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

Section 382. This notice invites public comments relating to possible modifications to the regulations under section 382 of the Code regarding the treatment of shareholders who are not 5-percent shareholders (Small Shareholders).

Section 382. This notice provides guidance under section 382 of the Code for measuring owner shifts of loss corporations that have more than one class of stock outstanding, and, in particular, regarding the effect of fluctuations in the value of one class of stock relative to another class of stock.

This notice provides relief to sponsors of defined contribution pre-approved plans (i.e., master and prototype (M&P) and volume submitter (VS) plans) affected by recent federally declared disasters. The relief provided by this notice extends the April 30, 2010, deadline for restating affected pre-approved defined contribution plans and, if applicable, for submitting determination letters to the Service to July 30, 2010. The section 401(b) remedial amendment period with respect to these plans is also extended to July 30, 2010. Rev. Proc. 2007-44 modified.

Final, temporary, and proposed regulations provide guidance on section 5000B of the Code- the indoor tanning services excise tax imposed by the Patient Protection and Affordable Care Act. The regulations affect persons that use, provide, or pay for indoor tanning services.

Final, temporary, and proposed regulations provide guidance on section 5000B of the Code- the indoor tanning services excise tax imposed by the Patient Protection and Affordable Care Act. The regulations affect persons that use, provide, or pay for indoor tanning services.

This procedure provides issuers of qualified mortgage bonds (QMBs) and qualified mortgage credit certificates (MCCs) with average area purchase price safe harbors for statistical areas in the United States and with a nationwide average purchase price for residences in the United States for purposes of the QMB rules under section 143 of the Code and the MCC rules under section 25. Rev. Proc. 2009-18 obsoleted in part.

This revenue ruling provides various prescribed rates for federal income tax purposes for July 2010 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. 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. Finally, Table 6 contains the blended annual rate for 2010 for purposes of section 7872.

Internal Revenue Service (IRS), Treasury.

Final and temporary regulations.

This document contains final and temporary regulations that provide guidance on the indoor tanning services excise tax imposed by the Patient Protection and Affordable Care Act. These final and temporary regulations affect persons that use, provide, or pay for indoor tanning services. The text of these temporary regulations also serves as the text of the proposed regulations (REG-112841-10) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.

Effective Date: These regulations are effective on June 15, 2010.

Applicability Date: For dates of applicability, see §§40.0-1T(e) and 49.5000B-1T(h).

Taylor Cortright, (202) 622-3130 (not a toll-free number).

Accordingly, 26 CFR parts 40, 49, and 602 are amended as follows:

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

* * * * *

This notice provides relief to sponsors of defined contribution pre-approved plans (i.e., master and prototype (“M&P”) and volume submitter (“VS”) plans) affected by recent federally declared disasters (as defined in § 165(h)(3)(C)(i) of the Internal Revenue Code (the “Code”)). The relief provided by this notice extends to July 30, 2010, the April 30, 2010, deadline for restating affected pre-approved defined contribution plans and, if applicable, for submitting determination letters to the Service. The § 401(b) remedial amendment period with respect to these plans is also extended to July 30, 2010. The relief provided by this notice is in addition to the relief already provided by the Internal Revenue Service (IRS) to those affected by the federally declared disasters identified in this notice.

In addition to the general requirements for submitting a determination letter application set forth in Rev. Proc. 2010-6, 2010-1 I.R.B. 193, an employer submitting a determination letter application pursuant to this notice should write “Extension Relief per Notice 2010-48” in the upper margin of the cover letter (do not write this on the determination letter application form).

Rev. Proc. 2007-44 is modified.

The principal author of this notice is Angelique Carrington of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans taxpayer assistance answering service at 1-877-829-5500 (a toll-free number) or e-mail Ms. Carrington at RetirementPlanQuestions@irs.gov.

This notice invites public comments relating to possible modifications to the regulations under § 382 of the Internal Revenue Code regarding the treatment of shareholders who are not 5-percent shareholders (Small Shareholders).

