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Bulletin No.

2006-21
May 22, 2006

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 eign base company shipping income provisions) by the Ameri-
can Jobs Creation Act (AJCA), it is unclear how to apply the in-
come inclusion test. This notice announces that Treasury and
Rev. Rul. 2006–27, page 915. the IRS will amend section 1.883–3(b) in light of the repeal of
Down payment assistance; home buyers. This ruling section 954(a) and (f) and provide a new “qualified U.S. person
sets forth the applicable rules and standards for determining ownership test” that is clear and simple to apply and on which
whether organizations that provide down payment assistance taxpayers may rely until the regulations are amended.
to home buyers qualify as tax-exempt charities. In addition,
the ruling addresses whether assistance received for a down Notice 2006–48, page 922.
payment is treated as a gift and included in a home buyer’s This notice provides guidance relating to amendments made by
basis. section 415 of the American Jobs Creation Act of 2004 (AJCA),
which affect the treatment of certain income and assets related
T.D. 9261, page 919. to the leasing of aircraft or vessels in foreign commerce. The
Final regulations under section 1502 of the Code relate to in- Treasury Department and the Service intend to amend the reg-
tercompany transactions. Section 1.1502–13(c)(7)(ii), Exam- ulations under sections 367(a), 954, and 956 to address the
ple 13, illustrates the treatment of manufacturer incentive pay- amendments made by section 415 of the AJCA and this notice.
ments. This example relies, in part, upon the premise that Until regulations reflecting these changes are issued, taxpay-
manufacturer incentive payment is an ordinary and necessary ers may rely upon this notice. This notice also solicits com-
business expense deductible under section 162. Because ments on whether any other changes to the regulations under
this treatment is now under reconsideration (see Rev. Rul. sections 367, 954, and 956 are necessary to implement the
2005–28, 2005–19 I.R.B. 997), these final regulations remove purposes of section 415 of the AJCA.
and reserve this example.
Rev. Proc. 2006–25, page 926.
Notice 2006–43, page 921. Specifications are set forth for the private printing of paper
This notice announces that the Treasury Department and the and laser-printed substitutes for the January 2006 revisions
Service will amend the regulations under section 883 of the of Form 941, Employer’s QUARTERLY Federal Tax Return, and
Code. The regulations exclude from gross income the income Schedule B (Form 941), Report of Tax Liability for Semiweekly
derived from the international operation of a ship or ships or Schedule Depositors. This procedure will be reproduced as
aircraft by a corporation organized in a foreign country that the next revision of Publication 4436, General Rules and Spec-
grants an equivalent exemption to U.S. corporations. To re- ifications for Substitute Form 941 and Schedule B (Form 941).
ceive this benefit, a foreign corporation must also satisfy one Rev. Proc. 2005–21 superseded.
of three ownership tests. One such test applies to a controlled
foreign corporation (CFC), as defined in section 957(a). To
satisfy the CFC ownership test, section 1.883–3(a) requires
a CFC to meet an “income inclusion test,” as defined in section
1.883–3(b). After the repeal of section 954(a)(4) and (f) (for-

(Continued on the next page)

Finding Lists begin on page ii.


Announcement 2006–34, page 937.
This document withdraws proposed regulations
(REG–131264–04, 2004–2 C.B. 506) under section
1502 of the Code regarding intercompany transactions.
The regulations provided additional examples in section
1.1502–13(c)(7)(ii), Example 13, to clarify the proper
treatment of manufacturer incentive payments. One of
these examples relied, in part, upon the premise that the
manufacturer incentive payment is an ordinary and necessary
business expense deductible under section 162. Because
this treatment is now under reconsideration (see Rev. Rul.
2005–28, 2005–19 I.R.B. 997), the proposed regulations are
withdrawn.

EXEMPT ORGANIZATIONS

Rev. Rul. 2006–27, page 915.


Down payment assistance; home buyers. This ruling
sets forth the applicable rules and standards for determining
whether organizations that provide down payment assistance
to home buyers qualify as tax-exempt charities. In addition,
the ruling addresses whether assistance received for a down
payment is treated as a gift and included in a home buyer’s
basis.

EMPLOYMENT TAX

Rev. Proc. 2006–25, page 926.


Specifications are set forth for the private printing of paper
and laser-printed substitutes for the January 2006 revisions
of Form 941, Employer’s QUARTERLY Federal Tax Return, and
Schedule B (Form 941), Report of Tax Liability for Semiweekly
Schedule Depositors. This procedure will be reproduced as
the next revision of Publication 4436, General Rules and Spec-
ifications for Substitute Form 941 and Schedule B (Form 941).
Rev. Proc. 2005–21 superseded.

ADMINISTRATIVE

Rev. Proc. 2006–26, page 936.


This procedure announces the introduction of user fees for re-
quests submitted to the U.S. competent authority for discre-
tionary determinations under limitation on benefits provisions
of U.S. income tax treaties. Rev. Proc. 2002–52 modified.

May 22, 2006 2006–21 I.R.B.


The IRS Mission
Provide America’s taxpayers top quality service by helping applying the tax law with integrity and fairness to all.
them understand and meet their tax responsibilities and by

Introduction
The Internal Revenue Bulletin is the authoritative instrument of court decisions, rulings, and procedures must be considered,
the Commissioner of Internal Revenue for announcing official and Service personnel and others concerned are cautioned
rulings and procedures of the Internal Revenue Service and for against reaching the same conclusions in other cases unless
publishing Treasury Decisions, Executive Orders, Tax Conven- the facts and circumstances are substantially the same.
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
The Bulletin is divided into four parts as follows:
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis. Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
It is the policy of the Service to publish in the Bulletin all sub- the Internal Revenue Code of 1986.
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod- Part II.—Treaties and Tax Legislation.
ify, or amend any of those previously published in the Bulletin. This part is divided into two subparts as follows: Subpart A,
All published rulings apply retroactively unless otherwise indi- Tax Conventions and Other Related Items, and Subpart B, Leg-
cated. Procedures relating solely to matters of internal man- islation and Related Committee Reports.
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published. 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
Revenue rulings represent the conclusions of the Service on the included in this part are Bank Secrecy Act Administrative Rul-
application of the law to the pivotal facts stated in the revenue ings. Bank Secrecy Act Administrative Rulings are issued by
ruling. In those based on positions taken in rulings to taxpayers the Department of the Treasury’s Office of the Assistant Sec-
or technical advice to Service field offices, identifying details retary (Enforcement).
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements. Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
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 The last Bulletin for each month includes a cumulative index
relied on, used, or cited as precedents by Service personnel in for the matters published during the preceding months. These
the disposition of other cases. In applying published rulings and monthly indexes are cumulated on a semiannual basis, and are
procedures, the effect of subsequent legislation, regulations, published in the last Bulletin of each semiannual period.

The contents 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.

2006–21 I.R.B. May 22, 2006


Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 61.—Gross Income FACTS accept any contributions contingent on the
Defined sale of a particular property or properties.
Situation 1
Whether certain down payment assistance pro- Situation 2
vided to a home buyer is includible in the recipient’s X is a non-profit corporation that helps
gross income under section 61. See Rev. Rul. low-income individuals and families pur- Y is a nonprofit corporation that is like
2006-27, page 915. chase decent, safe and sanitary homes X in all respects as set forth in Situation
throughout the metropolitan area in which 1, except as follows. Under Y’s grant-
Section 102.—Gifts and X is located. As a substantial part of its making procedures, Y’s staff considering
Inheritances activities, X makes assistance available a particular applicant’s application knows
exclusively to low-income individuals and the identity of the party selling the home
Whether certain down payment assistance pro- families to provide part or all of the funds to the grant applicant and may also know
vided to a home buyer is excludible from the recipi- they need to make a down payment on the the identities of other parties, such as real
ent’s gross income as a gift under section 102. See purchase of a home. X uses standards set
Rev. Rul. 2006-27, page 915.
estate agents and developers, who may
by Federal housing statutes and adminis- receive a financial benefit from the sale.
tered by the Department of Housing and Moreover, in substantially all of the cases
Section 501.—Exemption Urban Development to determine who in which Y provides down payment assis-
From Tax on Corporations, is a low-income individual. Individuals tance to a home buyer, Y receives a pay-
are eligible to receive assistance from X’s
Certain Trusts, etc. ment from the home seller. Further, there
program if they are low-income individ- is a direct correlation between the amount
26 CFR 1.501(c)(3)–1: Organizations organized and uals, have the employment history and of the down payment assistance provided
operated for religious, charitable, scientific, testing financial history necessary to qualify for a by Y in connection with each of these trans-
for public safety, literary, or educational purposes, or mortgage, and would so qualify but for the
for the prevention of cruelty to children or animals. actions and the amount of the home seller’s
(Also §§ 61, 102, 1012.) lack of a down payment. X also offers fi- payment to Y. Finally, Y does not conduct
nancial counseling seminars and conducts a broad based fundraising campaign to at-
Down payment assistance; home other educational activities to help prepare tract financial support. Rather, most of Y’s
buyers. This ruling sets forth the appli- potential low-income home buyers for the support comes from home sellers and real
cable rules and standards for determining responsibility of home ownership. estate-related businesses that may benefit
whether organizations that provide down X will consider applications for assis- from the sale of homes to buyers who re-
payment assistance to home buyers qual- tance in connection with an applicant’s ceive Y’s down payment assistance.
ify as tax-exempt charities. In addition, purchase of any home that meets X’s stan-
the ruling addresses whether assistance re- dards for habitability. Before making a Situation 3
ceived for a down payment is treated as a grant of down payment assistance, X re-
gift and included in a home buyer’s basis. quires a home inspection report for the Z is a nonprofit corporation formed
property that the applicant intends to buy to combat community deterioration in
Rev. Rul. 2006–27 to ensure that the house will be habitable. an economically depressed area that has
To fund its down payment assistance suffered a major loss of population and
ISSUES: program and other activities, X conducts a jobs. Studies have shown that the av-
broad based fundraising program that at- erage income in the area is below the
1. Whether organizations that other- tracts gifts, grants and contributions from median level for the State. Z cooperates
wise meet the requirements of § 501(c)(3) several foundations, businesses and the with government agencies and commu-
of the Internal Revenue Code and are de- general public. nity groups to develop an overall plan
scribed in the situations below operate ex- X’s grantmaking process is structured to attract new businesses to the area and
clusively for charitable purposes. to ensure that X’s staff awarding grants on to provide stable sources of decent, safe
2. Whether home buyers who receive behalf of X does not know the identity of and sanitary housing for the area resi-
down payment assistance from the orga- the party selling the home to the grant ap- dents without relocating them outside the
nizations may exclude the amount of the plicant or the identities of any other par- area. As part of the renewal project, Z
assistance from their gross income as gifts ties, such as real estate agents or develop- receives funding from government agen-
under § 102. ers, who may receive a financial benefit cies to build affordable housing units for
3. Whether home buyers who receive from the sale. The staff also does not know sale to low and moderate-income families.
down payment assistance from the organi- whether any of the interested parties to the As a substantial part of its activities, Z
zations may include the amount of the as- transaction have been solicited for contri- makes down payment assistance avail-
sistance in the cost basis of their homes un- butions to X or have made pledges or ac- able to eligible home buyers who wish
der § 1012. tual contributions to X. Further, X does not to purchase the newly-constructed units

