Low-income housing credit; satisfactory bond; “bond factor” amounts for the period January through June 2006. This ruling provides the monthly bond factor amounts to be used by taxpayers who dispose of qualified low-income buildings or interests therein during the period January through June 2006.

Frivolous tax returns; “nunc pro tunc.” This ruling emphasizes to taxpayers, promoters, and return preparers that inserting the phrase “nunc pro tunc” on a return or other document submitted to the Service has no legal effect and does not validate an invalid return, make a delinquent return timely, invalidate a signature, create a claim for refund of taxes previously paid, or reduce one’s federal tax liability.

Frivolous tax returns; only certain persons subject to federal income tax. This ruling emphasizes to taxpayers, promoters, and return preparers that all individuals are subject to federal income tax. Any argument that Forms W-2 only record and report payments made to federal employees, or that only federal employees or residents of the District of Columbia or federal territories and enclaves earn wages subject to tax, has no merit and is frivolous.

Frivolous tax returns; use of sham trusts. This ruling emphasizes that an individual cannot escape taxation by attributing income to a purported trust. The Service will take vigorous enforcement action against frivolous arguments relating to trusts.

Frivolous tax returns; “Native American Treaty.” This ruling emphasizes to taxpayers, promoters, and return preparers that there is no right to exemption from federal income tax for Native Americans under an unspecified “Native American Treaty.” Any return position based on an unspecified “Native American Treaty” has no merit and is frivolous. As a general rule, Native Americans are subject to federal income tax just like every other American.

Frivolous tax returns; reliance on Paperwork Reduction Act. This ruling emphasizes to taxpayers, promoters, and return preparers that taxpayers are required to file a federal income tax return under section 6012 of the Code, and the regulations thereunder, and that the Paperwork Reduction Act of 1980 (PRA) does not relieve taxpayers of the duty to file. Any argument that the PRA relieves the taxpayer of the duty to file an income tax return has no merit and is frivolous.

Final, temporary, and proposed regulations under section 1502 of the Code provide the IRS with the authority to designate a domestic member of a consolidated group as a substitute agent to act as the sole agent for the group where the common parent is a foreign entity that is treated as a domestic corporation pursuant to section 7874(b) or as the result of a section 953(d) election.

Final, temporary, and proposed regulations under section 1502 of the Code provide the IRS with the authority to designate a domestic member of a consolidated group as a substitute agent to act as the sole agent for the group where the common parent is a foreign entity that is treated as a domestic corporation pursuant to section 7874(b) or as the result of a section 953(d) election.

This notice sets out some of the most common frivolous arguments and schemes that taxpayers use to avoid their tax obligations. It also identifies civil and criminal penalties that the Service may impose against taxpayers who engage in abusive tax-avoidance schemes. Notice 2005-30 modified and superseded.

This notice provides transition guidance on the application of section 409A(b) of the Code to outstanding offshore trusts associated with nonqualified deferred compensation, as well as nonqualified deferred compensation arrangements providing that assets will become restricted to the payment of benefits under the plan in connection with a change in the employer’s financial health.

Frivolous tax returns; “nunc pro tunc.” This ruling emphasizes to taxpayers, promoters, and return preparers that inserting the phrase “nunc pro tunc” on a return or other document submitted to the Service has no legal effect and does not validate an invalid return, make a delinquent return timely, invalidate a signature, create a claim for refund of taxes previously paid, or reduce one’s federal tax liability.

Frivolous tax returns; only certain persons subject to federal income tax. This ruling emphasizes to taxpayers, promoters, and return preparers that all individuals are subject to federal income tax. Any argument that Forms W-2 only record and report payments made to federal employees, or that only federal employees or residents of the District of Columbia or federal territories and enclaves earn wages subject to tax, has no merit and is frivolous.

Frivolous tax returns; use of sham trusts. This ruling emphasizes that an individual cannot escape taxation by attributing income to a purported trust. The Service will take vigorous enforcement action against frivolous arguments relating to trusts.

Frivolous tax returns; “Native American Treaty.” This ruling emphasizes to taxpayers, promoters, and return preparers that there is no right to exemption from federal income tax for Native Americans under an unspecified “Native American Treaty.” Any return position based on an unspecified “Native American Treaty” has no merit and is frivolous. As a general rule, Native Americans are subject to federal income tax just like every other American.

Frivolous tax returns; reliance on Paperwork Reduction Act. This ruling emphasizes to taxpayers, promoters, and return preparers that taxpayers are required to file a federal income tax return under section 6012 of the Code, and the regulations thereunder, and that the Paperwork Reduction Act of 1980 (PRA) does not relieve taxpayers of the duty to file. Any argument that the PRA relieves the taxpayer of the duty to file an income tax return has no merit and is frivolous.

This notice sets out some of the most common frivolous arguments and schemes that taxpayers use to avoid their tax obligations. It also identifies civil and criminal penalties that the Service may impose against taxpayers who engage in abusive tax-avoidance schemes. Notice 2005-30 modified and superseded.

Public comments are requested on recommendations for items that should be included on the 2006-2007 Guidance Priority List. Taxpayers may submit recommendations for guidance at any time during the year. Recommendations submitted by May 15, 2006, will be reviewed for possible inclusion on the original 2006-2007 Guidance Priority List. Recommendations received after May 15, 2006, will be reviewed for inclusion in the next periodic update.

In Rev. Rul. 90-60, 1990-2 C.B. 3, the Internal Revenue Service provided guidance to taxpayers concerning the general methodology used by the Treasury Department in computing the bond factor amounts used in calculating the amount of bond considered satisfactory by the Secretary under § 42(j)(6) of the Internal Revenue Code. It further announced that the Secretary would publish in the Internal Revenue Bulletin a table of bond factor amounts for dispositions occurring during each calendar month.

Rev. Proc. 99-11, 1999-1 C.B. 275, established a collateral program as an alternative to providing a surety bond for taxpayers to avoid or defer recapture of the low-income housing tax credits under § 42(j)(6). Under this program, taxpayers may establish a Treasury Direct Account and pledge certain United States Treasury securities to the Internal Revenue Service as security.

This revenue ruling provides in Table 1 the bond factor amounts for calculating the amount of bond considered satisfactory under § 42(j)(6) or the amount of United States Treasury securities to pledge in a Treasury Direct Account under Rev. Proc. 99-11 for dispositions of qualified low-income buildings or interests therein during the period January through June 2006.

For a list of bond factor amounts applicable to dispositions occurring during other calendar years, see: Rev. Rul. 98-3, 1998-1 C.B. 248; Rev. Rul. 2001-2, 2001-1 C.B. 255; Rev. Rul. 2001-53, 2001-2 C.B. 488; Rev. Rul. 2002-72, 2002-2 C.B. 759; Rev. Rul. 2003-117, 2003-2 C.B. 1051; Rev. Rul. 2004-100, 2004-2 C.B. 718; and Rev. Rul. 2005-67, 2005-43 I.R.B. 771.

The principal author of this revenue ruling is David McDonnell of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Mr. McDonnell at (202) 622-3040 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Final and temporary regulations.

This document contains temporary regulations under section 1502 that provide the IRS with the authority to designate a domestic member of the consolidated group as a substitute agent to act as the sole agent for the group where a foreign entity is the common parent. The regulations affect corporations that join in the filing of a consolidated Federal income tax return where the common parent of the consolidated group is a foreign entity that is treated as a domestic corporation pursuant to section 7874(b) of the Internal Revenue Code (Code) or as the result of a section 953(d) election. The text of these temporary regulations also serves as the text of the proposed regulations (REG-164247-05) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.

Effective Date: These regulations are effective March 14, 2006.

Applicability Dates: These regulations apply to taxable years for which the due date (without extensions) for filing returns is after March 14, 2006. The applicability of these regulations will expire on or before March 10, 2009.

Stephen R. Cleary, (202) 622-7750, (not a toll-free number).

Accordingly, 26 CFR part 1 is amended as follows:

The principal author of these regulations is Stephen R. Cleary of the Office of Associate Chief Counsel (Corporate). Other personnel from the Treasury Department and the IRS participated in their development.

* * * * *

The Service is aware that some taxpayers are claiming that only federal employees and persons residing in Washington, D.C. or federal territories and enclaves are subject to federal tax. These taxpayers may attempt to avoid their federal tax liability by submitting a Form 4852 (Substitute for W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) to the Internal Revenue Service with a zero on the line for the amount of wages received. These taxpayers may also file tax returns showing no income and claiming a refund for withheld income taxes. The Service is also aware that some promoters market a book, package, kit or other materials that claim to show taxpayers how they can avoid paying income taxes based on this and other meritless arguments.

This revenue ruling emphasizes to taxpayers, promoters, and return preparers that all individuals are subject to federal income tax. This revenue ruling also provides that the terms “employee” and “wages” carry the meanings given to them in the Internal Revenue Code, regulations, and publications of the Internal Revenue Service. Under the Internal Revenue Code, wages include any compensation received due to the performance of services as an employee, and the term employee includes any individual for whom the legal relationship between the individual and the person for whom the individual performs services is the legal relationship of employer and employee. All wages are included in gross income for purposes of determining federal income tax liability, and are also subject to federal employment taxes. Any argument that Forms W-2 only record and report payments made to federal employees, or that only federal employees or residents of the District of Columbia or federal territories and enclaves earn wages subject to tax, has no merit and is frivolous.

The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through the Service’s Frivolous Return Program. As part of this program, the Service determines whether taxpayers who have taken frivolous positions have filed all required tax returns, and computes the correct amount of tax and interest due, and determines whether civil or criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether an injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov.

Whether only federal employees and persons residing in Washington, D.C. or federal territories and enclaves are subject to federal income and employment taxes.

Taxpayer A either 1) requests, by submitting a Form W-4, Employee’s Withholding Allowance Certificate, that his employer not withhold any amount of federal tax from wages earned, or 2) prepares a Form 4852 (Substitute for W-2) showing no wages received. In addition, taxpayer A either fails to file a return, or files a return with zero income claiming all withholding as a refund. Taxpayer A claims that he is not an “employee” and does not receive “wages” subject to federal income tax, as those terms are as defined in the Internal Revenue Code. Taxpayer A contends that the federal government can only legally demand an “income” tax from federal employees and persons residing in Washington, D.C. or federal territories and enclaves. Therefore, Taxpayer A claims that he does not have to pay “income” taxes — which Taxpayer A asserts also include employment taxes such as Federal Insurance Contributions Act (FICA) taxes — to the federal government.

