Annuity payments. This ruling addresses the taxation of income received by residents of Puerto Rico and nonresident aliens under life insurance and annuity contracts issued by a foreign branch of a U.S. life insurance company. The ruling holds that income received by nonresident aliens under life insurance and annuity contracts issued by a foreign branch of a U.S. life insurance company is U.S.-source FDAP income. The ruling also holds that income received by bona fide residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rican branch of a U.S. life insurance company is U.S.-source income.

Dual resident company. This ruling concludes that a dual resident company, resident in both Country Y and Country X under the domestic laws of those countries, is not entitled to claim benefits under the U.S. income tax convention with Country X if it is treated as a resident of Country Y and not of Country X for purposes of the income tax convention between Country X and Country Y and, as a result, is not liable to tax in Country X by reason of its residence. Rev. Rul. 73-354 obsoleted.

Corporate reorganizations; exchange of debt instruments. This ruling discusses the exchange of a debt security for a debt instrument in a reorganization.

Corporate distributions of property. This ruling addresses the tax consequences of the distribution by a subsidiary to its parent of parent indebtedness that the subsidiary previously purchased from a party unrelated to the parent.

This procedure provides alternative disclosure procedures that are deemed to satisfy a taxpayer’s disclosure obligations under section 1.6011-4 of the regulations for transactions with a significant book-tax difference under section 1.6011-4(b)(6). Taxpayers also may continue to follow the disclosure procedures provided in section 1.6011-4 for disclosing transactions described in section 1.6011-4(b)(6).

Minimum funding standards; amortization; extensions. This procedure sets forth guidelines for requesting extensions of the amortization period of the minimum funding standards with respect to defined benefit plans under section 412(e) of the Code. Rev. Proc. 79-61 superseded. Rev. Proc. 2004-4 modified.

Proposed regulations provide guidance for making the election under section 2632(c) of the Code to not have the deemed allocation of unused generation-skipping transfer (GST) tax exemption apply with regard to certain transfers to a GST trust. The regulations also provide guidance for making the election to treat a trust as a GST trust.

This procedure provides a simplified alternate method for certain taxpayers to obtain an extension of time under section 301.9100-3 of the regulations to make an allocation of the generation-skipping transfer exemption in accordance with section 2642(b)(1) of the Code. Notice 2001-50 modified.

Proposed regulations provide guidance for making the election under section 2632(c) of the Code to not have the deemed allocation of unused generation-skipping transfer (GST) tax exemption apply with regard to certain transfers to a GST trust. The regulations also provide guidance for making the election to treat a trust as a GST trust.

This procedure provides a simplified alternate method for certain taxpayers to obtain an extension of time under section 301.9100-3 of the regulations to make an allocation of the generation-skipping transfer exemption in accordance with section 2642(b)(1) of the Code. Notice 2001-50 modified.

Final regulations under section 3406 of the Code provide guidance on the information reporting and backup withholding requirements for payment card transactions made through a Qualified Payment Card Agent (QPCA). These regulations provide a limited exception to backup withholding for reportable payments made through a QPCA.

This procedure provides the requirements for a payment card organization to request and obtain an IRS determination that it is a Qualified Payment Card Agent (QPCA) for purposes of the related final regulations under sections 3406 and 6724 of the Code that address the information reporting and backup withholding requirements for payment card transactions.

This document establishes an optional procedure for payors who make payments in the course of their trade or business through payment cards to determine whether the payments are reportable under sections 6041 and 6041A of the Code and the regulations thereunder. This procedure classifies businesses by Merchant Category Codes (MCCs), or other similar codes, according to whether they predominantly furnish services or predominantly provide goods.

Disclosure of returns and return information. Rev. Rul. 54-379 concludes that heirs at law, next of kin, or beneficiaries who are distributees of a person who dies intestate under state law have a “material interest” to receive the decedent’s return information. The statute does not clearly address the application of the “material interest” standard in the context of a taxpayer who dies intestate. Rev. Rul. 54-379 superseded.

Disregarded entities. This ruling concludes that, if an eligible entity has two owners under local law, but one of the owners is, for federal tax purposes, disregarded as an entity separate from the other owner of the eligible entity, then the eligible entity cannot be classified as a partnership and is either disregarded as an entity separate from its owner or an association taxable as a corporation.

Final regulations under section 3406 of the Code provide guidance on the information reporting and backup withholding requirements for payment card transactions made through a Qualified Payment Card Agent (QPCA). These regulations provide a limited exception to backup withholding for reportable payments made through a QPCA.

This procedure provides the requirements for a payment card organization to request and obtain an IRS determination that it is a Qualified Payment Card Agent (QPCA) for purposes of the related final regulations under sections 3406 and 6724 of the Code that address the information reporting and backup withholding requirements for payment card transactions.

This document establishes an optional procedure for payors who make payments in the course of their trade or business through payment cards to determine whether the payments are reportable under sections 6041 and 6041A of the Code and the regulations thereunder. This procedure classifies businesses by Merchant Category Codes (MCCs), or other similar codes, according to whether they predominantly furnish services or predominantly provide goods.

If a subsidiary corporation makes a distribution of parent indebtedness to the parent corporation in a taxable year in which the subsidiary corporation’s earnings and profits are greater than or equal to the fair market value of the distributed indebtedness, what are the tax consequences of the distribution?

Situation 1

On January 1, Year 1, P, a domestic corporation, issued indebtedness that provides for monthly interest payments of $80,000 payable at the end of each month and a principal payment of $10,000,000 on its stated maturity date of December 31, Year 4. The $80,000 monthly interest payments are qualified stated interest payments within the meaning of § 1.1273-1(c) of the Income Tax Regulations. S, a domestic corporation, has only one class of stock outstanding, all of which is owned by P. On January 1, Year 2, S purchases all of the P indebtedness from A, an individual not related to S under § 1.108-2(d)(2), for cash in the amount of $9,500,000. On that date, the adjusted issue price of the P indebtedness is $10,000,000. On January 1, Year 3, S distributes all of the P indebtedness it holds to P. At the time of this distribution, the fair market value of the P indebtedness is $9,250,000. During Year 3, S makes no other distributions to P. P and S do not join in filing a consolidated return for Years 1 through 3. At all times, the fair market value of P’s assets exceeds the amount of its liabilities. At the end of Year 3, S has earnings and profits in the amount of $20,000,000.

Situation 2

The facts are the same as in Situation 1, except that at the time S distributes the P indebtedness to P, the fair market value of the P indebtedness is $10,050,000.

Section 301(a) of the Internal Revenue Code provides that a distribution of property (as defined in § 317(a)) made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in § 301(c).

Section 301(b)(1) provides, in part, that the amount of any distribution shall be the amount of money received, plus the fair market value of the other property received.

Section 301(c) provides that the portion of a distribution which is a dividend (as defined in § 316) is included in gross income, and that the remaining portion of the distribution is applied first against the adjusted basis of the stock and then is treated as gain from the sale or exchange of property.

Section 316(a) provides that a dividend is any distribution of property made by a corporation to its shareholders out of the corporation’s earnings and profits accumulated after February 28, 1913, or out of the corporation’s earnings and profits of the taxable year, without regard to the amount of the earnings and profits at the time the distribution was made. Generally, every distribution is made out of earnings and profits to the extent thereof, and from the most recently accumulated earnings and profits.

Section 317(a) defines “property” for the purposes of the corporate distribution provisions as money, securities, and any other property, except for stock, or rights to acquire stock, in the corporation making the distribution. Section 1.317-1 provides that the term "property" also includes indebtedness to the corporation.

Section 311(a) provides that, except as provided in § 311(b), no gain or loss shall be recognized to a corporation on the distribution (not in complete liquidation) with respect to its stock of (1) its stock (or rights to acquire its stock), or (2) property.

Section 311(b) provides that, if a corporation distributes property (other than an obligation of such corporation) to a shareholder in a distribution to which subpart A applies, and the fair market value of such property exceeds its adjusted basis (in the hands of the distributing corporation), then gain shall be recognized to the distributing corporation as if such property were sold to the distributee at its fair market value.

Section 312(a) provides that, except as otherwise provided, on the distribution of property by a corporation with respect to its stock, the earnings and profits of the corporation (to the extent thereof) shall be decreased by the sum of the amount of money, the principal amount of the obligations of such corporation (or, in the case of obligations having original issue discount, the aggregate issue price of such obligations), and the adjusted basis of the other property, so distributed.

Section 312(b) provides that on the distribution by a corporation, with respect to its stock, of any property (other than an obligation of such corporation) the fair market value of which exceeds the adjusted basis thereof, the earnings and profits of the corporation shall be increased by the amount of such excess, and reduced by the fair market value of the property.

Section 61(a)(12) provides that gross income includes income from the discharge of indebtedness. Section 1.61-12(a) provides that the discharge of indebtedness, in whole or in part, may result in the realization of income.

Section 1.61-12(c)(2)(ii) provides that an issuer realizes income from the discharge of indebtedness upon the repurchase of a debt instrument for an amount less than its adjusted issue price (within the meaning of § 1.1275-1(b)). The amount of discharge of indebtedness income is equal to the excess of the adjusted issue price over the repurchase price. Section 1.61-12(c)(2)(iii) provides that an issuer may be entitled to a repurchase premium deduction upon the repurchase of a debt instrument for an amount greater than its adjusted issue price.

Under § 1.163-7(c), if a debt instrument is repurchased by the issuer for a price in excess of its adjusted issue price, the excess (repurchase premium) is generally deductible as interest for the taxable year in which the repurchase occurs.

Section 1.1275-1(b)(1) provides that the adjusted issue price of a debt instrument at the beginning of the first accrual period is the issue price. Thereafter, the adjusted issue price of the debt instrument is the issue price of the debt instrument increased by the amount of original issue discount (OID) previously includible in the gross income of any holder (determined without regard to §§ 1272(a)(7) and 1272(c)(1)) and decreased by the amount of any payment previously made on the debt instrument other than a payment of qualified stated interest.

Section 1.1272-1(g) provides that the basis of a debt instrument in the hands of the holder is increased by the amount of OID included in the holder’s gross income and decreased by the amount of any payment from the issuer to the holder under the debt instrument other than a payment of qualified stated interest.

Section 108(e)(4) provides that for purposes of determining income of the debtor from discharge of indebtedness, to the extent provided in regulations prescribed by the Secretary, the acquisition of outstanding indebtedness by a person bearing a relationship to the debtor specified in § 267(b) or 707(b)(1) from a person who does not bear such a relationship to the debtor shall be treated as the acquisition of such indebtedness by the debtor.

Section 1.108-2(a) provides that the direct or indirect acquisition of outstanding indebtedness by a person related to the debtor from a person who is not related to the debtor results in the realization by the debtor of income from discharge of indebtedness (to the extent required by §§ 61(a)(12) and 108 in an amount determined under § 1.108-2(f)).

Section 1.108-2(f)(1) provides that the amount of discharge of indebtedness income realized under § 1.108-2(a) is measured by reference to the adjusted basis of the related holder (or of the holder that becomes related to the debtor) in the indebtedness on the acquisition date if the holder acquired the indebtedness by purchase on or less than six months before the acquisition date.

Section 1.108-2(g) provides that for income tax purposes, if a debtor realizes income from discharge of indebtedness in a direct or an indirect acquisition under this section (whether or not the income is excludable under § 108(a)), the debtor’s indebtedness is treated as new indebtedness issued by the debtor to the related holder on the acquisition date (the deemed issuance). The new indebtedness is deemed issued with an issue price equal to the amount used under § 1.108-2(f) to compute the amount realized by the debtor under § 1.108-2(a) (i.e., either the holder’s adjusted basis or the fair market value of the indebtedness, as the case may be). Under § 1273(a)(1), the excess of the stated redemption price at maturity (as defined in § 1273(a)(2)) of the indebtedness over its issue price is OID and, to the extent provided in §§ 163(e) and 1272, is deductible by the debtor and includible in the gross income of the related holder.

In Situation 1, because P and S have a relationship specified in § 267(b)(3), under § 108(e)(4), S’s purchase of the P indebtedness is treated as P’s acquisition of that indebtedness. Under § 1.108-2(a), S’s acquisition of the P indebtedness results in the realization by P of income from the discharge of indebtedness to the extent required by §§ 61(a)(12) and 108. Because S purchased the P indebtedness for an amount less than its adjusted issue price, P is treated as realizing income from the discharge of indebtedness in an amount determined under § 1.108-2(f). Because the adjusted issue price of the indebtedness ($10,000,000) exceeds S’s basis in the indebtedness on the acquisition date ($9,500,000), P realizes $500,000 of income from the discharge of indebtedness.

Under § 1.108-2(g), because P realizes income from the discharge of indebtedness in connection with S’s acquisition of the P indebtedness, the P indebtedness is treated as new indebtedness issued by P to S on the acquisition date. The new indebtedness is deemed issued with an issue price equal to S’s adjusted basis in the indebtedness, $9,500,000. Under § 1273(a)(1), the $500,000 excess of the stated redemption price at maturity of the indebtedness ($10,000,000) over its deemed issue price ($9,500,000) is OID. In Year 2, P deducts from gross income and S includes in gross income OID of $147,868, calculated pursuant to § 1272. Accordingly, as of January 1 of Year 3, under §§ 1.1275-1(b)(1) and 1.1272-1(g), respectively, the adjusted issue price of the new indebtedness and S’s adjusted basis in the indebtedness is $9,647,868.

Under §§ 317 and 1.317-1, the P indebtedness is property for purposes of the corporate distribution provisions. Therefore, S’s distribution of the P indebtedness to P is a distribution of property described in § 301. Under § 301(b), the amount of such distribution is the fair market value of the property distributed, $9,250,000. Under § 301(c), because as of the end of Year 3 S has earnings and profits in excess of that amount, the distribution in its entirety is treated as a dividend to P.

Additionally, because the distribution of the P indebtedness to P extinguishes the indebtedness, it is repurchased within the meaning of § 1.61-12(c)(2), and P is treated as having repurchased its indebtedness for an amount equal to the fair market value of the indebtedness, $9,250,000. Cf. Cora-Texas Manufacturing Co., Inc. v. U.S., 222 F. Supp. 527 (E.D. La. 1963), aff’d per curiam, 341 F.2d 579 (5th Cir. 1965) (treating a partnership’s liquidating distribution to a partner of the partner’s preferred stock as if the partner retired the preferred stock for its fair market value); Rev. Rul. 93-7, 1993-1 C.B. 125 (ruling that where a partnership distributes indebtedness of a partner to the issuing partner the partner is treated as having satisfied its indebtedness for an amount equal to the fair market value of such indebtedness). Accordingly, under § 1.61-12(c)(2)(ii), P realizes income from the discharge of indebtedness in an amount equal to $397,868, the excess of the adjusted issue price of the P indebtedness ($9,647,868) over the amount of the distribution ($9,250,000).

Under § 311(a), S does not recognize the loss inherent in the P indebtedness on the distribution of the P indebtedness. As a result of the distribution, pursuant to § 312(a), S’s earnings and profits are reduced by its adjusted basis in the P indebtedness distributed, $9,647,868.

In Situation 2, the tax consequences of S’s purchase of the P indebtedness are the same as in Situation 1. In Year 3, the amount of the distribution of the P indebtedness determined pursuant to § 301(b) and treated as a dividend under § 301(c) is $10,050,000. Additionally, P is treated as having repurchased its indebtedness for the same amount. Under § 1.163-7(c), P is generally entitled to an interest deduction in an amount equal to the $402,132 excess of the amount of the distribution ($10,050,000) over the adjusted issue price of the P indebtedness ($9,647,868). Under § 311(b), S recognizes gain as if it sold the indebtedness to P for an amount equal to its $10,050,000 fair market value. Thus, S recognizes gain in an amount equal to $402,132, the excess of the fair market value of the indebtedness distributed ($10,050,000) over S’s adjusted basis in the indebtedness distributed ($9,647,868). Under § 312(a) and (b), S’s earnings and profits must be increased by $402,132, the excess of the fair market value of the indebtedness distributed ($10,050,000) over S’s adjusted basis in the indebtedness distributed ($9,647,868), and reduced by the fair market value of the indebtedness distributed, $10,050,000.

If a subsidiary corporation makes a distribution of parent indebtedness to the parent corporation in a taxable year in which the subsidiary corporation’s earnings and profits are greater than or equal to the fair market value of the distributed indebtedness, the parent corporation is treated as receiving a distribution treated as a dividend in the amount of the fair market value of the indebtedness on the date of the distribution and may realize discharge of indebtedness income or be entitled to an interest deduction depending on the fair market value of the indebtedness on the date of the distribution relative to its adjusted issue price.

The principal author of this revenue ruling is Sean McKeever of the Office of Associate Chief Counsel (Corporate). For further information regarding this revenue ruling, contact Mr. McKeever at (202) 622-7750 (not a toll-free call).

Under the circumstances described below, whether a debt instrument issued by the acquiring corporation in a reorganization in exchange for a security of the target corporation is a security within the meaning of § 354 of the Internal Revenue Code.

On January 1, 2004, Target Corporation issues debt instruments with a stated maturity date of January 1, 2016. On the issue date, the debt instruments provide for a market rate of interest and are securities within the meaning of § 354. Target Corporation has outstanding one class of common stock. On January 1, 2014, pursuant to state law, Target Corporation merges into Acquiring Corporation in a transaction that qualifies as a reorganization under § 368(a)(1)(A). In the merger, the Target Corporation stockholders exchange their Target Corporation common stock for Acquiring Corporation common stock. Also in the merger, the Target Corporation security holders exchange their Target Corporation securities for Acquiring Corporation debt instruments with terms identical to those of the Target Corporation securities (including the maturity date), except that the interest rate is changed (for example, to reflect differences in creditworthiness between Target Corporation and Acquiring Corporation). The modification of the interest rate is a significant modification under § 1.1001-3 of the Income Tax Regulations.

Section 368(a)(1)(A) provides, in part, that the term “reorganization” includes a statutory merger. Section 368(b) provides that the term “party to a reorganization” includes a corporation resulting from a reorganization and both corporations, in the case of a reorganization resulting from the acquisition by one corporation of stock or properties of another corporation.

Section 354(a)(1) provides, in part, that no gain or loss shall be recognized if securities in a corporation that is a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for securities in such corporation or in another corporation that is a party to the reorganization.

Section 1.368-1(b) sets forth the general rule that, upon an exchange, gain or loss must be recognized if the new property differs materially in kind or extent from the old property. The regulation then explains that the purpose of the reorganization provisions is to except from the general rule certain exchanges incident to readjustments of corporate structures that are required by business exigencies and that effect only a readjustment of continuing interests in property under modified corporate forms. Congress has recognized that when a taxpayer receives stock or securities in exchange for stock or securities owned by the taxpayer incident to a readjustment of a corporate structure, the new stock or securities are treated as taking the place of the stock or securities exchanged therefor. See H.R. Rep. No. 704, at 13-14 (1933).

Neither § 354 nor the regulations under § 354 define the term “securities.” Under case law, an instrument with a term of less than five years generally is not a security. See, e.g., Pinellas Ice & Cold Storage Co. v. Commissioner, 287 U.S. 462 (1933) (holding that short-term notes payable within four months were not securities within the meaning of the reorganization provisions); Lloyd-Smith v. Commissioner, 116 F.2d 642 (2d Cir.), cert. denied, 313 U.S. 588 (1941) (holding that two-year notes were not securities); Neville Coke & Chemical Co., 148 F.2d 599 (3d Cir.), cert. denied, 326 U.S. 726 (1945) (holding that three, four, and five-year notes were not securities).

Under the foregoing authorities, an instrument with a term of two years generally would not qualify as a security. However, because the debt instruments of the Acquiring Corporation are issued in the reorganization in exchange for securities of the Target Corporation and bear the same terms (other than interest rate) as the securities of the Target Corporation, the debt instruments of the Acquiring Corporation represent a continuation of the security holder’s investment in the Target Corporation in substantially the same form. Therefore, the debt instruments of the Acquiring Corporation exchanged for the securities of the Target Corporation are securities within the meaning of § 354.

Under the circumstances described above, a debt instrument issued by the acquiring corporation in a reorganization in exchange for a security of the target corporation is a security within the meaning of § 354.

The principal author of this revenue ruling is Ricky Thomas of the Office of Associate Chief Counsel (Corporate). For further information regarding this revenue ruling, contact Ricky Thomas at (202) 622-7750 (not a toll-free call).

A U.S. life insurance company conducts business in Country A and Puerto Rico through a separate branch in each jurisdiction. The branches sell a wide range of insurance products including, but not limited to, whole life, universal life, and variable life insurance and fixed and variable annuities to individuals living in Country A and Puerto Rico. These products are life insurance and annuity contracts under the Internal Revenue Code. See sections 72(s), 101(f), 817(h), and 7702. There is no income tax treaty in force between Country A and the United States.

Individuals in Country A and Puerto Rico pay premiums to the U.S. life insurance company in exchange for the benefits set forth in the relevant contracts. For example, under a life insurance contract, the life insurance company generally agrees, in exchange for premiums, to pay a certain amount to a beneficiary upon the death of the insured. Under an annuity contract, the life insurance company typically agrees, in exchange for premiums, to pay a certain amount each year to the owner of the contract beginning upon the owner’s retirement and ending upon the owner’s death. The life insurance company invests the premiums received with respect to its life insurance and annuity contracts in domestic and foreign income-producing assets, such as stocks and bonds.

The life insurance and annuity contracts issued by the U.S. life insurance company to individuals in Country A and Puerto Rico have cash values. The individuals in Country A and Puerto Rico withdraw amounts from the cash values of their life insurance and annuity contracts, and the amounts withdrawn are gross income under section 61 to the extent provided under section 72. The individuals in Country A and Puerto Rico also receive annuity payments under their annuity contracts that are gross income under section 61 to the extent provided under section 72.

This revenue ruling applies only to annuity payments and withdrawals of cash value that are gross income to the extent provided under section 72, and does not apply to amounts received under life insurance contracts by reason of the death of the insured that are excludible from gross income under section 101.

Section 861(a) specifies that certain items of income are U.S.-source income. Section 861(a)(1) generally provides that interest is U.S.-source income when paid by a U.S. obligor. Section 861(a)(2) generally provides that dividends are U.S.-source income when paid by a domestic corporation. Section 861(a) does not specify the source of income paid by a U.S. life insurance company under a life insurance or annuity contract.

When the source of an item of income is not specified by statute or by regulation, courts have determined the source of the item by comparison and analogy to classes of income specified within the statute. Bank of America v. United States, 680 F.2d 142, 147 (Ct. Cl. 1982); Howkins v. Commissioner, 49 T.C. 689 (1968). In Clayton v. United States, 33 Fed. Cl. 628 (1995), aff’d. without published opinion, 91 F.3d 170 (Fed. Cir. 1996), cert. denied, 519 U.S. 1040 (1996), the Court of Federal Claims held that the earnings and accretions component of distributions made by an employee stock ownership plan (“ESOP”) to foreign participants was U.S.-source income because the trust underlying the ESOP was a domestic trust. See also, Rev. Rul. 79-388, 1979-2 C.B. 270.

Section 871(a) generally provides that a tax of 30 percent is imposed on an amount received from U.S. sources by a nonresident alien individual as interest, dividends, rents, annuities, and other fixed or determinable annual or periodical gains, profits, and income (“FDAP income”), provided that the amount is not income that is effectively connected with the conduct of a U.S. trade or business (“ECI”). The 30-percent tax is imposed by section 871(a) only upon the amount that constitutes gross income. Treas. Reg. 1.871-7(a)(2). Section 61(a) generally provides that annuities and income from life insurance and endowment contracts are included in gross income. Section 72 generally provides rules for determining the portion of certain amounts received under an annuity, endowment, or life insurance contract that is included in gross income.

FDAP income generally includes all U.S.-source income included in gross income under section 61, except for gain derived from the sale of property, or any other income that the Internal Revenue Service determines, in published guidance, is not FDAP income. Treas. Reg. §1.871-7(b)(1), 1.1441-2(b)(1)(i), and 1.1441-2(b)(2). Moreover, section 871(a)(1) specifically includes amounts received as annuities as a type of FDAP income. In Barba v. United States, 2 Cl. Ct. 674 (1983), the court, in determining whether gambling winnings of nonresident alien individuals from U.S. sources were FDAP income, concluded that the words “fixed and determinable annual or periodical gains” should be interpreted broadly to include all classes of income, except income arising from the sale of property. See also, Commissioner v. Wodehouse, 337 U.S. 369 (1949).

Section 933(1) provides that in the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof) is not included in gross income.

Treas. Reg. 1.863-6 provides that the principles applied for determining income from sources within and without the United States shall generally be applied for purposes of determining income from sources within and without a possession of the United States.

Section 876 provides that in the case of an alien individual who is a bona fide resident of Puerto Rico, sections 871 through 879 do not apply and such individual is subject to the tax imposed by section 1.

Because section 861(a) does not include rules specifying the source of income received under a life insurance or annuity contract under section 72, the source of such income is determined by comparison and analogy to classes of income that are specified within the statute. Bank of America, 680 F.2d at 147; Howkins, 49 T.C. at 689. Income received under a life insurance or annuity contract under section 72 is an investment return on the cash value of the contract and is analogous to (1) interest on a debt obligation, (2) dividends on a stock, and (3) earnings and accretions on pension fund assets. Thus, the source of that income is determined in the same manner as the source of interest, dividends, and earnings and accretions on pension fund assets. Under sections 861(a)(1) and (2), interest or dividends are U.S. source when the obligor or corporation, respectively, is domestic. Earnings and accretions on pension fund assets are also U.S. source when the pension trust is domestic. Clayton, 33 Fed. Cl. 628. Accordingly, income received under a life insurance or annuity contract is U.S. source when the issuer of the contract is a domestic corporation.

Income received from a life insurance or annuity contract under section 72 is not gain derived from the sale of property or income that is excluded from FDAP income by the IRS in published guidance. Payments from annuity contracts are specifically listed as a type of FDAP income in section 871(a)(1)(A). Thus, income received from a life insurance or annuity contract under section 72, both annuity payments and withdrawals made from the cash value of the contract, is FDAP income. Accordingly, when such income is received by nonresident alien individuals, it generally is subject to 30% tax and withholding under sections 871(a) and 1441.

Payments made to bona fide residents of Puerto Rico with respect to life insurance and annuity contracts issued by a Puerto Rican branch of a U.S. life insurance company are derived from sources within the United States under the principles described above. Because the payments are not derived from Puerto Rican sources, the payments are not excludible from gross income of the recipient under section 933.

Although the U.S.-source income of bona fide residents of Puerto Rico is subject to U.S. income tax, payments to such residents are not generally subject to tax and withholding under sections 871 and 1441. Bona fide residents of Puerto Rico who are citizens of the United States, as well as bona fide residents of Puerto Rico who are lawful permanent residents of the United States, are generally subject to the tax imposed by section 1. Moreover, under section 876, bona fide residents of Puerto Rico who are not citizens of the United States also are generally subject to the tax imposed by section 1.

The principal author of this revenue ruling is Gregory A. Spring of the Office of the Associate Chief Counsel (International). For further information regarding this revenue ruling, contact Mr. Spring at (202) 622-3870 (not a toll-free call).

If Corporation A, a resident of both Country X and Country Y under the laws of each country, is treated as a resident of Country Y and not of Country X for purposes of the X-Y Convention and, as a result, is not liable to tax in Country X by reason of its residence, is it entitled to claim the benefits of the U.S.-X Convention as a resident of Country X or of the U.S.-Y Convention as a resident of Country Y?

Situation 1

Corporation A is incorporated under the laws of Country X. Its place of effective management is situated in Country Y. Corporation A does not have a fixed place of business in Country X. Under the laws of Country X, prior to application of any income tax convention, Corporation A is liable to tax as a resident. Under the laws of Country Y, prior to application of any income tax convention, Corporation A is liable to tax as a resident. Corporation A receives U.S.-source income during the taxable year, with respect to which it seeks benefits under either the U.S. income tax convention with Country X (U.S.-X Convention) or the U.S. income tax convention with Country Y (U.S.-Y Convention).

The relevant articles of the U.S.-X Convention and the U.S.-Y Convention each provide:

There is in force an income tax convention between Country X and Country Y (the X-Y Convention) that contains the following article with respect to residence:

Situation 2

The facts are the same as in Situation 1 except that Corporation A has a fixed place of business in Country X, to which the income is attributable.

In Situation 1, before application of the X-Y Convention, Corporation A would be a resident of both Country X and Country Y under the domestic laws of each of Country X and Country Y. After the application of the relevant article of the X-Y Convention, Corporation A is treated as a resident of Country Y and not a resident of Country X because its place of effective management is situated in Country Y.

Accordingly, Corporation A continues to be liable to tax in Country Y by reason of residence. Therefore, under the relevant article of the U.S.-Y Convention, Corporation A is a resident of Country Y. Corporation A will be entitled to claim benefits under the U.S.-Y Convention as a resident of Country Y with respect to the U.S.-source income if it satisfies the requirements of the applicable limitation on benefits article, if any, and other applicable requirements in order to receive benefits under the U.S.-Y Convention.

Because Corporation A is treated as a resident of Country Y for purposes of the X-Y Convention, Corporation A is not subject to comprehensive taxation in Country X as it would be if it were liable to tax by reason of residence. Therefore, Corporation A is not a resident of Country X under the relevant article of the U.S.-X Convention and is not entitled to claim benefits under the U.S.-X Convention as a resident of Country X.

In Situation 2, after the application of the X-Y Convention, Corporation A continues to be liable to tax in Country Y by reason of residence. Therefore, under the relevant article of the U.S.-Y Convention, Corporation A is a resident of Country Y. Corporation A will be entitled to claim benefits under the U.S.-Y Convention as a resident of Country Y with respect to the U.S.-source income if it satisfies the requirements of the applicable limitation on benefits article, if any, and other applicable requirements in order to receive benefits under the U.S.-Y Convention.

Because Corporation A is treated as a resident of Country Y for purposes of the X-Y Convention, Corporation A’s fixed place of business in Country X is treated as a permanent establishment within the meaning of the X-Y Convention. Thus, Corporation A is liable to tax in Country X in respect of profits attributable to its permanent establishment, but is not subject to comprehensive taxation in Country X as it would be if it were liable to tax by reason of residence. Therefore, Corporation A is not a resident of Country X under the relevant article of the U.S.-X Convention and is not entitled to claim benefits under the U.S.-X Convention as a resident of Country X.

Rev. Rul. 73-354, 1973-2 C.B. 435, provided that a bank incorporated in Switzerland, managed and controlled in the United Kingdom, and engaged in the conduct of a business in both Switzerland and the United Kingdom, could choose to apply the provisions of either the United States-Swiss Confederation Income Tax Convention then in force or the United States-United Kingdom Income Tax Convention then in force to interest arising in the United States. Under those conventions, which are no longer in force, the determination of whether a corporation was a resident did not depend on whether the corporation was liable to tax in that country.

If Corporation A is treated as a resident of Country Y and not of Country X for purposes of the X-Y Convention and, as a result, is not liable to tax in Country X by reason of its residence, it is not entitled to claim benefits under the U.S.-X Convention, because it is not a resident of Country X under the relevant article of the U.S.-X Convention. However, Corporation A is entitled to claim benefits under the U.S.-Y Convention as a resident of Country Y, if it satisfies the requirements of the applicable limitation on benefits article, if any, and other applicable requirements in order to receive benefits under the U.S.-Y Convention.

This holding is applicable in interpreting income tax treaties that contain provisions that are the same as or similar to the relevant articles of the U.S.-X Convention, the U.S.-Y Convention, and the X-Y Convention.

Rev. Rul. 73-354, 1973-2 C.B. 435, is obsolete.

The principal author of this revenue ruling is Michelle S. Lyon of the Office of Associate Chief Counsel (International). For further information regarding this revenue ruling, contact Ms. Lyon at (202) 622-3880 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Final and temporary regulations.

This document contains final regulations relating to the information reporting requirements, information reporting penalties, and backup withholding requirements for payment card transactions. This document also contains final regulations relating to the IRS TIN Matching Program. The regulations in this document affect payors (and their authorized agents) and payees of certain reportable payments and provide guidance necessary to comply with the law.

Effective Date: These regulations are effective July 13, 2004.

Applicability Dates: The amendments to §31.3406(g)-1 are applicable for payments made on or after January 1, 2005. The amendments to §301.6724-1 are applicable for information returns required to be filed, and information statements required to be furnished, after December 31, 2005. Section 31.3406(j)-1(a) and (f) are applicable January 31, 2003.

Concerning the regulations, Donna Welch, (202) 622-4910 (not a toll-free number).

The IRS is also issuing two revenue procedures to implement the rules contained in the final regulations. The first of these revenue procedures sets forth the requirements that a payment card organization must satisfy to obtain an IRS determination that it is a QPCA. The revenue procedure also provides that a QPCA may act on behalf of a cardholder/payor for purposes of soliciting, collecting, and validating the names/TINs of the merchant/payees and on behalf of a merchant/payee for purposes of furnishing the payee’s name and TIN to the cardholder/payor.

The second revenue procedure provides an optional procedure for payors and their authorized agents to use in determining whether payment card transactions are reportable under section 6041 or section 6041A and are reportable payments for purposes of the IRS TIN Matching Program. In general, this revenue procedure classifies businesses by Merchant Category Codes (MCCs), or other equivalent Industry Codes, according to whether they predominantly furnish services (for which payments are reportable) or predominantly provide goods (for which payments are not reportable). Under the revenue procedure, payment card organizations would be permitted to assign MCCs, or other equivalent Industry Codes, to payees and payors would be permitted to rely on the assigned codes for information reporting and TIN matching purposes.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations.

It is hereby certified pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6) that the collection of information contained in these regulations will not have a significant economic impact on a substantial number of small entities. The reporting burden affects payment card organizations and financial institutions that issue payment cards. Most payment card organizations and payment card issuers are large businesses. To the extent that small financial institutions have a reporting burden, the burden is expected to be insignificant. Accordingly, a Regulatory Flexibility Analysis is not required.

Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Accordingly, 26 CFR parts 31, 301, and 602 are amended as follows:

The principal author of the regulations is Donna Welch, Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. However, other personnel from the IRS and the Treasury Department participated in the development of the regulations.

* * * * *

Whether the heir at law or next of kin of a decedent who dies intestate may inspect the income tax return filed by or on behalf of the decedent for the year prior to death.

The decedent, a resident of State X, died intestate (i.e., without a valid will). The decedent had two brothers and two sisters, and no other pre-deceased siblings. Under applicable state law, these four siblings are the decedent’s sole heirs at law and next of kin, and each is entitled to one-fourth of decedent’s estate. The four siblings want to inspect the decedent’s income tax return for the year prior to the decedent’s death in order to identify and locate assets owned by the decedent at the time of the decedent’s death.

Under I.R.C. § 6103(e)(3)(B), the return of a decedent shall, upon written request, be open to inspection by or disclosure to any heir at law, next of kin, or beneficiary under the will, of such decedent, or a donee of property, but only if the Service finds that such heir at law, next of kin, beneficiary, or donee has a material interest which will be affected by information contained therein.