2006–21 I.R.B. 915 May 22, 2006


from Z. Z also offers financial counseling to the individual and beneficial to the als, but that could not establish that it
seminars and conducts other educational community. operated on a nonpartisan basis, did not
activities to help prepare potential low Section 1.501(c)(3)–1(e) provides that exclusively serve purposes described in
and moderate-income home buyers for the an organization that operates a trade or § 501(c)(3) because it also served private
responsibility of home ownership. business as a substantial part of its ac- interests more than incidentally. The court
To fund its down payment assistance tivities may meet the requirements of found that the organization was created
program and other activities, Z conducts a § 501(c)(3) if the trade or business furthers and funded by persons affiliated with a
broad based fundraising program that at- an exempt purpose, and if the organiza- particular political party and that most
tracts gifts, grants and contributions from tion’s primary purpose does not consist of of the organization’s graduates worked
several foundations, businesses and the carrying on an unrelated trade or business. in campaigns for the party’s candidates.
general public. In Easter House v. U.S., 12 Cl. Ct. Consequently, the court concluded that the
476, 486 (1987), aff’d, 846 F.2d 78 (Fed. organization conducted its educational ac-
LAW Cir. 1988), the U.S. Court of Federal tivities with the objective of benefiting the
Claims considered whether an organiza- party’s candidates and entities. Although
Section 501 of the Code provides for tion that provided adoption and related the candidates and entities benefited were
the exemption from federal income tax of health services to pregnant women who not organization “insiders,” the court
corporations organized and operated ex- agreed to place their newborns for adop- stated that the conferral of benefits on dis-
clusively for charitable or educational pur- tion through the organization qualified for interested persons who are not members
poses, provided that no part of the net earn- exemption under § 501(c)(3). The court of a charitable class may cause an organi-
ings inures to the benefit of any private concluded that the organization did not zation to serve a private interest within the
shareholder or individual. See § 501(c)(3). qualify for exemption under § 501(c)(3) meaning of § 1.501(c)(3)–1(d)(1)(ii). The
Section 1.501(c)(3)–1(c)(1) of the In- because its primary activity was placing court concluded by stating that even if the
come Tax Regulations provides that an or- children for adoption in a manner indis- political party’s candidates and entities did
ganization operates exclusively for exempt tinguishable from that of a commercial “comprise a charitable class, [the organi-
purposes only if it engages primarily in ac- adoption agency. The court rejected the zation] would bear the burden of proving
tivities that accomplish exempt purposes organization’s argument that the adop- that its activities benefited members of the
specified in § 501(c)(3). An organiza- tion services merely complemented the class in a non-select manner.” American
tion must not engage in substantial activ- health-related services to unwed moth- Campaign Academy, 92 T.C. at 1077.
ities that fail to further an exempt purpose. ers and their children. Rather, the court In Columbia Park and Recreation Asso-
In Better Business Bureau of Washington, found that the health-related services were ciation v. Commissioner, 88 T.C. 1 (1987),
D.C. v. U.S., 326 U.S. 279, 283 (1945), merely incident to the organization’s op- aff’d without published opinion, 838 F.2d
the Supreme Court held that the “presence eration of an adoption service, which, in 465 (4th Cir. 1988), the court held that an
of a single . . . [nonexempt] purpose, if and of itself, did not serve an exempt pur- association formed in a private real estate
substantial in nature, will destroy the ex- pose. The organization did not provide development to operate parks, swimming
emption regardless of the number or im- health-related services to unwed mothers pools, boat docks, and other recreational
portance of truly . . . [exempt] purposes.” who wished to keep their children or who facilities did not qualify as a § 501(c)(3) or-
Section 1.501(c)(3)–1(d)(1)(ii) pro- arranged for an adoption independent of ganization. Although the organization pro-
vides that an organization is not organized the organization. The organization’s sole vided some benefit to the general public,
or operated exclusively for exempt pur- source of support was the fees it charged the primary intended beneficiaries were
poses unless it serves a public rather than a adoptive parents, rather than contribu- the residents and property owners of the
private interest. To meet this requirement tions from the public. The court also private development. Thus, the organiza-
it is necessary for an organization to es- found that the organization competed with tion operated for a substantial non-exempt
tablish that it is not organized or operated for-profit adoption agencies, engaged in purpose rather than for exclusively chari-
for the benefit of private interests. substantial advertising, and accumulated table purposes.
Section 1.501(c)(3)–1(d)(2) defines the substantial profits. Accordingly, the court Rev. Rul. 67–138, 1967–1 C.B. 129,
term “charitable” as used in § 501(c)(3) as found that the “business purpose, and held that helping low-income persons ob-
including the relief of the poor and dis- not the advancement of educational and tain adequate and affordable housing is
tressed or of the underprivileged, and the charitable activities purpose, of plaintiff’s “charitable” because it relieves the poor
promotion of social welfare by organiza- adoption service is its primary goal” and and distressed or underprivileged. In Rev.
tions designed to lessen neighborhood ten- held that the organization was not oper- Rul. 67–138, the organization carried
sions, to eliminate prejudice and discrimi- ated exclusively for purposes described in on several activities directed to assisting
nation, or to combat community deteriora- § 501(c)(3). Easter House, 12 Cl. Ct. at low-income families in obtaining im-
tion. The term “charitable” also includes 485–86. proved housing, including (1) conducting
the advancement of education. In American Campaign Academy v. a training course relative to various aspects
Section 1.501(c)(3)–1(d)(3)(i) pro- Commissioner, 92 T.C. 1053 (1989), the of homebuilding and homeownership, (2)
vides, in part, that the term “educational” court held that an organization that op- coordinating and supervising joint con-
as used in § 501(c)(3) relates to the in- erated a school to train individuals for struction projects, (3) purchasing building
struction of the public on subjects useful careers as political campaign profession-

May 22, 2006 916 2006–21 I.R.B.


sites for resale at cost, and (4) lending aid moderate-income families with a prefer- businesses that were unable to obtain funds
in obtaining home construction loans. ence given to residents of the area. The from conventional sources, and gave pref-
Rev. Rul. 70–585, 1970–2 C.B. 115, revenue ruling held that the organization erence to businesses that would provide
discussed four situations of organizations was described in § 501(c)(3) because its training and employment opportunities for
providing housing and analyzed whether purposes and activities combated commu- unemployed or under-employed area res-
each organization qualified as charitable nity deterioration. idents. Although some of the individual
within the meaning of § 501(c)(3). Situa- Situation 4 described an organization business owners receiving financial assis-
tion 1 described an organization formed to formed to alleviate a shortage of housing tance from the organization were not them-
construct new homes and renovate exist- for moderate-income families in a particu- selves members of a charitable class, the
ing homes for sale to low-income families lar community. The organization planned benefit to them did not detract from the
who could not obtain financing through to build housing to be rented at cost to charitable character of the organization’s
conventional channels. The organization moderate-income families. The Service program. As in Rev. Rul. 72–559, the
also provided financial aid to low-income held that the organization failed to qual- recipients of aid were instruments for ac-
families eligible for loans under a Federal ify for exemption under § 501(c)(3) be- complishing the organization’s charitable
housing program who did not have the cause the organization’s program was not purposes.
necessary down payment. The organiza- designed to provide relief to the poor or Rev. Rul. 76–419, 1976–2 C.B. 146,
tion made rehabilitated homes available further any other charitable purpose within held that an organization that converts
to families who could not qualify for any the meaning of § 501(c)(3) and the regula- blighted land in an economically de-
type of mortgage. When possible, the or- tions. pressed community to an industrial park
ganization recovered the cost of the homes Rev. Rul. 72–147, 1972–1 C.B. 147, and leases space on favorable terms to
through very small periodic payments, but held that an organization that provided businesses that agree to hire a significant
its operating funds were obtained from housing to low-income families did not number of unemployed area residents and
federal loans and contributions from the qualify for exemption under § 501(c)(3) train them in needed skills qualifies for
general public. The revenue ruling held because it gave preference to employees exemption under § 501(c)(3). The organ-
that by providing homes for low-income of a business operated by the individual ization furthered charitable purposes by
families who otherwise could not afford who also controlled the organization. Al- improving economic conditions for the
them, the organization relieved the poor though providing housing for low-income poor and distressed and combating com-
and distressed. families furthers charitable purposes, do- munity deterioration. The organization
Situation 2 described an organization ing so in a manner that gives preference offered inducements to businesses solely
formed to ameliorate the housing needs of to employees of the founder’s business for the purpose of advancing charitable
minority groups by building housing units primarily serves the private interest of the goals.
for sale to persons of low and moderate-in- founder rather than a public interest. Section 61 provides that, except as oth-
come on an open-occupancy basis. The Rev. Rul. 72–559, 1972–2 C.B. 247, erwise provided in subtitle A (relating to
housing was made available to members of held that an organization that subsidized income taxes), gross income means all in-
minority groups who were unable to obtain recent law graduates during the first three come from whatever source derived.
adequate housing because of local discrim- years of their practice to enable them to Section 1012 provides, generally, that
ination. The housing units were located to establish legal practices in economically the basis of property shall be its cost to the
help reduce racial and ethnic imbalances in depressed communities that have a short- taxpayer.
the community. As the activities were de- age of available legal services, and to pro- Section 1016(a)(1) provides that proper
signed to eliminate prejudice and discrim- vide free legal services to needy members adjustment shall be made to the basis of
ination and to lessen neighborhood ten- of the community, qualified for exemption property for expenditures, receipts, losses,
sions, the revenue ruling held that the or- under § 501(c)(3). Although the recipients or other items properly chargeable to cap-
ganization was engaged in charitable ac- of the subsidies were not themselves mem- ital account.
tivities within the meaning of § 501(c)(3). bers of a charitable class, the resulting ben- Section 1001(a) provides that the gain
Situation 3 described an organization efit to them did not detract from charita- from the sale or other disposition of prop-
formed to formulate plans for the renewal ble purposes. Rather, the young lawyers erty is the excess of the amount realized
and rehabilitation of a particular area in a were merely the instruments by which the over the adjusted basis for determining
city as a residential community. The me- organization accomplished the charitable gain provided in § 1011. Section 1011(a)
dian income level in the area was lower purpose of providing free legal services for provides generally that the adjusted basis
than in other sections of the city and the those unable to pay for, or obtain, such ser- for determining gain from the sale or other
housing in the area generally was old and vices. disposition of property is the basis deter-
badly deteriorated. The organization de- Rev. Rul. 74–587, 1974–2 C.B. 162, mined under § 1012, adjusted as provided
veloped an overall plan for the rehabil- held that an organization providing low- in § 1016.
itation of the area, sponsored a renewal cost or long-term loans to, or equity in- Section 102 provides that the value of
project, and involved residents in the area vestments in, businesses operating in eco- property acquired by gift is excluded from
renewal plan. The organization also pur- nomically depressed areas qualified for ex- gross income. A gift “proceeds from a
chased an apartment building that it re- emption under § 501(c)(3). The organiza- ‘detached and disinterested generosity,’
habilitated and rented at cost to low and tion provided financial assistance only to . . . ‘out of affection, respect, admiration,

2006–21 I.R.B. 917 May 22, 2006


charity or like impulses.’” Commissioner payment assistance. The low-income in a specific, economically depressed area
v. Duberstein, 363 U.S. 278, 285 (1960). beneficiaries constitute a charitable class. that has suffered a major loss of population
Payments that proceed from “the con- Any benefit to other parties (such as home and jobs. Through a combination of coun-
straining force of any moral or legal duty,” sellers, real estate agents, or developers) seling and financial assistance, Z helps low
or from “‘the incentive of anticipated ben- who participate in the transactions does and moderate-income families in that area
efit’ of an economic nature,” are not gifts. not detract from the charitable purpose of to acquire decent, safe and sanitary hous-
Duberstein, 363 U.S. at 285. Thus, pay- relieving the poor and distressed. See Rev. ing and to prepare for the responsibilities
ments attendant to ordinary business or Ruls. 72–559, 74–587, 76–419. Because of home ownership. In this respect, Z is
commercial transactions, or that proceed X is operated exclusively for charitable like the organization described in Situa-
primarily from the moral or legal obliga- purposes, X qualifies for exemption from tion 3 of Rev. Rul. 70–585. Because Z
tions attendant such transactions, are not federal taxation as an organization de- is operated exclusively for charitable pur-
gifts. However, a payment made to an in- scribed in § 501(c)(3). poses, Z qualifies for exemption from fed-
dividual that responds to the individual’s By contrast, in Situation 2, Y does not eral taxation as an organization described
needs, that is made without economic or qualify as an organization described in in § 501(c)(3).
other consideration being received by the § 501(c)(3). To finance its down payment Down payment assistance payments
donor, and that does not proceed from assistance activities, Y relies on sellers for home buyers in Situations 1 and 3
any moral or legal duty, is motivated by and other real-estate related businesses are made by those organizations out of
detached and disinterested generosity, and that stand to benefit from the transactions a detached and disinterested generosity
may be excluded from gross income as Y facilitates. Furthermore, in deciding and from charitable or like impulse, rather
a gift under § 102. See, e.g., Rev. Rul. whether to provide assistance to a low-in- than to fulfill any moral or legal duty,
99–44, 1999–2 C.B. 549. come applicant, Y’s grantmaking staff and thus qualify for exclusion from such
knows the identity of the home seller and home buyers’ gross incomes as “gifts”
ANALYSIS may also know the identities of other in- under § 102. The benefits provided to the
terested parties and is able to take into home buyers in these circumstances are
In Situation 1, X’s purposes and activi- account whether the home seller or an- sufficiently removed from the interests of
ties relieve the poor, distressed and under- other interested party is willing to make any home sellers or sales agents that they
privileged by enabling low-income indi- a payment to Y. Y’s receipt of a payment proceed from a detached and disinterested
viduals and families to obtain decent, safe from the home seller corresponding to the generosity on the part of the donor organ-
and sanitary homes. The way X conducts amount of the down payment assistance ization, and such grants lack the indicia
its down payment assistance program es- in substantially all of the transactions, and of a rebate, price adjustment, or quid pro
tablishes that X’s primary purpose is to ad- Y’s reliance on these payments for most quo incident to a sale. Favorable treat-
dress the needs of its low-income grantees. of its funding indicate that the benefit to ment under § 102 is thus appropriate. The
See Rev. Rul. 70–585, Sit. 1. As a the home seller is a critical aspect of Y’s home buyer’s payment of such amount
condition of providing assistance, X re- operations. In this respect, Y is like the toward the purchase of the residence will
quires a home inspection to ensure that the organization considered in Easter House, be included in his or her cost basis under
house the applicant intends to buy will be which received all of its support from fees § 1012.
habitable. X’s financial counseling semi- charged to adoptive parents, so that the In Situation 2, in substantially all of
nars and other educational programs help business purpose of the adoption service the cases in which Y provides down pay-
to prepare potential home buyers for the re- became its primary goal and overshad- ment assistance to a home buyer, Y re-
sponsibility of home ownership. See Rev. owed any educational or charitable pur- ceives a payment from the home seller
Rul. 67–138. X conducts a broad based pose. Like the organization considered in that directly correlates to the amount of
fundraising program, and X receives sup- American Campaign Academy, Y is struc- the down payment assistance Y provides
port from a wide array of sources. X’s tured and operated to assist private parties to the home buyer. In those cases, the
policies of ensuring that its grantmaking who are affiliated with its funders. Like payments received by the home buyers do
staff does not know the identity or contrib- the organizations considered in American not qualify for exclusion from gross in-
utor status of the party selling the home Campaign Academy, Easter House, and come as gifts under § 102. The payments
to the grant applicant (or any other party Columbia Park Recreation Association, do not proceed from detached and disin-
who may receive a financial benefit from Y also serves an exempt purpose, but be- terested generosity, but rather are in re-
the sale), and of not accepting contribu- cause Y is not operated exclusively for sponse to an anticipated economic bene-
tions contingent on the sale of any particu- exempt purposes, Y does not qualify for fit, namely facilitating the sale of a seller’s
lar properties, ensure that X is not beholden exemption from federal income tax as an home. Under Duberstein, supra, such pay-
to any particular donors or other supporters organization described in § 501(c)(3). ments are not gifts for purposes of § 102.
whose interest may conflict with that of the In Situation 3, although Z does not limit Unlike in Situations 1 and 3, in Situation
low-income buyers X is working to help. its down payment assistance program to 2, the down payment assistance received
X’s grantmaking procedures combined low-income recipients, Z’s down payment by those home buyers represents a rebate
with its efforts to educate home buyers en- assistance program still serves a charita- or purchase price reduction. As a rebate
sure that X is operated primarily to benefit ble purpose described in § 501(c)(3) be- or purchase price reduction, the down pay-
the low-income beneficiaries of its down- cause it combats community deterioration ment assistance is not includible in a home

