LIFO; price indexes; department stores. The November 2005 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, November 30, 2005.

Final regulations under section 1374 of the Code provide that (a) section 1374(d)(8) applies to any transaction described in that section that occurs on or after December 27, 1994, regardless of the date of the S corporation’s election under section 1362; and (b) for purposes of section 633(d)(8) of the Tax Reform Act of 1986, as amended, a corporation’s most recent S election, not an earlier election that has been revoked or terminated, determines whether or not it is subject to current section 1374.

Proposed regulations under section 168 of the Code provide guidance on the normalization requirements applicable to public utilities that benefit (or have benefited) from accelerated depreciation methods or from the investment tax credit permitted under pre-1999 law. The regulations permit a utility whose assets cease to be public utility property to return to its ratepayers the normalization reserve for excess deferred income taxes (EDFIT) with respect to those assets and, in certain circumstances, also permit the return of part or all of the reserve for accumulated deferred investment tax credits (ADITC) with respect to those assets. A public hearing is scheduled for April 5, 2006.

This document notifies taxpayers and material advisors of a future change to the categories of reportable transactions under proposed section 1.6011-4 of the regulations. The Service and Treasury Department will be issuing temporary and proposed regulations under section 1.6011-4 that will remove from the categories of reportable transactions under section 1.6011-4(b)(1) the category of transactions with a significant book-tax difference currently set forth in section 1.6011-4(b)(6). Until the amended regulations are issued, taxpayers and material advisors may rely on this notice.

Hurricane Katrina evacuation allowances. This notice discusses the income and employment tax treatment of special allowances paid by federal executive agencies to employees and their dependents to reimburse certain expenses incurred while evacuating from the Hurricane Katrina core disaster area and staying at a safe haven.

Weighted average interest rate update; 30-year Treasury securities. The weighted average interest rate for January 2006 and the resulting permissible range of interest rates used to calculate current liability and to determine the required contribution are set forth.

The Nunoi Foundation of Los Angeles, CA, no longer qualifies as an organization to which contributions are deductible under section 170 of the Code.

Hurricane Katrina evacuation allowances. This notice discusses the income and employment tax treatment of special allowances paid by federal executive agencies to employees and their dependents to reimburse certain expenses incurred while evacuating from the Hurricane Katrina core disaster area and staying at a safe haven.

This document notifies taxpayers and material advisors of a future change to the categories of reportable transactions under proposed section 1.6011-4 of the regulations. The Service and Treasury Department will be issuing temporary and proposed regulations under section 1.6011-4 that will remove from the categories of reportable transactions under section 1.6011-4(b)(1) the category of transactions with a significant book-tax difference currently set forth in section 1.6011-4(b)(6). Until the amended regulations are issued, taxpayers and material advisors may rely on this notice.

Hurricane Katrina evacuation allowances. This notice discusses the income and employment tax treatment of special allowances paid by federal executive agencies to employees and their dependents to reimburse certain expenses incurred while evacuating from the Hurricane Katrina core disaster area and staying at a safe haven.

This procedure provides the maximum vehicle values for use of the special valuation rules under regulations sections 1.61-21(d) and (e). These values are indexed for inflation and must be adjusted annually by referring to the Consumer Price Index (CPI).

This document provides notice of a public hearing on proposed regulations (REG-131739-03, 2005-36 I.R.B. 494) relating to the IRS preparing or executing returns for persons who fail to make required returns. The hearing is scheduled for March 8, 2006.

The following Department Store Inventory Price Indexes for November 2005 were issued by the Bureau of Labor Statistics. The indexes are accepted by the Internal Revenue Service, under § 1.472-1(k) of the Income Tax Regulations and Rev. Proc. 86-46, 1986-2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory methods for tax years ended on, or with reference to, November 30, 2005.

The Department Store Inventory Price Indexes are prepared on a national basis and include (a) 23 major groups of departments, (b) three special combinations of the major groups — soft goods, durable goods, and miscellaneous goods, and (c) a store total, which covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments.

The principal author of this revenue ruling is Michael Burkom of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Mr. Burkom at (202) 622-7924 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Final regulations.

