Fringe benefits aircraft valuation formula. For purposes of regulations section 1.61-21(g), relating to the rule for valuing non-commercial flights on employer-provided aircraft, the Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charge in effect for the first half of 2011 are set forth.

Life insurance contracts. This ruling concludes that if a business receives a life insurance contract in a tax-free exchange for a life insurance contract that is excepted from the pro rata interest disallowance rule of section 264(f)(1) of the Code, the new contract received in the exchange must be tested to determine whether it, too, is excepted from that rule. Exception from the pro rata interest disallowance rule is not an attribute that carries over to a contract received in a tax-free exchange.

Automobile owners and lessees. This procedure provides the depreciation deduction limitations for owners of passenger automobiles (including trucks and vans) first placed in service during calendar year 2011 and amounts to be included in income by lessees of passenger automobiles first leased during calendar year 2011. Rev. Proc. 2010-18 amplified and modified.

Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in March 2011; the 24-month average segment rates; the funding transitional segment rates applicable for March 2011; and the minimum present value transitional rates for February 2011.

Replacement of Schedule SSA (Form 5500) with Form 8955-SSA. This announcement designates Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits, as the form to be used to satisfy the reporting requirements of section 6057(a) of the Code for plan years beginning on or after January 1, 2009, and sets forth the due dates for filing the Form 8955-SSA for the 2009 plan year and subsequent plan years.

The IRS has revoked its determination that B & B Scholar Foundation, Inc., of Titusville, FL; Gentle Touch Ministries of Newport, TN; Harbour Credit Counseling Services, Inc., of Virginia Beach, VA; Initiatives for Community Development, Inc., of New York, NY; Past Presidents Club, Inc., of Houma, LA; Reproductive and Child Health Alliance of Henderson, NV; School in the Clouds Assisi of Coronado, CA; Waukesha Kennel Club, Inc., of Mukwonago, WI; and Xelan Foundation, Inc., of Tampa, FL, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.

This document is a Competent Authority Agreement entered into on November 24, 2010, by the competent authorities of the United States of America and the People’s Republic of China with respect to the taxation of professors and teachers under the U.S.-China income tax treaty and protocol.

For purposes of the taxation of fringe benefits under section 61 of the Internal Revenue Code, section 1.61-21(g) of the Income Tax Regulations provides a rule for valuing noncommercial flights on employer-provided aircraft. Section 1.61-21(g)(5) provides an aircraft valuation formula to determine the value of such flights. The value of a flight is determined under the base aircraft valuation formula (also known as the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided in section 1.61-21(g)(7) and then adding the applicable terminal charge. The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation and are reviewed semi-annually.

The following chart sets forth the terminal charge and SIFL mileage rates:

The principal author of this revenue ruling is Kathleen Edmondson of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this revenue ruling, contact Ms. Edmondson at (202) 622-0047 (not a toll-free call).

Does the pro rata interest expense disallowance rule of § 264(f)(1) of the Internal Revenue Code apply to Old Policy and to New Policy in the situations described below?

Situation 1. Taxpayer is a corporation engaged in a trade or business that has substantial indebtedness on which it incurs interest expense. On January 3, 2000, Taxpayer purchased a life insurance policy (“Old Policy”) covering the life of A, an employee of Taxpayer, as of that date. A was not a 20-percent owner, officer, or director of Taxpayer, and was the only individual covered by Old Policy. On January 3, 2011, Taxpayer received a new life insurance policy (“New Policy”) covering the life of A as of January 3, 2011, in exchange for Old Policy in a transaction that qualified for non-recognition of gain or loss under § 1035. New Policy also covers only the life of A and has the same death benefit as Old Policy. A remained an employee of Taxpayer as of January 3, 2011. Both Old Policy and New Policy are life insurance contracts as defined in § 7702.

Situation 2. The facts are the same as in Situation 1, except that on January 4, 2010, A terminated employment with Taxpayer.

Under § 264(f)(1), no deduction is allowed for that portion of the taxpayer’s interest expense that is allocable to unborrowed policy cash values.

Section 264(f)(7) defines “interest expense” as the aggregate amount allowable to the taxpayer as a deduction for interest (within the meaning of § 265(b)(4)) for the taxable year (determined without regard to §§ 264(f), 265(b) and 291).

Section 264(f)(3) defines “unborrowed policy cash value” as, with respect to any life insurance policy or annuity or endowment contract, the excess of (A) the cash surrender value of the policy or contract determined without regard to any surrender charge, over (B) the amount of any loan with respect to the policy or contract. If the amount described in (A) with respect to any policy or contract does not reasonably approximate its actual value, the amount taken into account under (A) is the greater of the amount of the insurance company liability or the insurance company reserve with respect to the policy or contract (as determined for purposes of the annual statement approved by the National Association of Insurance Commissioners) or is another amount as determined by the Secretary.

Section 264(f)(2) states that, for purposes of § 264(f)(1), the portion of the taxpayer’s interest expense that is allocable to unborrowed policy cash values is an amount that bears the same ratio to that interest expense as the taxpayer’s average unborrowed policy cash values of life insurance policies, and annuity and endowment contracts, issued after June 8, 1997, bears to the sum of (i) in the case of assets of the taxpayer that are life insurance policies or annuity or endowment contracts, the average unborrowed policy cash values of those policies and contracts, and (ii) in the case of any other assets of the taxpayer, the average adjusted bases (within the meaning of § 1016) of those assets.

Section 264(f)(4) provides an exception to the pro rata interest expense disallowance rule of § 264(f)(1) for certain policies and contracts. Under § 264(f)(4), § 264(f)(1) does not apply to any policy or contract owned by an entity engaged in a trade or business if the policy or contract covers only one individual and if that individual is (at the time first covered by the policy or contract) (i) a 20-percent owner of the entity, or (ii) an individual (not described in (i)) who is an officer, director, or employee of the trade or business.

Section 264(f) applies to contracts issued after June 8, 1997, in taxable years ending after that date. For this purpose, any material increase in the death benefit or other material change in the contract is treated as a new contract. Taxpayer Relief Act of 1997, Pub. L. No. 105-34, § 1084.

Section 1035(a)(1) provides that no gain or loss is recognized on the exchange of a life insurance contract for another life insurance contract, or for an endowment or annuity contract or for a qualified long-term care insurance contract. The legislative history of § 1035 explains that § 1035 provides non-recognition treatment for taxpayers who have “merely exchanged one insurance policy for another better suited to their needs and who have not actually realized gain.” H. Rep. 1337, 83d Cong., 2d Sess. 81 (1954). Under § 1.1035-1, the contracts exchanged must relate to the same insured.

In both Situation 1 and Situation 2, Old Policy qualified for the exception provided by § 264(f)(4). Therefore, the pro rata interest expense disallowance rule of § 264(f)(1) did not apply to Old Policy.

In Situation 1, New Policy qualifies for the exception provided by § 264(f)(4). Therefore, the pro rata interest expense disallowance rule of § 264(f)(1) does not apply to New Policy.

In Situation 2, New Policy does not qualify for the exception provided by § 264(f)(4). Therefore, the pro rata interest expense disallowance rule of § 264(f)(1) applies to New Policy.

The principal author of this revenue ruling is Rebecca L. Baxter of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue ruling, contact Ms. Baxter at (202) 622-3970 (not a toll-free call).

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i), as amended by the Pension Funding Equity Act of 2004 and by the Pension Protection Act of 2006 (PPA), provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004-34, 2004-1 C.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004-34 continues to apply in determining that rate. See Notice 2006-75, 2006-2 C.B. 366.

The composite corporate bond rate for February 2011 is 5.70 percent. Pursuant to Notice 2004-34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding requirements that apply to single employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. Section 430(h)(2)G) set forth a transitional rule applicable to plan years beginning in 2008 and 2009 under which the segment rates were blended with the corporate bond weighted average described above, including an election under § 430(h)(2)(G)(iv) for an employer to use the segment rates without the transitional rule.

Notice 2007-81, 2007-2 C.B. 899, provides guidelines for determining the monthly corporate bond yield curve, the 24-month average corporate bond segment rates, and the funding transitional segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007-81, the monthly corporate bond yield curve derived from February 2011 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of February 2011 are, respectively, 2.02, 5.34, and 6.54. The three 24-month average corporate bond segment rates applicable for March 2011 under the election of § 430(h)(2)(G)(iv) are as follows:

The transitional rule of § 430(h)(2)(G) does not apply to plan years beginning after December 31, 2009. Therefore, for a plan year beginning after 2009 with a lookback month to March 2011, the funding segment rates are the three 24-month average corporate bond segment rates applicable for March 2011, listed above without blending for any transitional period.

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual rate of interest on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury securities for February 2011 is 4.65 percent. The Service has determined this rate as the average of the yield on the 30-year Treasury bond maturing in November 2040 determined each day through February 9, 2011, and the yield on the 30-year Treasury bond maturing in February 2041 determined each day for the balance of the month.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in section 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The following rates were determined for plan years beginning in the month shown below.

Generally for plan years beginning after December 31, 2007, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. For plan years beginning in 2008 through 2011, the applicable interest rates are the monthly spot segment rates blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007-81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for February 2011, taking into account the February 2011 30-year Treasury rate of 4.65 stated above, are as follows:

The principal author of this notice is Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov.

This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).

.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation for trucks and vans since 1988.

.02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. L. No. 111-240, 124 Stat. 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (Dec. 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013.

Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012.

Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies.

.03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv).

Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.

.04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased.

.01 The limitations on depreciation deductions in section 4.01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service.

.02 The tables in section 4.02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. See Rev. Proc. 2006-18, 2006-1 C.B. 645, for passenger automobiles first leased during calendar year 2006; Rev. Proc. 2007-30, 2007-1 C.B. 1104, for passenger automobiles first leased during calendar year 2007; Rev. Proc. 2008-22, 2008-1 C.B. 658, for passenger automobiles first leased during calendar year 2008; Rev. Proc. 2009-24, 2009-1 C.B. 885, for passenger automobiles first leased during calendar year 2009; and Rev. Proc. 2010-18, 2010-1 C.B. 427, as amplified and modified by section 4.03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010.

.01 Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the inflation adjustment.

(a) Passenger automobiles (other than trucks or vans). Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. The new car component of the CPI was 115.2 for October 1987 and 137.880 for October 2010. The October 2010 index exceeded the October 1987 index by 22.680. Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19.69 percent (22.680/115.2 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.1969, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2011. This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011.

(b) Trucks and vans. To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 142.556 for October 2010. The October 2010 index exceeded the October 1987 index by 30.156. Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26.83 percent (30.156/112.4 x 100%). The dollar limitations in § 280F(a) are multiplied by a factor of 0.2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011.

(2) Amount of the limitation. Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year.

.02 Inclusions in Income of Lessees of Passenger Automobiles.

A taxpayer must follow the procedures in § 1.280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure.

.03 Revised Amounts for Passenger Automobiles Placed in Service During 2010.

(1) Calculation of the Revised Amount. The revised depreciation limits provided in this section 4.03 were calculated by increasing the existing limitations on the first year allowance in Rev. Proc. 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i).

(2) Amount of the Revised Limitation. For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. Proc. 2010-18 apply.

(3) Modification to lease inclusion amounts for 2010. The lease inclusion amounts in Tables 3 and 4 of Rev. Proc. 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. Consequently, Table 3 of Rev. Proc. 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. Proc. 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000.

This revenue procedure, with the exception of section 4.03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. Section 4.03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010.

Rev. Proc. 2010-18 is amplified and modified.

The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Harvey at (202) 622-4930 (not a toll-free call).

The following is a copy of the Competent Authority Agreement entered into on November 24, 2010, by the competent authorities of the United States of America and the People’s Republic of China with respect to the taxation of professors and teachers under the U.S.-China income tax treaty and protocol.

The text of the Competent Authority Agreement is as follows:

The competent authorities of the United States and the People’s Republic of China hereby enter into the following agreement (the “Agreement”) regarding the application of Article 19 (Professors and Teachers) of the Agreement Between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income and accompanying Protocol, signed at Beijing on April 30, 1984, as amended by the Protocol signed at Beijing on May 10, 1986 (the “Treaty”). The Agreement is entered into under paragraph 3 of Article 24 (Mutual Agreement Procedure).

Article 19 (Professors and Teachers) of the Treaty states:

It is understood that the three-year exemption period begins to run from the first day the individual enters the first-mentioned Contracting State (hereinafter referred to as the “host state”) for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution (the “entry date”). It is agreed that if an individual to whom Article 19 applies is present in the host state for the primary purpose of teaching, giving lectures, or conducting research for more than three years following the entry date, then the host state may begin to tax the individual’s remuneration for teaching, giving lectures or conducting research starting with the first day of the fourth year. Such an individual’s remuneration for the first three years will not lose its host state exemption.

It is further agreed that the three-year exemption period is suspended when an individual to whom Article 19 applies discontinues teaching, giving lectures or conducting research and departs the host state. Provided that the individual is, or immediately before returning to the host state was, a resident of the other Contracting State, the three-year exemption period resumes when the individual returns to the host state for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution.

It is understood that the exemption provided in Article 19 is not available if the research is not undertaken in the public interest, but for the private gain of a specific person or persons.

This announcement designates Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits, as the form to be used to satisfy the reporting requirements of § 6057(a) of the Internal Revenue Code for plan years beginning on or after January 1, 2009, and sets forth the due dates for filing the Form 8955-SSA for the 2009 plan year and subsequent plan years.

Section 6057(a) requires the plan administrator of a plan that is subject to the vesting standards of section 203 of the Employee Retirement Income Security Act of 1974 (ERISA) to report certain information relating to each plan participant with a deferred vested benefit in accordance with regulations prescribed by the Secretary of Treasury. Schedule SSA, an attachment to the Annual Return/Report of Employee Benefit Plan (Form 5500 Series), has been the form used by plan administrators to comply with the reporting requirements of § 6057(a).

In 2007, the Department of Labor (DOL) published a final rule requiring plans subject to the annual reporting requirements of Title I of ERISA to electronically file the Form 5500 annual return/report (72 Fed. Reg. 64710). The DOL electronic filing mandate is effective for plan years beginning on or after January 1, 2009, but does not apply to the reporting requirements imposed by § 6057(a). In order to accommodate the DOL’s mandate for electronic filing of the Form 5500 annual return/report, a number of changes were made to the Form 5500 Series and accompanying schedules and attachments. One of these changes was the removal of Schedule SSA from the Form 5500 annual return/report beginning with filings covering a plan year that begins on or after January 1, 2009.

The Internal Revenue Service (IRS), in coordination with the Social Security Administration, has developed Form 8955-SSA, a stand-alone form to be filed with the IRS, as the successor to the Schedule SSA (Form 5500). For plan years beginning on or after January 1, 2009, the Form 8955-SSA should be used to comply with the reporting requirements of § 6057(a). Form 8955-SSA for the 2009 plan year is expected to be available for filing by plan administrators shortly. Form 8955-SSA for the 2010 plan year is being developed and is expected to be available for filing later this year. Plan administrators are permitted to report information that would otherwise be required to be reported on the 2010 Form 8955-SSA using a 2009 Form 8955-SSA. The IRS has also developed a voluntary electronic filing system for filing Form 8955-SSA for the 2009 plan year and subsequent plan years. This system is ready to accept filings of Form 8955-SSA when the form becomes available for filing.

In general, as with Schedule SSA (Form 5500), if a Form 8955-SSA must be filed for a plan year, it must be filed by the last day of the seventh month following the last day of that plan year (plus extensions). Thus, for example, for plans on a calendar year, any 2011 Form 8955-SSA that is required to be filed under § 6057(a) must be filed with the IRS by July 31, 2012. However, in order to provide plan administrators with additional time to complete and file the new Form 8955-SSA, this announcement provides that the due date for filing the Form 8955-SSA for the 2009 and the 2010 plan years is the later of (1) the due date that generally applies for filing the Form 8955-SSA for the 2010 plan year, and (2) August 1, 2011. For example, in the case of a 2009 plan year or a short 2010 plan year, the Form 8955-SSA is not required to be filed before August 1, 2011.

The rules applicable to the extension of time for filing Form 8955-SSA are the same as those applicable to the extension of time for filing Schedule SSA (Form 5500). Thus, for example, Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, may be used to file for a one-time extension of time to file the Form 8955-SSA. The IRS is revising the Form 5558 to enable filers to obtain extensions of the time to file Form 8955-SSA and expects to have the revised Form 5558 available soon. Also, plan administrators are granted an automatic extension of time to file Form 8955-SSA (without filing a Form 5558) until the due date of the federal income tax return of the employer if certain conditions are satisfied. See Part II of the General Instructions to the Form 5558.

Some plan administrators have submitted a Schedule SSA to the IRS for the 2009 plan year or may be in the process of completing the Schedule SSA for the 2009 and/or 2010 plan year. In order to reduce the burdens on these plan administrators, the IRS will treat a Schedule SSA that is filed with the IRS for the 2009 or 2010 plan year no later than April 20, 2011, as satisfying the reporting requirements of § 6057 (and no Form 8955-SSA is required to be filed for the 2009 or 2010 plan year if a Schedule SSA for the applicable plan year is filed with the IRS by this date).

Section 6057(b) requires the plan administrator of a plan that is subject to the vesting standards of section 203 of the Employee Retirement Income Security Act of 1974 (ERISA) to notify the Secretary of the Treasury of certain changes relating to the plan and plan administrator. These changes are reported on the plan’s Form 5500 annual return/report. Neither the removal of the Schedule SSA from the Form 5500 annual return/report nor the creation of the Form 8955-SSA affect this requirement. Therefore, a plan administrator should continue to report changes in plan status on the Form 5500 annual return/report for the plan year in which the change occurs in accordance with the applicable instructions.

The principal authors of this announcement are Robert M. Walsh of the Employee Plans, Tax Exempt and Government Entities Division and William Gibbs of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this announcement, please call the Employee Plans taxpayer assistance number at (877) 829-5500 (a toll-free number) or email Mr. Walsh at retirementplanquestions@irs.gov.

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 21, 2011 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.

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations.

The disciplinary sanctions to be imposed for violation of the regulations are:

Disbarred from practice before the IRS—An individual who is disbarred is not eligible to represent taxpayers before the IRS.

Suspended from practice before the IRS—An individual who is suspended is not eligible to represent taxpayers before the IRS during the term of the suspension.

Censured in practice before the IRS—Censure is a public reprimand. Unlike disbarment or suspension, censure does not affect an individual’s eligibility to represent taxpayers before the IRS, but OPR may subject the individual’s future representations to conditions designed to promote high standards of conduct.

Monetary penalty—A monetary penalty may be imposed on an individual who engages in conduct subject to sanction or on an employer, firm, or entity if the individual was acting on its behalf and if it knew, or reasonably should have known, of the individual’s conduct.

Disqualification of appraiser—An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS.

Under the regulations, attorneys, certified public accountants, enrolled agents, enrolled actuaries, and enrolled retirement plan agents may not assist, or accept assistance from, individuals who are suspended or disbarred with respect to matters constituting practice (i.e., representation) before the IRS, and they may not aid or abet suspended or disbarred individuals to practice before the IRS.

Disciplinary sanctions are described in these terms:

Disbarred by decision after hearing, Suspended by decision after hearing, Censured by decision after hearing, Monetary penalty imposed after hearing, and Disqualified after hearing—An administrative law judge (ALJ) conducted an evidentiary hearing upon OPR’s complaint alleging violation of the regulations and issued a decision imposing one of these sanctions. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision became the final agency decision.

Disbarred by default decision, Suspended by default decision, Censured by default decision, Monetary penalty imposed by default decision, and Disqualified by default decision—An ALJ, after finding that no answer to OPR’s complaint had been filed, granted OPR’s motion for a default judgment and issued a decision imposing one of these sanctions.

Disbarment by decision on appeal, Suspended by decision on appeal, Censured by decision on appeal, Monetary penalty imposed by decision on appeal, and Disqualified by decision on appeal—The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions.

Disbarred by consent, Suspended by consent, Censured by consent, Monetary penalty imposed by consent, and Disqualified by consent—In lieu of a disciplinary proceeding being instituted or continued, an individual offered a consent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension for an indefinite term; conditions that the individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement affirming compliance with the terms of the consent and affirming current eligibility to practice (i.e., an active professional license or active enrollment status). An enrolled agent or an enrolled retirement plan agent may also offer to resign in order to avoid a disciplinary proceeding.

Suspended by decision in expedited proceeding, Suspended by default decision in expedited proceeding, Suspended by consent in expedited proceeding—OPR instituted an expedited proceeding for suspension (based on certain limited grounds, including loss of a professional license and criminal convictions).

OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a decision on or after September 26, 2007, which was the effective date of amendments to the regulations that permit making such decisions publicly available; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” form, which requires consenting individuals to admit to one or more violations of the regulations and to consent to the disclosure of the individual’s own return information related to the admitted violations (for example, failure to file Federal income tax returns); or (3) OPR has issued a decision in an expedited proceeding for suspension.

Announcements of disciplinary sanctions appear in the Internal Revenue Bulletin at the earliest practicable date. The sanctions announced below are alphabetized first by the names of states and second by the last names of individuals. Unless otherwise indicated, section numbers (e.g., § 10.51) refer to the regulations.