May 22, 2006 918 2006–21 I.R.B.


buyer’s gross income under § 61 and the Section 1502.—Regulations proper treatment of such incentive pay-
amount of the down payment assistance is ments under the intercompany transaction
26 CFR 1.1502–13: Intercompany transactions.
not included in the home buyer’s cost ba- regulations.
sis under § 1012, as adjusted under § 1016. On April 25, 2005, the IRS and Trea-
T.D. 9261 sury Department published Rev. Rul.
HOLDINGS 2005–28, 2005–19 I.R.B. 997, which sus-
DEPARTMENT OF pends, in part, Rev. Rul. 76–96, 1976–1
1. In Situations 1 and 3, the organi- THE TREASURY C.B. 23. Rev. Rul. 2005–28 states that
zation is operated exclusively for charita-
ble purposes and qualifies for exemption
Internal Revenue Service the IRS will not apply, and taxpayers may
26 CFR Part 1 not rely upon, the conclusion reached in
from federal income tax as an organiza-
Rev. Rul. 76–96 that certain rebates made
tion described in § 501(c)(3). In Situa-
Intercompany Transactions; by a manufacturer to retail customers are
tion 2, the organization is not operated ex-
ordinary and necessary business expenses
clusively for charitable purposes, and con- Manufacturer Incentive
deductible under section 162, pending the
sequently, does not qualify for exemption Payments IRS’s reconsideration of the issue and
from federal income tax as an organization
AGENCY: Internal Revenue Service publication of subsequent guidance.
described in § 501(c)(3).
2. In Situations 1 and 3, the home buy- (IRS), Treasury. Explanation of Provisions
ers may exclude the down payment assis-
tance from their gross income as gifts un- ACTION: Final regulations. The manufacturer incentive
der § 102. In Situation 2, the home buy- payment transaction described in
SUMMARY: This document contains final
ers may not exclude the down payment as- §1.1502–13(c)(7)(ii), Example 13 relies,
regulations under section 1502 of the Inter-
sistance as gifts under § 102. However, in part, upon the premise that the manufac-
nal Revenue Code. Example 13 of the in-
in Situation 2, the down payment assis- turer incentive payment is an ordinary and
tercompany transaction regulations illus-
tance is excluded from the gross income of necessary business expense deductible
trates the treatment of manufacturer incen-
home buyers because it represents a rebate under section 162. To the extent that this
tive payments. Because a premise under-
or purchase price reduction. premise is correct, this example illustrates
lying the example is under reconsideration,
3. In Situations 1 and 3, the home the proper application of the intercom-
these final regulations remove and reserve
buyers may include the down payment as- pany transaction regulations. However,
this example. The regulations will affect
sistance in the cost basis of their homes because Rev. Rul. 2005–28 suspends Rev.
corporations filing consolidated returns.
under § 1012. In Situation 2, the home Rul. 76–96, in pertinent part, these final
buyers may not include the amount of the DATES: Effective Date: These regulations regulations remove §1.1502–13(c)(7)(ii),
down payment assistance in the cost ba- are effective on May 8, 2006. Example 13, pending further guidance on
sis of their homes under § 1012. Rather, the section 162 issue considered in Rev.
the amount of the down payment assis- FOR FURTHER INFORMATION Rul. 76–96.
tance represents a rebate or purchase price CONTACT: Frances Kelly, (202)
reduction that is excluded from the home 622–7770 (not a toll-free number). Special Analyses
buyer’s cost basis under § 1012.
SUPPLEMENTARY INFORMATION: It has been determined that this Trea-
DRAFTING INFORMATION sury decision is not a significant regula-
Background tory action as defined in Executive Or-
The principal author of this revenue rul- der 12866. Therefore, a regulatory assess-
ing is Elizabeth C. Kastenberg of Exempt Section 1.1502–13 of the consolidated ment is not required. It is hereby certi-
Organizations, Tax Exempt and Govern- return regulations provides rules for tak- fied that these regulations will not have a
ment Entities Division. For further in- ing into account items of income, gain, significant economic impact on a substan-
formation regarding this revenue ruling, deduction, and loss of members from tial number of small entities. These final
contact Elizabeth C. Kastenberg at (202) intercompany transactions. In particu- regulations do not alter substantive provi-
283–9468 (not a toll-free call). lar, §1.1502–13(c)(7)(ii), Example 13, sions of the intercompany transaction reg-
illustrates how the matching rule of the in- ulations. They merely remove an example
tercompany transaction regulations treats which may be misleading and cause con-
Section 1012.—Basis of a transaction involving manufacturer in- fusion for taxpayers. Accordingly, good
Property—Cost centive payments. On August 13, 2004, cause is found for dispensing with prior
the IRS and Treasury Department pub- notice and comment pursuant to 5 U.S.C
Whether certain down payment assistance pro-
vided to a home buyer is included in the buyer’s cost
lished a notice of proposed rulemaking 553(b), and for dispensing with a delayed
basis under section 1012. See Rev. Rul. 2006-27, (REG–131264–04, 2004–2 C.B. 506) effective date pursuant to 5 U.S.C 553(d).
page 915. in the Federal Register (69 FR 50112) Because no notice of proposed rulemaking
proposing regulations to address addi- is required, the provisions of the Regula-
tional transactions involving manufacturer tory Flexibility Act (5 U.S.C. chapter 6)
incentive payments and to clarify the do not apply. Pursuant to section 7805(f)

2006–21 I.R.B. 919 May 22, 2006


of the Internal Revenue Code, this regula- Adoption of Amendments to the Mark E Matthews,
tion was submitted to the Chief Counsel Regulations Deputy Commissioner for
for Advocacy of the Small Business Ad- Services and Enforcement.
ministration for comments on its impact on Accordingly, 26 CFR part 1 is amended
small business. as follows: Approved April 28, 2006.

Drafting Information PART 1—INCOME TAXES Eric Solomon,


Deputy Assistant
The principal author of these regula- Paragraph 1. The authority citation for Secretary of the Treasury.
tions is Frances Kelly of the Office of part 1 is amended by adding an entry in
(Filed by the Office of the Federal Register on May 5, 2006,
the Associate Chief Counsel (Corporate). numerical order to read in part as follows: 8:45 a.m., and published in the issue of the Federal Register
However, other personnel from the IRS Authority: 26 U.S.C. 7805 * * * for May 8, 2006, 71 F.R. 26687)

and Treasury Department participated in


Section 1.1502–13 also issued under 26
their development.
U.S.C. 1502. * * *
*****
Par. 2. In §1.1502–13, paragraph
(c)(7)(ii), Example 13 is removed and re-
served.

May 22, 2006 920 2006–21 I.R.B.


Part III. Administrative, Procedural, and Miscellaneous
Interim Guidance With .02 Treasury Regulations under Section aircraft as a result of the statutory amend-
Respect to the Application of 883(a) and (c) ments to sections 954(a)(4) and (f).
Treas. Reg. §1.883–3 Section 423 of the AJCA delayed the
On August 26, 2003, Treasury and applicability date of the final regulations
the IRS issued Treasury Decision 9087, under section 883(a) and (c) for one year,
Notice 2006–43 2003–2 C.B. 781. Treasury Decision 9087 until taxable years beginning after Septem-
SECTION I. PURPOSE included final regulations implementing ber 24, 2004.
section 883(a) and (c) and provided that
This notice announces that the Trea- the section 883(a)(1) and (2) exclusion is .04 T.D. 9218
sury Department (Treasury) and the Inter- conditioned on the corporation satisfying
nal Revenue Service (IRS) will amend the certain stock ownership and related sub- On August 5, 2005, Treasury and the
regulations under section 883 of the In- stantiation and reporting requirements. IRS issued T.D. 9218, 2005–37 I.R.B. 503,
ternal Revenue Code (Code) to provide Under § 1.883–3(a), a CFC satisfies the to conform the applicability date of the
guidance regarding the proper interpreta- stock ownership requirement if it meets section 883(a) and (c) final regulations in
tion of §1.883–3(b) in light of the repeal the “income inclusion test” of §1.883–3(b) light of section 423 of the AJCA. In the
of section 954(a)(4) and (f) (foreign base and satisfies certain substantiation and preamble to T.D. 9218, Treasury and the
company shipping provisions) by section reporting requirements. The income in- IRS also addressed the interpretation of the
415 of the American Jobs Creation Act clusion test requires that more than 50 income inclusion test in light of the AJCA.
of 2004, Pub. L. No. 108–357, 118 Stat. percent of the CFC’s adjusted net for- The preamble stated that the better inter-
1418 (2004) (“AJCA”). Until such regula- eign base company income (as defined in pretation of §1.883–3(b) is that a CFC that
tions are issued, taxpayers may rely on the § 1.954–1(d) and as increased or decreased satisfied the income inclusion test prior to
rules set forth in this notice. by section 952(c)) derived from the inter- the effective date of the AJCA may con-
national operation of ships or aircraft is tinue to satisfy it after the effective date
SECTION 2. BACKGROUND includible in the gross income of one or of the legislation, provided the CFC can
more United States citizens, individual demonstrate that had section 954(a)(4) and
.01 Section 883(a) and (c) residents of the United States, or domestic (f) of the Code not been repealed, more
corporations. than 50 percent of its current earnings and
Section 883(a)(1) and (a)(2) of the Code profits derived from its international oper-
generally provide that income from the in- .03 AJCA Shipping Income Provisions ation of ships or aircraft would have been
ternational operation of ships or aircraft attributable to amounts includible in the
derived by a corporation organized in a Section 415 of the AJCA eliminated gross income of one or more U.S. citizens,
foreign country shall be excluded from foreign base company shipping income as individual residents of the United States or
gross income and exempt from U.S. tax- a type of subpart F income, effective for domestic corporations (pursuant to section
ation if the foreign country in which such taxable years of foreign corporations be- 951(a)(1)(A) or another provision of the
corporation is organized grants an equiva- ginning after December 31, 2004, and tax- Code) for the taxable years of such per-
lent exemption to corporations organized able years of U.S. shareholders with or sons in which the taxable year of the CFC
in the United States. Section 883(c)(1) within which such taxable years of the for- ends. The preamble to T.D. 9218 stated
provides that the section 883(a)(1) and (2) eign corporations end. The legislative his- that Treasury and the IRS would issue reg-
exclusion will not apply if 50 percent or tory to section 415 of the AJCA indicates ulations to clarify the application of the in-
more of the value of the stock of the for- that Congress believed the elimination of come inclusion test and invited comments
eign corporation is owned by individuals foreign base company shipping income as on the most appropriate way to accomplish
who are not residents of a country that a type of subpart F income would provide this clarification consistent with the princi-
grants an equivalent exemption to U.S. “U.S. shippers the opportunity to be com- ples of the existing section 883 regulations
corporations (the section 883(c)(1) limita- petitive with their tax-advantaged foreign and the AJCA.
tion). Under section 883(c)(2), the sec- competitors.” See H. Rep. No. 548, Part I, Treasury and the IRS received a num-
tion 883(c)(1) limitation does not apply to 108th Cong., 2nd Sess. 209 (2004). ber of comments in response to T.D.
any foreign corporation that is a CFC. Un- Commentators requested guidance on 9218. Generally, commentators suggested
der section 883(c)(3), the section 883(c)(1) the proper interpretation of §1.883–3(b) in that the test proposed in the preamble to
limitation does not apply if the stock of the light of the repeal of the foreign base com- T.D. 9218 was too complex because it
foreign corporation is primarily and reg- pany shipping provisions. Commentators required CFCs to calculate hypothetical
ularly traded on an established securities also expressed concern that foreign corpo- amounts of subpart F income as though
market in the United States or in a foreign rations may no longer satisfy the income sections 954(a)(4) and (f) had not been
country that grants an equivalent exemp- inclusion test if they no longer derive for- repealed. Commentators proposed sev-
tion to U.S. corporations. eign base company shipping income from eral alternative approaches they viewed
the international operation of their ships or as simpler than the approach described in
T.D. 9218, including replacing the income

2006–21 I.R.B. 921 May 22, 2006


inclusion test with a test that determines ness of U.S. shippers through the elimina- SECTION 5. REQUEST FOR
whether certain U.S. persons, who are not tion of foreign base company shipping in- COMMENTS
flow-through entities own, directly or in- come as a type of subpart F income, Trea-
directly, more than 50 percent of the value sury and the IRS intend to amend §1.883–3 Treasury and the IRS request fur-
of the CFC for more than half of the days to replace the income inclusion test with a ther comments from interested persons
in the CFC’s taxable year. Some commen- new ownership based test. Under the new on the rules announced in this notice.
tators suggested that CFCs organized in a test, a foreign corporation will satisfy the Written comments may be submitted to
foreign country that provides a reciprocal stock ownership test of §1.883–1(c)(2) if it CC:INTL:Br1 (Notice 2006–43), room
exemption to U.S. corporations on their meets a “qualified U.S. person ownership 4607, Internal Revenue Service, P.O.
income from the international operation test” and satisfies the substantiation and re- Box 7604, Ben Franklin Station, Wash-
of their ships or aircraft should be eligible porting requirements of paragraphs (c) and ington, DC 20224. Submissions may
for the exclusion under section 883(a)(1) (d), respectively, of § 1.883–3. be hand delivered Monday through Fri-
and (2) without further limitation. A foreign corporation shall satisfy the day between the hours of 8 a.m. and
“qualified U.S. person ownership test” if, 5 p.m. to: CC:INTL:Br1 (Notice 2006–43)
SECTION 3. NEW RULE: QUALIFIED for more than half the days of the corpo- Courier’s desk, Internal Revenue Ser-
U.S. PERSON OWNERSHIP TEST ration’s taxable year: (i) it is a CFC, and vice, 1111 Constitution Avenue, NW,
(ii) more than 50 percent of the total value Washington, DC 20224. Alternatively,
Treasury and the IRS have considered taxpayers may submit comments electron-
of all the outstanding stock of the CFC
the comments received in response to T.D. ically via the following e-mail address:
is owned (within the meaning of section
9218. Treasury and the IRS continue to Notice.Comments@irscounsel.treas.gov.
958(a), as modified for purposes of apply-
believe that residents of countries that do Please include “Notice 2006–43” in the
ing this notice) by one or more “qualified
not provide a reciprocal exemption to U.S. subject line of any electronic communica-
U.S. persons.”
corporations on their income from the in- tions.
A “qualified U.S. person” is a U.S. per-
ternational operation of their ships or air-
son (as defined in section 7701(a)(30)) that
craft might attempt to use the CFC ex- DRAFTING INFORMATION
is a U.S. citizen, resident alien, or a do-
ception to circumvent the rules of sec-
mestic corporation. For purposes of apply-
tion 883(c)(1) by owning more than 50 The principal author of this notice is
ing the “qualified U.S. person ownership
percent of the value of a foreign corpo- Patricia A. Bray of the Office of Associate
test,” the value of the stock in the CFC that
ration through a U.S. fiscally transparent Chief Counsel (International). However,
is owned (directly or indirectly) through
entity, such as a U.S. partnership. Trea- other personnel from Treasury and the IRS
bearer shares shall not be considered in the
sury and the IRS continue to believe that participated in its development. For fur-
numerator or denominator of the owner-
this is contrary to the Congressional in- ther information regarding this notice, con-
ship fraction. In addition, for purposes of
tent to ensure that the exclusion provided tact Patricia A. Bray at (202) 622–3880
applying this test, stock owned by a do-
in section 883(a)(1) and (2) is provided (not a toll-free call).
mestic partnership, domestic trust or do-
only to foreign corporations that are owned
mestic estate, shall be treated as owned by
by residents of foreign countries that pro-
its partners, beneficiaries or owners, re-
vide a reciprocal exemption to U.S. cor-
spectively, applying the rules of section Announcement of Rules
porations. See S. Rep. No. 313, 99th Implementing American
958(a) as if such domestic entity were a
Cong., 2nd Sess. 340–41 (1986); see also
Joint Committee on Taxation, General Ex-
foreign partnership, foreign trust, or for- Jobs Creation Act of 2004
eign estate, respectively. Section 415 Modifications to
planation of the Tax Reform Act of 1986,
at 927–928. In addition, Treasury and the SECTION 4. EFFECTIVE DATE the Subpart F Treatment of
IRS continue to believe this result is also Aircraft and Vessel Leasing
contrary to the Conference report accom- Regulations to be issued incorporating Income
panying the legislation that added the CFC the guidance set forth in this notice will
exception, which states that: “corporations apply for taxable years beginning after the Notice 2006–48
are not considered residents of countries May 2, 2006. Taxpayers also may ap-
that exempt U.S. persons unless 50 percent ply the provisions of this notice to taxable SECTION 1. OVERVIEW
or more of the ultimate individual owners years beginning before May 2, 2006, but
are U.S. shareholders of controlled foreign after December 31, 2004. Taxpayers ap- This notice provides guidance relating
corporations.” H.R. Conf. Rep. No. 841, plying this notice, however, must do so to amendments made by section 415 of
99th Cong., 2d Sess. 598 (1986). consistently for all taxable years for which the American Jobs Creation Act of 2004
However, Treasury and the IRS agree this notice is applied and for which it is in (Public Law 108–357) (October 24, 2004)
that the income inclusion test, as it was effect. (AJCA), which affect the treatment of cer-
interpreted in T.D. 9218, is overly com- tain income and assets related to the leas-
plex and unnecessary. As a result, based ing of aircraft or vessels in foreign com-
on the comments received and Congres- merce. The Treasury Department (Trea-
sional intent to increase the competitive- sury) and the Internal Revenue Service

May 22, 2006 922 2006–21 I.R.B.


(IRS) intend to amend the regulations un- Section 1.954–2(c)(2)(ii) provides that the financial accounting purposes. If a
der sections 367(a), 954, and 956 of the determination of whether the foreign or- lessor acquires, from an unrelated or
Internal Revenue Code (Code) to address ganization is substantial in relation to the related party, a ship or aircraft subject
the amendments made by section 415 of amount of rents derived is based on all to an existing FSC or ETI lease, the
the AJCA and this notice. Until regula- the facts and circumstances. However, un- requirements of section 954(c)(2)(A)
tions reflecting these changes are issued, der § 1.954–2(c)(ii), the organization will will be satisfied if, following the acqui-
taxpayers may rely upon this notice. This be considered substantial in relation to the sition, the lessor performs active and
notice also solicits comments on whether amount of rents if active leasing expenses substantial management, operational,
any other changes to the regulations under equal or exceed 25 percent of the adjusted and remarketing functions with respect
sections 367, 954, and 956 are necessary leasing profit, as those terms are defined to the leased property.
to implement the purposes of section 415 under the regulations.
of the AJCA. Section 415 of the AJCA amended Id.
section 954(c)(2)(A) to create a new safe An aircraft or vessel will qualify
SECTION 2. BACKGROUND harbor for rents derived from leasing an for the new safe harbor under section
aircraft or vessel in foreign commerce. 954(c)(2)(A) only if it is leased in “foreign
.01 In General
The amendment to section 954(c)(2)(A) commerce.” The legislative history pro-
Section 415 of the AJCA repealed sec- provides that, for purposes of section vides that, for purposes of this safe harbor:
tion 954(a)(4) and (f), the foreign base 954(c)(2)(A):
company shipping income provisions An aircraft or vessel will be considered
of subpart F. Following repeal of the [R]ents derived from leasing an aircraft to be leased in foreign commerce if it
foreign base company shipping income or vessel in foreign commerce shall not is used for the transportation of prop-
provisions, rents derived from leasing fail to be treated as derived in the active erty or passengers between a port (or
an aircraft or vessel may be included in conduct of a trade or business if, as de- airport) in the United States and one
subpart F income only if the rents are de- termined under regulations prescribed in a foreign country or between foreign
scribed in another category of subpart F by the Secretary, the active leasing ex- ports (or airports), provided the aircraft
income such as foreign personal holding penses are not less than 10 percent of or vessel is used predominantly outside
company income as defined in section the profit on the lease. the United States. An aircraft or ves-
954(c) (FPHCI). Rents are included in sel will be considered used predomi-
FPHCI under section 954(c)(1)(A). Sec- The legislative history of section 415 of nantly outside the United States if more
tion 954(c)(2)(A) excludes from FPHCI the AJCA provides that the new safe har- than 50 percent of the miles during the
rents received from unrelated persons and bor for rents derived from leasing an air- taxable year are traversed outside the
derived in the active conduct of a trade or craft or vessel in foreign commerce “is to United States or the aircraft or vessel is
business. be applied in accordance with the exist- located outside the United States more
Rents derived by a controlled foreign ing regulations under section 954(c)(2)(A) than 50 percent of the time during such
corporation (CFC) (i.e., the lessor) are con- by comparing the lessor’s ‘active leasing taxable year.
sidered to be derived in the active con- expenses’ for its pool of leased assets to
duct of a trade or business if the rents its ‘adjusted leasing profit.’” H.R. Rep. 2004 House Report at 210. This defini-
are derived under any one of four circum- No. 548, 108th Cong., 2d Sess. 210 tion of “foreign commerce” is similar to
stances described in the Income Tax Reg- (2004) (hereinafter 2004 House Report). the definition of foreign commerce con-
ulations under section 954(c)(2)(A). One The legislative history of section 415 of the tained in § 1.954–6(b)(3), the regulations
such relevant circumstance, provided in AJCA1 further indicates: under the now repealed foreign base com-
§ 1.954–2(c)(1)(iv), is when rents are de- pany shipping income provisions, except
rived from leasing property that is leased [T]he requirements of section that this regulation does not include a pre-
as a result of the performance of market- 954(c)(2)(A) will be met if a lessor dominant use standard.
ing functions by the lessor. These rents regularly and directly performs active The legislative history directs the Sec-
are considered to be derived in the ac- and substantial marketing, remarketing, retary of the Treasury to make conforming
tive conduct of a trade or business if the management and operational functions changes to current regulations “including
lessor, through its own officers or employ- with respect to the leasing of an aircraft guidance that aircraft or vessel leasing ac-
ees located in a foreign country, maintains or vessel (or component engines). This tivity that satisfies the requirements of sec-
and operates an organization in the for- will be the case regardless of whether tion 954(c)(2)(A) shall also satisfy the re-
eign country that is regularly engaged in the lessor engages in marketing of quirements for avoiding income inclusion
the business of marketing, or of market- the lease as a form of financing (ver- under section 956 and section 367(a).” Id.
ing and servicing, the leased property and sus marketing the property as such) This legislative history indicates that Con-
that is substantial in relation to the amount or whether the lease is classified as gress anticipated that taxpayers might re-
of rents derived from leasing the property. a finance lease or operating lease for structure their operations to take advantage

1While the legislative history indicates that the requirements of this provision may be met whether the lease is classified as a finance lease or an operating lease, under other provisions of the
Code financing and operating leases are provided different treatment.

2006–21 I.R.B. 923 May 22, 2006


of the new benefits under subpart F pro- changes must be made to the regulations time of the transfer unless: (1) the trans-
vided by section 415 of the AJCA, namely under section 956. feree was the lessee and the transferee
the repeal of the foreign base company will not lease to third persons, or (2) the
shipping income provisions and a liberal- .03 Section 367(a) transferee will lease to third persons and
ized safe harbor for excluding active leas- the transferee satisfies the conditions of
ing income from aircraft or vessels from Section 367(a)(1) provides that if, in § 1.367(a)–4T(c)(1) or (2).
foreign personal holding income. connection with any exchange described Finally, § 1.367(a)–4T(c)(1) provides
in section 332, 351, 354, 356, or 361, a that if the transferred property will be
.02 Section 956 United States person transfers property to leased by the transferee foreign corpora-
a foreign corporation, the foreign corpo- tion, the property generally is considered
Section 956(c)(1)(A) provides that ration will not, for purposes of determin- to be transferred for use in the active
the term “United States property” (“U.S. ing the extent to which gain will be rec- conduct of a trade or business outside
property”) generally includes tangible ognized on such transfer, be considered to of the United States only if all three of
property located in the United States. Sec- be a corporation. The effect of this gen- the following conditions are met: (i) the
tion 956(c)(2) provides exceptions to the eral rule is that the transfer will not qual- transferee’s leasing constitutes the active
general definition of U.S. property. Sec- ify for nonrecognition treatment, and thus, conduct of a leasing business; (ii) the
tion 956(c)(2)(D) excludes from the term the transferor must recognize gain on the lessee does not use the property in the
U.S. property any aircraft, railroad rolling transferred assets. However, under section United States; and (iii) the transferee has
stock, vessel, motor vehicle, or container 367(a)(3)(A), except as provided in regu- need for substantial investment in assets
used in the transportation of persons or lations, this general rule does not apply to of the type transferred.
property in foreign commerce and used any property transferred to a foreign cor- Even if property qualifies for the active
predominantly outside the United States. poration for use by the foreign corporation trade or business exception, when a U.S.
Section 1.956–2(b)(1)(vi) provides that in the active conduct of a trade or busi- person transfers U.S. depreciated prop-
whether an aircraft, railroad rolling stock, ness outside of the United States. Except erty to a foreign corporation, that person
vessel, motor vehicle, or container is used as provided in regulations, however, sec- must include as ordinary income in the
predominantly outside the United States tion 367(a)(3)(A) does not apply to prop- year of the transfer the gain realized that
depends on the facts and circumstances in erty with respect to which the transferor would have been included as ordinary in-
each case. This regulation also provides is a lessor at the time of the transfer (un- come under sections 617(d)(1), 1245(a),
that as a general rule, such transportation less the transferee is the lessee). I.R.C 1250(a), 1252(a), or 1254(a) if the tax-
property will be considered used predomi- § 367(a)(3)(B)(v). payer had sold the property at its fair
nantly outside the United States if 70 per- Section 1.367(a)–2T(a) provides, in market value on the date of the transfer.
cent or more of the miles traversed in the part, that section 367(a)(1) does not apply Treas. Reg. § 1.367(a)–4T(b)(1) (“section
use of such property are traversed outside to property transferred to a foreign corpo- 367 recapture”). For this purpose, U.S.
the United States or if such property is lo- ration if the property is transferred for use depreciated property includes property
cated outside the United States 70 percent by that corporation in the active conduct that has been used in the United States
of the time during such taxable year. of a trade or business outside of the United or has qualified as section 38 property by
As noted above, the legislative history States and certain reporting requirements virtue of section 48(a)(2)(B). Treas. Reg.
of section 415 of the AJCA provides, are met. Section 1.367(a)–2T(b)(3), in § 1.367(a)–4T(b)(2)(ii). Some transferors
for purposes of the newly-created section turn, provides that “[w]hether a trade or that qualify for the section 367 trade or
954(c)(2)(A) safe harbor, an aircraft or business that produces rents or royalties business exception under the provisions
vessel will be considered used predomi- is actively conducted shall be determined of this notice may have used depreciated
nantly outside the United States if more under the principles of § 1.954–2(d)(1) property in the United States prior to the
than 50 percent of the miles during the tax- (but without regard to whether the rents or transfer to the foreign corporation and
able year are traversed outside the United royalties are received from an unrelated therefore may be subject to section 367
States or the aircraft or vessel is used person).” Section 1.367(a)–2T(b)(4) pro- recapture.
predominantly outside the United States vides generally that a foreign corporation The section 367 recapture amount is re-
more than 50 percent of the time during conducts a trade or business outside of the duced if the property has been used partly
such taxable year. 2004 House Report at United States if the primary managerial outside the United States. Treas. Reg.
210. In addition, the legislative history in- and operational activities of the trade or § 1.367(a)–4T(b)(3). In this circumstance,
dicates that Congress intended to exclude business are located outside of the United the amount of the section 367 deprecia-
aircraft or vessels from the definition of States and if immediately after the transfer tion recapture is determined by multiply-
U.S. property under section 956 if the rents the transferred assets are located outside ing the full section 367 recapture amount
derived from leasing the aircraft or ves- of the United States. by a fraction, the numerator of which is the
sels are excluded from foreign personal Section 1.367(a)–5T(f) then provides U.S. use of the property and denominator
holding company income under section that, regardless of use in an active trade of which is the total use of the property.
954(c)(2)(A). To implement congressional or business, section 367(a)(1) applies to a U.S. use is the number of months that the
intent with regard to aircraft or vessels transfer of tangible property with respect property either was used within the United
leased in foreign commerce, conforming to which the transferor is a lessor at the States or qualified as section 38 property

May 22, 2006 924 2006–21 I.R.B.


by virtue of section 48(a)(2)(B) and was treated as used predominately outside the under section 367(a) will provide that
subject to depreciation by the transferor United States if it would be so treated generally the primary managerial and
or a related person. Total use is the total under § 1.956–2(b)(1)(vi) with the phrase operational activities of the trade or
number of months that the property was “more than 50 percent” substituted for business of leasing an aircraft or vessel
used (or was available for use), and sub- the phrases “70 percent or more” or “70 must be conducted outside of the United
ject to depreciation, by the transferor or a percent.” States, and the aircraft or vessel must be
related person. Property is not considered used predominantly outside of the United
to be used outside the United States dur- SECTION 4. SECTION 956 GUIDANCE States, as defined above in section 3.
ing any period in which the property was, A lessee that uses an aircraft or vessel
Future guidance will provide that, for
for purposes of section 38 or 168, treated predominantly outside of the United
purposes of applying § 1.956–2(b)(1)(vi),
as property not used predominately out- States will satisfy the requirement in
an aircraft or vessel used in the trans-
side the United States pursuant to the pro- § 1.367(a)–4T(c)(1)(ii).
portation of persons or property in foreign
visions of section 48(a)(2)(B).
commerce is excluded from U.S. property .03 Depreciation Recapture for Certain
Therefore, to apply the section 367 re-
under § 1.956–2(b)(1)(vi) if rents derived Section 367 Transfers
capture provisions, transferors must deter-
from leasing such aircraft or vessel are ex-
mine the number of months that the prop-
cluded from foreign personal holding com- Treasury and the IRS are considering
erty was used in the United States or qual-
pany income under section 954(c)(2)(A) future guidance regarding how to deter-
ified as section 38 property. Mobile as-
and such property is considered to be used mine whether an aircraft or vessel was
sets such as airplanes and vessels may en-
predominately outside the United States used predominantly outside the United
ter and leave the United States a number
under § 1.956–2(b)(1)(vi), determined States for a particular month for purposes
of times during a month, thus raising the
by substituting the phrase “more than 50 of calculating section 367 recapture. Until
issue of how to determine whether such an
percent” for the phrases “70 percent or further guidance is issued, taxpayers are
asset was used predominately outside the
more” or “70 percent.” For purposes of permitted to use any reasonable method to
United States during that month. Rev. Rul.
determining whether an aircraft or vessel make this determination.
71–178, 1971–1 C.B. 6, provides gener-
is used in foreign commerce, the defini-
ally that each day an aircraft under for- SECTION 6. EFFECTIVE DATE
tion of “foreign commerce” contained in
eign registry is physically located in the
§ 1.954–6(b)(3) shall continue to apply.
United States for more than 12 hours is The future regulations described in this
considered a day within the United States SECTION 5. SECTION 367(a) notice will be effective beginning on or af-
for purposes of § 1.48–1(g). There is no GUIDANCE ter May 2, 2006. Until those regulations
guidance under either section 48 or section are issued, taxpayers may rely upon the
367, however, that specifies how to deter- .01 Active Conduct of a Trade or Business provisions of this notice as of May 2, 2006.
mine whether the aircraft was used pre- that Produces Rents or Royalties In addition, taxpayers may elect to apply
dominately outside the United States for a sections 3 and 4 of this notice retroactively
particular month. In light of section 415 of the AJCA and to tax years of foreign corporations begin-
its legislative history, the regulations under ning after December 31, 2004, and for tax
SECTION 3. SECTION 954 GUIDANCE section 367(a) will provide that the princi- years of United States shareholders with
ples of section 954(c)(2)(A) (as amended or within which such tax years of foreign
Future guidance will amend the regula-
by the AJCA), and the regulations there- corporations end. Taxpayers may elect to
tions under section 954 to address the de-
under (as they will be amended pursuant apply section 5 of this notice retroactively
termination of whether rents derived from
to section 3 of this notice), shall apply to to transfers of aircraft or vessels occurring
leasing an aircraft or vessel in foreign com-
determine whether a trade or business that on or after October 22, 2004. This elec-
merce will be treated as derived in the ac-
produces rents or royalties is actively con- tion is made by providing the description
tive conduct of a trade or business under
ducted under § 1.367(a)–2T(b)(3). Until of the transfer under § 1.6038B–1T(c) as
section 954(c)(2)(A), as amended by sec-
those regulations under section 367(a) are specified in section 5.01 of this notice. No
tion 415 of the AJCA. Comments are re-
issued, taxpayers relying upon this notice relief under § 301.9100–1 is necessary for
quested on whether there are issues with
must state that they are applying the provi- this election. Taxpayers electing to apply
regard to this determination that require
sions of this notice to meet the requirement sections 3 through 5 of this notice retroac-
clarification.
of § 1.6038B–1T(c)(4)(i) and (iv) to spec- tively must do so consistently for all trans-
In addition, future guidance will clarify
ify the reason the transfer qualifies for the actions.
that an aircraft or vessel will be consid-
active trade or business exception.
ered to be leased in foreign commerce, SECTION 7. COMMENTS
for purposes of section 954(c)(2)(A), only .02 Conduct of Trade or Business Outside
if the aircraft or vessel is used in for- of the United States Comments are requested on whether
eign commerce, within the meaning of any other changes to the regulations under
§ 1.954–6(b)(3), and is used predom- For purposes of applying sections 367, 954, and 956 are necessary
inately outside the United States. For § 1.367(a)–2T(b)(4) or a similar provision to implement the purposes of section 415
this purpose, an aircraft or vessel will be of future regulations, the regulations of the AJCA. Specifically, Treasury and

2006–21 I.R.B. 925 May 22, 2006


the IRS are considering clarifying how 4710, CC:INTL:B2, Internal Revenue Office of Associate Chief Counsel (In-
the depreciation recapture rules apply to Service, 1111 Constitution Avenue, NW, ternational). For comments or questions
aircraft and vessels that were used both in Washington, D.C., 20224. Alternatively, regarding sections 954 or 956, contact
and outside the United States. Treasury taxpayers may submit comments electron- Mr. Kleinman at (202) 622–3840. For
and the IRS request comments on how the ically to Notice.comments@ml.irscoun- comments or questions regarding sec-
depreciation recapture rules under section sel.treas.gov. Comments will be available tion 367, contact Mr. McCall at (202)
367(a) should apply to leased aircraft and for public inspection and copying. 622–3860.
vessels.
Written comments on the issues ad- SECTION 8. DRAFTING
dressed in this notice may be sub- INFORMATION
mitted to the Office of Associate
Chief Counsel International, Attention: The principal authors of this notice are
Jason Kleinman (Notice 2006–48), room Jason Kleinman and Daniel McCall of the

Note. This revenue procedure will be reproduced as the next revision of IRS Publication 4436, General Rules and Specifications for
Substitute Form 941 and Schedule B (Form 941).

