
allocation round conducted in 2008–09.
To avoid this delay, this notice provides a
special allocation round for IGCC projects
using bituminous coal as a primary feed-
stock.
SECTION 3. SPECIAL ALLOCATION
ROUND FOR IGCC PROJECTS USING
BITUMINOUS COAL AS A PRIMARY
FEEDSTOCK
.01 Except as otherwise specifically
provided in this notice, this special alloca-
tion round will be conducted in the same
manner and under the same procedures as
provided under Notice 2007–52 includ-
ing Appendices A, B, and C. This notice
restates or references certain provisions
in Notice 2007–52 as a convenience to
taxpayers. The restatement or referencing
of these provisions does not diminish the
effect of provisions that are not restated or
referenced.
.02 This special allocation round ap-
plies only to the pool of qualifying ad-
vanced coal project credit for IGCC
projects using bituminous coal as a pri-
mary feedstock. The aggregate amount of
credits available for allocation from this
pool is $133.5 million. The entire $133.5
million is available for allocation in this
March 3, 20084872008–9 I.R.B.

special allocation round and may be allo-
cated to a single project.
.03 For this special allocation round, the
application period begins on February 13,
2008 and ends on June 2, 2008. During
the application period, an application for
§ 48A certification and a separate appli-
cation for DOE certification must be sub-
mitted for each qualifying advanced coal
project. See section 3.07 for the date by
which the application for DOE certifica-
tion must be submitted to the DOE. Any
completed application for § 48A certifi-
cation for an IGCC project using bitumi-
nous coal as a primary feedstock that is re-
ceived by the Service on or after February
13, 2008, and before June 3, 2008, will be
deemed to be submitted by the taxpayer on
June 2, 2008.
.04 For this special allocation round, the
Service will consider a project only if the
application for § 48A certification for the
project is submitted during the application
period for this round and the DOE provides
the DOE certification and the DOE rank-
ing (if any) for the project before July 4,
2008.
.05 If an application for DOE certifi-
cation does not include all of the infor-
mationrequiredbysection5.02ofNotice
2007–52 and meet the requirements in sec-
tions 7.01 and 7.02 of Notice 2007–52, the
DOE may decline to accept the applica-
tion. If an application for § 48A certifica-
tion does not include all of the information
listed in section 5.03 of Notice 2007–52
and meet the requirements in sections 7.01
and 7.02 of Notice 2007–52, the applica-
tion will not be accepted by the Service.
.06 An application for § 48A certifica-
tion must be submitted in the manner pro-
vided in section 5.04 of Notice 2007–52.
.07 For this special allocation round, the
DOE will consider an application for DOE
certification only if the application is post-
marked on or before May 2, 2008. The
DOE will determine the feasibility of each
project for which it receives a timely ap-
plication for DOE certification and, if the
project is determined to be feasible, will
provide a DOE certification for the project
to the Service. If the DOE certifies two
or more projects, the DOE also will rank
each of the projects it certifies (for exam-
ple, first, second, third, etc.) relative to
other certified projects. The DOE will pro-
vide the DOE certification for projects de-
termined to be feasible and the DOE rank-
ing (if any) to the Service on or before July
3, 2008.
.08 By July 31, 2008, the Service will
accept or reject the taxpayer’s application
for § 48A certification and will notify the
taxpayer, by letter, of its decision.
.09 If the taxpayer’s application for
§ 48A certification is accepted, the accep-
tance letter will state the amount of the
credit allocated to the project. If a credit
is allocated to a taxpayer’s project, the
taxpayer will be required to execute an
agreement in substantially the form set
forth in Appendix A to Notice 2007–52.
By September 8, 2008, the taxpayer must
execute and return the agreement to the
Service at the appropriate address listed in
section 5.04 of Notice 2007–52 or listed
in later guidance published in the Inter-
nal Revenue Bulletin. The Service will
execute and return the agreement to the
taxpayer by September 29, 2008. The
executed agreement applies only to the
accepted taxpayer.
.10 If the amount available for alloca-
tion from the pool for IGCC projects us-
ing bituminous coal as a primary feedstock
is not fully allocated in the special allo-
cation round, the remaining amount in the
pool will be treated for purposes of Notice
2007–52 as an amount that is not fully al-
located in the 2007–08 allocation round.
The remaining amount in the pool will
be available for allocation in the alloca-
tion round conducted in 2008–09 under the
provisions of Notice 2007–52. The provi-
sions of Notice 2007–52 relating to the al-
location round conducted in 2008–09 will
be applied with respect to this pool by sub-
stituting June 3, 2008, for March 3, 2008.
Thus, the application period for this pool
begins on June 3, 2008, and ends on March
2, 2009, and any completed application for
§ 48A certification for IGCC projects us-
ing bituminous coal as a primary feedstock
received by the Service after June 2, 2008,
and before March 3, 2009, will be deemed
to be submitted by the taxpayer on March
2, 2009. As under Notice 2007–52, an ap-
plication to the DOE for IGCC projects
using bituminous coal as a primary feed-
stock will not be considered in the alloca-
tion round conducted in 2008–09 unless it
is postmarked by October 31, 2008.
SECTION 4. EFFECTIVE DATE
This notice is effective February 13,
2008.
SECTION 5. PAPERWORK
REDUCTION ACT
The collection of information contained
in this notice has been reviewed and ap-
proved by the Office of Management and
Budget in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507) under
control number 1545–2003.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
notice are in section 3 (and in sections
4, 5, 6, 7, 8, and Appendix B of Notice
2007–52). This information is required
to obtain an allocation of qualifying ad-
vanced coal project credits. This informa-
tion will be used by the Service to verify
that the taxpayer is eligible for the quali-
fying advanced coal project credits. The
collection of information is required to ob-
tain a benefit. The likely respondents are
business or other for-profit institutions.
The estimated total annual reporting
burden is 4,950 hours.
The estimated annual burden per re-
spondent varies from 70 to 150 hours, de-
pending on individual circumstances, with
an estimated average of 110 hours. The es-
timated number of respondents is 45.
The estimated annual frequency of re-
sponses is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. § 6103.
DRAFTING INFORMATION
The principal author of this notice is
Jaime C. Park of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For furtherinformation regard-
ing this notice, contact Jaime C. Park at
(202) 622–3110 (not a toll-free call).
2008–9 I.R.B.488March 3, 2008

26 CFR 702.9037–2T: Payments from the Presiden-
tial Primary Matching Payment Account (temporary).
Rev. Proc. 2008–15
SECTION 1. PURPOSE
This revenue procedure provides pro-
cedures under § 9037 of the Internal Rev-
enue Code (26 U.S.C. § 9037 (2000)) and
§ 702.9037 of the Financing of Presidential
Election Campaigns Regulations (26 CFR
§ 702.9037 (2007)) for making payments
from the Presidential Primary Matching
Payment Account (Primary Account).
Under these procedures the Treasury Sec-
retary (Treasury) will make payments of
amounts due to primary candidates at least
once a week if funds are available in the
Primary Account. These payments will
start during the first week of January of
an election year and will continue through
the end of September of the year following
the presidential election. This revenue
procedure also provides procedures for
determining amounts paid to candidates
when the balance in the Primary Account
is not sufficient to pay all amounts certi-
fied by the Federal Election Commission
(Commission). When the Primary Ac-
count is in shortfall, the Treasury will
make paymentspro ratafrom the Primary
Account based on the amounts certified
by the Commission for each candidate
adjusted for the length of time between
the Treasury’s receipt of the certifications
and the Treasury’s making payments on
the certifications (see Sequencing Adjust-
ment, as defined in section 3.05 of this
revenue procedure).
SECTION 2. BACKGROUND
.01 Section 6096(a) permits individuals
(other than nonresident aliens) whose in-
come tax liability for the taxable year is
$3 or more to designate that $3 be paid to
the Presidential Election Campaign Fund
(Fund) in accordance with the provisions
of § 9006(a).
.02 Section 9006(a) establishes the
Fund and provides that the Treasury will
transfer to the Fund, from time to time,
an amount not in excess of the sums des-
ignated by individual taxpayers under
§ 6096.
.03 Under § 9037(a), the Treasury is to
maintain the Primary Account within the
Fund and will deposit amounts into the Pri-
mary Account from the Fund after deter-
mining that there are sufficient amounts
available in the Fund to make payments
described in § 9006 (payments for the gen-
eral election) and § 9008 (payments for
nomination conventions). The Primary
Account contains amounts for Presidential
primary candidates who are certified for
payments by the Commission.
.04 Section 9037(b) specifies that the
Treasury should pay certified primary can-
didates promptly.
.05 Notice 96–13, 1996–1 C.B. 366, in-
dicated that payment procedures would be
provided for payments from the Primary
Account when the balance in the Primary
Account is not sufficient to pay all amounts
certified by the Commission. The notice
states that when the Primary Account is in
shortfall, the Treasury may make an addi-
tional payment between regular payment
dates, promptly after funds become avail-
able.
.06 Notice 2007–96, 2007–49 I.R.B.
1091, superseded Notice 96–13 and an-
nounced that the Treasury intends to
change the procedures for making pay-
ments from the Primary Account.
.07 Section 702.9037–2T(a) of the tem-
porary Financing of Presidential Election
Campaigns Regulations provides that, pur-
suant to § 9036, the Commission will cer-
tify to the Treasury the full amount of pay-
ment to which a candidate is entitled under
§ 9034. The Treasury will pay promptly,
but not before the beginning of a Presi-
dential election year, the amounts certified
by the Commission from the Primary Ac-
count to the candidate.
.08 Section 702.9037–2T(b) provides
that the Internal Revenue Service may pro-
vide additional rules and procedures for
the Primary Account.
.09 This revenue procedure provides
additional rules and procedures for making
payments from the Primary Account.
SECTION 3. DEFINITIONS
.01Payment Date.Adayonwhichthe
Treasury makes payments to candidates
from the Primary Account.
.02Candidate’s Actual Shortfall.The
difference, if any, between the amounts
certified by the Commission for a candi-
date in certifications received by the Trea-
sury as of one day prior to the Payment
Date, and the amount of payments previ-
ously received by the candidate on such
certifications as of the Payment Date, with-
out taking into account the Sequencing
Adjustment.
.03Candidate’s Adjusted Shortfall.
The sum of a Candidate’s Actual Shortfall
plus the Sequencing Adjustment.
.04Aggregate Adjusted Shortfall.The
sum of all Candidates’ Adjusted Shortfalls
on a Payment Date.
.05Sequencing Adjustment. A factor
used to compute a candidate’s share of
pro ratapayments when the Primary Ac-
count is in shortfall. The Sequencing Ad-
justment is computedat the noncorporate
overpayment rate specified under § 6621
starting with the day the Treasury receives
certification from the Commission that the
candidate is entitled to receive an amount
of payment and ending on the Payment
Date.
SECTION 4. PAYMENT PROCEDURES
.01Timing of payments.
(a)Weekly payments. The Treasury will
make payments due to primary candidates
at least once a week, to the extent funds
are available in the Primary Account. Pay-
ments will be based on (1) certifications
which the Treasury has received from the
Commission, but not paid, as of one day
prior to a Payment Date, and (2) the bal-
ance in the Primary Account, as of one day
prior to a Payment Date.
(b)Payment period. The payments de-
scribed in section 4.01(a) of this revenue
procedure will commence during the first
week of January of an election year and
will continue through the end of Septem-
ber of the year following the presidential
election.
.02Amount of payment.
(a)No shortfall. If the amounts certi-
fied by the Commission in certifications
received by the Treasury as of one day
prior to a Payment Date do not exceed the
balance in the Primary Account on a Pay-
ment Date, the Treasury will pay the certi-
fied amounts to the candidates.
(b)Shortfall. If the amounts certified by
the Commission in certifications received
by the Treasury as of one day prior to a
Payment Date exceed the balance in the
Primary Account on a Payment Date, the
amount paid to a candidate is determined
by multiplying the Candidate’s Adjusted
March 3, 20084892008–9 I.R.B.

Shortfall (as defined in section 3.03 of this
revenue procedure) by the ratio of the bal-
ance in the Primary Account as of one day
prior to the Payment Date over the Aggre-
gate Adjusted Shortfall (as defined in sec-
tion 3.04 of this revenue procedure).
(c)Limitation. In no event will the
Treasury pay to a candidate more than the
amounts certified by the Commission for
the candidate in certifications received by
the Treasury from the Commission.
.03Allocation of payments.Payments
described in section 4.02(b) of this rev-
enue procedure will be allocated among
the amounts certified by the Commission
for a candidate based on the sequence in
which the Treasury received certifications
from the Commission. For example, if the
Treasury receives on January 29, 2008, a
certification from the Commission for a
payment of $100 to a candidate and re-
ceives on February 26, 2008, a certifica-
tion for a payment of $70 to the same can-
didate, and the Treasury makes a payment
of $60 to that candidate pursuant to sec-
tion 4.02(b) of this revenue procedure, that
payment is allocated to the certification the
Treasury received on January 29, 2008.
In determining the Candidate’s Adjusted
Shortfall for the next payment, the Trea-
sury will be considered to have received on
January 29, 2008, a certification for a pay-
ment of $40 to the candidate, and to have
received on February26, 2008, a certifica-
tion for a payment of $70 to the candidate.
SECTION 5. NOTIFICATION
The Treasury will notify the Commis-
sion of the amount paid to each candidate
and the balance remaining in the Primary
Account after making disbursements from
the Primary Account. The Treasury will
also notify the Commission if funds are not
available in a week to make the payments
to candidates described in section 4.02 of
this revenue procedure.
SECTION 6. RETURN OF FUNDS
Any amounts in the Primary Account
on October 31 of the year following a pres-
idential election will be returned to the
Fund for use in the next presidential elec-
tion.
SECTION 7. EFFECTIVE DATE
This revenue procedure provides proce-
dures for payments from the Primary Ac-
count in or after 2008. See Notice 96–13
for rules for payments made to candidates
when the Primary Account was in shortfall
from February 2, 1996, through 2007.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Karla M. Meola of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
concerning this revenue procedure, please
contact Ms. Meola at (202) 622–4930 (not
a toll-free call).
2008–9 I.R.B.490March 3, 2008

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Measurement o
fAssetsand
Liabilities f
or Pension Funding
Purposes
REG–139236–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations providing guidance on
the determination of plan assets and ben-
efit liabilities for purposes of the funding
requirements that apply to single employer
defined benefit plans. These regulations
affect sponsors, administrators, partici-
pants, and beneficiaries of single employer
defined benefit plans.
DATES: Written or electronic comments
and requests for a public hearing must be
received by March 31, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–139236–07),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–139236–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
viatheFederaleRulemaking
Portalatwww.regulations.gov
(IRS-REG–139236–07).
FOR FURT
HER INFORMATION
CONTACT
: Concerning the regulations,
Lauson C
. Green or Linda S. F. Marshall
at (202)
622–6090;concerning
submiss
ions and requests for a
public
hearing, Richard A. Hurst at
Richar
d.A.Hurst@irscounsel.treas.govor
at (202
) 622–7180 (not toll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Paperwork Red
uction Act
The collectio
ns of information con-
tained in this
notice of proposed rulemak-
ing have been s
ubmitted to the Office of
Management an
d Budget for review in
accordance w
ith the Paperwork Reduc-
tion Act of 19
95 (44 U.S.C. 3507(d)).
Comments on t
he collections of infor-
mation shoul
dbesenttotheOffice of
Management a
nd Budget,Attn: Desk
Officer for
the Department of the Trea-
sury, Offic
e of Information and Regulatory
Affairs, Wa
shington, DC 20503, with
copies to th
eInternal Revenue Service,
Attn: IRS R
eports Clearance Officer,
SE:W:CAR:
MP:T:T:SP, Washington, DC
20224. Com
ments on the collection of
informati
on should be received by Febru-
ary 29, 20
08. Comments are specifically
requeste
d concerning:
Whether t
he proposed collection of in-
formatio
n is necessary for the proper per-
formance
of the functions of the Internal
Revenue S
ervice, including whether the
informat
ion will have practical utility;
The accur
acy of the estimated burden
associat
ed with the proposed collection of
informa
tion;
How the qu
ality, utility, and clarity of
the info
rmation to be collected may be en-
hanced;
How the b
urden of complying with the
propose
d collections of information may
be minim
ized, including through the appli-
cation o
f automated collection techniques
or other
forms of information technology;
and
Estima
tes of capital or start-up costs
and cos
ts of operation, maintenance, and
purcha
se of service to provide information.
The col
lection of information
in this
proposed regulation is in
§1.430
(h)(2)–1(e). This information is re-
quired
in order for a plan sponsor to make
an ele
ction to use an alternative interest
rate f
or purposes of determining a plan’s
fundi
ng obligations under §1.430(h)(2)–1.
This i
nformation is required to obtain or
retain benefi
ts. The likely respondents are
qualified ret
irement plan sponsors.
Estimated tot
al annual reporting bur-
den: 54,000 ho
urs.
Estimated ave
rage annual burden hours
per responden
t: 0.75 hours.
Estimated num
ber of respondents:
72,000.
Estimated ann
ual frequency of re-
sponses: occa
sional.
An agency may n
ot conduct or sponsor,
and a person is
not required to respond to, a
collection of
information unless it displays
a valid contr
ol number assigned by the Of-
fice of Manag
ement and Budget.
Books or reco
rds relating to a collection
of informati
on must be retained as long
as their cont
ents may become material in
the administ
ration of any internal revenue
law. Genera
lly, tax returns and tax return
informatio
n are confidential, as required
by 26 U.S.C.
6103.
Background
This docume
nt contains proposed In-
come Tax Reg
ulations (26 CFR part 1) un-
der sectio
ns 430(d), 430(g), 430(h)(2), and
430(i), as
added to the Internal Revenue
Code (Code
) by the Pension Protection Act
of 2006 (PP
A ’06), Public Law 109–280
(120 Stat.
780).
Section 41
2 provides minimum fund-
ing requi
rements that generally apply for
pension p
lans (including both defined
benefit p
ension plans and money purchase
pension p
lans). PPA ’06 makes extensive
changes t
o those minimum funding re-
quiremen
ts that generally apply for plan
years be
ginning on or after January 1,
2008. Se
ction 430, which was added by
PPA ’06,
specifies the minimum funding
require
ments that apply to single employer
defined
benefit pension plans (including
multip
le employer plans) pursuant to sec-
tion 41
2.
1
Sectio
n 430(a) defines the minimum re-
quired
contribution for a single employer
plan as
the sum of the plan’s target normal
cost an
d the shortfall and waiver amortiza-
tion ch
arges for the plan year. Under sec-
tion 4
30(b), a plan’s target normal cost for
1
Section 302 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), sets forth funding rules that are parallel to those in section 412 of the Internal Revenue Code
(Code), and section 303 of ERISA sets forth additional funding rules for single employer plans that are parallel to those in section 430 of the Code. Under section 101 of Reorganization Plan
No. 4 of 1978 (43 FR 47713) and section 302 of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in these proposed regulations for purposes
of ERISA, as well as the Code. Thus, these proposed Treasury regulations issued under section 430 of the Code apply as well for purposes of section 303 ofERISA.
March 3, 20084912008–9 I.R.B.