The Internal Revenue Service (Service) and Treasury Department (Treasury) are currently considering modifying the regulations under § 382. In particular, the Service and Treasury are studying the operation of the rules relating to Small Shareholders, including the application of the aggregation and segregation rules to public groups. This notice sets forth policy considerations underlying § 382 and requests comments on what modifications would better reflect those policy considerations.

Section 382 provides special rules for Small Shareholders. Under § 382(g)(4)(A), Small Shareholders are aggregated and treated as one 5-percent shareholder. Section 382(g)(4)(B), however, requires that this aggregation rule must be applied separately to Small Shareholders of parties to certain § 368 reorganizations. Section 382(g)(4)(C) broadens the scope of the segregation rule of § 382(g)(4)(B) and provides that, except as provided in the regulations, similar segregation rules shall apply in determining whether there has been an owner shift involving a 5-percent shareholder and whether such shift (or a subsequent transaction) results in an ownership change.

The proper treatment of Small Shareholders under § 382(g)(4)(C) depends upon a determination concerning the policy considerations underlying § 382. This request for comments describes two general approaches, the Ownership Tracking Approach and the Purposive Approach, and sets forth some of the policy considerations underlying each. Both approaches recognize that one of the primary abuses § 382 seeks to prevent involves an acquisition of loss corporation stock followed by the contribution of income-producing assets or the diversion of income-producing opportunities to the corporation. The two approaches differ, however, in the extent they seek to identify and limit their effect to circumstances in which that abuse is most likely to occur.

Under the Ownership Tracking Approach, it generally is of no significance whether the shareholders who increase their ownership are Small Shareholders or 5-percent shareholders. This approach ensures that abusive transactions are addressed by tracking all changes in ownership without regard to their particular circumstances. Thus, any transaction that allows the corporation to track the increase in ownership interests held by Small Shareholders results in the segregation of Small Shareholders into a new public group, which is treated as a 5-percent shareholder. See § 1.382-2T(j)(3)(i) of the Income Tax Regulations. The creation of the new, segregated public group results in an increase in ownership for that public group. For example, if a 5-percent shareholder sells stock to Small Shareholders, these Small Shareholders are segregated into a separate public group because it is not unduly burdensome for the corporation to know that a 5-percent shareholder has reduced its ownership and that ownership interest has been acquired by Small Shareholders. However, the Ownership Tracking Approach makes a concession to administrative convenience and acknowledges that “public trading,” which is the purchase by one Small Shareholder of stock from another Small Shareholder, should not be taken into account because it is unduly burdensome for a corporation to take into account all such transactions. See § 1.382-2T(e)(1)(ii).

Consistent with the purpose of § 382, the Purposive Approach seeks to identify more specifically the circumstances in which abuses are likely to arise. This approach reflects the view that it is unnecessary to take into account all readily-identifiable acquisitions of stock by Small Shareholders, because Small Shareholders are generally not in a position to acquire loss corporation stock in order to contribute income-producing assets or divert income-producing opportunities. Instead, if the Purposive Approach is adopted, special rules generally could provide for a lesser percentage change in ownership for acquisitions of stock by Small Shareholders.

The current regulations primarily reflect the Ownership Tracking Approach. Although certain provisions may seem to follow the Purposive Approach, their justification is nevertheless based upon the Ownership Tracking Approach. For example, the cash issuance exception of § 1.382-3(j)(3) reduces the segregation effect of an issuance of stock to Small Shareholders by treating existing direct public groups as buying some of the stock sold in the issuance. However, this rule is justified on the grounds that there is likely to be substantial overlap between Small Shareholders who acquire stock in such an issuance and the existing Small Shareholder ownership base.

The different consequences of the two approaches may be illustrated by the treatment of 5-percent shareholders that acquire stock from Small Shareholders, and then sell the acquired stock back to Small Shareholders.

Example (1).

Facts. All the stock of loss corporation is owned by a single public group, Original Public Group. The following acquisitions and dispositions each occur during the testing period. First, Investor A acquires 10 percent of the corporation’s stock from Small Shareholders, and sells it to Small Shareholders a few months later. Second, Investor B acquires 10 percent of the stock from Small Shareholders, and sells it a few months later to Small Shareholders. Third, Investor C does the same.

Analysis. (i) Ownership Tracking Approach. The regulations reflect the Ownership Tracking Approach, and require the creation of a new, segregated public group when each of Investors A, B and C sells its stock back to Small Shareholders. As a result, the loss corporation has four 5-percent shareholders, Original Public Group and three new, segregated public groups (New Public Group 1, New Public Group 2, and New Public Group 3). Each investor is treated as acquiring the loss corporation stock proportionately from the direct public groups that exist immediately before the acquisition. See § 1.382-2T(j)(2)(vi). Accordingly, New Public Group 1, New Public Group 2, and New Public Group 3, the only 5-percent shareholders whose interests in loss corporation have increased during the testing period, have increased their respective ownership interest by 27.1 percent, in the aggregate — from zero to 8.1 percent for New Public Group 1, from zero to 9 percent for New Public Group 2, and from zero to 10 percent for New Public Group 3. This is so even though the stock is now, and at the beginning of the testing period was, held 100 percent by Small Shareholders, and even though no actual 5-percent shareholder ever held more than 10 percent of the corporation’s stock. This treatment is justified on the grounds that the corporation is able to track each time a 5-percent shareholder sells stock to new shareholders, including Small Shareholders.

(ii) Purposive Approach. Under the Purposive Approach, the amount of change in ownership is different from the amount under the Ownership Tracking Approach. When each investor sells its shares to Small Shareholders, the shares could be treated as being re-acquired by Original Public Group rather than the new, segregated public groups. As a result, the aggregate effect on the change in ownership is significantly reduced. Accordingly, Original Public Group is treated as increasing its ownership interest from 90 percent to 100 percent during the testing period.

A full embrace of the Purposive Approach could go further. For example, when Original Public Group acquires shares from each investor, Original Public Group could be treated, for testing dates on or after such an acquisition, as having owned them during the period they were owned by the seller. Under such a rule, there would have been no increase in ownership of any 5-percent shareholder during the testing period. Instead, Original Public Group would be treated, for testing dates on or after its reacquisition of the shares from the investors, as owning 100 percent of the corporation during the entire period. Such a result would be justified on the grounds that where Small Shareholders owned the shares at the beginning of the testing period and on the last testing date, no shareholder has increased its ownership interest in such a way that would allow it to engage in any abuse that § 382 was enacted to prevent.

Example (2).

Facts. The facts are the same as Example (1), except each acquisition by Investors A, B, and C precedes all dispositions by the investors to Small Shareholders.

Analysis. (i) Ownership Tracking Approach. The results are the same as in Example (1).

(ii) Purposive Approach. Under a limited application of the Purposive Approach, Original Public Group would be treated as increasing its ownership interest from 70 percent to 100 percent for an increase of 30 percentage points. However, under an expanded application of this principle, Original Public Group could be treated as always having owned the stock owned by Investors A, B, and C for testing dates on or after the sales to Small Shareholders. Under this rule, for testing dates on or after the reacquisition of the shares by Original Public Group from the investors, there would have been no increase in the ownership interest of any 5-percent shareholder during the testing period.

Other transactions would also receive different treatment under the Purposive Approach. For example, when stock is issued by a loss corporation, the stock could be treated as being acquired by the existing public group or groups, instead of by a new, segregated public group. Some type of look-back rule could also be employed in this context to mitigate the change in ownership that results from an issuance to Small Shareholders. The effect of redemptions of stock held by Small Shareholders under a Purposive Approach would also be different from the treatment of such transactions under the existing regulations.

