This procedure provides the 2019 cost-of-living adjustments to certain items due to inflation as required by various provisions of the Code and Service guidance.

This notice is intended to initiate and inform the process of developing guidance under sections 4980H and 105(h) that would address issues raised in the NPRM (REG-135724–17) that was issued on October 29, 2018 (83 FR 54420), and requests comments on potential approaches developed by the Treasury Department and the IRS, so employers understand how to structure HRAs integrated with individual health insurance coverage to avoid assessable payments (section 4980H) and potential loss of the exclusion from income for employer-provided health benefits (section 105(h)).

These proposed regulations would amend the current regulations under § 401(k) relating to hardship distributions. Section 41113 of the Bipartisan Budget Act of 2018 (BBA) directs the Secretary to remove the requirement in the current regulations that an employee's plan contributions be suspended for at least 6 months following a hardship distribution from the plan. The proposed amendments would conform the regulations with section 41113 and would update the regulations to reflect BBA § 41114 and certain other statutory changes to 401(k) plans.

This procedure provides the 2019 cost-of-living adjustments to certain items due to inflation as required by various provisions of the Code and Service guidance.

This notice is intended to initiate and inform the process of developing guidance under sections 4980H and 105(h) that would address issues raised in the NPRM (REG-135724–17) that was issued on October 29, 2018 (83 FR 54420), and requests comments on potential approaches developed by the Treasury Department and the IRS, so employers understand how to structure HRAs integrated with individual health insurance coverage to avoid assessable payments (section 4980H) and potential loss of the exclusion from income for employer-provided health benefits (section 105(h)).

These proposed regulations prescribe filing Form 4720 to report excise tax under sections 4960, 4966, 4967, and 4968 by the 15th day of the fifth month after the end of the tax year of the person or governmental entity reporting the tax, and update the abatement rules under section 4963 for section 4966 and 4967 taxes, consistent with a statutory change.

This procedure provides the 2019 cost-of-living adjustments to certain items due to inflation as required by various provisions of the Code and Service guidance.

These proposed regulations prescribe filing Form 4720 to report excise tax under sections 4960, 4966, 4967, and 4968 by the 15th day of the fifth month after the end of the taxable year of the person or governmental entity reporting the tax, and update the abatement rules under section 4963 for section 4966 and 4967 taxes, consistent with a statutory change.

This procedure provides the 2019 cost-of-living adjustments to certain items due to inflation as required by various provisions of the Code and Service guidance.

This notice is intended to initiate and inform the process of developing guidance under sections 4980H and 105(h) that would address issues raised in the NPRM (REG-135724–17) that was issued on October 29, 2018 (83 FR 54420), and requests comments on potential approaches developed by the Treasury Department and the IRS, so employers understand how to structure HRAs integrated with individual health insurance coverage to avoid assessable payments (section 4980H) and potential loss of the exclusion from income for employer-provided health benefits (section 105(h)).

This notice provides that the IRS will not assert that cash payments an employer makes to § 170(c) organizations (in exchange for vacation, sick or personal leave that its employees elect to forgo) constitute gross income or wages of the employees under certain circumstances.

The notice provides that transition relief in Rev. Rul. 2018-17 (Withholding and Reporting With Respect to Payments from IRAs to State Unclaimed Property Funds) is extended so that a person will not be treated as failing to comply with the withholding and reporting requirements described in Rev. Rul. 2018–17 with respect to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable for the person to comply with those requirements.

This procedure provides the 2019 cost-of-living adjustments to certain items due to inflation as required by various provisions of the Code and Service guidance.

Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for December 2018.

This revenue ruling provides various prescribed rates for federal income tax purposes for December 2018 (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, 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.

On October 23, 2018, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Department of Health and Human Services (HHS) (collectively, the Departments) issued proposed regulations^[1] under section 2711 of the Public Health Service Act (PHS Act)^[2] and the health nondiscrimination provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104–191, and the Patient Protection and Affordable Care Act, Public Law 111–148, as amended by the Health Care Education Reconciliation Act of 2010, Public Law 111–152, (collectively PPACA) (HIPAA/PPACA nondiscrimination provisions).^[3] The proposed regulations are intended to expand the usability of health reimbursement arrangements and other account-based group health plans (collectively referred to in this notice as HRAs).^[4] In general, the proposed regulations would expand the usability of HRAs by eliminating the current prohibition on integrating HRAs with individual health insurance coverage (as defined in Treas. Reg. § 54.9801–2)^[5], thereby permitting employers to offer HRAs to employees enrolled in individual health insurance coverage. Therefore, under the proposed regulations employees would be permitted to use amounts in an HRA integrated with individual health insurance coverage (referred to in this notice as an individual coverage HRA) to pay expenses for medical care (as defined in section 213(d), including premiums for individual health insurance coverage), subject to certain requirements (the proposed integration regulations). In addition, the Treasury Department and the IRS issued proposed regulations under section 36B regarding premium tax credit (PTC) eligibility for individuals offered coverage under an individual coverage HRA (the proposed PTC regulations).^[6]

The proposed integration regulations and the proposed PTC regulations raise issues under the Code, in particular concerning the application of section 4980H (the employer shared responsibility provisions) and section 105(h) (addressing discriminatory self-insured group health plans). This notice is intended to initiate and inform the process of developing guidance that addresses these issues, and requests comments on potential approaches developed by the Treasury Department and the IRS.

Although the proposed regulations do not include proposed regulations under section 4980H, as part of implementing the objectives of Executive Order 13813, the Treasury Department and the IRS considered how section 4980H would apply to an ALE that offers an individual coverage HRA. In order to provide clarity to stakeholders, section III.A. of this notice explains how section 4980H(a) would apply to an ALE that offers an individual coverage HRA. In addition, section III.B of this notice explains how section 4980H(b) (including the current affordability safe harbors) would apply to an ALE that offers an individual coverage HRA, describes potential additional affordability safe harbors, requests comments, and provides examples.

HRAs generally are subject to the rules under section 105(h) and its related regulations because they are self-insured medical reimbursement plans.^[46] However, HRAs that reimburse employees only for premiums paid to purchase health insurance policies, including individual health insurance policies, are not subject to the rules under section 105(h) and its related regulations.^[47] The proposed guidance described in this section IV addresses certain individual coverage HRAs that (1) would be subject to the rules under section 105(h) and the regulations thereunder, and (2) are offered to one or more HCIs. For purposes of section IV of this notice, these individual coverage HRAs are referred to as covered HRAs.

As described earlier in this notice, the proposed integration regulations would expand the potential use of HRAs by permitting employers to offer individual coverage HRAs to their employees, as long as certain requirements are satisfied. Among other requirements, the proposed integration regulations would allow the plan sponsor to limit the offer of the individual coverage HRA to members of certain classes of employees and to vary the amounts, terms, and conditions of individual coverage HRAs between the different classes of employees.^[48] However, the proposed integration regulations would require that within each class of employees offered an individual coverage HRA, the plan sponsor would be required to offer the individual coverage HRA on the same terms and conditions (including, generally, in the same amount) to all employees who are members of that class of employees.^[49]

Varying the maximum HRA amounts for different classes of employees would conflict with the requirement in the section 105 regulations that any maximum limit attributable to employer contributions must be uniform for all participants (later in this section of the notice the Treasury Department and the IRS address the permissibility of varying the maximum HRA amounts within a class of employees). The IRS interprets this rule to require that, while certain employees in certain classes may be excluded from a plan for discrimination testing purposes, if an employee in an excludible class is provided benefits, the benefits must be provided on a nondiscriminatory basis to all covered employees. Under the proposed integration regulations, employees in different classes may receive different HRA amounts, with the result that the maximum limit attributable to employer contributions, while generally uniform for all participants in a class (subject to certain exceptions set forth in Prop. Treas. Reg. § 54.9802–4(c)(3), as described later in this notice), would not be uniform for all HRA participants.

In order to facilitate the offering of covered HRAs as anticipated by the proposed integration regulations, the Treasury Department and the IRS anticipate that future guidance will provide that a covered HRA would be treated as not failing to meet the requirement in § 1.105–11(c)(3)(i) that any maximum limit attributable to employer contributions must be uniform for all participants, if the covered HRA provides the same maximum dollar amount to all employees who are members of a particular class of employees, limited to the classes specified under the proposed integration regulations (which includes combinations of specified classes) and subject to the exceptions set forth in Prop. Treas. Reg. § 54.9802–4(c)(3), as described later in this notice.

Further, as previously noted, while the proposed integration regulations would allow different HRA amounts for employees in different classes, the employer generally would be required to offer the HRA on the same terms to all employees who are members of the same class of employees. However, the proposed integration regulations include two exceptions to this rule.

The exception to this same-terms requirement that is relevant to the application of section 105(h) to the proposed integration regulations is that the covered HRA would be permitted to provide that the maximum dollar amount made available to an employee for any plan year increases as the age of the employee increases.^[50] Under this exception, the same maximum dollar amount attributable to the increase in an employee’s age would be required to be made available to all employees who are members of the same class of employees who are the same age.^[51]

Without further guidance, under section 105(h) and the regulations thereunder, however, certain amounts paid to an HCI under a covered HRA that implements such an age-based increase would be includible in the income of the HCI because the covered HRA would fail to meet the requirement in § 1.105–11(c)(3)(i) that prohibits the maximum limit attributable to employer contributions to the covered HRA from being modified by reason of a participant’s age. The Treasury Department and the IRS recognize that some employers may wish to offer a covered HRA to their employees without causing HCIs to include in their income certain payments from the arrangement, as a result of the arrangement failing to meet that requirement in the section 105(h) regulations.

To facilitate the offering of this type of covered HRA, the Treasury Department and the IRS anticipate that future guidance would provide that a covered HRA would be treated as not failing to meet the requirement in § 1.105–11(c)(3)(i) that any maximum limit attributable to employer contributions be uniform for all participants and that prohibits the maximum limit attributable to employer contributions from being modified by reason of a participant’s age, if the covered HRA meets certain conditions. Specifically, the covered HRA would have to provide that the maximum dollar amount made available to employees who are members of a particular class of employees increases in accordance with the increases in the price of an individual health insurance coverage policy in the relevant individual insurance market based on the ages of the employees who are members of that class of employees, provided that the same maximum dollar amount attributable to the increase in age is made available to all employees who are members of that class of employees who are the same age. For purposes of this notice, the “relevant individual insurance market” is an individual insurance market in which at least one employee who is a member of the class of employees is able to purchase individual health insurance coverage.

The following examples illustrate the potential safe harbors described in section IV of this notice that the Treasury Department and the IRS anticipate would be included in future guidance under section 105(h).

Example 1 (Covered HRA does not Fail to Satisfy Section 105(h) – Age Variation). Facts: In 2020, Employer A offers all full-time employees, including HCIs, an individual coverage HRA that reimburses all medical care expenses (including premiums for individual health insurance coverage). The maximum dollar amount available under the individual coverage HRA increases in accordance with the increases in the price of an individual health insurance policy in County X, based on the ages of all full-time employees. At least one full-time employee of Employer A is a resident of County X. The same maximum dollar amount attributable to the increase in age is made available to all full-time employees who are the same age.

Conclusion: The individual coverage HRA would be a covered HRA that would be treated as not failing to meet the requirement in § 1.105–11(c)(3)(i) that prohibits the maximum limit attributable to employer contributions from being modified by reason of a participant’s age.

Example 2 (Covered HRA does not Fail to Satisfy Section 105(h) – Class by Class Variation). Facts: In 2020, Employer B offers all full-time and part-time employees, including HCIs, an individual coverage HRA that reimburses all medical care expenses (including premiums for individual health insurance coverage). The maximum dollar amount available under the individual coverage HRA for each full-time employee is $5,000 per plan year. The maximum dollar amount available under the individual coverage HRA for each part-time employee is $2,000 per plan year.

Conclusion: The individual coverage HRA would be a covered HRA that would be treated as not failing to meet the requirement in § 1.105–11(c)(3)(i) that any maximum limit attributable to employer contributions must be uniform for all participants.

Example 3 (Individual Coverage HRA is not Subject to Section 105(h) – Only Reimburses Premiums). Facts: In 2020, Employer C offers all full-time employees, including HCIs, an individual coverage HRA that only reimburses premiums for individual health insurance coverage.

Conclusion: The individual coverage HRA would not be a covered HRA because it would only reimburse premiums for individual health insurance coverage. Therefore, it would not be subject to the nondiscrimination requirements in section 105(h) and the regulations thereunder.

Example 4 (Individual Coverage HRA is not Subject to Section 105(h) – No HCIs). Facts: In 2020, Employer D offers all employees included in a unit of employees covered by a particular collective bargaining agreement in which Employer D participates (collectively bargained employees) an individual coverage HRA that reimburses all medical care expenses (including premiums for individual health insurance coverage). No collectively bargained employee is an HCI.

Conclusion: The individual coverage HRA would not be a covered HRA because it would not be offered to any HCIs. Therefore, it would not be subject to the nondiscrimination requirements in section 105(h) and the regulations thereunder.

The Treasury Department and the IRS invite comments on the issues addressed in this notice, and on any other tax issues related to individual coverage HRAs as described in the proposed integration and PTC regulations. Also see section III.B of this notice for specific comment solicitations regarding section 4980H. The Treasury Department and the IRS intend to issue further guidance on the issues addressed in this notice in conjunction with the issuance of any final integration and PTC regulations. The Treasury Department and the IRS further intend to propose regulations to codify, and seek additional comment on, the safe harbors, if any, provided in the additional guidance anticipated to be released in conjunction with any final integration and PTC regulations.

Public comments should be submitted no later than December 28, 2018. Comments should include a reference to Notice 2018–88. Comments may be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2018–0032 in the search field on the regulations.gov homepage to find this notice and submit comments). Alternatively, submissions may be sent to CC:PA:LPD:PR (Notice 2018–88), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions also may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2018–88), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20044. All recommendations for guidance submitted by the public in response to this notice will be available for public inspection and copying in their entirety.

This notice does not provide guidance under section 4980H or section 105(h) upon which taxpayers may rely.

No inference should be drawn from any provision of this notice concerning any provision of section 4980H or section 105(h) or any other section of the Code, or PPACA, except those provisions specifically addressed in this notice.

The principal author of this notice is Ronald Rutherford-Triche of the Office of Associate Chief Counsel (Tax Exempt and Government Entities), although other Treasury Department and IRS officials participated in its development. For further information regarding this notice, contact Christopher Dellana or Kevin Knopf at (202) 317-5500 (not a toll-free number).

This notice provides guidance on the treatment of leave-based donation programs to aid victims of Hurricane Michael.

In response to the extreme need for charitable relief for victims of Hurricane Michael, employers may have adopted or may be considering adopting leave-based donation programs. Under leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to charitable organizations described in § 170(c) of the Internal Revenue Code (§ 170(c) organizations). This notice provides guidance for income and employment tax purposes on the treatment of cash payments made by employers under leave-based donation programs for the relief of victims of Hurricane Michael.

The Internal Revenue Service (the Service) will not assert that cash payments an employer makes to § 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are: (1) made to the § 170(c) organizations for the relief of victims of Hurricane Michael; and (2) paid to the § 170(c) organizations before January 1, 2020.

Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees. Electing employees may not claim a charitable contribution deduction under § 170 with respect to the value of forgone leave excluded from compensation and wages.

The Service will not assert that an employer is permitted to deduct these cash payments exclusively under the rules of § 170 rather than the rules of § 162. Cash payments to which this guidance applies need not be included in Box 1, 3 (if applicable), or 5 of the Form W–2.

For further information, please contact Suzanne R. Sinno of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 317-4718 (not a toll-free number).

The purpose of this notice is to extend the withholding and reporting transition relief described in Rev. Rul. 2018–17, 2018–25 IRB 753, that applies with respect to payments made before the earlier of January 1, 2019, or the date it becomes reasonably practicable to comply with those requirements. Relief is extended to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the withholding and reporting requirements described in Rev. Rul. 2018–17.

Rev. Rul. 2018–17 addressed federal income tax withholding under § 3405 of the Internal Revenue Code and reporting under § 408(i) relating to payment of an individual’s interest in an IRA to a State unclaimed property fund, as required by State law. Under the facts presented in Rev. Rul. 2018–17, payments from an IRA to a State unclaimed property fund are subject to federal income tax withholding and reporting.

However, Rev. Rul. 2018–17 included the following transition relief: “A person will not be treated as failing to comply with the withholding and reporting requirements described in this revenue ruling with respect to payments made before the earlier of January 1, 2019, or the date it becomes reasonably practicable for the person to comply with those requirements.”

The Department of the Treasury and the Internal Revenue Service have received a number of requests for an extension of the transition relief in Rev. Rul. 2018–17.

The transition relief in Rev. Rul. 2018–17 is extended so that a person will not be treated as failing to comply with the withholding and reporting requirements described in Rev. Rul. 2018–17 with respect to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable for the person to comply with those requirements.

Rev. Rul. 2018–17 is modified.

The principal author of this notice is Cynthia Van Bogaert of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). Ms. Van Bogaert may be reached at (202) 317-4102 (not a toll-free number).

 

This revenue procedure sets forth inflation-adjusted items for 2019 for various provisions of the Internal Revenue Code of 1986 (Code) as amended as of November 15, 2018. To the extent amendments to the Code are enacted for 2019 after November 15, 2018, taxpayers should consult additional guidance to determine whether these adjustments remain applicable for 2019.

.01 Section 11001(a)(5) of An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. 115–97, 131 Stat. 2504 (the Act), adds § 1(j)(5), which provides a temporary modification to the dollar amounts in § 1(h)(1)(B) and (C) for taxable years beginning after December 31, 2017, and before January 1, 2026. Section 1(j)(5)(B)(i) provides that under § 1(h)(1)(B)(i) the maximum zero rate amount is $77,200 for a joint return or surviving spouse, $51,700 for a head of household, half of the amount for a joint return for an individual, and $2,600 for an estate or trust. Section 1(j)(5)(B)(ii) provides that under § 1(h)(1)(C)(ii)(I) the maximum 15% rate amount is $479,000 for a joint return or surviving spouse (half of this amount for a married individual filing a separate return), $452,400 for a head of household, $425,800 in the case of any other individual (other than an estate or trust), and $12,700 for an estate or trust. These amounts are adjusted for inflation for taxable years beginning after December 31, 2018.

.02 Section 11022(a) of the Act adds § 24(h), which provides special rules for taxable years beginning after December 31, 2017, and before January 1, 2026. Section 24(h) provides that the value used in § 24(d)(1)(A) to determine the amount of child tax credit under § 24 that may be refundable is $1,400. The $1,400 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.03 Section 11041 of the Act amends § 151(d)(5) to provide a temporary set dollar amount of zero for the personal exemption deduction for taxable years beginning after December 31, 2017, and before January 1, 2026. However, Notice 2018–70, 2018–38 I.R.B. 441, notifies taxpayers that the Department of the Treasury and the Internal Revenue Service intend to issue proposed regulations to clarify that the reduction of the exemption amount to zero in § 151(d)(5)(A) for taxable years 2018 through 2025 does not apply to the gross income limitation in the definition of a qualifying relative in § 152(d)(1)(B). Thus, the § 151(d) exemption amount referenced in § 152(d)(1)(B) will be treated as $4,150, as adjusted for inflation, for taxable years in which the § 151(d)(5)(A) exemption amount is zero.

.04 Section 13101 of the Act amends § 179(b)(6) to provide that the $25,000 limitation of the cost of any sport utility vehicle under § 179(b)(5)(A) is adjusted for inflation for taxable years beginning after December 31, 2018.

.05 Section 11011 of the Act adds § 199A, which provides in part that if for a taxable year a taxpayer has income less than the sum of the threshold amount plus $50,000 ($100,000 for joint returns), then any specified service trade or business of the taxpayer shall not fail to be treated as a qualified trade or business due to § 199A(d)(1)(A). Section 199A(e)(2)(A) defines the threshold amount as $157,500. This $157,500 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.06 Section 13102 of the Act amends § 448(c) to provide that a corporation or partnership meets the gross receipts tests for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $25,000,000. The $25,000,000 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.07 Section 11012 of the Act adds § 461(l) to provide that a taxpayer’s excess business loss for the taxable year is the excess, if any, of the taxpayer’s aggregate deductions attributable to trades or businesses of the taxpayer (determined without regard to the limitation of the provision) over the sum of the taxpayer’s aggregate gross income or gain attributable to such trades or businesses, plus $250,000 (twice this amount for joint returns). The $250,000 amount under § 461(l)(3)(A)(ii)(II) is adjusted for inflation for taxable years beginning after December 31, 2018.

.08 Section 11041(b) of the Act adds § 642(b)(2)(C)(iii), which provides that in years when the personal exemption amount under § 151(d) is zero, § 642(b)(2)(C)(i) shall be applied by substituting $4,150 for the exemption amount under § 151(d). The $4,150 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.09 Section 11002(d)(10) of the Act amended § 1274A(d)(2) to change the calculation of the inflation-adjusted amounts for qualified debt instruments and cash method debt instruments for taxable years beginning after December 31, 2017. In prior years, the inflation-adjusted amounts under § 1274A have been published in a separate revenue ruling. Because of the change to the calculation of the inflation-adjusted amounts under § 1274A, these amounts will be included in this revenue procedure and will no longer be published in a separate revenue ruling. For inflation-adjusted amounts prior to January 1, 2019, see Rev. Rul. 2018–11, 2018–18 I.R.B. 518.

.10 Section 11081 of the Act amends § 5000A to provide that the applicable dollar amount used to determine the penalty under § 5000A(c) for failure to maintain minimum essential coverage is $0 for taxable years beginning after December 31, 2018. Accordingly, this amount is not included in this revenue procedure.

.11 Section 11041(d) of the Act adds § 6334(d)(4), which provides that in taxable years in which the personal exemption amount under § 151(d) is zero, the term “exempt amount” means an amount equal to (i) the sum of the amount determined under § 6334(d)(4)(B) and the standard deduction, divided by (ii) 52. The amount determined under § 6334(d)(4)(B) is $4,150 multiplied by the number of the taxpayer’s dependents for the taxable year in which the levy occurs. The $4,150 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.01 Tax Rate Tables. For taxable years beginning in 2019, the tax rate tables under § 1 are as follows:

TABLE 1 - Section 1(j)(2)(A) - Married Individuals Filing Joint Returns and Surviving Spouses

TABLE 2 - Section 1(j)(2)(B) – Heads of Households

TABLE 3 - Section 1(j)(2)(C) – Unmarried Individuals (other than Surviving Spouses and Heads of Households)

TABLE 4 - Section 1(j)(2)(D) – Married Individuals Filing Separate Returns

TABLE 5 - Section 1(j)(2)(E) – Estates and Trusts

.02 Unearned Income of Minor Children Taxed as if Parent’s Income (the “Kiddie Tax”). For taxable years beginning in 2019, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,100. This $1,100 amount is the same as the amount provided in § 63(c)(5)(A), as adjusted for inflation. The same $1,100 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax”). For example, one of the requirements for the parental election is that a child’s gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2019 must be more than $1,100 but less than $11,000.

.03 Maximum Capital Gains Rate. For taxable years beginning in 2019, the Maximum Zero Rate Amount under § 1(h)(1)(B)(i) is $78,750 in the case of a joint return or surviving spouse, $52,750 in the case of an individual who is a head of household (§ 2(b)), $39,375 in the case of any other individual (other than an estate or trust), and $2,650 in the case of an estate or trust. The Maximum 15-percent Rate Amount under § 1(h)(C)(ii)(l) is $488,850 in the case of a joint return or surviving spouse (1/2 such amount in the case of a married individual filing a separate return), $461,700 in the case of an individual who is the head of a household (§ 2(b)), $434,550 in the case of any other individual (other than an estate or trust), and $12,950 in the case of an estate or trust.

.04 Adoption Credit. For taxable years beginning in 2019, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $14,080. For taxable years beginning in 2019, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $14,080. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $211,160 and is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more. (See section 3.20 for the adjusted items relating to adoption assistance programs.)

.05 Child Tax Credit. For taxable years beginning in 2019, the value used in § 24(d)(1)(A) to determine the amount of credit under § 24 that may be refundable is $1,400.

.06 Lifetime Learning Credit. For taxable years beginning in 2019, a taxpayer’s modified adjusted gross income in excess of $58,000 ($116,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

.07 Earned Income Credit.

(1) In general. For taxable years beginning in 2019, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(3)(B)(i), as adjusted for inflation for taxable years beginning in 2019.

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive Investment Income. For taxable years beginning in 2019, the earned income tax credit is not allowed under § 32(i)(1) if the aggregate amount of certain investment income exceeds $3,600.

.08 Refundable Credit for Coverage Under a Qualified Health Plan. For taxable years beginning in 2019, the limitation on tax imposed under § 36B(f)(2)(B) for excess advance credit payments is determined using the following table:

.09 Rehabilitation Expenditures Treated as Separate New Building. For calendar year 2019, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $7,000.

.10 Low-Income Housing Credit. For calendar year 2019, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.75625 multiplied by the State population, or (2) $3,166,875.

.11 Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2019, the dollar amount in effect under § 45R(d)(3)(B) is $27,100. This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.

.12 Exemption Amounts for Alternative Minimum Tax. For taxable years beginning in 2019, the exemption amounts under § 55(d)(1) are:

For taxable years beginning in 2019, under § 55(b)(1), the excess taxable income above which the 28 percent tax rate applies is:

For taxable years beginning in 2019, the amounts used under § 55(d)(3) to determine the phaseout of the exemption amounts are:

.13 Alternative Minimum Tax Exemption for a Child Subject to the “Kiddie Tax.” For taxable years beginning in 2019, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $7,750.

.14 Certain Expenses of Elementary and Secondary School Teachers. For taxable years beginning in 2019, under § 62(a)(2)(D) the amount of the deduction allowed under § 162 that consists of expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $250.

.15 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans. For calendar year 2019, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $18 per hour for rig-related expenses that are deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002–41, 2002–1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $11 per hour is deemed substantiated if paid under Rev. Proc. 2002–41.

.16 Standard Deduction.

(1) In general. For taxable years beginning in 2019, the standard deduction amounts under § 63(c)(2) are as follows:

(2) Dependent. For taxable years beginning in 2019, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,100, or (2) the sum of $350 and the individual’s earned income.

(3) Aged or blind. For taxable years beginning in 2019, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,300. The additional standard deduction amount is increased to $1,650 if the individual is also unmarried and not a surviving spouse.

.17 Cafeteria Plans. For taxable years beginning in 2019, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,700.

.18 Qualified Transportation Fringe Benefit. For taxable years beginning in 2019, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $265. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $265.

.19 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2019, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $121,600 for joint returns and $81,100 for all other returns. The exclusion is completely phased out for modified adjusted gross income of $151,600 or more for joint returns and $96,100 or more for all other returns.

.20 Adoption Assistance Programs. For taxable years beginning in 2019, under § 137(a)(2), the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $14,080. For taxable years beginning in 2019, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $14,080. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $211,160 and is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more. (See section 3.04 of this revenue procedure for the adjusted items relating to the adoption credit.)

.21 Private Activity Bonds Volume Cap. For calendar year 2019, the amounts used under § 146(d) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $105 multiplied by the State population, or (2) $316,745,000.

.22 Loan Limits on Agricultural Bonds. For calendar year 2019, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $543,800.

.23 General Arbitrage Rebate Rules. For bond years ending in 2019, the amount of the computation credit determined under the permission to rely on § 1.148–3(d)(4) of the proposed Income Tax Regulations is $1,730.

.24 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2019, under § 1.148–5(e)(2)(iii)(B)(1), a broker’s commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $41,000, and (B) 0.2 percent of the computational base (as defined in § 1.148–5(e)(2)(iii)(B)(2)) or, if more, $4,000; and (2) for any issue, the issuer does not treat more than $115,000 in brokers’ commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.25 Gross Income Limitation for a Qualifying Relative. For taxable years beginning in 2019, the exemption amount referenced in § 152(d)(1)(B) is $4,200.

.26 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2019, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,020,000 and under § 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $25,500. Under § 179(b)(2), the $2,550,000 limitation is reduced (but not below zero) by the amount the cost of § 179 property placed in service during the 2019 taxable year exceeds $2,550,000.

.27 Qualified Business Income. For taxable years beginning in 2019, the threshold amount under § 199A(e)(2) is $321,400 for married filing joint returns, $160,725 for married filing separate returns, and $160,700 for single and head of household returns.

.28 Eligible Long-Term Care Premiums. For taxable years beginning in 2019, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:

.29 Medical Savings Accounts.

(1) Self-only coverage. For taxable years beginning in 2019, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,350 and not more than $3,500, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,650.

(2) Family coverage. For taxable years beginning in 2019, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,650 and not more than $7,000, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,550.

.30 Interest on Education Loans. For taxable years beginning in 2019, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $70,000 ($140,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $85,000 or more ($170,000 or more for joint returns).

.31 Limitation on Use of Cash Method of Accounting. For taxable years beginning in 2019, a corporation or partnership meets the gross receipts test of § 448(c) for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $26,000,000.

.32 Threshold for Excess Business Loss. For taxable years beginning in 2019, in determining a taxpayer’s excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $255,000 ($510,000 for joint returns).

.33 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2019, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $169.

.34 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.

(1) Low cost article. For taxable years beginning in 2019, for purposes of defining the term “unrelated trade or business” for certain exempt organizations under § 513(h)(2), “low cost articles” are articles costing $11.10 or less.

(2) Other insubstantial benefits. For taxable years beginning in 2019, under § 170, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90–12, 1990–1 C.B. 471 (as amplified by Rev. Proc. 92–49, 1992–1 C.B. 987, and modified by Rev. Proc. 92–102, 1992–2 C.B. 579), for the value of insubstantial benefits that may be received by a donor in return for a contribution, without causing the contribution to fail to be fully deductible, are $11.10, $55.50, and $111, respectively.

.35 Special Rules for Credits and Deductions. For taxable years beginning in 2019, the amount of the deduction under § 642(b)(2)(C)(i) is $4,200.

.36 Tax on Insurance Companies Other than Life Insurance Companies. For taxable years beginning in 2019, under § 831(b)(2)(A)(i) the amount of the limit on net written premiums or direct written premiums (whichever is greater) is $2,300,000 to elect the alternative tax for certain small companies under § 831(b)(1) to be taxed only on taxable investment income.

.37 Expatriation to Avoid Tax. For calendar year 2019, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual’s “average annual net income tax” under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $168,000.

.38 Tax Responsibilities of Expatriation. For taxable years beginning in 2019, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $725,000.

.39 Foreign Earned Income Exclusion. For taxable years beginning in 2019, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $105,900.

.40 Debt Instruments Arising Out of Sales or Exchanges. For calendar year 2019, a qualified debt instrument under § 1274A(b) has stated principal that does not exceed $5,944,600, and a cash method debt instrument under § 1274A(c)(2) has stated principal that does not exceed $4,246,200.

.41 Unified Credit Against Estate Tax. For an estate of any decedent dying in calendar year 2019, the basic exclusion amount is $11,400,000 for determining the amount of the unified credit against estate tax under § 2010.

.42 Valuation of Qualified Real Property in Decedent’s Gross Estate. For an estate of a decedent dying in calendar year 2019, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,160,000.

.43 Annual Exclusion for Gifts.

(1) For calendar year 2019, the first $15,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.

(2) For calendar year 2019, the first $155,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.

.44 Tax on Arrow Shafts. For calendar year 2019, the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.52 per shaft.

.45 Passenger Air Transportation Excise Tax. For calendar year 2019, the tax under § 4261(b)(1) on the amount paid for each domestic segment of taxable air transportation is $4.20. For calendar year 2019, the tax under § 4261(c)(1) on any amount paid (whether within or without the United States) for any international air transportation, if the transportation begins or ends in the United States, generally is $18.60. Under § 4261(c)(3), however, a lower amount applies under § 4261(c)(1) to a domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to departures. For calendar year 2019, the rate is $9.30.

.46 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2019, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98–19, 1998–1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $117 or less.

.47 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2019, § 6039F authorizes the Treasury Department and the Internal Revenue Service to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $16,388.

.48 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2019, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,590, or (2) a mechanic’s lienor under § 6323(b)(7) who repaired or improved certain residential property if the contract price with the owner is not more than $7,970.

.49 Property Exempt from Levy. For calendar year 2019, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed $9,540. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) cannot exceed $4,770.

.50 Exempt Amount of Wages, Salary, or Other Income. For taxable years beginning in 2019, the dollar amount used to calculate the amount determined under § 6334(d)(4)(B) is $4,200.

.51 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2019, the dollar amount used to determine the “2-percent portion” (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,550,000.

.52 Failure to File Tax Return. In the case of any return required to be filed in 2020, the amount of the addition to tax under § 6651(a) for failure to file a tax return within 60 days of the due date of such return (determined with regard to any extensions of time for filing) shall not be less than the lesser of $215 or 100 percent of the amount required to be shown as tax on such returns.

.53 Failure to File Certain Information Returns, Registration Statements, etc. For returns required to be filed in 2020, the penalty amounts under § 6652(c) are:

(1) for failure to file a return required under § 6033(a)(1) (relating to returns by exempt organization) or § 6012(a)(6) (relating to returns by political organizations):

(2) for failure to file a return required under § 6034 (relating to returns by certain trust) or § 6043(b) (relating to terminations, etc., of exempt organizations):

(3) for failure to file a disclosure required under § 6033(a)(2):

.54 Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons. In the case of any failure relating to a return or claim for refund filed in 2020, the penalty amounts under § 6695 are:

.55 Failure to File Partnership Return. In the case of any return required to be filed in 2020, the dollar amount used to determine the amount of the penalty under § 6698(b)(1) is $205.

.56 Failure to File S Corporation Return. In the case of any return required to be filed in 2020, the dollar amount used to determine the amount of the penalty under § 6699(b)(1) is $205.

.57 Failure to File Correct Information Returns. In the case of any failure relating to a return required to be filed in 2020, the penalty amounts under § 6721 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns:

(2) for persons with average annual gross receipts for the most recent three taxable years of $5,000,000 or less, for failure to file correct information returns:

(3) for failure to file correct information returns due to intentional disregard of the filing requirement (or the correct information reporting requirement):

.58 Failure to Furnish Correct Payee Statements. In the case of any failure relating to a statement required to be furnished in 2020, the penalty amounts under § 6722 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns:

(2) for persons with average annual gross receipts for the most recent 3 taxable years of $5,000,000 or less, for failure to file correct information returns:

(3) for failure to file correct payee statements due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement):

.59 Revocation or Denial of Passport in Case of Certain Tax Delinquencies. For calendar year 2019, the amount of a serious delinquent tax debt under § 7345 is $52,000.

.60 Attorney Fee Awards. For fees incurred in calendar year 2019, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $200 per hour.

.61 Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts. For calendar year 2019, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $370.

.62 Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2019, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,150 ($10,450 for family coverage).

.01 General Rule. Except as provided in section 4.02, this revenue procedure applies to taxable years beginning in 2019.

.02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2019 for purposes of sections 3.09 (rehabilitation expenditures treated as separate new building), 3.10 (low-income housing credit), 3.15 (transportation mainline pipeline construction industry optional expense substantiation rules for payments to employees under accountable plans), 3.21 (private activity bonds volume cap), 3.22 (loan limits on agricultural bonds), 3.23 (general arbitrage rebate rules), 3.24 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 3.37 (expatriation to avoid taxes), 3.40 (debt instruments arising out of sales or exchanges), 3.41 (unified credit against estate tax), 3.42 (valuation of qualified real property in decedent’s gross estate), 3.43 (annual exclusion for gifts), 3.44 (tax on arrow shafts), 3.45 (passenger air transportation excise tax), 3.48 (persons against whom a federal tax lien is not valid), 3.49 (property exempt from levy), 3.51 (interest on a certain portion of the estate tax payable in installments), 3.59 (revocation or denial of passport in case of certain tax delinquencies), 3.60 (attorney fee awards), and 3.61 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts).

The principal author of this revenue procedure is William Ruane of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Ruane at (202) 317-4718 (not a toll-free number).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

This document contains proposed regulations specifying which return to use to pay certain excise taxes and the time for filing the return. The regulations also implement the statutory addition of two excise taxes to the first-tier taxes subject to abatement. These regulations affect applicable tax-exempt organizations and their related organizations, applicable educational institutions, sponsoring organizations that maintain certain donor advised funds, fund managers of such sponsoring organizations, and certain donors, donor advisors and persons related to a donor or donor advisor of a donor advised fund.

Written or electronic comments and requests for a public hearing must be received by December 7, 2018.

Send submissions to: CC:PA:LPD:PR (REG-107163–18), 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-107163–18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, 20224 or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (indicate IRS REG-107163–18).

Concerning the proposed regulations, Amber L. MacKenzie at (202) 317-4086 or Ward L. Thomas at (202) 317-6173; concerning submission of comments and request for hearing, Regina Johnson at (202) 317-6901 (not toll-free numbers).

This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This rule merely provides guidance as to the timing and filing of Form 4720 for persons liable for the specified excise taxes and who have a statutory filing obligation. Completing the applicable portion of the Form 4720 imposes little incremental burden in time or expense as compared to any other filing method. In addition, a person may already be required to file the Form 4720 under the existing final regulations in §§ 53.6011–1 and 53.6071–1 if it is liable for another excise tax for which filing of the Form is required. Therefore, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, this regulation will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small entities.

The principal authors of these regulations are Amber L. MacKenzie and Ward L. Thomas, Office of Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in their development.

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

This document contains proposed amendments to the regulations relating to hardship distributions from section 401(k) plans. The amendments reflect statutory changes affecting section 401(k) plans, including recent changes made by the Bipartisan Budget Act of 2018. These regulations would affect participants in, beneficiaries of, employers maintaining, and administrators of plans that contain cash or deferred arrangements or provide for employee or matching contributions.

Comments and requests for a public hearing must be received by January 14, 2019.

Send submissions to CC:PA:LPD:PR (REG-107813–18) 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-107813–18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov/ (indicate IRS and REG-107813–18).

Concerning the proposed regulations, Roger Kuehnle at (202) 317-6060 or; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Regina L. Johnson at (202) 317-6901 (not toll-free numbers).

The principal author of these regulations is Roger Kuehnle of the Office of Associate Chief Counsel (Tax Exempt and Governmental Entities). However, other personnel from the IRS and Treasury Department participated in their development.

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 401(m)(9) and 26 U.S.C. 7805 * * *

Par. 2. Section 1.401(k)–1 is amended by:

1. Revising paragraphs (d)(1)(ii) and (iii) and adding new paragraph (d)(1)(iv).

2. Removing paragraph (d)(3)(ii) and redesignating paragraphs (d)(3)(iii), (iv) and (v) as paragraphs (d)(3)(ii), (iii) and (iv).

3. Revising newly redesignated paragraph (d)(3)(ii)(B) and adding new paragraph (d)(3)(ii)(C).

4. Revising newly redesignated paragraphs (d)(3)(iii) and (iv) and adding new paragraph (d)(3)(v).

5. In paragraph (d)(6), removing examples 3, 4, and 5 and redesignating example 6 as example 3.

The additions and revisions read as follows: