This notice informs tax practitioners that until all of the conditions for becoming a registered tax return preparer are able to be satisfied, no individual may represent that he or she is a registered tax return preparer. This notice also informs tax practitioners that registered tax return preparers will be required to add a specified statement to all mediums of paid advertising and broadcasting.

This procedure provides survey guidelines and estimation procedures to be used for determining basis in stock acquired in transferred basis transactions. This procedure updates and expands Rev. Proc. 81-70, while at the same time it obsoletes Rev. Proc. 81-70 and Notice 2009-4 with respect to transferred basis transactions completed on or after June 20, 2011. Rev. Proc. 81-70 and Notice 2009-4 obsoleted in part.

This procedure provides the extent to which grantors and contributors (including donors) may rely on the listing of an organization in Publication 78, Cumulative List of Organizations Described in Section 170(c) of the Internal Revenue Code, or on the IRS Business Master File (“BMF”) extract, for purposes of deducting contributions under section 170 of the Code and making grants under sections 4942, 4945, and 4966. In addition, this revenue procedure clarifies that the Internal Revenue Service (“IRS”) may give notice of revocation, including revocations under section 6033(j), through an appropriate public announcement, such as publication in the Internal Revenue Bulletin or on the IRS’s website at IRS.gov. Finally, this revenue procedure advises that the IRS will no longer publish a paper version of Publication 78. Rev. Proc. 82-39 and 2009-32 modified and superseded.

The Internal Revenue Service will publish a list of organizations that have had their federal tax-exempt status automatically revoked for failing to file an annual return or notice for three consecutive years on IRS.gov.

The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice requests public comments on the implementation of these new sections, which impose fees to be paid by issuers of health insurance policies and self-insured health plan sponsors. Comments are requested by September 6, 2011.

The Affordable Care Act added new sections 4375, 4376, 4377, and 9511 to the Code. This notice requests public comments on the implementation of these new sections, which impose fees to be paid by issuers of health insurance policies and self-insured health plan sponsors. Comments are requested by September 6, 2011.

This notice defers the date to June 10, 2011, by which a covered entity must submit an error report and defers the date to August 24, 2011, by which the IRS will send covered entities their 2011 final fee calculation and, if applicable, notification of the final determination with respect to error reports. Notice 2011-9 and Rev. Proc. 2011-24 modified.

This notice provides transitional relief for certain small organizations that have lost their tax-exempt status because they failed to file an annual electronic notice for taxable years beginning in 2007, 2008 and 2009. This notice describes what criteria a small organization must satisfy to qualify for the transitional relief and explains how qualifying organizations can apply for reinstatement of tax-exempt status and request retroactive reinstatement.

This notice provides guidance with respect to applying for reinstatement of tax-exempt status and requesting retroactive reinstatement and establishing reasonable cause under section 6033(j)(2) and (3) of the Code for an organization that has had its tax-exempt status automatically revoked under section 6033(j)(1).

This notice informs tax practitioners that until all of the conditions for becoming a registered tax return preparer are able to be satisfied, no individual may represent that he or she is a registered tax return preparer. This notice also informs tax practitioners that registered tax return preparers will be required to add a specified statement to all mediums of paid advertising and broadcasting.

This procedure provides a reduced user fee for applications for reinstatement of tax-exempt status filed by small organization that lost their tax-exempt status under section 6033(j) and qualify for the transitional relief described in Notice 2011-43. Rev. Proc. 2011-8 modified.

This notice requests public comments on the implementation of provisions of the Patient Protection and Affordable Care Act, P.L. 111-148, (Affordable Care Act) to fund comparative clinical effectiveness research relating to patient-centered outcomes. The Affordable Care Act includes provisions that promote research to evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.

As required by the Affordable Care Act, a nonprofit corporation — the Patient-Centered Outcomes Research Institute (Institute) — was established to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing comparative clinical effectiveness research. The Affordable Care Act provides that the Institute will not be an agency or establishment of the United States Government, and will be funded by a Patient-Centered Outcomes Research Trust Fund (Trust Fund). The Trust Fund, in turn, is to be funded in part by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans.

The Department of the Treasury (Treasury) and the Internal Revenue Service (Service) intend to publish proposed regulations implementing and providing guidance on the statutory requirements applicable to issuers and plan sponsors that pay those fees. To inform the development of the proposed regulations, this notice invites comments on how the fees should be determined and paid, including comments on several possible rules, safe harbors, and issues outlined below. Accordingly, while this notice does not provide guidance, it describes potential guidance that Treasury and the Service expect to propose to implement the new fees and seeks comments on this potential guidance.

.01 Section 6301 of the Affordable Care Act added new § 9511 to the Internal Revenue Code (Code) to establish the Patient-Centered Outcomes Research Trust Fund as a funding source for the Patient-Centered Outcomes Research Institute. The Trust Fund, in turn, will be funded in part through fees payable by issuers of health insurance policies and sponsors of self-insured health plans. Section 6301 of the Affordable Care Act also added new §§ 4375, 4376, and 4377 to the Code to impose those fees on what the statute refers to as “specified health insurance policies” and “applicable self-insured health plans” based on the average number of lives covered under the policy or plan. The fees are effective for policy and plan years ending after September 30, 2012.

Treasury and the Service anticipate proposing regulations under §§ 4375 and 4376. To inform the development of the proposed regulations, Treasury and the Service request comments on the following topics:

This notice provides transitional relief for certain small organizations that have lost their tax-exempt status because they failed to file a required annual electronic notice (Form 990-N e-Postcard) for taxable years beginning in 2007, 2008 and 2009. A small organization — that is, one that normally has annual gross receipts of not more than $50,000 in its most recently completed taxable year — that qualifies for the transitional relief under this notice and applies for reinstatement of tax-exempt status by December 31, 2012, will be treated by the Internal Revenue Service (“IRS”) as having established reasonable cause for its filing failures and its tax-exempt status will be reinstated retroactive to the date it was automatically revoked.

Organizations not described in this notice should consult Notice 2011-44, in this Bulletin, for guidance on how to apply for reinstatement of tax-exempt status and request retroactive reinstatement.

The Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780, § 1223 (2006), added sections 6033(i) and (j) to the Internal Revenue Code (“Code”), both of which became effective for taxable years beginning after 2006. Section 6033(i) requires tax-exempt organizations excepted from filing annual information returns because they normally have annual gross receipts of not more than $25,000 (increased to normally not more than $50,000 for taxable years beginning on or after January 1, 2010) to annually file a Form 990-N e-Postcard. Section 6033(j) automatically revokes the tax-exempt status of any organization that fails to file a required annual return or Form 990-N e-Postcard for three consecutive years.

In order to obtain reinstatement of its tax-exempt status, an organization that has had its tax-exempt status automatically revoked under section 6033(j) must apply for reinstatement with the IRS, even if it was not originally required to submit such an application. I.R.C. § 6033(j)(2). If an organization applying for reinstatement of tax-exempt status can show reasonable cause for its consecutive filing failures, the organization’s tax-exempt status may, in the discretion of the Secretary, be reinstated retroactive to the date of the automatic revocation. I.R.C. § 6033(j)(3).

The IRS recognizes that many small organizations that have lost their tax-exempt status because they failed to file a Form 990-N e-Postcard for their 2007, 2008, and 2009 taxable years were never required to file an annual return or notice prior to their 2007 taxable year. The IRS also recognizes that many small organizations are operated by volunteers and may face unique challenges in meeting federal tax obligations. Accordingly, the IRS will treat a small organization (one that normally has annual gross receipts of not more than $50,000 in its most recently completed taxable year) as having established reasonable cause for failing to file a Form 990-N e-Postcard or an annual return for its taxable years beginning in 2007, 2008, and 2009 if it meets each of the following criteria:

An organization’s annual gross receipts are “normally not more than” $25,000 or $50,000 in a taxable year if its average annual gross receipts for that taxable year and the two taxable years immediately preceding it are not more than $25,000 or $50,000, respectively. See Rev. Proc. 2011-15, 2011-3 I.R.B. 322, section 4.

The IRS will reinstate the tax-exempt status of a small organization that meets the above criteria retroactive to the date it was revoked.

An organization seeking reinstatement of tax-exempt status under section 6033(j)(2) must use the same forms that are filed by all other applicants for tax-exemption. Thus, an organization seeking reinstatement of tax-exempt status under section 501(c)(3) must submit Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Most other organizations seeking reinstatement of tax-exempt status must submit Form 1024, Application for Recognition of Exemption Under Section 501(a). Any organization that seeks reinstatement of tax-exempt status must submit the appropriate application regardless of whether the organization was originally required to apply with the IRS for recognition of tax-exemption.

A small organization seeking the transitional relief described in this notice must write “Notice 2011-43” on the top of the form it uses to apply for reinstatement of tax-exempt status and on the envelope.

A small organization seeking the transitional relief described in this notice must also attach to its application for reinstatement of tax-exempt status the following statement:

Small organizations that are eligible for the transitional relief described in this notice are also eligible for a reduced user fee of $100 for the application of reinstatement of tax-exempt status. See Rev. Proc. 2011-36, this Bulletin, modifying Rev. Proc. 2011-8, 2011-1 I.R.B. 237, section 6.07. For information on where to mail the application for reinstatement of tax-exempt status, see the Instructions for Form 1023 or Form 1024 (whichever is applicable).

An organization whose tax-exempt status has been automatically revoked and reinstated may have its tax-exempt status automatically revoked a second time under section 6033(j)(1) only if it fails to file returns or notices for another three consecutive taxable years, beginning with the taxable year the IRS approves its application for reinstatement of tax-exempt status. For example, if an organization reporting on a calendar year basis has its tax-exempt status automatically revoked for failing to file required returns or notices for 2007, 2008, and 2009 and receives a determination letter recognizing the reinstatement of its tax-exempt status dated September 1, 2011, the organization’s tax-exempt status will not be automatically revoked a second time for failing to timely file a return or notice for 2008, 2009, and 2010. However, the organization’s tax-exempt status will be automatically revoked a second time if the organization fails to timely file a return or notice for 2011, 2012, and 2013.

The principal authors of this notice are Monice Rosenbaum and Preston Quesenberry of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) and Matthew Giuliano of the Tax Exempt and Government Entities Division of the IRS. However, other personnel from the IRS and Treasury Department participated in developing this notice. For further information regarding this notice, contact Ms. Rosenbaum at (202) 622-6070, Mr. Quesenberry at (202) 622-1124, or Mr. Giuliano at (202) 283-8917 (not toll-free numbers).

This notice provides guidance with respect to applying for reinstatement of tax-exempt status and requesting retroactive reinstatement under sections 6033(j)(2) and (3) of the Internal Revenue Code (“Code”) for an organization that has had its tax-exempt status automatically revoked under section 6033(j)(1) of the Code. The Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) intend to issue regulations under section 6033(j) that will prescribe rules relating to the application for reinstatement of tax-exempt status under section 6033(j)(2) and the request for retroactive reinstatement under section 6033(j)(3). To assist in the drafting of these regulations, Treasury and the IRS solicit comments on the issues addressed in this notice.

In this Bulletin, the IRS has also published Notice 2011-43, which provides transitional relief for certain small organizations (those that normally have annual gross receipts of not more than $50,000 in their most recently completed taxable year) that have lost their tax-exempt status because they failed to file an annual electronic notice for taxable years beginning in 2007, 2008, and 2009. Notice 2011-43 sets forth the criteria for qualifying for the transitional relief and instructions on how qualifying organizations can apply for reinstatement of tax-exempt status retroactive to the date such status was automatically revoked.

In general, section 6033(a)(1) requires an organization exempt from taxation under section 501(a) to file an annual information return, such as a Form 990, Return of Organization Exempt from Income Tax, a Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, or a Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. Several categories of tax-exempt organizations, including most organizations (other than private foundations or section 509(a)(3) supporting organizations) whose annual gross receipts are normally not more than $50,000 ($25,000 for taxable years beginning before January 1, 2010), are not required to file an annual information return. See I.R.C. § 6033(a)(3); Rev. Proc. 2011-15, 2011-3 I.R.B. 322.

The Pension Protection Act of 2006, Pub. L. No.109-280, 120 Stat. 780, § 1223 (2006) (“PPA”), added sections 6033(i) and (j) to the Code, both of which became effective for taxable years beginning after 2006. Section 6033(i) added an annual notification requirement for tax-exempt organizations that, pursuant to section 6033(a)(3)(A)(ii) or (a)(3)(B), are not required to file an annual information return under section 6033(a)(1) because their gross receipts fall below certain thresholds. An organization satisfies the annual notification requirement under section 6033(i) by filing an annual electronic notice, also known as a Form 990-N e-Postcard. The annual notification requirement is also deemed satisfied if an organization files a complete Form 990 or Form 990-EZ. See Treas. Reg. § 1.6033-6(c)(4).

Section 6033(j)(1) automatically revokes the tax-exempt status of any organization described in section 6033(a)(1) that fails to file a required annual return for three consecutive years or any organization described in section 6033(i) that fails to file an annual return or notice for three consecutive years. Revocation under section 6033(j)(1) is effective on and after the date set by the Secretary for the filing of the third annual return or notice.

Section 6033(j)(1) also requires the Secretary to publish and maintain a list of all organizations that have had their tax-exempt statuses revoked under section 6033(j)(1) (“revocation list”). The IRS is publishing such a revocation list on the IRS website (http://www.irs.gov), which it will update monthly. The IRS is also mailing a letter to the last known address of each organization on the revocation list to notify the organization that its tax-exempt status has been revoked under section 6033(j)(1) (“IRS revocation letter”).

Section 7428(b)(4), as added by the PPA, provides that an organization may not bring a declaratory judgment action challenging automatic revocation under section 6033(j)(1).

Section 6033(j)(2) provides that any organization that has had its tax-exempt status automatically revoked under section 6033(j)(1) must apply with the IRS in order to obtain reinstatement of its tax-exempt status, regardless of whether the organization was originally required to apply for recognition of its tax exemption. If the application for reinstatement of tax-exempt status is approved, the effective date of the organization’s reinstated tax-exempt status generally will be the date the organization filed its application for reinstatement. However, section 6033(j)(3) provides that if, upon application for reinstatement, an organization “can show to the satisfaction of the Secretary evidence of reasonable cause for the failure described in [section 6033(j)(1)], the organization’s exempt status may, in the discretion of the Secretary, be reinstated effective from the date of the revocation.”

For taxable years beginning after December 31, 2006, the tax-exempt status of any organization that fails to file an annual information return required under section 6033(a)(1) or an electronic notice required under section 6033(i) for three consecutive years is automatically revoked pursuant to section 6033(j)(1) on and after the date set by regulation for the filing of the third annual return or notice, without regard to any extension of time for filing. Sections 1.6033-2(e) and 1.6033-6(f) of the Treasury Regulations generally require annual returns and notices, respectively, to be filed on or before the 15th day of the fifth month following the close of the period for which the return or notice is required to be filed. When the filing deadline falls on a Saturday, Sunday, or legal holiday the deadline may be timely satisfied if the filing is made on the next business day that is not a Saturday, Sunday, or a legal holiday. See I.R.C. § 7503. Thus, for example, in the case of an organization reporting on a calendar-year basis that did not file a required annual return or notice for 2007, 2008, or 2009, the revocation under section 6033(j)(1) would be effective as of May 17, 2010, given that May 15, 2010 fell on a Saturday.

An organization seeking reinstatement of its tax-exempt status under section 6033(j)(2) must apply using the same forms that are filed by all other applicants for tax exemption. Thus, an organization seeking reinstatement of its tax-exempt status under section 501(c)(3) must submit Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Most other organizations seeking reinstatement of tax-exempt status must submit Form 1024, Application for Recognition of Exemption Under Section 501(a). Any organization that seeks reinstatement of its tax-exempt status must submit the appropriate application regardless of whether the organization was originally required to apply with the IRS for recognition of tax exemption. For example, if the tax-exempt status of a subordinate organization included in a group exemption letter is automatically revoked under section 6033(j)(1), the subordinate organization must submit an application for reinstatement of its tax-exempt status on its own behalf. In addition, all organizations seeking reinstatement of tax-exempt status must pay the appropriate user fee. See Rev. Proc. 2011-8, 2011-1 I.R.B. 237, section 6.07 or its successor. (Small tax-exempt organizations described in Notice 2011-43 are eligible for a reduced user fee described in Rev. Proc. 2011-36, this Bulletin.)

To facilitate processing of applications for reinstatement of tax-exempt status, organizations should write “automatically revoked” on the top of the application form and on the envelope. For information on where to mail the application for reinstatement of tax-exempt status, see the Instructions for Form 1023 or Form 1024 (whichever is applicable).

.01 Request for Retroactive Reinstatement

An organization (other than a small organization that qualifies for the transitional relief described in Notice 2011-43) seeking to have its tax-exempt status reinstated effective from the date of automatic revocation pursuant to section 6033(j)(3) must submit a request for retroactive reinstatement with its application for reinstatement of tax-exempt status. The request for retroactive reinstatement must include the following:

(1) A written statement setting forth all of the facts that support its claim for reasonable cause for failing to file a required return or notice in each of the three consecutive years and over the entire consecutive three-year period, including a detailed description of all the facts and circumstances that led to each failure and the continuous failure, the discovery of the failures, and the steps taken to avoid or mitigate the failures;

(2) A written statement describing the safeguards the organization has put into place to ensure that the organization will not fail to file returns or notices in the future;

(3) Evidence to substantiate all material aspects of the written statements described in paragraphs (1) and (2) of this section;

(4) Properly completed and executed paper annual information returns (Forms 990, Forms 990-EZ, or Forms 990-PF, whichever is applicable) for all taxable years during and after the consecutive three-year period that the organization was required, but failed, to file an annual information return;

(5) Properly completed and executed Forms 990-EZ for all taxable years during and after the consecutive three-year period that the organization was eligible to file a Form 990-N e-Postcard but failed to file either a Form 990-N e-Postcard or an annual information return; and

(6) An original declaration, dated and signed under penalties of perjury by an officer, director, trustee, or other official who is authorized to sign for the organization in the following form:

.02 Reasonable Cause Standard

Because the failure described in section 6033(j)(1) involves a repeated and continuous failure to file annual returns or notices for a consecutive three-year period, an organization seeking retroactive reinstatement under section 6033(j)(3) must demonstrate that it had reasonable cause for failing to file a return or notice not only for each of the three years but also over the entire three-year period. Thus, for example, showing reasonable cause for failing to file a required return or notice for the first of the three years by the date it was due would be insufficient; an organization also would have to show reasonable cause for not filing that return or notice at any later time during the three-year period and for not filing required returns or notices for the second and third years of the three-year period.

In order to establish reasonable cause under section 6033(j)(3), an organization requesting retroactive reinstatement must provide evidence that it exercised ordinary business care and prudence in determining and attempting to comply with its reporting requirements under section 6033 for each of the three years and over the entire three-year period, but was nevertheless unable to file the required returns or notices for three consecutive years. In determining whether the organization establishes reasonable cause, the IRS will take into account all pertinent facts and circumstances, including, but not limited to, the following factors that weigh in favor of finding reasonable cause (with no single factor being either necessary or determinative):

(1) The organization’s failure was due to its reasonable, good faith reliance on erroneous written information from the IRS, stating that the organization was not required to file a return or notice under section 6033, provided the IRS was made aware of all relevant facts.

(2) The failure to file the returns or notices arose from events beyond the organization’s control (“impediment”) that made it impossible for the organization to file returns or notices for each of the three years at issue and over the entire three-year period.

(3) The organization acted in a responsible manner by undertaking significant steps to avoid or mitigate the failure to file the required returns or notices and to prevent similar failures in the future, including, but not limited to—

(a) Attempting to prevent an impediment or a failure, if it was foreseeable;

(b) Acting as promptly as possible to remove an impediment or the cause of the reporting failure, once the failure was discovered; and

(c) After the failure was discovered, implementing sufficient safeguards to ensure future compliance with the reporting requirements under section 6033.

(4) Aside from the three consecutive years in which the organization failed to file returns or notices, the organization has an established history of complying with its reporting requirements (if any) under section 6033 and/or any other applicable reporting or other requirements under the Code.

In determining whether reasonable cause exists, the IRS will only consider a factor on the above list or any other factor (such as the fact that substantially all of an organization’s activities are performed by volunteers) if the organization shows to the satisfaction of the IRS evidence to substantiate the factor.

.03 Timing of Request for Retroactive Reinstatement

Except for small organizations that qualify for the transitional relief described in Notice 2011-43, the IRS will, in exercising the discretion granted under section 6033(j)(3), consider an organization’s request for retroactive reinstatement only if it submits such a request, together with a properly completed and executed application for reinstatement of its tax-exempt status, within 15 months of the later of the date of the IRS revocation letter or the date on which the IRS posts the name of the organization on the revocation list available on the IRS website (or otherwise provides notice of the revocation to the public).

An organization whose tax-exempt status has been automatically revoked and reinstated may have its tax-exempt status automatically revoked a second time under section 6033(j)(1) only if it fails to file returns or notices for another three consecutive taxable years, beginning with the taxable year the IRS approves its application for reinstatement of tax-exempt status. For example, if an organization reporting on a calendar year basis has its tax-exempt status automatically revoked for failing to file required returns or notices for 2007, 2008, and 2009 and receives a determination letter recognizing the reinstatement of its tax-exempt status dated September 1, 2011, the organization’s tax-exempt status will not be automatically revoked a second time for failing to timely file a return or notice for 2008, 2009, and 2010. However, the organization’s tax-exempt status will be automatically revoked a second time if the organization fails to timely file a return or notice for 2011, 2012, and 2013.

The collection of information contained in this notice has been submitted to the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) and approved under OMB control number 1545-2206.

The collection of information in this notice is in section 5. In order to have its tax-exempt status retroactively reinstated under section 6033(j)(3), an organization must show to the satisfaction of the IRS evidence that it exercised ordinary business care and prudence in determining and attempting to comply with its reporting obligations under section 6033 for each of the three years (and over the entire three-year period) that it failed to meet such requirements. This information is necessary for inspection by the IRS in determining whether reasonable cause exists. The collection of information is required to meet the reasonable cause standard under section 6033(j)(3). The likely respondents providing the information required in section 5 of this notice are tax-exempt organizations that have had their tax-exempt statuses automatically revoked under section 6033(j)(1), have applied for reinstatement of such status under section 6033(j)(2), and are seeking that such reinstatement be made retroactive to the date of revocation under section 6033(j)(3).

Estimated total annual reporting burden: 2,917 hours.

Estimated average annual burden per respondent: 1 hour.

Estimated number of respondents over the next three years: 8,750.

Additional collection of information is proposed in section 4 of the notice, which will be reported and approved through Forms 1023 and 1024 (OMB approval numbers 1545-0056 and 1545-0057, respectively).

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Treasury and the IRS request comments regarding this notice and suggestions for future guidance regarding the provisions of section 6033(j). Comments should be submitted on or before August 19, 2011. Please include “Notice 2011-44” on the cover page. Comments should be sent to the following address:

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Submissions may also be sent electronically to the following e-mail address:

Notice.Comments@irscounsel.treas.gov.

Please include “Notice 2011-44” in the subject line.

All comments will be available for public inspection and copying.

The principal authors of this notice are Monice Rosenbaum and Preston Quesenberry of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) and Matthew Giuliano of the Tax Exempt and Government Entities Division of the IRS. However, other personnel from the IRS and Treasury Department participated in developing this notice. For further information regarding this notice, contact Ms. Rosenbaum at (202) 622-6070, Mr. Quesenberry at (202) 622-1124, or Mr. Giuliano at (202) 283-8917 (not toll-free numbers).

The Department of the Treasury and the IRS are implementing the recommendations contained in Publication 4832, “Return Preparer Review.” As part of this implementation, the Department of the Treasury and the IRS have issued final regulations (T.D. 9527) that include registered tax return preparers as practitioners under 31 CFR Part 10 (reprinted as Treasury Department Circular 230).

The Department of the Treasury and the IRS have also published final regulations under I.R.C. § 6109 (75 FR 60309) providing that attorneys, certified public accountants, enrolled agents, and registered tax return preparers who prepare all or substantially all of a tax return must obtain a preparer tax identification number (PTIN). In Notice 2011-6, 2011-3 I.R.B. 315, the IRS identified two additional groups of individuals who are eligible to obtain a PTIN: (1) specified individuals who are supervised by the attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary who signs the tax return or claim for refund prepared by the individual, and (2) individuals who certify they do not prepare or assist in the preparation of all or substantially all of any tax return or claim for refund covered by a competency examination. Notice 2011-6 further provided that individuals who are not attorneys, certified public accountants, enrolled agents, or registered tax return preparers may obtain a provisional PTIN before the date that the registered tax return preparer competency examination is first offered. After the competency examination is offered, only attorneys, certified public accountants, enrolled agents, registered tax return preparers, or the additional groups of individuals identified above will be eligible to obtain a PTIN. The IRS began issuing PTINs at the end of September 2010.

To become a registered tax return preparer, an applicant must pass a competency examination and tax compliance and suitability checks. The IRS has selected a vendor to develop and administer the competency examination, but the examination is not yet available. Additionally, the IRS is currently in the process of developing the suitability check. Because the conditions for becoming a registered tax return preparer are not yet able to be satisfied by any individual, no individual may represent that he is a registered tax return preparer. An individual with a provisional PTIN may not represent that he is a registered tax return preparer or has passed the competency examination. Once the competency examination is available, only an individual who has met all of the conditions to becoming a registered tax return preparer, including passing the competency examination and the tax compliance and suitability checks, may represent that he is a registered tax return preparer.

An individual who becomes a registered tax return preparer must comply with the applicable rules in Circular 230, including section 10.30 regarding practitioner advertising and solicitation. Section 10.30 will be amended to require a registered tax return preparer using any paid advertising involving print, television or radio, in which the individual represents himself or herself to be a registered tax return preparer to display or broadcast the following statement: “The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go to IRS.gov.”

The principal author of this notice is Emily M. Lesniak of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, contact Emily M. Lesniak at (202) 622-4570 (not a toll-free call).

This notice defers two dates by which certain actions are to be taken for purposes of the branded prescription drug fee.

An annual fee on covered entities engaged in the business of manufacturing or importing branded prescription drugs was enacted by section 9008 of the Patient Protection and Affordable Care Act (ACA), Public Law 111-148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010 (HCERA), Public Law 111-152 (124 Stat. 1029 (2010)).

Notice 2011-9, 2011-6 I.R.B. 459, provides guidance for implementing this fee in 2011. Among other things, Notice 2011-9 states that the IRS will provide each covered entity with a preliminary fee calculation by May 16, 2011, and a final fee calculation by August 15, 2011.

Rev. Proc. 2011-24, 2011-20 I.R.B. 787, provides a dispute resolution process by which a covered entity may dispute its preliminary fee calculation before the IRS sends it a final fee calculation. Section 4.01 of the Rev. Proc. provides that a covered entity must provide a written error report to the IRS, postmarked by June 1, 2011, in order for a correction to any claimed error to be considered by the IRS. Section 5.02(1) of the Rev. Proc. provides that the IRS will notify the covered entity in writing of the final determination with respect to error reports when the IRS sends the covered entity the final fee calculation no later than August 15, 2011.

The IRS has been told that certain covered entities may have difficulty meeting the June 1 deadline for submitting these error reports because of the volume of data they need to review. Accordingly, this notice defers until June 10, 2011, the date by which error reports under Rev. Proc. 2011-24 must be postmarked in order to receive IRS consideration.

To preserve the time needed to give appropriate consideration to the error reports, the IRS will send covered entities their 2011 final fee calculation and, if applicable, notification of the final determination with respect to error reports by August 24, 2011, instead of August 15, 2011.

Notice 2011-9 and Rev. Proc. 2011-24 are modified.

The principal author of this notice is Celia Gabrysh of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Celia Gabrysh at (202) 622-3130 (not a toll-free call).

This revenue procedure modifies and supersedes Revenue Procedure 82-39, 1982-2 C.B. 759, and Revenue Procedure 2009-32, 2009-28 I.R.B. 142, and provides the extent to which grantors and contributors (including donors) may rely on the listing of an organization in Publication 78, Cumulative List of Organizations described in § 170(c) of the Internal Revenue Code, or on the IRS Business Master File (“BMF”) extract, for purposes of deducting contributions under § 170 and making grants under §§ 4942, 4945, and 4966. In addition, this revenue procedure clarifies that the Internal Revenue Service (“IRS”) may give notice of revocation, including revocations under §6033(j), through an appropriate public announcement, such as publication in the Internal Revenue Bulletin or on the IRS’s website at www.irs.gov.

.01 Section 170, with certain limitations, allows deductions for federal income tax purposes of contributions or gifts made to or for the use of an organization that qualifies as an organization described in § 170(c). In order for contributions to be deductible, the organization must qualify at the time of the contribution. Thus, it is the responsibility of an organization receiving contributions to ensure that its character, purposes, activities, and method of operation satisfy the qualification requirements of § 170(c) in order for grantors and contributors to have the assurance that their contributions at the time made are deductible.

.02 Treas. Reg. § 1.509(a)-7(a) sets forth general rules regarding reliance by grantors and contributors to organizations described in §§ 509(a)(1), (2), and (3). This regulation provides that once an organization has received a ruling or determination letter classifying it as an organization described in § 509(a)(1), (2), or (3), the treatment of contributions and grants, and the status of grantors and contributors to such organization under §§ 170, 507, 545(b)(2), 642(c), 4942, 4945, 2055, 2106(a)(2), and 2522, will not be affected by reason of a subsequent revocation by the IRS of the organization’s classification as described in § 509(a)(1), (2), or (3) until the date on which notice of change of status is made to the public.

.03 Generally, Publication 78 lists organizations that have received a ruling or determination letter from the IRS stating that contributions by grantors or contributors to the listed organization (or to the listed central (or parent) organization and those local (or subordinate) units covered by the group exemption letter) are deductible as provided in § 170. (Note that Publication 78 does not include separate listings for local organizations included in a group ruling.) Each ruling or determination letter is based on a factual showing by the listed organization that its character, purposes, activities, and method of operation satisfy the statutory requirements for qualification at the time the ruling or determination letter is issued. If there is a material change in the character, purposes, activities, or method of operation of an organization from those on which the ruling or determination letter was based and the change is such that the organization ceases, as a matter of law, to qualify under § 170(c), the ruling or determination letter also immediately ceases to be applicable (see also Sec. 11.02 of Rev. Proc. 2011-9, 2011-2 I.R.B. 283). Where this circumstance occurs, except for the validation provision of § 7428(c) (see Sec. 5.02), it is only by exercise of the authority under § 7805(b) that grantors or contributors to the organization may be allowed a deduction for grants or contributions made after the organization ceases to qualify under § 170(c).

.04 Through the use of a “deductibility code,” Publication 78 generally indicates the foundation classification under § 509(a) of the listed organizations. This classification determines the appropriate limitations for deductibility purposes and whether private foundations and sponsoring organizations of donor-advised funds making grants to particular organizations would be required to exercise expenditure responsibility. The coding system in Publication 78 does not indicate specifically whether an organization is described in § 509(a)(1), (2), or (3), or a particular subparagraph of § 170(b)(1)(A).

.05 The IRS no longer publishes a paper version of Publication 78. Grantors and contributors can no longer rely on the paper version of Publication 78 or any paper supplements for current information after the date of publication of this revenue procedure. Publication 78 now appears solely in electronic format on the IRS website at http://www.irs.gov/app/pub-78. Electronic Publication 78 and its electronic addenda are generally updated at least quarterly.

.06 The IRS also makes an extract of certain information on exempt organizations from the BMF available to the public through the Tax Statistics section of the IRS website. The extract of the BMF contains more information, in a slightly different format, than Publication 78. Among the data fields provided are an organization’s name and Employer Identification Number (“EIN”), address, subsection code (the paragraph under § 501(c) under which it is recognized as exempt), ruling date, affiliation code (status as an independent, central, or local organization), deductibility code, foundation code (indicating whether an organization is a private foundation, private operating foundation, or public charity described in § 509(a)(1), (2), or (3)), and, if applicable, the appropriate subparagraph of § 170(b)(1)(A)), and other data fields. The IRS plans to modify the foundation codes in early 2011 to indicate whether a § 509(a)(3) organization is a Type I, Type II, Type III, or Type III functionally integrated supporting organization. Unlike Publication 78, the BMF extract contains information on all organizations that have been recognized by the IRS as tax-exempt, including organizations not eligible to receive tax deductible contributions. References to listing in or reliance on the BMF extract in this revenue procedure only pertain to organizations contributions to which have been determined to be deductible under §170, as reflected in the deductibility code in Publication 78 or the BMF extract.

.07 Due to its large size, the BMF extract is available as compressed ASCII Text or Excel spreadsheet files. These files must be downloaded and uncompressed before viewing. The BMF extract and its corresponding instructions are available for download directly from the IRS website at http://www.irs.gov/taxstats/charitablestats/article/0,,id=97186,00.html. Generally, the BMF information is extracted and updated on a monthly basis.

.08 Temporary Regulations §§ 1.170A-9T(f)(5)(ii) and 1.509(a)-3T(e)(2), 73 Fed. Reg. 52,528 (Sept. 9, 2008), state generally that grantors and contributors may rely on an organization’s ruling that the organization is described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) until the IRS publishes notice of a change of status (for example, in the Internal Revenue Bulletin or Publication 78), unless the grantor or contributor was responsible for, or aware of, the act or failure to act that results in the organization’s loss of public charity status.

.09 Section 6033(j) was added to the Internal Revenue Code as part of the Pension Protection Act of 2006, and is effective for returns and notices for tax years beginning after December 31, 2006. Section 6033(j) provides that an organization exempt from tax under § 501(a) that fails to file an annual return or submit an electronic notice for 3 consecutive years will lose its Federal tax exempt status. Section 6033(j) further provides that the IRS shall publish and maintain a list of any organization that is so revoked.

.01 Revocations. Where an organization listed in or covered by Publication 78 or the BMF extract ceases to qualify as an organization contributions to which are deductible under § 170:

Publication in either case may be effected in the Internal Revenue Bulletin or on the IRS’s website at http://www.irs.gov or by such other means designed to put the public on notice of the change in the organization’s status.

Under certain circumstances, such as where a legally enforceable obligation under local law has been made to the organization prior to the date of publication, and the satisfaction of such obligation is on or after the date, the allowance period may be extended upon specific exercise of authority under § 7805(b). See, for example, Rev. Rul. 78-129, 1978-1 C.B. 67. However, the IRS is not precluded from disallowing a deduction for any contribution made after an organization ceases to qualify under § 170, where grantor or contributor (1) had knowledge of the revocation of the ruling or determination letter prior to publication of the revocation, (2) was aware that such revocation was imminent, or (3) was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification.

.02 Foundation status. With regard to an organization’s public charity status under § 509(a)(1), (2), or (3), grantors and contributors may rely on the classification of an organization listed in or covered by Publication 78 or the BMF extract for such purpose to the same extent as provided for § 170 purposes in paragraph .01 above. To the extent included in Publication 78 or the BMF extract, this includes whether a § 509(a)(3) organization is a Type I, Type II, Type III, or Type III functionally integrated supporting organization. Private foundations and sponsoring organizations of donor-advised funds may rely on an organization’s foundation status (or supporting organization type) set forth in Publication 78 or the BMF extract for grant making purposes under §§ 4942, 4945, and 4966, except where the grantor (1) had knowledge of the revocation of the ruling or determination letter classifying the organization as one described in § 509(a)(1), (2), or (3) (or specifying its supporting organization type) prior to the publication of the revocation; or (2) was in part responsible for, or was aware of, the act or the failure to act that gave rise to the revocation of the ruling or determination letter classifying the organization as one described in § 509(a)(1), (2), or (3) (or specifying its supporting organization type).

.03 The advance assurance of deductibility and foundation status provided by paragraphs .01 and .02 above, respectively, applies only to grants or contributions made to an organization listed in or covered by Publication 78 or the BMF extract in the organization’s official name, its recognized popular name, or a contraction of either of these names that is reasonably identifiable or widely known. The advance assurance of deductibility and foundation status provided by paragraphs .01 and .02 does not apply to contributions or grants made nominally to an organization listed in or covered by Publication 78 or the BMF extract but with the understanding or on a condition that they be made available to or for the use of an organization not listed in or covered by Publication 78 or the BMF extract.

.04 The provisions of paragraphs .01 and .02 above do not apply to an organization that is not listed in or covered by Publication 78 or the BMF extract. In such a case the effect of a ruling or determination letter concerning the deductibility of contributions to the organization or its foundation status is determined in the manner described in Rev. Proc. 2011-4, 2011-1 I.R.B. 123.

.05 The advance assurance of deductibility and foundation status provided by paragraphs .01 and .02 above do not apply to local organizations included in a group ruling regardless of whether the local organization appears in the BMF extract. For further reliance information, follow the procedures listed in Publication 4573, Group Exemptions, and contact the tax-exempt central organization.

A grantor or contributor may rely on information about an organization from the BMF extract that is obtained from a third party, so long as the following requirements are met:

.01 Section 7428 creates a remedy under declaratory judgment procedures, in part, for cases involving a determination by the IRS with respect to the continuing qualification of an organization as one described in § 170(c)(2) or § 501(c)(3), or to the continuing classification of an organization under § 509(a). The remedy is available in these cases if the IRS determines that revocation of exemption under § 501(c)(3), deductibility status under §170(c)(2), or foundation status under § 509(a) is appropriate, the organization has exhausted its administrative remedies, and the IRS has issued a final adverse determination letter to the organization. Under § 7428(b)(4), no action may be brought under § 7428 with respect to any revocation of status described in § 6033(j)(1).

.02 However, § 7428(c) provides for the “validation of certain contributions” made during the pendency of a proceeding for declaratory judgment involving the revocation of a determination that the organization is described in § 170(c)(2). Under this provision, the organization continues to be treated as an eligible organization described in § 170(c)(2) with respect to contributions from individuals (up to a maximum of $1,000 in the aggregate during the pendency of the proceeding) and from other charitable organizations described in § 170(c)(2). Statutory protection for such contributions, if declaratory judgment is sought on the revocation action, would begin on the date of publication of the revocation and end on the date on which a decision in the Tax Court becomes final or a judgment of the District Court of the United States for the District of Columbia or the Court of Federal Claims is entered that the organization is not described in § 170(c)(2). This reliance, however, is not extended to any individual who was responsible, in whole or in part, for the activities (or failures to act) on the part of the organization that were the basis for the revocation.

Any errors or omissions in Publication 78 or the BMF extract should be reported by the tax-exempt organization to the toll-free IRS customer service line at 1-877-829-5500.

Rev. Proc. 82-39, 1982-1 C.B. 759, is modified and superseded. Rev. Proc. 2009-32, 2009-28 I.R.B. 142 is modified and superseded.

This revenue procedure is effective immediately upon publication in the Internal Revenue Bulletin.

The principal author of this Revenue Procedure is Melinda Williams of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this notice, contact Ms. Williams at 202-283-9467 (not a toll-free call).

This revenue procedure provides procedures that a corporation (Acquiring) may use to establish its basis in stock of another corporation (Target) when it acquires the Target stock in a transferred basis transaction.

The Internal Revenue Service has long held that the optimal method for establishing basis in stock acquired in a reorganization described in § 368(a)(1)(B) of the Internal Revenue Code (B reorganizations) is a survey of the surrendering Target shareholders. The Service has also long recognized that it will not be practical to survey all surrendering Target shareholders in all such cases, particularly where Target stock is publicly traded. To mitigate this concern, the Service published Rev. Proc. 81-70, 1981-2 C.B. 729, which provides survey procedures, as well as procedures for the use of statistical sampling and estimation of basis, for establishing basis in stock acquired in a B reorganization if a survey of all surrendering shareholders would not be practical or feasible.

Since the publication of Rev. Proc. 81-70, however, the operation of the securities market has changed significantly. Foremost among the changes has been the pervasive shift to the holding of stock in street name, that is, the holding of stock by nominees, typically clearinghouses or other financial institutions, on behalf of their members or customers. Because these nominee holders are subject to confidentiality and other restrictions, it is often difficult, if not impossible, for corporations acquiring stock in a B reorganization to obtain the information necessary to establish basis in acquired stock using the procedures prescribed by Rev. Proc. 81-70. Furthermore, the difficulties associated with determining basis in stock acquired in a B reorganization can also be present when determining basis in stock acquired in any transferred basis transaction.

In 2004, the Service undertook a study of the need for revised and further guidance in the determination of basis of shares acquired in transferred basis transactions. See Notice 2004-44, 2004-2 C.B. 32. The comments received in response to Notice 2004-44 were reflected in Notice 2009-4, 2009-2 I.R.B. 251, which affirmed the intent to revise the general provisions of Rev. Proc. 81-70, described three basis-determination safe harbors under consideration, and requested comments. The basis-determination safe harbors in Notice 2009-4 were: a survey-based methodology for shares surrendered by or on behalf of reporting shareholders, an estimation model based on stock registry and trading data for shares surrendered by registered, nonreporting shareholders, and an estimation model based on public trading data for shares surrendered by nominee shareholders. Comments were received affirming the need for such guidance and suggesting various modifications to the safe harbor models.

This revenue procedure adopts the surveying and statistical sampling guidelines in Rev. Proc. 81-70, but updates and revises them to take current market practices into account. This revenue procedure also adopts the safe harbor methodologies described in Notice 2009-4, but modifies them to reflect the comments received, particularly regarding the need for a model that uses data more readily accessible to acquiring corporations. Finally, this revenue procedure expands the applicability of these provisions by permitting their use in any transferred basis transaction.

.01 In General. Section 4.0 of this revenue procedure sets forth procedures for four methodologies that taxpayers may use to determine basis in stock acquired in a transferred basis transaction. Section 4.01 provides procedures for surveying all surrendering Target shareholders to determine actual basis in surrendered shares. Section 4.02 provides procedures for the use of statistical sampling when a full survey is not feasible. Sections 4.03 and 4.04 provide estimation techniques that may be used in lieu of a full survey or statistical sampling when specified criteria are satisfied. Taxpayers may use one or more of these methodologies in any combination. If a taxpayer cannot or does not use the methodologies prescribed in this revenue procedure, basis in acquired Target shares may be established by such other methodologies as agreed by the Service and Acquiring.

Notwithstanding any provision of this revenue procedure, if Acquiring or the Service has or acquires (including by survey and by examining Target’s books and records) knowledge of a surrendering shareholder’s actual basis in a surrendered share, Acquiring’s basis in the share is the surrendering shareholder’s actual basis. For example, in many cases, if Target issued shares to employee plans or with respect to options, convertible stock, or convertible debt, the basis of the shares can be determined using Target’s books and records. In those cases, Acquiring’s basis in the shares will be the actual basis as determined using Target’s books and records. However, the Service will not undertake its own survey of shareholders (other than, perhaps, reporting shareholders) for the purpose of obtaining actual knowledge of their basis.

In the absence of actual knowledge, the Service will not assert an alternative basis, or an alternative method for determining basis, to the extent a taxpayer determines basis in Target stock in compliance with this revenue procedure.

The Appendix to this revenue procedure sets forth an illustration of the application of the estimation and modeling provisions in Section 4.

.02 Definitions. For purposes of this revenue procedure, the following definitions apply:

.01 Surveying. This Section 4.01 provides procedures for surveying surrendering Target shareholders to establish basis in the shares surrendered by or on behalf of such shareholders. The procedures of this Section 4.01 apply to all surveys, whether done with respect to all acquired shares, with respect to a sample of acquired shares under the statistical sampling procedures described in Section 4.02, or with respect to shares that are surrendered by or on behalf of reporting shareholders when basis is estimated under Section 4.03 or Section 4.04.

(1) Timeliness requirement. All surveys under this Section 4.01 must be done timely. A survey will generally be considered to have been done timely if it is substantially completed within two years of the transferred basis transaction. However, see Section 7 of this revenue procedure for the application of this requirement to transferred basis transactions completed prior to June 20, 2011.

(2) Survey procedure. All surveys done pursuant to this Section 4.01 are to be done in accordance with the following—

After 30 days, Acquiring must make at least two additional attempts to contact all shareholders that failed to respond to the initial survey letter. This follow-up contact may be made by telephone, email, and/or such other means as appropriate and available.

(3) Allowable basis. The basis reported by surveyed shareholders will be deemed to be the surrendering shareholder’s actual basis, and Acquiring’s basis will therefore be the basis reported by such shareholders, unless the reported basis—

(i) Differs from the actual basis known by Acquiring or the Service, in which case Acquiring’s basis will be such actual basis, or

(ii) Is inaccurate on its face and differs significantly from the trading prices of the shares at any time within a week of the date they were acquired in a cost-basis transaction. In such a case, the shareholder is considered to have failed to respond to the survey.

If a shareholder surveyed in accordance with this Section 4.01 fails to respond to Acquiring’s request for basis information within 30 days of Acquiring’s second follow-up attempt, Acquiring may determine its basis in a share or shares surrendered by or on behalf of the shareholder using such other procedures in this revenue procedure as are applicable.

.02 Statistical Sampling. This Section 4.02 provides procedures for the use of standard statistical sampling techniques to establish basis in Section 4.02 Eligible Shares (as defined in Section 4.02(1)) when the administrative cost of surveying all surrendering shareholders is unreasonably high. Factors that determine whether administrative cost is unreasonably high include the time, burden, and financial cost of conducting a full survey. The administrative cost of surveying every surrendering Target shareholder is presumed unreasonably high if, immediately before the transaction, Target stock was traded on an established securities market (within the meaning of § 1.7704-1(b) of the Procedure and Administration Regulations). Under this Section 4.02, Acquiring’s basis in each Section 4.02 Eligible Share is determined in accordance with the following—

(1) Section 4.02 Eligible Share. The term “Section 4.02 Eligible Share” means any Target share—

(a) The actual basis of which is not known, and

(b) That is not surrendered by or on behalf of a reporting shareholder.

(2) Statistical sampling procedure. To satisfy the requirements of this Section 4.02—

(a) Statistical sampling is done separately for common and preferred shares.

(b) No reporting shareholders may be included in a sample to be surveyed.

(c) All shareholders in the sample must be surveyed under procedures described in Section 4.01, and

(d) The statistical sampling procedures used must comply with standard statistical sampling procedures recognized by the Service. The use of statistical sampling has been provided for in several items of published guidance. See, for example, Rev. Proc. 2004-29, 2004-1 C.B. 918 (statistical sampling methodology for use in establishing the amount of substantiated meal and entertainment expenses that are excepted from the 50% deduction disallowance under section 274(n)(1)); Rev. Proc. 2007-35, 2007-1 C.B. 1349 (addressing when statistical sampling may be used for purposes of section 199 of the Code (income attributable to domestic production activities)); Rev. Proc. 2002-55, 2002-2 C.B. 435 (permitting external auditors of qualified intermediaries to use statistical sampling); and Rev. Proc. 72-36, 1972-2 C.B. 771 (setting forth statistical sampling guidelines for determining the redemption rate of trading stamps).

If the Service determines that Acquiring’s sampling procedure fails to comply with accepted statistical sampling procedures, Acquiring will have an opportunity to recompute the estimate (Sample Basis Estimate), expand the sample, or make such other adjustments to the basis calculation as necessary to comply with standard statistical sampling procedures. Alternatively, Acquiring may determine its basis in Target stock using such other procedures in this revenue procedure as are applicable.

(3) Allowable basis. Acquiring’s allowable basis in each Section 4.02 Eligible Share will be a valid estimate (Sample Basis Estimate) computed at the least advantageous 95% one-sided confidence limit. The “least advantageous” confidence limit is either the upper or lower limit that results in the least benefit to Acquiring. If the relative precision, as described in Section 4.02(4) of this revenue procedure, does not exceed 10%, the Sample Basis Estimate may be used as the basis for each Section 4.02 Eligible Share. For purposes of determining basis under this revenue procedure, where the relative precision is less than 15% and greater than 10%, Allowable Basis is an amount between the least advantageous 95% one-sided confidence limit and the Sample Basis Estimate, determined as follows:

(4) Calculating the relative precision for each estimator. The relative precision for each estimator is commonly calculated by dividing the relative precision at the 95% one-sided confidence limit (sometimes referred to as the sampling error) of the Sample Basis Estimate by the estimator. Where a Sample Basis Estimate may be calculated using either a corrected value or difference perspective, as in the case of Ratio and Regression methods or solely a corrected value perspective as in the case of a Mean method, the test will be applied on the basis of a difference perspective. In such cases the numerator of the calculation is the sampling error of the adjustment and the denominator the Sample Basis Estimate of the adjustment.

.03 Estimation Procedure for shares surrendered by registered shareholders and certain reporting shareholders. This Section 4.03 provides procedures for determining basis of Section 4.03 Eligible Shares (as defined in Section 4.03(1)) using data from the Master Securityholder Files. Under this Section 4.03, Acquiring’s basis in each Section 4.03 Eligible Share is determined in accordance with the following—

(1) Section 4.03 Eligible Share. The term “Section 4.03 Eligible Share” means any Target share—

(2) Estimation procedure. Under this Section 4.03, Acquiring’s basis in each Section 4.03 Eligible Share is determined in accordance with the following—

(3) Allowable basis. Acquiring’s basis in each Section 4.03 Eligible Share is the initial estimated basis for the share determined under Section 4.03(2)(a) and adjusted as required by Section 4.03(2)(b).

.04 Estimation procedure for shares surrendered by nominees. This Section 4.04 provides procedures for determining the basis of Section 4.04 Eligible Shares (as defined in Section 4.04(1)(a)) using data from Target Security Position Reports (SPRs) or from SEC Form 13F filings (but not both). Under this Section 4.04, Acquiring’s basis in each Section 4.04 Eligible Share is determined in accordance with the following—

(1) Definitions. For purposes of this Section 4.04, the following definitions apply—

(2) Estimation procedure. The estimation of basis under this Section 4.04 is done separately for common and preferred shares, and estimations are made as follows—

Each modeled shareholder’s aggregate adjusted basis on its last Measuring Date is divided by the total number of shares held by the shareholder on that date to determine the shareholder’s per share final estimated basis.

For purposes of the model, each Target share actually surrendered by a modeled shareholder is deemed to have a basis equal to the surrendering shareholder’s per share final estimated basis.

(d) Section 4.04 per share modeled basis. The deemed bases of all shares actually surrendered by modeled shareholders are combined and the total is divided by the number of shares actually surrendered by those shareholders. The result is the per share modeled basis.

(3) Allowable basis. Acquiring’s basis in each Section 4.04 Eligible Share is determined in accordance with the following—

(i) If SPR data is used to compute the Section 4.04 per share modeled basis, Acquiring’s basis in each Section 4.04 Eligible Share is equal to the Section 4.04 per share modeled basis multiplied by the percentage of Measuring Dates in the Data Collection Period for which SPR data is obtained. Thus, if there are 60 Measuring Dates in the Data Collection Period and Acquiring obtained SPR data for only 54 of those Measuring Dates, Acquiring’s basis in each Section 4.04 Eligible Share is an amount equal to 90 percent (54/60) of the Section 4.04 per share modeled basis. Further, appropriate adjustments will be made if the Service determines that SPRs not included in the determination represent material omissions.

(ii) If SEC Form 13F data is used to compute the Section 4.04 per share modeled basis, Acquiring’s basis in each Section 4.04 Eligible Share is equal to the Section 4.04 per share modeled basis multiplied by 75 percent.

Taxpayers acquiring stock in transferred basis transactions described in this revenue procedure are deemed to satisfy the reporting requirements of §§ 1.351-3 and 1.368-3 if they include a statement on or with the timely filed original return for the taxable year of the transferred basis transaction that identifies the transferred basis transaction and states that a basis study is pending with respect to the acquired stock. However, to satisfy the requirements of those sections in such cases, the taxpayer must include complete statements as required under those regulations, with basis amounts determined pursuant to the study or otherwise under this revenue procedure, on or with a timely filed original return for a tax year that is no later than the tax year that includes the date that is two years after the date of the transferred basis transaction. See Section 7 of this revenue procedure for the application of this requirement to transferred basis transactions prior to June 20, 2011. This Section 5 applies to all transferred basis transactions without regard to whether basis is determined under Section 4 of this revenue procedure.

The determination of whether a basis study is done in compliance with one of the procedures described in Section 4 of this revenue procedure may be the subject of a pre-filing agreement.

This revenue procedure is effective with respect to transferred basis transactions completed on or after June 20, 2011. However, taxpayers may use this revenue procedure with respect to transferred basis transactions completed prior to June 20, 2011; in such cases, surveys will be considered timely if substantially completed, and reporting requirements will be considered satisfied if filed, on or before June 20, 2013.

Rev. Proc. 81-70 and Notice 2009-4 are obsoleted with respect to transferred basis transactions completed on or after June 20, 2011.

EXAMPLE, PART 1

On January 1, Year 1, Target was formed. On February 2, Year 3, Acquiring acquired all 1000 outstanding shares of Target publicly traded common stock and all 100 outstanding shares of Target nonvoting preferred stock in a transferred basis transaction. The nonvoting preferred stock is not publicly traded and, at the time of the transferred basis transaction, represents 2 percent of the value of Target. Immediately after the transaction, Acquiring collected information to establish its basis in the acquired shares. Acquiring will use the survey and estimation methods provided in this revenue procedure. Note that, to simplify computations, all numbers (other than those related to individual shares) are rounded to whole numbers; individual shares are rounded to the second place.

DATA COLLECTION:

1. From the stock registry, publicly available records (trading prices), and its own books and records, Acquiring collected the following information:

Target’s books and records also indicate:

a. There was a $5 distribution declared on each preferred share outstanding on 4/15/Y1. The distributions were made to Officer ($100) and to Employee Plan1 ($150) on 5/1/Y1. For the year of the distribution, Target had no earnings and profits.

b. On or about 1/1/Y2, the date that a certificate was issued to Individual C for 50 shares, a certificate issued on 1/1/Y1 to Individual C for 25 shares was cancelled.

2. From SEC Form 13F Filings, publicly available trading information, and its own books and records, Acquiring collected the following information regarding the ownership of its common shares held by nominees:

* the volume weighted average adjusted closing price applicable with respect to the first Measuring Date is determined for the period beginning on the later of Target’s first day of its first tax year and the day that is three months prior to the first Measuring Date; the volume weighted average adjusted closing price applicable to all subsequent Measuring Dates is determined for the period between Measuring Dates.

DATA ANALYSIS:

IDENTIFYING APPLICABLE BASIS DETERMINATION METHODS

BASIS DETERMINATIONS UNDER SECTION 4.01 (SURVEY METHOD)

Acquiring conducted a survey of the following shareholders. The survey complied with the procedures of Section 4.01(2)(b). The following summarizes the results of the survey:

Notes:

Officer. Although Acquiring surveyed Officer and received no response, Acquiring cannot determine basis in the shares surrendered by Officer by the methods described in Section 4.03 and Section 4.04 because the requisite market information is not available.

Employee Plans. Because Acquiring had knowledge of actual basis (issue price was recorded in the register), Acquiring’s basis is the actual basis of the shares ($10, reduced by the $5/share “section 301(c)(2)” distribution, or $5), notwithstanding that Employee Plan1 reported a basis of $4.50 in the shares. Although Acquiring was not required to survey Employee Plan1, because it did and Employee Plan1 reported that, in addition to the preferred shares, it also beneficially owned 50 of the shares of common stock held by Nominee1, the basis of each of those 50 common shares is the $12/share basis reported by Employee Plan1 (even though all of Nominee1’s trading activity, including with respect to the 50 shares held on behalf of Employee Plan1, will be taken into account in modeling basis in Section 4.04).

Individual A. Although Acquiring was not required to survey Individual A in order to use the estimation method in Section 4.03, Acquiring did survey Individual A and Individual A responded to the survey. Accordingly, the basis in the shares surrendered by Individual A is Individual A’s reported basis of $13 per share, notwithstanding that the basis determined under Section 4.03 would only be $9/share for those shares.

Individual B. Acquiring does not have an actual basis for Individual B and was not required to survey Individual B in order to use the estimation method in Section 4.03. Accordingly, Acquiring may determine the basis of Individual B’s shares using the estimation method in Section 4.03.

Individual C. Individual C, a reporting shareholder, was surveyed but did not respond. Accordingly, Acquiring may determine the basis of Individual C’s shares using the estimation method in Section 4.03.

Individual D. Individual D, a reporting shareholder, was not surveyed. As a result, Acquiring has not satisfied the requirements for using the estimation procedures in this revenue procedure and, thus, cannot establish the bases of those shares under this revenue procedure. However, Acquiring may establish its bases in those shares under such other method as agreed to by the Service.

Individual E and Director A. Individual E and Director A, both reporting shareholders, were surveyed and responded. However, the survey responses given by Individual E ($40/share) and Director A ($1/share) are inaccurate on their faces because they differ significantly from the high/low trading prices within a week of their acquisition by the surrendering shareholders ($8-$13/share), and thus Individual E and Director A are considered to have not responded to the survey and the reported bases are disregarded. Acquiring may therefore establish its bases in those shares using the procedures in Section 4.03.

Nominee shareholders. All five of the nominee shareholders are reporting shareholders and must therefore be surveyed in order to determine the bases of their surrendered shares under the modeling procedure of Section 4.04. Acquiring surveyed all the nominee shareholders except Nominee3. Nominee1, Nominee4, and Nominee5 failed to respond. Further, although Nominee2 responded, its response was inaccurate on its face ($65/share) and so Nominee2 is considered also to have not responded. As a result, Acquiring has generally satisfied the requirements to determine its bases in the shares surrendered by Nominee1, Nominee2, Nominee4, and Nominee5 under Section 4.04. However, with respect to Nominee1, Acquiring received survey information on the basis of 50 common shares it held and surrendered on behalf of Employee Plan1, and so 50 of the shares surrendered by Nominee1 will have a basis equal to the reported basis. Because Nominee3 was not surveyed, Acquiring has not satisfied the requirements for using the estimation procedures in this revenue procedure and so cannot use these procedures to determine the bases of those shares. However, Acquiring may establish its bases in the shares surrendered by Nominee3 under such other method as agreed to by the Service. Note that, although the bases of 50 shares surrendered by Nominee1 and all the shares surrendered by Nominee3 are not determined under Section 4.04, all the trading information collected with respect to Nominee1 and Nominee3 is included in the modeling computations.

BASIS DETERMINATIONS UNDER SECTION 4.03

Even though Individual C, Individual E, Director A, and Private Placement were reporting shareholders, Acquiring surveyed them, they failed to respond, and Acquiring has knowledge of the issue date of shares issued to such shareholders. Thus, the shares they surrendered are Section 4.03 Eligible Shares. The bases in the Section 4.03 Eligible Shares are computed as follows (rounding numbers other than “per share” numbers):

Note: In determining the basis of Individual C’s 50 shares, Acquiring must take into account the cancellation of a certificate for 25 shares (issued to Individual C on 1/1/Y1) on the same day that the certificate for 50 shares was issued to Individual C. Individual C is treated as surrendering 25 shares with a basis equal to the closing price on 1/1/Y1 and 25 shares with a basis equal to the closing price on 1/1/Y2.

BASIS DETERMINATIONS UNDER SECTION 4.04 (FORM 13F DATA)

Acquiring’s bases in Section 4.04 Eligible Shares are computed as follows:

Computation of Section 4.04 per share modeled basis (common shares):

Notes:

Nominee1. As noted above, the basis of 50 of the 250 shares surrendered by Nominee1 was reported by Employee Plan1 and so was not determined under the Section 4.04 model.

Nominee3. As noted above, Acquiring did not satisfy the requirements to determine its basis in the shares surrendered by Nominee3 under this revenue procedure. Thus, there is no basis allowable under the model; however, Acquiring may establish its bases in those shares under such other method as agreed to by the Service.

EXAMPLE, PART 2:

Assume that the facts are the same as in Example 1, except that Acquiring uses data from Target’s SPRs instead of the SEC Form 13F filings. Further, Acquiring obtains 100 of the 109 SPRs that were published during the data collection period and that were available from the DTC as of the date of the transaction (the missing SPRs are not a material omission); the first SPR obtained by Acquiring that shows Target stock ownership was published in Week 4; the only other SPRs that show movement in Target holdings were published in Weeks 21, 34, 48, 60, 72, 80, and 104. (Note that, to simplify the illustration, the SPR dates correspond to the SEC Form 13F filing dates in Part 1 of this example; thus, the numbers of shares reported (and their volume weighted average adjusted closing price) on the first SEC Form 13F filing correspond to those on the Week 4 SPR, the second SEC Form 13F filing numbers (and prices) to those in SPR Week 21, and so forth; where no SEC Form 13F was filed, the shares reported are zero; the number of shares surrendered are unchanged.) The determination of the Section 4.04 modeled basis using SPR data is done as follows:

Computation of Section 4.04 per share modeled basis (common shares):

ALLOCATION OF ALLOWABLE BASIS TO SECTION 4.04 ELIGIBLE SHARES

Notes:

Nominee1. As noted above, the basis of 50 of the 250 shares surrendered by Nominee1 was reported by Employee Plan1 and so was not determined under the Section 4.04 model.

Nominee3. As noted above, Acquiring did not satisfy the requirements to determine its basis in the shares surrendered by Nominee3 under this revenue procedure. Thus, there is no basis allowable under the model; however, Acquiring may establish its bases in those shares under such other method as agreed to by the Service.

.01 This revenue procedure modifies section 6.07 of Rev. Proc. 2011-8, 2011-1 I.R.B. 237, to provide for a reduced user fee for applications for reinstatement of tax-exempt status filed by certain small organizations following automatic revocation of their tax-exempt status under section 6033(j) of the Internal Revenue Code.

.02 This revenue procedure is effective as of the date stated in section 5 and shall be effective only for applications made by certain small organizations that are postmarked no later than December 31, 2012.

.03 The reduced user fee described in section 3 of this revenue procedure shall apply only to small organizations that normally have annual gross receipts of not more than $50,000 in their most recently completed taxable year and that are otherwise eligible for the transitional relief described in Notice 2011-43, this Bulletin.

.04 All organizations not eligible for the transitional relief described in Notice 2011-43 must refer to the user fee schedule in section 6.07 of Rev. Proc. 2011-8 or its successor.

The tax-exempt status of an organization that is described in section 6033(a)(1) or section 6033(i) of the Code and fails to file a required annual return or notice for three consecutive years is automatically revoked as of the date set for the filing of the third annual return or notice. I.R.C. § 6033(j)(1). An organization that has had its tax-exempt status automatically revoked and wishes to have its tax-exempt status reinstated is required to apply for reinstatement of tax-exempt status, even if it was not originally required to make such an application. I.R.C. § 6033(j)(2). Notice 2011-43 provides transitional relief for certain small organizations that have lost their tax-exempt status for failing to file required annual notices for taxable years beginning in 2007, 2008, and 2009. For more information about how to apply for transitional relief and reinstatement of tax-exempt status, see Notice 2011-43, this Bulletin.

The amount of the user fee payable with respect to an application for reinstatement of tax-exempt status postmarked no later than December 31, 2012 by an organization eligible for the transitional relief described in Notice 2011-43 is $100.

Section 6.07 of Rev. Proc. 2011-8 is modified only with respect to applications for reinstatement of tax-exempt status filed by organizations that qualify for the transitional relief described in Notice 2011-43.

This revenue procedure is effective June 9, 2011.

The principal author of this revenue procedure is Matthew Giuliano of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this revenue procedure, please contact the TE/GE Customer Service office at (877) 829-5500 (a toll-free call).

The Internal Revenue Service is required to publish and maintain a list of organizations that have had their federal tax-exempt status automatically revoked for failing to file an annual return or notice for three consecutive years pursuant to section 6033(j) of the Internal Revenue Code of 1986. As provided in Revenue Procedure 2011-33, the Internal Revenue Service will publish this auto-revocation list on its website at www.irs.gov. The auto-revocation list will not appear in the Internal Revenue Bulletin.