Rev. Proc. 2006–25

TABLE OF CONTENTS

SECTION 1 – PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 926

SECTION 2 – WHAT’S NEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927

SECTION 3 – GENERAL REQUIREMENTS FOR REPRODUCING IRS OFFICIAL FORM 941 AND
SCHEDULE B (FORM 941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927

SECTION 4 – REPRODUCING FORM 941 AND SCHEDULE B (FORM 941) FOR SOFTWARE-GENERATED
PAPER FORMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927

SECTION 5 – OMB REQUIREMENTS FOR SUBSTITUTE FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928

SECTION 6 – REPRODUCIBLE COPIES OF FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929

SECTION 7 – EFFECT ON OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929

SECTION 8 – EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929

Section 1 – Purpose
.01 The purpose of this publication is to provide general rules and specifications from the Internal Revenue Service (IRS) for paper
and computer-generated substitutes for the January 2006 revision of Form 941, Employer’s QUARTERLY Federal Tax Return, and
Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors.
Note. Substitute territorial forms (941-PR, 941-SS, and Anexo B (Forma 941-PR)) should also conform to the specifications outlined
in this revenue procedure.
.02 This publication provides measurements and printing specifications for substitute Form 941 and Schedule B (Form 941). If
you need more in-depth information on who must complete the forms and how to complete them, see the Instructions for Form 941
and Publication 15 (Circular E), Employer’s Tax Guide, or visit the IRS website at www.irs.gov.
.03 Forms should not be submitted to the IRS for specific approval. If you are uncertain of any specification and want clarification,
do the following.

(1) Submit a letter citing the specification.

(2) State your understanding of the specification.

(3) Enclose an example (if appropriate) of how the form would appear if produced using your understanding.

(4) Use the following address. Be sure to include your name, complete address, phone number, and, if applicable, your email
address with your correspondence.

May 22, 2006 926 2006–21 I.R.B.


Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:T:T:SP, IR-6406
1111 Constitution Avenue, NW
Washington, DC 20224

Note. Allow at least 30 days for the IRS to respond.


.04 However, software developers and form producers should send a blank copy of their substitute Form 941 and Schedule B (Form
941) in pdf format to Victor.V.Martin@irs.gov. The purpose is not specifically for approval but to assist the IRS in preparing to scan
these forms. Submitters will only receive comments if a significant problem is discovered through this process. Submitters are not
expected to delay marketing their forms in order to receive feedback. In no case should submitters include “live” taxpayer data.

Section 2 – What’s New


.01 The 2006 revisions of Form 941 and Schedule B (Form 941) have six-digit Form ID codes instead of the four-digit codes used
in 2005.
.02 The 2006 revision of Schedule B (Form 941) now includes a calendar year designation area near the top of the form.
.03 There are new 6x10 grid layouts for the 2006 revisions.

Section 3 – General Requirements for Reproducing IRS Official Form 941 and Schedule B
(Form 941)
.01 Do not submit substitute Form 941 and Schedule B (Form 941) to the IRS for approval. Substitute Form 941 and Schedule B
(Form 941) that completely conform to the specifications contained in this revenue procedure do not require prior approval from the
IRS. Substitute forms filed with the IRS that do not conform may be returned.
.02 Print the form on paper that is 8.5 inches wide by 11 inches deep.
.03 Use white paper that meets generally-accepted weight, color, and quality standards (minimum 20 lb. white bond paper).

Note. Reclaimed fiber in any percentage is permitted provided that the requirements of this standard are met.
.04 The IRS prefers printing Form 941 on both sides of a single sheet of paper, but it is acceptable to print on one side of each of
two separate sheets of paper.
.05 Make substitute paper forms as identical to the official IRS-printed forms as possible.
.06 Print using nonreflective black inks.
.07 Use typefaces that are substantially identical in size and shape to the official forms and use rules and shading that are substan-
tially identical to those on the official forms.
.08 Print the six-digit form ID codes in the upper right-hand corner of each form using nonreflective black, carbon-based, 12-point
(minimum 10-point required) OCR-A font. Use the official paper over-the-counter IRS forms to develop your substitute paper forms.
Print “950106” on page 1 of Form 941, “950206” on page 2 of Form 941, and “950306” on Schedule B (Form 941) of substitute paper
forms. See Section 4 for form ID codes for software-generated forms.

Note. Maintain as much white space as possible around the form ID code. Do not allow character strings to print adjacent to the code.
.09 Print the OMB number in the same location as on the official forms.
.10 Print all entry boxes and checkboxes exactly as shown on the official forms.
.11 Print your IRS-issued three-letter substitute form printer source code in the middle at the bottom of page 1 of Form 941.

Note. You can obtain a three-letter substitute form printer source code by requesting it by email at *taxforms@irs.gov. (The asterisk
must be included in the address.) Please enter “Substitute Forms” on the subject line.
.12 Print “For Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher” at the bottom of page 1 of
Form 941.
.13 Print “For Paperwork Reduction Act Notice, see separate instructions” at the bottom of Schedule B (Form 941).
.14 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions.
.15 Do not print the Government Printing Office (GPO) symbol at the bottom of the forms or instructions.
.16 See Exhibits A and B in Section 8.

Section 4 – Reproducing Form 941 and Schedule B (Form 941) for Software-Generated Paper
Forms
.01 You may use the 6x10 grid exhibits (C and D) at the end of this document to develop a software version of Form 941 and
Schedule B (Form 941). Please follow the specifications exactly to develop the fields.

2006–21 I.R.B. 927 May 22, 2006


.02 If you are developing software that is designed using the 6x10 grid in the exhibits, you may make the following modifications.
See Exhibits C and D in Section 8.

• Use “970106” for page 1 of Form 941, “970206” for page 2 of Form 941, and “970306” for Schedule B (Form 941) as the form
ID codes.
Note. Maintain as much white space as possible around the form ID code. Do not allow character strings to print adjacent to the
code.

• Place all boxes and entry spaces in the same field locations as indicated in the 6x10 grid exhibits.

• Use single lines for “Employer Identification Number” (EIN) and other entry areas in the entity section of page 1 of Form 941.

• You do not need to use reverse type as shown on the IRS official form.

• You do not need to pre-print decimal points in the data boxes. However, all amounts should be printed with decimal points and
place holders for cents.

• Use a single box for “state abbreviation” in line 14 of Form 941.

• Delete the pre-printed formatting in the “date” box for line 16 and in Parts 5 and 6 of Form 941.

• Delete the pre-printed formatting in the “Phone” box for Parts 4, 5, and 6.

• Use a single box for “Personal Identification Number (PIN)” in Part 4 of Form 941.

• You may delete all shading when using the 6x10 grid format.
.03 If producing both the form and the data or the form only, print your three-letter IRS-issued form printer source code in Row
63, Columns 49-51 on page 1 of Form 941. See Section 3.11.
.04 If producing only the data on the form, print your four-digit software industry form code in Row 4, Columns 58-61 on page 1
of Form 941. See the National Association of Computerized Tax Processors (NACTP) website at www.nactp.org for information on
these codes.
.05 Print “For Privacy Act and Paperwork Reduction Act Notice, see the Payment Voucher” at the bottom of page 1 of Form 941.
.06 Print “For Paperwork Reduction Act Notice, see separate instructions” at the bottom of Schedule B (Form 941).
.07 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions.
.08 Do not print the Government Printing Office (GPO) symbol at the bottom of the forms or instructions.
.09 To enable accurate scanning and processing, enter data on Form 941 and Schedule B (Form 941) as follows:

• Show name and EIN on all pages and attachments.

• Use 12-point (minimum 10-point) Courier font (if possible).

• Omit dollar signs, but use commas to show amounts.

• Except for lines 1, 2, and 10, leave blank any data field with a value of zero.

• Enter negative amounts with a minus sign.


Note. The IRS prefers that you use a minus sign for negative amounts instead of parentheses or some other means. The IRS will
update the Instructions for Form 941 in 2007 to specify this preference.

Section 5 – OMB Requirements for Substitute Forms


.01 The Paperwork Reduction Act (the Act) of 1995 (Public Law 104-13) requires the following.

• The Office of Management and Budget (OMB) approves all IRS tax forms that are subject to the Act.

• Each IRS form contains the OMB approval number, if assigned. (The official OMB numbers may be found on the official IRS
forms and are also shown on the forms in the exhibits.)

May 22, 2006 928 2006–21 I.R.B.


• Each IRS form (or its instructions) states:

(1) Why the IRS needs the information,

(2) How it will be used, and

(3) Whether or not the information is required to be furnished to the IRS.


.02 This information must be provided to any users of official or substitute IRS forms or instructions.
.03 The OMB requirements for substitute IRS forms are the following.

• Any substitute form or substitute statement to a recipient must show the OMB number as it appears on the official IRS form.

• For Form 941 and Schedule B (Form 941), the OMB number (1545-0029) must appear exactly as shown on the official IRS form.

• For Form 941 and Schedule B (Form 941), the OMB number must use one of the following formats.

(1) OMB No. 1545-0029 (preferred) or

(2) OMB # 1545-0029 (acceptable).


.04 If no instructions are provided to users on your forms, you must furnish to them the exact text of the Privacy Act and Paperwork
Reduction Act Notice.

Section 6 – Reproducible Copies of Forms


.01 You can order official IRS forms and information copies of federal tax materials at local IRS offices or by calling the IRS
National Distribution Center at 1-800-829-3676. Other ways to get federal tax material include the following.

• The IRS website at www.irs.gov.

• The IRS’ CD-ROM (Publication 1796).


.02 The IRS also offers an alternative to downloading electronic files and provides current and prior year access to tax forms and
instructions through its Federal Tax Forms CD-ROM. Order Publication 1796, IRS Federal Tax Products CD-ROM, by using the IRS
website at www.irs.gov/cdorders or by calling 1-877-CDFORMS (1-877-233-6767).

Section 7 – Effect on Other Documents


.01 Revenue Procedure 2005-21, 2005-1 C.B. 899 (reproduced as Publication 4436, Rev. 4-2005) is superseded.

Section 8 – Exhibits
.01 Please follow the specifications indicated in the following exhibits to produce substitute Form 941 and Schedule B (Form 941).
.02 These forms are subject to review and possible change as required. Therefore, employers are cautioned against overstocking
supplies of privately-printed substitutes.
.03 Do not submit substitute Form 941 and Schedule B (Form 941) to the IRS for approval. Substitute Form 941 and Schedule B
(Form 941) that completely conform to the specifications contained in this revenue procedure may be privately printed without prior
approval from the IRS. Substitute forms filed with the IRS that do not conform may be returned. See Section 3 of this publication.

2006–21 I.R.B. 929 May 22, 2006


May 22, 2006 930 2006–21 I.R.B.
2006–21 I.R.B. 931 May 22, 2006
May 22, 2006 932 2006–21 I.R.B.
2006–21 I.R.B. 933 May 22, 2006
May 22, 2006 934 2006–21 I.R.B.
2006–21 I.R.B. 935 May 22, 2006
26 CFR 601.201: Rulings and determination letters. type of request for competent authority as- plicant has submitted the appropriate user
(Also: Part l, Section 7528.) sistance. The rules for these user fees fee.
are set forth below and will be incorpo- The mailing address for the user fee is:
Rev. Proc. 2006–26 rated into the next update of Rev. Proc.
2002–52. IRS/BFC
P.O. Box 9002
SECTION 1. PURPOSE Beckley, WV 25802
SECTION 3. PROCEDURES
The purpose of this revenue procedure .03 Refunds of user fees
is to announce the introduction of user fees .01 Fees
for requests submitted to the U.S. compe- In general, a user fee will not be re-
tent authority for discretionary determina- Effective May 4, 2006, a user fee of funded once the competent authority ac-
tions under limitation on benefits provi- $15,000 will be charged for each entity re- cepts a request for consideration and the
sions of U.S. income tax treaties. This rev- questing a discretionary limitation on ben- user fee is paid. For example, the Service
enue procedure modifies section 14 (Fees) efits determination. The fee will apply re- will not refund the user fee if the request
of Rev. Proc. 2002–52, 2002–2 C.B. 242, gardless of whether the request is for: (1) for a discretionary determination is with-
and will be effective for such requests sub- an initial determination; (2) a renewal of drawn by the applicant, or if the applicant
mitted on or after May 4, 2006. a previously issued determination; or (3) fails to submit additional information as
a supplemental determination required, for requested by the Competent Authority.
SECTION 2. BACKGROUND example, if there is a material change in A user fee may be refunded, however,
fact, or the applicant seeks benefits with if:
Almost all U.S. income tax treaties con- respect to a different type of income, or re-
tain a limitation on benefits article. A res- quests a lower rate of withholding tax on (a) A higher user fee is paid than is
ident of a Contracting State must satisfy dividends. If a request is submitted that re- required; or
one of the enumerated tests set forth in that quires the competent authority to make a
article to be entitled to U.S. treaty benefits discretionary determination for more than (b) Taking into account all the facts
with respect to an item of income, profit one entity, a separate fee will be charged and circumstances, including the Service’s
or gain. The U.S. competent authority will for each entity. resources devoted to the request, the Com-
not make a determination on whether or petent Authority declines to rule and, in his
not a resident of a Contracting State meets .02 Acceptance of Request or her sole discretion, decides a refund is
the conditions of one of these enumerated appropriate.
tests. However, if a resident of a Contract- A user fee will not be charged until
ing State does not meet one of the tests, the U.S. competent authority has formally SECTION 4. EFFECT ON OTHER
most limitation on benefits articles autho- accepted the request for consideration. DOCUMENTS
rize the U.S. competent authority to make Requests should continue to be submitted
a discretionary determination that the res- to the Director, International (LMSB), and Section 14 of Rev. Proc. 2002–52,
ident be entitled to some or all of the ben- include the information required in sec- 2002–2 C.B. 242, is modified accordingly.
efits of the income tax treaty. Rev. Proc. tion 3.08 of Rev. Proc. 2002–52. Within SECTION 5. EFFECTIVE DATE
2002–52, Procedures for Obtaining Com- 30 days of receipt of a complete submis-
petent Authority Assistance, currently sets sion, the U.S. competent authority will This revenue procedure is effective
forth rules for requesting a discretionary provide written notice to the applicant as May 4, 2006.
determination under a limitation on bene- to whether the request will be accepted or
fits provision of an income tax treaty. Sec- rejected for consideration. If a request is SECTION 6. DRAFTING
tion 3.08 of Rev. Proc. 2002–52. accepted, the applicant will be required INFORMATION
Section 14 of Rev. Proc. 2002–52 cur- to mail a check or money order in the
rently provides that user fees are not re- appropriate amount, along with a copy The principal author of this revenue
quired as a condition to requesting com- of the written notice of acceptance to the procedure is Quyen P. Huynh of the Of-
petent authority assistance, including re- IRS office identified below. The check fice of Associate Chief Counsel (Inter-
quests for a discretionary determination or money order should be payable to the national). For further information re-
pursuant to section 3.08. The Internal Rev- United States Treasury. Substantive con- garding this revenue procedure, contact
enue Service has recently determined that sideration of a request for a discretionary Quyen P. Huynh at (202) 622–3880 (not a
user fees are appropriate for this limited determination will not begin until the ap- toll-free call).