The complete adoption of a Purposive Approach to public groups would require significant changes to the existing regulations. Alternatively, it may be appropriate to adopt new rules reflecting the Purposive Approach only for certain transactions. For example, stock issuances, which allow the loss corporation to receive additional income-producing capital, present concerns that shareholder-to-shareholder sales do not.

The Service and Treasury are also studying more modest changes. For example, the cash issuance exception is currently limited, as the name implies, to issuances of stock for cash. Under consideration is the possible expansion of this rule to issuances for other property, including the debt of the loss corporation. The Service and Treasury also are considering whether it would be appropriate to expand the small issuance exception to exempt larger share issuances from the application of the segregation rules.

The Service and Treasury request comments concerning what modifications, if any, to the existing rules for public groups are appropriate, and an analysis of whether authority exists for any recommended changes. Comments are requested concerning whether the regulations under § 382 should follow the Ownership Tracking Approach, Purposive Approach, or another approach. Additionally, consistent with an application of a Purposive Approach, comments are requested regarding whether the look-through treatment of first-tier and higher-tier entities should be limited in cases where these entities have a relatively small direct or indirect investment in the loss corporation. Due to the complexity of the existing regulations under § 382, modifications to the treatment of public groups would likely raise questions regarding how such modifications should be harmonized with other rules. The Service and Treasury also request comments on the consequences of any recommended modifications on these questions.

Comments should be submitted by September 9, 2010, and include a reference to Notice 2010-49. Send submissions to Internal Revenue Service, Attn: CC:PA:LPD:PR (Notice 2010-49), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044 or hand-deliver Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to Courier’s Desk, Internal Revenue Service, Attn: CC:PA:LPD:PR (Notice 2010-49), 1111 Constitution Avenue, N.W., Washington, D.C. 20044. Alternatively, comments may be submitted electronically via the following e-mail address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2010-49” in the subject line. All comments will be available for public inspection and copying.

The principal author of this notice is Rubin B. Ranat of the Office of Associate Chief Counsel (Corporate). For further information regarding this notice, contact Rubin B. Ranat at (202) 622-7530 (not a toll-free call).

This notice provides guidance under § 382 of the Internal Revenue Code for measuring owner shifts of loss corporations that have more than one class of stock outstanding, and, in particular, regarding the effect of fluctuations in the value of one class of stock relative to another class of stock (fluctuations in value). It provides interim guidance to the effect that the Internal Revenue Service (IRS) will accept certain methodologies for taking into account or not taking into account fluctuations in value, and identifies one methodology that the IRS views as inconsistent with § 382(l)(3)(C). It also requests comments to assist in the development of future guidance. Any terms and definitions used in this notice have the same meaning as they do in § 382 and the § 382 regulations unless otherwise provided in this notice.

Because of the complexity of the issues involved in measuring owner shifts of loss corporation stock where fluctuations in value are present, the IRS and Treasury have determined that it is appropriate to accept taxpayers’ reasonable attempts to measure increases in ownership where fluctuations in value are present. Accordingly, the IRS will not challenge any reasonable application of either a Full Value Methodology or the HCP, provided that a single methodology (as described below) is applied consistently to the extent required in this notice. The IRS and Treasury believe that each of the HCP alternative methodologies discussed in section I above-including the common elements of both for dealing with various transactions such as issuances and redemptions-are reasonable applications of the HCP.

Taxpayers may rely on the guidance provided in this notice until such time as the IRS and Treasury issue additional guidance under § 382(l)(3)(C).

The IRS and Treasury plan to issue proposed or temporary regulations on the application of § 382(l)(3)(C) in fluctuation in value situations, and request comments on that subject, including the issues addressed in this notice.

This revenue procedure provides issuers of qualified mortgage bonds, as defined in section 143(a) of the Internal Revenue Code, and issuers of mortgage credit certificates, as defined in section 25(c), with (1) the nationwide average purchase price for residences located in the United States, and (2) average area purchase price safe harbors for residences located in statistical areas in each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam.