This document contains final regulations that provide guidance concerning the applicability of section 1374 of the Internal Revenue Code to S corporations that acquire assets in carryover basis transactions from C corporations on or after December 27, 1994, and to certain corporations that terminate S corporation status and later elect again to become S corporations.

Effective Date: These regulations are effective December 21, 2005.

Applicability Dates: Section 1.1374-8 applies to any transaction described in section 1374(d)(8) that occurs on or after December 27, 1994. Section 1.1374-10 applies for taxable years beginning after December 22, 2004.

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 Treasury and the IRS participated in their development.

* * * * *

The purpose of this notice is to notify taxpayers and material advisors of a future change to the categories of reportable transactions under § 1.6011-4 of the Income Tax Regulations. Until regulations reflecting this change are issued, taxpayers and material advisors may rely on this notice.

Section 1.6011-4 requires a taxpayer that participates in a reportable transaction to disclose the transaction in accordance with procedures provided in § 1.6011-4. Similarly, § 6111 of the Internal Revenue Code, as amended by the American Jobs Creation Act of 2004, Pub. L. No. 108-357, 118 Stat. 1418 (the Act), requires that each material advisor with respect to any reportable transaction make a return setting forth information identifying and describing the transaction and any potential tax benefits expected to result from the transaction by the date specified by the Secretary. Section 6112, as amended by the Act, requires material advisors to maintain lists identifying each person with respect to whom the advisor acted as a material advisor and containing such other information as the Secretary may by regulations require.

Under § 1.6011-4(b), there are currently six categories of reportable transactions. One category of reportable transactions is a transaction with a significant book-tax difference. A transaction with a significant book-tax difference is defined in § 1.6011-4(b)(6) as a transaction where the amount for tax purposes of any item or items of income, gain, expense, or loss from the transaction differs by more than $10 million on a gross basis from the amount of the item or items for book purposes in any taxable year. The amount of an item for book purposes is normally determined by applying U.S. generally accepted accounting principles for worldwide income.

In 2004, the Internal Revenue Service released Schedule M-3, Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More, for corporations that file Form 1120, U.S. Corporation Income Tax Return, effective for taxable years ending on or after December 31, 2004. On August 2, 2004, the Service and Treasury Department released Rev. Proc. 2004-45, 2004-2 C.B. 140, which provided procedures for filing the Schedule M-3 that are deemed to satisfy a taxpayer’s disclosure obligations for reporting transactions with a significant book-tax difference under § 1.6011-4. Rev. Proc. 2004-45 also announced that the Service and Treasury Department will continue to evaluate whether the disclosure requirements described in the revenue procedure and Schedule M-3 provide the Service and Treasury Department adequate information regarding significant book-tax differences. In December 2005, the Service released draft Schedules M-3 and instructions for corporations and partnerships that, in general, have total assets of $10 million or more and that file Forms 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return, 1120-L, U.S. Life Insurance Company Income Tax Return, 1120-S, U.S. Income Tax Return for an S Corporation, or 1065, U.S. Return of Partnership Income. When finalized, these Schedules M-3 will be effective for tax years ending on or after December 31, 2006.

Based on a review of the Forms 8886, Reportable Transaction Disclosure Statement, and Schedules M-3 received during the most recent filing season, the Service and Treasury Department have concluded that the book-tax difference category of reportable transactions under § 1.6011-4 is no longer necessary. As a result, the Service and Treasury Department will be issuing temporary and proposed regulations under § 1.6011-4 that will remove from the categories of reportable transactions under § 1.6011-4(b)(1) the category of transactions with a significant book-tax difference currently set forth in § 1.6011-4(b)(6).

The removal of the book-tax difference category of reportable transactions will apply to transactions with a significant book-tax difference that otherwise would have to be disclosed by taxpayers under § 1.6011-4 on Form 8886 (or on Schedule M-3 as prescribed in Rev. Proc. 2004-45) on or after January 6, 2006, the date this notice is released to the public. Consequently, for those affected transactions, taxpayers are not required to file a disclosure statement solely because the transaction has a significant book-tax difference under § 1.6011-4(b)(6).

The removal of this category of reportable transaction also will apply to transactions with a significant book-tax difference that otherwise would have to be disclosed by material advisors under § 6111 on Form 8264, Application for Registration of a Tax Shelter, on or after January 6, 2006. For those affected transactions, material advisors are not required to file a disclosure statement solely because the transaction has a significant book-tax difference under § 1.6011-4(b)(6).

Similarly, the removal of this category of reportable transaction will apply to transactions with a significant book-tax difference for which lists under § 6112 otherwise should have been prepared and maintained beginning on or after January 6, 2006. For those affected transactions, material advisors are not required to prepare and maintain lists solely because the transaction has a significant book-tax difference under § 1.6011-4(b)(6).

This notice does not relieve taxpayers or material advisors of any disclosure, registration or list maintenance obligations for transactions that should have been disclosed or registered, or for transactions for which lists should have been prepared and maintained, prior to January 6, 2006. Further, this notice does not relieve taxpayers of any obligation to file a Schedule M-3.

If a transaction with a significant book-tax difference also is described in § 1.6011-4(b)(2) through (5) or (7), the transaction is a reportable transaction under § 1.6011-4 for which disclosure may be required by taxpayers under § 1.6011-4, and for which disclosure and list maintenance may be required by material advisors under §§ 6111 and 6112, respectively.

The principal author of this notice is Tara P. Volungis of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Ms. Volungis at (202) 622-3080 (not a toll-free call).

Sections 412(b)(5)(B) and 412(l)(7)(C)(i) of the Internal Revenue Code generally provide that the interest rates used to calculate current liability for purposes of determining the full funding limitation under § 412(c)(7) and the required contribution under § 412(l) must be within a permissible range around the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year.

Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability for the purpose of the full funding limitation of § 412(c)(7) of the Code.

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

The rate of interest on 30-year Treasury securities for December 2005 is 4.65 percent. Pursuant to Notice 2002-26, 2002-1 C.B. 743, the Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.

The following 30-year Treasury rates were determined for the plan years beginning in the month shown below.

The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number), between the hours of 8:30 a.m. and 4:30 p.m. Eastern time, Monday through Friday. Mr. Stern may be reached at 1-202-283-9703. Mr. Montanaro may be reached at 1-202-283-9714. The telephone numbers in the preceding sentences are not toll-free.

This notice provides guidance on the federal income and employment tax treatment of special allowances (as defined in 5 C.F.R. §§ 550.403(c) and 550.405(b)(2)) paid by federal executive agencies (as defined in 5 U.S.C. § 105) to employees (as defined in 5 C.F.R. § 550.401(b)(2), (3), and (4)) to reimburse certain expenses the employees and their dependents incur while evacuating from the Hurricane Katrina core disaster area and staying at a safe haven as a result of the extraordinary damage and destruction caused by Hurricane Katrina. The term “Hurricane Katrina core disaster area” means that portion of the Hurricane Katrina Disaster Area determined by the President to warrant individual or individual and public assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. See § 2(2) of the Katrina Emergency Tax Relief Act of 2005, Pub. L. No. 109-73, 119 Stat. 2016 (2005).

In the wake of Hurricane Katrina, which was a Presidentially declared disaster, federal executive agencies may make payments to their employees to reimburse the costs of travel, lodging, meals, and incidental expenses the employees and their dependents incur while evacuating from the Hurricane Katrina core disaster area and staying at a safe haven. Federal executive agencies are authorized to pay these special allowances to employees under 5 U.S.C. § 5523(b) (“An employee in an Executive agency may be granted such additional allowance payments . . . .”) and 5 C.F.R. § 550.403(c) if the employees and their dependents “are evacuated in the United States because of natural disasters or for military or other reasons that create imminent danger to their lives.” 5 C.F.R. § 550.401(a). The payments authorized by 5 C.F.R. § 550.403(c) include travel expenses and per diem payments to offset direct added expenses the employees and their dependents incur due to an evacuation. Additional special allowance payments for subsistence expenses, as authorized by and computed under 5 C.F.R. § 550.405(b)(2), may be paid for a period not to exceed 180 days after the effective date of the order to evacuate. Federal executive agencies generally must determine the amount of the special allowance payments for the employees and their dependents consistent with the Federal Travel Regulation (FTR), 41 C.F.R. Chapters 300 through 304. For dependents under 12 years of age and for payments made after the first 30 days of evacuation, the special allowance payments are paid at a rate less than the maximum per diem. 5 C.F.R. § 550.405. The regulations authorizing these payments are silent as to whether federal executive agencies are required to take into account reimbursements from other payors when determining the amount of a special allowance.

Section 61 provides that except as otherwise provided in subtitle A of the Code, gross income means all income from whatever source derived.

The Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107-134, 115 Stat. 2427 (2001), added § 139 to the Code. Section 139(a) provides that gross income shall not include any amount received by an individual as a qualified disaster relief payment.

Under § 139(b)(1), a qualified disaster relief payment includes any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster, but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.

Section 139(c) defines a qualified disaster to include:

(1) a disaster that results from a terroristic or military action (as defined in § 692(c)(2));

(2) a Presidentially declared disaster (as defined in § 1033(h)(3)); or

(3) a disaster resulting from an accident involving a common carrier, or from any other event, that is determined by the Secretary to be of a catastrophic nature.

Section 139(d) provides that for purposes of chapter 2 and subtitle C of the Code, a qualified disaster relief payment shall not be treated as net earnings from self-employment, wages, or compensation subject to tax.

Because “of the extraordinary circumstances surrounding a qualified disaster, it is anticipated that individuals will not be required to account for actual expenses in order to qualify for the [§ 139] exclusion, provided that the amount of the payments can be reasonably expected to be commensurate with the expenses incurred.” Joint Committee on Taxation Staff, Technical Explanation of the “Victims of Terrorism Tax Relief Act of 2001,” As Passed by the House and Senate on December 20, 2001, 107^th Cong., 1^st Sess. 16 (2001).

.01 Payments Made by Federal Executive Agencies to Which This Notice Applies

The special allowances described in 5 U.S.C. § 5523(b) and 5 C.F.R. §§ 550.403(c) and 550.405(b)(2) that an employee receives as a result of Hurricane Katrina will be treated as reasonable, necessary, and excludable from the gross income and wages of the employee under § 139 to the extent that the expenses compensated by the special allowances are not otherwise compensated for by insurance or otherwise.

Federal executive agencies that pay an employee special allowances authorized by 5 U.S.C. § 5523(b) and 5 C.F.R. §§ 550.403(c) and 550.405(b)(2) as a result of Hurricane Katrina will not be required to report the special allowances (even if the expenses are otherwise compensated for by insurance or otherwise) on Form W-2, Wage and Tax Statement, or to deduct and withhold taxes from these amounts. In addition, the IRS will not require either a Federal executive agency or its employee to include any amount of Hurricane Katrina special allowances in wages for employment tax purposes (even if the expenses are otherwise compensated for by insurance or otherwise).

.02 Payments Made by Federal Executive Agencies to Which This Notice Does Not Apply

The rules provided in section 3.01 of this notice do not apply to payments not described therein. For example, the rules do not apply to advance payments of pay, allowances, and differentials under 5 U.S.C. § 5522(a) and to payments made by a federal executive agency to compensate an employee for expenses incurred in relocating to the disaster area.

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

.01 This revenue procedure provides: (1) the maximum value of employer-provided vehicles first made available to employees for personal use in calendar year 2006 for which the vehicle cents-per-mile valuation rule provided under section 1.61-21(e) of the Income Tax Regulations may be applicable is $15,000 for a passenger automobile and $16,400 for a truck or van; (2) the maximum value of employer-provided vehicles first made available to employees for personal use in calendar year 2006 for which the fleet-average valuation rule provided under section 1.61-21(d) of the regulations may be applicable is $19,900 for a passenger automobile and $21,400 for a truck or van.

.01 If an employer provides an employee with a vehicle that is available to the employee for personal use, the value of the personal use must generally be included in the employee’s income and wages. Internal Revenue Code § 61; Treas. Reg. § 1.61-21.

.02 For employer-provided passenger automobiles (including trucks and vans) made available to employees for personal use that meet the requirements of section 1.61-21(e)(1) of the regulations, generally the value of the personal use may be determined under the vehicle cents-per-mile valuation rule of section 1.61-21(e). However, regulations section 1.61-21(e)(1)(iii)(A) provides that for a passenger automobile first made available after 1988 to any employee of the employer for personal use, the value of the personal use may not be determined under the vehicle cents-per-mile valuation rule for a calendar year if the fair market value of the passenger automobile (determined pursuant to regulations section 1.61-21(d)(5)(i) through (iv)) on the first date the passenger automobile is made available to the employee exceeds a specified dollar limit.

.03 For employer-provided vehicles available to employees for personal use for an entire year, generally the value of the personal use may be determined under the automobile lease valuation rule of section 1.61-21(d) of the regulations. Under this valuation rule, the value of the personal use is the Annual Lease Value. Provided the requirements of regulations section 1.61-21(d)(5)(v) are met, an employer with a fleet of 20 or more automobiles may use a fleet-average value for purposes of calculating the Annual Lease Values of the automobiles in the employer’s fleet. The fleet-average value is the average of the fair market values of all the automobiles in the fleet. However, section 1.61-21(d)(5)(v)(D) of the regulations provides that for an automobile first made available after 1988 to an employee of the employer for personal use, the value of the personal use may not be determined under the fleet-average valuation rule for a calendar year if the fair market value of the automobile (determined pursuant to regulations section 1.61-21(d)(5)(i) through (v)) on the first date the passenger automobile is made available to the employee exceeds a specified dollar limit.

.04 The maximum passenger automobile values for applying the vehicle cents-per-mile and the fleet-average value rules reflect the automobile price inflation adjustment of Code section 280F(d)(7). The method of calculating this price inflation amount for automobiles other than trucks and vans uses the “new car” component of the Consumer Price Index (CPI) “automobile component”. When calculating this price inflation adjustment for trucks and vans, the “new trucks” component of the CPI is used. This results in somewhat higher maximum values for trucks and vans. This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988, and is consistent with the change announced in Rev. Proc. 2003-75, 2003-2 C.B. 1018, for purposes of calculating depreciation deductions. See also Rev. Proc. 2004-20, 2004-1 C.B. 642, and Rev. Proc. 2005-13, 2005-12 I.R.B. 759. For purposes of this revenue procedure, the term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.

.01 Maximum Automobile Value for Using the Cents-per-mile Valuation Rule. An employer providing a passenger automobile for the first time in calendar year 2006 for the personal use of any employee may determine the value of the personal use by using the vehicle cents-per-mile valuation rule in section 1.61-21(e) of the regulations if its fair market value on the date it is first made available does not exceed $15,000 for a passenger automobile other than a truck or van, or $16,400 for a truck or van. If the fair market value of the passenger automobile exceeds this amount, the employer may determine the value of the personal use under the general valuation rules of regulations section 1.61-21(b) or under the special valuation rules of section 1.61-21(d) (Automobile lease valuation) or section 1.61-21(f) (Commuting valuation) if the applicable requirements are met. See Rev. Proc. 2004-20 for guidance on determining the maximum value of passenger automobiles first made available during calendar year 2004, and Rev. Proc. 2005-48 for guidance on determining the maximum value of passenger automobiles first made available during calendar year 2005.

.02 Maximum Automobile Value for Using the Fleet-Average Valuation Rule. An employer with a fleet of 20 or more automobiles providing an automobile for the first time in calendar year 2006 for the personal use of any employee for an entire year may determine the value of the personal use by using the fleet-average valuation rule in regulations section 1.61-21(d)(5)(v) to calculate the Annual Lease Values of the automobiles in the fleet. The fleet-average valuation rule may not be used to determine the Annual Lease Value of any automobile if its fair market value on the date it is first made available exceeds $19,900 for a passenger automobile other than a truck or van, or $21,400 for a truck or van. If all other applicable requirements are met, an employer with a fleet of 20 or more vehicles consisting of passenger automobiles other than trucks or vans as well as trucks and vans may use the fleet-average valuation rule as long as none of the vehicles exceed their respective maximum allowable values. If the fair market value of any passenger automobile in the fleet exceeds these amounts, the employer may determine the value of the personal use under regulations section 1.61-21(f) (Commuting valuation) or the general valuation rules of section 1.61-21(b), or may determine the Annual Lease Value of such automobile separately under the automobile lease valuation rule of section 1.61-21(d)(2) if the applicable requirements are met.

This revenue procedure applies to employer-provided passenger automobiles first made available to employees for personal use in calendar year 2006.

The principal author of this revenue procedure is Frederick L. Wesner of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt/Government Entities). For further information regarding the maximum automobile value for applying the valuation rules of regulations section 1.61-21(e)(1)(iii)(A) (the vehicle cents-per-mile valuation rule), and section 1.61-21(d)(5)(v)(D) (the fleet-average valuation rule), contact Frederick L. Wesner at (202) 622-6040 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking, notice of public hearing, and withdrawal of previous proposed regulations.

This document contains proposed regulations that provide guidance on the normalization requirements applicable to public utilities that benefit (or have benefited) from accelerated depreciation methods or from the investment tax credit permitted under pre-1991 law. The proposed regulations permit a utility whose assets cease to be public utility property to return to its ratepayers the normalization reserve for excess deferred income taxes (EDFIT) with respect to those assets and, in certain circumstances, also permit the return of part or all of the reserve for accumulated deferred investment tax credits (ADITC) with respect to those assets. This document also provides notice of a public hearing on these proposed regulations and a withdrawal of proposed regulations [REG-104385-01, 2003-1 C.B. 634] published March 4, 2003, at 68 FR 10190.

Written or electronic comments must be received by March 21, 2005. Requests to speak and outlines of topics to be discussed at the public hearing scheduled for April 5, 2006, at 10 a.m. must be received by March 15, 2006.

Send submissions to: CC:PA:LPD:PR (REG-104385-01), room 5203, Internal Revenue Service, PO 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-104385-01), 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 (indicate IRS and REG-104385-01). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

Concerning the proposed regulations, David Selig, at (202) 622-3040; concerning submissions of comments, the hearing, or to be placed on the building access list to attend the hearing, Richard Hurst, at (202) 622-7180 (not toll-free numbers).

Under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-104385-01) published in the Federal Register on March 4, 2003 (68 FR 10190) is withdrawn.

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

The principal author of these regulations is David Selig, Office of the Associate Chief Counsel (Passthroughs and Special Industries), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

* * * * *

The name of an organization that no longer qualifies as an organization described in section 170(c)(2) of the Internal Revenue Code of 1986 is listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on January 30, 2006, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

Internal Revenue Service (IRS), Treasury.

Notice of public hearing on proposed rulemaking.

This document provides notice of public hearing on proposed regulations (REG-131739-03, 2005-36 I.R.B. 494) relating to the IRS preparing or executing returns for persons who fail to make required returns.

The public hearing is being held on Wednesday, March 8, 2006, at 10 a.m. The IRS must receive outlines of the topics to be discussed at the hearing by Wednesday, February 15, 2006.

The public hearing is being held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building.

Mail outlines to: CC:PA:LPD:PR (REG-131739-03), room 5203, Internal Revenue Service, POB 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-131739-03), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit outlines electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS and notice.comment@irscounsel.treas.gov (REG-131739-03).

Concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing Treena Garrett, (202) 622-7180 (not a toll-free number).

The subject of the public hearing is the notice of proposed rulemaking (REG-131739-03) that was published in the Federal Register on Monday, July 18, 2005 (70 FR 41165).

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who have submitted written or electronic comments and wish to present oral comments at the hearing must submit an outline of the topics to be discussed and the amount of time to be devoted to each topic (signed original and eight (8) copies) by February 15, 2006.

A period of 10 minutes is allotted to each person for presenting oral comments. After the deadline for receiving outlines has passed, the IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available, free of charge, at the hearing. Because of access restrictions, the IRS will not admit visitors beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the “FOR FURTHER INFORMATION CONTACT” section of this document.