Section 3401(a) provides that “wages” include all remuneration for services performed by an employee for his employer. Section 3121(a) provides a similar definition of wages for FICA tax purposes. The argument that only federal employees and persons residing in Washington, D.C. or federal territories and enclaves are subject to tax is based on a misinterpretation of section 3401(c), which defines “employee” and states that the term “includes an officer, employee or elected official of the United States, a State, or any political subdivision thereof . . . .” Section 31.3401(c)-1 of the Employment Tax Regulations provides that the term “employee” includes every individual performing services if the relationship between that individual and the person for whom he performs such services is the legal relationship of employer and employee. Section 7701(c) states that the use of the word “includes” “shall not be deemed to exclude other things otherwise within the meaning of the term defined.” Thus, the word “includes” as used in the definition of “employee” under § 3401(c) is a term of enlargement, not of limitation. Courts have recognized that federal employees and officials are among those within the definition of “employee,” which also includes private citizens. See Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986) (contention that taxpayer was not an “employee” is meritless, section 3401(c) does not limit withholding to the persons listed therein); United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) (under section 3401(c), the category of “employee” includes privately employed wage earners; the word “includes” is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others); Pabon v. Commissioner, T.C. Memo. 1994-476 (1994) (taxpayer’s frivolous position that she was not subject to tax because she was not an employee of the federal or state governments warranted sanctions of $2,500).

The employment tax withholding provisions do not affect whether wages are gross income. Section 61 provides that compensation for services is includable in gross income. Whether the compensation for services is in the form of wages, or in some other form, is irrelevant. The amount is still subject to income tax. All employees, not just federal employees and those living in federal territories and enclaves, are subject to income and employment taxes.

Federal income tax laws do not apply solely to federal employees and persons residing in the District of Columbia, or federal territories and enclaves, and any contrary contention is frivolous. The terms “employee” and “wages” as used by the Internal Revenue Code apply to all employees, unless specifically exempted by the Internal Revenue Code. The income tax withholding provisions do not affect whether an amount is gross income.

The Service will challenge the claims of individuals who attempt to avoid or evade their federal tax liability. In addition to liability for the tax due plus statutory interest, taxpayers who fail to file valid returns or pay tax based on the argument that Forms W-2 only record and report payments made to federal workers, or that only federal employees or residents of federal territories and enclaves earn wages, face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of tax the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty imposed under section 6702 when the taxpayer files a document that purports to be a return but that contains a frivolous position or suggests a desire by the taxpayer to delay or impede the administration of Federal income tax laws; (4) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on this frivolous position also may face criminal prosecution under: (1) section 7201 for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203 for willful failure to file a return, the penalty for which is a significant fine and imprisonment for up to a year; (3) section 7206 for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote this frivolous position and those who assist taxpayers in claiming tax benefits based on frivolous positions may face civil and criminal penalties and also may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return, statement or other document under the internal revenue laws.

This revenue ruling was authored by the office of the Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622-7950 (not a toll-free call).

The Service is aware that some taxpayers are attempting to reduce their federal income tax liability by contending that they are not required to file an income tax return because of the Paperwork Reduction Act of 1980, Pub. L. No. 96-511, 94 Stat. 2812 (codified at 44 U.S.C. § 3501, et seq.) (“PRA”). The PRA was enacted, among other reasons, to limit federal agencies’ information requests in order to minimize the paperwork burden for the public. The “public protection” provision of the PRA provides that no person shall be subject to any penalty for failing to maintain or provide information to any agency if the information collection request involved does not display a current control number assigned by the Office of Management and Budget (“OMB”). 44 U.S.C. § 3512. Taxpayers who attempt to rely on the PRA contend that they are not required to file a Form 1040, U.S. Individual Income Tax Return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number. The Service is also aware that some promoters, including return preparers, market a package, kit or other materials, advising or recommending that taxpayers take this frivolous position.

This revenue ruling emphasizes to taxpayers, promoters and return preparers that taxpayers are required to file a federal income tax return under section 6012 of the Internal Revenue Code, and the regulations thereunder, and that the PRA does not relieve taxpayers of the duty to file. Any argument that the PRA relieves the taxpayer of the duty to file an income tax return has no merit and is frivolous.

The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through the Service’s Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil or criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether an injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov.

Whether taxpayers may avoid their obligation to file federal income tax returns based on the PRA.

Taxpayer A fails to file a federal income tax return, contending that it is not possible to comply with the filing requirement of Internal Revenue Code section 6012, because the Commissioner has not supplied an information collection request form that complies with the PRA.

No law allows taxpayers to avoid their obligation under the Internal Revenue Code to file a federal tax return through reliance on the PRA. Courts repeatedly have rejected PRA-based arguments on a number of alternative grounds. Some courts have simply noted that the PRA applies to forms themselves, not to the instructions, and, because the Form 1040 does have a control number, there is no PRA violation. Other courts have held that Congress created the duty to file federal income tax returns in section 6012(a) and “Congress did not enact the PRA’s public protection provision to allow OMB to abrogate any duty imposed by Congress.” United States v. Neff, 954 F.2d 698, 699 (11^th Cir. 1992); see also Salberg v. United States, 969 F.2d 379, 383 (7^th Cir. 1992) (affirming conviction for tax evasion and failing to file a return, rejecting claims under the PRA); United States v. Holden, 963 F.2d 1114, 1116 (8^th Cir. 1992) (affirming conviction for failing to file a return and rejecting argument in favor of acquittal premised on the fact that tax instruction booklets fail to comply with the PRA); United States v. Hicks, 947 F.2d 1356, 1359 (9^th Cir. 1991) (affirming conviction for failing to file a return, finding requirement to provide information is required by statute, not by the Service); Lonsdale v. United States, 919 F.2d 1440, 1445 (10^th Cir. 1990) (finding the PRA inapplicable to “information collection request” forms issued during an investigation of an individual to determine tax liability); United States v. Wunder, 919 F.2d 34, 37 (6^th Cir. 1990) (rejecting claim of a PRA violation and affirming conviction for failing to file a return).