.01 Section 103(a) provides that, except as provided in section 103(b), gross income does not include interest on any state or local bond. Section 103(b)(1) provides that section 103(a) shall not apply to any private activity bond that is not a “qualified bond” within the meaning of section 141. Section 141(e) provides, in part, that the term “qualified bond” means any private activity bond if such bond (1) is a qualified mortgage bond under section 143, (2) meets the volume cap requirements under section 146, and (3) meets the applicable requirements under section 147.

.02 Section 143(a)(1) provides that the term “qualified mortgage bond” means a bond that is issued as part of a qualified mortgage issue. Section 143(a)(2)(A) provides that the term “qualified mortgage issue” means an issue of one or more bonds by a state or political subdivision thereof, but only if: (i) all proceeds of the issue (exclusive of issuance costs and a reasonably required reserve) are to be used to finance owner-occupied residences; (ii) the issue meets the requirements of subsections (c), (d), (e), (f), (g), (h), (i), and (m)(7) of section 143; (iii) the issue does not meet the private business tests of paragraphs (1) and (2) of section 141(b); and (iv) with respect to amounts received more than 10 years after the date of issuance, repayments of $250,000 or more of principal on mortgage financing provided by the issue are used by the close of the first semiannual period beginning after the date the prepayment (or complete repayment) is received to redeem bonds that are part of the issue.

.03 Section 143(e)(1) provides that an issue of bonds meets the purchase price requirements of section 143(e) if the acquisition cost of each residence financed by the issue does not exceed 90 percent of the average area purchase price applicable to such residence. Section 143(e)(5) provides that, in the case of a targeted area residence (as defined in section 143(j)), section 143(e)(1) shall be applied by substituting 110 percent for 90 percent.

.04 Section 143(e)(2) provides that the term “average area purchase price” means, with respect to any residence, the average purchase price of single-family residences (in the statistical area in which the residence is located) that were purchased during the most recent 12-month period for which sufficient statistical information is available. Under sections 143(e)(3) and (4), respectively, separate determinations are to be made for new and existing residences, and for two-, three-, and four-family residences.

.05 Section 143(e)(2) provides that the determination of the average area purchase price for a statistical area shall be made as of the date on which the commitment to provide the financing is made or, if earlier, the date of the purchase of the residence.

.06 Section 143(k)(2)(A) provides that the term “statistical area” means (i) a metropolitan statistical area (MSA), and (ii) any county (or the portion thereof) that is not within an MSA. Section 143(k)(2)(C) further provides that if sufficient recent statistical information with respect to a county (or portion thereof) is unavailable, the Secretary may substitute another area for which there is sufficient recent statistical information for such county (or portion thereof). In the case of any portion of a State which is not within a county, section 143(k)(2)(D) provides that the Secretary may designate as a county any area that is the equivalent of a county. Section 6a.103A-1(b)(4)(i) of the Temporary Income Tax Regulations (issued under section 103A of the Internal Revenue Code of 1954, the predecessor of section 143) provides that the term “State” includes a possession of the United States and the District of Columbia.

.07 Section 6a.103A-2(f)(5)(i) provides that an issuer may rely upon the average area purchase price safe harbors published by the Department of the Treasury for the statistical area in which a residence is located. Section 6a.103A-2(f)(5)(i) further provides that an issuer may use an average area purchase price limitation different from the published safe harbor if the issuer has more accurate and comprehensive data for the statistical area.

.08 Section 25(c) permits a state or political subdivision to establish a qualified mortgage credit certificate program. In general, a qualified mortgage credit certificate program is a program under which the issuing authority elects not to issue an amount of private activity bonds that it may otherwise issue during the calendar year under section 146, and in their place, issues mortgage credit certificates to taxpayers in connection with the acquisition of their principal residences. Section 25(a)(1) provides, in general, that the holder of a mortgage credit certificate may claim a federal income tax credit equal to the product of the credit rate specified in the certificate and the interest paid or accrued during the tax year on the remaining principal of the indebtedness incurred to acquire the residence. Section 25(c)(2)(A)(iii)(III) generally provides that residences acquired in connection with the issuance of mortgage credit certificates must meet the purchase price requirements of section 143(e).