a plan year is the present value of all ben-
efits expected to accrue or be earned un-
der the plan during the plan year. For this
purpose, section 430(b) provides that an
increase in any benefit attributable to ser-
vices performed in a preceding plan year
by reason of a compensation increase dur-
ing the current plan year is treated as hav-
ing accrued during the current plan year.
One of the amortization charges used in
determining the minimum required contri-
bution, the shortfall amortization charge,
is determined based on the difference be-
tween the plan’s funding target and the
value of plan assets. Under section 430(d),
except as provided in section 430(i)(1)
(regarding plans in at-risk status), a plan’s
“funding target” for a plan year is the
present value of all benefits accrued or
earned under the plan as of the beginning
of the plan year.
Section 430(g)(1) provides that all de-
terminations made with respect to mini-
mum required contributions for a plan year
(suchasthevalueofplanassetsandliabil-
ities) must be made as of the plan’s valua-
tion date. Section 430(g)(2) provides that,
other than for plans with 100 or fewer par-
ticipants (determined as provided in sec-
tion 430(g)(2)(B) and (C)), the valuation
date for a plan year must be the first day
of the plan year. Under section 430(g)(3),
the value of plan assets is generally the fair
market value of those assets. However, the
value of plan assets may be determined on
the basis of the averaging of fair market
values, but only if the averaging method
is permitted under regulations and satisfies
certain other requirements.
Under section 430(g)(4), if a required
contribution for a preceding plan year is
made after the valuation date for the cur-
rent plan year, the contribution is taken
into account in determining the value
of plan assets for the current plan year.
For 2009 and future plan years, only the
present value (determined as of the valu-
ation date for the current plan year, using
the plan’s effective interest rate for the
preceding plan year) of the contributions
made for the preceding plan year is taken
into account. If any contributions for the
current plan year are made before the val-
uation date (which could only occur for
a small plan with a valuation date that is
not the first day of the plan year), plan as-
sets as of the valuation date must exclude
(1) those contributions, and (2) interest
on those contributions (determined at the
plan’s effective interest rate for the plan
year) for the period between the date of
the contribution and the valuation date.
Under section 430(h)(2)(A), a plan’s ef-
fective interest rate for a plan year is
defined as the single interest rate that, if
used to determine the present value of the
benefits taken into account in determining
the plan’s funding target for the plan year,
wouldresultinanamountequaltothe
plan’s funding target determined for the
plan year under section 430(d).
Under section 430(h)(1), the determi-
nation of any present value or other com-
putation under section 430 is to be made
on the basis of actuarial assumptions and
methods each of which is reasonable (tak-
ing into account the experience of the plan
and reasonable expectations) and which, in
combination, offer the actuary’s best esti-
mate of anticipated experience under the
plan.
Section 430(h)(2) specifies the interest
rates that must be used in determining a
plan’s target normal cost and funding tar-
get. Under the provision, present value is
determined using three interest rates (seg-
ment rates), each of which applies to ben-
efit payments expected to be paid during
a certain period. The first segment rate
applies to benefits reasonably determined
to be payable during the 5-year period be-
ginningonthefirstdayoftheplanyear.
The second segment rate applies to bene-
fits reasonably determined to be payable
during the 15-year period following the
initial 5-year period. The third segment
rate applies to benefits reasonably deter-
mined to be payable after the end of that
15-year period.
Each segment rate is a single interest
rate determined monthly by the Treasury
Department on the basis of a corporate
bond yield curve. The corporate bond
yield curve used for this purpose is to
be prescribed monthly by the Treasury
Department and is to reflect the average,
for the 24-month period ending with the
preceding month, of yields on investment
grade corporate bonds with varying matu-
rities that are in the top three quality levels
available. Under section 430(h)(2)(F), the
Secretary of the Treasury is directed to
publish each month the corporate bond
yield curve and each of the segment rates
for the month. In addition, the Secretary
is directed to publish a description of the
methodology used to determine the yield
curve and segment rates to enable plans to
make reasonable projections regarding the
yield curve and segment rates for future
months, based on a plan’s projection of
future interest rates.
Section 430(h)(2)(G) provides a tran-
sition rule for plan years beginning in
2008 and 2009 (other than for plans where
the first plan year begins on or after Jan-
uary 1, 2008). Under this transition rule,
the interest rates to be used in the valua-
tion are based on a blend of the segment
rates and the long-term corporate bond
rates used for plan years prior to the ef-
fective date of PPA ’06. Under section
430(h)(2)(G)(iv), a plan sponsor may elect
to have this transition rule not apply. In
addition, solely for purposes of determin-
ing minimum required contributions under
section 430, in lieu of using the segment
rates, an employer may elect under section
430(h)(2)(D)(ii) to use interest rates on a
yield curve based on the yields on invest-
ment grade corporate bonds within the top
three quality levels without regard to the
24-month averaging described above.
Section 430(i) requires the application
of special assumptions in determining
the funding target and target normal cost
of a plan in at-risk status. Under sec-
tion 430(i)(4), a plan is in at-risk status
for a year if, for the preceding year: (1)
the plan’s funding target attainment per-
centage, determined without regard to
the at-risk assumptions, was less than 80
percent (with a transition rule discussed
below), and (2) the plan’s funding target
attainment percentage, determined using
the at-risk assumptions (without regard
to whether the plan was in at-risk status
for the preceding year), was less than 70
percent. Under a transition rule applicable
for plan years beginning in 2008, 2009,
and 2010, the following percentages apply
instead of 80 percent in the first part of
the test for determining at-risk status: 65
percent for 2008, 70 percent for 2009, and
75 percent for 2010. In the case of plan
years beginning in 2008, the plan’s fund-
ing target attainment percentage for the
preceding plan year is to be determined
under rules provided by the Treasury De-
partment.
Under section 430(i)(6), the at-risk
rules do not apply if a plan had 500 or
fewer participants on each day during the
preceding plan year. For this purpose,
2008–9 I.R.B.492March 3, 2008

all defined benefit pension plans (other
than multiemployer plans) maintained
by the same employer (or a predecessor
employer), or by any member of the em-
ployer’s controlled group, are treated as a
single plan.
If a plan is in at-risk status, the plan’s
funding target and normal cost are deter-
mined (under section 430(i)(1) and (2)) us-
ing special actuarial assumptions. Under
these assumptions, all employees who are
not otherwise assumed to retire as of the
valuation date, but who will be eligible to
elect to commence benefits in the current
and 10 succeeding plan years, are assumed
to retire at the earliest retirement date un-
der the plan, but not before the end of the
current plan year. All employees are as-
sumed to elect the form of retirement bene-
fit available under the plan at that assumed
retirement age that results in the highest
present value.
The funding target of a plan in at-risk
status for a plan year is generally the sum
of: (1) the present value of all benefits ac-
crued or earned as of the beginning of the
plan year, and (2) in the case of a plan that
has been in at-risk status for at least 2 of
the 4 preceding plan years, a loading fac-
tor. That loading factor is equal to the sum
of: (1) $700 multiplied by the number of
participants in the plan, plus (2) 4% of the
funding target determined without regard
to the loading factor. The target normal
cost of a plan in at-risk status for a plan
year is generally the sum of: (1) the present
value of benefits expected to accrue or be
earned under the plan during the plan year,
determined using the special assumptions
described above, and (2) in the case of a
plan that has been in at-risk status for at
least 2 of the 4 preceding plans years, a
loading factor of 4% of the target normal
cost determined without regard to the load-
ing factor. If a plan has been in at-risk sta-
tus for fewer than 5 consecutive plan years,
a phase-in rule applies to the determination
of the “funding target” and “target normal
cost” under section 430(i)(5).
Explanation of Provisions
I.Overview
These proposed regulations are the third
in a series of proposed regulations under
new section 430.
2
These proposed regula-
tions would provide guidance on the deter-
mination of assets and liabilities for pur-
poses of applying the new funding rules of
section 430. The Treasury Department and
the IRS intend to issue additional proposed
regulations relating to other portions of the
rules under section 430 (including sections
430(a), (c), and (j)) in the first part of 2008.
It is expected that those regulations will be
effective for plan years beginning on or af-
ter January 1, 2009.
II.Section 1.430(d)–1 Determination of
Funding Target and Target Normal Cost
Section 1.430(d)–1 would provide rules
for determining the funding target and the
target normal cost of a plan that is not
in at-risk status (within the meaning of
section 430(i)). The proposed regulations
would provide that the funding target is
the present value of all benefits that have
been accrued or earned under the plan as of
the first day of the plan year, and that the
target normal cost for the plan year is the
present value of all benefits that accrue or
are earned (or that are expected to accrue
or to be earned) under the plan during the
plan year. Thus, if the actuarial valuation
date for the plan year is not the first day
of the plan year, the target normal cost will
include the benefits actually earned during
the year through the valuation date for the
plan year plus a projection of benefits that
will be earned through the rest of the plan
year.
In order to determine the funding tar-
get and target normal cost, the future ben-
efits to be paid from the plan must be al-
located among prior plan years (in which
case they will be taken into account in de-
termining the funding target for the current
year), the current plan year (in which case
they will be taken into account in deter-
mining the target normal cost of the plan
for the plan year), and future years. If the
amount of a benefit that is expected to be
paid is a function of the accrued benefit
at the time the benefit is expected to be
paid, then the amount taken into account
in the funding target is determined by ap-
plying that function to the accrued benefit
as of the beginning of the plan year and the
amount of the benefit taken into account in
the target normal cost is determined by ap-
plying that function to the increase in the
accrued benefit for the plan year. If the
amount of a benefit that is expected to be
paid is not a function of the accrued bene-
fit at the time the benefit is expected to be
paid (for example, certain ancillary bene-
fits), but is a function of the participant’s
service at that time,then the amount taken
into account for purposes of determining
the funding target for a plan year is based
on a participant’s service as of the first day
of the plan year and the amount of the ben-
efit that is taken into account in the target
normal cost is the increase in that benefit
for the plan year based on the additional
year of service. If the amount of a benefit
that is expected to be paid is neither a func-
tion of the accrued benefit at the time the
benefit is expected to be paid nor a func-
tion of the participant’s service at that time,
then the portion of the benefit taken into
account for purposes of determining the
funding target for a plan year is based on
the proportion of a participant’s service as
of the first day of the plan year relative to
the service the participant will have when
the participant meets the age and service
eligibility requirement for the benefit, and
the portion of the benefit that is taken into
account in the target normal cost is the in-
crease in the proportional benefit for the
plan year.
The proposed regulations would pro-
vide that the determination of the funding
target and the target normal cost for a plan
year is not permitted to take into account
any limitations or anticipated limitations
under section 436. Also, the proposed
regulations would provide that plan ad-
ministrative expenses paid (or expected to
be paid) from plan assets for a plan year
are not taken into account in determining
a plan’s target normal cost and funding
target for that plan year. With respect to
benefits provided by insurance, the pro-
posed regulations would provide that, in
general, a plan must reflect the liability for
benefits that are funded through insurance
contracts held by the plan in the plan’s
2
Proposed regulation §§1.430(h)(3)–1 and 1.430(h)(3)–2, relating to the mortality tables used to determine liabilities under section 430(h)(3), were issued May 29, 2007 (REG–143601–06,
2007–24 I.R.B. 1398 [72 FR 29456]), and proposed regulation §1.430(f)–1, relating to prefunding and funding standard carryover balances under section 430(f), was issued August 31, 2007
(REG–113891–07, 2007–42 I.R.B. 821 [72 FR 50544]).
March 3, 20084932008–9 I.R.B.

funding target and target normal cost, and
must include the value of the correspond-
ing insurance contracts in plan assets.
However, an alternative rule is provided in
the case of benefits that are funded through
certain insurance contracts purchased from
an insurance company licensed under the
laws of a State. Under this rule, a plan
is permitted to exclude benefits provided
under such contracts from the plan’s fund-
ing target and target normal cost and to
exclude the corresponding insurance con-
tractsfromplanassets,butonlytothe
extent that a participant’s or beneficiary’s
right to receive those benefits is an irre-
vocable contractual right based on
premiums paid to the insurance company
prior to the valuation date under the
insurance contracts.
The proposed regulations would pro-
vide that, except as provided in section
412(d)(2), the funding target and target
normal cost are determined based on the
plan terms that are adopted no later than
the valuation date for the plan year and
become effective during that plan year.
Thus, the rules of Revenue Ruling 77–2,
1977–1 C.B. 120, would no longer apply.
See §601.601(d)(2) of this chapter. For
example, if an amendment that increases
plan liabilities is adopted on or before
the plan’s valuation date and is effective
during the plan year that includes the valu-
ation date, the full increase in liability with
respect to the amendment is taken into
account as of that year’s valuation date.
However, with respect to the pre-PPA
counterpart to section 412(d)(2) (section
412(c)(8) as in effect prior to amendments
made by PPA ’06), Rev. Rul. 79–325,
1979–2 C.B. 190, provides that section
412(c)(8) applies to plan amendments
made during the plan year (as well as to
plan amendments made within 2
1
/2months
after the end of the plan year), and this
same rule applies under the identical statu-
tory provisions of section 412(d)(2). See
§601.601(d)(2) of this chapter. Thus, if an
amendment that increases plan liabilities
is adopted after the valuation date for a
plan year but the amendment is effective
during that plan year, the full increase in
liability will be taken into account as of
the valuation date for that plan year if a
section 412(d)(2) election is made, and
none of the increase in liability will be
taken into account as of the valuation date
for that plan year if no section 412(d)(2)
election is made. Regardless of whether
a section 412(d)(2) election is made, the
rules of section 436(c) must be applied
in determining whether the amendment is
permitted to take effect during the plan
year. Section 430 does not contain a cor-
responding provision to former section
412(c)(12) under which the provisions of a
collective bargaining agreement are taken
into account for funding purposes before
the corresponding plan amendments have
been made.
The proposed regulations would require
all currently employed plan participants,
formerly employed plan participants (in-
cluding retirees and terminated vested
participants), and other individuals cur-
rently entitled to benefits under the plan
to be included in the valuation. Unlike
§1.412(c)(3)–1(c)(3)(ii), the proposed reg-
ulations would not permit exclusion from
the valuation of those plan participants
who could have been excluded from par-
ticipation in the plan under the rules of
section 410(a). However, the proposed
regulations would continue to apply the
rules of §1.412(c)(3)–1(c)(3)(iii) (relating
to the exclusion of terminated employees
who do not have a vested benefit under the
plan but whose service might be taken into
account in future years upon rehire) and
the rules of §1.412(c)(3)–1(d)(2) (under
which the future participation in the plan
of current employees who are not yet par-
ticipants is permitted to be anticipated).
Section 1.430(d)–1 of the proposed reg-
ulations would cross-reference other reg-
ulations for the details of the statutorily
specified interest rates, mortality tables,
and actuarial assumptions that apply to
plans in at-risk status. With respect to the
actuarial assumptions that are not specified
by statute or regulations, the proposed reg-
ulations would requirethat the actuarial as-
sumptions used to determine present value
satisfy the section 430(h)(1) requirements
to be individually reasonable (taking into
account the experience of the plan and rea-
sonable expectations) and, in combination,
offer the plan’s enrolled actuary’s best es-
timate of anticipated experience under the
plan.
The proposed regulations would pro-
vide that, once the actuarial assumptions
for a plan year are established, they are not
permitted to be changed for that plan year
(unless the Commissioner determines that
the assumptions are unreasonable). Simi-
larly, the proposed regulations would pro-
vide that, once the funding method for a
plan year is established, it is not permit-
ted to be changed for that plan year (unless
the Commissioner determines that the use
of the funding method for the plan year is
impermissible).
In general, the actuarial assumptions
and funding method used by a plan for a
plan year are required to be established not
later than the due date (with extensions)
for the filing of Form 5500, “Annual Re-
turn/Report of Employee Benefit Plan,” for
that plan year (or not later than the last
day of the seventh month after the end of
the plan year in the case of a plan not re-
quired to file Form 5500). The proposed
regulations would provide that the filing
of the first actuarial report (Schedule SB)
under section 6059 for a plan year that
reflects the use of actuarial assumptions
and a funding method is treated as the es-
tablishment of those assumptions and the
funding method for that plan year.
In accordance with section 430(h)(4),
the proposed regulations would provide
that the plan’s actuarial valuation must
take into account the probability that fu-
ture benefits will be paid in optional forms
of benefit under the plan, including single
sum distributions, determined on the basis
of the plan’s experience and other relevant
assumptions. In addition, the plan’s en-
rolled actuary must take into account any
difference in the present value of those
future benefit payments that results from
the use of actuarial assumptions in de-
termining benefit payments in any such
optional forms of benefit that are different
from those prescribed by section 430(h).
In the case of a distribution that is
subject to section 417(e)(3) and that is de-
termined using the applicable interest rate
and applicable mortality table under sec-
tion 417(e)(3), the proposed regulations
would provide that the computation of
the present value of that distribution will
be treated as having taken into account
any difference in present value that results
from the use of actuarial assumptions that
are different from those prescribed by sec-
tion 430(h) only if the present value of the
distribution is determined by valuing the
annuity that corresponds to the distribu-
tion using special actuarial assumptions.
Under these special assumptions, for the
period beginning with the annuity starting
date, the current applicable mortality table
2008–9 I.R.B.494March 3, 2008

under section 417(e)(3) is substituted for
the mortality table under section 430(h)(3)
that would otherwise apply. In addition,
under these special actuarial assumptions,
the valuation interest rates under section
430(h)(2) are used for all periods (as op-
posed to the interest rates under section
417(e)(3) which the plan uses to determine
the amount of the benefit).
The proposed regulations provide two
elective adjustments to this methodology
for valuing distributions subject to sec-
tion 417(e)(3). First, in determining the
present value of such a distribution, if a
plan uses the generational mortality ta-
bles under §1.430(h)(3)–1(a)(4) or under
§1.430(h)(3)–2, the plan would be per-
mitted to use a 50–50 male-female blend
of the annuitant mortality rates under the
§1.430(h)(3)–1(a)(4) generational mortal-
ity tables in lieu of the applicable mor-
tality table under section 417(e)(3) that
would apply to a distribution with an annu-
itystartingdateoccurringonthevaluation
date. Second, a plan would be permitted to
make adjustments to reflect differences be-
tween the phase-in of the section 430(h)(2)
segment rates under section 430(h)(2)(G)
and the adjustments to the segment rates
under section 417(e)(3)(D)(iii).
In the case of a distribution that is sub-
ject to section 417(e)(3) but that is de-
termined as the greater of the benefit de-
termined using the applicable interest rate
and the applicable mortality table under
section 417(e)(3) and the benefit deter-
mined using some basis other than the sec-
tion 417(e)(3) assumptions, the proposed
regulations would provide that the com-
putation of present value must take into
account the extent to which the present
value of the distribution is greater than the
present value determined using the appli-
cable interest rate and applicable mortality
table.
In the case of an applicable de-
fined benefit plan described in section
411(a)(13)(C) (such as a cash balance
plan), the proposed regulations would pro-
vide that, if the distribution is determined
under the rules of section 411(a)(13)(A),
the amount of the future distribution must
be determined by projecting the future in-
terest credits or equivalent amounts under
the plan’s interest crediting rules to the ex-
pected date of payment using reasonable
actuarial assumptions. Thus, the present
value of a future distribution is not neces-
sarily the current amount of a participant’s
hypothetical account balance.
The proposed regulations would pro-
vide that any reasonable technique can be
used to determine the present value of the
benefits expected to be paid during a plan
year, based on the interest rates and mor-
tality assumptions applicable for the plan
year. For example, the present value of
a monthly retirement annuity payable at
the beginning of each month can be deter-
mined using the standard actuarial approx-
imation that reflects 13/24ths of the dis-
counted expected payments for the year as
of the beginning of the year and 11/24ths of
the discounted expected payments for the
year as of the end of the year, or by assum-
ing that the payment is made in the middle
of the year.
The proposed regulations would also
reflect the provisions of section 430(h)(5),
requiring approval of the Commissioner
for large changes in actuarial assump-
tions. In general, this rule applies where
the application of the changes in actuarial
assumptions results in a decrease in the
plan’s funding shortfall for the current
plan year (disregarding the effect on the
plan’s funding shortfall resulting from
changes in interest and mortality assump-
tions) that exceeds $50,000,000, or that
exceeds $5,000,000 and that is 5 percent
or more of the funding target of the plan
before the change. Thus, for example, if a
plan leaves at-risk status and consequently
makes changes to its actuarial assump-
tions (including a return to previously
used assumptions) that result in a reduc-
tion in the funding shortfall that exceeds
$50,000,000, that change in actuarial as-
sumptions would require approval of the
Commissioner. In determining whether
aggregate unfunded vested benefits ex-
ceed $50,000,000, the proposed regula-
tions would provide that multiemployer
plans and plans with no unfunded vested
benefits are disregarded. In addition, the
proposed regulations would provide that
the aggregate unfunded vested benefits
used to determine premiums for the cur-
rent plan year (as determined under section
4006(a)(3)(E)(iii) of ERISA) are used for
purposes of calculating whether unfunded
vested benefits exceed $50,000,000.
III.Section 1.430(g)–1 Valuation Date
and Value of Plan Assets
Section 1.430(g)–1 would provide rules
for a plan’s valuation date and the value
of plan assets.
3
Under the proposed regu-
lations, except in the case of a small plan, a
plan’s valuation date is the first day of the
plan year. For this purpose, a small plan
isdefinedasaplansponsoredbyanem-
ployer that had 100 or fewer participants in
defined benefit plans (other than multiem-
ployer plans as defined in section 414(f))
sponsored by the employer or members of
the employer’s controlled group, includ-
ing active and inactive participants and all
other individuals entitled to future bene-
fits. A small plan is permitted to have a
valuation date other than the first day of
a plan year. The selection of a valuation
date by a small plan is part of the plan’s
funding method and, thus, is permitted to
be changed only with the Commissioner’s
consent. If a plan that was using a val-
uation date that was not the first day of
the plan year is no longer eligible to use
that date because the plan is no longer a
small plan, the required change of the val-
uation date to the first day of the plan year
is treated as automatically approved and no
prior approval of the Commissioner is nec-
essary.
The proposed regulations would pro-
vide that plan assets must be valued ei-
ther at their fair market value on the val-
uation date or at the “average” value of
assets on the valuation date. Under this
average value, the value of plan assets is
set equal to the average of the fair mar-
ket value of assets on the valuation date
and the adjusted fair market value of assets
determined for one or more earlier deter-
mination dates. The proposed regulations
would provide that the period of time be-
tween the valuation date and each of the
earlier determination dates must be equal
(with a period that is not more than 12
months), and the earliest of these determi-
nation dates cannot be earlier than the last
day of the 25th month before the valuation
date of the plan year. In a typical situa-
tion, the earlier determination dates will be
the two immediately preceding valuation
dates. The proposed regulations would
provide that this average of fair market val-
ues is increased for contributions included
3
The value of plan assets under these proposed regulations isreferred to in Schedule SB of Form 5500 as “actuarial assets.”
March 3, 20084952008–9 I.R.B.

in the plan’s asset balance on the current
valuation date that were not included in the
plan’s asset balance on an earlier determi-
nation date, and reduced for benefits and
administrative expenses paid from plan as-
sets during the same period.
4
After these
adjustments, as well as the adjustments de-
scribed in the following two paragraphs,
the resulting average value must be con-
strained so that it falls between 90 and 110
percent of the fair market value of plan as-
sets.
The proposed regulations would imple-
ment the rules of section 430(g)(4) relat-
ing to the treatment of contributions for a
prior plan year that are made after the val-
uation date for the current plan year. These
rulesworkinconjunctionwiththerulesof
section 430(j)(2) in order to keep employ-
ers and plans neutralregarding the timing
of contributions that are paid after the end
of the plan year. Under section 430(j)(2),
the amount of the contribution must be ad-
justed for interest at the effective interest
rate under section 430(h)(2) in order to
take into account the delay in contributions
(including the period after the end of the
year). For this purpose, section 430(g)(4)
requires that only the present value of a
prior year contribution paid after the val-
uationdatebeincludedinplanassets,so
that the value of plan assets for the next
plan year is not inflated by reflecting a de-
layed contribution at full value. This ef-
fectively means that the present value of
the contribution is the same from the per-
spective of the employer and the plan, re-
gardless of when it is made. Because the
requirement to adjust contributions for de-
layed payment after the end of the plan
year is first effective for plan years begin-
ning in 2008 (except for certain plans with
a delayed effective date), the correspond-
ing requirement to include only the present
value of a prior year contribution paid after
the valuation date is not effective until the
second plan year for which section 430 ap-
plies to the plan. Thus, this corresponding
requirement will become effective in plan
years beginning in2009, except with re-
spect to plans for which the effective date
of section 430 is delayed.
The proposed regulations would spec-
ify the treatment of current year contri-
butions that are made before the valua-
tion date (which could only occur for small
plans with valuation dates other than the
first day of the plan year). These contribu-
tions, adjusted for interest at the effective
interest rate under section 430(h)(2) for the
plan year, must be subtracted from plan as-
sets in determining the actuarial value of
plan assets. This is similar to the pre-PPA
’06 requirement to subtract these contribu-
tions from plan assets after adjustment us-
ing the plan’s valuation interest rate.
The proposed regulations would incor-
porate the provisions of section 430(l) (in-
volving qualified transfers to health bene-
fit accounts under section 420).
IV.Section 1.430(h)(2)–1 Interest Rates
Section 1.430(h)(2)–1 would specify
the interest rates that are to be used to
determine present value and to make other
calculations under section 430. These
rates are generally based on the 24-month
moving averages of 3 separate segment
rates for the month that includes the valua-
tion date (the applicable month). The first
segment rate, which is based on the por-
tion of the corporate bond yield curve over
the period from 0 to 5 years, applies for
purposes of discounting benefits that are
expected to be paid during the 5-year pe-
riod beginning on the valuation date for a
plan year. The second segment rate, which
is based on the portion of the corporate
bond yield curve over the period between
5 and 20 years, applies for purposes of
discounting benefit payments that are ex-
pected to be paid at least 5 years after the
valuation date, but before 20 years. The
third segment rate applies to benefit pay-
ments that are expected to be paid at least
20 years after the valuation date. Thus, for
example, if a series of monthly payments
is assumed to be made beginning on the
valuation date, the second segment rate
will apply to the 61
st
such payment and the
third segment rate will apply beginning
with the 241
st
such payment.
5
Except in
the case of a new plan, a transition rule
applies for 2008 and 2009 under which
these segment rates are blended with the
long-term corporate bond rate that applies
under pre-PPA law.
The monthly corporate bond yield
curve is, with respect to any month, a yield
curve that is prescribed by the Commis-
sioner for that month based on yields for
that month on investment grade corporate
bonds with varying maturities that are
in the top three quality levels available.
Notice 2007–81, 2007–44 I.R.B. 899,
provides guidance on the monthly corpo-
rate bond yield curve and related interest
rates used to make certain computations
related to the funding requirements that
apply to single employer defined benefit
plans under section 430(h)(2), including a
description of the methodology for deter-
mining the monthly corporate bond yield
curve. See §601.601(d)(2) of this chapter.
The proposed regulations would reflect
the special interest rate for determining a
plan’s funding target in the case of airlines
that make the 10-year amortization elec-
tion described in section 402(a)(2) of PPA
’06, in accordance with section 6615 of
the U.S. Troop Readiness, Veterans’ Care,
Katrina Recovery, and Iraq Accountabil-
ity Appropriations Act, 2007, Public Law
110–28 (121 Stat. 112). The special inter-
est rate does not apply for other purposes
such as the determination of the plan’s tar-
get normal cost.
The proposed regulations describe sev-
eral elections a plan sponsor is permitted to
make in order to use an alternative interest
rate rather than the segment rates. These
elections are made by providing written
notification of the election to the plan’s
enrolled actuary. Such an election is part
of the plan’s funding method and, accord-
ingly, may only be adopted or changed
with the consent of the Commissioner. Un-
der one such election, a plan sponsor that is
using segment rates may elect the use of an
alternative month as the applicable month,
provided that the alternative month is one
of the 4 months that precede the month
that includes the valuation date for the plan
year. Under another such election, the plan
sponsor may elect not to apply the tran-
sition rule under which the segment rates
are blended with the 30-year Treasury rate
for 2008 and 2009. Under the third such
election, for purposes of determining the
minimum required contribution under sec-
tion 430 (including the determination of
4
Note that this average of fair market values is different from the calculation of average value under §1.412(c)(2)–1(b)(7). For example, the adjusted value described in the proposed regulations
does not include interest and dividends on plan assets attributable to the period between the earlier determination date and the valuation date in determining the adjusted fair market value of
assets.
5
The same interest rate timing rules apply for purposes of determining present values for purposes of section 417(e)(3).
2008–9 I.R.B.496March 3, 2008

shortfall amortization installments, waiver
amortization installments, and the present
value of those installments), the plan spon-
sor may elect to use interest rates under
the monthly corporate bond yield curve —
which is a set of spot rates for the month
preceding the valuation date rather than a
24-month moving average for that month
or an alternative applicable month — in
lieu of the segment rates. The amount
of the funding target calculated in accor-
dance with any of these elections applies
for all purposes, including determining the
adjusted funding target attainment percent-
age under section 436 and the applicable
limitations under section 404. In the case
of the first plan year to which section 430
applies to a plan (the first plan year begin-
ning in 2008 other than for a plan with a
delayed section 430 effective date), any of
these elections are treated as having been
approved by the Commissioner and do not
require the Commissioner’s specific prior
approval.
In the case of a plan sponsor that has
elected to use interest rates under the
monthly corporate bond yield curve, if
with respect to a decrement the benefit is
only expected to be paid for one-half of a
year (because the decrement was assumed
to occur in the middle of the year), the
proposed regulations would provide that
the interest rate for that year can be deter-
mined as if the benefit were being paid for
the entire year.
Under the proposed regulations, the ef-
fective interest rate determined under sec-
tion 430(h)(2)(A) is the single interest rate
that, if used to determine the present value
of the benefits taken into account in de-
termining the plan’s funding target for a
plan year, would result in an amount equal
to the plan’s funding target determined for
the plan year under section 430(d) as de-
scribed in §1.430(d)–1(b)(2) (without re-
gard to calculations for plans in at-risk sta-
tus under section 430(i)). The effective in-
terest rate is used to adjust plan contribu-
tions made on a date other than the valua-
tion date.
Under the proposed regulations, the in-
terest rates used to determine the amount
of shortfall amortization installments and
waiver amortization installments are de-
termined based on the dates those install-
ments are assumed to be paid, using the
same timing rules that apply for purposes
of determining the target normal cost.
Thus, for a plan that uses the segment
rates, the first segment rate applies to the
five shortfall amortization installments
assumedtobepaidduringthefirstfive
years beginning on the valuation date for
the plan year, and the second segment rate
applies to the two shortfall amortization
installments that are assumed to be paid
after that period.
V.Section 1.430(i)–1 Plans in At-risk
Status
The proposed regulations would pro-
vide rules and assumptions for determin-
ing the funding target and making other
computations for certain defined benefit
plans that are referred to as plans in “at-
risk” status due to their significantly under-
funded status. These rules apply to single
employer defined benefit plans (including
multiple employer plans) but do not ap-
ply to multiemployer plans. The at-risk
rules do not apply to small plans. For this
purpose, a small plan is defined as a plan
sponsored by an employer that had 500 or
fewer participants (including both active
and inactive participants) in defined bene-
fit plans (other thanmultiemployer plans)
sponsored by the employer or any member
of the employer’s controlled group on each
day during the preceding plan year.
In general, the proposed regulations
wouldprovidethataplanisinat-risk
status for a plan year if the funding target
attainment percentage (FTAP) for the pre-
ceding plan year is less than 80% (65%,
70%, and 75%, for plan years beginning
in 2008, 2009, and 2010, respectively),
6
and the at-risk FTAP for the preceding
plan year is less than 70 percent. For this
purpose, the proposed regulations would
provide that a plan’s FTAP for a plan year
is a fraction (expressed as a percentage)
determined as: (i) the value of plan as-
sets for the plan year after subtraction of
the prefunding balance and the funding
standard carryover balance under section
430(f)(4)(B)), divided by (ii) the funding
target of the plan for the plan year (de-
termined without regard to section 430(i)
and these proposed regulations). The pro-
posed regulations would provide that the
at-risk FTAP of a plan for a plan year is
determined similarly except that the de-
nominator is the at-risk funding target of
the plan for the plan year (but determined
without regard to the loading factor dis-
cussed in the following paragraph). The
proposed regulations would provide that,
in the case of a newly established plan,
this FTAP and at-risk FTAP determination
are assumed to be 100% for years before
the plan exists.
In general, in accordance with section
430(i)(1), the proposed regulations would
provide that the at-risk funding target and
the at-risk target normal cost of the plan for
the plan year are generally determined in
the same manner as for plans not in at-risk
status but using special actuarial assump-
tions. In addition, the at-risk funding tar-
get and the at-risk target normal cost are in-
creased to take into account a loading fac-
tor. In any case, the at-risk funding tar-
get and the at-risk target normal cost of
a plan for a plan year cannot be less than
the plan’s funding target and target nor-
mal cost determined without regard to the
at-risk rules. This minimum value is deter-
mined on a plan-wide (rather than a partic-
ipant-by-participant) basis.
The actuarial assumptions used to de-
termine a plan’s at-risk funding target for a
plan year are the actuarial assumptions that
are applied under section 430, with cer-
tain modifications as set forth in the pro-
posed regulations. Under these special ac-
tuarial assumptions, if an employee would
be eligible to commence an immediate dis-
tribution upon termination of employment
by the end of the plan year that begins 10
years after the end of the current plan year
(that is, the end of the 11th plan year begin-
ning with the current plan year), that em-
ployee is assumed to terminate and com-
mence an immediate distribution at the ear-
liest retirement date under the plan, or, if
later, at the end of the current plan year.
(However, the proposed regulations would
provide that this special assumption does
not apply to the extent the employee is oth-
erwise assumed to retire during the current
plan year. Thus, for example, if generally
applicable retirement assumptions would
provide for a 25% probability that an em-
ployee will retire during the current plan
year, the special retirement age assumption
6
This phase-in of the 80% rule applies solely for plan years beginning in 2008through 2010 and is not adjusted for plans described in §1.430(i)–1(f)(2)for which the effective date of section
430 is delayed.
March 3, 20084972008–9 I.R.B.

would require the plan to assume a 75%
probability that the employee will retire at
the end of the plan year.) For this purpose,
the proposed regulations would define the
earliest retirement age under the plan as
the earliest age at which a participant could
terminate employment and receive an im-
mediate distribution. In addition, the spe-
cial actuarial assumptions in the proposed
regulations would provide that all employ-
ees are assumed to elect the optional form
of benefit available under the plan at the
assumed retirement age that would result
in the highest present value of benefits.
If a plan that is in at-risk status for the
plan year has been in at-risk status for a
consecutive period of fewer than 5 plan
years, the plan’s funding target for the plan
year is determined as a blend of the fund-
ing target determined as if the plan were
not in at-risk status and the funding tar-
get determined as if the plan had been in
at-risk status for each of the previous 5
plan years. For this purpose, the funding
target determined as if the plan had been
in at-risk status for each of the previous 5
plan years is determined without applying
the loading factor if the plan has not been
in at-risk status for two of the last four plan
years. The increase in the funding target to
reflect the at-risk rules is phased in over 5
years at 20% per year. The proposed regu-
lations provide similar rules for determin-
ing the at-risk target normal cost of a plan
that has been in at-risk status for fewer than
5 consecutive plan years.
For purposes of applying the rules un-
der section 430(i), the proposed regula-
tions set forth rules for making certain cal-
culations with respect to the first plan year
to which section 430 applies to the plan.
These rules are generally the same as the
rules that apply for that plan year for pur-
poses of section 436.
There is no specialrule for determin-
ing the at-risk funding target for the plan
year preceding the plan year section 430
first applies to the plan. This is because,
for a plan to which section 430 applies be-
ginning in 2008, if the plan’s FTAP for the
preceding plan year was less than the 65%
needed to be in at-risk status (pursuant
to the transition rule described in section
430(i)(4)(B)), then the at-risk FTAP would
necessarily be below the 70% needed for
the plan to be in at-risk status (because the
at-risk funding target cannot be less than
the funding target for a plan that is not in
at-risk status). However, plans for which
the effective date of section 430 is delayed
will have to determine the at-risk funding
target for the plan year that precedes the
plan year for which section 430 is first ef-
fective with respect to the plan.
Effective/Applicability Dates
Section430generallyappliestoplan
years beginning on or after January 1,
2008. These regulations are proposed to
apply to plan years beginning on or after
January 1, 2009. However, in the case of a
plan for which the effective date of section
430 is delayed in accordance with sections
104 through 106 of the Pension Protection
Act of 2006, Public Law 109–280 (120
Stat. 780), the regulations are proposed to
apply to plan years beginning on or after
the date section 430 applies with respect
to the plan. For plan years beginning
in 2008, plans are permitted to rely on
the provisions set forth in these proposed
regulations for purposes of satisfying the
requirements of section 430.
Under the proposed regulations, any
change in a plan’s funding method that is
made for the first plan year section 430
applies to the plan and that is not inconsis-
tent with the requirements of section 430
would be treated as having been approved
by the Commissioner and would not re-
quire the Commissioner’s specific prior
approval. In addition, the Commissioner’s
specific prior approval is not required
with respect to any actuarial assumptions
that are adopted for the first plan year for
which section 430 applies to the plan and
that are not inconsistent with the require-
ments of section 430. Future guidance
will cover procedures for obtaining the
Commissioner’s approval for changes in
funding method and may provide for ad-
ditional circumstances in which automatic
approval is granted.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations. It
is hereby certified that the collection of in-
formation imposed by these proposed reg-
ulations will not have a significant eco-
nomic impact on a substantial number of
small entities. Accordingly, a regulatory
flexibility analysis is not required. The
estimated burden imposed by the collec-
tion of information contained in these pro-
posed regulations is 0.75 hours per respon-
dent. Moreover, this burden is attribut-
able to the flexibility given under the appli-
cable statutory requirements under which
a plan sponsor may make any of several
elections related to the interest rate used
for minimum funding purposes. The writ-
ten elections under these proposed regula-
tions are made by the plan sponsor upon
occasion and will require minimal time to
prepare. Pursuant to section 7805(f) of
the Code, these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and the Treasury Depart-
ment specifically request comments on
the clarity of the proposed regulations and
how they may be made easier to under-
stand. All comments will be available for
public inspection and copying. A public
hearing will be scheduled if requested in
writing by any person that timely submits
written comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in theFederal Register.
Drafting Information
The principal authors of these reg-
ulations are Lauson C. Green and
Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development ofthese regulations.
*****
2008–9 I.R.B.498March 3, 2008

Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be 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 * * *
Par. 2. Section 1.430(d)–1 is added to
read as follows:
§1.430(d)–1 Determination of target
normal cost and funding target.
(a)In general—(1)Overview.This
section sets forth rules for determining
a plan’s target normal cost and funding
target under sections 430(b) and 430(d),
including guidance relating to the appli-
cation of actuarial assumptions described
in sections 430(h)(1) and 430(h)(4). Sec-
tion 430 and this section apply to single
employer defined benefit plans (including
multiple employer plans as defined in sec-
tion 413(c)) that are subject to section 412
but do not apply to multiemployer plans
(as defined in section 414(f)). For further
guidance on actuarial assumptions, see
§1.430(h)(2)–1 (relating to interest rates)
and §§1.430(h)(3)–1 and 1.430(h)(3)–2
(relating to mortality tables). See also
§1.430(i)–1 for the determination of the
funding target and target normal cost for a
plan that is in at-risk status.
(2)Organization of regulation. Para-
graph (b) of this section sets forth defini-
tions of target normal cost and funding tar-
get. Paragraph (c) of this section provides
rules regarding which benefits are taken
into account in determining a plan’s target
normal cost and funding target. Paragraph
(d) of this section sets forth the rules re-
garding the plan provisions that are taken
into account in making these determina-
tions, and paragraph (e) of this section pro-
vides rules on which plan participants are
taken into account for this purpose. Para-
graph (f) of this section provides rules re-
lating to the actuarial assumptions and the
plan’s funding method that are used to de-
termine present values. Paragraph (g) of
this section contains effective/applicability
dates and transition rules.
(3)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) ap-
plies, the rules of section 430 and this
section are applied separately for each
employer under the plan, as if each em-
ployer maintained a separate plan. Thus,
the plan’s funding target and target nor-
mal cost are computed separately for each
employer under such a multiple employer
plan. In the case of a multiple employer
plan to which section 413(c)(4)(A) does
not apply (that is, a plan described in sec-
tion 413(c)(4)(B) that has not made the
election for section 413(c)(4)(A) to apply),
the rules of section 430 and this section
are applied as if all participants in the plan
were employed by a single employer.
(b)Definition of target normal cost,
funding target, and funding target at-
tainment percentage—(1)Target normal
cost—(i)In general. For a plan that is not
in at-risk status under section 430(i) for
the plan year, the target normal cost of the
plan for the plan year is the present value
of all benefits that have accrued or have
been earned (or that are expected to accrue
or to be earned) under the plan during the
plan year. See §1.430(i)–1(d) and (e)(2)
for the determination of target normal cost
for a plan that is in at-risk status.
(ii)Benefits accruing for a plan year.
The benefits that have been accrued or
have been earned (or that are expected to
accrue or to be earned) under a plan during
a plan year include any increase in benefits
during the plan year that is a result of any
actual or projected increase in compensa-
tion during the current plan year, even if
that increase in benefits is with respect to
benefits attributable to services performed
in a preceding plan year.
(2)Funding target.Foraplanthatis
not in at-risk status under section 430(i) for
the plan year, the funding target of the plan
for the plan year is the present value of all
benefits that have been accrued or earned
under the plan as of the first day of the plan
year. See §1.430(i)–1(c) and (e)(1) for the
determination of the funding target for a
plan that is in at-risk status.
(3)Funding target attainment per-
centage.See §1.430(i)–1(b)(3) and
§1.436–1(j)(2) for rules relating to the
determination of the funding target attain-
ment percentage under section 430(d)(2).
(c)Benefits taken into account—(1)
In general—(i)Basic rule. The bene-
fits taken into account in determining the
funding target and target normal cost un-
der paragraph (b) of this section are all
benefits earned or accrued under the plan,
including retirement-type and ancillary
benefits.
(ii)Allocation of benefits—(A)Benefits
that are based on accrued benefits.Ifthe
amount of a benefit that is expected to be
paid is a function of the accrued benefit at
the time the benefit is expected to be paid,
then the amount of the benefit that is taken
into account in the funding target is de-
termined by applying that function to the
accrued benefit as of the beginning of the
plan year and the amount of the benefit that
is taken into account in the target normal
cost is determined by applying that func-
tion to the increase in the accrued benefit
for the plan year. For example, a benefit
that is assumed to be payable at a partic-
ular early retirement age in the amount of
90% of the accrued benefit is taken into ac-
count in the funding target in the amount
of 90% of the accrued benefit as of the be-
ginning of the plan year, and that benefit is
taken into account in the target normal cost
in the amount of 90% of the increase in the
accrued benefit for the plan year.
(B)Benefits that are based on service.
If the amount of a benefit that is expected
to be paid is not a function of the accrued
benefit at the time the benefit is expected
to be paid, but is a function of the partic-
ipant’s service at that time, then the por-
tion of the benefit taken into account for
purposes of determining the funding tar-
get for a plan year is determined by apply-
ing that function to the participant’s ser-
vice as of the first day of the plan year
and the amount of the benefit that is taken
into account in the target normal cost is the
increase in that benefit for the plan year
based on the additional year of service. For
example, if a plan provides a post-retire-
ment death benefit of $500 per year of ser-
vice, then the funding target is determined
based on a death benefit of $500 multiplied
by a participant’s service at the beginning
of the year and the target normal cost is
based on the additional $500 in death ben-
efits earned for one more year of service.
(C)Other benefits. If the amount of a
benefit that is expected to be paid is nei-
ther a function of the accrued benefit at the
time the benefit is expected to be paid as
described in paragraph (c)(1)(ii)(A) of this
section nor a function of the participant’s
service at that time as described in para-
graph (c)(1)(ii)(B) of this section, then the
portion of the benefit taken into account
March 3, 20084992008–9 I.R.B.

for purposes of determining the funding
target for a plan year is based on the pro-
portion of a participant’s service as of the
first day of the plan year relative to the
service the participant will have when the
participant meets the age and service eligi-
bility requirements for the benefit, and the
portion of the benefit that is taken into ac-
count in the target normal cost is the in-
crease in the proportional benefit for the
plan year. For example, if a plan provides
a Social Security supplement for a partic-
ipant who retires after 30 years of service
that is equal to a participant’s Social Se-
curity benefit, the funding target is deter-
mined based on the participant’s Social Se-
curity benefit as of the beginning of the
plan year multiplied by a fraction, the nu-
merator of which is the participant’s ser-
vice as of the first day of the plan year and
the denominator of which is 30 years. In
such a case, the target normal cost is based
on the increase in the proportional bene-
fit taking into account one additional year
of service and any changes in the partici-
pant’s Social Security benefit.
(iii)Application of section 436 limita-
tions to funding target and target normal
cost determination. The determination of
the funding target and target normal cost
of a plan for a plan year is not permitted to
take into account any limitations or antici-
pated limitations under section 436.
(2)Payment of expenses from plan as-
sets. Plan administrative expenses paid (or
expected to be paid) from plan assets for
a plan year are not taken into account in
the determination of a plan’s target normal
cost and funding target for that plan year.
(3)Benefits provided by insurance.A
plan generally is required to reflect in
the plan’s funding target and target nor-
mal cost the liability for benefits that are
funded through insurance contracts held
by the plan, and to include in plan assets
the value of the corresponding insurance
contracts. Alternatively, in the case of
benefits that are funded through insurance
contracts purchased from an insurance
company licensed under the laws of a
State, the plan is permitted to exclude ben-
efits provided under such contracts from
the plan’s funding target and target nor-
mal cost and to exclude the corresponding
insurance contracts from plan assets, but
only to the extent that a participant’s or
beneficiary’s right to receive those benefits
is an irrevocable contractual right, based
on premiums paid to the insurance com-
pany prior to the valuation date under the
insurance contracts. Thus, for example,
in the case of a retired participant receiv-
ing benefits from an annuity contract in
pay status under which no premiums are
required on or after the valuation date, a
plan is permitted to exclude the benefits
provided by the contract from the plan’s
funding target and target normal cost, pro-
vided that the value of the contract is also
excluded from plan assets. Similarly, in
the case of an active or deferred vested
participant whose benefits are funded by
a life insurance or annuity contract under
which further premiums are required on or
after the valuation date, a plan is permitted
to exclude the benefits, if any, that would
be paid from the contract if no further
premiums were to be paid (for example, if
the contract were to go on reduced paid-up
status) from the plan’s funding target and
target normal cost, provided that the value
of the contract is excluded from plan as-
sets. A plan’s treatment of benefits funded
through insurance contracts pursuant to
this paragraph (c)(3) is part of the plan’s
funding method. Accordingly, that treat-
ment can be changed only with the consent
of the Commissioner.
(d)Plan provisions taken into account.
Except as provided in section 412(d)(2),
the determination of a plan’s funding tar-
get and target normal cost for a plan year is
based on plan provisions that are adopted
no later than the valuation date for the
plan year and that become effective during
that plan year. Section 412(d)(2) applies
for purposes of determining whether a
plan amendment is treated as having been
adopted on the first day of the plan year
(including a plan amendment adopted
within 2
1
/2months after the close of the
plan year).
(e)Plan population taken into ac-
count—(1)In general. Inmakingany
determination of the funding target or tar-
get normal cost under paragraph (b) of
this section, the plan population is deter-
mined as of the valuation date. The plan
population must include three classes of
individuals—
(i) Participants currently employed in
the service of the employer;
(ii) Participants who are retired under
the plan or who are otherwise no longer
employed in the service of the employer;
and
(iii) All other individuals currently en-
titled to benefits under the plan.
(2)Special exclusion for “rule of par-
ity” cases. Certain individuals may be ex-
cluded from the class of individuals de-
scribed in paragraph (e)(1)(ii) of this sec-
tion. The excludable individuals are those
former participants who, prior to the val-
uation date for the plan year, have termi-
nated service with the employer without
vested benefits and whose service might be
taken into account in future years because
the ‘rule of parity’ of section 411(a)(6)(D)
does not permit that service to be disre-
garded. However, if the plan’s experi-
ence as to separated employees returning
to service has been such that the exclusion
described in this paragraph (e)(2) would
be unreasonable, the exclusion would no
longer apply.
(3)Anticipated future participants.In
making any determination of the funding
target or target normal cost under para-
graph (b) of this section, the actuarial as-
sumptions and funding method used for
the plan must not anticipate the affiliation
with the plan of future participants not em-
ployed in the service of the employer on
the plan valuation date. However, any
such determination may anticipate the af-
filiation with the planof current employees
who have not yet satisfied the participation
(age and service) requirements of the plan
as of the valuation date.
(f)Actuarial assumptions and funding
method used in determination of present
value—(1)Establishment of actuarial as-
sumptions and funding method—(i)Gen-
eral rules—(A)Assumptions and method
cannot be changed for a plan year once
established. The determination of any
present value or other computation under
section 430 must be made on the basis
of actuarial assumptions and a funding
method. Actuarial assumptions estab-
lished for a plan year in accordance with
paragraph (f)(1)(ii) of this section cannot
subsequently be changed for that plan year
unless the Commissioner determines that
the assumptions that were used are un-
reasonable. Similarly, a funding method
established for a plan year in accordance
with paragraph (f)(1)(ii) of this section
cannot subsequently be changed for that
plan year unless the Commissioner deter-
mines that the use of that funding method
for that plan year is impermissible.
2008–9 I.R.B.500March 3, 2008

(B)Scope of funding method.Aplan’s
funding method includes not only the over-
all funding method used by the plan but
also each specific method of computation
used in applying the overall method. How-
ever, the choice of which actuarial assump-
tions are appropriate to the overall method
or to the specific method of computation is
not a part of the funding method.
(ii)Timing rule for establishing actu-
arial assumptions and funding method.
The actuarial assumptions and the funding
method used by a plan for a plan year must
be established not later than the due date
(with extensions) for the filing of Form
5500, “Annual Return/Report of Employee
Benefit Plan,” for that plan year (or the last
day of the 7th month after the end of the
plan year in the case of a plan not required
to file Form 5500). The filing of the first
actuarial report (Schedule SB) for a plan
year under section 6059 that reflects the
use of actuarial assumptions and a funding
method is treated as the establishment of
those assumptions and the funding method
for that plan year.
(2)Interest and mortality rates. Sec-
tion 430(h)(2) and §1.430(h)(2)–1 set forth
the interest rates, and section 430(h)(3)
and §§1.430(h)(3)–1 and 1.430(h)(3)–2 set
forth the mortality tables, that must be used
for purposes of determining any present
value under this section.
(3)Other assumptions. In the case
of actuarial assumptions other than those
specified in sections 430(h)(2), 430(h)(3),
and 430(i), each of those actuarial as-
sumptions must be reasonable (taking into
account the experience of the plan and
reasonable expectations), and the actuarial
assumptions, in combination, must offer
the plan’s enrolled actuary’s best estimate
of anticipated experience under the plan.
See paragraph (f)(4)(iii) of this section for
special rules for determining the present
value of a single sum and similar distribu-
tions.
(4)Probability of benefit payments in
single sum or other optional forms—(i)In
general. This paragraph (f)(4) provides
rules relating to the probability that bene-
fit payments will be paid as single sums or
other optional forms under a plan and the
impact of that probability on the determi-
nation of the present value of those benefit
payments under section 430.
(ii)General rules of application.Any
determination of present value or any other
computation under this section must take
into account—
(A) The probability that future benefit
payments under the plan will be made in
the form of optional forms of benefits pro-
vided under the plan (including single sum
distributions), determined on the basis of
the plan’s experience and other related as-
sumptions; and
(B) Any difference in the present value
of future benefit payments that results
from the use of actuarial assumptions in
determining benefit payments in any such
optional form of benefits that are different
from those prescribed by section 430(h).
(iii)Single sum and similar distribu-
tions—(A)Distributions using section
417(e) assumptions. In the case of a distri-
bution that is subject to section 417(e)(3)
and that is determined using the applica-
ble interest rate and applicable mortality
table under section 417(e)(3), for purposes
of applying paragraph (f)(4)(ii) of this
section, the computation of the present
value of that distribution will be treated as
having taken into account any difference
in present value that results from the use
of actuarial assumptions that are different
from those prescribed by section 430(h)
(as required under paragraph (f)(4)(ii)(B)
of this section) if the present value of the
distribution is determined in accordance
with paragraph (f)(4)(iii)(B) of this sec-
tion.
(B)Substitution of annuity form—(1)
In general. Except as otherwise provided
in this paragraph (f)(4)(iii)(B), the present
value of a distribution is determined in ac-
cordance with this paragraph (f)(4)(iii)(B)
if it is determined by valuing the annuity
that corresponds to the distribution using
special actuarial assumptions. Under these
special assumptions, for the period begin-
ning with the annuity starting date, the cur-
rent applicable mortality table under sec-
tion 417(e)(3) that would apply to a distri-
bution with an annuity starting date occur-
ring on the valuation date is substituted for
the mortality table under section 430(h)(3)
that would otherwise be used. In addition,
under these special assumptions, the valu-
ation interest rates under section 430(h)(2)
are used for this purpose for all periods (as
opposed to the interest rates under section
417(e)(3) which the plan uses to determine
the amount of the benefit).
(2)Optional application of gener-
ational mortality. In determining the
present value of a distribution under this
paragraph (f)(4)(iii)(B), if a plan uses
the generational mortality tables under
§1.430(h)(3)–1(a)(4) or §1.430(h)(3)–2,
the plan is permitted to use a 50–50
male-female blend of the annuitant mor-
tality rates under the §1.430(h)(3)–1(a)(4)
generational mortality tables in lieu of the
applicable mortality table under section
417(e)(3) that would apply to a distribu-
tion with an annuity starting date occurring
on the valuation date.
(3)Optional phase-in of section
417(e)(3) segment interest rates. In deter-
mining the present value of a distribution
under this paragraph (f)(4)(iii)(B), a plan
is permitted to make adjustments to re-
flect differences between the phase-in
of the section 430(h)(2) segment rates
under section 430(h)(2)(G) and the adjust-
ments to the segment rates under section
417(e)(3)(D)(iii).
(C)Distributions subject to section
417(e)(3) using other assumptions.Inthe
case of a distribution that is subject to sec-
tion 417(e)(3) but that is determined as the
greater of the benefit determined using the
applicable interest rate and the applicable
mortality table under section 417(e)(3) and
the benefit determined using some basis
other than the section 417(e)(3) assump-
tions, for purposes of applying paragraph
(f)(4)(ii)(B) of this section, the compu-
tation of present value must take into
account the extent to which the present
value of the distribution is greater than the
present value determined using the rules
of paragraph (f)(4)(iii)(B) of this section.
(D)Distributions subject to section
411(a)(13). In the case of an applicable
defined benefit plan described in sec-
tion 411(a)(13)(C), if the distribution is
determined under the rules of section
411(a)(13)(A), the amount of the fu-
ture distribution must be determined by
projecting the future interest credits or
equivalent amounts under the plan’s in-
terest crediting rules to the expected date
of payment using reasonable actuarial as-
sumptions.
(5)Reasonable techniques permitted.
Any reasonable technique can be used to
determine the present value of the bene-
fits expected to be paid during a plan year,
basedontheinterestratesandmortalityas-
sumptions applicable for the plan year. For
example, the present value of a monthly re-
March 3, 20085012008–9 I.R.B.

tirement annuity payable at the beginning
of each month can be determined—
(i) Using the standard actuarial approx-
imation that reflects 13/24ths of the dis-
counted expected payments for the year as
of the beginning of the year and 11/24ths of
the discounted expected payments for the
year as of the end of the year; or
(ii) By assuming that the payment is
made in the middle of the year.
(6)Approval of significant changes in
actuarial assumptions for large plans—(i)
In general. A large plan as described in
paragraph (f)(6)(ii) of this section cannot
change any actuarial assumption used to
determine the plan’s funding target for a
plan year without the approval of the Com-
missioner if the change in assumptions re-
sults in a decrease in the plan’s funding
shortfall (within the meaning of section
430(c)(4)) for the current plan year (dis-
regarding the effect on the plan’s funding
shortfall resulting from changes in interest
and mortality assumptions) that exceeds
$50,000,000, or that exceeds $5,000,000
and is 5 percent or more of the funding tar-
get of the plan before such change.
(ii)Affected plans. A plan is a large plan
as described in this paragraph (f)(6)(ii)
if—
(A) The plan is a defined benefit plan
(other than a multiemployer plan) to which
Title IV of the Employee Retirement In-
come Security Act of 1974 (ERISA) ap-
plies; and
(B) The aggregate unfunded vested
benefits used to determine premiums for
the plan year (as determined under section
4006(a)(3)(E)(iii) of ERISA) of the plan
and all other plans maintained by the con-
tributing sponsors (as defined in section
4001(a)(13)ofERISA)andmembersof
such sponsors’ controlled groups (as de-
fined in section 4001(a)(14) of ERISA)
which are covered by Title IV (disregard-
ing multiemployer plans and disregarding
plans with no unfunded vested benefits)
exceed $50,000,000.
(7)Examples. The following examples
illustrate the rules of this section. Un-
less otherwise indicated, these examples
are based on the following assumptions:
the normal retirement age is 65, the plan
is subject to section 430 starting in 2008,
the plan year is the calendar year, and the
valuation date is January 1. The examples
read as follows:
Example 1. (i) Plan P provides an accrued benefit
equal to 1.0% of a participant’s highest 3-year aver-
age compensation for each year of service. Plan P
provides that an early retirement benefit can be re-
ceived at age 60 equal to the participant’s accrued
benefit reduced by 0.5% per month for early com-
mencement. On January 1, 2008, Participant A is age
60 and has 12 years of past service. Participant A’s
compensation for the years 2005 through 2007 was
$47,000, $50,000, and $52,000, respectively. Partici-
pant A’s rate of compensation at December 31, 2007,
is $54,000 and A’s rate of compensation for 2008 is
assumed not to increase at any point during 2008.
(ii) Participant A’s annual accrued benefit as of
January 1, 2008, is $5,960 [0.01 x 12 x ($47,000 +
$50,000 + $52,000)/3]. Participant A’s expected ben-
efit accrual for 2008 is $800 [0.01 x 13 x ($50,000 +
$52,000 + $54,000)/3 - $5,960].
(iii) The early retirement benefit, with respect to
the decrement at age 60, that is taken into account
when determining the 2008 funding target is $4,172
[$5,960 accrued benefit x (1–0.005 x 60 months)].
The annual accrual of the early retirement benefit,
with respect to the decrement at age 60, that is taken
into account when determining the 2008 target nor-
mal cost is $560 [$800 annual accrual x (1–0.005 x
60 months)].
(iv) The early retirement benefit, with respect
to the decrement at age 61, that is taken into ac-
count when determining the 2008 funding target is
$4,529.60 [$5,960 accrued benefit x (1–0.005 x 48
months)]. The annual accrual of the early retirement
benefit, with respect to the decrement at age 61, that
is taken into account when determining the 2008
target normal cost is $608[$800 annual accrual x
(1–0.005 x 48 months)].
Example 2. (i)ThefactsarethesameasinEx-
ample 1. In addition, the plan offers a $500 tempo-
rary monthly supplement to participants who com-
plete 15 years of service and retire from active em-
ployment after attaining age 60. The temporary sup-
plement is available for retirements occurring at ages
60 and 61, and is payable until the participant turns
age 62. In addition, the supplement is limited so
that it does not exceed the participant’s social secu-
rity benefit payable at age 62. On January 1, 2008,
Participant B is age 55 and has 20 years of past ser-
vice, and Participant C is age 60 and has 14 years of
past service. For Participants B and C, the projected
social security benefit is greater than $500 per month.
(ii) For Participant B, the allocable portion of the
annual temporary supplement that is taken into ac-
count when determining the funding target for 2008
is $4,800, which applies for the decrement at age 60
until age 62 [($500 x 12 months) x 20 years of past
service / 25 years of service at eligibility for the sup-
plement]. This same dollar amount will apply for the
assumed decrement at age 60 or age 61, but the pe-
riod of time the amount will be paid is different for
those two decrements.
(iii) For Participant C, the allocable portion of the
annual temporary supplement that is taken into ac-
count when determining the funding target for 2008
is $5,600, which is payable for the decrement at age
61 until age 62 [($500 x 12 months) x 14 years of past
service / 15 years of service at eligibility for the sup-
plement].
Example 3.(i) The facts are the same as inExam-
ple 1. In addition, the plan provides a disability ben-
efit to participants who become disabled after com-
pleting 15 years of service. The disability benefit is
payable at normal retirement age. For purposes of
calculating the disability benefit, service continues to
accrue until normal retirement age (unless recovery
or retirement occurs earlier). Further, compensation
is deemed to continue to normal retirement age at the
same rate as when the disability began.
(ii) Participant A will be eligible for the disability
benefit at age 63 when he will have 15 years of ser-
vice. Participant A’s projected annual disability ben-
efit at normal retirement age is $9,180 (that is, 1%
of highest 3-year average compensation of $54,000
multiplied by 17 years of deemed service at normal
retirement age).
(iii) The allocable portion of the disability benefit
that is taken into account when determining the 2008
funding target with respect to the disability decre-
ments occurring at age 63 and later is $7,344 [$9,180
x (12 years of past service / 15 years of service at el-
igibility for disability benefits)].
(iv) The disability benefit accrual that is taken
into account when determining the 2008 target nor-
mal cost with respect to the disability decrements oc-
curring at age 63 and later is $612 [$9,180 x (1 year
of deemed service / 15 years of service at eligibility
for disability benefits)].
Example 4.(i) Retiree D, a participant in Plan
P, is a male age 72 and is receiving a $100 monthly
straight life annuity. The 2008 actuarial valuation
is performed using the segment rates applicable for
September 2007 (determined without regard to the
transitional rule of section 430(h)(2)(G)), and the
2008 annuitant and nonannuitant (male and female)
mortality tables (published in §1.430(h)(3)–1).
(ii) The present value of Retiree D’s straight life
annuity on the valuation date is $10,624. This is equal
to the sum of: $5,005, which is the present value of
payments expected to be made during the first 5 years,
using the first segment interest rate of 5.26%; $5,431,
which is the present value of payments expected to
be made during the next 15 years, using the second
segment interest rate of 5.82%; and $188, which is
the present value of payments expected to be made
after 20 years, using the third segment interest rate of
6.38%.
Example 5.(i) The facts are same as inExam-
ple 4, except Plan P does not provide for early retire-
ment benefits or single sum distributions. The actu-
ary assumes that no participants terminate employ-
ment prior to age 50 (other than by death), there is a
5% probability of withdrawal at age 50, and that those
participants who do withdraw receive a deferred an-
nuity starting at age 65. Participant E is a male age 46
on January 1, 2008, and has an annual accrued bene-
fit of $23,000 beginning at age 65.
(ii) After taking into account the 5% probability
of withdrawal, the funding target associated with Par-
ticipant E’s assumed age 50 withdrawal benefit in the
2008 actuarial valuation is $3,573.69. This is equal
to the sum of: $363.55, which is the present value
of payments expected to be made during the year the
participant turns age 65 (the 20
th
year after the valu-
ation date), using the secondsegment interest rate of
5.82%; and $3,210.14, which is the present value of
payments expected to be made after the 20
th
year, us-
ing the third segment interest rate of 6.38%.
Example 6. (i) The facts are the same as inExam-
ple 5, except the plan offers a single sum distribution
2008–9 I.R.B.502March 3, 2008

payable at normal retirement age (age 65) determined
based on the applicable interest rate and the applica-
ble mortality table under section 417(e)(3). The ac-
tuary assumes that 70% of the participants will elect
a single sum upon retirement and the remaining 30%
will elect a straight life annuity.
(ii) After taking into account the 5% probability
of withdrawal, the portion of the 2008 funding tar-
get that is attributable to Participant E’s assumed sin-
gle sum payment, deferred to age 65, is $2,564.86.
This is calculated in the same manner as the present
value of annuity payments, except that the 2008 ap-
plicable mortality rates are substituted for the 2008
male annuitant mortality rates. This portion of the
2008 funding target is equal to the sum of: $254.63,
which is the present value of annuity payments ex-
pected to be made between age 65 and 66 (during
the 20
th
year after the valuation date), using the sec-
ond segment interest rate of 5.82%; and $2,310.23,
which is the present value of annuity payments ex-
pected to be made after the 20
th
year following the
valuation date, using the third segment interest rate
of 6.38%. These present value amounts reflect the
2008 male nonannuitant mortality rates prior to the
assumed commencement of benefits at age 65, the
100% probability of retiring at age 65, and the 70%
probability that E will elect a single sum distribution.
(iii) After taking into account the 5% probability
of withdrawal, the portion of the 2008 funding target
that is attributable to Participant E’s assumed straight
life annuity, deferred to age 65, is equal to 30% of the
result obtained inExample 5.
Example 7. (i) The facts are the same as inExam-
ple 6, except the plan offers an immediate single sum
upon withdrawal at age 50 determined based on the
applicable interest rate and the applicable mortality
table under section 417(e)(3). The actuary assumes
that 70% of the participants will elect to receive a sin-
gle sum distribution upon withdrawal.
(ii) After taking into account the 5% probabil-
ity of withdrawal, the portion of the 2008 funding
target that is attributable to Participant E’s assumed
single sum payment is $2,523.03. This is calculated
in the same manner as the present value of annuity
payments, except that the 2008 applicable mortality
rates are substituted for the 2008 male annuitant and
nonannuitant mortality rates after the annuity starting
date. This portion of the 2008 funding target is equal
to the sum of: $250.48, which is the present value
of annuity payments expected to be made between
age 65 and 66 (during the 20
th
year after the valua-
tion date), using the second segment interest rate at
an interest rate of 5.82%; and $2,272.55, which is
the present value of annuity payments expected to
be made after the 20
th
year following the valuation
date, using the third segment interest rate of 6.38%.
These present value amounts reflect the 2008 male
nonannuitant mortality rates prior to the assumed sin-
gle sum distribution age of 50, and the 70% probabil-
ity that E will elect a single sum distribution.
Example 8.(i) The facts are the same as inExam-
ple 5, except that the plan sponsor elects under section
430(h)(2)(D)(ii) to use the monthly corporate bond
yield curve instead of segment rates. The enrolled ac-
tuary assumes payments are made monthly through-
out the year and uses the interest rate from the middle
of the monthly corporate bond yield curve because
this mid-year yield rate most closely matches the av-
erage timing of benefits paid. Solely for purposes of
this example, assume that the monthly yield curve de-
rived from the August 2007 data is applicable (even
though the plan would actually have to use the yield
curve derived from the December 2007 data).
(ii) After taking into account the 5% probabil-
ity of withdrawal, the funding target associated with
Participant E’s assumed age 50 withdrawal benefit in
the 2008 actuarial valuation is $3,359.69. This re-
flects the sum of each year’s expected payments, dis-
counted at the yield rates described in paragraph (i)
of thisExample 8, as shown below:
Age
Discount periodYield ratePresent value
6519.5
6.47%
$322.75
66
20.5
6.49%
298.51
67
21.56.51%275.62
68 and overVariesVaries2,462.81
Total
$3,359.69
Example 9. (i) Plan F is a cash balance plan that
permits an immediate payment of a single sum equal
to
the participant’s hypothetical account balance upon
termination of employment. Plan terms provide that
the hypothetical account is credited with interest at
t
he 3rd segment rate. In the 2008 actuarial valua-
tion, the enrolled actuary assumes that the hypotheti-
cal account balances will increase with annual inter-
e
st credits of 5.0% until the participant commences
receiving his or her benefit, that all participants will
retire on the first day of the plan year in which they
a
ttain age 65 (that is, no participant will terminate em-
ployment prior to age 65 other than by death), and that
100% of participants will elect a single sum upon re-
tirement. The 2008 actuarial valuation is performed
using the 24-month average segment rates applica-
ble for September 2007 (determined without regard
to the transitional rule of section 430(h)(2)(G)), and
the separate annuitant and non-annuitant mortality ta-
bles under §1.430(h)(3)–1 for 2008 for periods prior
to commencement of benefits (however, the annui-
tant mortality table is never used because the only as-
sumed payment is a single sum). No mortality table is
required for the period after commencement of ben-
efits because the single sum payment is equal to the
account balance. Participant F is a male age 61 on
January 1, 2008, and has a hypothetical account bal-
ance equal to $150,000 on that date.
(ii) Participant F’s hypothetical account balance
projected to January 1, 2012 (the plan year in which F
attains age 65) is $182,326 based on the assumed an-
nual interest crediting rate of 5%. The 2008 funding
target attributable to Participant F’s benefit at age 65
is $145,905, which is calculated by discounting the
pr
ojected hypothetical account balance of $182,326
using the first segment rate of 5.26% and the male
non-annuitant mortality rates.
(i
ii) In contrast, if the enrolled actuary assumes
that the hypothetical account balances increase with
annual interest credits of 6.0%, the 2008 funding tar-
g
et attributable to Participant F’s benefit at age 65
is $151,544 calculated by discounting the projected
hypothetical account balance of $189,372 using the
f
irst segment rate of 5.26% and the male non-annui-
tant mortality rates.
(g)Effective/applicability dates and
transition rules—(1)In general. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
For plan years beginning in 2008, plans
are permitted to rely on the provisions set
forth in this section for purposes of satis-
fying the requirements of section 430.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
the Pension Protection Act of 2006, Public
Law 109–280 (120 Stat. 780), this section
applies to plan years beginning on or after
the date section 430 applies with respect to
the plan.
(3)Approval for changes in funding
method. Any change in a plan’s fund-
ing method that is made for the first plan
year for which section 430 applies to the
plan and that is not inconsistent with the
requirements of section 430 is treated as
having been approved by the Commis-
sioner and does not require the Commis-
sioner’s specific prior approval.
(4)Approval for changes in actuarial
assumptions. The Commissioner’s spe-
cific prior approval is not required with re-
spect to any actuarial assumptions that are
adopted for the first plan year for which
section 430 applies to the plan and that are
not inconsistent with the requirements of
section 430.
Par. 3. Section1.430(g)–1isaddedto
read as follows:
March 3, 20085032008–9 I.R.B.

§1.430(g)–1 Valuation date and valuation
of plan assets.
(a)In general—(1)Overview. This sec-
tion provides rules relatingtoaplan’svalu-
ation date and the valuation of a plan’s as-
sets for a plan year under section 430(g).
Section 430 and this section apply to single
employer defined benefit plans (including
multiple employer plans as defined in sec-
tion 413(c)) that are subject to the rules of
section 412, but do not apply to multiem-
ployer plans (as defined in section 414(f)).
Paragraph (b) of this section describes val-
uation date rules. Paragraph (c) of this
section describes rules regarding the de-
termination of the asset value for purposes
of a plan’s actuarial valuation. Paragraph
(d) of this section contains rules for tak-
ing employer contributions into account in
the determination of the value of plan as-
sets. Paragraph (e) of this section contains
an example. Paragraph (f) of this section
sets forth effective/applicability dates and
transition rules.
(2)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) applies,
the rules of section 430 and this section
are applied separately for each employer
under the plan as if each employer main-
tained a separate plan. Thus, in such a
case, the value of plan assets is determined
separately for each employer under the
plan. In the case of a multiple employer
plan to which section 413(c)(4)(A) does
not apply (that is, a plan described in sec-
tion 413(c)(4)(B) that has not made the
election for section 413(c)(4)(A) to apply),
the rules of section 430 and this section
are applied as if all participants in the plan
were employed by a single employer.
(b)Valuation date—(1)In general.The
determination of the funding target, target
normal cost, and asset value of a plan for a
plan year is made as of the valuation date
of the plan for that plan year. Except as
provided in paragraph (b)(2) of this sec-
tion, the valuation date of a plan for any
plan year is the first day of the plan year.
(2)Exception for small plans—(i)In
general. If, on each day during the pre-
ceding plan year, a plan had 100 or fewer
participants (including active and inactive
participants and all other individuals enti-
tled to future benefits), the plan may desig-
nate any day during the plan year as its val-
uation date for that plan year and succeed-
ing plan years. For purposes of this para-
graph (b)(2)(i), all defined benefit plans
(other than multiemployer plans as defined
in section 414(f)) maintained by an em-
ployer are treated as one plan, but only par-
ticipants with respect to that employer or
that employer’s controlled group members
are taken into account.
(ii)Employer determination. For pur-
poses of this paragraph (b)(2), the em-
ployer includes all members of the em-
ployer’s controlled group determined pur-
suant to sections 414(b), (c), (m), and (o).
(iii)Application of exception in first
plan year. In the case of the first plan year
of any plan, the exception for small plans
under paragraph (b)(2)(i) of this section is
applied by taking into account the number
of participants that the plan is reasonably
expected to have on each day during the
first plan year.
(iv)Valuation date is part of funding
method. The selection of a plan’s valuation
date is part of the plan’s funding method
and, accordingly, may only be changed
with the consent of the Commissioner. The
change of a plan’s valuation date that is re-
quired by section 430 is treated as having
been approved by the Commissioner and
does not require the Commissioner’s prior
specific approval.
(c)Determination of asset value—(1)
In general—(i)General use of fair mar-
ket value. Except as provided in this para-
graph (c), the value of plan assets for pur-
poses of section 430 is equal to the fair
market value of plan assets on the valua-
tion date. Prior year contributions made
after the valuation date and current year
contributions made before the valuation
date are taken into account to the extent
provided in paragraph (d) of this section.
(ii)Fair market value. The fair market
value of an asset is determined as the price
at which the asset would change hands be-
tween a willing buyer and a willing seller,
neither being under any compulsion to buy
or sell and both having reasonable knowl-
edge of relevant facts. The Commissioner
may, in guidance of general applicability,
issue guidance on the valuation of insur-
ance contracts. See §601.601(d)(2) of this
chapter.
(2)Averaging of fair market values—(i)
In general. Subject to the plan asset cor-
ridor rules of paragraph (c)(2)(iii) of this
section, a plan is permitted to determine
the value of plan assets on the valuation
date as the average of the fair market value
of assets on the valuation date and the ad-
justed fair market value of assets deter-
mined for one or more earlier determina-
tion dates using the method described in
this paragraph (c)(2). The period of time
between the valuation date and each of the
earlier determination dates must be equal
and that period of time cannot exceed 12
months. In addition, the earliest such de-
termination date cannot be earlier than the
last day of the 25th month before the valu-
ation date of the plan year. In a typical sit-
uation, the earlier determination dates will
be the two immediately preceding valua-
tion dates. The method of determining the
value of assets is part of the plan’s fund-
ing method and, accordingly, may only be
changed with the consent of the Commis-
sioner.
(ii)Adjusted fair market value.Thead-
justed fair market value of plan assets for a
prior determination date is the fair market
value of plan assets on that date, increased
for contributions included in the plan’s as-
set balance on the current valuation date
that were not included in the plan’s asset
balance on the earlier determination date,
and reduced for benefits and administra-
tive expenses paid from plan assets during
thesameperiod.
(iii)Restriction to 90–110 percent cor-
ridor—(A)Asset value less than 90 per-
cent of fair market value.Ifthevalue
of plan assets determined under paragraph
(c)(2)(i) of this section is less than 90 per-
cent of the fair market value of plan assets
on the valuation date, then the value of plan
assets under this paragraph (c)(2) is equal
to 90 percent of the fair market value of
plan assets.
(B)Asset value greater than 110 per-
cent of fair market value.Ifthevalue
of plan assets determined under paragraph
(c)(2)(i) of this section is greater than 110
percent of the fair market value of plan as-
sets on the valuation date, then the value
of plan assets under this paragraph (c)(2)
is equal to 110 percent of the fair market
value of plan assets.
(3)Qualified transfers to health benefit
accounts. In the case of a qualified transfer
(as defined in section 420), any assets so
transferred are not treated as plan assets for
purposes of section 430 and this section.
(d)Accounting for contribution re-
ceipts—(1)Prior year contributions—(i)
In general
. For purposes of determining
2008–9 I.R.B.504March 3, 2008

the value of plan assets under paragraph
(c) of this section, if an employer makes a
contribution to the plan after the valuation
date for the plan year, and the contribu-
tion is for a preceding plan year, then the
present value of the contribution deter-
mined as of that valuation date is taken
into account as an asset of the plan as
of the valuation date. For this purpose,
the present value is determined using
the effective interest rate under section
430(h)(2)(A) for the preceding plan year.
(ii)Special rule for plan years begin-
ning before plan’s first effective plan year.
Notwithstanding paragraph (d)(1)(i) of
this section, in the case of a plan’s first
effective plan year, if the plan sponsor
makes a contribution to the plan after the
valuation date for the first effective plan
year and that contribution is for a pre-
ceding plan year, then the contribution is
taken into account as a plan asset under
paragraph (d)(1)(i) of this section without
applying any present value discount.
(2)Current year contributions made be-
fore valuation date. For purposes of deter-
mining the value of plan assets under para-
graph (c) of this section, if an employer
makes a contribution for a plan year be-
fore that year’s valuation date, that con-
tribution (and any interest on the contri-
bution for the period between the contri-
bution date and the valuation date, deter-
mined using the effective interest rate un-
der section 430(h)(2)(A) for the plan year)
must be subtracted from plan assets in de-
termining the value of plan assets as of the
valuation date.
(e)Example. The following example
illustrates the application of this section:
Example.(i)Facts. All assets of Plan F are in-
vested in a trust fund, the plan year is the calendar
year, and the valuation date is January 1. The actuar-
ial value is determined by averaging fair market value
over the valuation date and the preceding two valua-
tion dates. For each plan year, all contributions for the
plan year are made during that plan year. An actuar-
ial valuation is performed as of January 1, 2019. The
fair market value of assets, the plan contributions, the
benefit payments, and other relevant items for 2017
through 2019 are as follows:
201720182019
Fairmarketvalue:Jan.1..................
$196,500$238,000$228,000
Contributions........................
$ 62,000$ 66,000
Benefitpayments.....................
$ (24,000)$ (25,000)
Expenses............................
$ (7,000)$ (7,500)
Interestanddividends.....................
$ 7,500$ 7,000
Netrealizedgains(losses).................
$ 6,000$ (8,500)
Balancingitem..........................
$ (3,000)$ (42,000)
Fairmarketvalue:Dec.31.................
$238,000$228,000
(ii)Computation of average value. The average
value as of January 1, 2019, is computed as follows:
Adjusted values201720182019
Fair market value: January 1
$196,500$238,000$228,000
Net adjustments:
Contributions
$128,000$ 66,000
Benefits Paid
$ (49,000)$ (25,000)
Expenses Paid
$ (14,500)$ (7,500)
Total..............................
$261,000$271,500$228,000
Average value as of January 1, 2019 equals:
$261,000 + $271,500 + $228,000 ÷ 3 = $253,500
(iii)Conclusion. Havingdeterminedanaverage
value as of January 1, 2019 equal to $253,500, Plan F
must confirm that this value satisfies the 90–110 per-
cent corridor rules under paragraph (c)(2)(iii) of this
section. Because 110% of $228,000 equals $250,800,
the value of Plan F’s assets under paragraph (c)(2) of
this section must be limited to $250,800 (rather than
$253,500) for this purpose. This valuation method
meets the requirements of this section.
(f)Effective/applicability dates and
transition rules—(1)In general. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
For plan years beginning in 2008, plans
are permitted to rely on the provisions set
forth in this section for purposes of satis-
fying the requirements of section 430.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
the Pension Protection Act of 2006, Public
Law 109–280 (120 Stat. 780), this section
applies to plan years beginning on or after
the date section 430 applies with respect to
the plan.
(3)First effective plan year. For pur-
poses of this section, the first effective plan
year for a plan is the first plan year to
which section 430 applies to the plan.
(4)Approval for changes in the valua-
tion date and valuation method for first ef-
fective plan year. Any change in a plan’s
valuation date or asset valuation method
that is made for the first effective plan year
and that is not inconsistent with the re-
quirements of section 430 is treated as hav-
ing been approved by the Commissioner
and does not require the Commissioner’s
specific prior approval.
Par. 4. Section 1.430(h)(2)–1 is added
to read as follows:
§1.430(h)(2)–1 Interest rates used to
determine present value.
(a)In general—(1)Overview. This sec-
tion provides rules relating to the interest
rates to be applied for a plan year under
section 430(h)(2). Section 430(h)(2) and
March 3, 20085052008–9 I.R.B.

this section apply to single employer de-
fined benefit plans (including multiple em-
ployer plans as defined in section 413(c))
that are subject to section 412 but do not
apply to multiemployer plans (as defined
in section 414(f)). Paragraph (b) of this
section describes how the segment interest
rates are used for a plan year. Paragraph
(c) of this section describes those segment
rates. Paragraph (d) of this section de-
scribes the monthly corporate bond yield
curve that is used to develop the segment
rates. Paragraph (e) of this section de-
scribes certain elections that are permitted
to be made under this section. Paragraph
(f) of this section describes other rules re-
lated to interest rates. Paragraph (g) con-
tains effective/applicability dates and tran-
sition rules.
(2)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) ap-
plies, the rules of section 430 and this
section are applied separately for each em-
ployer under the plan as if each employer
maintained a separate plan. Thus, each
employer under such a multiple employer
plan may make elections with respect to
the interest rate rules under this section
that are independent of the elections of
other employers under the plan. In the
case of a multiple employer plan to which
section 413(c)(4)(A) does not apply (that
is, a plan described in section 413(c)(4)(B)
that has not made the election for section
413(c)(4)(A) to apply), the rules of section
430 and this section are applied as if all
participants in the plan were employed by
asingleemployer.
(b)Interest rates for determining plan
liabilities—(1)In general. For purposes
of determining the target normal cost and
the funding target for any plan year, the in-
terest rates used in determining the present
value of the benefits that are included in
the target normal cost and the funding tar-
get for the plan are determined as set forth
in this paragraph (b).
(2)Benefits payable within 5 years.In
the case of benefits expected to be payable
during the 5-year period beginning on the
valuation date for the plan year, the interest
rate used in determining the present value
of the benefits that are included in the tar-
getnormalcostandthefundingtargetfor
the plan is the first segment rate with re-
spect to the applicablemonth, as described
in paragraph (c)(2)(i) of this section.
(3)Benefits payable after 5 years and
within 20 years. In the case of benefits
expected to be payable during the 15-year
period beginning after the end of the pe-
riod described in paragraph (b)(2) of this
section, the interest rate used in determin-
ing the present value of the benefits that
are included in the target normal cost and
the funding target for the plan is the second
segment rate with respect to the applicable
month, as described in paragraph (c)(2)(ii)
of this section.
(4)Benefits payable after 20 years.In
the case of benefits expected to be payable
after the period described in paragraph
(b)(3) of this section, the interest rate used
in determining the present value of the
benefits that are included in the target
normal cost and the funding target for the
plan is the third segment rate with respect
to the applicable month, as described in
paragraph (c)(2)(iii) of this section.
(5)Applicable month. Except as pro-
vided in paragraph (e) of this section, the
term “applicable month” for purposes of
this paragraph (b) means the month that in-
cludes the valuation date of the plan for the
plan year.
(6)Special rule for certain airlines—(i)
In general. Pursuant to section 6615 of
the U.S. Troop Readiness, Veterans’ Care,
Katrina Recovery, and Iraq Accountabil-
ity Appropriations Act, 2007, Public Law
110–28 (121 Stat. 112), for a plan spon-
sor that makes the election described in
section 402(a)(2) of the Pension Protec-
tion Act of 2006 (PPA ’06), Public Law
109–280 (120 Stat. 780), the interest rate
requiredtobeusedtodeterminetheplan’s
funding target for each of the 10 years un-
der that election is 8.25 percent (rather than
the segment rates otherwise described in
this paragraph (b)).
(ii)Special interest rate not applicable
for other purposes. The special interest
rate described in paragraph (b)(6)(i) of this
section does not apply for other purposes
such as the determination of the plan’s tar-
get normal cost.
(c)Segment rates—(1)Overview.This
paragraph (c) sets forth rules for deter-
mining the first, second, and third seg-
ment rates for purposes of paragraph (b)
of this section. The first, second, and
third segment rates are set forth in rev-
enue rulings, notices, or other guidance
published in the Internal Revenue Bulletin.
See §601.601(d)(2) of this chapter. See
paragraph (g)(3) of this section for a transi-
tion rule under which the definition of the
segment rates is modified for plan years
beginning in 2008 and 2009.
(2)Definition of segment rates—(i)
First segment rate. For purposes of this
section, except as provided under the
transition rule of paragraph (g)(3) of this
section, the “first segment rate” is, with
respect to any month, the single rate of
interest determined by the Commissioner
on the basis of the average of the monthly
corporate bond yield curves (described
in paragraph (d) of this section) for the
24-month period ending with the month
preceding that month, taking into account
only the first 5 years of each of those yield
curves.
(ii)Second segment rate. For purposes
of this section, except as provided under
the transition rule of paragraph (g)(3) of
this section, the “second segment rate”
is, with respect to any month, the single
rate of interest determined by the Com-
missioner on the basis of the average of
the monthly corporate bond yield curves
(described in paragraph (d) of this section)
for the 24-month period ending with the
month preceding that month, taking into
account only the portion of each of those
yield curves corresponding to the 15-year
period that follows the end of the 5-year
period described in paragraph (c)(2)(i) of
this section.
(iii)Third segment rate. For purposes
of this section, except as provided under
the transition rule of paragraph (g)(3) of
this section, the “third segment rate” is,
with respect to any month, the single rate
of interest determined by the Commis-
sioner on the basis of the average of the
monthly corporate bond yield curves (de-
scribed in paragraph (d) of this section)
for the 24-month period ending with the
month preceding that month, taking into
account only the portion of each of those
yield curves corresponding to the 40-year
period that follows the end of the 15-year
period described in paragraph (c)(2)(ii) of
this section.
(d)Monthly corporate bond yield
curve—(1)In general. For purposes of
this section, the “monthly corporate bond
yield curve” is, with respect to any month,
a yield curve that is prescribed by the
Commissioner for that month based on
yields for that month on investment grade
corporate bonds with varying maturities
2008–9 I.R.B.506March 3, 2008

that are in the top three quality levels
available.
(2)Determination and publication of
yield curve. A description of the method-
ology for determining the monthly corpo-
rate bond yield curve is provided in guid-
ance issued by the Commissioner that is
published in the Internal Revenue Bulletin.
The yield curve for a month will be set
forth in revenue rulings, notices, or other
guidance published in the Internal Rev-
enue Bulletin. See §601.601(d)(2) of this
chapter.
(e)Elections—(1)In general.This
paragraph (e) describes elections that a
plan sponsor can make to use alternative
interest rates under this section. Any elec-
tion under this section must be made by
providing written notification of the elec-
tion to the plan’s enrolled actuary. Any
election in this paragraph (e) is part of the
plan’s funding method and, accordingly,
may only be adopted or changed with the
consent of the Commissioner.
(2)Elections for alternative date.A
plan sponsor that is using segment rates
as provided under paragraph (b) of this
section may elect the use of an alterna-
tive month as the applicable month for pur-
poses of paragraph (b)(5) of this section,
provided that the alternative month is one
of the 4 months that precede the month that
includes the valuation date of the plan for
the plan year.
(3)Election not to apply transition rule.
The plan sponsor may elect not to apply the
transition rule in paragraph (g)(3) of this
section.
(4)Election to use full yield curve—(i)
In general. For purposes of determining
the minimum required contribution under
section 430, the plan sponsor may elect to
use interest rates under the monthly cor-
porate bond yield curve described in para-
graph (d) of this section for the month pre-
ceding the month that includes the valua-
tion date in lieu of the segment rates deter-
mined under paragraph (c) of this section.
These purposes include determining the
installments and present values described
in paragraph (f)(2) of this section. In order
to address the timing of benefit payments
during a year, reasonable approximations
are permitted to be used to value benefit
payments that are expected to be made dur-
ing a plan year.
(ii)Reasonable techniques permitted.
In the case of a plan sponsor using the
monthly corporate bond yield curve un-
der this paragraph (e)(4), if with respect
to a decrement the benefit is only expected
to be paid for one-half of a year (because
the decrement was assumed to occur in the
middle of the year), the interest rate for
that year can be determined as if the ben-
efit were being paid for the entire year.
See §1.430(d)–1(f)(5) for additional rea-
sonable techniques that can be used in de-
termining present value.
(5)Plan sponsor. For purposes of the
elections described in this section, any
reference to the plan sponsor generally
means the employer or employers respon-
sible for making contributions to or under
the plan. In the case of plans that are
multiple employer plans to which section
413(c)(4)(A) does not apply, any reference
to the plan sponsor means the plan ad-
ministrator within the meaning of section
414(g).
(f)Interest rates used for other pur-
poses—(1)Effective interest rate.The
effective interest rate determined under
section 430(h)(2)(A) is the single interest
rate that, if used to determine the present
value of the benefits that are taken into
account in determining the plan’s funding
target for a plan year, would result in an
amount equal to the plan’s funding target
determined for the plan year under section
430(d) as described in §1.430(d)–1(b)(2)
(without regard to calculations for plans in
at-risk status under section 430(i)).
(2)Interest rates used for determining
shortfall amortization installments and
waiver amortization installments.Thein-
terest rates used to determine the amount
of shortfall amortization installments and
waiver amortization installments and the
present value of those installments are
determined based on the dates those in-
stallments are assumed to be paid, using
the same timing rules that apply in deter-
mining target normal cost as described in
paragraph (b) of this section. Thus, for a
plan that uses the segment rates described
in paragraph (c) of this section, the first
segment rate applies to installments as-
sumed to be paid during the first five plan
years beginning on the valuation date for
the plan year, and the second segment
rate applies to installments assumed to be
paid during the subsequent 15-year period.
For purposes of this paragraph (f)(2), the
shortfall amortization installments for a
plan year are assumed to be paid on the
valuation date for that plan year. Thus, for
example, for a plan that uses the segment
rates described in paragraph (c) of this
section, the shortfall amortization install-
ment for the fifth plan year following the
current plan year (the sixth installment) is
assumedtobepaidonthevaluationdate
for that year so that such shortfall amor-
tization installment will be determined
using the second segment rate.
(g)Effective/applicability dates and
transition rules—(1)In general. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
For plan years beginning in 2008, plans
are permitted to relyon the provisions set
forth in this section for purposes of satis-
fying the requirements of section 430.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
PPA ’06, this section applies to plan years
beginning on or after the date section 430
applies with respect to the plan.
(3)Transition rule—(i)In general.
Notwithstanding the general rules for
determination of segment rates under para-
graph (c)(2) of this section, for plan years
beginning in 2008 or 2009, the first, sec-
ond, or third segment rate for a plan with
respect to any month is equal to the sum
of—
(A) The product of that rate for that
month determined without regard to this
paragraph (g)(3), multiplied by the appli-
cable percentage; and
(B) The product of the weighted aver-
age interest rate determined under the rules
of section 412(b)(5)(B)(ii)(II) (as that pro-
vision was in effect for plan years begin-
ning in 2007), multiplied by a percentage
equal to 100 percent minus the applicable
percentage.
(ii)Applicable percentage.Forpur-
poses of this paragraph (g)(3), the appli-
cable percentage is 33
1
/3percent for plan
years beginning in 2008 and 66-2/3 per-
cent for plan years beginning in 2009.
(iii)New plans ineligible.Thetransi-
tion rule of this paragraph (g)(3) does not
apply to a plan if the first plan year of the
plan begins on or after January 1, 2008.
(4)Approval to make elections in first
effective plan year. In the case of the
first plan year to which section 430 ap-
March 3, 20085072008–9 I.R.B.

plies to a plan, the plan sponsor’s elec-
tions described in paragraph (e) of this sec-
tion are treated as having been approved by
the Commissioner and do not require the
Commissioner’s specific prior approval.
Par. 5. Section 1.430(i)–1 is added to
read as follows:
§1.430(i)–1 Special rules for plans in
at-risk status.
(a)In general—(1)Overview.This
section provides special rules related to
determining the funding target and mak-
ing other computations for certain defined
benefit plans that are in at-risk status for
the plan year. Section 430(i) and this
section apply to single employer defined
benefit plans (including multiple employer
plans) but do not apply to multiemployer
plans (as defined in section 414(f)). Para-
graph (b) of this section describes rules for
determining whether a plan is in at-risk
status for a plan year, including the deter-
mination of a plan’s funding target attain-
ment percentage and at-risk funding target
attainment percentage. Paragraph (c) of
this section describes the funding target
for a plan in at-risk status. Paragraph (d)
of this section describes the target normal
cost for a plan in at-risk status. Paragraph
(e) of this section describes rules regarding
how the funding target and target normal
cost are determined for a plan that has been
inat-riskstatusforfewerthan5consec-
utive years. Paragraph (f) of this section
sets forth effective/applicability dates and
transition rules.
(2)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) applies,
the rules of section 430 and this section
are applied separately for each employer
under the plan, as if each employer main-
tained a separate plan. Thus, for example,
at-risk status is determined separately for
each employer under such a multiple em-
ployer plan. In the case of a multiple em-
ployer plan to which section 413(c)(4)(A)
does not apply (that is, a plan described
in section 413(c)(4)(B) that has not made
the election for section 413(c)(4)(A) to ap-
ply), the rules of section 430 and this sec-
tion are applied as if all participants in the
plan were employed by a single employer.
(b)Determination of at-risk status of a
plan—(1)General rule. Except as other-
wise provided in this section, a plan is in
at-risk status for a plan year if—
(i) The funding target attainment per-
centage for the preceding plan year (deter-
mined under paragraph (b)(3) of this sec-
tion) is less than 80 percent; and
(ii) The at-risk funding target attain-
ment percentage for the preceding plan
year (determined under paragraph (b)(4) of
this section) is less than 70 percent.
(2)Small plan exception. If, on each
day during the preceding plan year, a plan
had 500 or fewer participants (including
both active and inactive participants), the
plan is not treated as in at-risk status for the
plan year. For purposes of this paragraph
(b)(2), all defined benefit plans (other than
multiemployer plans as defined in section
414(f)) maintained by an employer (or
any member of the employer’s controlled
group) are treated as one plan, but only
participants with respect to that employer
or member are taken into account. For this
purpose, the rules of section 412(d)(3) and
§1.430(g)–1(b)(2)(ii) apply.
(3)Funding target attainment percent-
age. The funding target attainment per-
centage of a plan for a plan year is a frac-
tion (expressed as a percentage)—
(i)Thenumeratorofwhichisthevalue
of plan assets for the plan year after sub-
traction of the prefunding balance and the
funding standard carryover balance under
section 430(f)(4)(B)); and
(ii) The denominator of which is the
funding target of the plan for the plan
year (determined without regard to section
430(i) and this section).
(4)At-risk funding target attainment
percentage. The at-risk funding target
attainment percentage of a plan for a plan
year is a fraction (expressed as a percent-
age)—
(i)Thenumeratorofwhichisthevalue
of plan assets for the plan year after sub-
traction of the prefunding balance and the
funding standard carryover balance under
section 430(f)(4)(B); and
(ii) The denominator of which is the
at-risk funding target of the plan for the
plan year (determined under paragraph (c)
of this section, but without regard to the
loading factor imposed under paragraph
(c)(2)(ii) of this section).
(5)Special rules—(i)Special rule for
new plans. In the case of a newly es-
tablished plan, the funding target attain-
ment percentage under paragraph (b)(3)
of this section and the at-risk funding tar-
get attainment percentage under paragraph
(b)(4) of this section are assumed to be 100
percent for years before the plan exists.
Except as otherwise provided in paragraph
(b)(5)(ii) of this section, a plan that has a
predecessor plan in accordance with sec-
tion 414(a) or §1.415(f)–1(c) is not a newly
established plan under this rule.
(ii)Special rules for mergers, acquisi-
tions, and spinoffs.[Reserved]
(6)Special rule for determining at-risk
status of plans of specified automobile
manufacturers. See section 430(i)(4)(C)
for special rules for determining the at-risk
status of plans of specified automobile and
automobile parts manufacturers.
(c)Funding target for plans in at-risk
status—(1)In general. If the plan has been
in at-risk status for 5 consecutive years,
including the current plan year, then the
funding target for the plan is the at-risk
funding target determined under paragraph
(c)(2) of this section. See paragraph (e)
of this section for the determination of the
funding target where the plan is in at-risk
status for the plan year but was not in
at-risk status for one or more of the 4 pre-
ceding plan years.
(2)At risk funding target—(i)Use of
modified actuarial assumptions. Except
as provided in this paragraph (c)(2), the
at-risk funding target of the plan for the
plan year is equal to the present value of all
benefits accrued or earned under the plan
as of the beginning of the plan year, as de-
termined in accordance with §1.430(d)–1
but using the additional actuarial assump-
tions described in paragraph (c)(3) of this
section.
(ii)Funding target includes load.The
at-risk funding target is increased by the
sum of—
(A) $700 multiplied by the number of
participants in the plan (including active
participants, inactive participants, and
beneficiaries); plus
(B) Four percent of the funding target
(determined under §1.430(d)–1(b)(2) as if
the plan was not in at-risk status) of the
plan for the plan year.
(iii)Minimum amount. Notwithstand-
ing any otherwise applicable provisions of
this section, the at-risk funding target of
a plan for a plan year is not less than the
plan’s funding target for the plan year de-
termined without regard to this section.
2008–9 I.R.B.508March 3, 2008

(3)Additional actuarial assump-
tions—(i)In general. The actuarial as-
sumptions used to determine a plan’s
at-risk funding target for a plan year are
the actuarial assumptions that are applied
under section 430, with the modifications
described in this paragraph (c)(3).
(ii)Special retirement age assump-
tion—(A)Employees eligible to retire and
collect benefits within 11 years. Subject
to paragraph (c)(3)(ii)(B) of this section,
if an employee would be eligible to com-
mence an immediate distribution by the
end of the plan year that begins 10 years
after the end of the current plan year (that
is, the end of the 11th plan year beginning
with the current plan year), that employee
isassumedtocommenceanimmediate
distribution at the earliest retirement date
under the plan, or, if later, at the end of
the current plan year. The rule of this
paragraph (c)(3)(ii)(A) does not affect the
application of plan assumptions regarding
an employee’s termination of employment
prior to the employee’s earliest retirement
date.
(B)Employees otherwise assumed to
retire immediately. The special retirement
age assumption of paragraph (c)(3)(ii)(A)
of this section does not apply to an em-
ployee to the extent the employee is oth-
erwise assumed to retire during the current
plan year. Thus, for example, if generally
applicable retirement assumptions would
provide for a 25% probability that an em-
ployee will retire during the current plan
year, the special retirement age assump-
tion of paragraph (c)(3)(ii)(A) of this sec-
tion will require the plan to assume a 75%
probability that the employee will retire at
theendoftheplanyear.
(C)Definition of earliest retirement
date. For purposes of paragraph (c)(3)(ii)
of this section, a plan’s earliest retire-
ment date is the earliest date on which a
participant can commence receiving an
immediate distribution. See §1.401(a)–20,
Q&A–17(b).
(iii)Requirement to assume most valu-
able benefit. An employee who is assumed
to retire at a date determined under para-
graph (c)(3)(ii) of this section is assumed
to elect the optional form of benefit avail-
able under the plan at that date that would
result in the highest present value of bene-
fits. The plan’s actuary is permitted to use
reasonable assumptions in determining the
optional form of benefit under the plan that
would result in the highest present value of
benefits for this purpose.
(d)Target normal cost of plans in
at-risk status—(1)General rule.Ifthe
plan has been in at-risk status for 5 con-
secutive years, including the current plan
year, then the target normal cost for the
plan is the at-risk target normal cost de-
termined under paragraph (d)(2) of this
section. See paragraph (e) of this section
for the determination of the target normal
cost where the plan is in at-risk status for
the plan year but was not in at-risk status
for one or more of the 4 preceding plan
years.
(2)At-risk target normal cost—(i)Use
of modified actuarial assumptions. Except
as provided in this paragraph (d)(2), the
at-risk target normal cost of a plan for the
plan year is equal to the present value of all
benefits expected to be accrued or earned
under the plan during the plan year, as de-
termined in accordance with §1.430(d)–1
but using the additional actuarial assump-
tions described in paragraph (c)(3) of this
section.
(ii)Loading factor. The at-risk target
normal cost is increased by a loading fac-
tor equal to 4 percent of the target normal
cost determined without regard to section
430(i) and this section.
(iii)Minimum amount. The at-risk tar-
get normal cost of a plan for a plan year
is not less than the plan’s target normal
cost determined without regard to section
430(i) and this section.
(e)Transition between applicable fund-
ing targets and applicable target normal
costs—(1)Funding target. If a plan that is
in at-risk status for the plan year has been
in at-risk status for a consecutive period of
fewer than 5 plan years, the plan’s funding
target for the plan year is determined as the
sum of—
(i) The funding target determined with-
out regard to this section; plus
(ii) The phase-in percentage for the plan
year multiplied by the excess of—
(A) The at-risk funding target deter-
mined under paragraph (c)(2) of this sec-
tion (determined taking into account para-
graph (e)(4) of this section); over
(B) The funding target determined
without regard to this section.
(2)Target normal cost. If a plan that is
in at-risk status for the plan year has been
in at-risk status for a consecutive period of
fewer than 5 plan years, the plan’s target
normal cost for the plan year is determined
as the sum of—
(i) The target normal cost determined
without regard to section 430(i) and this
section; plus—
(ii) The phase-in percentage for the plan
year multiplied by the excess of—
(A) The at-risk target normal cost deter-
mined under paragraph (d)(2) of this sec-
tion (determined taking into account para-
graph (e)(4) of this section); over
(B) The target normal cost determined
without regard to section 430(i) and this
section.
(3)Phase-in percentage. For purposes
of this paragraph (e), the phase-in percent-
age is 20 percent multiplied by the number
of consecutive plan years that the plan has
been in at-risk status (including the current
plan year).
(4)Transition funding target and tar-
get normal cost determined without load.
Notwithstanding paragraph (c)(2)(ii) of
this section, if a plan has not been in at-risk
status for 2 of the last 4 plan years, the
plan’s at-risk funding target that is used
for purposes of paragraph (e)(1)(ii)(A) (to
calculate the plan’s funding target where
the plan has been in at-risk status for fewer
than 5 plan years) is determined without
regard to the load set forth in paragraph
(c)(2)(ii) of this section. Similarly, if a
plan has not been in at-risk status for 2
of the last 4 plan years, the plan’s at-risk
target normal cost that is used for purposes
of paragraph (e)(2)(ii)(A) (to calculate the
plan’s target normal cost where the plan
has been in at-risk status for fewer than 5
plan years) is determined without regard
to the load set forth in paragraph (d)(2)(ii)
of this section.
(f)Effective/applicability dates and
transition rules—(1)In general
. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
For plan years beginning in 2008, plans
are permitted to relyon the provisions set
forth in this section for purposes of satis-
fying the requirements of section 430.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
the Pension Protection Act of 2006, Public
Law 109–280 (120 Stat. 780), this section
applies to plan years beginning on or after
March 3, 20085092008–9 I.R.B.

the date section 430 applies with respect to
the plan.
(3)First effective plan year. For pur-
poses of this section, the first effective plan
year for a plan is the first plan year to
which section 430 applies.
(4)Pre-effective plan year. For pur-
poses of this section, the pre-effective plan
year for a plan is the last plan year begin-
ning before the first day of the first effec-
tive plan year. Thus, except for plans with
a delayed effective date under paragraph
(f)(2) of this section, the pre-effective plan
year for a plan is the last plan year begin-
ning before January 1, 2008.
(5)Transition rule for determining
funding target attainment percentage for
the plan’s pre-effective date plan year—(i)
In general. In the case of the plan’s
first effective plan year, the funding tar-
get attainment percentage for the plan’s
pre-effective plan year is determined as
the fraction (expressed as a percentage),
the numerator of which is the plan assets
determined under paragraph (f)(5)(ii) of
this section, and the denominator of which
is the plan’s current liability determined
pursuant to section 412(l)(7) on the valua-
tion date for the plan’s pre-effective plan
year.
(ii)General determination of value of
net plan assets—(A)In general. The value
of net plan assets for purposes of this para-
graph (f)(5)(ii) is determined under section
412(c)(2) as in effect for the plan’s pre-ef-
fective plan year, except that the value of
plan assets prior to subtracting the plan’s
funding standard account credit balance
described in paragraph (f)(5)(ii)(B) of this
section can neither be less than 90 per-
cent of the fair market value of plan as-
sets nor greater than 110 percent of the fair
market value of plan assets on the valua-
tion date for that plan year. If the value
of plan assets determined under this para-
graph (f)(5)(ii) is less than 90 percent of
the fair market value of plan assets on the
valuation date, then the value of plan as-
sets under this paragraph (f)(5)(ii) is equal
to 90 percent of the fair market value of
plan assets. If the value of plan assets de-
termined under this paragraph (f)(5)(ii) is
greater than 110 percent of the fair mar-
ket value of plan assets on the valuation
date, then the value of plan assets under
this paragraph (f)(5)(ii) is equal to 110 per-
cent of the fair market value of plan assets.
(B)Subtraction of credit balance.Ifa
plan has a funding standard account credit
balance as of the valuation date for the
plan’s pre-effective plan year, that balance
is subtracted from the net asset value de-
scribed in paragraph (f)(5)(ii)(A) of this
section as of that valuation date.
(C)Effect of funding standard carry-
over balance reduction for first effective
plan year. Notwithstanding paragraph
(f)(5)(ii)(B) of this section, if, for the first
effective plan year, the employer has made
an election to reduce some or all of the
funding standard carryover balance as of
the first day of that year in accordance
with §1.430(f)–1(e), then the present value
(determined as of the valuation date for
the pre-effective plan year using the val-
uation interest rate for that pre-effective
plan year) of the amount so reduced is
not treated as part of the funding standard
account credit balance when that balance
is subtracted from the asset value under
paragraph (f)(5)(ii)(B) of this section.
(6)Transition rule for determining
at-risk status. In the case of plan years
beginning in 2008, 2009, and 2010, para-
graph (b)(1)(i) of this section is applied by
substituting the following percentages for
‘80 percent’—
(i) 65 percent in the case of 2008;
(ii) 70 percent in the case of 2009; and
(iii) 75 percent in the case of 2010.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on December 28,
2007, 8:45 a.m., and published in the issue of the Federal
Register for December 31, 2007, 72 F.R. 74215)
Notice of Proposed
Rulemaking by
Cross-reference to Temporary
Regulations
Payments From the
Presidential Primary Matching
Payment Account
REG–149475–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9382) under Part 702, Presidential
Primary Matching Payment Account, of ti-
tle 26 of the CFR, relating to the financing
of presidential primary campaigns. The
temporary regulations amend Treasury
procedures for making payments from the
Presidential Primary Matching Payment
Account (Primary Account) to eligible
primary candidates. The text of those reg-
ulations also serves as the text for these
proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by May 14, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–149475–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–149475–07),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, tax-
payers may submit comments elec-
tronically via the Federal eRulemak-
ing Portal atwww.regulations.gov(IRS
REG–149475–07).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, Karla M. Meola, (202) 622–4930
(not a toll-free number); concerning the
submission of comments and/or to request
a public hearing, Oluwafunmilayo Taylor
of the Publications and Regulation Branch
at (202) 622–7180 (not a toll-free num-
ber).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue of
the Bulletin amend 26 CFR part 702 relat-
ing to section 9037 of the Internal Revenue
Code (Code). The temporary regulations
authorize the Treasury Department to de-
vise procedures thatensure payments from
2008–9 I.R.B.510March 3, 2008