May 22, 2006 936 2006–21 I.R.B.


Part IV. Items of General Interest
Withdrawal of Proposed proposed rulemaking (REG–131264–04) cation of the original issue discount rules
Regulations Regarding in the Federal Register (69 FR 50112) to the facts described in paragraph (e) and,
Intercompany Transactions; proposing regulations to address addi- based on these facts, concludes that the
tional transactions involving manufacturer transaction is not an intercompany trans-
Manufacturer Incentive incentive payments and to clarify the action. This conclusion is not dependent
Payments proper treatment of such incentive pay- upon the issue being reconsidered in Rev.
ments under the intercompany transaction Rul. 76–96. Nevertheless, because the
Announcement 2006–34 regulations. example in paragraph (e), standing alone,
On April 25, 2005, the IRS and Trea- does not provide guidance with respect to
AGENCY: Internal Revenue Service
sury Department published Rev. Rul. the application of the intercompany trans-
(IRS), Treasury.
2005–28, 2005–19 I.R.B. 997, which sus- action regulations to an intercompany
ACTION: Withdrawal of notice of pro- pends, in part, Rev. Rul. 76–96, 1976–1 transaction, paragraph (e) of the proposed
posed rulemaking. C.B. 23. Rev. Rul. 2005–28 states that regulations is also withdrawn.
the IRS will not apply, and taxpayers may *****
SUMMARY: This document with- not rely upon, the conclusion reached in
draws a notice of proposed rulemaking Rev. Rul. 76–96 that certain rebates made Withdrawal of Notice of Proposed
(REG–131264–04, 2004–38 I.R.B. 506) by a manufacturer to retail customers are Rulemaking
regarding the treatment of manufacturer ordinary and necessary business expenses
incentive payments. The proposed reg- deductible under section 162, pending the Accordingly, under the authority of 26
ulations were published in the Federal IRS’s reconsideration of the issue and U.S.C. 7805, the notice of proposed rule-
Register on August 13, 2004 (69 FR publication of subsequent guidance. making (REG–131264–04) that was pub-
50112). After consideration of additional The example in paragraph (c) of the lished in the Federal Register on August
issues, the IRS and Treasury Department proposed regulations relies, in part, upon 13, 2004 (69 FR 50112) is withdrawn.
have decided to withdraw the proposed the premise that the manufacturer incen-
Mark E. Matthews,
regulations. tive payment is an ordinary and necessary
Deputy Commissioner for
business expense deductible under section
DATES: These proposed regulations are Services and Enforcement.
162. To the extent that this premise is cor-
withdrawn on May 8, 2006. rect, paragraph (d) of the proposed regu- (Filed by the Office of the Federal Register on May 5, 2006,
8:45 a.m., and published in the issue of the Federal Register
lations illustrates the proper application of for May 8, 2006, 71 F.R. 26721)
FOR FURTHER INFORMATION the intercompany transaction regulations.
CONTACT: Frances Kelly, (202) However, because Rev. Rul. 2005–28 sus-
622–7770 (not a toll-free number). pends Rev. Rul. 76–96, in pertinent part,
these paragraphs of the proposed regula-
SUPPLEMENTARY INFORMATION:
tions are withdrawn pending further guid-
Background ance on the section 162 issue considered in
Rev. Rul. 76–96.
On August 13, 2004, the IRS and Trea- The example in paragraph (e) of the
sury Department published a notice of proposed regulations illustrates the appli-

2006–21 I.R.B. 937 May 22, 2006


Definition of Terms
Revenue rulings and revenue procedures and B, the prior ruling is modified because of a prior ruling, a combination of terms
(hereinafter referred to as “rulings”) that it corrects a published position. (Compare is used. For example, modified and su-
have an effect on previous rulings use the with amplified and clarified, above). perseded describes a situation where the
following defined terms to describe the ef- Obsoleted describes a previously pub- substance of a previously published ruling
fect: lished ruling that is not considered deter- is being changed in part and is continued
Amplified describes a situation where minative with respect to future transac- without change in part and it is desired to
no change is being made in a prior pub- tions. This term is most commonly used in restate the valid portion of the previously
lished position, but the prior position is be- a ruling that lists previously published rul- published ruling in a new ruling that is self
ing extended to apply to a variation of the ings that are obsoleted because of changes contained. In this case, the previously pub-
fact situation set forth therein. Thus, if in laws or regulations. A ruling may also lished ruling is first modified and then, as
an earlier ruling held that a principle ap- be obsoleted because the substance has modified, is superseded.
plied to A, and the new ruling holds that the been included in regulations subsequently Supplemented is used in situations in
same principle also applies to B, the earlier adopted. which a list, such as a list of the names of
ruling is amplified. (Compare with modi- Revoked describes situations where the countries, is published in a ruling and that
fied, below). position in the previously published ruling list is expanded by adding further names in
Clarified is used in those instances is not correct and the correct position is subsequent rulings. After the original rul-
where the language in a prior ruling is be- being stated in a new ruling. ing has been supplemented several times, a
ing made clear because the language has Superseded describes a situation where new ruling may be published that includes
caused, or may cause, some confusion. the new ruling does nothing more than re- the list in the original ruling and the ad-
It is not used where a position in a prior state the substance and situation of a previ- ditions, and supersedes all prior rulings in
ruling is being changed. ously published ruling (or rulings). Thus, the series.
Distinguished describes a situation the term is used to republish under the Suspended is used in rare situations
where a ruling mentions a previously pub- 1986 Code and regulations the same po- to show that the previous published rul-
lished ruling and points out an essential sition published under the 1939 Code and ings will not be applied pending some
difference between them. regulations. The term is also used when future action such as the issuance of new
Modified is used where the substance it is desired to republish in a single rul- or amended regulations, the outcome of
of a previously published position is being ing a series of situations, names, etc., that cases in litigation, or the outcome of a
changed. Thus, if a prior ruling held that a were previously published over a period of Service study.
principle applied to A but not to B, and the time in separate rulings. If the new rul-
new ruling holds that it applies to both A ing does more than restate the substance

Abbreviations
The following abbreviations in current use ER—Employer. PRS—Partnership.
and formerly used will appear in material ERISA—Employee Retirement Income Security Act. PTE—Prohibited Transaction Exemption.
EX—Executor. Pub. L.—Public Law.
published in the Bulletin.
F—Fiduciary. REIT—Real Estate Investment Trust.
FC—Foreign Country. Rev. Proc.—Revenue Procedure.
A—Individual.
FICA—Federal Insurance Contributions Act. Rev. Rul.—Revenue Ruling.
Acq.—Acquiescence.
B—Individual. FISC—Foreign International Sales Company. S—Subsidiary.
FPH—Foreign Personal Holding Company. S.P.R.—Statement of Procedural Rules.
BE—Beneficiary.
F.R.—Federal Register. Stat.—Statutes at Large.
BK—Bank.
B.T.A.—Board of Tax Appeals. FUTA—Federal Unemployment Tax Act. T—Target Corporation.
FX—Foreign corporation. T.C.—Tax Court.
C—Individual.
G.C.M.—Chief Counsel’s Memorandum. T.D. —Treasury Decision.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations. GE—Grantee. TFE—Transferee.
GP—General Partner. TFR—Transferor.
CI—City.
GR—Grantor. T.I.R.—Technical Information Release.
COOP—Cooperative.
Ct.D.—Court Decision. IC—Insurance Company. TP—Taxpayer.
I.R.B.—Internal Revenue Bulletin. TR—Trust.
CY—County.
LE—Lessee. TT—Trustee.
D—Decedent.
DC—Dummy Corporation. LP—Limited Partner. U.S.C.—United States Code.
LR—Lessor. X—Corporation.
DE—Donee.
M—Minor. Y—Corporation.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation. Nonacq.—Nonacquiescence. Z —Corporation.
O—Organization.
DR—Donor.
P—Parent Corporation.
E—Estate.
PHC—Personal Holding Company.
EE—Employee.
PO—Possession of the U.S.
E.O.—Executive Order.
PR—Partner.

May 22, 2006 i 2006–21 I.R.B.


Numerical Finding List1 Notices— Continued: Revenue Procedures— Continued:
2006-12, 2006-7 I.R.B. 458 2006-2, 2006-1 I.R.B. 89
Bulletin 2006–1 through 2006–21 2006-13, 2006-8 I.R.B. 496 2006-3, 2006-1 I.R.B. 122
2006-14, 2006-8 I.R.B. 498 2006-4, 2006-1 I.R.B. 132
Announcements:
2006-15, 2006-8 I.R.B. 501 2006-5, 2006-1 I.R.B. 174
2006-1, 2006-1 I.R.B. 260 2006-16, 2006-9 I.R.B. 538 2006-6, 2006-1 I.R.B. 204
2006-2, 2006-2 I.R.B. 300 2006-17, 2006-10 I.R.B. 559 2006-7, 2006-1 I.R.B. 242
2006-3, 2006-3 I.R.B. 327 2006-18, 2006-8 I.R.B. 502 2006-8, 2006-1 I.R.B. 245
2006-4, 2006-3 I.R.B. 328 2006-19, 2006-9 I.R.B. 539 2006-9, 2006-2 I.R.B. 278
2006-5, 2006-4 I.R.B. 378 2006-20, 2006-10 I.R.B. 560 2006-10, 2006-2 I.R.B. 293
2006-6, 2006-4 I.R.B. 340 2006-21, 2006-12 I.R.B. 643 2006-11, 2006-3 I.R.B. 309
2006-7, 2006-4 I.R.B. 342 2006-22, 2006-11 I.R.B. 593 2006-12, 2006-3 I.R.B. 310
2006-8, 2006-4 I.R.B. 344 2006-23, 2006-11 I.R.B. 594 2006-13, 2006-3 I.R.B. 315
2006-9, 2006-5 I.R.B. 392 2006-24, 2006-11 I.R.B. 595 2006-14, 2006-4 I.R.B. 350
2006-10, 2006-5 I.R.B. 393 2006-25, 2006-11 I.R.B. 609 2006-15, 2006-5 I.R.B. 387
2006-11, 2006-6 I.R.B. 420 2006-26, 2006-11 I.R.B. 622 2006-16, 2006-9 I.R.B. 539
2006-12, 2006-6 I.R.B. 421 2006-27, 2006-11 I.R.B. 626 2006-17, 2006-14 I.R.B. 709
2006-13, 2006-7 I.R.B. 462 2006-28, 2006-11 I.R.B. 628 2006-18, 2006-12 I.R.B. 645
2006-14, 2006-8 I.R.B. 516 2006-29, 2006-12 I.R.B. 644 2006-19, 2006-13 I.R.B. 677
2006-15, 2006-11 I.R.B. 632 2006-31, 2006-15 I.R.B. 751 2006-20, 2006-17 I.R.B. 841
2006-16, 2006-12 I.R.B. 653 2006-32, 2006-13 I.R.B. 677 2006-23, 2006-20 I.R.B. 900
2006-17, 2006-12 I.R.B. 653 2006-33, 2006-15 I.R.B. 754 2006-25, 2006-21 I.R.B. 926
2006-18, 2006-12 I.R.B. 654 2006-34, 2006-14 I.R.B. 705 2006-26, 2006-21 I.R.B. 936
2006-19, 2006-13 I.R.B. 674 2006-35, 2006-14 I.R.B. 708
Revenue Rulings:
2006-20, 2006-13 I.R.B. 675 2006-36, 2006-15 I.R.B. 756
2006-21, 2006-14 I.R.B. 703 2006-37, 2006-18 I.R.B. 855 2006-1, 2006-2 I.R.B. 261
2006-22, 2006-16 I.R.B. 779 2006-38, 2006-16 I.R.B. 777 2006-2, 2006-2 I.R.B. 261
2006-23, 2006-14 I.R.B. 729 2006-39, 2006-17 I.R.B. 841 2006-3, 2006-2 I.R.B. 276
2006-24, 2006-16 I.R.B. 820 2006-40, 2006-18 I.R.B. 855 2006-4, 2006-2 I.R.B. 264
2006-25, 2006-18 I.R.B. 871 2006-41, 2006-18 I.R.B. 857 2006-5, 2006-3 I.R.B. 302
2006-26, 2006-18 I.R.B. 871 2006-42, 2006-19 I.R.B. 878 2006-6, 2006-5 I.R.B. 381
2006-27, 2006-18 I.R.B. 871 2006-43, 2006-21 I.R.B. 921 2006-7, 2006-6 I.R.B. 399
2006-28, 2006-18 I.R.B. 873 2006-44, 2006-20 I.R.B. 889 2006-8, 2006-9 I.R.B. 520
2006-29, 2006-19 I.R.B. 879 2006-45, 2006-20 I.R.B. 891 2006-9, 2006-9 I.R.B. 519
2006-30, 2006-19 I.R.B. 879 2006-47, 2006-20 I.R.B. 892 2006-10, 2006-10 I.R.B. 557
2006-31, 2006-20 I.R.B. 912 2006-48, 2006-21 I.R.B. 922 2006-11, 2006-12 I.R.B. 635
2006-32, 2006-20 I.R.B. 913 2006-12, 2006-12 I.R.B. 637
Proposed Regulations:
2006-33, 2006-20 I.R.B. 914 2006-13, 2006-13 I.R.B. 656
2006-34, 2006-21 I.R.B. 937 REG-107722-00, 2006-4 I.R.B. 354 2006-14, 2006-15 I.R.B. 740

