Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for April 2010.

This notice provides the face amount of qualified school construction bonds (QSCBs) allocated by the Department of the Treasury to each state and large local education agency for 2010 under section 54F(d) of the Code. This notice does not contain any other guidance. Notice 2009-35 supplemented.

This notice provides guidance to assist state housing credit agencies in determining how to reduce the state housing credit ceiling under section 42(h)(3) of the Code when credits are exchanged for funds under section 1602 of the American Recovery and Reinvestment Tax Act of 2009, including guidance concerning the effect of section 1602 funds on building basis and taxpayer income.

This notice provides taxpayers with interim guidance on measurement of continuity of interest of reorganizations during the period between expiration of the current temporary regulations and the issuance of new regulations.

Chile earthquake in 2010. This notice designates the Chile earthquake occurring in February 2010 as a qualified disaster for purposes of section 139 of the Code.

This announcement provides procedures that a charitable trust may use to request a ruling that it was and continues to be a Type III supporting organization described in section 509(a)(3) of the Code and to obtain a refund of any section 4940 tax paid with respect to its 2008 taxable year.

Nonshareholder contribution to capital under section 118(a). This procedure provides that the Service will not challenge a corporation’s treatment of a Smart Grid Investment Grant made by the Department of Energy to the corporation as a nonshareholder contribution to the capital of the corporation under section 118(a) of the Code if the corporation properly reduces the basis of its property under section 362(c)(2) and the regulations thereunder.

It is the policy of the Internal Revenue Service to announce at an early date whether it will follow the holdings in certain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unappealed issues decided adverse to the government. Generally, an Action on Decision is issued where its guidance would be helpful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent.

Actions on Decisions shall be relied upon within the Service only as conclusions applying the law to the facts in the particular case at the time the Action on Decision was issued. Caution should be exercised in extending the recommendation of the Action on Decision to similar cases where the facts are different. Moreover, the recommendation in the Action on Decision may be superseded by new legislation, regulations, rulings, cases, or Actions on Decisions.

Prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions. The Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal. Regardless of the court deciding the case, the recommendation of any Action on Decision will be published in the Internal Revenue Bulletin.

The recommendation in every Action on Decision will be summarized as acquiescence, acquiescence in result only, or nonacquiescence. Both “acquiescence” and “acquiescence in result only” mean that the Service accepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts. However, “acquiescence” indicates neither approval nor disapproval of the reasons assigned by the court for its conclusions; whereas, “acquiescence in result only” indicates disagreement or concern with some or all of those reasons. “Nonacquiescence” signifies that, although no further review was sought, the Service does not agree with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a circuit court of appeals, a “nonacquiescence” indicates that the Service will not follow the holding on a nationwide basis. However, the Service will recognize the precedential impact of the opinion on cases arising within the venue of the deciding circuit.

The Actions on Decisions published in the weekly Internal Revenue Bulletin are consolidated semiannually and appear in the first Bulletin for July and the Cumulative Bulletin for the first half of the year. A semiannual consolidation also appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year.

The Commissioner ACQUIECES in result only in the following decision:

James R. Thompson v.
United States,^[1]

87 Fed. Cl. 728 (Fed. Cl. 2009)

This revenue ruling provides various prescribed rates for federal income tax purposes for April 2010 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

This notice sets forth the maximum face amount of qualified school construction bonds (“QSCBs”) allocated by the Department of the Treasury (Treasury) to each State and large local educational agency for 2010 under § 54F(d) of the Internal Revenue Code (Code). For this purpose, § 54A(e)(3) provides that the term “State” includes the District of Columbia and any possession of the United States. This notice supplements Notice 2009-35, 2009-17 I.R.B. 876 (April 27, 2009).

The 2010 national bond volume cap for QSCBs is $11 billion. This amount is allocated among the States and large local educational agencies as set forth in this notice. The 2010 allocations to 103 large local educational agencies reflects the determination by the Secretary of Education to select 3 additional large local educational agencies under § 54F(d)(2)(E)(ii) for such year. The first chart below allocates $6.6 billion of the $11 billion 2010 calendar year volume cap for QSCBs to States to be issued by such State or further allocated to the issuers within such State. The second chart below allocates $4.4 billion of the $11 billion 2010 calendar year volume cap for QSCBs to large local educational agencies.

The allocations of the national bond volume cap for QSCBs in Section 3 are effective for QSCBs issued, pursuant to an allocation of 2010 calendar year volume cap, after March 16, 2010.

The Department of the Interior is exclusively responsible for making the allocations of the Indian tribal government volume cap and published a notice in the Federal Register, 74 F.R. 56211-02 (October 30, 2009), soliciting applications for allocations of such volume cap. Interested parties may also contact John Rever, Director, Office of Facilities, Environment and Cultural Resources, Bureau of Indian Affairs, at (703) 390-6314 or John.Rever@bia.gov.

The principal authors of this notice are Aviva M. Roth and Johanna Som de Cerff of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this notice, contact Johanna Som de Cerff at (202) 622-3980 (not a toll-free call).

This notice clarifies certain issues under sections 1404 and 1602 of the American Recovery and Reinvestment Tax Act of 2009 (Pub. L. 111-5) (the Act). Specifically, this notice provides guidance on how to take into account the amount of a grant under section 1602 of the Act in reducing the amount of a state’s housing credit ceiling, on the exclusion of the amount of grants from the recipients’ gross income, and on the effect of such grants on the depreciable or eligible basis of property.

Section 42 of the Internal Revenue Code allows a 10-year tax credit for investment in qualified low-income buildings placed in service after December 31, 1986. Section 42(h)(1) provides, generally, that the amount of credit under § 42 for any taxable year for any building shall not exceed the housing credit dollar amount allocated to the building. Section 42(h)(3)(A) provides, in part, that the aggregate housing credit dollar amount that a State housing credit agency may allocate for any calendar year is limited to that year’s State housing credit ceiling (Ceiling).

Section 42(h)(3)(C) of the Code provides, in part, that the Ceiling applicable to any State for any calendar year is an amount equal to—

(i) the unused Ceiling, if any, of the State for the preceding calendar year;

(ii) the greater of (I) $1.75 multiplied by the State population, or (II) $2,000,000;

(iii) the amount of Ceiling returned in the calendar year, and;

(iv) the amount, if any, allocated to the State by the Secretary under § 42(h)(3)(D) from a national pool (National Pool) of unused credit.

Section 42(h)(3)(H) of the Code provides that for calendar years after 2002, the $2,000,000 and $1.75 amounts in § 42(h)(3)(C)(ii) shall be increased by a cost-of-living adjustment (COLA). Section 42(h)(3)(I) increases the Ceiling for 2009 by adding (i) $0.20 for the dollar amount in effect under § 42(h)(3)(C)(ii)(I) after application of the § 42(h)(3)(H) COLA, and (ii) an amount equal to 10 percent for the dollar amount in effect under § 42(h)(3)(C)(ii)(II) (rounded to the next lowest multiple of $5,000) after application of the § 42(h)(3)(H) COLA. For the 2009 Ceiling, the § 42(h)(3)(C)(ii)(I) and (II) amounts are $2.30 and $2,665,000, respectively. See Section 3.07 of Rev. Proc. 2008-66, 2008-45 I.R.B. 1107, 1111.

Section 42(i)(9)(A) of the Code, as added by section 1404 of the Act, provides that the amounts described in § 42(h)(3)(C)(i) through (iv) with respect to any State for 2009 shall each be reduced by so much of the amount as is taken into account in determining the amount of any grant to the State under section 1602 of the Act. Section 1602(a) of the Act provides that the Department of the Treasury shall make a grant to the housing credit agency of each State in an amount equal to the State’s low-income housing grant election amount. Section 1602(b) of the Act provides that the term “low-income housing grant election amount” means, for any State, the amount as the State may elect that does not exceed 85 percent of—

(1) the sum of—

(A) 100 percent of the State’s 2009 Ceiling that is attributable to amounts described in § 42(h)(3)(C)(i) and (iii) of the Code, and

(B) 40 percent of the State’s 2009 Ceiling that is attributable to amounts described in § 42(h)(3)(C)(ii) and (iv), multiplied by

(2) 10.

On May 4, 2009, the Department of the Treasury released guidance in the form of an application (Application) and grantee terms and conditions (Terms and Conditions) informing designated State housing credit agencies (Designated Agencies) how to exchange low-income housing tax credits for amounts under section 1602 of the Act. This guidance may be accessed electronically at: http://www.treas.gov/recovery/docs/LIH_application-package.pdf

A list of the Designated Agencies is provided, and background information to the Application states, on page 3, that a Designated Agency is one that files Form 8610, “Annual Low-Income Housing Credit Agencies Report,” for all agencies within the State. Paragraph 2.a. of the Terms and Conditions provides that the grantee is the housing credit agency that files Form 8610. Paragraph 7.a. of the Terms and Conditions provides that the grantee shall track (1) the credit equivalent of all grant election amounts to ensure that the 2009 Ceiling is appropriately reduced as required by § 42(i)(9)(A) of the Code and (2) total grant election amounts to ensure that these amounts do not exceed the amount authorized by section 1602(b) of the Act. Paragraph 7.b. provides that the grantee shall track the total of credits allocated under § 42(h)(1). Paragraph 7.c. provides that the grantee shall ensure that the credit equivalent of all elected grant amounts through 2010, plus the credits allocated under § 42(h)(1) during 2009, do not exceed the 2009 Ceiling. The Terms and Conditions do not explain how the credit equivalent of a grant election amount is determined.

Section 42(d)(1) of the Code provides that the eligible basis of a new building is its adjusted basis as of the close of the first tax year of the credit period. Section 42(d)(4)(A) provides that, except as provided in § 42(d)(4)(B) and (C), the adjusted basis of any building is determined without regard to the adjusted basis of any property that is not residential rental property. Section 42(d)(4)(B) provides that the adjusted basis of any building includes the adjusted basis of property of a character subject to the allowance for depreciation used in common areas or provided as comparable amenities to all residential rental units in the building. Section 42(d)(5)(A) provides that the eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant. Section 42(i)(9)(B), as added by section 1404 of the Act, provides that the basis of a qualified building shall not be reduced by the amount of any grant described in § 42(i)(9)(A). The legislative history to the Act provides that grants received under this provision (i.e., cash assistance received under section 1602 of the Act) do not reduce [the] tax basis of a qualified low-income building. The legislative history to the Act further provides that grants under this provision are not taxable income to recipients. See H.R. Conf. Rep. No. 16, 111^th Cong., 1^st Sess. 532, 533 (2009).

The principal author of this notice is Christopher J. Wilson, Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information concerning this notice, contact Mr. Wilson at (202) 622-3040 (not a toll-free call).

This notice pertains to the continuity of interest test generally applicable to reorganizations described in section 368 of the Internal Revenue Code.

Under section 7805(e)(2) of the Internal Revenue Code, temporary regulations expire three years after issuance, if not earlier withdrawn. Section 1.368-1T(e)(2) of the Income Tax Regulations will accordingly expire on March 19, 2010. The purpose of this notice is to provide taxpayers with interim guidance applicable to the period between the expiration of the temporary regulations and the issuance of replacement guidance.

The Internal Revenue Code of 1986 (Code) generally provides nonrecognition treatment for reorganizations described in section 368 of the Code. Besides satisfying the statutory and other requirements, in order to qualify as a reorganization, a transaction generally must satisfy the continuity of interest (COI) requirement. COI requires that, in substance, a substantial part of the value of the proprietary interests in the target corporation be preserved in the reorganization.

On March 20, 2007, the Internal Revenue Service (Service) and the Treasury Department (Treasury) published temporary regulations § 1.368-1T(e)(2) (T.D. 9316, 2007-1 C.B. 962) and proposed regulations (REG-146247-06, 2007-1 C.B. 977) in the Federal Register (72 FR 12974 and 72 FR 13058, respectively). The text of the temporary regulations and the proposed regulations is the same. The Service and the Treasury intend to issue final regulations, but do not expect to issue such regulations prior to the expiration of the temporary regulations. The purpose of this notice is to provide taxpayers with interim guidance applicable to the period between the expiration of the temporary regulations and the issuance of new regulations.

After expiration of the temporary regulations and prior to the issuance of new regulations, taxpayers may apply the rules set forth in the proposed regulations notwithstanding that the temporary regulations have expired. However, the target corporation, the issuing corporation, the controlling corporation of the acquiring corporation if stock thereof is provided as consideration in the transaction, and any direct or indirect transferee of transferred basis property from any of the foregoing, may not apply the provisions of the proposed regulations unless all such taxpayers elect to apply the provisions of such regulations. This requirement will be satisfied if none of the specified parties adopts treatment inconsistent with this election.

The principal author of this notice is Richard Starke of the Office of Associate Chief Counsel (Corporate). For further information regarding this notice, please contact Richard Starke at (202) 622-7790 (not a toll-free call).

This notice designates the Chile earthquake occurring in February 2010 as a qualified disaster for purposes of § 139 of the Internal Revenue Code in the affected areas of Chile.

On February 27, 2010, a magnitude 8.8 earthquake with numerous significant aftershocks and a tsunami affected southern and central Chile (“Chile earthquake”). The earthquake and resulting aftershocks affected approximately 2 million individuals, displaced thousands of individuals from damaged and destroyed houses, and resulted in 795 deaths. The earthquake also caused major damage to buildings and infrastructure near the epicenter, and disrupted communications, electricity, water, and gas services in the affected areas. In addition, a tsunami caused significant damage along parts of coastal Chile. USAID Chile — Earthquake Fact Sheet No. 1 (March 1, 2010) and No. 2 (March 2, 2010).

This notice enables employer-sponsored private foundations to assist certain victims in areas affected by the Chile earthquake and enables recipients to exclude qualified disaster relief payments from gross income.

Section 139(a) provides that gross income shall not include any amount received by an individual as a qualified disaster relief payment.

Section 139(b) provides that a qualified disaster relief payment includes any amount paid to or for the benefit of an individual—

(1) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses (not otherwise compensated for by insurance or otherwise) incurred as a result of a qualified disaster, or

(2) to reimburse or pay reasonable and necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster.

Under § 139(c)(3) the term “qualified disaster” includes a disaster resulting from an event that is determined by the Secretary to be of a catastrophic nature.

The Commissioner of Internal Revenue, pursuant to delegation by the Secretary, has determined that the Chile earthquake occurring in February 2010 is an event of a catastrophic nature under § 139(c)(3). Therefore, the Chile earthquake is designated as a qualified disaster under § 139 in the affected areas of Chile.

Employer-sponsored private foundations may choose to provide disaster relief to employee victims of the Chile earthquake. Like all organizations described in § 501(c)(3), private foundations should exercise due diligence when providing disaster relief as set forth in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations.

The principal author of this notice is Sheldon Iskow of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Mr. Iskow at (202) 622-4920 (not a toll-free call).

This revenue procedure provides a safe harbor under section 118(a) of the Internal Revenue Code for the treatment of a Smart Grid Investment Grant (SGIG) under 42 U.S.C. 17386 made by the United States Department of Energy (DOE) to a corporation for qualifying investments under the Smart Grid Investment Matching Grant Program as authorized by section 1306 of the Energy Independence and Security Act of 2007 (Pub. L. 110-140), as amended by section 405, Division A of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5).

Section 118(a) of the Code provides that in the case of a corporation, gross income does not include a contribution to the capital of the taxpayer.

Section 1.118-1 of the Income Tax Regulations provides that section 118 applies to contributions to capital made by a person other than a shareholder, for example, property contributed to a corporation by a governmental unit for the purpose of enabling the corporation to expand its operating facilities.

Section 362(c)(2) of the Code requires a basis reduction in a corporation’s property when the corporation receives money from a nonshareholder as a contribution to its capital.

42 U.S.C. 17386 provides that DOE shall establish a Smart Grid Investment Matching Grant Program to make grants for qualifying investments. Under 42 U.S.C. 17386, an SGIG may not be used for ongoing or routine operating and maintenance expenditures.

This revenue procedure applies to corporate taxpayers that receive an SGIG under 42 U.S.C. 17386 from DOE. This revenue procedure does not apply to noncorporate taxpayers, or to grants under 42 U.S.C. 17384 (Smart Grid technology research, development, and demonstration).

The Internal Revenue Service will not challenge a corporation’s treatment of an SGIG made by DOE to the corporation as a nonshareholder contribution to the capital of the corporation under section 118(a) of the Code if the corporation properly reduces the basis of its property under section 362(c)(2) and the regulations thereunder.

This revenue procedure is effective March 10, 2010.

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

This announcement applies to any trust that met the requirements to be classified as a Type III supporting organization through the end of the 2008 taxable year (including by meeting the significant voice responsiveness test for periods after August 16, 2007), but erroneously filed Form 990-PF and paid section 4940 tax for the 2008 taxable year. It provides procedures that such a trust may use to request a ruling that it was and continues to be a Type III supporting organization described in section 509(a)(3) and to obtain a refund of any section 4940 tax paid with respect to its 2008 taxable year.

This announcement also describes procedures for charitable trusts that became private foundations after August 16, 2007, and wish to terminate their private foundation status under section 507(b)(1)(B) by operating as Type III supporting organizations.

Treas. Reg. § 1.509(a)-4(i) sets forth the requirements for an organization to qualify as a section 509(a)(3) supporting organization that is “operated in connection with” one or more publicly supported organizations (i.e., a “Type III supporting organization”). Type III supporting organizations are required to meet a “responsiveness test” and an “integral part test.” See Treas. Reg. § 1.509(a)-4(i)(1)(i), (i)(2).

Prior to passage of the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006) (“PPA”), there were two alternative ways for a Type III supporting organization to meet the responsiveness test.

Section 1241(c) of the PPA eliminated the charitable trust test, effective August 17, 2007. Consequently, as of August 17, 2007, a charitable trust can no longer qualify as a Type III supporting organization unless it meets the significant voice test.

Notice 2008-6, 2008-1 C.B. 275, provided that any charitable trust that became a private foundation because of the PPA’s elimination of the charitable trust test would not be required to file an information return on Form 990-PF or pay excise taxes on investment income under section 4940 until its first taxable year beginning on or after January 1, 2008.

On August 2, 2007, the Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) published an advance notice of proposed rulemaking (“ANPRM”) describing the rules Treasury and the IRS anticipated proposing regarding Type III supporting organizations. The ANPRM states that Treasury and the IRS expect that all Type III supporting organizations will be required to meet the significant voice responsiveness test under Treas. Reg. § 1.509(a)-4(i)(2)(ii).

On September 24, 2009, Treasury and the IRS published a notice of proposed rulemaking in the Federal Register (74 Fed. Reg. 48,672) addressing Type III supporting organizations (“proposed regulations”). The proposed regulations require that all Type III supporting organizations meet the significant voice responsiveness test, and provide two new examples illustrating the application of the significant voice test to charitable trusts.

A trust may request a ruling stating that it is a Type III supporting organization and obtain a refund of any tax paid under section 4940 by following the procedures set forth in this Announcement if it is either: