Interest rates; underpayments and overpayments. The rates of interest determined under section 6621 of the Code for the calender quarter beginning April 1, 2008, will be 6 percent for overpayments (5 percent in the case of a corporation), 6 percent for underpayments, and 8 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 3.5 percent.

S corporation; qualified subchapter S subsidiary (QSub). This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling holds that the newly formed parent does not have to make a new S election pursuant to Rev. Rul. 64-250. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub’s EIN. However, for S corporations that have previously reorganized under section 368(a)(1)(F) in a manner described in this ruling, where the parent took the QSub’s EIN, the parent should continue to use that EIN and the QSub will have to get a new EIN when it is treated as a separate corporation. Rev. Rul. 64-250 amplified.

Insurance companies; interest rate tables. Prevailing state assumed interest rates are provided for the determination of reserves under section 807 of the Code for contracts issued in 2007 and 2008. Rev. Rul. 92-19 supplemented in part.

Proposed regulations amend regulations under section 664(c) of the Code to provide that charitable remainder trusts with unrelated business taxable income (UBTI) in taxable years beginning after December 31, 2006, are exempt from federal income tax, but are subject to a 100-percent excise tax on the UBTI of the charitable remainder trust pursuant to section 424 of the Tax Relief and Health Care Act of 2006. The regulations provide that the excise tax is reported and payable in accordance with appropriate forms. The regulations clarify that, consistent with regulations section 1.664-1(d)(2), the excise tax imposed upon the charitable remainder trust with UBTI is treated as paid from corpus and the trust income that is UBTI is income of the trust for purposes of determining the character of the distribution made to the beneficiary. A public hearing is scheduled for April 11, 2008.

This notice invites public comments regarding guidance to be provided to federal, state, and local governments required to withhold on payments made by the government entities or their paying agents for services and property.

This procedure provides guidance concerning the treatment under sections 1035 and 72 of the Code of the partial exchange of an annuity contract. Specifically, the procedure makes those interim rules final, with clarifications concerning (i) the length of time a taxpayer must wait before withdrawing or annuitizing amounts from either of the contracts that were subject to the exchange (ii) the status of the transactions in which the same insurance company issued both contracts involved in the exchange and (iii) the treatment of transactions that fall outside of these rules. Notice 2003-51 superseded.

This procedure provides a safe harbor method of accounting for accrual method taxpayers that incur payroll tax liabilities for compensation (including bonuses and vacation pay). It also provides procedures for taxpayers to obtain the automatic consent of the Commissioner of Internal Revenue to change to the safe harbor method of accounting. Rev. Proc. 2002-9 modified and amplified.

Proposed regulations amend regulations under section 664(c) of the Code to provide that charitable remainder trusts with unrelated business taxable income (UBTI) in taxable years beginning after December 31, 2006, are exempt from federal income tax, but are subject to a 100-percent excise tax on the UBTI of the charitable remainder trust pursuant to section 424 of the Tax Relief and Health Care Act of 2006. The regulations provide that the excise tax is reported and payable in accordance with appropriate forms. The regulations clarify that, consistent with regulations section 1.664-1(d)(2), the excise tax imposed upon the charitable remainder trust with UBTI is treated as paid from corpus and the trust income that is UBTI is income of the trust for purposes of determining the character of the distribution made to the beneficiary. A public hearing is scheduled for April 11, 2008.

This announcement explains the procedures the public may use to request from the Service the inspection and copying of a section 501(c)(3) organization's annual return reporting section 511 unrelated business income (Form 990-T).

The IRS has revoked its determination that Young Lions Foundation of Sausalito, CA; Med-School, Inc., of Warner Robbins, GA; National Housing Foundation, Inc., of Schaumburg, IL; Vernon Parish School Board of Leesville, VA; Credit Success Company of St. Augustine, FL; and Computer Programming Institute of N. Royalton, OH, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.

S corporation; qualified subchapter S subsidiary (QSub). This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling holds that the newly formed parent does not have to make a new S election pursuant to Rev. Rul. 64-250. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub’s EIN. However, for S corporations that have previously reorganized under section 368(a)(1)(F) in a manner described in this ruling, where the parent took the QSub’s EIN, the parent should continue to use that EIN and the QSub will have to get a new EIN when it is treated as a separate corporation. Rev. Rul. 64-250 amplified.

S corporation; qualified subchapter S subsidiary (QSub). This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling holds that the newly formed parent does not have to make a new S election pursuant to Rev. Rul. 64-250. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub’s EIN. However, for S corporations that have previously reorganized under section 368(a)(1)(F) in a manner described in this ruling, where the parent took the QSub’s EIN, the parent should continue to use that EIN and the QSub will have to get a new EIN when it is treated as a separate corporation. Rev. Rul. 64-250 amplified.

S corporation; qualified subchapter S subsidiary (QSub). This ruling describes situations where an S corporation undergoes a reorganization pursuant to section 368(a)(1)(F) of the Code where the operating S corporation becomes a QSub of a newly formed holding company. The ruling holds that the newly formed parent does not have to make a new S election pursuant to Rev. Rul. 64-250. The ruling further holds that, effective 1/1/09, the new parent will have to get its own EIN rather than take over the QSub’s EIN. However, for S corporations that have previously reorganized under section 368(a)(1)(F) in a manner described in this ruling, where the parent took the QSub’s EIN, the parent should continue to use that EIN and the QSub will have to get a new EIN when it is treated as a separate corporation. Rev. Rul. 64-250 amplified.

This notice describes filing rules for certain claims arising under section 41 of the Code. Notice 2002-44 superseded.

This document provides notice of a public hearing on proposed regulations (REG-127770-07, 2007-50 I.R.B. 1171) that would expand the list of permitted loan modifications to include certain modifications of commercial mortgages. A public hearing is scheduled for April 4, 2008.

This document contains a notice of public hearing on proposed regulations (REG-149856-03, 2007-24 I.R.B. 1394) relating to a claim that a child is a dependent by parents who are divorced, legally separated under a decree of separate maintenance, agreement, or who live apart at all times during the last 6 months of the calendar year. A public hearing is scheduled for April 3, 2008.

For purposes of § 807(d)(4) of the Internal Revenue Code, for taxable years beginning after December 31, 2006, this ruling supplements the schedules of prevailing state assumed interest rates set forth in Rev. Rul. 92-19, 1992-1 C.B. 227. This information is to be used by insurance companies in computing their reserves for (1) life insurance and supplementary total and permanent disability benefits, (2) individual annuities and pure endowments, and (3) group annuities and pure endowments. As § 807(d)(2)(B) requires that the interest rate used to compute these reserves be the greater of (1) the applicable federal interest rate, or (2) the prevailing state assumed interest rate, the table of applicable federal interest rates in Rev. Rul. 92-19 is also supplemented.

Following are supplements to schedules A, B, C, and D to Part III of Rev. Rul. 92-19, providing prevailing state assumed interest rates for insurance products with different features issued in 2007 and 2008, and a supplement to the table in Part IV of Rev. Rul. 92-19, providing the applicable federal interest rates under § 807(d) for 2007 and 2008. This ruling does not supplement Parts I and II of Rev. Rul. 92-19.

This is the sixteenth supplement to the interest rates provided in Rev. Rul. 92-19. Earlier supplements were published in Rev. Rul. 93-58, 1993-2 C.B. 241 (interest rates for insurance products issued in 1992 and 1993); Rev. Rul. 94-11, 1994-1 C.B. 196 (1993 and 1994); Rev. Rul. 95-4, 1995-1 C.B. 141 (1994 and 1995); Rev. Rul. 96-2, 1996-1 C.B. 141 (1995 and 1996); Rev. Rul. 97-2, 1997-1 C.B. 134 (1996 and 1997); Rev. Rul. 98-2, 1998-1 C.B. 259 (1997 and 1998); Rev. Rul. 99-10, 1999-1 C.B. 671 (1998 and 1999); Rev. Rul. 2000-17, 2000-1 C.B. 842 (1999 and 2000); Rev. Rul. 2001-11, 2001-1 C.B. 780 (2000 and 2001); Rev. Rul. 2002-12, 2002-1 C.B. 624 (2001 and 2002); Rev. Rul. 2003-24, 2003-1 C.B. 557 (2002 and 2003); Rev. Rul. 2004-14, 2004-1 C.B. 511 (2003 and 2004); Rev. Rul. 2005-29, 2005-1 C.B. 1080 (2004 and 2005); Rev. Rul. 2006-25, 2006-1 C.B. 882 (May 15, 2006) (2005 and 2006); and Rev. Rul. 2007-10, 2007-10 I.R.B. 660 (Mar. 5, 2007) (2006 and 2007).

Rev. Rul. 92-19 is supplemented by the addition to Part III of that ruling of prevailing state assumed interest rates under § 807 for certain insurance products issued in 2007 and 2008 and is further supplemented by an addition to the table in Part IV of Rev. Rul. 92-19 listing applicable federal interest rates. Parts I and II of Rev. Rul. 92-19 are not affected by this ruling.

The principal author of this revenue ruling is Josephine H. Firehock of the Office of Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling, contact her at (202) 622-3970 (not a toll-free call).

In the transactions described in Situations 1 and 2 below, does an S corporation election under § 1362(a) of the Internal Revenue Code (the Code) terminate and what are the proper employer identification numbers (EINs) for the entities participating in the transactions?

Situation 1. B, an individual, owns all of the stock in Y, an S corporation. Y’s EIN is 22-2222222. In Year 1, B forms Newco and contributes all of the Y stock to Newco. Newco meets the requirements for qualification as a small business corporation and timely elects to treat Y as a qualified subchapter S subsidiary (QSub), effective immediately following the transaction. The transaction meets the requirements of a reorganization under § 368(a)(1)(F). In Year 2, Newco sells a 1% interest in Y to D.

Situation 2. C, an individual owns all of the stock of Z, an S corporation. Z’s EIN is 33-3333333. In Year 1, Z forms Newco, which in turn forms Mergeco. Pursuant to a plan of reorganization, Mergeco merges with and into Z, with Z surviving and C receiving solely Newco stock in exchange for Z stock. Newco meets the requirements for qualification as a small business corporation and timely elects to treat Z as a QSUB, effective immediately following the transaction. The transaction meets the requirements of a reorganization under § 368(a)(1)(F).

Situation 1. In Situation 1, consistent with Rev. Rul. 64-250, Y’s original S election does not terminate but continues for Newco. Newco must obtain a new EIN. Y must retain its EIN (EIN 22-2222222) even though a QSub election is made for it and must use its original EIN any time the QSub is otherwise treated as a separate entity for federal tax purposes (including for employment and certain excise taxes) or if the QSub election terminates. In Year 2, when Newco sells a 1% interest of Y to D, Y’s QSub election terminates pursuant to § 1361(b)(3)(C). Y must use its original EIN of 22-2222222 following the termination of Y’s QSub election.

Situation 2 . In Situation 2, consistent with Rev. Rul. 64-250, Z’s original S election does not terminate but continues for Newco. Newco must obtain a new EIN. Z must retain its EIN (EIN 33-3333333) even though a QSub election is made for Z and must use its original EIN any time the QSub is otherwise treated as a separate entity for federal tax purposes (including for employment and certain excise taxes) or if the QSub election terminates.

Rev. Rul. 64-250 is amplified for transactions qualifying as a reorganization under § 368(a)(1)(F) where the transferor S corporation becomes a QSub of the acquiring corporation. The holding of Situation 3 in Rev. Rul. 73-526 continues to apply to its facts.

This revenue ruling applies to § 368(a)(1)(F) reorganizations occurring on or after January 1, 2009. For § 368(a)(1)(F) reorganizations occurring on or after March 7, 2008 and before the effective date of this ruling, taxpayers may rely on this revenue ruling. The Service is aware that, prior to the effective date of this revenue ruling, some S corporations have undergone reorganizations under § 368(a)(1)(F) in a manner similar to those described in Situations 1 and 2 above in which the acquiring corporation continued to use the transferor corporation’s EIN in an effort to comply with Rev. Rul. 73-526. In the cases described in the immediately preceding sentence, the acquiring corporation should continue to follow Rev. Rul. 73-526 and use the transferor corporation’s EIN, and furthermore, after the § 368(a)(1)(F) reorganization, the transferor (QSub) should use the parent’s EIN until such time the transferor (QSub) is otherwise treated as a separate corporation for federal tax purposes (including for employment and certain excise taxes) or until such time that the QSub terminates. At such time, the QSub must obtain a new EIN.

The IRS will need to make administrative adjustments to ensure that its Campuses recognize the continuation of the S election in the fact situations presented in this revenue ruling. Consequently, for a § 368(a)(1)(F) reorganization occurring prior to January 1, 2009, it may be prudent for the acquiring corporation to make a protective S election.

The principal authors of this revenue ruling are Charles J. Langley, Jr., of the Office of Associate Chief Counsel (Passthroughs and Special Industries) and Rebecca O. Burch of the Office of Associate Chief Counsel (Corporate). For further information regarding this revenue ruling, contact Mr. Langley at (202) 622-3060 (not a toll-free call) or Ms. Burch at (202) 622-7750 (not a toll-free call).

Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. Under section 6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points (2 percentage points in the case of a corporation), except the rate for the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal short-term rate plus 0.5 of a percentage point. Under section 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

Section 6621(c) provides that for purposes of interest payable under section 6601 on any large corporate underpayment, the underpayment rate under section 6621(a)(2) is determined by substituting “5 percentage points” for “3 percentage points.” See section 6621(c) and section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date. Section 6621(c) and section 301.6621-3 are generally effective for periods after December 31, 1990.

Section 6621(b)(1) provides that the Secretary will determine the federal short-term rate for the first month in each calendar quarter.

Section 6621(b)(2)(A) provides that the federal short-term rate determined under section 6621(b)(1) for any month applies during the first calendar quarter beginning after that month. Section 6621(b)(2)(B) provides that in determining the addition to tax under section 6654 for failure to pay estimated tax for any taxable year, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year. Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during that month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of ¹/₂ of 1 percent, the rate is increased to the next highest full percent).

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Rounded to the nearest full percent, the federal short-term rate based on daily compounding determined during the month of January 2008 is 3 percent. Accordingly, an overpayment rate of 6 percent (5 percent in the case of a corporation) and an underpayment rate of 6 percent are established for the calendar quarter beginning April 1, 2008. The overpayment rate for the portion of a corporate overpayment exceeding $10,000 for the calendar quarter beginning April 1, 2008, is 3.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter beginning April 1, 2008, is 8 percent. These rates apply to amounts bearing interest during that calendar quarter.

Under section 6621(b)(2)(B), the 7 percent rate that applies to estimated tax underpayments for the first calendar quarter in 2008, as provided in Rev. Rul. 2007-68, 2007-52 I.R.B. 1236, also applies to estimated tax underpayments for the first 15 days in April 2008.

Interest factors for daily compound interest for annual rates of 3.5 percent, 5 percent, 6 percent, and 8 percent are published in Tables 60, 63, 65, and 69 of Rev. Proc. 95-17, 1995-1 C.B. 556, 614, 617, 619, and 623.

Annual interest rates to be compounded daily pursuant to section 6622 that apply for prior periods are set forth in the tables accompanying this revenue ruling.

The principal author of this revenue ruling is Wendy Kribell of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue ruling, contact Ms. Kribell at (202) 622-4570 (not a toll-free call).

This notice invites public comments regarding guidance to be provided to Government entities, Federal, State and local, required to withhold on payments made by the Government entities or their paying agents for services and property. See sections 3401(d) and 3402(t)(3). The new withholding is required by section 3402(t) of the Internal Revenue Code (the Code), which was added by section 511 of the Tax Increase Prevention and Reconciliation Act of 2005, Pub. L. No. 109-222 (TIPRA). Section 511 of TIPRA is effective for payments made after December 31, 2010.

The Department of the Treasury and Internal Revenue Service propose to issue guidance on compliance with the withholding requirements of section 3402(t). The Treasury and Service are requesting comments from all affected entities. The information collected will assist the Treasury and Service in drafting guidance under section 3402(t).

Under section 3402(t), all Government entities (except for certain small State entities) will be required to withhold 3 percent of all payments for services or property made after December 31, 2010. Section 3402(t) identifies certain payments, such as payments that were already subject to withholding or payments that would not be subject to tax, as being excluded from the 3 percent withholding requirements. Except for those payments, all payments by affected Government entities, however made, will be subject to the mandatory 3 percent withholding requirements.

Section 3402(t)(1) of the Code provides that the Government of the United States, every State, every political subdivision thereof and every instrumentality of the foregoing making any payment to any person providing any property or services (including any payment made in connection with a Government voucher or certificate program which functions as a payment for property or services) shall deduct and withhold from such payment a tax in an amount equal to 3 percent of such payment.

Political subdivisions of a State (or any instrumentality thereof) making less than $100,000,000 of payments for property or services are exempt from this requirement. See section 3402(t)(2)(G). There is no statutory exception for de minimis payments for property or services made by a Government entity (or any instrumentality thereof) that is not exempt from this withholding requirement.

Section 3402(t)(1) of the Code does not apply to any payments made through a Federal, State, or local Government public assistance or public welfare program for which eligibility is determined by a needs or income test. See section 3402(t)(2)(H). For example, payments under Government programs providing food vouchers or medical assistance to low-income individuals are not subject to withholding under section 3402(t). However, payments under Government programs to provide health care or other services that are not based on the needs or income of the recipients are subject to withholding, including programs where eligibility is based on the age of the beneficiary. H.R. Conf. Rept. 109-455, 109^th Cong., 2^nd Sess., at 301 (2006).

Section 3402(t)(1) of the Code does not apply to payments of wages or to any other payment with respect to which mandatory (e.g., U.S. source income of foreign taxpayers) or voluntary (e.g., unemployment benefits) withholding applies under present law. See section 3402(t)(2)(A). Section 3402(t) does not exclude payments that are potentially subject to backup withholding under section 3406. If, however, payments are actually being withheld under backup withholding, withholding under section 3402(t) does not apply. See section 3402(t)(2)(B); H.R. Conf. Rept. 109-455 at 301.

In addition, section 3402(t)(1) of the Code does not apply to the following: payments of interest; payments for real property; payments to tax-exempt entities or foreign Governments; intra-Governmental payments; payments made pursuant to a classified or confidential contract (as defined in section 6050M(e)(3)); and payments to Government employees that are not otherwise excludable from the new withholding provision with respect to the employees’ services as employees. See section 3402(t)(2)(C) — (F), (I). Section 3402(t) is effective for payments made after December 31, 2010. See section 511(b) of TIPRA.

The withholding requirement will apply regardless of whether the Government entity making the payment is the recipient of the property or services. For example, payments to a commodity producer under a Government commodity support program will be subject to the withholding requirement. See H.R. Conf. Rept. 109-455 at 301.

The Treasury and Service request comments on issues as to which Government entities and their paying agents will need guidance in order to implement the requirements of section 3402(t). The Treasury and Service are particularly interested in any comments regarding:

Written comments should be sent to: CC:PA:LPD:PR (Notice 2008-38), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Alternatively, comments may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2008-38), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, D.C. Comments may also be transmitted electronically via the following e-mail address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2008-38” in the subject line of any electronic communications.

All comments will be available for public inspection and copying. Because Government entities will need guidance on compliance with section 3402(t) as soon as possible, comments, if any, must be received by April 28, 2008.

The principal author of this notice is Stephen J. Coleman of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, contact Stephen J. Coleman at (202) 622-4910 (not a toll-free call).

This notice prescribes filing rules for certain claims arising under section 41 of the Code.

An overpayment of tax for a taxable year generated, in whole or in part, by the research credit and not taken into account on a taxpayer’s original return may be taken into account by the timely filing of a claim for credit or refund.

Under § 6402(a), the Secretary is authorized to credit, within the applicable period of limitations, an overpayment against any liability in respect of an internal revenue tax of the person who made the overpayment, and must generally refund any balance to that person. Section 6511(b)(1) provides that no credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in § 6511(a), unless a claim for credit or refund is filed by the taxpayer within such period.

This notice applies to taxpayers required to file Form 1120, U.S. Corporation Income Tax Return, with claims for credit or refund attributable, in whole or in part, to the research credit that (1) were not reported on an original return or an amended Income Tax Return, filed on or before the due date of the original Form 1120, including extensions, and (2) were not filed with the Internal Revenue Service on or before March 31, 2008.

This notice does not apply to those claims for credit or refund subject to the electronic filing requirements for amended returns stated in Treas. Reg. § 301.6011-5.

All claims for credit or refund subject to this notice shall be filed with the Ogden Service Center at the following address:

The claim for credit or refund shall indicate at the top “Refund-Research Credit” and include a copy of the Form 6765, Credit for Increasing Research Activities (if any), filed with the original return and an amended Form 6765.

Notice 2002-44, 2002-2 C.B. 39, is superseded.

For questions regarding this notice, contact Paul V. Colleran of the Office of Division Counsel (Large and Mid-Size Business) at (617) 565-7838 (not a toll-free call).

This revenue procedure addresses the tax treatment of certain tax-free exchanges of annuity contracts under § 72 and § 1035 of the Internal Revenue Code. The interim guidance provided by Notice 2003-51, 2003-2 C.B. 361, is superseded.

.01 Section 1035(a)(3) provides that no gain or loss shall be recognized on the exchange of an annuity contract for another annuity contract. The legislative history of § 1035 states that exchange treatment is appropriate for “individuals who have merely exchanged one insurance policy for another better suited to their needs.” H.R. Rep. No. 1337, 83d Cong., 2d Sess. 81 (1954). Section 1.1035-1 of the Income Tax Regulations provides that “the exchange, without recognition of gain or loss, of an annuity contract for another annuity contract under § 1035(a)(3) is limited to cases where the same person or persons are the obligee or obligees under the contract received in the exchange as under the original contract.”

.02 Section 72(e) governs the federal tax treatment of distributions from an annuity contract that are not received as an annuity. Under § 72(e)(2), such amounts generally are taxed on an income-first basis. Section 72(e)(12) provides that all annuity contracts issued by the same company to the same policyholder during any calendar year are treated as a single annuity contract for purposes of § 72(e).

.03 Section 72(q)(1) imposes a 10 percent penalty on withdrawals or surrenders of annuity contracts, unless one of the exceptions enumerated in § 72(q)(2) applies.

.04 In Conway v. Commissioner, 111 T.C. 350 (1998), acq., 1999-2 C.B. xvi, the Tax Court held that the direct exchange by an insurance company of a portion of an existing annuity contract to an unrelated insurance company for a new annuity contract was a tax-free exchange under § 1035. Such a transaction is sometimes referred to as a “partial exchange.” The Internal Revenue Service (Service) acquiesced in Conway v. Commissioner. 1999-2 C.B. xvi. See also Rev. Rul. 2007-24, 2007-21 I.R.B. 1282 (receipt of a check under a nonqualified annuity contract and endorsement of the check to a second company as consideration for a second annuity contract treated as a distribution under § 72(e), rather than as a tax-free exchange under § 1035); Rev. Rul. 2003-76, 2003-2 C.B. 355 (direct transfer of a portion of an annuity contract for a new annuity contract treated as a tax-free exchange under § 1035); Rev. Rul. 2002-75, 2002-2 C.B. 812 (assignment of an entire annuity contract for deposit into a preexisting annuity contract treated as a tax-free exchange under § 1035).

.05 Notice 2003-51 provided interim guidance on partial exchanges. Specifically, section 4 of the notice stated that “the Service, using general principles of tax law, will consider all the facts and circumstances to determine whether a partial exchange and a subsequent withdrawal from, or surrender of, either the surviving annuity contract or the new annuity contract within 24 months of the date on which the partial exchange was completed should be treated as an integrated transaction, and thus whether the two contracts should be viewed as a single contract to determine the tax treatment of a surrender or withdrawal under § 72(e).” If however, a taxpayer could demonstrate that one of the conditions of § 72(q)(2), or any other similar life event, such as a divorce or the loss of employment, occurred between the partial exchange and the surrender or distribution, and that the surrender or distribution was not contemplated at the time of the partial exchange, the taxpayer would not be treated as having entered into the surrender or distribution for tax avoidance purposes.

.06 Treasury and the Service have determined that it is in the interest of sound tax administration to adopt the provisions of Notice 2003-51, with changes, in the form of a revenue procedure. See §601.601(d)(2)(vi) of the Procedure and Administration Regulations. In doing so, Treasury and the Service have determined that the 24-month period referred to in section 4 of Notice 2003-51 should be shortened to 12 months, and the subjective requirement that certain surrenders or distributions not have been “contemplated” at the time of the exchange should be removed. In addition, Treasury and the Service have determined it is appropriate to make the following clarifications to the rules of Notice 2003-51: First, if the direct transfer of a portion of an annuity contract for a second annuity contract does not qualify as a tax-free exchange under § 1035 and the rules of this revenue procedure, it will be treated as a taxable distribution followed by a payment for the second contract. Second, the rule treating a transfer as a tax-free exchange if one of the § 72(q)(2) conditions is met cannot be satisfied based on a payment described in §§ 72(q)(2)(D) (distribution that is part of a series of substantially equal periodic payments) or (I) (distribution under an immediate annuity). See Rev. Proc. 2008-3, 2008-1 I.R.B. 110, section 5.02 (identifying “partial annuitization” as an area under study in which rulings or determination letters will not be issued until the Service resolves the issue through publication). Third, the Service will not require aggregation pursuant to the authority of § 72(e)(12) or otherwise of two contracts that are the subject of a tax-free exchange under § 1035 and section 4.01 of this revenue procedure, even if both contracts were issued by the same insurance company.

.01 This revenue procedure applies to the direct transfer of a portion of the cash surrender value of an existing annuity contract for a second annuity contract, regardless of whether the two annuity contracts are issued by the same or different companies.

.02 This revenue procedure does not apply to transactions (sometimes referred to as “partial annuitizations”) in which the holder of an annuity contract irrevocably elects to apply only a portion of the contract to purchase a stream of annuity payments under the contract, leaving the remainder of the contract to accumulate income on a tax-deferred basis.

.01 A transfer that is within the scope of this revenue procedure will be treated as a tax-free exchange under § 1035 if either—

(a) no amounts are withdrawn from, or received in surrender of, either of the contracts involved in the exchange during the 12 months beginning on the date on which amounts are treated as received as premiums or other consideration paid for the contract received in the exchange (the date of the transfer); or

(b) the taxpayer demonstrates that one of the conditions described by § 72(q)(2)(A), (B), (C), (E), (F), (G), (H) or (J), or any similar life event (such as divorce or loss of employment), occurred between (i) the date of the transfer, and (ii) the date of the withdrawal or surrender.

.02 A transfer that is within the scope of this revenue procedure but not treated under § 4.01 as a tax-free exchange under § 1035 will be treated as a distribution, taxable under § 72(e), followed by a payment for the second contract.

.03 The Service will not require aggregation pursuant to the authority of § 72(e)(12), or otherwise, of two annuity contracts that are the subject of a tax-free exchange under § 1035 and section 4.01 of this revenue procedure, even if both contracts are issued by the same insurance company, but will instead treat the contracts as separate annuity contracts. See Rev. Rul. 2003-76.

This revenue procedure is effective for transfers described in section 3 of this revenue procedure that are completed on or after June 30, 2008.

Notice 2003-51 is superseded.

The principal author of this revenue procedure is John E. Glover of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Mr. Glover at (202) 622-3970 (not a toll-free call).

This revenue procedure provides a safe harbor method of accounting for taxpayers using an accrual method of accounting that incur Federal Insurance Contributions Act (FICA) tax and Federal Unemployment Tax Act (FUTA) tax (“payroll tax”) liabilities for compensation (including bonuses and vacation pay), and also provides procedures for taxpayers to obtain the automatic consent of the Commissioner of Internal Revenue to change to the safe harbor method of accounting.

.01 Section 461(a) of the Internal Revenue Code provides that the amount of any deduction or credit must be taken for the taxable year that is the proper taxable year under the method of accounting used in computing taxable income.

.02 Section 1.461-1(a)(2)(i) of the Income Tax Regulations provides that, under an accrual method of accounting, a liability is incurred, and generally is taken into account for federal income tax purposes, in the taxable year in which (1) all the events have occurred that establish the fact of the liability, (2) the amount of the liability can be determined with reasonable accuracy, and (3) economic performance has occurred with respect to the liability (the “all events test”). See also § 1.446-1(c)(1)(ii)(A).

.03 Section 1.461-4(g)(6) provides generally that, if a taxpayer is liable to pay a tax, economic performance occurs as the tax is paid to the governmental authority that imposed it.

.04 Section 1.461-5(b)(1) provides a recurring item exception to the general rule of economic performance. Under the recurring item exception, a liability is treated as incurred for a taxable year if: (i) at the end of the taxable year, all events have occurred that establish the fact of the liability and the amount can be determined with reasonable accuracy; (ii) economic performance occurs on or before the earlier of (a) the date that the taxpayer files a return (including extensions) for the taxable year, or (b) the 15th day of the 9th calendar month after the close of the taxable year; (iii) the liability is recurring in nature; and (iv) either the amount of the liability is not material or accrual of the liability in the taxable year results in better matching of the liability against the income to which it relates than would result from accrual of the liability in the taxable year in which economic performance occurs. Section 1.461-5(b)(5)(ii) provides that, in the case of a liability for taxes, the matching requirement of the recurring item exception is deemed satisfied.

.05 Section 3111 imposes a liability on employers for their share of FICA taxes and § 3301 imposes a liability on employers for FUTA taxes. The employer’s portion of FICA taxes consists of a component for old-age, survivors, and disability insurance (social security tax) and a component for hospital insurance tax (Medicare tax). The social security tax applies only to wages paid by an employer to an employee during a calendar year not exceeding the contribution and benefit base (as determined under section 230 of the Social Security Act), which is $102,000 in 2008. Thus, there is a ceiling on the wages subject to social security tax. In contrast, there is no ceiling on wages subject to the Medicare tax. See §§ 3301, 3111, and 3121(a). FUTA taxes are imposed on the first $7,000 of wages paid to a covered employee by an employer during the calendar year. See § 3301(2). Employers are allowed credits against the FUTA tax through participation in state unemployment compensation laws. See § 3301 et seq.

.06 For many years, Service position was that FICA and FUTA taxes for accrual method taxpayers were treated as incurred only in the taxable year the compensation giving rise to the payroll tax liability was paid. For example, Rev. Rul. 69-587, 1969-2 C.B. 108, concludes that, under the all events test of § 461, an accrual method employer generally may not deduct payroll taxes payable with respect to bonuses and vacation pay accrued but unpaid at year-end until the taxable year in which the bonuses and vacation pay are paid. Similarly, Rev. Rul. 74-70, 1974-1 C.B. 116, concludes that, under the all events test of § 461, an accrual method employer generally may not deduct its share of FICA taxes payable with respect to wages accrued but unpaid at year-end until the taxable year in which those wages are actually or constructively paid.

The Service’s position on the accrual of payroll taxes was challenged in litigation. The Court of Claims in Eastman Kodak Co. v. United States, 534 F.2d 252 (Ct. Cl. 1976), acq., 1996-2 C.B. 1, addressed the deductibility of FICA and FUTA taxes on wages, bonuses, and vacation pay accrued in Year 1 but paid in Year 2. The court held, contrary to Rev. Rul. 74-70, that the fact of the liability for payroll taxes on the wages was established in Year 1 as an automatic consequence of the definite and legal obligation to pay the year-end wages. However, the court also held that the fact of the liability for payroll taxes on bonuses and vacation pay was not established in Year 1 because of the uncertainty as of the end of Year 1 that the employee may have reached the payroll tax ceiling at the time of payment in Year 2.

.07 Consistent with the court’s holding in Eastman Kodak, the Service conceded the issue of deductibility of payroll taxes for year-end wages in Rev. Rul. 96-51, 1996-2 C.B. 36. Rev. Rul. 96-51, which revoked Rev. Rul. 74-70, concludes that, under the all events test of § 461, an accrual method employer may deduct in Year 1 its otherwise deductible payroll taxes imposed on year-end wages properly accrued in Year 1 but paid in Year 2, provided the employer satisfies the requirements of the recurring item exception in § 1.461-5 with respect to those taxes. In Rev. Rul. 96-51, the year-end wages were paid before the 15^th day of the 3^rd calendar month after the end of Year 1 and, thus, were not deferred compensation under § 404. Because the year-end wages were not deferred compensation, Rev Rul. 96-51 does not address the application of § 404 to payroll taxes on deferred compensation.

.08 Rev. Rul. 2007-12, 2007-11 I.R.B. 685, revoked Rev. Rul. 69-587 and amplified Rev. Rul. 96-51. Rev. Rul. 2007-12 concludes that if the all events test and recurring item exception of § 461 are otherwise met, an accrual method taxpayer may treat its payroll tax liability as incurred in Year 1, regardless of whether the compensation to which the liability relates is deferred compensation that is deductible under § 404 in Year 2.

.09 The Service and the Department of the Treasury recognize that the proper accrual of FICA and FUTA tax liabilities continues to be an area of uncertainty for taxpayers. As noted by the Court of Claims in Eastman Kodak, a taxpayer that has a fixed liability to pay the compensation to which the payroll taxes relate may not know, as of the end of the taxable year, whether a particular employee will have reached any applicable payroll tax ceiling by the time the tax ultimately is paid, raising a question as to when the payroll tax liability is fixed. In addition, the ceiling limitations no longer exist on the Medicare portion of an employer’s payroll tax liability, and the ceiling limitations that still exist on other portions of an employer’s payroll tax liability are significantly higher than those addressed in Eastman Kodak. Therefore, for reasons of administrative convenience and to reduce further controversy, the Service will not challenge a taxpayer’s use of the safe harbor method of accounting described in section 4.01 of this revenue procedure for payroll taxes on compensation.

.10 Under § 446(b), the Commissioner has broad authority to determine whether a method of accounting clearly reflects income. Section 1.446-1(c)(2)(ii) provides that the Commissioner may authorize a taxpayer to adopt or change to a permissible method of accounting although the method is not specifically described in the regulations as permissible if, in the opinion of the Commissioner, that method clearly reflects income.

.11 Section 446(e) and § 1.446-1(e)(2)(i) state that, except as otherwise provided, a taxpayer must secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to obtain the Commissioner’s consent to effect the change in method of accounting and to prevent amounts from being duplicated or omitted.

.12 Section 481(a) requires adjustments necessary to prevent amounts from being duplicated or omitted by reason of a change in method of accounting.

.13 Rev. Proc. 2002-9, 2002-1 C.B. 327 (as modified and amplified by Rev. Proc. 2002-19, 2002-1 C.B. 696, modified and clarified by Announcement 2002-17, 2002-1 C.B. 561, and amplified, clarified, and modified by Rev. Proc. 2002-54, 2002-2 C.B. 432), provides procedures by which a taxpayer may obtain automatic consent to change to a method of accounting described in the Appendix of Rev. Proc. 2002-9.

This revenue procedure applies to an accrual method taxpayer that uses the recurring item exception under § 1.461-5 for its payroll tax liabilities and chooses to account for its payroll tax liabilities using the safe harbor method of accounting described in section 4.01 of this revenue procedure. This revenue procedure does not apply to an employee’s portion of FICA tax imposed under § 3101 and deducted by the employer from wages paid to the employee.

.01 In General. Under the safe harbor method of accounting, and solely for purposes of the recurring item exception provided in § 1.461-5, a taxpayer will be treated as satisfying the requirement in § 1.461-5(b)(1)(i) for its payroll tax liability in the same taxable year in which all events have occurred that establish the fact of the related compensation liability and the amount of the related compensation liability can be determined with reasonable accuracy.

.02 Examples.

(1) Example 1. X uses an accrual method of accounting, including the use of the recurring item exception, and files its returns on a calendar year basis. X properly changes to the safe harbor method of accounting described in section 4.01 of this revenue procedure for its payroll tax liabilities. During Year 1, A, an employee of X, earns $10,000 of vested vacation compensation for services performed during Year 1. X pays the vacation compensation to A in February and May of Year 2. X incurs a payroll tax liability for the $10,000 vested vacation compensation payment. Assume that, as of December 31 of Year 1, all events have occurred to establish the fact of X’s vested vacation compensation liability and the amount of the liability is determinable with reasonable accuracy. Under the provisions of this revenue procedure, and solely for purposes of applying the recurring item exception, all events necessary to establish the fact of X’s payroll tax liability for the $10,000 vested vacation compensation will be treated as having occurred in Year 1 and the amount of the payroll tax liability will be treated as being determined with reasonable accuracy in Year 1.

(2) Example 2. Y uses an accrual method of accounting, including the use of the recurring item exception, and files its returns on a calendar year basis. X properly changes to the safe harbor method of accounting described in section 4.01 of this revenue procedure for its payroll tax liabilities. On December 28 of Year 1, Y’s board of directors approves a bonus pool of $1,000,000 to be paid to Y’s employees for services provided during Year 1. The $1,000,000 in bonuses is paid to Y’s employees on January 5 of Year 2. Y incurs a payroll tax liability as a result of the $1,000,000 in bonuses paid to its employees. Assume that, as of December 31 of Year 1, all events have occurred to establish the fact of the bonus compensation liability and the amount of the liability is determinable with reasonable accuracy. Under the provisions of this revenue procedure, and solely for purposes of applying the recurring item exception, all events necessary to establish the fact of Y’s payroll tax liability for the $1,000,000 in bonuses will be treated as having occurred in Year 1, and the amount of the payroll tax liability will be treated as being determined with reasonable accuracy in Year 1.

.01 In General. A change in the treatment of payroll tax liabilities to conform to the safe harbor method provided by this revenue procedure is a change in method of accounting to which the provisions of §§ 446 and 481 and the regulations thereunder apply.

.02 Automatic change to the safe harbor method. A taxpayer within the scope of this revenue procedure that wants to change its treatment of payroll tax liabilities to conform to the safe harbor method of accounting provided in this revenue procedure (including a change to use the recurring item exception for such payroll tax liabilities) must follow the automatic change in accounting method provisions of Rev. Proc. 2002-9, with the following modifications:

(i) The scope limitations in section 4.02 of Rev. Proc. 2002-9 do not apply to a taxpayer that wants to make the change for its first taxable year ending on or after December 31, 2007.

(ii) For purposes of completing line 1a of Form 3115, Application for Change in Accounting Method, the designated automatic accounting method change number for the change in method of accounting provided in this revenue procedure is No. 113.

Rev. Proc. 2002-9 is modified and amplified to include this automatic change in section 10.02 of the APPENDIX.

This revenue procedure is effective for taxable years ending on or after December 31, 2007. The Service will not challenge a taxpayer’s use of the safe harbor method of accounting described in this revenue procedure on a federal income tax return filed before March 11, 2008, if the taxpayer meets the requirements of this revenue procedure in that taxable year. Moreover, if the taxpayer’s use of the safe harbor method on a federal income tax return filed before March 11, 2008, is an issue under consideration in examination, appeals, or before a federal court, the issue will not be further pursued by the Service.

The principal author of this revenue procedure is Martin L. Osborne of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Martin L. Osborne at (202) 622-7900 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking and notice of hearing.

This document contains proposed regulations that provide guidance under Internal Revenue Code (Code) section 664 on the tax effect of unrelated business taxable income (UBTI) on charitable remainder trusts. The proposed regulations reflect the changes made to section 664(c) by section 424(a) and (b) of the Tax Relief and Health Care Act of 2006. The proposed regulations affect charitable remainder trusts that have UBTI in taxable years beginning after December 31, 2006. This document also provides notice of a public hearing on these proposed regulations.

Written or electronic comments must be received by May 6, 2008. Outlines of topics to be discussed at the public hearing scheduled for April 11, 2008, must be received by March 28, 2008.

Send submissions to: CC:PA:LPD:PR (REG-127391-07), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-127391-07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC; or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-127391-07).

Concerning the proposed regulations, Cynthia Morton at (202) 622-3060; concerning submissions of comments, the hearing, and/or access list to attend the hearing, contact Richard Hurst at (202) 622-7180 (not toll-free numbers) or e-mail at Richard.A.Hurst@irscounsel.treas.gov.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

The principal author of the proposed regulations is Cynthia Morton, Office of the Associate Chief Counsel (Passthroughs and Special Industries).

* * * * *

This document explains the procedures the public may use to request the inspection and copying of a section 501(c)(3) organization’s annual return reporting section 511 unrelated business income (Form 990-T).

The Tax Technical Corrections Act of 2007, Pub. L. 110-172, H.R. 4839, provides that the Internal Revenue Service is required to make Forms 990-T that are filed by a section 501(c)(3) organization publicly available for inspection and copying pursuant to section 6104(b). This provision is effective for returns filed after August 17, 2006, the date of enactment of the Pension Protection Act of 2006, Pub. L. 109-280 (PPA).

Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form, is used to request from the Internal Revenue Service a copy of an exempt or political organization’s return, report, or notice pursuant to section 6104(b). The Form 4506-A does not currently contain a check box for a Form 990-T, although the Internal Revenue Service is in the process of revising the Form 4506-A to include this provision. If you want to inspect or copy a Form 990-T that was filed after August 17, 2006, please mail or fax a copy of the Form 4506-A to the Internal Revenue Service following the instructions for that form. In line 7 of the Form 4506-A, however, please write in “Form 990-T”. Please be advised that a CD-ROM will not be available for Form 990-T returns. The charges listed on Form 4506-A for copies will apply.

For further information, contact Melinda Williams at 202-283-9467 (not a toll-free number).

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on March 31, 2008, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

Internal Revenue Service (IRS), Treasury.

Notice of public hearing on proposed rulemaking.

This document provides notice of public hearing on proposed regulations (REG-127770-07, 2007-50 I.R.B. 1171) that would expand the list of permitted loan modifications to include certain modifications of commercial mortgages.

The public hearing is being held on Friday, April 4, 2008, at 10:30 a.m. The IRS must receive outlines of the topics to be discussed at the public hearing by Friday, March 14, 2008.

The public hearing is being held in the IRS Auditorium, Internal Revenue Service Building, 1111 Constitution Avenue, NW, Washington, DC 20224.

Send Submissions to CC:PA:LPD:PR (REG-127770-07), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday to CC:PA:LPD:PR (REG-127770-07), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically via the Federal erulemaking Portal at www.regulations.gov (IRS-REG-127770-07).

Concerning the regulations, Diana Imholtz or Susan Thompson Baker (202) 622-3930; concerning submissions of comments, the hearing and/or to be placed on the building access list to attend the hearing Funmi Taylor at (202) 622-7180 (not toll-free numbers).

The subject of the public hearing is the notice of proposed rulemaking (REG-127770-07) that was published in the Federal Register on Friday, November 9, 2007 (72 FR 63523).

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing that submitted written comments by February 7, 2008 must submit an outline of the topics to be addressed and the amount of time to be allotted to each topic (signed original and eight (8) copies).

A period of 10 minutes is allotted to each person for presenting oral comments. After the deadline for receiving outlines has passed, the IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available, free of charge, at the hearing or in the Freedom of Information Reading Room (FOIA RR) (Room 1621) which is located at the 11^th and Pennsylvania Avenue, NW, entrance, 1111 Constitution Avenue, NW, Washington, DC.

Because of access restrictions, the IRS will not admit visitors beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” section of this document.

Internal Revenue Service (IRS), Treasury.

Notice of public hearing on proposed rulemaking.

This document contains a notice of public hearing on proposed regulations (REG-149856-03, 2007-24 I.R.B. 1394) relating to a claim that a child is a dependent by parents who are divorced, legally separated under a decree of separate maintenance, agreement, or who live apart at all times during the last 6 months of the calendar year.

The public hearing is being held on April 3, 2008, at 10 a.m. The IRS must receive outlines of the topics to be discussed at the hearing by March 26, 2008.

The public hearing is being held in Room 2615, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

Send submissions to: CC:PA:LPD:PR (REG-149856-03), room 5203, Internal Revenue Service, POB 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-149856-03), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS internet site via the Federal eRulemaking Portal at http://www.regulations.gov (IRS-REG-149856-03).

Concerning the regulations, Victoria Driscoll (202) 622-4920; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing Regina Johnson (202) 622-7180 (not toll-free numbers).

The subject of the public hearing is the notice of proposed regulations (REG-149856-03) that was published in the Federal Register on Wednesday, May 2, 2007 (72 FR 24192).

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing that submitted written comments by July 31, 2007, must submit an outline of the topics to be discussed and the amount of time to be devoted to each topic (signed original and eight (8) copies).

A period of 10 minutes is allotted to each person for presenting oral comments.

After the deadline for receiving outlines has passed, the IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available, free of charge, at the hearing.

Because of access restrictions, the IRS will not admit visitors beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” section of this document.