Generally, the Service has interpreted the term “material interest” as an important interest that is financial in nature. In this case involving a taxpayer dying intestate, the income tax return filed by or on behalf of the decedent for the year prior to death may disclose assets or information materially affecting the distribution to each distributee of the estate. Where the heir at law or next of kin is a distributee, under applicable state law, of the estate of a decedent who dies intestate, such person shall be considered as having a “material interest” which will be affected by information contained in the income tax return filed by or on behalf of the decedent for the year prior to death, within the meaning of section 6103(e)(3)(B).

In addition to the written request for inspection or disclosure, the person requesting access under section 6103(e)(3)(B) must provide the Service with (i) proof of the date of death, place of death, and state of decedent’s residence, to help determine which state law is applicable and (ii) proof of his or her relationship to the decedent, including, but not limited to, a copy of a birth certificate, baptismal certificate, school record, or insurance designation. The person requesting access also must provide the Service with a written statement, along with supporting documents, to demonstrate that he or she has a material interest that will be affected by information contained in each requested return. Evidence sufficient to establish the nature and extent of the requester’s material interest may include, but is not limited to, a copy of the petition for probate or other comparable pleading required to institute the proceeding for the administration of the decedent’s estate. The Service may require additional information or documentation to determine the nature and extent of the requester’s material interest in the decedent’s return. In this case, upon receipt of satisfactory evidence of (i) the relationship to the decedent, (ii) the date of death, the place of death, and the state of decedent’s residence, and (iii) the decedent’s intestacy, the Service shall disclose to any of the decedent’s siblings the income tax return filed by or on behalf of the decedent for the year prior to decedent’s death.

The income tax return of an intestate decedent for the calendar year prior to decedent’s death shall be open to inspection or disclosure to any heir at law or next of kin who is a distributee, under applicable state law, of the probate estate of the decedent, and the existence of a material interest of such a person that is affected by information contained in that return will be presumed. The Secretary may disclose any other income tax returns of the decedent, provided that such heir at law or next of kin establishes to the satisfaction of the Secretary that he or she has a material interest which will be affected by information contained in each requested return. If, over time, the Secretary deems it prudent to amend the material interest access procedures, individuals who request access to the returns of an intestate decedent may be required to meet additional requirements.

This ruling supersedes Revenue Ruling 54-379.

N/A

The principal author of this revenue ruling is Charles B. Christopher of the Office of Associate Chief Counsel (Procedure and Administration). For further information regarding this revenue ruling, you may contact Charles B. Christopher at (202) 622-4580 (not a toll-free call).

How is an eligible entity (as defined in § 301.7701-3(a) of the Procedure and Administration Regulations) classified for federal tax purposes if the entity has two members under local law, but one of the members of the eligible entity is disregarded as an entity separate from the other member of the eligible entity for federal tax purposes?

Situation 1. X, a domestic corporation, is the sole owner of L, a domestic limited liability company (LLC). Under § 301.7701-3(b)(1), L is disregarded as an entity separate from its owner, X. L and X are the only members under local law of P, a state law limited partnership or LLC. There are no other constructive or beneficial owners of P other than L and X. L and P are eligible entities that do not elect under § 301.7701-3(c) to be treated as associations for federal tax purposes.

Situation 2. X is an entity that is classified as a corporation under § 301.7701-2(b). X is the sole owner of L, a foreign eligible entity. Under § 301.7701-3(c), L has elected to be disregarded as an entity separate from its owner. L and X are the only members under local law of P, a foreign eligible entity. There are no other constructive or beneficial owners of P other than L and X.

Section 7701(a)(2) of the Internal Revenue Code provides that the term partnership includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not a trust, estate, or corporation.

Section 301.7701-1(a)(1) provides that whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law.

Section 301.7701-2(a) provides that a business entity is any entity recognized for federal tax purposes (including an entity with a single owner that may be disregarded as an entity separate from its owner under § 301.7701-3) that is not properly classified as a trust under § 301.7701-4 or otherwise subject to special treatment under the Code. A business entity with two or more owners is classified for federal tax purposes as either a corporation or a partnership. A business entity with only one owner is classified as a corporation or is disregarded; if the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner.

Section 301.7701-2(c)(1) provides that, for federal tax purposes, the term “partnership” means a business entity that is not a corporation under § 301.7701-2(b) and that has at least two owners.

Section 301.7701-2(c)(2)(i) provides, in general, that a business entity that has a single owner and is not a corporation under § 301.7701-2(b) is disregarded as an entity separate from its owner.

Section 301.7701-3(a) provides that a business entity that is not classified as a corporation under § 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes. An eligible entity with at least two owners can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner.

Section 301.7701-3(b)(1) provides generally that in the absence of an election otherwise, a domestic eligible entity is (a) a partnership if it has at least two members, or (b) disregarded as an entity separate from its owner if it has a single owner.

Section 301.7701-3(b)(2) provides generally that, in the absence of an election otherwise, a foreign eligible entity is (a) a partnership if it has two or more owners and at least one owner does not have limited liability, (b) an association if all its owners have limited liability, or (c) disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

Situation 1. Under § 301.7701-2(c)(2), L is disregarded as an entity separate from its owner, X, and its activities are treated in the same manner as a branch or division of X. Because L is disregarded as an entity separate from X, X is treated as owning all of the interests in P. P is a domestic entity, with only one owner for federal tax purposes, that has not made an election to be classified as an association taxable as a corporation. Because P has only one owner for federal tax purposes, P cannot be classified as a partnership under § 7701(a)(2).For federal tax purposes, P is disregarded as an entity separate from its owner.

Situation 2. Under § 301.7701-3(c), L is disregarded as an entity separate from its owner, X, and its activities are treated in the same manner as a branch or division of X. Because L is disregarded as an entity separate from X, X is treated as owning all of the interests in P. Because P has only one owner for federal tax purposes, P cannot be classified as a partnership under § 7701(a)(2). For federal tax purposes, P is either disregarded as an entity separate from its owner or an association taxable as a corporation.

If an eligible entity has two members under local law, but one of the members of the eligible entity is, for federal tax purposes, disregarded as an entity separate from the other member of the eligible entity, then the eligible entity cannot be classified as a partnership and is either disregarded as an entity separate from its owner or an association taxable as a corporation.

The principal author of this revenue ruling is Jason T. Smyczek of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. Smyczek at (202) 622-3050 (not a toll-free call).

This revenue procedure establishes a procedure for a payment card organization to request a determination that it is a Qualified Payment Card Agent (QPCA) for purposes of section 3406 and section 6724 of the Internal Revenue Code. A QPCA may act on behalf of cardholder/payors in soliciting, collecting, and validating merchants’ names, taxpayer identification numbers (TINs) and corporate status (collectively referred to as merchant/payee data) and on behalf of merchant/payees in furnishing merchant/payee data to cardholder/payors. The Regulations on Procedure and Administration relieve cardholder/payors from certain TIN solicitation requirements for payments made through a QPCA. The Employment Tax Regulations provide a limited exception from the backup withholding requirements for payments made to certain merchant/payees through a QPCA.

.01 Payment card transactions. A payment card transaction is a transaction in which a cardholder/payor uses a payment card (as defined in section 4.04 of this revenue procedure) to purchase goods or services and a merchant agrees to accept the payment card as a means of obtaining payment. A payment card organization (as defined in section 4.05 of this revenue procedure) sets the standards and provides the mechanism for effecting the payment.

.02 Reporting requirements. In general, section 6041 requires a person engaged in a trade or business and making a payment in the course of the trade or business of $600 or more during a calendar year of fixed or determinable income to file an information return with the Internal Revenue Service (IRS) and to furnish an information statement to the payee. Section 1.6041-3(p) of the Income Tax Regulations provides exceptions to these requirements, including, for example, exceptions for payments made to a payee that is a corporation.

Section 6109(a)(2) provides that any payee, with respect to whom a return is required to be made by another person or whose identifying number is required to be shown on a return of another person, must furnish to the other person the identifying number prescribed for securing the proper identification of the payee. Section 6109(a)(3) provides that any person required to make a return with respect to a payee must ask the payee for the identifying number prescribed for securing the proper identification of the payee and must include that number in the return.

.03 Backup withholding. Section 3406(a)(1) requires a payor to withhold on reportable payments (as defined in section 3406(b)(1)) if the payee does not provide a TIN to the payor in the manner required or if the Secretary notifies the payor that the TIN furnished by the payee is incorrect or in certain other circumstances. Section 3406(i) provides that the Secretary shall prescribe the regulations necessary or appropriate to carry out the purposes of section 3406.

Section 31.3406(j)-1 of the Employment Tax Regulations provides that the Commissioner has the authority to establish TIN matching programs through revenue procedures or other appropriate guidance. Under the regulations, a payor or a payor’s authorized agent may participate in a TIN matching program that permits the payor or authorized agent to contact the IRS with respect to the TIN furnished by a payee before the payor files an information return for reportable payments to the payee. The regulations further provide that the IRS will inform the payor or the payor’s authorized agent whether or not the name/TIN combination furnished by the payee matches a name/TIN combination maintained for the TIN matching program. Revenue Procedure 2003-9, 2003-1 C.B. 516, describes the procedures for participation in the IRS TIN Matching Program.

Section 31.3406(g)-1(f) of the Employment Tax Regulations provides that the backup withholding requirements of section 3406 do not apply to payments made through a QPCA if the payments are made to a qualified payee or during a grace period. Section 31.3406(g)-1(f)(3) requires a QPCA to notify the cardholder/payor when payments are made to a merchant/payee who is not a qualified payee.

.04 Information reporting penalties and waivers for reasonable cause. Section 6721 provides that a payor may be subject to a penalty for failure to file a complete and correct information return. Section 6722 provides that a payor may be subject to a penalty for failure to furnish a complete and correct information statement to a payee. A failure subject to the section 6721 and section 6722 penalties includes a failure to include correct payee TINs.

Section 6724 provides that the penalties under section 6721 and section 6722 may be waived if the filer shows that the failure was due to reasonable cause and was not due to willful neglect. Section 301.6724-1(e)(1)(vi)(H) and (f)(5)(vii) of the Regulations on Procedure and Administration provide that a cardholder/payor in a payment card transaction may establish reasonable cause based on its reliance on a QPCA.

This revenue procedure applies to payment card organizations acting or seeking to act on behalf of cardholder/payors in soliciting, collecting, and validating merchant/payee data and on behalf of merchant/payees in furnishing merchant/payee data to cardholder/payors.

The following definitions and related rules apply solely for purposes of this revenue procedure:

.01 Cardholder. A cardholder (or cardholder/payor) is the person that agrees to make the payment through the payment card organization. Thus, in the case of a payment card issued to an employee of a person that agrees to make payments through the payment card organization, the employer rather than the employee is the cardholder/payor.

.02 Merchant. A merchant (or merchant/payee) is a person that has agreed to accept the payment card issued by the payment card organization as payment for goods and services.

.03 Merchant/payee data. Merchant/payee data includes the merchant/payee’s name, corporate status, and TIN, and whether the TIN has been validated through participation in the IRS TIN Matching Program.

.04 Payment card. A payment card is a card (or an account) issued by a payment card organization to a cardholder/payor which, upon presentation to a merchant/payee, represents an agreement of the cardholder to pay the merchant through the payment card organization.

.05 Payment card organization. A payment card organization is an entity that sets the standards and provides the mechanism for effectuating payment between a purchaser and a merchant in a payment card transaction. A payment card organization generally provides this payment mechanism by issuing payment cards, enrolling merchants as authorized acceptors of payment cards for payment for goods or services, and ensuring the system conducts the transactions in accordance with prescribed standards. In any case in which a payment card organization acts through a member, affiliate, or licensee, the action is treated for purposes of this revenue procedure (including this definition) as an action by a payment card organization.

.06 Qualified Payment Card Agent (QPCA). A QPCA is a payment card organization that has a current QPCA determination from the IRS. A person acting in its capacity as a QPCA does not act as an agent of the IRS, nor does it have the authority to hold itself out as an agent of the IRS.

