Internal Revenue Bulletin 2010-2 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 201
0-2
January 11, 2010
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2010–1, page 248.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for January 2010.
Notice 2010–1, page 251.
This notice provides that after a Code section 338(g) or
338(h)(10) election, new target and old target are treated as
the same corporation for purposes of section 807(e)(4).
Notice 2010–2, page 251.
This notice provides additional guidance regarding the applica-
tion of section 382 of the Code and other provisions of law to
corporations whose instruments are acquired and disposed of
by the Treasury Department pursuant to the Emergency Eco-
nomic Stabilization Act of 2008, (EESA). Notice 2009–38 am-
plified and superseded.
Notice 2010–3, page 253.
This notice modifies Notice 2008–55 to extend the date by
which an initial liquidity facility may be added to support certain
auction rate preferred stock to December 31, 2010. Notice
2008–55 modified.
Notice 2010–4, page 253.
This notice provides guidance and limited penalty relief to mid-
dlemen and trustees for transition year reporting for widely
held mortgage trusts (WHMTs). The notice also provides guid-
ance on the preparation of Forms 1099 and written tax in-
formation statements and on furnishing tax information pack-
ages for certain non-mortgage widely held fixed investment
trusts (NMWHFITs). The notice also provides guidance on trust
interest holders’ (TIHs’) treatment of transition payments.
Notice 2010–5, page 256.
This notice provides for funds that otherwise qualify for the ex-
ception under sections 1.148(d)(1)(i) through (v) to guarantee
bonds in an amount equal to 500% of the cost of the assets of
the fund. The notice also solicits public comment with respect
to this change.
EXEMPT ORGANIZATIONS
Rev. Proc. 2010–9, page 258.
Determination letters and rulings.This document sets
forth procedures for issuing determination letters and rulings
on the exempt status of organizations under sections 501 and
521 of the Code. The procedures also apply to the revocation
and modification of determination letters or rulings, and pro-
vide guidance on the exhaustion of administrative remedies for
purposes of declaratory judgment under section 7428. Rev.
Proc. 2009–9 superseded.
TAX CONVENTIONS
Announcement 2010–2, page 271.
This document is a Competent Authority Agreement entered
into on October 1, 2009, by the competent authorities of the
United States of America and Germany with respect to the tax-
ation of certain consular employees under the U.S.-Germany
income tax treaty and protocol.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
Rev. Proc. 2010–11, page 269.
The purpose of this procedure is to modify the conditions es-
tablished in Rev. Proc. 80–59, 1980–2 C.B. 855, under which
a trustee of a blind trust meets the requirements of section
102(f)(3) of the Appendix to Title 5 of the United States Code
(or any successor provision of the United States Code) may ex-
ecute and file an income tax return on behalf of any individual
described in section 101(f) of the Appendix to Title 5 of the
United States Code (or any successor provision of the United
States Code) (“eligible individual”). Rev. Proc. 80–59 modified
and superseded.
January 11, 20102010–2 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.
2010–2 I.R.B.January 11, 2010

January 11, 20102010–2 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—L
ow-Income
Housing Credi
t
The adjusted a
pplicable federal short-term, mid-
term, and long
-term rates are set forth for the month
of December 20
09. See Rev. Rul. 2010-1, page 248.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of December 2009. See
Rev. Rul. 2010-1, page 248.
Section 338.—Certain
Stock Purchases Treated
as Asset Acquisitions
After a section 338 election, is new target treated
as the same corporation as old target for purposes of
section 807(e)(4). See Notice 2010-1, page 251.
Section 382.
—Limitation
on Net Opera
ting Loss
Carryforwards and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of December 2009. See Rev.
Rul. 2010-1, page 248.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 468.—
Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of December 2009. See
Rev. Rul. 2010-1, page 248.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of December 2009. See
Rev. Rul. 2010-1, page 248.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
After a section 338 election, is new target treated
as the same corporation as old target for purposes of
section 807(e)(4). See Notice 2010-1, page 251.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 1274.
—Determi-
nation of Issu
ePriceinthe
Case of Certai
n Debt Instru-
ments Issued
for Property
(Also Section
s 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807
, 846, 1288, 7520, 7872.)
Federal rates
; adjusted federal rates;
adjusted fed
eral long-term rate and the
long-term ex
empt rate.For purposes of
sections 382
, 642, 1274, 1288, and other
sections of t
he Code, tables set forth the
rates for Ja
nuary 2010.
Rev. Rul. 20
10–1
This revenu
e ruling provides various
prescribed
rates for federal income tax
purposes fo
r January 2010 (the current
month). Ta
ble 1 contains the short-term,
mid-term,
and long-term applicable fed-
eral rates
(AFR) for the current month
for purpos
es of section 1274(d) of the
Internal R
evenue Code. Table 2 contains
the short
-term, mid-term, and long-term
adjusted
applicable federal rates (ad-
justed AF
R) for the current month for
purposes
of section 1288(b). Table 3 sets
forth the
adjusted federal long-term rate
and the l
ong-term tax-exempt rate de-
scribed
in section 382(f). Table 4 contains
the appr
opriate percentages for deter-
mining t
he low-income housing credit
describ
ed in section 42(b)(1) for build-
ings pl
aced in service during the current
month.
However, under section 42(b)(2),
the app
licable percentage for non-feder-
ally su
bsidized new buildings placed in
servic
e after July 30, 2008, and before
Decem
ber 31, 2013, shall not be less than
9%. Ta
ble 5 contains the federal rate
for de
termining the present value of an
annui
ty, an interest for life or for a term
of yea
rs, or a remainder or a reversionary
inte
rest for purposes of section 7520.
Fina
lly, Table 6 contains the deemed
rate
of return for transfers made during
cale
ndar year 2010 to pooled income funds
desc
ribed in § 642(c)(5) that have been
in ex
istence for less than 3 taxable years
imm
ediately preceding the taxable year in
whi
ch the transfer was made.
2010–2 I.R.B.248January 11, 2010

REV. RUL. 2010–1 TABLE 1
Applicable Federal Rates (AFR) for January 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR
.57%.57%.57%.57%
110% AFR.63%.63%.63%.63%
120% AFR.68%.68%.68%.68%
130% AFR.74%.74%.74%.74%
Mid-term
AFR
2.45%
2.44%2.43%2.43%
110% AFR2.70%2.68%2.67%2.67%
120% AFR
2.95%
2.93%2.92%2.91%
130% AFR3.20%3.17%3.16%
3.15%
150% AFR
3.69%3.66%3.64%3.63%
175% AFR
4.32%4.27%
4.25%
4.23%
Long-term
AFR4.11%4.07%
4.05%
4.04%
110% AFR
4.53%
4.48%4.46%4.44%
120% AFR4.94%4.88%
4.85%
4.83%
130% AFR
5.36%5.29%5.26%5.23%
REV. RUL. 2010–1 TABLE 2
Adjusted AFR for January 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
.63%.63%.63%.63%
Mid-term adjusted AFR1.79%1.78%1.78%1.77%
Long-term adjusted
AFR
4.01%3.97%
3.95%
3.94%
REV. RUL. 201
0–1 TABLE 3
Rates Under S
ection 382 for January 2010
Adjusted fed
eral long-term rate for the current month
4.01%
Long-term ta
x-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long
-term rates for the current month and the prior two months.)
4.14%
January 11, 20102492010–2 I.R.B.

REV. RUL. 2010–1 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for January 2010
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.76%
Appropriate percentage for the 30% present value low-income housing credit3.32%
REV. RUL. 2010–1 TABLE 5
Rate Under Section 7520 for January 2010
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest3.0%
REV. RUL. 2010–1 TABLE 6
Deemed Rate for Transfers to New Pooled Income Funds During 2010
Deemed rate of return for transfers during 2010 to pooled income funds that have been in existence for
less than 3 taxable years4.6%
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev. Rul. 2010-1, page 248.
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of December 2009. See Rev.Rul. 2010-1, page 248.
2010–2 I.R.B.250January 11, 2010

Part III. Administrative, Procedural, and Miscellaneous
Section 807(e)(4) Exception
for § 338 Regulations
Notice 2010–1
Section 1.338–1(b)(1) of the Income
Tax Regulations provides that after an
election under § 338(g) or § 338(h)(10)
of the Internal Revenue Code, new target
is generally treated as a new corporation
unrelated to old target for purposes of sub-
title A of the Code. Section 1.338–1(b)(2)
provides exceptions for provisions in sub-
title A under which new target and old
target are treated as the same corporation.
Sections 1.338–1(b)(2)(i) through (vii)
enumerate seven such exceptions. Section
1.338–1(b)(2)(viii) authorizes the addition
of other exceptions by designation of such
in the Internal Revenue Bulletin. This
notice designates such an exception.
Section 807(e)(4)(A) provides that in
the case of a “qualified foreign contract,”
the amount of the reserve under § 807 is
not less than the minimum reserve required
by the laws, regulations, or administrative
guidance of the regulatory authority of the
foreign country in which the foreign life
insurance branch of the domestic life in-
surance company has its principal place of
business. For this purpose, § 807(e)(4)(B)
defines a “qualified foreign contract” as
a contract issued by a foreign life insur-
ance branch (which has its principal place
of business in a foreign country) of a do-
mestic life insurance company if (1) the
contract is issued on the life or health of
a resident of that country; (2) the domes-
tic life insurance company was required by
the foreign country (as of the time it be-
gan operations in the country) to operate
in the country through a branch; and (3)
the foreign country is not contiguous to the
United States.
The Internal Revenue Service and
Treasury believe it would be inappro-
priate to treat new target as a new cor-
poration unrelated to old target for pur-
poses of § 807(e)(4)(B). The fact that
§ 1.338–1(b)(1) would otherwise treat new
target as a new corporation for Federal
income tax purposes does not result in a
change in the terms of the contracts that
are qualified foreign contracts within the
meaning of § 807(e)(4)(B), nor does it
alter the requirements of the regulatory
authority of the foreign country that were
in effect when old target’s foreign life
insurance branch began operations in that
country.Cf. § 1.338–1(b)(2)(vii) (treat-
ing new target and old target as the same
corporation for purposes of electing to
use an insurance company’s historical loss
payment pattern to compute discounted
unpaid losses).
Accordingly, pursuant to the authority
of § 1.338–1(b)(2)(viii), for purposes of
§ 807(e)(4), new target and old target,
within the meaning of § 1.338–2(c)(17),
are treated as the same corporation.
This notice is effective for qualified
stock purchases occurringonorafterDe-
cember 10, 2009. In addition, taxpayers
mayelecttoapplythisnoticetoanyqual-
ified stock purchase with respect to which
the election under § 338(g) or § 338(h)(10)
is due on or after such date by treating new
target and old target as the same corpora-
tion for purposes of § 807(e)(4).
The principal author of this notice is
Jean Brenner of the Office of Associate
Chief Counsel (Corporate). For further
information regarding this notice, contact
Ms. Brenner at (202) 622–4732 (not a
toll-free call).
Application of Section 382
to Corporations Whose
Instruments are Acquired
andDisposedofbythe
Treasury Department Under
Certain Programs Pursuant
to the Emergency Economic
Stabilization Act of 2008
Notice 2010–2
This notice provides additional guid-
ance regarding the application of section
382 of the Internal Revenue Code and
other provisions of law to corporations
whose instruments are acquired and dis-
posed of by the Treasury Department
pursuant to the Emergency Economic
Stabilization Act of 2008, P.L. 110–343
(EESA). This notice amplifies and super-
sedes Notice 2009–38, 2009–18 I.R.B.
901, to provide additional guidance.
I. PURPOSE
The Internal RevenueService (Service)
and Treasury Department (Treasury) in-
tend to issue regulations implementing cer-
tain of the rules as described below. Pend-
ing the issuance of further guidance, tax-
payersmayrelyontherulessetforthin
this notice to the extent provided herein.
Section 101(a)(1) of EESA authorizes
the Secretary to establish the Troubled
Asset Relief Program (TARP). Section
102(a) of EESA authorizes the Secretary
to also establish a program to guarantee
troubled assets. This notice provides guid-
ance to corporate issuers with respect to
Treasury’s acquisition of instruments pur-
suant to the following EESA programs:
(i) the Capital Purchase Program for pub-
licly-traded issuers (Public CPP); (ii) the
Capital Purchase Program for private
issuers (Private CPP); (iii) the Capital Pur-
chase Program for S corporations (S Corp
CPP); (iv) the Targeted Investment Pro-
gram (TARP TIP); (v) the Asset Guarantee
Program; (vi) the Systemically Signifi-
cant Failing Institutions Program; (vii) the
Automotive Industry Financing Program;
and (viii) the Capital Assistance Program
for publicly-traded issuers (TARP CAP).
Unless otherwise specified below, a refer-
ence to “the Programs” shall include any
of the various EESA programs described
in the preceding sentence.
II. BACKGROUND
Section 382(a) of the Internal Revenue
Code (Code) provides that the taxable in-
come of a loss corporation for a year fol-
lowing an ownership change may be off-
set by pre-change losses only to the extent
of the section 382 limitation for such year.
An ownership change occurs with respect
to a corporation if it is a loss corporation
on a testing date and, immediately after
the close of the testing date, the percent-
age of stock of the corporation owned by
one or more 5-percent shareholders has in-
creased by more than 50 percentage points
over the lowest percentage of stock of such
corporation owned bysuch shareholders at
anytimeduringthetestingperiod. See
section 1.382–2T(a)(1) of the Income Tax
Regulations. Section 382(m) of the Code
provides that the Secretary shall prescribe
January 11, 20102512010–2 I.R.B.

such regulations as may be necessary or
appropriate to carry out the purposes of
sections 382 and 383. Section 7805(a) of
the Code provides that except where such
authority is expressly given to any person
other than an officer or employee of Trea-
sury, the Secretary shall prescribe all need-
ful rules and regulations for the enforce-
ment of Title 26, including all rules and
regulations as may be necessary by reason
of any alteration of law in relation to inter-
nal revenue.
Section 101(c)(5) of EESA provides
that the Secretary is authorized to issue
such regulations and other guidance as
may be necessary or appropriate to carry
out the purposes of EESA.
Except as otherwise provided, any def-
initions and terms used in this notice have
the same meaning as they do in section 382
of the Code (and the regulations thereun-
der) or in EESA, as applicable. Unless oth-
erwise specified, a reference to “section” is
to the particular section of the Code or reg-
ulations.
III. GUIDANCE REGARDING
CORPORATIONS WHOSE
INSTRUMENTS ARE ACQUIRED BY
TREASURY PURSUANT TO EESA
Taxpayersmayrelyontherulesde-
scribed in this Section III to the extent pro-
vided below.
RULES:
A.Characterization of instruments
(other than warrants) issued to Treasury.
Any instrument issued to Treasury pur-
suant to any of the Programs except TARP
CAP, whether owned by Treasury or sub-
sequent holders, shall be treated for all
Federal income tax purposes as an instru-
ment of indebtedness if denominated as
such, and as stock described in section
1504(a)(4) if denominated as preferred
stock. No instrument so denominated
shall be treated as stock for purposes of
section 382 while held by Treasury or by
other holders, except that preferred stock
describedinsection1504(a)(4)willbe
treated as stock for purposes of section
382(e)(1). In the case of any instrument
issued to Treasury pursuant to TARP CAP,
the appropriate classification of such in-
strument shall be determined by applying
general principles of Federal tax law.
B.Characterization of warrants issued
to Treasury. For all Federal income tax
purposes, any warrant to purchase stock
issued to Treasury pursuant to any of the
Programs except Private CPP and S Corp
CPP, whether owned by Treasury or sub-
sequent holders, shall be treated as an
option (and not as stock). While held by
Treasury, such warrant will not be deemed
exercised under section 1.382–4(d)(2).
For all Federal income tax purposes, any
warrant to purchase stock issued to Trea-
sury pursuant to the Private CPP shall
be treated as an ownership interest in the
underlying stock, which shall be treated
as preferred stock described in section
1504(a)(4). For all Federal income tax
purposes, any warrant issued to Treasury
pursuant to the S Corp CPP shall be treated
as an ownership interest in the underlying
indebtedness.
C.Value-for-value exchange.Forall
Federal income tax purposes, any amount
received by an issuer in exchange for in-
struments issued to Treasury under the
Programs shall be treated as received, in
its entirety, as consideration for such in-
struments.
D.Section 382 treatment of stock ac-
quired by and redeemed from Treasury.
For purposes of section 382, with respect
to any stock (other than preferred stock
described in section 1504(a)(4)) issued to
Treasury pursuant to the Programs (either
directly or upon the exercise of a warrant),
the ownership represented by such stock
on any date on which it is held by Trea-
sury shall not be considered to have caused
Treasury’s ownership in the issuing cor-
poration to have increased over its low-
est percentage owned on any earlier date.
Except as provided in the following sen-
tence, such stock is considered outstanding
for purposes of determining the percentage
of stock owned by other 5-percent share-
holders on any testing date. For purposes
of measuring shifts in ownership by any
5-percent shareholder on any testing date
occurring on or afterthe date on which an
issuing corporation redeems stock held by
Treasury that had been issued to Treasury
pursuant to the Programs (either directly or
upon the exercise of a warrant), the stock
so redeemed shall be treated as if it had
never been outstanding.
E.Section 382 treatment of stock sold
by Treasury to public shareholders.If
Treasury sells stock that was issued to it
pursuant to the Programs (either directly
or upon the exercise of a warrant) and the
sale creates a publicgroup (“New Public
Group”), the New Public Group’s owner-
ship in the issuing corporation shall not
be considered to have increased solely
as a result of such a sale. A New Pub-
lic Group’s ownership shall be treated as
having increased to the extent the New
Public Group increases its ownership pur-
suant to any transaction other than a sale
of stock by Treasury, including pursuant
to a stock issuance described in section
1.382–3(j)(2) or a redemption (see sec-
tion 1.382–2T(j)(2)(iii)(C)). Such stock is
considered outstanding for purposes of de-
termining the percentage of stock owned
by other 5-percent shareholders on any
testing date, and section 382 (and the reg-
ulations thereunder) shall otherwise apply
to the New Public Group in the same man-
ner as with respect to other public groups.
F.Section 382(l)(1) not applicable with
respect to capital contributions made by
Treasury pursuant to the Programs.For
purposes of section 382(l)(1), any capital
contribution made by Treasury pursuant to
the Programs shall not be considered to
have been made as part of a plan a principal
purpose of which was to avoid or increase
any section 382 limitation.
G.Certain exchanges. Paragraphs (C),
(D), (E), and (F), but not paragraphs (A)
and (B), of this notice apply to “Covered
Instruments” as though such instruments
were issued directly to Treasury under the
Programs. For purposes of this notice, the
term “Covered Instrument” means any in-
strumentacquiredbyTreasuryinexchange
for an instrument that was issued to Trea-
sury under the Programs. In addition, the
term also includes any instrument acquired
by Treasury in exchange for a Covered In-
strument. General principles of Federal
tax law determine the characterization of
all Covered Instruments.
IV. RELIANCE ON NOTICE
Taxpayers may rely on the rules de-
scribed in Section III of this notice. These
rules will continue to apply unless and un-
til there is additional guidance. Any future
contrary guidance will not apply to any in-
strument (i) issued to Treasury pursuant to
the Programs, or acquired by Treasury in
an exchange described in Section III(G) of
this notice, prior to the publication of that
2010–2 I.R.B.252January 11, 2010

guidance, or (ii) issued to Treasury pur-
suant to the Programs, or acquired by Trea-
sury in an exchange described in Section
III(G) of this notice, under a binding con-
tract entered into prior to the publication
of that guidance. In exercising its author-
ity under EESA in this notice, Treasury
and the Service intend no implication re-
garding the Federal income tax results that
would obtain with respect to instruments
that are not specifically described in this
notice. Accordingly,the Federal income
tax consequences of instruments not de-
scribed in this notice continue to be deter-
mined based upon the application of gen-
eral principles of Federal tax law to the
specific facts and circumstances of each
case.
V. EFFECT ON OTHER DOCUMENTS
This notice amplifies and supersedes
Notice 2009–38, 2009–18 I.R.B. 901.
DRAFTING INFORMATION
The principal author of this notice is
Rubin B. Ranat of the Office of Associate
Chief Counsel (Corporate). For further
information regarding this notice, contact
Rubin B. Ranat at (202) 622–7530 (not a
toll-free call).
Auction Rate Preferred
Stock—Extension of Date for
Addition of a Liquidity Facility
Notice 2010–3
This notice modifies Notice 2008–55,
2008–27 I.R.B. 11 (July 7, 2008), to
extend the date by which an initial liq-
uidity facility may be added to support
certain auction rate preferred stock from
December 31, 2009 to December 31, 2010.
SECTION 1. Background
In Notice 2008–55, the Internal Rev-
enue Service (IRS) provided guidance re-
garding the effect of adding certain liq-
uidity facilities to support certain auction
rate preferred stock on the equity charac-
ter of the stock for Federal income tax pur-
poses. In Notice 2008–55, the IRS con-
firmed that the IRS will not challenge the
equity characterization of the auction rate
preferred stock as a result of adding a liq-
uidity facility agreement if certain require-
ments are satisfied. Among other require-
ments under Notice 2008–55, the auction
rate preferred stock must have been out-
standing on February 12, 2008, or issued
after that date to refinance, directly or indi-
rectly, auction rate preferred stock that was
outstanding on that date. In addition, the
liquidity facility must be an initial liquid-
ity facility with respect to the auction rate
preferred stock that is entered into on or
before December 31, 2009, or a liquidity
facility that renews, replaces, or extends
such an initial liquidity facility, either di-
rectly or in a series of liquidity facilities.
SECTION 2. Scope and Application
This notice extends the time period
during which an initial liquidity facility
can be entered into under § 3.2 of Notice
2008–55 from December 31, 2009 until
December 31, 2010.
SECTION 3. Effect on Other Guidance
This notice modifies Notice 2008–55.
SECTION 4. Drafting Information
The principal author of this notice is
Alfred C. Bishop of the Office of Associate
Chief Counsel (Corporate). For further
information regarding this notice, please
contact Mr. Bishop at (202) 622–7930.
WHFIT Transition Guidance
Notice 2010–4
SECTION I: PURPOSE
This notice provides guidance to
trustees, middlemen and trust interest
holders (TIHs) of widely held fixed in-
vestment trusts (WHFITs) regarding the
WHFIT reporting rules in § 1.671–5 of
the Income Tax Regulations. Specifically,
this notice provides (1) guidance on
transition payments (as defined in Section
III below) and limited penalty relief
for trustees and middlemen required to
file Forms 1099 and furnish written tax
information statements under the widely
held mortgage trust (WHMT) safe harbor
in § 1.671–5(g); (2) guidance regarding
the TIHs’ treatment of the transition
payments; (3) guidance regarding the
inclusion of WHFIT interest, dividend,
and miscellaneous income in the summary
totals on Forms 1099; (4) guidance
regarding the format of the written tax
information statement provided to TIHs
under § 1.671–5(e); and (5) guidance
regarding the obligations of trustees and
middlemen with respect to reporting under
the WHFIT rules for certain non-mortgage
WHFITs (NMWHFITs).
SECTION II: BACKGROUND
Section 1.671–5 provides the WHFIT
reporting rules.A WHFIT is an
arrangement classified as a trust under
§ 301.7701–4(c), provided that: (i) the
trust is a United States person under
§ 7701(a)(30)(E); (ii) the beneficial
owners of the trust are treated as owners
under subpart E, part I, subchapter J,
chapter 1 of the Code; and (iii) at least one
interest in the trust is held by a middleman.
See § 1.671–5(b)(22). A WHMT is a
WHFIT, the assets of which consist only of
mortgages, regular interests in a REMIC,
interests in another WHMT, reasonably
required reserve funds, amounts received
with respect to these assets, and during
a brief initial funding period, cash and
short-term contracts to purchase these
assets. See § 1.671–5(b)(23).
Trustees of fixed investment trusts
frequently do not know the identities of
the beneficial owners of the trust inter-
ests because the trust interests are of-
ten held in the name of a middleman.
Thus, trustees are unable to communicate
tax information directly to the benefi-
cial owners of the trust interests. The
WHFIT reporting rules in § 1.671–5
provide rules that specifically require the
sharing of tax information among trustees,
middlemen, and beneficial owners of
the trust interests. To accomplish this,
§ 1.671–5 generally requires trustees to
make trust tax information available to
middlemen. Sections 1.671–5(d) and (e)
require middlemen, and in some cases,
trustees, to file a Form 1099 with the IRS
and to furnish a written tax information
statement to a TIH for the trust interests
that the trustee or middleman holds on
behalf of, or for the account of, the TIH.
Section 1.671–5(n) provides that the
WHFIT reporting rules are applicable
January 1, 2007. The preamble to the
January 11, 20102532010–2 I.R.B.

final regulations under § 1.671–5 (T.D.
9308, 2007–1 C.B. 523 [71 FR 78351]
(December 29, 2006)) informed trustees
and middlemen that the IRS would not
impose any penalties that would otherwise
apply as a result of a failure to comply with
the WHFIT reporting rules with respect
to the 2007 calendar year in cases where
the trustee or middleman was unable to
change its information reporting systems
to comply with the WHFIT reporting
rules. In September of 2008, the IRS and
the Treasury Department issued Notice
2008–77, 2008–40 I.R.B. 814, which
informed trustees and middlemen of
WHFITs that the IRS would not assert
penalties as a result of a failure to comply
with the WHFIT reporting rules with
respect to calendar year 2008.
ExceptasprovidedinSectionIIIbelow,
trustees and middlemen must comply with
the WHFIT reporting rules for calendar
year 2009.
SECTION III: TRANSITION
PAYMENTS AND LIMITED PENALTY
RELIEF FOR TRUSTEES AND
MIDDLEMEN REPORTING UNDER
THE WHMT SAFE HARBOR
The WHMT safe harbor in § 1.671–5(g)
provides safe harbor reporting rules for
trustees of certain WHMTs. If a trustee
reports WHMT itemsin accordance with
the safe harbor, the information provided
by a middleman or trustee with respect
to WHMT items on the Forms 1099 re-
quired to be filed with the IRS and on
the written tax information statement fur-
nished to the TIH must be determined as
provided in § 1.671–5(g)(2). For the pur-
pose of determining the timing of when
an item of trust income that is attributable
to a TIH is included on the Form 1099
filed for that TIH, the WHMT safe har-
bor looks to the record date for the pay-
ment rather than the actual payment date.
See § 1.671–5(g)(2)(ii). Further, the regu-
lations require that a TIH be provided with
information regarding the amount of the
gross income and separately provided with
information regarding the amount of the
expenses of a WHMT that are attributable
to the TIH. See § 1.671–5(g)(1)(iii)(C).
Prior to the effective date of the
WHFIT reporting rules, many trustees
and middlemen reported income from a
WHMT to a beneficial owner based on
payment dates and amounts rather than
based on record dates and amounts as
required under the WHMT safe harbor.
As a result, when a trustee or middleman
transitions to the new reporting rules,
some income might not be reported to
the IRS on Forms 1099 and some income
and expense information may not be
furnished to TIHs. These omissions could
occur where the record date for a payment
falls in a year prior to the first year of
reporting under the WHMT safe harbor
and the payment date falls in the first
year of reporting under the safe harbor.
For example, income received by many
WHMTs for December 2008 and payable
to record holders as of December 31, 2008,
was paid on January 15, 2009. The
income and expenses which relate to
the December 31
st
record date and
January 15
th
payment date were not
included on the Form 1099 or written tax
information statement for 2008 under the
reporting method used by the trustees and
middlemen for 2008 if the trustees and
middlemen were reporting based on the
payment date, which occurred in 2009.
If the trustees or middlemen transition to
the WHMT safe harbor for 2009, absent
the rules contained in this Section III, the
income and expenses also would not be
included by trustees and middlemen in
calculating trust income for 2009 under
the safe harbor because they would be
reporting based on the record date, which
occurred in 2008.
To address this problem, trustees and
middlemen must report as provided in this
Section III in the first year that the trustee
or middleman transitions from reporting
based on payment dates to reporting based
on record dates under the WHMT safe
harbor. For purposes of this notice, a
Transition Payment is any payment (gross
income less applicable expenses) that has
(1) a payment date in the first year that
the trustee or middleman transitions to
reporting under § 1.671–5(g)(2) of the
WHMT safe harbor (“transition year”);
and (2) a record date in a year prior to the
transition year. Trustees and middlemen
that are transitioning to reporting under the
WHMT safe harbor must include informa-
tion with respect to Transition Payments
on Forms 1099 filed with the IRS for the
transition year, if information for these
payments has not previously been in-
cluded on a Form 1099 for a prior year.
Additionally, the trustee or middleman
must include information with respect to
Transition Payments in the written tax
information statement furnished to the
TIH for the transition year. Although
§ 1.671–5(g)(1)(iii)(C) requires middle-
men and trustees reporting under the
WHMT safe harbor to provide TIHs with
information regarding gross income and
separately provide information regarding
the expenses of the WHMT attributable to
the TIH, trustees and middlemen may re-
port net amounts with respect to Transition
Payments. The trustee or middleman need
not separately identify the information
with respect to the Transition Payments
on the Form 1099 or on the written tax
information statement.
Trustees and middlemen also must
provide the TIH with a statement that ex-
plains that (i) the WHFIT is transitioning
from reporting based on payment dates
to reporting based on record dates to
comply with the newly applicable WHFIT
reporting rules; (ii) to effect this transition,
the information reported on the statement
and to the IRS includes information with
respect to Transition Payments and that
a Transition Payment is a payment that
had a record date in a prior year and
payment date in the current year, which
was not previously included on a prior
Form 1099; and (iii) the TIH must include
the Transition Payment in computing its
taxable income for the transition year as a
§ 481(a) adjustment to prevent omission of
income caused by the reporting transition
(see Section IV below).
The IRS and the Treasury Department
recognize that trustees and middlemen
may not have adequate time to modify
their reporting systems to report Tran-
sition Payments that span the 2008 and
2009 calendar years as required under this
Section III. Accordingly, the IRS will not
impose any penalties on trustees and mid-
dlemen for 2009 for a failure to comply
with §§ 1.671–5(d), (e), and (g)(2) with
respect to TIHs in a WHMT. However,
trustees and middlemen must continue to
comply with §§ 6041 through 6050W to
the extent applicable, and this notice does
not provide penalty relief with respect to
a failure to comply with those reporting
sections. In addition, a trustee or middle-
man must report Transition Payments as
required under this Section III in the first
year that the trustee or middleman transi-
2010–2 I.R.B.254January 11, 2010

tions to reporting under the WHMT safe
harbor, regardless of whether the trustee
transitions for 2009 or 2010.
SECTION IV: TREATMENT OF
TRANSITION PAYMENTS BY THE
TIHs
A change from recognizing trust in-
come in the year of the payment date to the
year of the record date in accordance with
the transition to record date reporting un-
der the WHMT safe harbor is a change in
method of accounting under § 446(e) and
§ 1.446–1(e)(2)(ii)(a). A taxpayer gener-
ally must secure the consent of the Com-
missioner before changing a method of ac-
counting for federal income tax purposes.
Section 446(e) and § 1.446–1(e)(2)(i).
Section 1.446–1(e)(3)(ii) authorizes the
Commissioner to prescribe administrative
procedures setting forth the limitations,
terms, and conditionsdeemed necessary
to permit a taxpayer to obtain consent
to change a method of accounting. Sec-
tion 481(a) requires those adjustments
necessary to prevent amounts from be-
ing duplicated or omitted when the tax-
payer’s taxable income is computed under
a method of accounting different from the
method used to compute taxable income
for the preceding taxable year.
In accordance with § 1.446–1(e)(3)(ii),
the Commissioner hereby grants consent
toacashmethodTIHwhoincludedin-
come on its individual income tax return
consistent with the amount reported on a
Form 1099 for the year prior to the transi-
tion year, to change its method of account-
ing for trust income from recognizing the
income based on the payment date to rec-
ognizing the income based on the record
date in accordance with the transition to
record date reporting under the WHMT
safe harbor. The Transition Payment re-
ported on a TIH’s Form 1099 and writ-
ten tax information statement for the tran-
sition year is an adjustment required under
§ 481(a). The entire amount of the § 481(a)
adjustment (i.e., the Transition Payment)
must be taken into account in computing
a TIH’s taxable income for the transition
year. A TIH who changes its method of
accounting for the trust income in accor-
dance with this section does not need to
fileaForm3115,Application for Change
in Accounting Method.
SECTION V: WHFIT INTEREST
AND DIVIDEND INCOME MAY
BE INCLUDED IN THE SUMMARY
TOTALS PROVIDED TO THE IRS ON
FORMS 1099
Middlemen and trustees have also in-
dicated that they provide the IRS with
a summary total for interest, dividends
and miscellaneous payments made to
a TIH during the calendar year on the
relevant Form 1099. These middlemen
and trustees have questioned whether
including WHFIT items of income in
these summary totals is permissible under
§ 1.671–5(d) or whether a separate Form
1099 must be filed to report WHFIT
income to the IRS. This notice informs
middlemen and trustees that WHFIT
income that is appropriately reported on
a Form 1099–INT, a Form 1099–DIV, or
a Form 1099–MISC under § 1.671–5(d)
may be included in the summary total on
the Form 1099 filed with the IRS.
SECTION VI: PROCEDURES FOR
FURNISHING THE WRITTEN TAX
INFORMATION STATEMENT TO
BENEFICIAL OWNERS UNDER
REGULATION § 1.671–5
(a)Electronic statements.
Section 1.671–5(k) provides that the
information reporting sections in subpart
B, part III, subchapter A, chapter 61, of the
Code (§§ 6041 through 6050W) and the
regulations thereunder are incorporated
into the WHFIT rules to the extent those
provisions are not inconsistent with the
WHFIT reporting rules.
Effective March 9, 2002, § 401 of the
Job Creation and Worker Assistance Act of
2002, an off-Code provision, removed the
paper delivery impediment by authorizing
all payee statements required by §§ 6041
through 6050W to be furnished electroni-
cally. Additionally, § 4.5.1 of Rev. Proc.
2008–36, 2008–33 I.R.B. 340, provides
that if a person is required to furnish a writ-
ten statement (Copy B or acceptable sub-
stitute) to a recipient, then the statement
may be furnished electronically instead of
on paper. Provided that the trustee or mid-
dleman has followed the rules and proce-
dures outlined in § 4.5.1 of Rev. Proc.
2008–36, a trustee or middleman may pro-
vide electronically the written tax informa-
tion statement required to be furnished to a
beneficial owner under § 1.671–5(e).
(b)Composite statements.
Section 4.2.1 of Rev. Proc. 2008–36
indicates that a composite recipient state-
ment may be used for certain Forms 1099
and provides the rules for providing such
a composite statement. Composite state-
ments that meet the requirements of § 4.2.1
of Rev. Proc. 2008–36 may be used to
provide the WHFIT information required
to be furnished to beneficial owners under
the WHFIT reporting rules, provided that
the information required to be provided to
the beneficial owner that is not required to
be reported to the IRS on Forms 1099 also
is included in an accompanying statement.
(c)Summary totals.
As noted above, it is permissible for
middlemen and trustees to include income
from a WHFIT in the summary totals on
Forms 1099–INT, Forms 1099–DIV, and
Forms 1099–MISC, when these forms
are provided to the IRS. Middlemen
and trustees may also include income
from a WHFIT in a summary total
provided to a beneficial owner, but only
if the summary total is accompanied
by sufficient information to enable the
beneficial owner to properly report its
items of income, deduction and credits
from the WHFIT on its federal income
tax return and such information satisfies
the requirements of § 1.671–5(e) as
modified by the reporting safe harbors in
§§ 1.671–5(f) and (g) and for the transition
year, satisfies Section III of this notice.
However, the deadline for furnish-
ing WHFIT information to a TIH may
differ from that for furnishing information
with respect to other securities that the
middleman may hold for the TIH. Where
WHFIT information is included in a
summary total with information regarding
securities that are required to be reported
at an earlier date, the inclusion of WHFIT
information on the statement does not alter
the earlier deadline. Additionally, if the
amount of WHFIT income is determined
to be different than what was reported on
the earlier date, acorrected Form 1099
must be sent to the TIH.
January 11, 20102552010–2 I.R.B.

SECTION VII: FURNISHING TAX
INFORMATION PACKAGES FOR
CERTAIN NMWHFITS
There are a number of royalty trusts
and commodity trusts that meet the def-
inition of a WHFIT. The IRS and the
Treasury Department have been asked
to clarify the application of the WHFIT
rules with respect to furnishing TIHs in
a royalty trust or a commodity trust with
information necessary to properly report
the tax consequences of their ownership
interest in the trust. Under the structure
of the WHFIT reporting rules, trustees
are to make trust information available
to middlemen. See § 1.671–5(c). The
middlemen are then required to provide
Forms1099totheIRSandtofurnish
written tax information statements to TIHs
on whose behalf or account the middleman
holds an interest in the WHFIT or acts as
an intermediary. See §§ 1.671–5(d) and
(e).
TIHs in royalty and commodity trusts
need certain information (e.g.,costdeple-
tion schedules) in order for them to prop-
erly report the tax consequences of owner-
ship of a trust interest. Historically, some
royalty trusts have distributed annual tax
packages or booklets to TIHs that included
this information. In some cases, the trustee
of a royalty trust makes this information
available on an Internet website.
Middlemen are concerned that the
WHFIT rules now require them to publish
and mail this information, which was
formerly provided by the trustees of
these trusts. Middlemen have inquired
whether they can provide this additional
information by providing a TIH with
the address of an Internet website where
the information can be found. Until
further guidance is issued, the IRS and
the Treasury Department have determined
that providing the TIH of a royalty or
commodity trust with the address of an
Internet website where the information
can be found is sufficient to meet the
requirements of § 1.671–5(e) if the trustee
or middleman also informs the TIH that
a written tax information package will be
provided if requested and the middleman
or trustee does in fact furnish a written
package if requested. This does not,
however, relieve trustees and middlemen
of any requirement to provide the IRS and
TIHs with individualized calculation of
the items of income that are required to be
reported to the IRS on a Form 1099.
It has been suggested that the IRS
and the Treasury Department clarify
the application of the WHFIT reporting
rules to royalty and commodity trusts.
One suggested clarification is to limit
the burden on middlemen to providing
the IRS with appropriate Forms 1099
and providing TIHs with statements
regarding the information provided on
the Form 1099, and to require trustees to
maintain an Internet website capable of
providing investor-specific information
for other items that are required to be
provided to the TIH under § 1.671–5(e)
but are not required to be included on the
Form 1099. The IRS and the Treasury
Department request comments regarding
this suggestion and also welcome any
alternative suggestions on how trustees
and middlemen should share the reporting
burden. The IRS and the Treasury
Department also request comments
on whether there are other types of
NMWHFITs from which TIHs need
significant information to report the tax
consequences of ownership of an interest
in the NMWHFIT on their individual
tax returns and suggestions on how this
information could best be provided.
Comments should include a reference
to Notice 2010–4. Send submissions to
CC:PA:LPD:RU (Notice 2010–4), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may
be hand-delivered Monday through Fri-
day between the hours of 8:00 a.m. and
4:00 p.m. to CC:PA:LPD:RU (Notice
2010–4), Courier’s Desk, Internal Rev-
enue Service, 1111 Constitution Avenue,
NW, Washington, DC 20224, or sent
electronically via the following email ad-
dress:Comments@irscounsel.treas.gov.
Please include the notice number 2010–4
in the subject line of any electronic
communication. All materials submitted
will be available for public inspection and
copying.
SECTION VIII: EFFECTIVE DATE
This notice is effective on
December 17, 2009.
SECTION IX: DRAFTING
INFORMATION
The principal author of this notice is
Michala P. Irons of the Office of Associate
Chief Counsel (Passthroughs & Special In-
dustries). For furtherinformation regard-
ing this notice, contact Michala P. Irons at
(202) 622–3050 (not a toll-free call).
Arbitrage Treatment of
Certain Guarantee Funds
Notice 2010–5
This notice describes proposed rules
that the Internal Revenue Service (IRS)
and the Department of the Treasury expect
to issue regarding whether certain per-
petual trust funds created and controlled
by States that are pledged as credit en-
hancement to guarantee tax-exempt bonds
will be treated as replacement proceeds
of the guaranteed bonds for purposes of
the arbitrage investment restrictions on
tax-exempt bonds under § 148 of the In-
ternal Revenue Code (Code). (Unless
noted, section references in this notice are
totheCodeandtheIncomeTaxRegula-
tions.) Such rules are intended to provide
further flexibility to State and local gov-
ernments to obtain credit enhancement for
tax-exempt bonds in recognition of credit
constraints in the municipal bond market.
This notice affects certain state guarantee
programs that support local public schools
and other governmental purposes.
In addition, this notice solicits public
comments regarding provisions of the reg-
ulations under § 148 that may impede an
issuer’s ability to obtain credit enhance-
ment for tax-exempt bonds.
SECTION 2. BACKGROUND
In general, the interest on bonds issued
by State and local governments is exclud-
able from gross income under § 103(a) if
certain requirements are met. Section 148
imposes arbitrage investment restrictions
on tax-exempt bonds that limit the invest-
ment of proceeds of tax-exempt bonds in
higher-yielding investments and that re-
quire issuers to rebate certain excess earn-
ings above the yield on tax-exempt bonds
to the Federal Government. The arbitrage
restrictions apply to ordinary proceeds
derived from the sale of tax-exempt bonds
2010–2 I.R.B.256January 11, 2010

and investment earnings thereon. In addi-
tion, the arbitrage restrictions apply to a
special type of tax-exempt bond proceeds,
known as “replacement proceeds,” as a
result of their use as security for tax-ex-
empt bonds or other nexus to tax-exempt
bonds. These special replacement pro-
ceeds include, among other things, certain
“pledged funds” that are pledged to secure
repayment of tax-exempt bonds with a
reasonable assurance of availability for
such purpose. One special exception to the
treatment of pledged funds as replacement
proceeds covers certain perpetual trust
funds under certain parameters and under
a specified size limitation, as described
further herein.
In particular, § 148(a) defines an arbi-
trage bond as any bond issued as part of an
issue any portion of the proceeds of which
are reasonably expected (at the time of is-
suance of the bond) to be used directly
or indirectly (1) to acquire higher yield-
ing investments or (2) to replace funds
which were used directly or indirectly to
acquire higher yielding investments. Sec-
tion 148(a) further provides that a bond is
an arbitrage bond if an issuer intentionally
uses any portion of the proceeds of the is-
sue of which such bond is a part to ac-
quire higher yielding investments or to re-
place funds which were used directly or in-
directly to acquire higher yielding invest-
ments. In addition, § 148(f) requires that
issuers rebate certain excess earnings on
proceeds of tax-exempt bonds to the Fed-
eral Government. Under §§ 1.148–2(a)
and 1.148–3(a) of the Income Tax Regula-
tions, “proceeds” for these purposes means
“gross proceeds”. Section 1.148–1(b) de-
fines “gross proceeds” to include proceeds
and replacement proceeds of an issue.
Section 1.148–1(c)(1) defines “replace-
ment proceeds” as amounts that have a
sufficiently direct nexus to a tax-exempt
bond issue or to the governmental purpose
of a tax-exempt bond issue to conclude
that the amounts would have been used for
that governmental purpose if the proceeds
of the bond issue were not used or to be
used for that governmental purpose. Sec-
tion 1.148–1(c)(1) further provides that re-
placement proceeds include, but are not
limited to, sinking funds, pledged funds,
and other replacement proceeds described
in § 1.148–1(c)(4) to the extent that those
funds or amounts are held by or derived
from a substantial beneficiary of the issue.
Section 1.148–1(c)(1) defines a substantial
beneficiary of an issue to include the issuer
of such issue, any related party to the is-
suer and, if the issuer is not a State, the
State in which the issuer is located. Sec-
tion 1.148–1(c) further provides, however,
that a person is not a substantial benefi-
ciary of an issue solely because it is a guar-
antor under a qualified guarantee.
Section 1.148–1(c)(3)(i) defines a
“pledged fund” as any amount that is
directly or indirectly pledged to pay prin-
cipal or interest on the issue. Although a
pledge need not be cast in any particular
form, it must, in substance provide rea-
sonable assurance that the amount will be
available to pay principal or interest on the
issue even if the issuer encounter financial
difficulties.
Section §1.148–11(d)(1) provides a
special exception to the treatment of funds
as pledged funds for arbitrage purposes
for certain perpetual trust funds if the re-
quirements and limitations enumerated
in §§ 1.148–11(d)(1)(i) through (vi) are
satisfied. Specifically, § 1.148–11(d)(1)
provides that a guarantee by a fund created
and controlled by a State and established
pursuant to such State’s constitution does
not cause the amounts in such fund to be
pledged funds treated as replacement pro-
ceeds for purposes of § 148 if: (i) substan-
tially all of the corpus of the fund consists
of nonfinancial assets, revenues derived
from these assets, gifts, and bequests, (ii)
the fund corpus may be invaded only to
support specifically designated essential
governmental functions (the “designated
functions”) carried on by a political sub-
division with general taxing powers; (iii)
substantially all of the available income of
the fund is required to be applied annually
to support the designated functions; (iv)
the issue of bonds guaranteed consists of
general obligation bonds that are not pri-
vate activity bonds substantially all of the
proceeds of which are to be used for the
designated functions; (v) the fund satisfied
all of requirements in §§ 1.148–11(d)(1)(i)
through (iii) on August 16, 1986; and
(vi) the guarantee is not attributable to a
deposit to the fund after May 14, 1989,
unless the deposit is attributable to the
sale or other disposition of fund assets or
unless prior to the deposit, the outstanding
amount of the bonds guaranteed by the
fund did not exceed 250 percent of the
lowerofthecostorfairmarketvalueof
the fund.
The recent financial crisis has resulted
in significant volatility in the fair market
value of assets in these perpetual trust
funds and has constrained the availability
of credit enhancement in the municipal
bond market. As a result, certain per-
petual trust funds that otherwise could
provide credit enhancement under the
special exception to thearbitrage restric-
tions for eligible pledged funds under
§ 1.148–11(d)(1) have been limited in
their capacity to provide guarantees for
tax-exempt bonds at a time when there is
a significant need for such guarantees.
SECTION 3. SCOPE AND
APPLICATION
The IRS and the Department of the
Treasury intend to issue proposed reg-
ulations to amend § 1.148–11(d)(1)(vi)
in its entirety to provide that, as of the
sale date of the tax-exempt bonds to be
guaranteed, the amount of the bonds to be
guaranteed by the fund plus the then-out-
standing amount of bonds previously
guaranteed by the fund may not exceed a
total amount equal to 500 percent of the
total costs of the assets held by the fund as
of December 16, 2009.
SECTION 4. RELIANCE ON THIS
NOTICE
This notice may be relied upon for
bonds sold on or after December 16, 2009
and before the effective date of future
regulations or other public administra-
tive guidance under § 148 addressing or
otherwise affecting funds described in
§ 1.148–11(d)(1) and this notice.
SECTION 5. REQUEST FOR
COMMENTS
Before any notice of proposed rule-
making is issued with respect to the
guidance provided in this notice, con-
sideration will be given to any written
public comments on this notice that are
submitted. In addition, the Treasury De-
partment and the IRS specifically request
comments regarding provisions of the reg-
ulations under § 148 that may impede an
issuer’s ability to obtain credit enhance-
ment and how those provisions should
January 11, 20102572010–2 I.R.B.

be amended. Comments should be sub-
mitted in writing and can be emailed to
notice.comments@irscounsel.treas.gov
(include “Notice 2010–5” in the
subject line) or mailed to Office of
Associate Chief Counsel (Financial
Institutions and Products), Re: Notice
2010–5, CC:FIP:B5, Room 3547, 1111
Constitution Avenue, NW, Washington,
DC 20224. Comments that are submitted
will be made available to the public.
SECTION 6. DRAFTING
INFORMATION
The principal authors of this notice are
Aviva M. Roth and Johanna Som de Cerff,
Office of the Chief Counsel (Financial In-
stitutions and Products). However, other
personnel from the IRS and the Treasury
Department participated in its develop-
ment. For further information regarding
this notice, contact Johanna Som de Cerff
at (202) 622–3980 (not a toll-free call).
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 2010–9
TABLE OF CONTENTS
SECTION 1. WHAT IS THE PURPOSE OF THIS REVENUE PROCEDURE?
.............................................. 259
.01Descriptionoftermsusedinthisrevenueprocedure.............................................................. 259
.02Updatedannually............................................................................................ 260
SECTION 2. NATURE OF CHANGES AND RELATED REVENUE PROCEDURES......................................... 260
.01Rev.Proc.2009–9issupersededandtheprocessingofapplicationsisnowcentralized............................... 260
.02Relatedrevenueprocedures................................................................................... 260
SECTION 3. WHAT ARE THE PROCEDURES FOR REQUESTING RECOGNITION OF EXEMPT
STATUS?
............................................................................................. 260
.01Ingeneral................................................................................................... 260
.02Userfee.................................................................................................... 261
.03Form1023application....................................................................................... 261
.04Form1024application....................................................................................... 261
.05Letterapplication............................................................................................ 261
.06Form1028application....................................................................................... 261
.07Form8871noticeforpoliticalorganizations.................................................................... 261
.08Requirementsforasubstantiallycompletedapplication .......................................................... 261
.09Terroristorganizationsnoteligibletoapplyforrecognitionofexemption........................................... 262
SECTION 4. WHAT ARE THE STANDARDS FOR ISSUING A DETERMINATION LETTER OR RULING
ON EXEMPT STATUS?
................................................................................. 262
.01Exemptstatusmustbeestablishedinapplicationandsupportingdocuments ........................................ 262
.02Determinationletterorrulingbasedsolelyonadministrativerecord................................................ 262
.03Exemptstatusmayberecognizedinadvanceofactualoperations ................................................. 262
.04NoletterifexemptstatusissueinlitigationorunderconsiderationwithintheService ............................... 262
.05Incompleteapplication....................................................................................... 262
.06Evenifapplicationiscomplete,additionalinformationmayberequired............................................ 263
.07Expeditedhandling.......................................................................................... 263
SECTION 5. WHAT OFFICES ISSUE AN EXEMPT STATUS DETERMINATION LETTER OR RULING?.................... 263
.01EODeterminationsissuesadeterminationletterinmostcases .................................................... 263
.02CertainapplicationsreferredtoEOTechnical................................................................... 263
.03Technicaladvicemayberequestedincertaincases .............................................................. 263
.04Technicaladvicemustberequestedincertaincases.............................................................. 263
SECTION 6. WITHDRAWAL OF AN APPLICATION................................................................... 264
.01Applicationmaybewithdrawnpriortoissuanceofadeterminationletterorruling .................................. 264
.02§7428implicationsofwithdrawalofapplicationunder§501(c)(3)................................................ 264
SECTION 7. WHAT ARE THE PROCEDURES WHEN EXEMPT STATUS IS DENIED?..................................... 264
.01Proposedadversedeterminationletterorruling ................................................................. 264
.02AppealofaproposedadversedeterminationletterissuedbyEODeterminations .................................... 264
.03ProtestofaproposedadverserulingissuedbyEOTechnical...................................................... 264
2010–2 I.R.B.258January 11, 2010

.04Finaladversedeterminationletterorrulingwherenoappealorprotestissubmitted ................................. 264
.05HowEODeterminationshandlesanappealofaproposedadversedeterminationletter .............................. 264
.06ConsiderationbytheAppealsOffice........................................................................... 265
.07IfaprotestofaproposedadverserulingissubmittedtoEOTechnical ............................................. 265
.08Anappealorprotestmaybewithdrawn ........................................................................ 265
.09Appealorprotestandconferencerightsnotapplicableincertainsituations ......................................... 265
SECTION 8. DISCLOSURE OF APPLICATIONS AND DETERMINATION LETTERS AND RULINGS....................... 265
.01Disclosureofapplications,supportingdocuments,andfavorabledeterminationlettersorrulings...................... 265
.02Disclosureofadversedeterminationlettersorrulings............................................................ 265
.03DisclosuretoStateofficialswhentheServicerefusestorecognizeexemptionunder§501(c)(3)....................... 266
.04DisclosuretoStateofficialsofinformationabout§501(c)(3)applicants............................................ 266
SECTION 9. REVIEW OF DETERMINATION LETTERS BY EO TECHNICAL........................................... 266
.01DeterminationlettersmaybereviewedbyEOTechnicaltoassureuniformity....................................... 266
.02ProceduresforcaseswhereEOTechnicaltakesexceptiontoadeterminationletter .................................. 266
SECTION 10. DECLARATORY JUDGMENT PROVISIONS OF § 7428................................................... 266
.01Actualcontroversyinvolvingcertainissues..................................................................... 266
.02Exhaustionofadministrativeremedies......................................................................... 266
.03Notearlierthan270daysafterseekingdetermination............................................................ 266
.04Servicemusthavereasonabletimetoactonanappealorprotest .................................................. 267
.05Finaldeterminationtowhich§7428applies.................................................................... 267
SECTION 11. EFFECT OF DETERMINATIONLETTER OR RULING RECOGNIZING EXEMPTION....................... 267
.01Effectivedateofexemption................................................................................... 267
.02Relianceondeterminationletterorruling....................................................................... 267
SECTION 12. REVOCATION OR MODIFICATION OF DETERMINATION LETTER OR RULING
RECOGNIZING EXEMPTION
.......................................................................... 267
.01Revocationormodificationofadeterminationletterorrulingmayberetroactive.................................... 267
.02Appealandconferenceproceduresinthecaseofrevocationormodificationofexemptstatusletter.................... 268
SECTION 13. EFFECT ON OTHER REVENUE PROCEDURES......................................................... 268
SECTION 14. EFECTIVE DATE..................................................................................... 268
SECTION 15. PAPERWORK REDUCTION ACT....................................................................... 268
DRAFTING INFORMATION........................................................................................ 268
SECTION 1. WHAT IS THE
PURPOSE OF THIS REVENUE
PROCEDURE?
This revenue procedure sets forth proceduresfor issuing determination letters and rulings
on the exempt status of organizations under §§ 501 and 521 of the Internal Revenue Code other
than those subject to Rev. Proc. 2010–6, 2010–1 I.R.B. 193 (relating to pension, profit-shar-
ing, stock bonus, annuity, and employee stock ownership plans). Generally, the Service issues
these determination letters and rulings in response to applications for recognition of exemption
from Federal income tax. These procedures alsoapply to revocation or modification of deter-
mination letters or rulings. This revenue procedure also provides guidance on the exhaustion
of administrative remedies for purposes of declaratory judgment under § 7428 of the Code.
Description of terms used in this
revenue procedure
.01 For purposes of this revenue procedure—
(1) the term “Service” means the Internal Revenue Service.
(2) the term “application” means the appropriate form or letter that an organization must
file or submit to the Service for recognition ofexemption from Federal income tax under the
applicable section of the Internal Revenue Code.Seesection 3 for information on specific
forms.
January 11, 20102592010–2 I.R.B.

(3) the term “EO Determinations” means the office of the Service that is primarily respon-
sible for processing initial applications for tax-exempt status. It includes the main EO Deter-
minations office located in Cincinnati, Ohio, and other field offices thatare under the direction
and control of the Manager, EO Determinations.
(4) the term “EO Technical” means the office of the Service that is primarily responsible for
issuing letter rulings to taxpayers on exempt organization matters, and for providing technical
advice or technical assistance to other officesof the Service on exempt organization matters.
The EO Technical office is located in Washington, DC.
(5) the term “Appeals Office” means any office under the direction and control of the Chief,
Appeals. The purpose of the Appeals Office is to resolve tax controversies, without litigation,
on a fair and impartial basis. The Appeals Office is independent of EO Determinations and EO
Technical.
(6) the term “determination letter” means a written statement issued by EO Determi
nations
or an Appeals Office in response to an application for recognition of exemption f
rom Federal
income tax under §§ 501 and 521. This includes a written statement issued by EO Det
ermina-
tions or an Appeals Office on the basis of advice secured from EO Technical pursu
ant to the
procedures prescribed herein and in Rev. Proc. 2010–5, 2010–1 I.R.B. 165.
(7) the term “ruling” means a written statement issued by EO Technical in response to an
application for recognition of exemption from Federal income tax under §§ 501 and 521.
Updated annually.02 This revenue procedure is updated annually, but may be modified or amplified during
the year.
SECTION 2. NATURE OF
CHANGES AND RELATED
REVENUE PROCEDURES
Rev. Proc. 2009–9 is superseded
and the processing of applications
is now centralized
.01 This revenue procedure updates Rev. Proc. 2009–9, 2009–2 I.R.B. 256, which is hereby
superseded.
(1) The responsibility for processing applications is now centralized in the EO Determina-
tions office in Cincinnati, Ohio. Key district offices no longer exist.
(2) Although applications are generally processed in the Cincinnati office, some applica-
tions may be processed in other EO Determinations offices or referred to EO Technical.
Related revenue procedures.02 This revenue procedure supplements Rev. Proc. 76–34, 1976–2 C.B. 656, with respect
to the effects of § 7428 of the Code on the classification of organizations under §§ 509(a) and
4942(j)(3). Rev. Proc. 80–27, 1980–1 C.B. 677, sets forth procedures under which exemption
may be recognized on a group basis for subordinate organizations affiliated with and under the
general supervision and control of a central organization. Rev. Proc. 72–5, 1972–1 C.B. 709,
provides information for religious and apostolic organizations seeking recognition of exemp-
tion under § 501(d). General procedures for requests for a determination letter or ruling are
provided in Rev. Proc. 2010–4, 2010–1 I.R.B. 122. User fees for requests for a determination
letter or ruling are set forth in Rev. Proc. 2010–8, 2010–1 I.R.B. 234.
SECTION 3. WHAT ARE
THE PROCEDURES FOR
REQUESTING RECOGNITION
OF EXEMPT STATUS?
In general.01 An organization seeking recognition of exempt status under § 501 or § 521 is required
to submit the appropriate application. In the case of a numbered application form, the current
version of the form must be submitted. A central organization that has previously received
recognition of its own exemption can request a group exemption letter by submitting a letter
application with Form 8718,User Fee for Exempt Organization Determination Letter Request.
SeeRev. Proc. 80–27.
2010–2 I.R.B.260January 11, 2010

User fee.02 An application must be submitted with the correct user fee, as set forth in Rev. Proc.
2010–8.
Form 1023 application.03 An organization seeking recognition of exemption under § 501(c)(3) and §§ 501(e), (f),
(k), (n) or (q) must submit a completed Form 1023. In the case of an organization that provides
credit counseling services, see § 501(q) of the Code.
Form 1024 application.04 An organization seeking recognition of exemption under §§ 501(c)(2), (4), (5), (6), (7),
(8), (9), (10), (12), (13), (15), (17), (19) or (25) must submit a completed Form 1024 with
Form 8718. In the case of an organization that provides credit counseling services and seeks
recognition of exemption under section 501(c)(4), see § 501(q) of the Code.
Letter application.05 An organization seeking recognition of exemption under §§ 501(c)(11), (14), (16), (18),
(21), (22), (23), (26), (27) or (28) or under § 501(d) must submit a letter application with Form
8718.
Form 1028 application.06 An organization seeking recognition of exemption under § 521 must submit a completed
Form 1028 with Form 8718.
Form 8871 notice for political
organizations
.07 A political party, a campaign committee for a candidate for federal, state or local office,
and a political action committee are all political organizations subject to tax under § 527. To be
tax-exempt, a political organization may be required to notify the Service that it is to be treated
as a § 527 organization by electronically filing Form 8871,Political Organization Notice of
Section 527 Status. For details, go to the IRS website atwww.irs.gov/polorgs.
Requirements for a substantially
completed application
.08 A substantially completed application,including a letter application, is one that:
(1) is signed by an authorized individual.
(2) includes an Employer Identification Number (EIN).
(3) includes a statement of receipts and expenditures and a balance sheet for the current
year and the three preceding years (or the years the organization was in existence, if less than
four years). If the organization has not yet commenced operations, or has not completed one
accounting period, a substantially completed application generally includes a proposed budget
for two full accounting periods and a current statement of assets and liabilities.
(4) includes a detailed narrative statement of proposed activities, including each of the
fundraising activities of a § 501(c)(3) organization, and a narrative description of anticipated
receipts and contemplated expenditures.
(5) includes a copy of the organizing or enabling document that is signed by a principal
officer or is accompanied by a written declaration signed by an authorized individual certify-
ing that the document is a complete and accuratecopy of the original or otherwise meets the
requirements of a “conformed copy” as outlined in Rev. Proc. 68–14, 1968–1 C.B. 768.
(6) if the organizing or enabling document is in the form of articles of incorporation, includes
evidence that it was filed with and approved by an appropriate state official (e.g.,stamped
“Filed” and dated by the Secretary of State). Alternatively, a copy of the articles of incor-
poration may be submitted if accompanied by awritten declaration signed by an authorized
individual that the copy is a complete and accurate copy of the original copy that was filed
with and approved by the state. If a copy is submitted, the written declaration must include the
date the articles were filed with the state.
(7) if the organization has adopted by-laws, includes a current copy. The by-laws need
not be signed if submitted as an attachment to the application for recognition of exemption.
Otherwise, the by-laws must be verifiedas current by an authorized individual.
(8) is accompanied by the correct userfee and Form 8718, when applicable.
January 11, 20102612010–2 I.R.B.

Terrorist organizations not
eligible to apply for recognition of
exemption
.09 An organization that is identified or designated as a terrorist organization within the
meaning of § 501(p)(2) of the Code is not eligible to apply for recognition of exemption.
SECTION 4. WHAT ARE THE
STANDARDS FOR ISSUING A
DETERMINATION LETTER OR
RULING ON EXEMPT STATUS?
Exempt status must be established
in application and supporting
documents
.01 A favorable determination letter or ruling will be issued to an organization only if its
application and supporting documents establishthat it meets the particular requirements of the
section under which exemption from Federal income tax is claimed.
Determination letter or ruling
basedsolelyonadministrative
record
.02 A determination letter or ruling on exempt status is issued based solely upon the facts
and representationscontained in the administrative record.
(1) The applicant is responsible for the accuracy of any factual representations contained in
the application.
(2) Any oral representation of additional facts or modification of facts as represented or
alleged in the application must be reduced to writing over the signature of an officer or director
of the taxpayer under a penalties of perjury statement.
(3) The failure to disclose a material fact or misrepresentation of a material fact on the ap-
plication may adversely affect the reliance that would otherwise be obtained through issuance
by the Service of a favorable determination letter or ruling.
Exempt status may be recognized
in advance of actual operations
.03 Exempt status may be recognized in advance of the organization’s operations if the pro-
posed activities are described in sufficient detail to permit a conclusion that the organization
will clearly meet the particular requirements for exemption pursuant to the section of the In-
ternal Revenue Code under which exemption is claimed.
(1) A mere restatement of exempt purposes or astatement that proposed activities will be
in furtherance of such purposes will not satisfy this requirement.
(2) The organization must fully describe all of the activities in which it expects to engage,
including the standards, criteria, proceduresor other means adopted or planned for carrying out
the activities, the anticipatedsources of receipts, and the natureof contemplated expenditures.
(3) Where the organization cannot demonstrate to the satisfaction of the Service that it quali-
fies for exemption pursuant to the section of theInternal Revenue Code under which exemption
is claimed, the Service will generally issue a proposed adverse determination letter or ruling.
See alsosection 7 of this revenue procedure.
No letter if exempt status issue in
litigation or under consideration
within the Service
.04 A determination letter or ruling on exempt status will not o
rdinarily be issued if an issue
involving the organization’s exempt status under § 501 or § 521
is pending in litigation, is under
consideration within the Service, or if issuance of a determi
nation letter or ruling is not in the
interest of sound tax administration. If the Service decline
s to issue a determination or ruling
to an organization seeking exempt status under § 501(c)(3), t
he organization may be able to
pursue a declaratory judgment under § 7428 provided that it ha
s exhausted its administrative
remedies.
Incomplete application.05 If an application does not contain all of the items set out in section 3.08, the Service may
return it to the applicant for completion.
(1) In lieu of returning an incomplete application, the Service may retain the application and
request additional information needed for asubstantially completed application.
(2) In the case of an application under § 501(c)(3) that is returned incomplete, the 270-day
period referred to in § 7428(b)(2) will not be considered as starting untilthe date a substantially
completed Form 1023 is refiled with or remailed to the Service. If the application is mailed
2010–2 I.R.B.262January 11, 2010

to the Service and a postmark is not evident, the 270-day period will start to run on the date
the Service actually receives the substantially completed Form 1023. The same rules apply for
purposes of the notice requirement of § 508.
(3) Generally, the user fee will not be refunded if an incomplete application is filed.See
Rev. Proc. 2010–8, section 10.
Even if application is complete,
additional information may be
required
.06 Even though an application is substantially complete, the Service may request additional
information before issuing a determination letter or ruling.
(1) If the application involves an issue where contrary authorities exist,an applicant’s failure
to disclose and distinguish contrary authorities may result in requests for additional informa-
tion, which could delay final action on the application.
(2) In the case of an application under § 501(c)(3), the period of time beginning on the date
the Service requests additional information until the date the information is submitted to the
Service will not be counted for purposes of the 270-day period referred to in § 7428(b)(2).
Expedited handling.07 Applications are normally processed in the order of receipt by the Service. However,
expedited handling of an application may be approved where a request is made in writing and
contains a compelling reason for processing the application ahead of others. Upon approval
of a request for expedited handling an application will be considered out of its normal order.
This does not mean the application will be immediately approved or denied. Circumstances
generally warranting expedited processing include:
(1) A grant to the applicant is pending and
the failure to secure the grant may have an adverse
impact on the organization’s ability to c
ontinue to operate.
(2) The purpose of the newly created organization is to provide disaster relief to victims of
emergencies such as flood and hurricane.
(3) There have been undue delays in issuing a determination letter or ruling caused by a
Service error.
SECTION 5. WHAT OFFICES
ISSUEANEXEMPTSTATUS
DETERMINATION LETTER
OR RULING?
EO Determinations issues a
determination letter in most cases
.01 Under the general procedures outlinedin Rev. Proc. 2010–4, EO Determinations is
authorized to issue determination letters on applications for exempt status under §§ 501 and
521.
Certain applications referred to
EO Technical
.02 EO Determinations will refer to EO Technical those applications that present issues
which are not specifically covered by statute or regulations, or by a ruling, opinion, or court
decision published in the Internal Revenue Bulletin. In addition, EO Determinations will refer
those applications that have been specifically reserved by revenue procedure or by other official
Service instructions for handling by EO Technical for purposes of establishing uniformity or
centralized control of designated categories of cases. EO Technical will notify the applicant
organization upon receipt of a referred application, and will consider each such application and
issue a ruling directly to the organization.
Technical advice may be requested
in certain cases
.03 If at any time during the course of consideration of an exemption application by EO
Determinations the organization believes that its case involves an issue on which there is no
published precedent, or there has been non-uniformity in the Service’s handling of similar
cases, the organization may request that EO Determinations either refer the application to EO
Technical or seek technical advice from EO Technical.SeeRev. Proc. 2010–5, section 4.04.
Technical advice must be
requested in certain cases
.04 If EO Determinations proposes to recognize the exemption of an organization to which
EO Technical had issued a previous contrary ruling or technical advice, EO Determinations
must seek technical advice from EO Technical before issuing a determination letter. This does
January 11, 20102632010–2 I.R.B.

not apply where EO Technical issued an adverse ruling and the organization subsequently made
changes to its purposes, activities, or operations to remove the basis for which exempt status
was denied.
SECTION 6. WITHDRAWAL OF
AN APPLICATION
Application may be withdrawn
prior to issuance of a
determination letter or ruling
.01Anapplicationmaybewithdrawnuponthewritten request of an authorized individual
atanytimepriortotheissuanceofadetermination letter or ruling. Therefore, an application
may not be withdrawn after the issuance of a proposed adverse determination letter or ruling.
(1) When an application is withdrawn, the Service will retain the application and all sup-
porting documents. The Service may consider the information submitted in connection with
the withdrawn request in a subsequent examination of the organization.
(2) Generally, the user fee will not be refunded if an application is withdrawn.SeeRev.
Proc. 2010–8, section 10.
§ 7428 implications of withdrawal
of application under § 501(c)(3)
.02 The Service will not consider the withdrawal of an application under § 501(c)(3) as
either a failure to make a determination withinthe meaning of § 7428(a)(2) or as an exhaustion
of administrative remedies within the meaning of § 7428(b)(2).
SECTION 7. WHAT ARE
THE PROCEDURES WHEN
EXEMPT STATUS IS DENIED?
Proposed adverse determination
letter or ruling
.01 If EO Determinations or EO Technical reaches the conclusion that the organization does
not satisfy the requirements for exempt statuspursuant to the section of the Internal Revenue
Code under which exemption is claimed, the Service will generally issue a proposed adverse
determination letter or ruling, which will:
(1) Include a detailed discussion of the Service’s rationale for the denial of tax-exempt sta-
tus.
(2) Advise the organization of its opportunity to appeal or protest the decision and request
a conference.
Appeal of a proposed adverse
determination letter issued by EO
Determinations
.02 A proposed adverse determination letterissued by EO Determinations will advise the
organization of its opportunity to appeal the determination by requesting Appeals Office con-
sideration. To do this, the organization must submit a statement of the facts, law and arguments
in support of its position within 30 days from the date of the adverse determination letter. The
organization must also state whether it wishes an Appeals Office conference. Any determina-
tion letter issued on the basis of technical advice from EO Technical may not be appealed to
the Appeals Office on issues that were the subject of the technical advice.
Protest of a proposed adverse
ruling issued by EO Technical
.03 A proposed adverse ruling issued by EO Technical will advise the organization of its
opportunity to file a protest statement within30 days and to request a conference. If a confer-
ence is requested, the conference procedures outlined in Rev. Proc. 2010–4, section 12, are
applicable.
Final adverse determination letter
or ruling where no appeal or
protest is submitted
.04 If an organization does not submit a timely appeal of a proposed adverse determination
letter issued by EO Determinations, or a timely protest of a proposed adverse ruling issued by
EO Technical, a final adverse determination letter or ruling will be issued to the organization.
The final adverse letter or ruling will provideinformation about the filing of tax returns and
the disclosure of the proposed and final adverse letters or rulings.
How EO Determinations handles
an appeal of a proposed adverse
determination letter
.05 If an organization submits an appeal of the proposed adverse determination letter, EO
Determinations will first review the appeal, and if it determines that the organization qualifies
for tax-exempt status issue a favorable exempt status determination letter. If EO Determina-
tions maintains its adverse position after reviewing the appeal, it will forward the appeal and
the exemption application case file to the Appeals Office.
2010–2 I.R.B.264January 11, 2010

Consideration by the Appeals
Office
.06 The Appeals Office will consider the organization’s appeal. If the Appeals Office agrees
with the proposed adverse determination, it will either issue a final adverse determination or,
if a conference was requested, contact the organization to schedule aconference. At the end
of the conference process, which may involve the submission of additional information, the
Appeals Office will either issue a final adversedetermination letter or a favorable determina-
tion letter. If the Appeals Office believes that an exemption or private foundation status issue
is not covered by published precedent or that there is non-uniformity, the Appeals Office must
request technical advice from EO Technical inaccordance with Rev. Proc. 2010–5, section
4.04.
If a protest of a proposed
adverse ruling is submitted to EO
Technical
.07 If an organization submits a protest of a proposed adverse exempt status ruling, EO
Technical will review the protest statement.If the protest convinces EO Technical that the
organization qualifies for tax-exempt status, afavorable ruling will be issued. If EO Technical
maintains its adverse position after reviewing the protest, it will either issue a final adverse
ruling or, if a conference was requested, contact the organization to schedule a conference. At
the end of the conference process, which may involve the submission of additional information,
EO Technical will either issue a final adverse ruling or a favorable exempt status ruling.
An appeal or protest may be
withdrawn
.08 An organization may withdraw its appealor protest before the Service issues a final
adverse determination letter or ruling. Upon receipt of the withdrawal request, the Service will
complete the processing of the case in the same manner as if no appeal or protest was received.
Appeal or protest and conference
rights not applicable in certain
situations
.09 The opportunity to appeal or protest a proposed adverse determination letter or ruling
and the conference rights described above are not applicable to matters where delay would be
prejudicial to the interests of the Service (such as in cases involving fraud, jeopardy, the immi-
nence of the expiration of the statute of limitations, or where immediate action is necessary to
protect the interestsof the Government).
SECTION 8. DISCLOSURE
OF APPLICATIONS AND
DETERMINATION LETTERS
AND RULINGS
Sections 6104 and 6110 of the Code provide rules for the disclosure of applications, includ-
ing supporting documents, and determination letters and rulings.
Disclosure of applications,
supporting documents, and
favorable determination letters or
rulings
.01 The applications, any supporting documents, and the favorable determination letter or
ruling issued are available for public inspection under § 6104(a)(1) of the Code. However,
there are certain limited disclosure exceptions for a trade secret, patent, process, style of work,
or apparatus if the Service determines that the disclosure of the information would adversely
affect the organization.
(1) The Service is required to make the applications, supporting documents, and favorable
determination letters or rulings available upon request. The public can request this information
by submitting Form 4506–A,Request for Public Inspection or Copy of Exempt or Political
Organization IRS Form.
(2) The exempt organization is required to make its exemption application, supporting doc-
uments, and determination letter or ruling available for public inspection without charge. For
more information about the exempt organization’s disclosure obligations,seePublication 557,
Tax-Exempt Status for Your Organization.
Disclosure of adverse
determination letters or rulings
.02 The Service is required to make adverse determination letters and rulings available for
public inspection under § 6110 of the Code. Uponissuance of the final adverse determination
letter or ruling to an organization, both the proposed adverse determination letter or ruling and
the final adverse determination letter or ruling will be released under § 6110.
(1) These documents are made available to the public after the deletion of names, addresses,
and any other information that might identify the taxpayer.See§ 6110(c) for other specific
disclosure exemptions.
(2) The final adverse determination letter or ruling will enclose Notice 437,Notice of Inten-
tion to Disclose,and redacted copies of the final and proposed adverse determination letters
January 11, 20102652010–2 I.R.B.

or rulings. Notice 437 provides instructions ifthe organization disagrees with the deletions
proposed by the Service.
Disclosure to State officials when
the Service refuses to recognize
exemption under § 501(c)(3)
.03 The Service may notify the appropriate State officials of a refusal to recognize an or-
ganization as tax-exempt under § 501(c)(3).See§ 6104(c) of the Code. The notice to the State
officials may include a copy of a proposed or final adverse determination letter or ruling the
Service issued to the organization. In addition, upon request by the appropriate State official,
the Service may make available for inspection and copying the exemption application and other
information relating to the Service’s determination on exempt status.
Disclosure to State officials of
information about § 501(c)(3)
applicants
.04 The Service may disclose to State officialsthe name, address, and identification number
of any organization that has applied for recognition of exemption under § 501(c)(3).
SECTION 9. REVIEW OF
DETERMINATION LETTERS
BY EO TECHNICAL
Determination letters may be
reviewed by EO Technical to
assure uniformity
.01 Determination letters issued by EO Determinations may be reviewed by EO Technical,
ortheOfficeoftheAssociateChiefCounsel(Passthroughs and Special Industries) (for cases
under § 521), to assure uniform application of the statutes or regulations, or rulings, court
opinions, or decisions published in the Internal Revenue Bulletin.
Procedures for cases where EO
Technical takes exception to a
determination letter
.02 If EO Technical takes exception to a determination letter issued by EO Determinations,
the manager of EO Determinations will be advised. If EO Determinations notifies the organ-
ization of the exception taken, and the organization disagrees with the exception, the file will
be returned to EO Technical. The referral to EOTechnical will be treated as a request for tech-
nical advice and the procedures in Rev. Proc. 2010–5 will be followed.
SECTION 10. DECLARATORY
JUDGMENT PROVISIONS OF
§7428
Actual controversy involving
certain issues
.01 Generally, a declaratory judgment proceeding under § 7428 of the Code can be filed in
the United States Tax Court, the United States Court of Federal Claims, or the district court of
the United States for the District of Columbia with respect to an actual controversy involving
a determination by the Service or a failure of theService to make a determination with respect
to the initial or continuing qualification or classification of an organization under § 501(c)(3)
(charitable, educational, etc.); § 170(c)(2) (deductibility of contributions); § 509(a) (private
foundation status); § 4942(j)(3) (operating foundation status); or § 521 (farmers cooperatives).
Exhaustion of administrative
remedies
.02 Before filing a declaratory judgment action, an organization must exhaust its adminis-
trative remedies by taking, in a timely manner,all reasonable steps to secure a determination
from the Service. These include:
(1) the filing of a substantially completed application Form 1023 or group exemption re-
quest under § 501(c)(3) pursuant to section 3.08 of this revenue procedure or the request for a
determination of foundation status pursuant to Rev. Proc. 76–34;
(2) in appropriate cases, requesting relief pursuant to Treas. Reg. 301.9100–1 of the Pro-
cedure and Administration Regulations regarding the extension of time for making an election
or application for relief from tax (seeRev. Proc. 92–85, 1992–2 C.B. 490);
(3) the timely submission of all additional information requested by the Service to perfect
an exemption application or request for determination of private foundation status; and
(4) exhaustion of all administrative appeals available within the Service pursuant to section
7 of this revenue procedure.
Not earlier than 270 days after
seeking determination
.03 An organization will in no event be deemed to have exhausted its administrative reme-
dies prior to the earlier of:
2010–2 I.R.B.266January 11, 2010

(1) the completion of the steps in section 10.02, and the sending by the Service by certified
or registered mail of a final determination letter or ruling; or
(2) the expiration of the 270-day period described in § 7428(b)(2) in a case where the Service
has not issued a final determination letter or ruling and the organization has taken, in a timely
manner, all reasonable steps to secure a determination letter or ruling.
Service must have reasonable time
toactonanappealorprotest
.04 The steps described in section 10.02 willnot be considered completed until the Service
has had a reasonable time to act upon an appeal or protest as the case may be.
Final determination to which
§7428applies
.05 A final determination to which § 7428 of theCode applies is a determination letter or
ruling, sent by certified or registered mail, which holds that the organization is not described in
§ 501(c)(3) or § 170(c)(2), is a public charity described in a part of § 509 or § 170(b)(1)(A) other
than the part under which the organization requested classification, is not a private foundation
as defined in § 4942(j)(3), or is a private foundation and not a public charity described in a part
of § 509 or § 170(b)(1)(A).
SECTION 11. EFFECT OF
DETERMINATION LETTER
OR RULING RECOGNIZING
EXEMPTION
Effectivedateofexemption.01 A determination letter or ruling recognizing exemption is usually effective as of the date
of formation of an organization if its purposesand activities prior to the date of the determi-
nation letter or ruling were consistent with the requirements for exemption. However, special
rules under § 508(a) of the Code may apply to an organization applying for exemption under
§ 501(c)(3), and special rules under § 505(c) may apply to an organization applying for ex-
emption under §§ 501(c)(9), (17), or (20).
(1) If the Service requires the organization to alter its activities or make substantive amend-
ments to its enabling instrument, the exemption will be effective as of the date specified in a
determination letter or ruling.
(2) If the Service requires the organization to make a nonsubstantive amendment, exemp-
tion will ordinarily be recognized as of the date of formation. Examples of nonsubstantive
amendments include correction of a clerical error in the enabling instrument or the addition of
a dissolution clause where the activities of the organization prior to the determination letter or
ruling are consistent with the requirements for exemption.
Reliance on determination letter
or ruling
.02 A determination letter or ruling recognizing exemption may not be relied upon if there
is a material change, inconsistent with exemption, in the character, the purpose, or the method
of operation of the organization. Also, a determination letter or ruling may not be relied upon
if it was based on any inaccurate material factual representations.Seesection 12.01.
SECTION 12. REVOCATION
OR MODIFICATION OF
DETERMINATION LETTER
OR RULING RECOGNIZING
EXEMPTION
A determination letter or ruling recognizing exemption may be revoked or modified by (1)
a notice to the taxpayer to whom the determination letter or ruling was issued, (2) enactment of
legislation or ratification of a tax treaty, (3) a decision of the United States Supreme Court, (4)
the issuance of temporary or final regulations, or (5) the issuance of a revenue ruling, revenue
procedure, or other statement published in the Internal Revenue Bulletin.
Revocation or modification of a
determination letter or ruling may
be retroactive
.01 The revocation or modification of a determination letter or ruling recognizing exemption
may be retroactive if the organizationomittedormisstatedamaterialfact,operatedinamanner
materially different from that originally represented, or, in the case of organizations to which
§ 503 of the Code applies, engaged in a prohibited transaction with the purpose of diverting
corpus or income of the organization from its exempt purpose and such transaction involved a
substantial part of the corpus or income of suchorganization. In certain cases an organization
may seek relief from retroactive revocation or modification of a determination letter or ruling
under § 7805(b). Requests for § 7805(b) relief are subject to the procedures set forth in Rev.
Proc. 2010–4.
January 11, 20102672010–2 I.R.B.

(1) Where there is a material change, inconsistent with exemption, in the character, the pur-
pose, or the method of operation of an organization, revocation or modification will ordinarily
take effect as of the date of such material change.
(2) In the case where a determination letter or ruling is issued in error or is no longer in
accord with the Service’s positionand § 7805(b) relief is granted (seesections 13 and 14 of
Rev. Proc. 2010–4), ordinarily, the revocation or modification will be effective not earlier than
the date when the Service modifies or revokesthe original determination letter or ruling.
Appeal and conference procedures
in the case of revocation or
modification of exempt status
letter
.02 In the case of a revocation or modification of a determination letter or ruling, the appeal
and conference procedures are generally the same as set out in section 7 of this revenue proce-
dure, including the right of the organization to request that EO Determinations or the Appeals
Office seek technical advice from EO Technical. However, appeal and conference rights are
not applicable to matters where delay would be prejudicial to the interests of the Service (such
as in cases involving fraud, jeopardy, the imminence of the expiration of the statute of limita-
tions, or where immediate action is necessaryto protect the interests of the Government).
(1) If the case involves an exempt status issue on which EO Technical had issued a previous
contrary ruling or technical advice, EO Determinations generally must seek technical advice
from EO Technical.
(2) EO Determinations does not have to seek technical advice if the prior ruling or technical
advice has been revoked by subsequent contrary published precedent or if the proposed revo-
cation involves a subordinate unit of an organization that holds a group exemption letter issued
by EO Technical, the EO Technical ruling or technical advice was issued under the Internal
Revenue Code of 1939 or prior revenue acts, or if the ruling was issued in response to Form
4653,Notification Concerning Foundation Status.
SECTION 13. EFFECT
ON OTHER REVENUE
PROCEDURES
Rev. Proc. 2009–9 is superseded.
SECTION 14. EFECTIVE DATEThis revenue procedure is effective January 11, 2010.
SECTION 15. PAPERWORK
REDUCTION ACT
The collection of information for a letter application under section 3.05 of this revenue pro-
cedure has been reviewed and approved by the Office of Management and Budget (OMB)
in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507) under control number
1545–2080. All other collections of information under this revenue procedure have been ap-
proved under separate OMB control numbers.
An agency may not conduct or sponsor, and a person is not required to respond to, a collec-
tion of information unless the collection of information displays a valid OMB control number.
The collection of this information is required if an organization wants to be recognized as
tax-exempt by the Service. We need the information to determine whether the organization
meets the legal requirements for tax-exempt status. In addition, this information will be used
to help the Service delete certain information from the text of an adverse determination letter
or ruling before it is made available for public inspection, as required by § 6110.
The time needed to complete and file a letter application will vary depending on individual
circumstances. The estimated average time is 10 hours.
Books and records relating to the collection of information must be retained as long as their
contents may become material in the administration of any internal revenue law. The rules
governing the confidentiality of letter applications are covered in § 6104.
DRAFTING INFORMATIONThe principal author of this revenue procedure is Matthew Giuliano of the Exempt Orga-
nizations, Tax Exempt and Government Entities Division. For further information regarding
this revenue procedure, please contact the TE/GE Customer Service office at (877) 829–5500
(a toll-free call).
2010–2 I.R.B.268January 11, 2010

26 CFR 601.602: Forms and Instructions.
(Also: Part I, Section 6012; 1.6012–1.)
Rev. Proc. 2010–11
SECTION 1. PURPOSE
The purpose of this revenue procedure
is to modify the conditions established in
Rev. Proc. 80–59, 1980–2 C.B. 855, under
which a trustee of a blind trust that meets
the requirements of section 102(f)(3) of
the Appendix to Title 5 of the United
States Code (or any successor provision
of the United States Code) may execute
and file an income tax return on behalf of
any individual described in section 101(f)
oftheAppendixtoTitle5oftheUnited
States Code (or any successor provision
of the United States Code) (“eligible indi-
vidual”).
SECTION 2. CHANGES
This revenue procedure modifies and
supersedes Revenue Procedure 80–59, by
eliminating the requirement that an eligi-
ble individual receive advance permission
from the Service for the trustee to make the
income tax return on behalf of the eligi-
ble individual prior to filing of the eligible
individual’s income tax return. This rev-
enue procedure requires the eligible indi-
vidual to submit with the relevant income
tax return both the letter requesting per-
mission for the trustee to make the income
tax return on behalf of the eligible individ-
ual and a power of attorney. The revenue
procedure further provides that permission
will be granted automatically where the
blind trust meets therequirements of sec-
tion 102(f)(3) of the Appendix to Title 5 of
the United States Code (or any successor
provision of the United States Code).
SECTION 3. BACKGROUND
.01 Section 102(f)(4)(B) of the Appen-
dix to Title 5 of the United States Code pro-
vides that, in the case of a trust created for
the benefit of an eligible individual, an as-
set placed in trust will not be considered
a financial interest of the individual for
purposes of section 208 of Title 18 of the
United States Code, and any other conflict
of interest statutes or regulations, if certain
requirements are met, including giving the
trustee the power to prepare on behalf of
the individual the personal income tax re-
turn and similar returns which may contain
information relating to the trust.
.02 Section 1.6012–1(a)(5)oftheIn-
come Tax Regulations, concerning returns
made by agents, permits a return to be
made by an agent if the taxpayer requests
permission, in writing, and the appropriate
IRS official determines that good cause ex-
ists for permitting an agent to make the re-
turn. That section provides that whenever
a return is made by an agent it must be ac-
companied by a power of attorney (or copy
thereof) authorizing the agent to represent
the principal in making the return.
.03 Section 601.504(a) of the Confer-
ence and Practice Requirements, State-
ment of Procedural Rules, provides that
a power of attorney is required when the
taxpayer wishes to authorize a recognized
representative to represent the taxpayer
before the Internal Revenue Service or
perform the following acts on behalf of
the taxpayer: (1) Offer or execute either a
waiver of restriction on assessment or col-
lection of a deficiency in tax or a waiver
of notice of disallowance of a claim for
credit or refund on behalf of the taxpayer,
(2) Execute a consent to extend the statu-
tory period for assessment or collection of
a tax on behalf of the taxpayer, (3) Exe-
cute a closing agreement on behalf of the
taxpayer, (4) Receive (but not endorse or
collect) a check in payment of any refund
of taxes, penalties or interest on behalf of
the taxpayer, or (5) Sign a tax return under
certain conditions.
.04 Section 601.506(a) of the Confer-
ence and Practice Requirements, State-
ment of Procedural Rules, provides that
any notice or communication (or a copy
thereof) required or permitted to be given
to a taxpayer in any matter before the Ser-
vice shall be given to the taxpayer and,
unless restricted by the taxpayer, to the
taxpayer’s recognized representative.
SECTION 4. APPLICATION
.01 An eligible individual who has an
interest in a blind trust that meets the re-
quirements of section 102(f)(3) of the Ap-
pendix to Title 5 of the United States Code
(or any successor provision of the United
States Code) must request permission, in
writing, for the trustee of the blind trust to
execute and file the Federal income tax re-
turn of the eligible individual.
.02 Both the letter requesting permis-
sion and a power of attorney (or copy
thereof) that grants the trustee authority to
sign the return, to receive (but not endorse
or collect) a refund check, to execute a
waiver of restriction on assessment or
collection, to execute a waiver of notice
of disallowance, to execute a consent to
extend the period for assessment or collec-
tion, and to execute a closing agreement
must be submitted to the Internal Revenue
Service with the eligible individual’s Fed-
eral income tax return when the tax return
is filed.
.03 The eligible individual who has an
interest in a blind trust that meets the re-
quirements of section 102(f)(3) of the Ap-
pendix to Title 5 of the United States Code
(or any successor provision of the United
States Code), and who submits the written
request for permission and power of attor-
ney consistent with paragraph .02 above,
will be considered to have shown good
causeforhavingthereturnfiledbythe
trustee, and will be deemed to have been
granted such permission. The eligible in-
dividual must submit a separate request for
permission for the trustee to execute and
file the Federal income tax return each tax-
able year.
.04 Notwithstanding the provisions of
section 601.506(a) of the Conference and
Practice Requirements, Statement of Pro-
cedural Rules, all notices or other writ-
ten communication required or permitted
to be given to the eligible individual will
be given only to the trustee.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 80–59 is modified and su-
perseded.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective for
income tax returns due (including any ex-
tension of time to file) on or after the date
of its publication in the Internal Revenue
Bulletin.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Richard Goldstein of the
Office of Associate Chief Counsel (Pro-
cedure & Administration). For further
January 11, 20102692010–2 I.R.B.

information regarding this revenue pro-
cedure, contact Steve Coleman at (202)
622–4910 (not a toll-free call).
2010–2 I.R.B.270January 11, 2010

Part IV. Items o
fGeneralInterest
German Consul
ar Employees
MAP Agreement
Announcemen
t 2010–2
The followin
g is a copy of the Com-
petent Autho
rity Agreement entered into
on October 1
, 2009, by the competent au-
thorities o
f the United States of America
and Germany
with respect to the taxation
of certain c
onsular employees under the
U.S.-Germa
ny income tax treaty and pro-
tocol.
The text of
the Competent Authority
Agreement
is as follows:
COMPETENT
AUTHORITY
AGREEMENT
The Compet
ent Authorities of the
United St
ates and Germany enter into
the follo
wing agreement (“Agreement”)
concerni
ng the taxation of certain con-
sular emp
loyees under the Convention
Between
the United States of America and
the Fede
ral Republic of Germany for the
Avoidan
ce of Double Taxation and the
Prevent
ion of Fiscal Evasion with Respect
to Taxes
on Income and Capital and to
Certai
n Other Taxes, signed at Bonn on
August
29, 1989, as amended by the Pro-
tocol,
signed at Berlin on June 1, 2006 (the
“Tax Tr
eaty”).
This Ag
reement is entered into pursuant
to para
graph 3(a)(aa) of Article 1 and para-
graph
3 of Article 25 (Mutual Agreement
Proce
dure) of the Tax Treaty. Paragraph
3(a)(
aa) of Article 1 provides that the Con-
tract
ing States may agree that any ques-
tion a
rising as to the interpretation or ap-
plica
tion of the Tax Treaty and, in partic-
ular
, whether a taxation measure is within
the scope of th
e Tax Treaty, shall be deter-
mined exclusi
vely in accordance with the
provisions of
Article 25 of the Tax Treaty.
Paragraph 1(b
)ofArticle19(Govern-
ment Service)
of the Tax Treaty provides
that remunera
tion paid by the State for
which the serv
ices are provided (the “send-
ing State”) s
hall be taxable only in the
Contracting
State in which the services are
rendered (th
e “receiving State”) if the in-
dividual is a
resident of the receiving State
who: (i) is a
national of the receiving State,
or (ii) did n
ot become a resident of the
receiving S
tate solely for the purpose of
rendering t
he services (i.e., the individual
was a resid
ent of the receiving State prior
to being hi
red, even if the individual is a
national o
f the sending State). By these
terms, the
remuneration of certain consular
employees
of the United States working
in German
y who are U.S. nationals would
be taxabl
e in Germany, and the remunera-
tion of ce
rtain consular employees of Ger-
many work
ing in the United States who are
German n
ationals would be taxable in the
United S
tates.
Article
XIX of the Treaty of Friendship,
Commerc
e and Consular Rights between
the Unit
ed States and Germany, signed
at Washi
ngton on December 8, 1923 (the
“Consul
ar Treaty”) provides: “All con-
sular o
fficers and employees, nationals of
the Sta
te appointing them shall be exempt
from th
e payment of taxes on the salary,
fees, o
r wages received by them in com-
pensat
ion for their consular services.”
It has c
ome to the attention of the
Compet
ent Authorities that, in light of the
Consu
lar Treaty, difficulties have arisen
as to w
hether the taxation of the remuner-
ation
of consular employees of the United
State
s and Germany who are nationals
of the sending
State but residents of the
receiving Sta
te and who fall outside the
scope of the Vi
enna Convention on Con-
sular Relatio
ns (such consular employees
hereinafter r
eferred to as “resident con-
sular employ
ees”) is within the scope of
the Tax Treat
y.
Paragraph 2(
b) of Article 1 (General
Scope) of the
Tax Treaty provides that the
Tax Treaty sh
all not restrict in any man-
ner any exemp
tion accorded by any other
agreement t
o which the Contracting States
are a party.
Under the au
thority of Paragraph
3(a)(aa) of
Article1oftheTaxTreaty,the
Competent A
uthorities agree that Article
XIX of the Co
nsular Treaty constitutes
an “exempt
ion” accorded by the Consular
Treaty wit
hin the meaning of Paragraph
2(b) of Art
icle 1 of the Tax Treaty. The
Competent
Authorities further note that it
is the vie
w of the Governments of Ger-
many and t
he United States that Article
XIX provi
des an exemption from income
tax in the
receiving State for resident con-
sular emp
loyees, as that term is defined
herein.
Therefore, such resident consular
employe
es are not subject to Paragraph
1(b) of A
rticle 19 of the Tax Treaty. Thus,
in accor
dance with Article 1 of the Tax
Treaty,
taxation of the remuneration of
such em
ployees is not within the scope of
the Tax
Treaty. Article XIX of the Con-
sular T
reaty applies and the remuneration
of such
resident consular employees of the
United
States working in Germany who
are U.
S. (or dual) nationals is exempt from
tax in
Germany, and the remuneration of
such r
esident consular employees of Ger-
many w
orking in the United States who
are Ge
rman (or dual) nationals is exempt
from
tax in the United States.
Barry B. Shott
United States Competent Authority
Dieter Eimermann
German Competent Authority
Date:
Date:
January 11, 20102712010–2 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.
2010–2 I.R.B.iJanuary 11, 2010

Numerical Finding List
1
Bulletins 2010–1 through 2010–2
Announcements:
2010-2, 2010-2 I.R.B.271
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-11, 2010-2 I.R.B.269
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
January 11, 2010ii2010–2 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–2
Notices:
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
2010–2 I.R.B.iiiJanuary 11, 2010

January 11, 20102010–2 I.R.B.

2010–2 I.R.B.January 11, 2010

January 11, 20102010–2 I.R.B.

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