.09 Section 143(f) imposes limitations on the income of mortgagors for whom financing may be provided by qualified mortgage bonds. In addition, section 25(c)(2)(A)(iii)(IV) provides that holders of mortgage credit certificates must meet the income requirement of section 143(f). Generally, under sections 143(f)(1) and 25(c)(2)(A)(iii)(IV), the income requirement is met only if all owner-financing under a qualified mortgage bond and all mortgage credit certificates issued under a qualified mortgage credit certificate program are provided to mortgagors whose family income is 115 percent or less of the applicable median family income. Section 143(f)(5), however, generally provides for an upward adjustment to the percentage limitation in high housing cost areas. High housing cost areas are defined in section 143(f)(5)(C) as any statistical area for which the housing cost/income ratio is greater than 1.2.

.10 Under section 143(f)(5)(D), the housing cost/income ratio with respect to any statistical area is determined by dividing (a) the applicable housing price ratio for such area by (b) the ratio that the area median gross income for such area bears to the median gross income for the United States. The applicable housing price ratio is the new housing price ratio (new housing average area purchase price divided by the new housing average purchase price for the United States) or the existing housing price ratio (existing housing average area purchase price divided by the existing housing average purchase price for the United States), whichever results in the housing cost/income ratio being closer to 1.

.11 Average area purchase price safe harbors for each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam were last published in Rev. Proc. 2009-18, 2009-11 I.R.B. 686.

.12 The nationwide average purchase price limitation was last published in section 4.02 of Rev. Proc. 2009-18. Guidance with respect to the United States and area median gross income figures that are to be used in computing the housing cost/income ratio described in section 143(f)(5) was last published in Rev. Proc. 2010-23, 2010-24 I.R.B. 762.

.13 This revenue procedure uses FHA loan limits for a given statistical area to calculate the average area purchase price safe harbor for that area. FHA sets limits on the dollar value of loans it will insure based on median home prices and conforming loan limits established by the Federal Home Loan Mortgage Corporation. In particular, FHA sets an area’s loan limit at 95 percent of the median home sales price for the area, subject to certain floors and caps measured against conforming loan limits.

.14 To calculate the average area purchase price safe harbors in this revenue procedure, the FHA loan limits are adjusted to take into account the differences between average and median purchase prices. Because FHA loan limits do not differentiate between new and existing residences, this revenue procedure contains a single average area purchase price safe harbor for both new and existing residences in a statistical area. The Treasury Department and the Internal Revenue Service have determined that FHA loan limits provide a reasonable basis for determining average area purchase price safe harbors. If the Treasury Department and the Internal Revenue Service become aware of other sources of average purchase price data, including data that differentiate between new and existing residences, consideration will be given as to whether such data provide a more accurate method for calculating average area purchase price safe harbors.

.15 The average area purchase price safe harbors listed in section 4.01 of this revenue procedure are based on FHA loan limits released November 25, 2009. FHA loan limits are available for statistical areas in each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam. See section 3.03 of this revenue procedure with respect to FHA loan limits revised after November 25, 2009.

.16 OMB Bulletin No. 03-04, dated and effective June 6, 2003, revised the definitions of the nation’s metropolitan areas and recognized 49 new metropolitan statistical areas. The OMB bulletin no longer includes primary metropolitan statistical areas.

.01 Average area purchase price safe harbors for statistical areas in each state, the District of Columbia, Puerto Rico, the Northern Mariana Islands, American Samoa, the Virgin Islands, and Guam are set forth in section 4.01 of this revenue procedure. Average area purchase price safe harbors are provided for single-family and two to four-family residences. For each type of residence, section 4.01 of this revenue procedure contains a single safe harbor that may be used for both new and existing residences. Issuers of qualified mortgage bonds and issuers of mortgage credit certificates may rely on these safe harbors to satisfy the requirements of sections 143(e) and (f). Section 4.01 of this revenue procedure provides safe harbors for MSAs and for certain counties and county equivalents. If no purchase price safe harbor is available for a statistical area, the safe harbor for “ALL OTHER AREAS” may be used for that statistical area.

.02 If a residence is in an MSA, the safe harbor applicable to it is the limitation of that MSA. If an MSA falls in more than one state, the MSA is listed in section 4.01 of this revenue procedure under each state.

.03 If the FHA revises the FHA loan limit for any statistical area after November 25, 2009, an issuer of qualified mortgage bonds or mortgage credit certificates may use the revised FHA loan limit for that statistical area to compute (as provided in the next sentence) a revised average area purchase price safe harbor for the statistical area provided that the issuer maintains records evidencing the revised FHA loan limit. The revised average area purchase price safe harbor for that statistical area is computed by dividing the revised FHA loan limit by 1.00.

.04 If, pursuant to section 6a.103A-2(f)(5)(i), an issuer uses more accurate and comprehensive data to determine the average area purchase price for a statistical area, the issuer must make separate average area purchase price determinations for new and existing residences. Moreover, when computing the average area purchase price for a statistical area that is an MSA, as defined in OMB Bulletin No. 03-04, the issuer must make the computation for the entire applicable MSA. When computing the average area purchase price for a statistical area that is not an MSA, the issuer must make the computation for the entire statistical area and may not combine statistical areas. Thus, for example, the issuer may not combine two or more counties.

.05 If an issuer receives a ruling permitting it to rely on an average area purchase price limitation that is higher than the applicable safe harbor in this revenue procedure, the issuer may rely on that higher limitation for the purpose of satisfying the requirements of section 143(e) and (f) for bonds sold, and mortgage credit certificates issued, not more than 30 months following the termination date of the 12-month period used by the issuer to compute the limitation.

.06 Section 4.02 of this revenue procedure sets forth a single nationwide average purchase price for purposes of computing the housing cost/income ratio under section 143(f)(5).

.07 Issuers must use the nationwide average purchase price set forth in section 4.02 of this revenue procedure when computing the housing cost/income ratio under section 143(f)(5) regardless of whether they are relying on the average area purchase price safe harbors contained in this revenue procedure or using more accurate and comprehensive data to determine average area purchase prices for new and existing residences for a statistical area that are different from the published safe harbors in this revenue procedure.

.08 If, pursuant to section 6.02 of this revenue procedure, an issuer relies on the average area purchase price safe harbors contained in Rev. Proc. 2009-18, the issuer must use the nationwide average purchase price set forth in section 4.02 of Rev. Proc. 2009-18 in computing the housing cost/income ratio under section 143(f)(5). Likewise, if, pursuant to section 6.05 of this revenue procedure, an issuer relies on the nationwide average purchase price published in Rev. Proc. 2009-18, the issuer may not rely on the average area purchase price safe harbors published in this revenue procedure.

.01 Average area purchase prices for single-family and two to four-family residences in MSAs, and for certain counties and county equivalents are set forth below. The safe harbor for “ALL OTHER AREAS” (found at the end of the table below) may be used for a statistical area that is not listed below.

.02 The nationwide average purchase price (for use in the housing cost/income ratio for new and existing residences) is $217,300.

Rev. Proc. 2009-18 is obsolete except as provided in section 6 of this revenue procedure.

.01 Issuers may rely on this revenue procedure to determine average area purchase price safe harbors for commitments to provide financing or issue mortgage credit certificates that are made, or (if the purchase precedes the commitment) for residences that are purchased, in the period that begins on June 16, 2010, and ends on the date as of which the safe harbors contained in section 4.01 of this revenue procedure are rendered obsolete by a new revenue procedure.

.02 Notwithstanding section 5 of this revenue procedure, issuers may continue to rely on the average area purchase price safe harbors contained in Rev. Proc. 2009-18, with respect to bonds sold, or for mortgage credit certificates issued with respect to bond authority exchanged, before July 16, 2010, if the commitments to provide financing or issue mortgage credit certificates are made on or before August 15, 2010.

.03 Except as provided in section 6.04, issuers must use the nationwide average purchase price limitation contained in this revenue procedure for commitments to provide financing or issue mortgage credit certificates that are made, or (if the purchase precedes the commitment) for residences that are purchased, in the period that begins on June 16, 2010, and ends on the date when the nationwide average purchase price limitation is rendered obsolete by a new revenue procedure.

.04 Notwithstanding sections 5 and 6.03 of this revenue procedure, issuers may continue to rely on the nationwide average purchase price set forth in Rev. Proc. 2009-18 with respect to bonds sold, or for mortgage credit certificates issued with respect to bond authority exchanged, before July 16, 2010, if the commitments to provide financing or issue mortgage credit certificates are made on or before August 15, 2010.

The Treasury Department and the IRS are reviewing the available data sources and method used to determine the average area purchase price safe harbors listed in section 4.01 of this revenue procedure and are considering possible changes in the data used to determine these safe harbors for future years. One possible alternative method under consideration would involve the use of certain current available data from the Department of Housing and Urban Development (“HUD”) regarding county median housing purchase prices. The Treasury Department and the IRS solicit public comments generally on whether the average area purchase price safe harbors listed in section 4.01 of this revenue procedure should continue to be based on FHA loan limits or whether the data used to calculate these safe harbors should be changed in any way, such as, without limitation, a change to an alternative method using current HUD data on county median housing purchase prices.

Comments should be submitted in writing and can be e-mailed to notice.comments@irscounsel.treas.gov (include “Rev. Proc. 2010-25” in the subject line) or mailed to Office of Associate Chief Counsel (Financial Institutions & Products), Re: Rev. Proc. 2010-25, CC:FIP:B5, Room 3547, 1111 Constitution Avenue, NW, Washington, DC 20224. The due date for the public comments is September 6, 2010. Comments that are submitted will be made available to the public.

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1877.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

This revenue procedure contains a collection of information requirement in section 3.03. The purpose of the collection of information is to verify the applicable FHA loan limit that issuers of qualified mortgage bonds and qualified mortgage certificates have used to calculate the average area purchase price for a given metropolitan statistical area for purposes of section 143(e) and 25(c). The collection of information is required to obtain the benefit of using revisions to FHA loan limits to determine average area purchase prices. The likely respondents are state and local governments.

The estimated total annual reporting and/or recordkeeping burden is: 15 hours.

The estimated annual burden per respondent and/or recordkeeper: 15 minutes.

The estimated number of respondents and/or recordkeepers: 60.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

The principal authors of this revenue procedure are David E. White and Timothy L. Jones of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact David E. White at (202) 622-3980 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations.

In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9486) that provide guidance on the indoor tanning services excise tax imposed by the Patient Protection and Affordable Care Act of 2010. These regulations affect users and providers of indoor tanning services. The text of the temporary regulations also serves as the text of the proposed regulations. These regulations affect users and providers of indoor tanning services.

Written and electronic comments and requests for a public hearing must be received by September 13, 2010.

Send submissions to: CC:PA:LPD:PR (REG-112841-10), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered to: CC:PA:LPD:PR Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-112841-10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW; Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-112841-10).

Concerning the proposed regulations, Taylor Cortright, (202) 622-3130; concerning submissions of comments and requests for a public hearing, Regina Johnson, (202) 622-7180 (not toll-free numbers).

Accordingly, 26 CFR parts 40 and 49 are proposed to be amended as follows:

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

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

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

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

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

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

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

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

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

Disciplinary sanctions are described in these terms:

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

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

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

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

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

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

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