the Primary Account are made promptly
to eligible primary candidates. The text
of the temporary regulations also serves
as the text for these proposed regulations.
The preamble to the temporary regulations
explains the amendment.
Special Analys
es
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866. Therefore, a regula-
tory assessment is not required. It has also
been determined thatsection 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regu-
lations, and because the regulation does
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
The IRS and Treasury Department specif-
ically request comments on the clarity of
the proposed rules and how they can be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing will be sched-
uled if requested in writing by any person
that timely submits written comments. If
a public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is Karla M. Meola, Office of the As-
sociate Chief Counsel (Income Tax and
Accounting), IRS. However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 702 is pro-
posed to be amended as follows:
PART 702—PRESIDENTIAL PRIMARY
MATCHING PAYMENT ACCOUNT
Paragraph 1. The authority citation for
part 702 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 702.9037–1 is revised
to read as follows:
§702.9037–1 Transfer of amounts to the
Presidential Primary Matching Payment
Account.
[The text of the proposed §702.9037–1
is the same as the text of §702.9037–1T(a)
through (b)(1) published elsewhere in this
issue of the Bulletin.]
Par. 3. Section 702.9037–2 is revised
to read as follows:
§702.9037–2 Payments from the
Presidential Primary Matching Payment
Account.
[The text of proposed §702.9037–2 is
the same as the text of §702.9037–2T(a)
through (c)(1) published elsewhere in this
issue of the Bulletin.]
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on February 11,
2008, 12:09 p.m., and published in the issue of the Federal
Register for February 14, 2008, 73 F.R. 8632)
Maximum Vehicle Values for
Use With the Special Valuation
Rules Under Regulations
Section 1.61–21(d) and (e);
Correction
Announcement 2008–15
This announcement is a correction to
Rev. Proc. 2008–13, 2008–6 I.R.B. 407,
published February 11, 2008, relating to
maximum vehicle values for use with the
special valuation rules under regulations
section 1.61–21(d) and (e).
Section 1.01 is amended by deleting
the amounts “$15,400” and “$16,700”
and by substituting therefore the amounts
“$15,000” and $15,900,” respectively.
Section 3.01 is amended by deleting
the amounts “$15,400” and “$16,700”
and by substituting therefore the amounts
“$15,000” and $15,900,” respectively.
The principal author of this announce-
ment is Don M. Parkinson of the Office of
Division Counsel/Associate Chief Coun-
sel (Tax Exempt & Government Entities).
For further information regarding this an-
nouncement, contact Don M. Parkinson at
(202) 622–6040 (not a toll-free call).
Guidance Necessary To
Facilitate Electronic Tax
Administration — Updating
of Section 7216 Regulations;
Correction
Announcement 2008–16
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations; Correction
SUMMARY: This document contains cor-
rections to final regulations (T.D. 9375,
2008–5 I.R.B. 344) that were published in
theFederal Registeron Monday, January
7, 2008 (73 FR 1058) regarding the disclo-
sure and use of tax return information by
tax return preparers.
DATES: The correction is effective Febru-
ary 13, 2008.
FOR FURTHER INFORMATION
CONTACT: Lawrence Mack, (202)
622–4940 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (T.D. 9375) that
are the subject of the correction are under
section 7216 of the Internal Revenue Code.
Need for Correction
As published, final regulations (T.D.
9375) contain errors that may prove to be
misleading and are in need of clarification.
March 3, 20085112008–9 I.R.B.

Correction of Publication
Accordingly, the publication of the final
regulations (T.D. 9375), which were the
subject of FR Doc. 08–1, is corrected as
follows:
1. On page 1058, column 3, in the
preamble, under the paragraph heading
“Background”, seventh line of the fifth
paragraph of the column, the language
“2005–52 I.R.B. 1204 (December 07,” is
corrected to read “2005–52 I.R.B. 1204
(December 7,”.
2. On page 1062, column 1, in the pre-
amble, under the paragraph heading “D.
Disclosures to Other Tax Return Prepar-
ers”, thirteenth line of the column, the
language “Service provider. The com-
mentator’s” is corrected to read “service
provider. The commentator’s”.
3. On page 1066, column 3, in the
preamble, under the paragraph heading
“H. Multiple Disclosures or Multiple
Uses Within a Single Consent Form”, fif-
teenth line of the second paragraph, the
language “Section 301–7216–3(c)(1) of
the final” is corrected to read “Section
301.7216–3(c)(1) of the final”.
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on February 12,
2008, 8:45 a.m., and published in the issue of the Federal
Register for February 13, 2008, 73 F.R. 8193)
Guidance on Qualified Tuition
Programs Under Section 529
Announcement 2008–17
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Advance Notice of Proposed
Rulemaking.
SUMMARY: This document invites com-
ments from the public regarding rules un-
der section 529 of the Internal Revenue
Code (Code) that the IRS and the Treasury
Department expect to propose in a notice
of proposed rulemaking. The rules focus
mainly on the transfer tax provisions appli-
cable to accounts (section 529 accounts) in
Qualified Tuition Programs (QTPs). It is
anticipated that these rules will generally
apply to section 529 accounts after the ef-
fective date of final regulations. All mate-
rials submitted will be available for public
inspection and copying.
DATES: Written and electronic comments
must be submitted by March 18, 2008.
ADDRESSES: Send written comments
to: Internal Revenue Service, Attn:
CC:PA:LPD:PR (REG–127127–05), room
5203, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered between the hours of
8a.m. and4p.m. toCC:PA:LPD:PR
(REG–127127–05), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitu-
tion Ave, NW, Washington, DC, or sent
electronically, via the Federal eRulemak-
ing Portal atwww.regulations.gov(IRS-
REG–127127–05).
FOR FURTHER INFORMATION
CONTACT:Concerningsub-
missions, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.govor,
(202) 622–7180; concerning rules relating
to estate, gift, and generation-skip-
ping transfer tax issues, Mary Berman,
(202) 622–3090; concerning other
proposed rules, Monice Rosenbaum, (202)
622–6070 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Prior Administrative Guidance
A Notice of Proposed Rulemaking
under section 529 was published in the
Federal Registeron August 24, 1998
(REG–106177–97, 1998–2 C.B. 344 [63
FR 45019]) (the 1998 proposed regula-
tions). Additional guidance was published
in Notice 2001–55, 2001–2 C.B. 299 and
Notice 2001–81, 2001–2 C.B. 617. No-
tice 2001–55 provides guidance regarding
the statutory restriction against invest-
ment direction. Notice 2001–81 provides
guidance on recordkeeping, reporting and
other requirements applicable to QTPs in
light of certain amendments made to sec-
tion 529 by the Economic Growth and Tax
Relief Reconciliation Act of 2001 (Public
Law 107–16, 115 Stat. 38) (EGTRRA).
See §601.601(d)(2)(ii)(b).
Although the 1998 proposed regu-
lations and these notices provide rules
regarding many issues arising under sec-
tion 529, other issues remain unresolved.
Current law regarding the transfer tax
treatment of section 529 accounts is un-
clear and in some situations imposes tax
in a manner inconsistent with generally
applicable transfer tax provisions of the
Code. In addition, current law raises the
potential for abuse of section 529 accounts
in certain situations.
Pension Protection Act of 2006
The Pension Protection Act of 2006
(Public Law 109–280, 120 Stat. 780) (the
PPA) permanently extended the EGTRRA
amendments to section 529, which pre-
viously were scheduled to expire at the
end of 2010, including the provision that
exempts from Federal income tax distribu-
tions made from section 529 accounts that
are used to pay qualified higher education
expenses (QHEEs). See section 1304(a) of
the PPA. At the same time, section 1304(b)
of the PPA enacted section 529(f). Section
529(f) provides that, notwithstanding any
other provision of section 529, the Sec-
retary shall prescribe such regulations as
may be necessary or appropriate to carry
out the purposes of section 529 and to
prevent abuse of such purposes, including
regulations under chapters 11, 12, and 13.
In discussing new section 529(f), the
Technical Explanation prepared by the
Joint Committee on Taxation provides
two examples of how present law creates
the opportunity for abuse of section 529
accounts. See Joint Committee on Tax-
ation, Technical Explanation of H.R. 4,
The “Pension Protection Act of 2006,” as
Passed by the House on July 28, 2006 and
as Considered by the Senate on August
3, 2006, (JCX–38–06), at 369. Abuse
may arise because of the ability to change
designated beneficiaries (DBs) in certain
circumstances without triggering transfer
tax. For example, taxpayers may seek to
establish and contribute to multiple ac-
counts (taking advantage of the 5-year
rule of section 529(c)(2)(B)) with different
DBs with the intention of subsequently
changing the DBs of such accounts to a
single, common beneficiary and distribut-
ing the entire amount to such beneficiary
without further transfer tax consequences.
Abuse may also arise because taxpayers
seek to use section 529 accounts as retire-
ment accounts, with all of the tax benefits
2008–9 I.R.B.512March 3, 2008

but none of the restrictions and require-
ments of qualified retirement accounts.
Potential for Abuse of Section 529
Accounts
The IRS and the Treasury Department
are aware of other situations where current
law raises the potential for abuse of section
529 accounts. For example, abuse may
also arise if a person contributes a large
sum to an account for himself or herself
and then changes the DB to a member of
hisorherfamilywhoisinthesameora
higher generation (as determined in accor-
dance with section 2651) as the contribu-
tor. The contributor’s contributions to his
or her own account would not trigger the
gift tax because an individual cannot make
a gift to himself or herself. The contributor
may claim that the subsequent change of
DB to a member of the contributor’s fam-
ily who is in the same or a higher genera-
tion avoids the gift tax under the special
transfer tax rules of section 529. Abuse
may also arise because contributions to ac-
counts are treated as completed gifts to the
DB even though the account owner (AO)
may be able to withdraw the money at his
or her discretion.
Overview of Proposed Regulations
Section 529(f) authorizes the IRS and
the Treasury Department to promulgate
regulations as needed to protect against
these and other types of abuse. Accord-
ingly, the IRS and the Treasury Depart-
ment intend to issue a notice of proposed
rulemaking to address the potential for
abuse of section 529 accounts. The no-
tice of proposed rulemaking will provide
a general anti-abuse rule that will apply
when section 529 accounts are estab-
lished or used for purposes of avoiding or
evading transfer tax or for other purposes
inconsistent with section 529. In addi-
tion, the notice of proposed rulemaking
will include rules relating to the tax treat-
ment of contributionsto and participants
in QTPs, including rules addressing the
inconsistency between section 529 and the
generally applicable income and transfer
tax provisions of the Code. The notice
of proposed rulemaking also will include
rules relating to the function and operation
of QTPs and section 529 accounts.
With some exceptions, the 1998 pro-
posed regulations will be reproposed in the
notice of proposed rulemaking. The guid-
ance published in Notice 2001–55, Notice
2001–81, and the instructions and publica-
tions related to Form 1099–Q,“Payments
From Qualified Education Programs (Un-
der Sections 529 and 530),”also will be
included in the forthcoming notice of pro-
posed rulemaking. Taxpayers and QTPs
may continue to rely on the information
provided in existing published guidance,
including any effective dates therein. See
§601.601(d)(2)(ii)(b)oftheregulations.
The IRS and the Treasury Department
anticipate that the forthcoming notice of
proposed rulemaking also will address ad-
ditional comments that have been received
with regard to certain administrative, in-
come tax, and other issues affecting QTPs
and section 529 accounts.
The IRS and the Treasury Department
anticipate that the new rules to be provided
in the notice of proposed rulemaking will
generally apply prospectively to all sec-
tion 529 accounts. Transition rules will be
provided if necessary. However, the anti-
abuse rule may be applied on a retroactive
basis pursuant to section 7805(b)(3).
The IRS and the Treasury Department
also anticipate that the notice of proposed
rulemaking may require some States (or
agencies or instrumentalities thereof) and
eligible educational institutions that have
established and maintained QTPs to make
changes to the terms and operating provi-
sions of their programs in order to ensure
that their programs remain qualified under
section 529. The forthcoming notice of
proposed rulemaking will provide a grace
period of no less than 15 months to imple-
ment most changes.
The following discussion sets forth the
rules expected to be included in the notice
of proposed rulemaking and explains the
rationale for these rules.
Explanation of Provisions
I.Anti-abuse Rule.
The IRS and the Treasury Department
are aware that the inconsistency between
the section 529 transfer tax provisions and
the generally applicable transfer tax provi-
sions of the Code create the potential for
abuse of section 529 accounts.
As described above, the Technical
Explanation accompanying new section
529(f) provides two examples in which
present law creates the opportunity for
abuse of section 529 accounts. Concern
has also been raised as to the potential for
abuse in other situations. For example,
assume that in 2007, when the gift tax
annual exclusion amount under section
2503(b) is $12,000, Grandparents wish
to give more than $1 million to Child,
free of transfer taxes. Grandparents open
section 529 accounts for each of their
10 grandchildren, naming Child the AO
of each account. Grandparents use the
5-year spread rule of section 529(c)(2)(B)
to contribute $120,000 ($60,000 from
each Grandparent) to each grandchild’s
account without triggering any gift or
generation-skipping transfer (GST) tax
liability. The earnings then accumulate
on a tax-deferred basis in the accounts
and Child may withdraw the balances at
any time. If Grandparents survive for 5
years, the account balances will not be
included in their gross estates at death.
In effect, Grandparents have transferred
$1.2 million to Child while claiming that
no transfer taxes are due and claiming to
use none of their applicable credit amount
(formerly the unified credit). As discussed
more fully below, similar concerns have
been raised where there is a change from
one AO to a new AO, thus giving the
new AO all rights to and control over the
section 529 account, including the right
to completely withdraw the entire account
for the new AO’s benefit.
The forthcoming notice of proposed
rulemaking will contain an anti-abuse
rule designed to prevent opportunities for
abuse of section 529 accounts such as
those set forth above. The anti-abuse rule
generally will deny the favorable transfer
tax treatment under section 529 if contri-
butions to those accounts are intended or
used for purposes other than providing for
the QHEEs of the DB (except to the extent
otherwise allowable under section 529 or
the corresponding regulations). The IRS
and the Treasury Department anticipate
that the anti-abuse rule will generally fol-
low the steps in the overall transaction by
focusing on the actual source of the funds
for the contribution, the person who actu-
ally contributes the cash to the section 529
account, and the person who ultimately
receives any distribution from the account.
If it is determined that the transaction, in
whole or in part, is inconsistent with the
intent of section 529 and the regulations,
March 3, 20085132008–9 I.R.B.

taxpayers will not be able to rely on the
favorable tax treatment provided in sec-
tion 529. The anti-abuse rule will include
examples such as those set forth above
that provide clear guidance to taxpayers
about the types of transactions considered
abusive.
The IRS and the Treasury Department
intend to monitor transactions involving
section 529 accounts. If concerns regard-
ing abuse continue, the IRS and the Trea-
sury Department will consider adopting
broader rules including, for example, rules
limiting the circumstances under which a
QTP may permit AOs to withdraw funds
from accounts; limiting the circumstances
under which there may be a change in
DB; and limiting the circumstances under
whichtheAOmaynameadifferentAO.
Theserulesmaybeadoptedinadditionor
as an alternative to thegeneral anti-abuse
rule.
II.Rules Relating to the Tax Treatment
of Contributions to and Participants in
Section 529 Accounts.
A.AO’s liability for any gift and/or GST
tax imposed on a taxable change of DB.
Section 529(c)(5)(B) provides that the
gift and GST tax apply to a transfer by rea-
son of a change in the DB of a section 529
account (or a rollover to the account of a
new DB) unless the new DB is both: (1)
assigned to the same or a higher genera-
tion (determined in accordance with sec-
tion 2651) as the former DB, and (2) a
member of the family of the former DB.
The statute does not identify the individ-
ual who would be liable for the gift and/or
GST tax in such a situation.
Section 1.529–5(b)(3) of the 1998 pro-
posed regulations, in accordance with the
legislative history (H.R. Rep. No. 148
at 328), provides that, if the AO changes
the DB, or directs a rollover of credits or
account balances from the account of one
beneficiary to the account of another ben-
eficiary, and if the new DB is not both a
member of the family of the former DB
and in the same or a higher generation (as
determined under section 2651) as the for-
mer DB, the change of DB by the AO
is treated as a taxable gift by the former
DB to the new DB. This result follows
from generally applicable transfer tax pro-
visions because each contribution to the
section 529 account on behalf of the for-
mer DB was treated as a completed gift to
the former DB. As a consequence, under
the 1998 proposed regulations, the former
DB is deemed to be the owner of the funds
contributed to the account and, therefore,
is the donor/transferor of the account to the
new DB.
Because the AO rather than the DB has
the power to change a beneficiary, several
comments on the 1998 proposed regula-
tions raised concerns about the imposition
of tax on the former DB. In many cases, the
DBs are minors who may not be aware of
the existence of the account for their ben-
efit.
The term “account owner” does not ap-
pear in section 529. The definition of ac-
count owner in §1.529–1(c) of the 1998
proposed regulations was included to re-
flect practices used at that time to facili-
tate the establishment of accounts for mi-
nor beneficiaries. In practice, the AO re-
tains control over the selection of the DB
and has personal access to the funds in the
account.
In order to assign the tax liability to the
party who has control over the account and
is responsible for the change of any bene-
ficiary, the forthcoming notice of proposed
rulemaking will provide that a change of
DB that results in the imposition of any
tax will be treated as a deemed distribu-
tion to the AO followed by a new gift.
Therefore, the AO will be liable for any
gift or GST tax imposed on the change of
the DB, and the AO must file gift and GST
tax returns if required. This position com-
ports with the income tax provision under
§1.529–3(c)(1) of the 1998 proposed reg-
ulations that treats a change of DB to a
new DB who is not a member of the fam-
ily of the former DB as a distribution to
the AO, provided the AO has the author-
ity to change the DB. Special rules may
be needed to address situations in which a
trust or an entity such as a bank, rather than
an individual, is the AO. The IRS and the
Treasury Department welcome comments
regarding such special rules and on pos-
sible alternative approaches to collecting
any transfer taxes due upon a change of
DB.
B.AO’s liability for tax imposed on any
withdrawal by the AO from a section 529
account for the AO’s own benefit and on a
change in AO.
Section 529(c)(3)(A) provides that, in
general, any distribution from a section
529 account is includible in the gross in-
come of the distributee in the manner pro-
vided under section 72, to the extent not
excluded from gross income under any
other provision of chapter 1 of the Code.
Section 529(c)(3)(A) does not limit the
class of potential distributees.
As discussed previously in this pream-
ble, the AO of a section 529 account is
the party with control over the account.
Concerns have been raised regarding the
potential tax consequences in situations
where the AO withdraws part or all of the
funds from the section 529 account for the
AO’s own benefit. For example, a con-
tributor might attempt to avoid gift tax by
making contributions that do not exceed
the gift tax annual exclusion amount un-
der section 2503(b) to multiple accounts
havingthesameAO.TheAOcouldthen
withdraw some or all of those funds for the
AO’s own benefit. The AO, as distribu-
tee, would claim to owe only the income
tax and a 10-percent additional tax on the
earnings portion of the withdrawal, while
the taxpayer who contributed those funds
would claim to owe no gift or GST tax.
Concerns also have been raised regard-
ing the possible tax consequences in sit-
uations where an AO transfers control of
the account to a new AO, or names him-
self or herself (or the AO’s spouse) as the
DB. The IRS and the Treasury Department
expect to develop additional rules to ad-
dress these and other similar transactions
by AOs, including (1) limiting AOs to in-
dividuals; and, (2) making the AO liable
for income tax on the entire amount of the
funds distributed for the AO’s benefit ex-
cept to the extent that the AO can sub-
stantiate that the AO made contributions
to the section 529 account and, therefore,
has an investment in the account within the
meaning of section 72. The IRS and the
Treasury Department welcome comments
on such additional rules and on any alter-
native approaches topreventing misuse by
AOs of section 529 accounts.
2008–9 I.R.B.514March 3, 2008

C.Application of transfer tax where
permissible contributors to section 529
accounts include persons other than
individuals.
Under section 529(b)(1), a QTP is a
program under which a person may pur-
chase tuition credits or certificates on be-
half of a DB which entitle the DB to the
waiver or payment of QHEEs or, in the
case of a program established and main-
tained by a State or agency or instrumen-
tality thereof, may make contributions to
an account which is established for the pur-
pose of paying the QHEEs of the DB of
the account. Section 1.529–1(c) of the
1998 proposed regulations provides that,
for purposes of section 529, the term “per-
son” has the same meaning as under sec-
tion 7701(a)(1). Section 7701(a)(1) pro-
vides that, when the term “person” is used
in the Code and not otherwise distinctly
expressed or manifestly incompatible with
the intent thereof, the term shall be con-
strued to mean and include an individual, a
trust, estate, partnership, association, com-
pany or corporation.
Since publication of the 1998 proposed
regulations, this broad definition of “per-
son” has raised questions concerning the
application of the transfer tax and, in cer-
tain situations, the income tax and the em-
ployment tax.
With respect to transfer taxes, section
529(c)(2)(A) provides that any contribu-
tion to a section 529 account on behalf
of a DB shall be treated as a completed
gift of a present interest in property to
the DB. Section 2501(a) imposes a tax
onthetransferofpropertybygiftbyan
“individual.” Under §25.2501–1(a) of the
Gift Tax Regulations, the gift tax is not
applicable to transfers by corporations or
persons other than individuals, except as
provided in §25.2511–(1)(h)(1). Section
25.2511–(1)(h)(1) provides that a transfer
of property by a corporation to an individ-
ual is a gift to the individual by the stock-
holders of the corporation. If the individ-
ual is a stockholder, the transfer is a gift to
the individual by the other stockholders to
the extent it exceeds the individual’s own
interest in such amount as a stockholder.
Because any contribution to a section
529 account is treated as a completed gift,
and because the gift tax is imposed only
on individuals, it can be argued that the
definition of “person” in section 529(b)(1)
should be limited to individuals. Never-
theless, the IRS and the Treasury Depart-
ment believe it may be possible to inter-
pret sections 529(b)(1) and 529(c)(2)(A)
consistently without limiting the class of
permissible contributors to individuals by
providing special rules for contributions
made by corporations, partnerships, es-
tates, trusts, and other entities. For exam-
ple, based on §25.2511–1(h)(1), a contri-
bution by a person other than an individual
may be treated as a separate gift by each
beneficiary, member, shareholder, partner,
etc., in an amount representing that indi-
vidual’s allocable share of the contribu-
tion.
Accordingly, the forthcoming notice of
proposed rulemaking will follow the 1998
proposed regulations in providing that the
definition of “person” as used in section
529(b)(1) will have the same meaning as
under section 7701(a)(1).
The IRS and the Treasury Department
welcome comments on whether the def-
inition of “person” in section 529(b)(1)
should be limited to individuals and on
rules necessary to ensure appropriate
transfer tax consequences in situations
where persons other than individuals make
contributions to section 529 accounts. In
addition, comments are welcome as to
whether the complexity of any special
rules would outweigh the benefit of allow-
ing non-individual contributors.
Comments are also welcome regarding
potential income tax consequences when
contributions are made by non-individuals,
such as a trust or estate, and whether the
complexity of any special rules would out-
weigh the benefit. For example, if a trust
makes contributions to a section 529 ac-
count, how should the trust treat the con-
tributions to and distributions from the ac-
count for income tax purposes? If the
trustee of the trust is the AO, would the in-
come tax treatment be the same?
The IRS and the Treasury Department
also have considered the possibility that
employers may consider funding section
529 accounts for employees’ children or
that a debtor may fund an account for the
lender’s child. Section 529 does not over-
ride (or permit avoidance of) federal taxes
otherwise applicable to payments that are
not in the nature of gifts. The IRS and the
Treasury Department believe that if such
contributions are made, all necessary pro-
cedures and reporting mechanisms must be
in place to ensure the assessment and col-
lection of all appropriate income, employ-
ment, and gift taxes. The IRS and the Trea-
sury Department welcome comments as to
whether (and how) this could be accom-
plished without undue burden.
D.Special rules apply in the case of
individuals who contribute to section
529 accounts for their own benefit and
in the case of Uniform Gifts to Minors
Act (UGMA) and Uniform Transfers
to Minors Act (UTMA) accounts that
contribute to such accounts for the benefit
of their minor beneficiaries.
The 1998 proposed regulations do not
address situations in which individuals
contribute to section 529 accounts for their
own benefit, or where UGMA and UTMA
accounts make contributions for the bene-
fit of their minor beneficiaries. (This situa-
tion should be distinguished from a section
529 account established with the program
as an UGMA or UTMA account.) The
IRS and the Treasury Department believe
guidance is needed regarding contribu-
tions by individuals for their own benefit
and by UGMA and UTMA accounts for
the benefit of their minor beneficiaries in
order to ensure consistent tax treatment
with section 529 accounts set up by per-
sons for the benefit of other DBs.
As stated in the previous paragraph,
section 2501(a) imposes a tax on the trans-
fer of property by gift by an individual.
Section 529(c)(2)(A) provides that any
contribution to a section 529 account on
behalf of any DB shall be treated as a com-
pleted gift of a present interest in property
to the DB. A contribution to a section 529
account by the contributor for the con-
tributor’s own benefit cannot be treated
as a completed gift because an individual
cannot make a transfer of property to him-
self or herself, and a transfer of property
is a fundamental requirement for a com-
pleted gift. Although there is no express
statutory intent to prohibit the funding of
a section 529 account for the contributor’s
own QHEEs, the transfer tax provisions of
section 529 do not appear to contemplate
such a result.
Minor beneficiaries of UGMA and
UTMA accounts are the beneficial owners
of the accounts. In this respect, contri-
butions to a section 529 account from an
UGMA or UTMA account would be con-
March 3, 20085152008–9 I.R.B.

sidered to be contributions to the section
529 accounts by the minor beneficiaries
for their own benefit.
The IRS and the Treasury Department
recognize that individuals may want to
save for their higher education expenses
by contributing to section 529 accounts
and that individuals might not have par-
ents or other benefactors who are able or
willing to make such contributions on their
behalf. The IRS and the Treasury Depart-
ment also acknowledge that section 529
accounts provide an efficient method for
UGMA and UTMA accounts to provide
for the higher education expenses of their
minor beneficiaries.
Accordingly, it is anticipated that the
notice of proposed rulemaking will allow
contributions to section 529 accounts by
individuals for their own benefit and by
UGMA and UTMA accounts for the bene-
fit of their minor beneficiaries. In order to
ensure consistent transfer and income tax
treatment under section 529 for these ac-
counts and accounts created by persons for
the benefit of other DBs, special rules will
apply in cases of a subsequent change of
the DB.
When contributors set up section 529
accounts naming themselves as DB (or
UGMA and UTMA accounts set up such
accounts for their minor beneficiaries) and
subsequently change the DB, the change of
DB from the contributor to any other per-
son will be deemed to be a distribution to
the contributor followed by a new contri-
bution (as described in section 529(c)(2))
of the account balance by the contributor
to a new section 529 account for the new
DB. It is anticipated that the deemed distri-
bution to the contributor, followed by the
new contribution of the account balance to
a new section 529 account for the new DB,
will be treated as a rollover (as described in
section 529(c)(3)(C)) and thus will not be
subject to income tax or the 10-percent ad-
ditional tax imposed by section 529(c)(6)
if the new DB is a member of the family of
theformerDB.Thenewcontributionby
the contributor will be treated in the same
way for transfer tax purposes as all other
contributions to section 529 accounts un-
der section 529(c)(2). If the change of DB
in these situations results in any gift and/or
GST tax, the contributor will be liable for
the tax and must file gift and/or GST tax re-
turns. However, the contributor may elect
to take advantage of the special 5-year rule
under section 529(c)(2)(B).
E.Circumstances under which the account
of a deceased DB will be distributed to,
and includible in, the gross estate of the
deceased DB for estate tax purposes.
Section 529(c)(4) provides that, with
two exceptions, no amount shall be in-
cludible in the gross estate of any individ-
ual for purposes of the estate tax by rea-
son of an interest in a section 529 account.
The exception relevant to this discussion is
for amounts distributed on account of the
death of the DB.
Under section 529(c)(4)(B), amounts
distributed on account of the death of a DB
are subject to estate tax. The legislative
history (H.R. Rep. No. 148 at 328) makes
no reference to the term “distributed” but
provides that the value of any interest in a
section 529 account will be includible in
the estate of a DB. Section 1.529–5(d)(3)
of the 1998 proposed regulations adopts
the position stated in the legislative his-
tory. This position has raised several
concerns because, under generally appli-
cable transfer tax provisions, the gross
estate of a decedent does not include prop-
erty in which the decedent has no interest,
or over which the decedent has no power
or control.
It is anticipated that the forthcoming no-
tice of proposed rulemaking will provide
the following rules regarding the tax con-
sequences arising from the death of a DB.
Rule 1. If the AO distributes the entire
section 529 account to the estate of the
deceased DB within 6 months of the death
of the DB, the value of the account will be
included in the deceased DB’s gross estate
for federal estate tax purposes.
Rule 2. If a successor DB is named in
the section 529 account contract or pro-
gram and the successor DB is a member
of the family of the deceased DB and is in
the same or a higher generation (as deter-
mined under section 2651) as the deceased
DB, the value of the account will not be in-
cluded in the gross estate of the deceased
DB for Federal estate tax purposes.
Rule 3. If no successor DB is named
in the section 529 account contract or pro-
gram, but the AO names a successor DB
who is a member of the family of the de-
ceased DB and is in the same or a higher
generation (as determined under section
2651) as the deceased DB, the value of the
account will not be included in the gross
estate of the deceased DB for Federal es-
tate tax purposes.
Rule 4. If no successor DB is named
in the section 529 account contract or pro-
gram, and the AO does not name a new
DB but instead withdraws all or part of the
value of the account, the AO will be li-
able for the income tax on the distribution,
and the value of the account will not be in-
cluded in the gross estate of the deceased
DB for federal estate tax purposes.
Rule 5. If, by the due date for filing the
deceased DB’s estate tax return, the AO
has allowed funds to remain in the section
529 account without naming a new DB, the
account will be deemed to terminate with
a distribution to the AO, and the AO will
be liable for the income tax on the distribu-
tion. The value of the account will not be
included in the gross estate of the deceased
DB for Federal estate tax purposes.
III.Rules Governing the Function and
Operation of QTPs and Section 529
Accounts
A.Rules for making the election under
section 529(c)(2)(B) to treat contributions
to a section 529 account as being made
over a 5-year period.
The IRS and the Treasury Depart-
ment have received numerous taxpayer
inquiries regarding the operation of and
the procedures for making the 5-year elec-
tion provided in section 529(c)(2)(B).
Section 529(c)(2)(B) provides that, if the
aggregate amount of contributions to a
section 529 account during the calen-
dar year by a donor exceeds the gift tax
exclusion amount for such year under
section 2503(b), the donor may elect to
have the aggregate amount taken into ac-
count, for purposes of section 2503(b),
over the 5-year period beginning in such
calendar year. The forthcoming notice of
proposed rulemaking will provide the fol-
lowing rules that clarify the circumstances
and manner in which the election may be
made.
Rule 1. The election must be made on
the lastUnited States Gift (and Genera-
tion-Skipping Transfer) Tax Return(Form
709) filed on or before the due date of
the return, including extensions actually
granted, or, if a timely return is not filed, on
2008–9 I.R.B.516March 3, 2008

the first gift tax return filed by the donor af-
ter the due date. The election, once made,
will be irrevocable, except that it may be
revoked or modified on a subsequent re-
turn that is filed on or before the due date,
including extensions actually granted.
Rule 2. The election applies to contri-
butions to a section 529 account on behalf
of a DB during a calendar year that exceed
the gift tax exclusion amount for that year
but are not in excess of five times the ex-
clusion amount for the year. Any excess
may not be taken into account ratably and
is treated as a taxable gift in the calendar
year of the contribution.
Rule 2 is illustrated by the following
examples:
Example A. Assume the contributor makes con-
tributions to a section 529 account on behalf of DB
in 2007, when the gift tax annual exclusion amount
under section 2503(b) is $12,000. If the contributor’s
aggregate contributions on behalf of DB in 2007 are
$30,000, contributor may elect to account for the gift
as 5 annual gifts of $6,000 to DB, beginning in 2007.
Assuming the gift tax annual exclusion amount re-
mains at $12,000 over the 5-year period covered by
the election, the contributor could make additional
gifts described in section 2503(b) of up to $6,000 in
each of the 5 years to the same beneficiary without
the imposition of any gift tax.
Example B. Assume the contributor makes con-
tributions to a section 529 account on behalf of DB
in 2007, when the gift tax annual exclusion amount
under section 2503(b) is $12,000. If the contribu-
tor’s aggregate contributions on behalf of DB in 2007
are $65,000, contributor may make the election under
section 529(c)(2)(B) only with respect to that portion
of the contributions that is not in excess of $60,000
(5 x $12,000). The $5,000 excess will be treated as a
taxable gift by the contributor in 2007.
Rule 3. The election may be made by a
donor and the donor’s spouse with respect
to a gift considered to be made one-half by
each spouse under section 2513.
B.Income tax issues related to section
529 accounts
The IRS and the Treasury Department
have received numerous inquiries relating
to several income tax issues that will be ad-
dressed in the forthcoming notice of pro-
posed rulemaking. The following items
are illustrative of these inquiries and the
IRS and the Treasury Department antici-
pate addressing additional income tax mat-
ters raised by comments.
The notice of proposed rulemaking will
provide formal guidance on how to recog-
nize a loss in a section 529 account. Di-
rection on this issue was first provided in
Publication 970(Tax Benefits for Educa-
tion:For Use in Preparing 2002 Returns).
Losses in section 529 accounts may be de-
ducted as miscellaneous itemized deduc-
tions subject to the 2% of adjusted gross
income limit. Taxpayers will continue to
be able to rely upon this interpretation.
Section 529 is silent regarding whether
distributions must be made from a section
529 account in the same tax year as QHEEs
were paid or incurred. Concerns have been
raised that individuals could allow the ac-
count to grow indefinitely on a tax-de-
ferred basis before requesting reimburse-
ment or use distributions in earlier years
to pay QHEEs in later years. Accord-
ingly, the IRS and the Treasury Depart-
ment propose to adopt a rule that, in order
for earnings to be excluded from income,
any distribution from a section 529 ac-
count during a calendar year must be used
to pay QHEEs during the same calendar
year or by March 31 of the following year.
The IRS and the Treasury Department wel-
come comments on rules necessary to en-
sure that distributions from section 529 ac-
counts are appropriately matched to the
payment of QHEEs.
C.Recordkeeping reguirements and
administrative procedures
The forthcoming notice of proposed
rulemaking may contain recordkeeping
requirements designed to facilitate the im-
plementation of these new rules, including
the proposed anti-abuse rule. QTPs may
be required to collect and retain, and in
some cases report to the IRS, certain infor-
mation. Programs may also need to revise
their program documents, administrative
procedures, and promotional and required
literature for AOs and DBs. The forth-
coming notice of proposed rulemaking
will provide a grace period of no less than
15 months to implement most changes.
The IRS and the Treasury Department
welcome comments regarding the infor-
mation that would be necessary to imple-
ment the proposed anti-abuse rule, includ-
ing a discussion of how to minimize the
burden on QTPs of collecting or reporting
such information.
Request for Comments
Before the notice of proposed rulemak-
ing is issued, consideration will be given
to any written comments that are submit-
ted timely (a signed original and eight (8)
copies) to the IRS. All comments will be
available for public inspection and copy-
ing.
Drafting Information
The principal authors of this ad-
vance notice of proposed rulemaking
are Mary Berman of the Office of Chief
Counsel (Passthroughs and Special
Industries) and Monice Rosenbaum of
the Office of Chief Counsel (Tax-Exempt
and Government Entities). However,
other personnel from the IRS and the
Treasury Department participated in its
development.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on January 17,
2008, 8:45 a.m., and published in the issue of the Federal
Register for January 18, 2008, 73 F.R. 3441)
March 3, 20085172008–9 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.
2008–9 I.R.B.iMarch 3, 2008

Numerical Finding List
1
Bulletins 2008–1 through 2008–9
Announcements:
2008-1, 2008-1 I.R.B.246
2008-2, 2008-3 I.R.B.307
2008-3, 2008-2 I.R.B.269
2008-4, 2008-2 I.R.B.269
2008-5, 2008-4 I.R.B.333
2008-6, 2008-5 I.R.B.378
2008-7, 2008-5 I.R.B.379
2008-8, 2008-6 I.R.B.403
2008-9, 2008-7 I.R.B.444
2008-10, 2008-7 I.R.B.445
2008-11, 2008-7 I.R.B.445
2008-12, 2008-7 I.R.B.446
2008-13, 2008-8 I.R.B.480
2008-14, 2008-8 I.R.B.481
2008-15, 2008-9 I.R.B.511
2008-16, 2008-9 I.R.B.511
2008-17, 2008-9 I.R.B.512
Notices:
2008-1, 2008-2 I.R.B.251
2008-2, 2008-2 I.R.B.252
2008-3, 2008-2 I.R.B.253
2008-4, 2008-2 I.R.B.253
2008-5, 2008-2 I.R.B.256
2008-6, 2008-3 I.R.B.275
2008-7, 2008-3 I.R.B.276
2008-8, 2008-3 I.R.B.276
2008-9, 2008-3 I.R.B.277
2008-10, 2008-3 I.R.B.277
2008-11, 2008-3 I.R.B.279
2008-12, 2008-3 I.R.B.280
2008-13, 2008-3 I.R.B.282
2008-14, 2008-4 I.R.B.310
2008-15, 2008-4 I.R.B.313
2008-16, 2008-4 I.R.B.315
2008-17, 2008-4 I.R.B.316
2008-18, 2008-5 I.R.B.363
2008-19, 2008-5 I.R.B.366
2008-20, 2008-6 I.R.B.406
2008-21, 2008-7 I.R.B.431
2008-22, 2008-8 I.R.B.465
2008-23, 2008-7 I.R.B.433
2008-24, 2008-8 I.R.B.466
2008-25, 2008-9 I.R.B.484
2008-26, 2008-9 I.R.B.487
Proposed Regulations:
REG-104713-07, 2008-6 I.R.B.409
REG-111583-07, 2008-4 I.R.B.319
REG-114126-07, 2008-6 I.R.B.410
REG-139236-07, 2008-9 I.R.B.491
Proposed Regulations— Continued:
REG-141399-07, 2008-8 I.R.B.470
REG-147832-07, 2008-8 I.R.B.472
REG-149475-07, 2008-9 I.R.B.510
Revenue Procedures:
2008-1, 2008-1 I.R.B.1
2008-2, 2008-1 I.R.B.90
2008-3, 2008-1 I.R.B.110
2008-4, 2008-1 I.R.B.121
2008-5, 2008-1 I.R.B.164
2008-6, 2008-1 I.R.B.192
2008-7, 2008-1 I.R.B.229
2008-8, 2008-1 I.R.B.233
2008-9, 2008-2 I.R.B.258
2008-10, 2008-3 I.R.B.290
2008-11, 2008-3 I.R.B.301
2008-12, 2008-5 I.R.B.368
2008-13, 2008-6 I.R.B.407
2008-14, 2008-7 I.R.B.435
2008-15, 2008-9 I.R.B.489
Revenue Rulings:
2008-1, 2008-2 I.R.B.248
2008-2, 2008-2 I.R.B.247
2008-3, 2008-2 I.R.B.249
2008-4, 2008-3 I.R.B.272
2008-5, 2008-3 I.R.B.271
2008-6, 2008-3 I.R.B.271
2008-7, 2008-7 I.R.B.419
2008-8, 2008-5 I.R.B.340
2008-9, 2008-5 I.R.B.342
Tax Conventions:
2008-8, 2008-6 I.R.B.403
Treasury Decisions:
9368, 2008-6 I.R.B.382
9369, 2008-6 I.R.B.394
9370, 2008-7 I.R.B.428
9371, 2008-8 I.R.B.447
9372, 2008-8 I.R.B.462
9373, 2008-8 I.R.B.463
9375, 2008-5 I.R.B.344
9382, 2008-9 I.R.B.482
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin
2007–52, dated December 26, 2007.
March 3, 2008ii2008–9 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–1 through 2008–9
Notices:
2001-16
Modified by
Notice 2008-20, 2008-6 I.R.B.406
2006-77
Clarified and amplified by
Notice 2008-25, 2008-9 I.R.B.484
2006-107
Modified by
Notice 2008-7, 2008-3 I.R.B.276
2007-30
Modified and superseded by
Notice 2008-14, 2008-4 I.R.B.310
2007-54
Clarified by
Notice 2008-11, 2008-3 I.R.B.279
Proposed Regulations:
REG-209020-86
Corrected by
Ann. 2008-11, 2008-7 I.R.B.445
REG-113891-07
Hearing scheduled by
Ann. 2008-4, 2008-2 I.R.B.269
Revenue Procedures:
2007-1
Superseded by
Rev. Proc. 2008-1, 2008-1 I.R.B.1
2007-2
Superseded by
Rev. Proc. 2008-2, 2008-1 I.R.B.90
2007-3
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-4
Superseded by
Rev. Proc. 2008-4, 2008-1 I.R.B.121
2007-5
Superseded by
Rev. Proc. 2008-5, 2008-1 I.R.B.164
2007-6
Superseded by
Rev. Proc. 2008-6, 2008-1 I.R.B.192
2007-7
Superseded by
Rev. Proc. 2008-7, 2008-1 I.R.B.229
Revenue Procedures— Continued:
2007-8
Superseded by
Rev. Proc. 2008-8, 2008-1 I.R.B.233
2007-39
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-52
Superseded by
Rev. Proc. 2008-9, 2008-2 I.R.B.258
2008-13
Corrected by
Ann. 2008-15, 2008-9 I.R.B.511
Revenue Rulings:
2007-4
Supplemented and superseded by
Rev. Rul. 2008-3, 2008-2 I.R.B.249
Treasury Decisions:
9362
Corrected by
Ann. 2008-9, 2008-7 I.R.B.444
Ann. 2008-12, 2008-7 I.R.B.446
9363
Corrected by
Ann. 2008-10, 2008-7 I.R.B.445
9375
Corrected by
Ann. 2008-16, 2008-9 I.R.B.511
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin 2007–52, dated December 26,
2007.
2008–9 I.R.B.iiiMarch 3, 2008

March 3, 20082008–9 I.R.B.

2008–9 I.R.B.March 3, 2008

March 3, 20082008–9 I.R.B.

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