Taxpayers are required to file a federal income tax return under section 6012 of the Internal Revenue Code. The PRA does not relieve taxpayers of the duty to file, and any argument to the contrary has no merit and is frivolous.

The Service will challenge the claims of individuals who attempt to avoid or evade their federal tax liabilities. In addition to liability for the tax due plus statutory interest, taxpayers who fail to file valid returns or pay tax based on frivolous PRA-based arguments face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of tax the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty imposed under section 6702 when the taxpayer files a document that purports to be a return but that contains a frivolous position or suggests a desire by the taxpayer to delay or impede the administration of Federal income tax laws; (4) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on frivolous positions involving the PRA also may face criminal prosecution under: (1) section 7201 for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203 for willful failure to file a return, the penalty for which is a significant fine and imprisonment for up to a year; and (3) section 7206 for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on frivolous positions may face civil and criminal penalties and also may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty of up to $1,000 under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return, statement or other document under the internal revenue laws.

This revenue ruling was authored by the Office of the Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622-7950 (not a toll-free call).

The Service is aware that some taxpayers are attempting to reduce their federal tax liability by claiming tax exempt status based on a general “Native American Treaty.” The Service is also aware that some promoters, including return preparers, are advising or recommending that Native American taxpayers take the frivolous position that they are exempt from federal income tax based on an unspecified Native American treaty. Some promoters market a package, kit or other materials that claim to show taxpayers how they can avoid paying income taxes based on these and other meritless arguments.

This revenue ruling emphasizes to taxpayers, promoters, and return preparers that there is no right to exemption from federal income tax for Native Americans under an unspecified “Native American Treaty.” Any return position based on an unspecified “Native American Treaty” has no merit and is frivolous. As a general rule, Native Americans are subject to federal income tax just like every other American.

The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through the Service’s Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil or criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether an injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov.

Whether taxpayers may avoid their federal income tax liability by claiming tax exempt status based on an unspecified “Native American Treaty.”

Taxpayer A is a Native American and receives income from a tribal or non-tribal source. The income paid to taxpayer A is reported on an information return (e.g., a Form 1099-MISC, Form W-2. etc.). Taxpayer A then either: 1) fails to report the income shown on the information return on his federal income tax return, claiming an erroneous exemption from federal income tax under an unspecified “Native American Treaty,” or 2) wrongly reports a loss offsetting the information return income on the “Other Income” line of his federal income tax return with an explanation that reads, “Less - Native American Treaty” or “Native American Treaty.”

Native Americans are subject to the same income tax laws as other U.S. citizens unless there is an exemption explicitly created by treaty or statute. Squire v. Capoeman, 351 U.S. 1, 6 (1956); Estate of Poletti v. Commissioner, 99 T.C. 554, 557-58 (1992), aff’d, 34 F.3d 742 (9th Cir. 1994); Doxtator v. Commissioner, T.C. Memo. 2005-113. Any exemption must be based on clear and unambiguous treaty or statutory language. Squire, 351 U.S. at 6; Ramsey v. United States, 302 F.3d 1074 (9th Cir. 2002); Cook v. United States, 86 F.3d 1095 (Fed. Cir. 1996); Estate of Peterson v. Commissioner, 90 T.C. 249, 250 (1988). Under the Internal Revenue Code, all individuals, including Native Americans, are subject to federal income tax. Section 1 imposes a tax on all taxable income. Section 61 provides that gross income includes all income from whatever source derived. Adjustments to income, deductions, and credits must be claimed in accordance with the provisions of the Internal Revenue Code and accompanying Treasury regulations. Although there are certain exemptions and other provisions throughout the Internal Revenue Code that apply to Native Americans, none of these exempt individual Native American taxpayers from federal tax. Moreover, under the Indian Gaming Regulatory Act, any distribution of casino gaming proceeds to individual tribe members is also subject to federal income tax.

Additionally, while there are numerous valid treaties between various Federally Recognized Indian Tribal Governments and the United States government, some of which may contain language providing for narrowly defined tax exemptions, these treaties have limited application to specific tribes. Any exemptions from federal tax are expressly stated in the language of the treaty. Taxpayers who are affected by such treaty language must be a member of a particular tribe having a treaty and must cite that specific treaty in claiming any exemption. There is no general treaty that is applicable to all Native Americans.

Taxpayer A made improper and unfounded claims for exemption from federal income tax by either failing to report his income or reporting it and claiming an offsetting deduction. Any claim that a taxpayer is exempt from federal income tax due to a general “Native American Treaty” is frivolous. Unless a taxpayer can cite a specific treaty or statutory language providing for exemption of income from federal income tax, that taxpayer is subject to all applicable federal income tax laws. Thus, Taxpayer A must report the income shown on the information return and may not report a loss or exemption attributable to a general Native American treaty to offset the income received from the tribal organization.

The Service will challenge the claims of individuals who attempt to avoid or evade their federal tax liability. In addition to liability for the tax due plus statutory interest, taxpayers who fail to file valid returns or pay tax based on the argument that they are exempt from income tax due to a general “Native American Treaty” face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of taxes the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty imposed under section 6702 when the taxpayer files a document that purports to be a return but that contains a frivolous position or suggests a desire by the taxpayer to delay or impede the administration of federal income tax laws; (4) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on these frivolous positions also may face criminal prosecution under: (1) section 7201 for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203 for willful failure to file a return under, the penalty for which is a significant fine and imprisonment for up to 1 year; and (3) section 7206 for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on frivolous positions may face civil and criminal penalties and also may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty of up to $1,000 under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, resulting in a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return statement or other document under the internal revenue laws.

This revenue ruling was authored by the Office of Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622-7800 (not a toll-free call).

The Service is aware that some taxpayers are attempting to reduce their federal income tax liability by filing a return or submitting documents to the Service with the phrase “nunc pro tunc” written or stamped on the face of the return or document, and asserting that the phrase has some legal effect. The Service is also aware that some promoters, including return preparers, are advising or recommending that taxpayers take this frivolous position. Some promoters market a package, kit or other materials that claim to show taxpayers how they can avoid paying income taxes based on this and other meritless arguments.

This revenue ruling emphasizes to taxpayers, promoters, and return preparers that inserting the phrase “nunc pro tunc” on a return or other document submitted to the Service has no legal effect and does not validate an invalid return, make a delinquent return timely, invalidate a signature, create a claim for refund of taxes previously paid, or reduce one’s federal tax liability. Any argument that the inclusion of the phrase “nunc pro tunc” on a return or other document submitted to the Service has any legal effect has no merit and is frivolous.

The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through the Service’s Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil or criminal penalties should apply. The Service also determines whether civil or criminal penalties should apply to return preparers, promoters, and others who assist taxpayers in taking frivolous positions, and recommends whether an injunction should be sought to halt these activities. Other information about frivolous tax positions is available on the Service website at www.irs.gov.

Whether inclusion of the phrase “nunc pro tunc” on a return or other document filed with the Service has any legal effect.

Some taxpayers file returns or other documents with the Service that have the phrase “nunc pro tunc” stamped or written on the face of the return or document. These taxpayers assert that the phrase “nunc pro tunc” has some legal effect in reducing, eliminating, or altering in some way their federal income tax liability or other obligations under the tax laws.

The phrase “nunc pro tunc,” a Latin phrase translated as “now for then,” denotes that an act has retroactive legal effect through a court’s inherent power. Black’s Law Dictionary 1097 (8^th ed. 2004). When a document is signed “nunc pro tunc” as of a specified date, it means that a thing is now done which should have been done on the specified date. 56 Am. Jur. 2d Motions, Rules, and Orders § 58, at 45 (2000).

The term “nunc pro tunc” also describes a later record entry of a previous action that is intended to have effect as of the date of the action itself. Black’s Law Dictionary 1097. The inclusion of the phrase “nunc pro tunc” on the face of the return form or in other documents submitted to the Service has no legal effect, and does not validate an invalid return, make an untimely return timely, invalidate a signature, create a claim for refund of taxes previously paid, or reduce one’s federal tax liability.

To the extent taxpayers are attempting to validate an otherwise invalid return by writing or stamping the phrase “nunc pro tunc” on the face of a return or in attached documents, this phrase has no validating effect. For a document to qualify as a valid return, it must contain sufficient data to calculate tax liability, it must purport to be a return, there must be an honest and reasonable attempt to satisfy the requirements of the tax law, and the taxpayer must execute the return under penalties of perjury. Beard v. Commissioner, 82 T.C. 766 (1984), aff’d, 793 F.2d 139 (6^th Cir. 1986). The inclusion of the phrase “nunc pro tunc” on the face of the return form or in the attachments does not provide any further information sufficient to calculate tax liability, or to satisfy any other requirements of the tax law. Accordingly, it does not validate an otherwise invalid return.

Inclusion of the phrase “nunc pro tunc” on a return or other document submitted to the Service has no legal effect and is therefore frivolous.

The Service will challenge the claims of individuals who attempt to avoid or evade their federal tax liability. In addition to liability for the tax due plus statutory interest, taxpayers who fail to file valid returns or pay tax based on the argument that the inclusion of the phrase “nunc pro tunc” on the face of their return or other document submitted to the Service has some legal effect, face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of tax the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty imposed under section 6702 when the taxpayer files a document that purports to be a return but that contains a frivolous position or suggests a desire by the taxpayer to delay or impede the administration of Federal income tax laws; (4) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on these frivolous positions also may face criminal prosecution under: (1) section 7201 for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203 for willful failure to file a return under section 7203, the penalty for which is a significant fine and imprisonment for up to a year; and (3) section 7206 for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years; and (4) any other penalties pursuant to applicable provisions of federal law.

Persons, including return preparers, who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on frivolous positions may face civil and criminal penalties and also may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return or other document under the internal revenue laws.

This revenue ruling was authored by the Office of the Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622-7950 (not a toll-free call).

The Service is aware that some taxpayers are attempting to reduce their federal tax liability by filing a Form 1041, U.S. Income Tax Return for Estates and Trusts, listing income in the amount stated on their W-2, but claiming a deduction on the return for a “fiduciary fee” in the exact amount of that income. These taxpayers then request a refund of the full amount withheld with respect to that income.

This revenue ruling emphasizes that an individual cannot escape taxation by attributing income to a purported trust. The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions, based on arguments relating to trusts. The Service will take vigorous enforcement action against frivolous arguments relating to trusts. The Service processes frivolous returns and other similar documents submitted to the Service through the Service’s Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil and criminal penalties should apply. Other information about frivolous tax positions is available on the Service website at www.irs.gov.

Whether taxpayers can eliminate their federal income tax liability by attributing income to a trust and claiming expense deductions related to that trust.

Individual taxpayer A files a Form 1041 trust income tax return for the 2005 taxable year. On it, taxpayer A lists the full amount of income reported on his W-2, but claims a deduction for a “fiduciary fee” in the same amount. Taxpayer A requests a refund of the full amount of withholding.

Many frivolous trust schemes involve the purported transfer of income and expenses to a trust, on the theory that the income and expenses then become that of the trust. Such schemes are ignored for federal tax purposes because taxpayers cannot assign personal income to a trust in order to avoid tax, because such trusts are shams for federal tax purposes, and because the grantor trust rules of the Internal Revenue Code (sections 671 through 679) tax the income to the individual grantor and not to the trust. See, e.g., United States v. Krall, 835 F.2d 711, 714 (8th Cir. 1987); United States v. Buttorff, 761 F.2d 1056, 1060-61 (5^th Cir. 1985).

Income is ordinarily taxed to the person who earned it, and tax liability may not be shifted by assigning the income to another person. Commissioner v. Culbertson, 337 U.S. 733, 739-740 (1949); Helvering v. Eubank, 311 U.S. 122 (1940); Lucas v. Earl, 281 U.S. 111 (1930). The taxpayer is taxable on assigned income even if the income is paid directly to a trust. Wheeler v. United States, 768 F.2d 1333 (Fed. Cir. 1985); Saunders v. Commissioner, 720 F.2d 871 (5th Cir. 1983); Armantrout v. Commissioner, 67 T.C. 996 (1977), aff’d, 570 F.2d 210 (7th Cir. 1978). Thus, assignments of personal income and expenses to a trust are not valid for federal income tax purposes.

Even if the taxpayer created a valid trust under state law, the trust would be ignored for federal tax purposes because it is a sham. When the form of the transaction has not, in fact, altered economic relationships, income is taxed according to the substance of the transaction. Markosian v. Commissioner, 73 T.C. 1235 (1980). This rule applies regardless of whether the entity has a separate existence recognized under state law (see Furman v. Commissioner, 45 T.C. 360 (1966), aff’d. per curiam 381 F.2d 22 (5th Cir. 1967)), and regardless of the form of the entity, such as a trust or common law business trust. See Zmuda v. Commissioner, 731 F.2d 1417 (9th Cir. 1984).

In addition, the grantor trust provisions of the Internal Revenue Code require the attribution of the income and expenses of the trust to the individual. These provisions provide that all items of income, deduction, and credit of the trust, shall be included in computing the taxable income and credits of the grantors and other persons who have substantial powers of ownership or control over the trust. The power to control the beneficial enjoyment of the corpus or the income of the trust, the power to borrow from or deal with the trust without adequate and full consideration or security, the power to revoke the trust or to have the corpus or income revert to the grantor, the power to use the corpus or income of the trust for the benefit of the grantor, or similar powers, result in the trust being ignored for federal tax purposes and all income and allowable expenses being attributed to the individual grantor. See sections 671-679; Vnuk v. Commissioner, 621 F.2d 1318 (8th Cir. 1980); Rev. Rul. 75-257, 1975-2 C.B. 251.

Finally, because no trust is deemed to exist for federal tax purposes, there is no fiduciary relationship upon which trustees’ fees could be predicated and there is no ordinary and necessary business expense which could validly be claimed for such amounts. Thus, the claimed expense for trustees’ fees would be disallowed.

Individual taxpayers must file Form 1040 to report earned income and may not file Form 1041 reporting income through a trust in order to avoid federal income tax liability.

The Service will challenge the claims of individuals who attempt to avoid or evade their federal tax liability. In addition to liability for the tax due plus statutory interest, taxpayers who fail to file valid returns or pay tax based on a frivolous argument face substantial civil and criminal penalties. Potentially applicable civil penalties include: (1) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of tax the taxpayer should have paid; (2) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (3) a $500 penalty imposed under section 6702 when the taxpayer files a document that purports to be a return but that contains a frivolous position or suggests a desire by the taxpayer to delay or impede the administration of federal income tax laws; (4) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers relying on these frivolous positions also may face criminal prosecution under the following provisions: (1) section 7201, for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203, for willful failure to file a return, the penalty for which is a significant fine and imprisonment for up to 1 year; and (3) section 7206, for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote these frivolous positions and those who assist taxpayers in claiming tax benefits based on frivolous positions may face civil and criminal penalties and also may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty of up to $1,000 under section 6700 for each activity promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, resulting in a significant fine and imprisonment for up to 3 years, for assisting or advising about the preparation of a false return or other document under the internal revenue laws.

This revenue ruling was authored by the Office of the Associate Chief Counsel (Procedure and Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact that office at (202) 622-7950 (not a toll-free call).

As April 15 approaches, the Internal Revenue Service reminds taxpayers to steer clear of abusive tax-avoidance schemes that purportedly allow them to reduce or eliminate taxes based on false or frivolous arguments. If an idea to save on taxes seems too good to be true, it probably is.

Many abusive tax-avoidance schemes are based on frivolous arguments that the Service and the courts have repeatedly rejected. These schemes are often sold by promoters for a substantial fee, and may be sold over the Internet, through advertisements in newspapers and magazines and at conferences and seminars.

Section 2 of this notice sets out some of the most common frivolous arguments used by these abusive tax-avoidance schemes. The Service is committed to identifying taxpayers who attempt to avoid their federal tax obligations by taking frivolous positions. The Service will take vigorous enforcement action against these taxpayers and against promoters and return preparers who assist taxpayers in taking these frivolous positions. Frivolous returns and other similar documents submitted to the Service are processed through the Service’s Frivolous Return Program. As part of this program, the Service confirms whether taxpayers who take frivolous positions have filed all of their required tax returns, computes the correct amount of tax and interest due, and determines whether civil or criminal penalties should apply.

Section 3 of this notice identifies potential civil and criminal penalties for participation in, or promotion of, abusive tax-avoidance schemes. Taxpayers who engage in abusive tax-avoidance schemes will be liable for unpaid taxes and interest. In addition, the Service will impose civil and criminal penalties against taxpayers where appropriate. The Service also will impose appropriate penalties and consider taking other appropriate action against persons who promote abusive tax-avoidance schemes and who prepare frivolous returns based on those schemes.

This section of this notice sets out some of the most common frivolous arguments used by taxpayers to avoid or evade tax. This notice is not intended to be a description of all frivolous arguments used to avoid or evade tax. Accordingly, the fact that an abusive tax-avoidance scheme is not described in this notice does not mean that it is not false and frivolous.

The Service and the courts have repeatedly rejected these arguments and variations on them, and have rejected numerous other tax-avoidance schemes and frivolous arguments used by taxpayers to avoid or evade taxes.

Civil and criminal penalties may apply to taxpayers who make frivolous arguments. Potentially applicable civil penalties include: (1) the section 6651 additions to tax for failure to file a return, failure to pay the tax owed, and fraudulent failure to file a return; (2) the section 6662 accuracy-related penalties, which are generally equal to 20 percent of the amount of taxes the taxpayer should have paid; (3) the section 6663 penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid; (4) a $500 penalty under section 6702 for filing a frivolous income tax return; and (5) a penalty of up to $25,000 under section 6673 if the taxpayer makes frivolous arguments in the United States Tax Court.

Taxpayers who take frivolous positions also may face criminal prosecution under: (1) section 7201 for attempting to evade or defeat tax, the penalty for which is a significant fine and imprisonment for up to 5 years; (2) section 7203 for willful failure to file a return, the penalty for which is a fine of up to $25,000 and imprisonment for up to one year; and (3) section 7206 for making false statements on a return, statement, or other document, the penalty for which is a significant fine and imprisonment for up to 3 years.

Persons, including return preparers, who promote frivolous positions and those who assist taxpayers in claiming tax benefits based on frivolous positions may face penalties and may be enjoined by a court pursuant to sections 7407 and 7408. Potential penalties include: (1) a $250 penalty under section 6694 for each return or claim for refund prepared by an income tax return preparer who knew or should have known that the taxpayer’s position was frivolous (or $1,000 for each return or claim for refund if the return preparer’s actions were willful, intentional or reckless); (2) a penalty under section 6700 for promoting abusive tax shelters; (3) a $1,000 penalty under section 6701 for aiding and abetting the understatement of tax; and (4) criminal prosecution under section 7206, for which the penalty is a significant fine and imprisonment for up to 3 years for assisting or advising about the preparation of a false return, statement or other document under the internal revenue laws.

Notice 2005-30 is modified and superseded.

Other information about frivolous tax positions is available on the Service website at www.irs.gov.

This notice was authored by the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, contact that office at (202) 622-7800 (not a toll-free call).

This notice provides transition relief with respect to the application of section 409A(b) of the Internal Revenue Code to nonqualified deferred compensation plans. Pursuant to section 403(hh)(3)(B) of the Gulf Opportunity Zone Act of 2005, P.L. 109-135 (GOZA), this transition relief includes a limited period for certain nonqualified deferred compensation plans that are in violation of the requirements of section 409A(b) to come into compliance with such requirements.

Section 409A(b) generally applies to the use of offshore trusts in connection with amounts payable under a nonqualified deferred compensation plan, and also the use of restrictions on assets to protect the payment of benefits under a nonqualified deferred compensation plan in connection with a change in the service recipient’s financial health. The use of such offshore trusts or restrictions on assets in connection with a change in the financial health of the service recipient generally triggers the income inclusion and additional tax provisions of section 409A. This notice addresses the application of certain technical corrections made to these provisions in GOZA, (which was enacted on December 21, 2005), including the requirement that sponsors of certain plans be given a limited period during which the arrangements may be made compliant with section 409A(b).

This notice is intended solely to address the requirements under section 409A(b), and nothing in this notice should be construed to affect the requirements of, or any potential liability under, section 409A(a).

In addition, section 409A(c) provides that nothing in section 409A shall be construed to prevent the inclusion of amounts in gross income under any other provisions of this chapter or any other rule of law earlier than the time provided in section 409A. Accordingly, a participant in a nonqualified deferred compensation plan may be required to include amounts in income due to the application to the plan (or to any trust or assets associated with the plan) of section 83, section 451, the economic benefit doctrine, or other applicable law even though the plan (and any associated trust or assets) complies with this notice or section 409A(b).

The Treasury Department and the IRS request comments as to the application of this notice, as well as all aspects of the application of section 409A(b). Because section 409A(b) only applies to the use of a trust, restriction or other arrangement determined by the Secretary in connection with a deferred compensation plan as defined for purposes of section 409A, commentators should consider the impact of any guidance with respect to the definition of a deferred compensation plan for purposes of section 409A, including Notice 2005-1, 2005-2 I.R.B. 274, and any proposed or final regulations issued under section 409A.

Comments may be submitted through June 21, 2006 to Internal Revenue Service, CC:PA:LPD:RU (Notice 2006-33), Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may also be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to the Courier’s Desk at 1111 Constitution Avenue, NW, Washington, DC 20224, Attn: CC:PA:LPD:RU (Notice 2006-33), Room 5203. Submissions may also be sent electronically via the internet to the following email address: Notice.comments@irscounsel.treas.gov. Include the notice number (Notice 2006-33) in the subject line.

The principal author of this notice is Stephen Tackney of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Stephen Tackney at (202) 927-9639 (not a toll-free call), or for further information regarding the submission of comments, contact Richard Hurst at Richard.A.Hurst@irscounsel.treas.gov.

The Department of Treasury and Internal Revenue Service invite public comment on recommendations for items that should be included on the 2006-2007 Guidance Priority List.

Treasury’s Office of Tax Policy and the Service use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2006-2007 Guidance Priority List will establish the guidance that the Treasury Department and the Service intend to issue from July 1, 2006, through June 30, 2007. The Treasury Department and the Service recognize the importance of public input to formulate a Guidance Priority List that focuses resources on guidance items that are most important to taxpayers and tax administration.

As is the case whenever significant legislation is enacted, the Treasury Department and the Service have dedicated substantial resources during the previous (2004-2005) and current plan years to published guidance projects necessary to implement the provisions of the American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418, which was enacted on October 22, 2004. Similarly, the Treasury Department and the Service have devoted resources to published guidance projects necessary to implement the provisions of additional tax legislation that has been enacted during the current plan year, such as the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594, which was enacted on August 8, 2005; the Katrina Emergency Tax Relief Act of 2005, Pub. L. No. 109-73, 119 Stat. 2016, which was enacted on September 23, 2005; and the Gulf Opportunity Zone Act of 2005, Pub. L. No. 109-135, 119 Stat. 2577, which was enacted on December 21, 2005. The Treasury Department and the Service will continue to evaluate the priority of each guidance project in light of the above-mentioned tax legislation and other developments occurring during the 2006-2007 plan year.

In reviewing recommendations and selecting projects for inclusion on the 2006-2007 Guidance Priority List, the Treasury Department and the Service will consider the following:

Taxpayers may submit recommendations for guidance at any time during the year. Please submit recommendations by May 15, 2006, for possible inclusion on the original 2006-2007 Guidance Priority List. The Service plans to update the 2006-2007 Guidance Priority List periodically to reflect additional guidance that the Treasury Department and the Service intend to publish during the plan year. The periodic updates allow the Treasury Department and the Service to respond to the need for additional guidance that may arise during the plan year. Recommendations for guidance received after May 15, 2006, will be reviewed for inclusion in the next periodic update.

Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. It would be helpful if taxpayers suggesting more than one guidance project would prioritize the projects by order of importance. If a large number of projects are being suggested, it also would be helpful if the projects were grouped in terms of high, medium or low priority.

Taxpayers should send written comments to:

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Alternatively, taxpayers may submit comments electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov. Taxpayers should include “Notice 2006-36” in the subject line. All comments will be available for public inspection and copying in their entirety.

For further information regarding this notice, contact Crystal Foster of the Office of Associate Chief Counsel (Procedure and Administration) at (202) 622-7198 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking by cross-reference to temporary regulations.

In this issue of the Bulletin, the IRS is issuing regulations (T.D. 9255) that provide the IRS with the authority to designate a domestic member of the consolidated group as a substitute agent to act as the sole agent for the group where a foreign entity is the common parent. These regulations affect corporations that join in the filing of a consolidated Federal income tax return where the common parent of the consolidated group is treated as a domestic corporation pursuant to section 7874(b) of the Internal Revenue Code (Code) or as a result of a section 953(d) election. The text of the temporary regulations also serves as the text of these proposed regulations.

Written or electronic comments, and a request for a public hearing, must be received by June 12, 2006.

Send submissions to: CC:PA:LPD:PR (REG-164247-05), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-164247-05), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov (IRS-REG-164247-05).

Concerning the proposed regulations, Stephen R. Cleary, (202) 622-7750, concerning submissions of comments, Kelly Banks, (202) 622-7180 (not toll-free numbers).

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

The principal author of these regulations is Stephen R. Cleary of the Office of Associate Chief Counsel (Corporate). Other personnel from the Treasury Department and the IRS participated in their development.

* * * * *

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

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

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

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

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

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

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

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

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

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