Court Decisions: REG-104385-01, 2006-5 I.R.B. 389 2006-15, 2006-13 I.R.B. 661
REG-122380-02, 2006-10 I.R.B. 563 2006-16, 2006-14 I.R.B. 694
2081, 2006-13 I.R.B. 656 REG-137243-02, 2006-3 I.R.B. 317 2006-17, 2006-15 I.R.B. 748
2082, 2006-14 I.R.B. 697 REG-133446-03, 2006-2 I.R.B. 299 2006-18, 2006-15 I.R.B. 743
REG-113365-04, 2006-10 I.R.B. 580 2006-19, 2006-15 I.R.B. 749
Notices:
REG-148568-04, 2006-6 I.R.B. 417 2006-20, 2006-15 I.R.B. 746
2006-1, 2006-4 I.R.B. 347 REG-106418-05, 2006-7 I.R.B. 461 2006-21, 2006-15 I.R.B. 745
2006-2, 2006-2 I.R.B. 278 REG-133036-05, 2006-20 I.R.B. 911 2006-22, 2006-14 I.R.B. 687
2006-3, 2006-3 I.R.B. 306 REG-138879-05, 2006-8 I.R.B. 503 2006-23, 2006-17 I.R.B. 839
2006-4, 2006-3 I.R.B. 307 REG-143244-05, 2006-6 I.R.B. 419 2006-24, 2006-19 I.R.B. 875
2006-5, 2006-4 I.R.B. 348 REG-146384-05, 2006-17 I.R.B. 843 2006-25, 2006-20 I.R.B. 882
2006-6, 2006-5 I.R.B. 385 REG-146459-05, 2006-8 I.R.B. 504 2006-27, 2006-21 I.R.B. 915
2006-7, 2006-10 I.R.B. 559 REG-157271-05, 2006-12 I.R.B. 652
Tax Conventions:
2006-8, 2006-5 I.R.B. 386 REG-164247-05, 2006-15 I.R.B. 758
2006-9, 2006-6 I.R.B. 413 2006-6, 2006-4 I.R.B. 340
Revenue Procedures:
2006-10, 2006-5 I.R.B. 386 2006-7, 2006-4 I.R.B. 342
2006-11, 2006-7 I.R.B. 457 2006-1, 2006-1 I.R.B. 1 2006-8, 2006-4 I.R.B. 344

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2005–27 through 2005–52 is in Internal Revenue Bulletin
2005–52, dated December 27, 2005.

2006–21 I.R.B. ii May 22, 2006


Tax Conventions— Continued:
2006-19, 2006-13 I.R.B. 674
2006-20, 2006-13 I.R.B. 675
2006-21, 2006-14 I.R.B. 703

Treasury Decisions:

9231, 2006-2 I.R.B. 272


9232, 2006-2 I.R.B. 266
9233, 2006-3 I.R.B. 303
9234, 2006-4 I.R.B. 329
9235, 2006-4 I.R.B. 338
9236, 2006-5 I.R.B. 382
9237, 2006-6 I.R.B. 394
9238, 2006-6 I.R.B. 408
9239, 2006-6 I.R.B. 401
9240, 2006-7 I.R.B. 454
9241, 2006-7 I.R.B. 427
9242, 2006-7 I.R.B. 422
9243, 2006-8 I.R.B. 475
9244, 2006-8 I.R.B. 463
9245, 2006-14 I.R.B. 696
9246, 2006-9 I.R.B. 534
9247, 2006-9 I.R.B. 521
9248, 2006-9 I.R.B. 524
9249, 2006-10 I.R.B. 546
9250, 2006-11 I.R.B. 588
9251, 2006-11 I.R.B. 590
9252, 2006-12 I.R.B. 633
9253, 2006-14 I.R.B. 689
9254, 2006-13 I.R.B. 662
9255, 2006-15 I.R.B. 741
9256, 2006-16 I.R.B. 770
9257, 2006-17 I.R.B. 821
9258, 2006-20 I.R.B. 886
9259, 2006-19 I.R.B. 874
9261, 2006-21 I.R.B. 919

May 22, 2006 iii 2006–21 I.R.B.


Finding List of Current Actions on Proposed Regulations— Continued: Revenue Procedures— Continued:
Previously Published Items1 REG-131739-03 2005-1
Corrected by Superseded by
Bulletin 2006–1 through 2006–21
Ann. 2006-10, 2006-5 I.R.B. 393 Rev. Proc. 2006-1, 2006-1 I.R.B. 1
Announcements:
REG-131264-04 2005-2
2000-48 Withdrawn by Superseded by
Modified by Ann. 2006-34, 2006-21 I.R.B. 937 Rev. Proc. 2006-2, 2006-1 I.R.B. 89
Notice 2006-35, 2006-14 I.R.B. 708 REG-138647-04 2005-3
Notices: Corrected by Superseded by
Ann. 2006-4, 2006-3 I.R.B. 328 Rev. Proc. 2006-3, 2006-1 I.R.B. 122
2001-4
REG-158080-04 2005-4
Sections (V)(C), (D), and (E) superseded by
Corrected by Superseded by
T.D. 9253, 2006-14 I.R.B. 689
Ann. 2006-11, 2006-6 I.R.B. 420 Rev. Proc. 2006-4, 2006-1 I.R.B. 132
2001-11
Revenue Procedures: 2005-5
Superseded by
Superseded by
T.D. 9253, 2006-14 I.R.B. 689 89-8 Rev. Proc. 2006-5, 2006-1 I.R.B. 174
2001-43 Superseded by
2005-6
Modified by Rev. Proc. 2006-23, 2006-20 I.R.B. 900
Superseded by
Notice 2006-35, 2006-14 I.R.B. 708 96-52 Rev. Proc. 2006-6, 2006-1 I.R.B. 204
Sections 2 and 3 superseded by Superseded by
T.D. 9253, 2006-14 I.R.B. 689 2005-7
Rev. Proc. 2006-10, 2006-2 I.R.B. 293
Superseded by
2002-35 97-27 Rev. Proc. 2006-7, 2006-1 I.R.B. 242
Clarified and modified by Modified by
Notice 2006-16, 2006-9 I.R.B. 538 2005-8
Rev. Proc. 2006-11, 2006-3 I.R.B. 309
Superseded by
2005-30 Modified and amplified by
Rev. Proc. 2006-12, 2006-3 I.R.B. 310 Rev. Proc. 2006-8, 2006-1 I.R.B. 245
Modified and superseded by
Notice 2006-31, 2006-15 I.R.B. 751 2005-9
2002-9
Superseded for certain taxable years by
2005-44 Modified by
Rev. Proc. 2006-12, 2006-3 I.R.B. 310
Supplemented by Rev. Proc. 2006-11, 2006-3 I.R.B. 309
Notice 2006-1, 2006-4 I.R.B. 347 Modified and amplified by 2005-12
Notice 2006-47, 2006-20 I.R.B. 892 Section 10 modified and superseded by
2005-66 Rev. Proc. 2006-12, 2006-3 I.R.B. 310 Rev. Proc. 2006-1, 2006-1 I.R.B. 1
Supplemented by Rev. Proc. 2006-14, 2006-4 I.R.B. 350
Notice 2006-20, 2006-10 I.R.B. 560 Rev. Proc. 2006-16, 2006-9 I.R.B. 539 2005-15
Obsoleted in part by
2005-73 2002-17
Rev. Proc. 2006-17, 2006-14 I.R.B. 709
Supplemented by Modified by
Notice 2006-20, 2006-10 I.R.B. 560 Rev. Proc. 2006-14, 2006-4 I.R.B. 350 2005-21
Superseded by
2005-81 2002-52
Rev. Proc. 2006-25, 2006-21 I.R.B. 926
Supplemented by Modified by
Notice 2006-20, 2006-10 I.R.B. 560 Rev. Proc. 2006-26, 2006-21 I.R.B. 936 2005-22
Obsoleted by
2005-98 2003-31
Rev. Proc. 2006-20, 2006-17 I.R.B. 841
Supplemented by Superseded by
Notice 2006-7, 2006-10 I.R.B. 559 Rev. Proc. 2006-19, 2006-13 I.R.B. 677 2005-24
Modified by
Proposed Regulations: 2003-38
Notice 2006-15, 2006-8 I.R.B. 501
Modified by
REG-103829-99 Rev. Proc. 2006-16, 2006-9 I.R.B. 539 2005-61
Withdrawn by Superseded by
2004-23
Ann. 2006-16, 2006-12 I.R.B. 653 Rev. Proc. 2006-3, 2006-1 I.R.B. 122
Superseded for certain taxable years by
REG-150313-01 Rev. Proc. 2006-12, 2006-3 I.R.B. 310 2005-68
Withdrawn by Superseded by
2004-40
Ann. 2006-30, 2006-19 I.R.B. 879 Rev. Proc. 2006-1, 2006-1 I.R.B. 1
Superseded by
Rev. Proc. 2006-3, 2006-1 I.R.B. 122
Rev. Proc. 2006-9, 2006-2 I.R.B. 278

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2005–27 through 2005–52 is in Internal Revenue Bulletin 2005–52, dated December 27,
2005.

2006–21 I.R.B. iv May 22, 2006


Revenue Rulings:

55-355
Obsoleted by
T.D. 9244, 2006-8 I.R.B. 463

74-503
Revoked by
Rev. Rul. 2006-2, 2006-2 I.R.B. 261

77-230
Obsoleted by
T.D. 9249, 2006-10 I.R.B. 546

91-5
Modified by
T.D. 9250, 2006-11 I.R.B. 588

92-19
Supplemented in part by
Rev. Rul. 2006-25, 2006-20 I.R.B. 882

92-86
Modified by
T.D. 9250, 2006-11 I.R.B. 588

Treasury Decisions:

9191
Corrected by
Ann. 2006-26, 2006-18 I.R.B. 871

9192
Corrected by
Ann. 2006-15, 2006-11 I.R.B. 632

9203
Corrected by
Ann. 2006-12, 2006-6 I.R.B. 421

9244
Corrected by
Ann. 2006-31, 2006-20 I.R.B. 912

9248
Corrected by
Ann. 2006-32, 2006-20 I.R.B. 913

May 22, 2006 v U.S. GPO: 2006—320–797/20058 2006–21 I.R.B.