.01 Where to apply for QPCA determination. A person authorized to act on behalf of a payment card organization may submit a written request for a QPCA determination to the following address:

.02 Content of QPCA application. A payment card organization requesting a QPCA determination must include the following in its application:

(1) The name, address, and employer identification number of the payment card organization and a description of its business.

(2) The name of the department or office of the payment card organization that will serve as the information contact.

(3) The name of the department or the names and titles of the officers or employees that will be responsible for the performance of the TIN solicitation activities described in section 6.

(4) A list of the systems, business lines, or card product lines or levels that will be covered by the TIN solicitation activities described in section 6 and that will be covered by a QPCA determination.

(5) An explanation of the account opening procedures and documents the payment card organization uses, or requires its members, affiliates, or licensees to use, to establish merchant account relationships related to the payment card organization’s activities as a QPCA.

(6) The approximate number and the type of merchants (individuals, corporations, etc.) enrolled by the payment card organization.

(7) An explanation of the payment card organization’s systems and controls related to the payment card organization’s activities as a QPCA for—

(a) Obtaining merchant/payee data (including merchant/payee data provided by reputable third-party sources);

(b) Validating the accuracy of the merchant/payee data;

(c) Ensuring the accuracy and reliability of the merchant/payee data;

(d) Maintaining the merchant/payee data; and

(e) Supplying the merchant/payee data to the cardholder/payor.

.03 Requirements for QPCA determination. A payment card organization must meet the following requirements to obtain a QPCA determination:

(1) Authorization to act on behalf of cardholder/payors and on behalf of merchant/payees.

(a) The payment card organization must establish that cardholder/payors have authorized it or its members, affiliates, or licensees to act on their behalf in soliciting, collecting, and validating merchants’ names and TINs and to assist the cardholders in meeting their information reporting obligations under section 6041 and section 6041A. The payment card organization must also establish that merchant/payees have authorized it or its members, affiliates, or licensees to act on their behalf in furnishing their names and TINs to cardholders and to assist the merchants in meeting their obligations under section 6109(a)(2). To satisfy these requirements, the payment card organization must provide the written notice described in section 5.03(1)(b) to each cardholder/payor and must provide the written notice described in section 5.03(1)(c) to each merchant/payee.

(b) The text of the written notice provided to cardholder/payors must be in bold and conspicuous type, and the notice must include the legend: “Important Tax and Privacy Materials.” The notice must state:

The notice may be included in the annual (or periodic) agreement, or amendments thereto, between the payment card organization and the cardholder or in a separate document. The outside of the envelope in which the written notice is mailed must contain, in bold and conspicuous type, the legend: “Important Tax and Privacy Materials Enclosed.”

(c) The text of the written notice provided to merchant/payees must be in bold and conspicuous type, and the notice must include the legend: “Important Tax and Privacy Materials.” The notice must state:

The notice may be included in the annual (or periodic) agreement, or amendments thereto, between the payment card organization and the merchant or in a separate document. The outside of the envelope in which the written notice is mailed must contain, in bold and conspicuous type, the legend: “Important Tax and Privacy Materials Enclosed.”

(2) TIN solicitation activities. The payment card organization must establish that it has undertaken, or demonstrate that it will undertake, the TIN solicitation activities described in section 6.

(3) Reliability of merchant/payee data. After obtaining the authorizations required by section 5.03(1), the payment card organization must participate in the IRS TIN Matching Program and must demonstrate, based on the TIN matching results, that its merchant/payee data is sufficiently reliable.

.01 TIN solicitation methods. A QPCA must solicit merchant/payee TINs in a manner described in section 301.6724-1(e)(1)(i) of the Regulations on Procedure and Administration. Alternatively, a QPCA may obtain merchant/payee TINs from a reputable third-party source.

.02 Notification and disclosure requirements. A QPCA must give each merchant/payee for which it acts as agent the written notice described in section 5.03(1)(c) and must give each cardholder/payor for which it acts as agent the written notice described in 5.03(1)(b). In addition, a QPCA must give written notice of its status as a QPCA, and of any change in that status, to any member, affiliate, or licensee that issues payment cards, as well as to the merchant/payees and cardholder/payors for which it acts as agent.

.03 TIN Matching participation. A QPCA must participate in the IRS TIN Matching Program and must match its merchant/payee data relating to reportable payments with IRS within three months after obtaining the merchant/payee’s TIN.A QPCA may seek to cure merchant/payee data that has not previously been validated through the IRS TIN Matching Program. The QPCA must transmit only merchant/payee data that has not previously been validated through IRS TIN Matching.

.04 Providing merchant/payee data to cardholders. The QPCA must provide cardholder/payors with a report containing merchant/payee data within four months of the date on which the QPCA makes the payment.The report may be provided in a quarterly or other regular report of merchant/payee data that includes the merchant/payee’s name, corporate status, TIN, and whether the TIN has been validated through participation in the IRS TIN Matching Program.A QPCA must furnish the report containing merchant/payee data for transactions occurring on or before December 31 of the calendar year no later than January 15 of the following calendar year.

.01 Availability of records. A payment card organization and its members, affiliates, and licensees must respond to any reasonable IRS request for inspection of any books and records that relate to the operation of TIN solicitation activity, including, but not limited to, reports, memoranda, budgets, and computer printouts. The payment card organization and its members, affiliates, and licensees must allow the IRS reasonable access to the merchant/payee TIN data system, including instruction manuals describing the system.

.02 Change in information. The QPCA must promptly notify the IRS of any change in the information described in section 5.

.03 Confidentiality of information. For purposes of this revenue procedure, the payment card organization and its members, affiliates, and licensees must maintain the confidentiality of information obtained through the TIN solicitation activities in accordance with the requirements of section 31.3406(f)-1 of the Employment Tax Regulations. Except as permitted under section 31.3406(f)-1, the payment card organization and its members, affiliates, and licensees may not disclose any merchant/payee information to any person other than the cardholder/payor without prior written consent of the merchant/payee. The IRS will treat all information provided by a QPCA as return information that is confidential under section 6103.

.01 Term and renewal. In general, a QPCA determination will be effective for five years from the date of the determination. A QPCA may request a renewal of the QPCA determination by submitting an application for renewal to the IRS no earlier than 12 months and no later than three months before the expiration of the five-year term. In the application for renewal, the QPCA must report any change in the information in the original application. Before renewal of the determination, the IRS may review the QPCA’s systems. In addition, the QPCA must demonstrate that the merchant/payee data continues to be reliable. The application for renewal must include the results from participation in the IRS TIN Matching Program during the current five-year term. The IRS will make every effort to issue a decision on a renewal application at least 30 days before the expiration of the current five-year term. In the event that the IRS does not issue a decision on a timely renewal application before the expiration of the existing QPCA determination, the determination will remain in effect until the IRS issues a decision on the renewal application.

.02 Revocation of determination. The IRS may revoke a QPCA determination before the expiration of its five-year term if the IRS determines, based on the results of the QPCA’s participation in the IRS TIN Matching Program, that the merchant/payee data is not reliable or if the payment card organization fails to meet any of the requirements in section 5, 6, or 7. A QPCA may terminate its status as a QPCA upon 60 days written notice to the IRS.

This revenue procedure is effective July 14, 2004.

The principal author of this revenue procedure is Donna Welch of the Office of Associate Chief Counsel (Procedure and Administration). For further information regarding this revenue procedure, contact Ms. Welch at (202) 622-4910 (not a toll-free call).

This revenue procedure provides an optional procedure that payors may use in determining whether payment card transactions are reportable under section 6041 or section 6041A of the Internal Revenue Code. In addition, payors, or their authorized agents, may use this optional procedure in determining whether payment card transactions are reportable payments for purposes of the Internal Revenue Service TIN Matching Program under section 3406.

In general, this revenue procedure classifies businesses by Merchant Category Codes (MCCs) according to whether they predominantly furnish services (for which payments are reportable) or predominantly provide goods (for which payments are not reportable). A payment card organization may assign MCCs, or equivalent Industry Codes, to merchant/payees that accept its payment cards and notify cardholder/payors that use its payment card of the MCC or equivalent Industry Code assigned to a merchant/payee. A cardholder/payor may then rely on the MCC or equivalent Industry Code assigned to a merchant/payee in determining whether a payment card transaction with that merchant/payee is subject to reporting under section 6041 or section 6041A.

.01 Reporting requirements under sections 6041 and 6041A. If a person is engaged in a trade or business and, in the course of that trade or business, pays any person $600 or more of rent, salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or other fixed or determinable gains, profits, and income during a calendar year, section 6041 generally requires the payor to file an information return with the Internal Revenue Service (Service) and to furnish an information statement to the payee.

Section 1.6041-3(c) of the Income Tax Regulations provides an exception to reporting for payments for merchandise, telegrams, telephone, freight, storage and similar charges. Section 1.6041-3(p)(1) provides an exception to reporting for payments made to a corporation, unless the corporation is engaged in providing medical and health care services or is engaged in the billing and collecting of payments in respect to providing medical and health care services. The same provision also provides that reporting is not required for payments made to a hospital or extended care facility that is a tax-exempt organization described in section 501(c)(3) or to a hospital or extended care facility owned and operated by the United States, a State, the District of Columbia, a possession of the United States, or a political subdivision, agency or instrumentality of any of the foregoing.Section 1.6041-3(p)(2) provides that reporting is not required for payments to an organization exempt from taxation under section 501(a) or an individual retirement plan. Section 1.6041-3(p)(3) provides that reporting is not required for payments made to the United States. Section 1.6041-3(p)(4) provides that reporting is not required for payments made to a State, the District of Columbia, a possession of the United States, or any political subdivision of the foregoing.

If a person is engaged in a trade or business and, in the course of that trade or business, pays any person $600 or more for services during a calendar year, section 6041A(a) generally requires the payor to file an information return with the Service and to furnish an information statement to the service provider. In general, the exceptions to reporting under section 6041 apply to reporting under section 6041A. However, section 6041A(d)(3) provides that reporting is generally required for payments made by a Federal executive agency to a corporation.

Revenue Ruling 81-232, 1981-2 C.B. 231, involved an insurance company making payments to an automobile repair shop for the repair of an insured automobile. The repair contract required payment of $300 for labor and $700 for parts. The ruling held that the entire payment was reportable under section 6041 because the portion of the payment attributable to parts was merely incidental to the obligation to repair the automobile. The ruling further held that no part of the payment was excepted from the reporting requirements of section 6041 as a payment of a bill for merchandise.

.02 Payment card transactions. A payment card transaction is a transaction in which a cardholder/payor uses a payment card (as defined in section 4.05 of this revenue procedure) to purchase goods or services and a merchant agrees to accept the payment card as a means of obtaining payment. A payment card organization (as defined in section 4.06 of this revenue procedure) sets the standards and provides the mechanism for effecting the payment.

This revenue procedure applies to payment card organizations and their members, affiliates, and licensees and to cardholder/payors that purchase goods or services in payment card transactions. In addition, cardholder/payors, or their authorized agents, will be allowed to rely on MCCs or equivalent Industry Codes for purposes of TIN matching with respect to reportable payments as defined in section 3406(b).Currently, the IRS TIN Matching Program is available only for certain reportable payments as defined in section 3406(b), including reportable payments under sections 6041 and 6041A.

For purposes of this revenue procedure, the terms listed below are defined and applied as follows:

.01 Cardholder. A cardholder (or cardholder/payor) is the person that agrees to make the payment through the payment card organization. Thus, in the case of a payment card issued to an employee of a person that agrees to make payments through the payment card organization, the employer rather than the employee is the cardholder.

.02 Merchant. A merchant (or merchant/payee) is a payee that has agreed to accept the payment card issued by the payment card organization as payment for goods and services.

.03 Merchant Category Code. A Merchant Category Code (MCC) is a classification code that is assigned by a payment card organization to a merchant/payee. The payment card organization assigns the merchant a particular code based on the predominant business activity of the merchant.

.04 Industry Code. An Industry Code is the number that corresponds to, and identifies, a merchant in the same business as a merchant assigned a particular MCC.

.05 Payment Card. A payment card is a card (or an account) issued by a payment card organization to a cardholder/payor, which upon presentation to a merchant/payee, represents an agreement of the cardholder to pay the merchant through the payment card organization.

.06 Payment Card Organization. A payment card organization is an entity that sets the standards and provides the mechanism for effectuating payment between a purchaser and a merchant in a payment card transaction. A payment card organization generally provides the payment mechanism by issuing payment cards, enrolling merchants as authorized acceptors of payment cards for payment for goods or services, and ensuring the system conducts the transactions in accordance with prescribed standards. In any case in which a payment card organization acts through a member, affiliate, or licensee, the action is treated for purposes of this revenue procedure (including this definition) as an action by the payment card organization.

.07 Payment Card Transaction. A payment card transaction is a transaction in which a cardholder/payor uses a payment card (as defined in section 4.05 of this revenue procedure) to purchase goods or services, and a merchant agrees to accept a payment card as a means of obtaining payment.

.01 Payment Card Organizations. A payment card organization may assign MCCs, or equivalent Industry Codes, to merchant/payees and notify cardholder/payors of the MCCs or equivalent Industry Codes assigned to merchant/payees. If the MCC or equivalent Industry Code assigned to a merchant/payee is not listed in section 5.03 (an unlisted code) and the payment card organization determines that merchants within the assigned code are similar to merchants within an MCC or equivalent Industry Code that is listed (a listed code), the payment card organization may notify cardholder/payors that they may treat payments to the merchant in the same manner as payments to merchants within the listed code. If the payment card organization determines that merchants within the assigned code are not similar to merchants within any listed code, it should notify cardholder/payors that the treatment of payments to the merchant depends on whether, under the facts and circumstances, information reporting is required with respect to the payments. The payment card organization and its members, affiliates, and licensees must exercise due diligence in verifying the type of business that a merchant conducts. In addition, the payment card organization and its members, affiliates, and licensees must exercise reasonable business judgment in assigning MCCs or equivalent Industry Codes and in determining whether merchants within an unlisted code are similar to merchants within a listed code.

If the Service notifies the payment card organization that the MCC or equivalent Industry Code assigned to a merchant/payee is incorrect, this revenue procedure does not apply to payment card transactions with the merchant/payee occurring more than 60 days after the date of the notification unless the payment card organization has assigned the merchant/payee a new MCC or equivalent Industry Code that is satisfactory to the Service and notified cardholder/payors of the correction. If the payment card organization fails to assign the merchant/payee a new MCC or equivalent Industry Code that is satisfactory to the Service and notify cardholder/payors of the correction during the 60-day period following the date of the notification that a merchant/payee MCC or equivalent Industry Code is incorrect, the payment card organization must notify cardholder/payors before the end of the period that they may no longer rely on the MCC or equivalent Industry Code assigned to the merchant/payee. Similar procedures apply if the payment card organization determines that merchants within the unlisted code assigned to a merchant/payee are similar to merchants within a listed code and the Service notifies the payment card organization that this determination is incorrect.

The Service may assist payment card organizations and their members, affiliates, and licensees in determining whether the MCC or equivalent Industry Code assigned to a merchant/payee is correct or whether merchants within an unlisted code are similar to merchants within a listed code. The Service will periodically update the table in section 5.03 and requests that payment card organizations notify the Service of updates to the MCCs.

02. Cardholder/payors. A cardholder/payor may rely on the MCC or equivalent Industry Code assigned to a merchant/payee in determining whether a payment card transaction with that merchant/payee is subject to information reporting under section 6041 or section 6041A. Thus, if a merchant/payee is assigned an MCC and the table in section 5.03 indicates that payments to merchants in that category are not reportable under section 6041 or section 6041A, a cardholder/payor is not required to report payment card transactions with the merchant/payee. Similarly, an indication in the table that payments to a category of merchants are reportable under section 6041 or section 6041A reflects a determination by the Service that those merchants predominantly furnish services, and cardholder/payors may treat payment card transactions with those merchants as payments for services. Similar procedures apply if the merchant/payee is assigned an unlisted code and the payment card organization notifies the cardholder/payor that it may treat payments to the merchant in the same manner as payments to merchants within a listed code. If the merchant/payee is assigned an unlisted code and the payment card organization notifies the cardholder/payor that the treatment of payments to the merchant depends on the facts and circumstances, the cardholder/payor must determine based on the actual nature of the transaction whether information reporting is required with respect to the payments.

If a cardholder/payor determines that the MCC or equivalent Industry Code assigned by the payment card organization does not reflect the actual nature of the transaction, the cardholder/payor may determine whether information reporting is required based on the actual nature of the transaction. For example, transactions not qualifying for the merchandise exception to information reporting under this revenue procedure may qualify for the exception under the generally applicable rules of sections 6041 and 6041A if, in fact, only merchandise is provided. In addition, other exceptions to information reporting (such as the exception for payments to corporations) may apply.

.03 Table. The following table is used in applying the optional procedure permitted under this revenue procedure.

This revenue procedure is effective July 14, 2004.

The principal author of this revenue procedure is Joseph P. Dewald of the Office of Associate Chief Counsel (Procedure and Administration). For further information regarding this revenue procedure, contact Mr. Dewald at (202) 622-4910 (not a toll-free call).

The purpose of this revenue procedure is to outline the procedure by which a plan administrator or a plan sponsor may request and obtain approval for an extension of an amortization period in accordance with § 412(e) of the Internal Revenue Code and section 304(a) of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 1974-3 C.B. 1, 42.

.01 Statute—Section 412(e) of the Code and section 304(a) of ERISA provide that the period of years required to amortize any unfunded liability of any plan may be extended by the Secretary of Labor for a period of time (not in excess of 10 years).

.02 Reorganization Plan—Reorganization Plan No. 4 of 1978, 1979-1 C.B. 480, which became effective December 31, 1978, transferred the function described in subsection .01 to the Secretary of the Treasury.

.01 Who may submit—Only a plan administrator, plan sponsor, or an authorized representative of either may submit a request for approval to extend the period of years required to amortize any unfunded liability. The request must be signed by the taxpayer maintaining the plan (hereinafter referred to as “applicant”) or an authorized representative of the applicant who either must be identified in (a), (b), or (c) of subsection 9.02(11) of Rev. Proc. 2004-4, 2004-1 I.R.B. 125, or must be an enrolled actuary within the meaning of § 7701(a)(35) of the Code. Where an authorized representative signs the request or will appear before the Service in connection with the request, a Form 2848, Power of Attorney and Declaration of Representative, must be submitted with the request. For multiemployer plans, the request must be made by the Board of Trustees (which shall be deemed to be the applicant) or by an authorized representative of the Board of Trustees. An individual is not an authorized representative of the applicant merely on account of being an administrator or trustee of the plan.

.02 Submission.--Requests for approval to extend an amortization period must be submitted to:

The user fee required by Rev. Proc. 2004-8, 2004-1 I.R.B. 240, or its successors, must be sent with such requests.

.03 Necessary Procedural Documents.—A request will not be considered unless it complies with (1) through (3) below.

(1) The request also must contain a declaration in the following form: “Under the penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the request are true, correct, and complete.” This declaration must be signed by the applicant (e.g., an authorized officer of a corporation). The signature of an individual with a power of attorney will not suffice for the declaration. See section 9.02(13) of Rev. Proc. 2004-4, supra, at 142.

(2) Because a request for an extension constitutes a request for a ruling, compliance with section 6110 of the Code is also required. Section 601.201 of the Statement of Procedural Rules sets forth the requirements applicable to requests for rulings and determination letters which are subject to section 6110. Section 601.201(e) furnishes specific instructions to applicants.

The applicant must provide with the request either a statement of proposed deletions and the statutory basis for each proposed deletion, or a statement that no information other than names, addresses, and taxpayer identifying numbers need be deleted.

(3) The applicant must provide a copy of a written notification to each employee organization representing employees covered by the plan, and each participant, beneficiary, and alternate payee of the plan, that an application for an extension of the amortization period under § 412(e) has been submitted to the Service. The original of the written notification must bear a signature by an appropriate officer of the applicant and must be in substantially the form set forth in the Model Notice found in the Appendix A to this revenue procedure. The Service does not require the applicant to furnish any information in addition to that required by the Model Notice in the Appendix A to plan participants, beneficiaries, alternate payees, or employee organizations as part of the extension application process, but additional information may, of course, be provided by the applicant pursuant to the collective bargaining process or otherwise.

The application must state that such notice was hand delivered or mailed to the last known address of each employee organization, participant, beneficiary, and alternate payee (within the meaning of § 414(p)(8)) within 14 days prior to the date of the application. If the applicant makes a reasonable effort to carry out the provisions of this paragraph, failure of an employee organization, participant, beneficiary, or alternate payee to receive the notice will not cause the applicant to fail the notice requirement. However, merely posting the notice on a bulletin board is not sufficient to satisfy this requirement.

.04 Necessary Information.--The applicant must furnish appropriate evidence that the extension of the amortization period is needed to continue the plan or to prevent a substantial curtailment of pension benefit levels or employee compensation, and that a denial of the extension would be adverse to the interests of the plan participants in the aggregate. What constitutes appropriate evidence will depend on the facts and circumstances of each case. A response must be furnished for each of the paragraphs (1) through (6) below. In certain cases, some of the material described in paragraphs (1) through (6) may be inapplicable, unavailable, inappropriate or burdensome to furnish. In such cases, the applicant should furnish a statement indicating why the material for a particular paragraph is inapplicable, unavailable, inappropriate or burdensome.

(1) General facts concerning the employer.

A brief statement should be submitted concerning: (a) the history of the employer and its primary business; (b) the ownership of the employer and any recent or contemplated changes (such as acquisitions, mergers, discontinuances of operations) which might have a bearing on the employer’s organization or financial condition; (c) whether the employer is aggregated with any other entity for purposes of § 414(b), (c), (m) or (o); and (d) whether the plan is also maintained by employers described in (c) above or any other employers.

(2) The financial condition of the employer.

For plans other than multiemployer plans, the latest available annual financial report of the employer and each of the other entities included within the controlled group of which the employer is a member. This submission must include at least the balance sheet, profit and loss statement, cash flow statement, and notes to the financial statement. Recent interim financial reports for each of the controlled group members, if available, should also be submitted along with an interim financial report covering the corresponding period for the previous year. If the employer submits financial reports to the Securities and Exchange Commission, these reports should be submitted for the same period as the annual financial report. Preferably, the financial report should include certified financial statements. If certified financial statements have not been prepared, an uncertified report is acceptable. If neither certified nor uncertified reports are available, a copy of the company’s latest available federal income tax return, including all of the supporting schedules, must be submitted.

For multiemployer plans, the financial information described in the above paragraph must only be submitted for employers who either (1) are represented on the Board of Trustees or (2) made or were required to make five percent or more of the total required contributions under the collective bargaining agreements relating to the plan for which the extension is requested. In addition, the applicant must submit a general description of the financial state of the industry in which employees covered by the plan are employed. Regardless of whether any employer makes more than five percent of the total contributions, a general description of the financial state of the industry in which employees covered by the plan are employed is required. For purposes of this paragraph, a multiple employer plan for which the plan administrator did not make an election under § 413(c)(4)(B) of the Code is required to submit the same information as a multiemployer plan. Financial information of employers contributing to a multiemployer plan (identified by name of plan and plan number) must be submitted directly from the contributing employers to the Service at the same time that the submission is made to the following address:

(3) Information concerning the extension of the amortization period. Information concerning the extension of the amortization period should include the following.

The Service may request additional information as needed.

(4) Facts concerning the pension plan. For each pension plan for which an extension is requested, the following information should be supplied.

(5) Other pension, profit-sharing, or stock bonus plans. If the employer maintains more than one plan, an outline of the essential facts for each such plan should be submitted. This should include:

(6) Other information.

.05 Checklist.--A checklist has been provided in Appendix B for the convenience of the taxpayer submitting the request. This checklist should be signed, by the taxpayer or authorized representative, and dated and placed on top of the request.

All extension requests should be submitted by the last day of the plan year for which the extension is intended to take effect. The Service will consider applications for extensions submitted after this date only upon a showing of good cause. In seeking an extension of an amortization period with respect to a plan year which has not yet ended, the applicant may have difficulty in furnishing sufficient current evidence in support of the request. For this reason, it is generally advised that a request not be submitted earlier than 180 days prior to the end of the plan year for which the extension is requested.

Employers who have difficulty in furnishing the information specified in this revenue procedure may call the Employee Plans Customer Assistance Service at 1-877-829-5500 (a toll-free number), or write for guidance to the following address:

In appropriate instances, pre-submission conferences may be afforded in addition to conferences available under Rev. Proc. 2004-4.

If the applicant or a significant number of controlled group members file a bankruptcy petition after the request for an extension of an amortization period is submitted to the Service, the applicant must provide to the Service an update to the information required to be submitted in section 3 of this revenue procedure, especially the financial information in section 3.04(2).

This revenue procedure is effective for all ruling requests received after August 2, 2004, the date of its publication in the Internal Revenue Bulletin.

Rev. Proc. 2004-4 is modified to the extent that this revenue procedure provides special procedures for issuing rulings with respect to requests for an extension of an amortization period.

Rev. Proc. 79-61, 1979-2 C.B. 575, is superseded

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. section 3507) under control number 1545-1890.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in this revenue procedure is in section 3 and Appendix B. This collection of information is required to evaluate, process and obtain approval of the request for an extension of an amortization period. This information will be used to make determinations on extensions of the amortization period under § 412(e) of the Code. The likely respondents are businesses or other for-profit institutions and nonprofit institutions.

The estimated total annual reporting/recordkeeping burden is 2500 hours.

The estimated annual burden per respondent/recordkeeper varies from 71 to 129 hours, depending on individual circumstances, with an estimated average burden of 100 hours. The estimated number of respondents/recordkeepers is 25.

The estimated annual frequency of responses is one.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. section 6103.

The principal author of this revenue procedure is John C. Heil of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding how this revenue procedure applies to employee plans matters, contact the Employee Plans Customer Assistance Service at 1-877-829-5500 (a toll-free call). Mr. Heil’s telephone number is (202) 283-9694 (not a toll-free call).

This revenue procedure provides alternative disclosure procedures that are deemed to satisfy a taxpayer’s disclosure obligations under § 1.6011-4 of the Income Tax Regulations for transactions with a significant book-tax difference under § 1.6011-4(b)(6). Taxpayers also may continue to follow the disclosure procedures provided in § 1.6011-4 for disclosing transactions described in § 1.6011-4(b)(6).

.01 Section 1.6011-4 requires a taxpayer who participates in a reportable transaction to disclose the transaction in accordance with the procedures provided in § 1.6011-4. Under § 1.6011-4(b), there are six categories of reportable transactions. One category of reportable transactions is a transaction with a significant book-tax difference. A transaction with a significant book-tax difference is defined in § 1.6011-4(b)(6) as a transaction where the amount for tax purposes of any item or items of income, gain, expense, or loss from the transaction differs by more than $10 million on a gross basis from the amount of the item or items for book purposes in any taxable year. For purposes of § 1.6011-4(b)(6), the amount of an item for book purposes is determined by applying U.S. generally accepted accounting principles for worldwide income.

.02 Section 1.6011-4(b)(6)(ii) provides that the following taxpayers must disclose transactions with a significant book-tax difference: (1) reporting companies under the Securities Exchange Act of 1934 (15 U.S.C. 78a) and related business entities; and (2) business entities that have $250 million or more in gross assets for book purposes at the end of any financial accounting period that ends with or within the entity’s taxable year in which the transaction occurs.

.03 On July 7, 2004, the Treasury Department and Internal Revenue Service released a draft of the final version of Schedule M-3, Net Income (Loss) Reconciliation For Corporations With Total Assets of $10 Million or More. In general, for taxable years ending on or after December 31, 2004, any corporation (or U.S. consolidated tax group) required to file Form 1120, U.S. Corporation Income Tax Return, that reports total assets at the end of the corporation’s (or U.S. consolidated tax group’s) taxable year that equal or exceed $10 million on Schedule L of Form 1120 is required to complete and file Schedule M-3.

This revenue procedure applies to a taxpayer that is required to disclose reportable transactions under § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6).

.01 Corporation required to complete Schedule M-3 for a taxable year ending on or after December 31, 2004. For a taxable year ending on or after December 31, 2004, a corporation required to file Schedule M-3 that completes and files Schedule M-3 (in accordance with the instructions to the form, including draft instructions until such instructions are finalized) with the corporation’s timely-filed original tax return (including extensions) for the taxable year is deemed to satisfy the disclosure requirements of § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6) for that taxable year.

.02 Taxpayer not required to complete Schedule M-3 for a taxable year ending on or after December 31, 2004. A taxpayer that is required to disclose reportable transactions under § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6), but is not required to complete Schedule M-3, for a taxable year ending on or after December 31, 2004, will continue to be subject to the disclosure requirements of § 1.6011-4. However, the taxpayer is deemed to satisfy the disclosure requirements of § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6) for a taxable year ending on or after December 31, 2004, if the taxpayer complies with the alternative disclosure procedures described in section 4.04 of this revenue procedure for that taxable year.

.03 Alternative disclosure procedures for a taxable year ending before December 31, 2004, for transactions entered into on or after January 1, 2003. For a taxable year ending before December 31, 2004, a taxpayer required to disclose reportable transactions under § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6) that were entered into on or after February 28, 2003, is deemed to satisfy the disclosure requirements of § 1.6011-4 with respect to those transactions if the taxpayer complies with the alternative disclosure procedures described in section 4.04 of this revenue procedure. These rules also may be relied upon for taxable years ending before December 31, 2004, with respect to transactions entered into on or after January 1, 2003, and before February 28, 2003, that are subject to disclosure under § 1.6011-4 or § 1.6011-4T with respect to transactions described in § 1.6011-4(b)(6) or § 1.6011-4T(b)(6), respectively.

.04 Alternative disclosure procedures for transactions with a significant book-tax difference.

(1) In general. A taxpayer described in section 4.02 or section 4.03 of this revenue procedure is deemed to satisfy the disclosure requirements of § 1.6011-4 with respect to transactions described in § 1.6011-4(b)(6) if the taxpayer discloses on a Schedule M-3 each item of income, gain, loss, deduction, or credit for which the difference between the amount included in the taxpayer’s financial statement net income (loss) for the taxable year and the amount included in taxable income for the taxable year (“difference”) is greater than $10 million. The taxpayer must separately state and adequately disclose, on the applicable line of Column B and Column C of Part II and Part III of Schedule M-3, each difference that is greater than $10 million. The Schedule M-3 must be completed (and filed in accordance with section 4.04(2) of this revenue procedure) as if the taxpayer were a corporation required to complete and file Schedule M-3 for that taxable year. For purposes of this section 4.04(1), the rules applicable to a corporation (or U.S. consolidated tax group) required to complete and file Schedule M-3 (for example, guidance provided in the form of instructions to Schedule M-3 (including draft instructions until such instructions are finalized)) will apply, including rules for determining: (i) an item of income, gain, loss, deduction, or credit; (ii) how to separately state and adequately disclose a difference; (iii) whether an item(s) can be combined with another item(s); (iv) the classification of a difference as temporary or permanent; and (v) the information required to be provided for items of partnerships and flow-through entities.

For purposes of this section 4.04(1), the taxpayer’s financial statement net income (loss) is the financial statement net income (loss) of the taxpayer if the taxpayer were a corporation required to complete Schedule M-3 (that is, the amount that would be reported on line 11, Part I of Schedule M-3). In addition, in the case of a member of a group of affiliated corporations filing a U.S. consolidated tax return, whether an item of difference exceeds $10 million is based on the separate activity of that group member, and is not based on the consolidated activity of the U.S. consolidated tax group.

(2) Time and manner for complying with the alternative disclosure procedures of section 4.04(1). The Schedule M-3 required under section 4.04(1) of this revenue procedure, and any supporting statements, must be attached to the taxpayer’s timely filed original tax return (including extensions). The taxpayer must include its name and identification number on the top of Page 1 of Schedule M-3 and also must include the following statement on the top of Page 1 of Schedule M-3: “Alternative disclosure under Rev. Proc. 2004-45 for transactions with a significant book-tax difference under § 1.6011-4(b)(6).” In addition, the taxpayer must send a copy of the Schedule M-3 required under section 4.04(1) of this revenue procedure, and any supporting statements, to the Office of Tax Shelter Analysis, Internal Revenue Service LM:PFTG:OTSA, Large & Mid-Size Business Division, 1111 Constitution Ave., NW, Washington, DC 20224, on or before the due date for the taxpayer’s timely filed original tax return (including extensions). If a taxpayer does not have a difference in excess of $10 million as determined under section 4.04(1) of this revenue procedure, the taxpayer is not required to file a Schedule M-3 otherwise required by this revenue procedure and the taxpayer also is not required to file Form 8886, Reportable Transaction Disclosure Statement, otherwise required by § 1.6011-4, with respect to transactions described in § 1.6011-4(b)(6).

(3) Use of draft final version of Schedule M-3. For purposes of complying with the alternative disclosure procedures described in section 4.04(1) and (2) of this revenue procedure, a taxpayer must use the most recent draft version of Schedule M-3 (and any guidance provided in the form of instructions to Schedule M-3, including draft instructions) referred to in section 2.03 of this revenue procedure until Schedule M-3 is released in final form.

.05 Effect on other disclosure obligations. This revenue procedure does not affect any of a taxpayer’s disclosure obligations under §§ 1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 with respect to a transaction described in one or more of §§ 1.6011-4(b)(2), (b)(3), (b)(4), (b)(5), or (b)(7), even if the transaction also is described under § 1.6011-4(b)(6).

.06 The Service and the Treasury will continue to evaluate whether the disclosure requirements described in this revenue procedure and Schedule M-3 provide the Service and Treasury adequate information regarding significant book-tax differences.

This revenue procedure is effective July 7, 2004.

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1894.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in this revenue procedure is in section 4. The information will be used to determine if taxpayers have complied with the disclosure requirements in § 1.6011-4. This information collection is voluntary. Taxpayers may choose this alternate procedure of disclosing instead of disclosing the information on Form 8886.

The likely respondents are business or other for-profit institutions. The estimated total annual reporting burden associated with this alternative method of compliance is zero. This is because the burden is already accounted for under control number 1545-1685 which applies to the regulations under § 1.6011-4.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

The principal author of this revenue procedure is Tara P. Volungis of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Ms. Volungis at (202) 622-3070 (not a toll-free number). For information regarding Schedule M-3, contact Diane Litecky at (732) 452-8134 (not a toll-free number).

This revenue procedure provides a simplified alternate method for certain taxpayers to obtain an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to make an allocation of the generation-skipping transfer (GST) exemption in accordance with § 2642(b)(1) of the Internal Revenue Code (the Code). This alternate method may be used in lieu of the letter ruling process. No user fee is charged for requests filed under this revenue procedure.

.01 Chapter 13 of the Code imposes a GST tax on all transfers, whether made directly or indirectly, to skip persons. Under § 2613(a), a skip person includes a person who is two or more generations below the generation of the transferor or a trust, if all of the interests are held by skip persons. Generally, under § 2652, the transferor is the individual who transfers property in a transaction subject to the federal gift or estate tax. Under § 2611(a), transfers that are subject to the GST tax are direct skips, taxable distributions, and taxable terminations.

.02 Section 2602 provides that the amount of GST tax imposed on a transfer is determined by multiplying the amount transferred by the applicable rate. Under § 2641, the applicable rate for a transfer is the maximum federal estate tax rate multiplied by the inclusion ratio, and the inclusion ratio (defined under § 2642) is one minus the applicable fraction. The applicable fraction is a fraction the numerator of which is the amount of GST exemption allocated to the trust (or to the property transferred in a direct skip), and the denominator of which is the value of the property transferred to the trust (or involved in the direct skip) reduced by federal estate tax and state estate and death taxes actually recovered from the trust (or transferred property) and any charitable deduction allowed under § 2055 or 2522 with respect to the property.

.03 Section 2631 allows every transferor a GST exemption of $1,000,000 that may be allocated to transfers made by the transferor either during the transferor’s life or at death. For calendar years after 1998, the exemption amount has been indexed for inflation and, for transfers made between January 1, 2004, and December 31, 2009, inclusive, the exemption equals the amount that is exempted from transfer tax by the applicable credit amount described in § 2010.

.04 An outright transfer to an individual who is a skip person that qualifies for the gift tax exclusion under § 2503(b) or 2503(e) is deemed to have an inclusion ratio of zero and, thus, is not subject to the GST tax. A different rule, however, applies for a transfer to a trust that is a direct skip. Under § 2642(c)(2), a transfer to a trust for the benefit of one beneficiary that qualifies for the gift tax annual exclusion will be deemed to have a zero inclusion ratio only if certain requirements are met. Many trusts, however, have more than one beneficiary and thus will not have an inclusion ratio of zero by reason of § 2642(c)(2), even if the trust meets the other requirement of that section. In this case, the transferor must affirmatively allocate GST exemption to the trust if the transferor desires to reduce the inclusion ratio to zero.

.05 Affirmative allocations of GST exemption to transfers made during life generally are made on a federal gift tax return (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return), and can be made whether or not the return is timely filed. Under § 2642(b)(1), if a transferor allocates GST exemption on a timely filed federal gift tax return, the transferor may allocate an amount of GST exemption equal to the value of the property on the date of the transfer to reduce the inclusion ratio to zero. If, however, the transferor allocates GST exemption on a gift tax return that is not timely filed (late allocation), then under § 2642(b)(3), to reduce the inclusion ratio to zero, the transferor must allocate an amount of GST exemption equal to the value of the property either on the date the return is filed or on the first day of the month in which that return is filed.

.06 Automatic allocations of GST exemption are made under § 2632 to certain transfers made during life that are direct skips, so that the inclusion ratio for such transfers may be reduced to zero even without any affirmative allocation of GST exemption. As a result of The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), Pub. L. No. 107-16, § 561, 115 Stat. 91, automatic allocations are also made to certain transfers made after 2000 that are not direct skips. With regard to pre-2001 transfers made during life, however, if a transferor failed to make an affirmative allocation of the GST exemption on a timely filed gift tax return, no relief was available, other than to make a late allocation based on the value of the property as of the filing of the late allocation.

.07 Section 564 of EGTRRA added § 2642(g) to the Code, which provides, generally, that the Secretary is to prescribe by regulations the circumstances and procedures under which an extension of time will be granted to affirmatively allocate GST exemption, and that the time for making the allocation shall be treated as if not expressly prescribed by statute. In response, the Internal Revenue Service issued Notice 2001-50, 2001-2 C.B. 189, which announced that transferors may seek an extension of time to make an allocation of GST exemption. That notice provides, generally, that under § 301.9100-3, relief will be granted if the taxpayer establishes to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith and that a grant of the requested relief will not prejudice the interests of the government. Thus, if relief is granted under § 301.9100-3 and the allocation is made, the amount of GST exemption necessary to reduce the inclusion ratio to zero is based on the value of the property on the date of the transfer and the allocation is effective as of the date of the transfer.

.08 To date, the Service has issued several letter rulings under § 301.9100-3 granting an extension of time to make a timely allocation in situations in which a transfer to a trust qualified for the gift tax annual exclusion under § 2503(b), but was not deemed to have a zero inclusion ratio because the trust did not meet one or more of the requirements of § 2642(c)(2) (for example, because there was more than one beneficiary of the trust). In most of these cases, the transferor failed to allocate GST exemption to the trust on a timely filed gift tax return because the transferor was not aware of the need to affirmatively allocate the exemption to the transfers. The Service believes that in these cases, it is appropriate to provide an alternate simplified method to obtain an extension of time to make an allocation of GST exemption, provided that certain requirements (set forth in sections 3 and 4 of this revenue procedure) are met. In such a case, the transferor’s GST exemption remaining at the time the gift tax return is filed pursuant to this revenue procedure may be allocated to the transfer based on the value of the property as of the date of the transfer.

.01 In General. This revenue procedure applies only to a taxpayer who satisfies the following requirements:

(1) On or before December 31, 2000, the taxpayer made or was deemed to have made a transfer by gift to a trust from which a GST may be made;

(2) At the time the taxpayer files the request for relief under this revenue procedure, no taxable distributions have been made and no taxable terminations have occurred;

(3) The transfer qualified for the annual exclusion under § 2503(b), and the amount of the transfer, when added to the value of all other gifts by the transferor to that donee in the same year, was equal to or less than the amount of the applicable annual exclusion for the year of the transfer;

(4) No GST exemption was allocated to the transfer, whether or not a Form 709 was filed;

(5) At the time the taxpayer files a request for relief under this revenue procedure, the taxpayer has unused GST exemption available to allocate to the transfer; and

(6) All requirements of section 4 of this revenue procedure are satisfied.

.02 Failure to Qualify for Relief Under This Revenue Procedure. Taxpayers who are denied relief or who are otherwise outside the scope of this revenue procedure may request an extension of time to allocate GST exemption by requesting a letter ruling under the provisions of § 301.9100-3. The procedural requirements for requesting a letter ruling are described in Rev. Proc. 2004-1, 2004-1 C.B. 1 (or its successors). If a letter ruling is requested after relief has been denied under this revenue procedure, the letter ruling request must indicate that relief was requested and denied under this revenue procedure. Rev. Proc. 2004-1, Appendix C, 2004-1 I.R.B. 70.

.01 Procedural Requirements.

(1) File a Form 709 for the year of the transfer to the trust, regardless of whether a Form 709 had been previously filed for that year. State at the top of the Form 709 that the return is “FILED PURSUANT TO REV. PROC. 2004-46.”

(2) Report on the Form 709 the value of the transferred property as of the date of the transfer.

(3) Allocate GST exemption to the trust by attaching a statement to the Form 709 entitled “Notice of Allocation.” The notice of allocation must contain the following information:

(4) Subject to any change in applicable instructions in future forms, instructions, or guidance published by the Service, send the Form 709 with attachments to the Cincinnati Service Center for processing.

(5) The Form 709 must be filed on or before the date prescribed for filing the federal estate tax return for the transferor’s estate (determined with regard to any extensions actually obtained), regardless of whether an estate tax return is required to be filed.

.02 Relief from Late GST Exemption Allocation. Upon receipt of a request for relief under section 4.01 of this revenue procedure, the Service Center will determine whether the requirements for granting relief to make a GST exemption allocation under this revenue procedure have been satisfied and will notify the taxpayer of the result of this determination. If the Service Center determines that the requirements for granting relief to make a GST exemption allocation under this revenue procedure have been satisfied, the allocation will be effective as of the date of the transfer.

.03 Subsequent Estate Tax Inclusion Period. A grant of relief under this revenue procedure does not preclude a subsequent determination that the transfer is one described in § 2642(f), specifically an inter vivos transfer the value of which would be included in the transferor’s gross estate under chapter 11 (other than by reason of § 2035) if the transferor died immediately after making the transfer. If it is determined that the transfer is one described in § 2642(f), the GST exemption allocated pursuant to this revenue procedure would not be changed, but the effective date and effect of that allocation of GST exemption would be governed by § 26.2632-1(c) of the Generation-Skipping Transfer Tax Regulations.

Notice 2001-50 is modified.

.01 In General. This revenue procedure is effective August 2, 2004.

.02 Transition Rule for Pending Letter Ruling Requests. If a taxpayer has filed a request for a letter ruling seeking an extension of time to allocate GST exemption and that request is pending in the national office on August 2, 2004, the taxpayer may withdraw that letter ruling request and receive a refund of the taxpayer’s user fee if, prior to the earlier of September 16, 2004, or the issuance of the letter ruling, the taxpayer notifies the national office that it will withdraw its letter ruling request. Otherwise, the national office will process letter ruling requests pending on August 2, 2004, and will retain the user fee paid.

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1895.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this revenue procedure are in section 4. This information is required to be submitted to the applicable service center in order to obtain an automatic extension of time to allocate GST exemption. This information will be used to determine whether the eligibility requirements for obtaining relief have been met. The collection of information is required to obtain a benefit. The likely respondents are individuals.

The estimated total annual reporting burden is 350 hours.

The estimated annual burden per respondent varies from 2 hours to 10 hours, depending on individual circumstances, with an estimated average burden of 7 hours to complete the statements required under this revenue procedure. The estimated number of respondents is 50.

The estimated annual frequency of responses is on occasion.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

The principal author of this revenue procedure is Lian A. Mito of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this revenue procedure, contact Lian A. Mito at (202) 622-7830 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

These proposed regulations provide guidance for making the election under section 2632(c)(5)(A)(i) of the Internal Revenue Code to not have the deemed allocation of unused generation-skipping transfer (GST) tax exemption under section 2632(c)(1) apply with regard to certain transfers to a GST trust, as defined in section 2632(c)(3)(B). The proposed regulations also provide guidance for making the election under section 2632(c)(5)(A)(ii) to treat a trust as a GST trust. The regulations primarily affect individuals.

Written and electronic comments and requests for a public hearing must be received by October 12, 2004.

Send submissions to: CC:PA:LPD:PR (REG-153841-02), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153841-02), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (IRS - REG-153841-02).

Mayer R. Samuels, (202) 622-3090 (not a toll-free number).

Accordingly, 26 CFR part 26 is proposed to be amended as follows:

The principal author of these proposed regulations is Mayer R. Samuels, Office of the Associate Chief Counsel (Passthroughs and Special Industries), IRS. If you have any questions concerning these proposed regulations, please contact Mayer R. Samuels at (202) 622-3090. Other personnel from the IRS and the Treasury Department participated in their development.

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Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been disbarred from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been placed under suspension from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her consent to suspension from such practice. The Director, Office of Professional Responsibility, in his discretion, may suspend an attorney, certified public accountant, enrolled agent, or enrolled actuary in accordance with the consent offered.

The following individuals have been placed under consent suspension from practice before the Internal Revenue Service:

Under Title 31, Code of Federal Regulations, Part 10, the Director, Office of Professional Responsibility, is authorized to immediately suspend from practice before the Internal Revenue Service any practitioner who, within five years from the date the expedited proceeding is instituted (1) has had a license to practice as an attorney, certified public accountant, or actuary suspended or revoked for cause or (2) has been convicted of certain crimes.

The following individuals have been placed under suspension from practice before the Internal Revenue Service by virtue of the expedited proceeding provisions:

Under Title 31, Code of Federal Regulations, Part 10, an enrolled agent, in order to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her resignation as an enrolled agent. The Director, Office of Professional Responsibility, in his discretion, may accept the offered resignation.

The Director, Office of Professional Responsibility, has accepted offers of resignation as an enrolled agent from the following individuals:

Under Title 31, Code of Federal Regulations, Part 10, in lieu of a proceeding being instituted or continued, an attorney, certified public accountant, enrolled agent, or enrolled actuary, may offer his or her consent to the issuance of a censure. Censure is a public reprimand.

The following individuals have consented to the issuance of a Censure: