Japan earthquake and tsunami in 2011. This notice designates the Japan earthquake and tsunami occurring in March 2011 as a qualified disaster for purposes of section 139 of the Code.

This procedure provides a safe harbor method of accounting for determining the recovery periods for depreciation of certain tangible assets used by wireless telecommunications carriers. The procedure also explains how a taxpayer may obtain automatic consent from the Commissioner of Internal Revenue to change to the safe harbor method of accounting provided. Rev. Proc. 2011-14 modified and amplified.

This procedure provides two alternative safe harbor approaches that taxpayers may use to determine whether expenditures to maintain, replace, or improve wireline network assets must be capitalized under section 263(a) of the Code: a network asset maintenance allowance method or a units of property method. This procedure also provides procedures for obtaining automatic consent to change to either safe harbor method. A companion revenue procedure (Rev. Proc. 2011-28) provides similar safe harbor approaches that may be used for wireless network assets. Rev. Proc. 2011-14 modified.

This procedure provides two alternative safe harbor approaches that taxpayers may use to determine whether expenditures to maintain, replace, or improve wireless network assets must be capitalized under section 263(a) of the Code: a network asset maintenance allowance method or a units of property method. This procedure also provides procedures for obtaining automatic consent to change to either safe harbor method. A companion revenue procedure (Rev. Proc. 2011-27) provides similar safe harbor approaches that may be used for wireline network assets. Rev. Proc. 2011-14 modified.

This procedure provides a safe harbor election for allocating success-based fees paid in business acquisitions or reorganizations described in regulations section 1.263(a)-5(e)(3). In lieu of maintaining the documentation required by section 1.263(a)-5(f), this safe harbor permits electing taxpayers to treat 70 percent of the success-based fee as an amount that does not facilitate the transaction. The remaining portion of the fee must be capitalized as an amount that facilitates the transaction.

This announcement provides notice of a public hearing on proposed regulations relating to the payment of rewards under section 7623(a) of the Code and awards under section 7623(b). The guidance is necessary to clarify the definition of proceeds of amounts collected and collected proceeds under section 7623. This regulation provides needed guidance to the general public as well as officers and employees of the IRS who review claims under section 7623. A public hearing is scheduled for May 11, 2011.

Final regulations under section 7811 of the Code relate to the issuance of taxpayer assistance orders.

Final regulations under section 6323 of the Code provide rules relating to the validity and priority of the Federal tax lien against certain persons.

This announcement reinstates the enrollment renewal period under section 10.6(d) of the regulations governing practice before the IRS, Treasury Department Circular No. 230, for enrolled agents whose social security number or tax identification numbers end in 4, 5, or 6.

Internal Revenue Service (IRS), Treasury.

Final regulations.

This document contains final regulations related to the validity and priority of the Federal tax lien against certain persons under section 6323 of the Internal Revenue Code (the Code). The final regulations update the corresponding Treasury Regulations to reflect changes in the law and in IRS practice.

Effective Date: These regulations are effective on April 4, 2011.

Applicability Date: These regulations apply to any notice of Federal tax lien filed on or after April 4, 2011.

Debra A. Kohn at (202) 622-3600 (not a toll-free number).

Accordingly, 26 CFR part 301 is amended as follows:

The principal author of these regulations is Debra A. Kohn of the Office of the Associate Chief Counsel (Procedure and Administration).

* * * * *

Internal Revenue Service (IRS), Treasury.

Final regulations.

This document contains final regulations relating to taxpayer assistance orders. These regulations reflect changes to the law made by the Taxpayer Bill of Rights II, the Internal Revenue Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief Act of 2000, and the American Jobs Creation Act of 2004. The final regulations affect taxpayers in cases where a taxpayer assistance order is being considered or issued.

Effective date: These regulations are effective on April 1, 2011.

Applicability date: For dates of applicability, see §301.7811-1(f).

Janice R. Feldman, (202) 622-8488 (not a toll-free number).

Accordingly, 26 CFR part 301 is amended as follows:

The principal author of these regulations is Janice R. Feldman, Office of the Special Counsel (National Taxpayer Advocate Program) (CC:NTA).

* * * * *

This notice designates the Japan earthquake and tsunami occurring in March 2011 as a qualified disaster for purposes of § 139 of the Internal Revenue Code.

On March 11, 2011, a magnitude 9.0 earthquake occurred, affecting northeastern Japan and generating a large tsunami which struck the eastern coast of Japan (collectively “Japan earthquake”). As of March 24, 2011, the Japan earthquake has resulted in more than 9,800 confirmed deaths, more than 17,500 missing persons, and approximately 245,000 individuals still taking shelter in evacuation centers. The Japan earthquake also damaged or destroyed more than 139,000 buildings and 2,000 roads and led to a serious nuclear incident at a nuclear power plant. USAID Fact Sheet No. 13 (March 24, 2011).

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

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

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

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

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

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

The Commissioner of Internal Revenue, pursuant to delegation by the Secretary, has determined that the Japan earthquake occurring in March 2011 is an event of a catastrophic nature under § 139(c)(3). Therefore, the Japan earthquake is designated as a qualified disaster under § 139.

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

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

This revenue procedure provides a safe harbor method of accounting for determining the recovery periods for depreciation of certain tangible assets used by wireless telecommunications carriers. This revenue procedure also explains how a taxpayer may obtain automatic consent from the Commissioner of Internal Revenue to change to this method of accounting.

.01 Section 167(a) of the Internal Revenue Code provides that there is allowed as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear of property used in a trade or business or held for the production of income. The depreciation deduction provided by § 167(a) for tangible property placed in service after 1986 generally is determined under § 168, which prescribes two methods of accounting for determining depreciation allowances: (1) the general depreciation system in § 168(a); and (2) the alternative depreciation system in § 168(g). Under either depreciation system, a taxpayer computes the depreciation deduction by using a prescribed depreciation method, recovery period, and convention. The applicable recovery period for purposes of § 168(a) or § 168(g) is determined by reference to class life or by statute.

Rev. Proc. 87-56, 1987-2 C.B. 674, as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785, provides the class lives of property for computing the depreciation allowance under § 168. That revenue procedure establishes two broad categories of depreciable assets: (1) asset classes 00.11 through 00.4, which consist of specific assets used in all business activities; and (2) asset classes 01.1 through 80.0, which consist of assets used in specific business activities.

.02 Taxpayers and the Internal Revenue Service often do not agree which asset class of Rev. Proc. 87-56 includes the tangible assets used by wireless telecommunications carriers to provide wireless telecommunication services. To minimize disputes regarding the depreciation of these assets, this revenue procedure provides a safe harbor method of accounting for determining the recovery periods of these assets.

.03 Except as otherwise expressly provided by the Code or the regulations thereunder, § 446(e) and § 1.446-1(e)(2) of the Income Tax Regulations require a taxpayer to secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting.

.01 Wireless telecommunication assets include a mobile telephone switching office (MTSO) and cell sites. The functions of the MTSO and cell sites are comparable to those of a wireline telephone central office and the associated land line cables.

.02 The MTSO is a central switching facility that transmits wireless voice and data (including video) communications to and from cell sites and other equipment that comprise the wireless network, and also connects the wireless network to the wireline network (public switched telephone network). The MTSO and its equipment are powered by conventional electrical service with back-up support from electric generators or battery systems.

.03 MTSO equipment typically includes the mobile switching center, base station controllers or generational equivalent, radio network controllers, mobility managers, operations and management platforms, protocol handlers, vocoders, modems, cross-connects, and optical-cross connect bays.

.04 A typical cell site consists of cell site equipment, a self-supporting antenna support structure (also known as a tower) for mounting antennas, and related support and power equipment. Cell site equipment typically includes a base transceiver station or generational equivalent (which may include, for example, vocoders, modems, channel cards, transceivers/amplifiers cards, modulators, demodulators, and combiners), antennas, and alarm and support equipment, and also may include microwave equipment. In some cases, cell site equipment includes a base station controller.

The antenna system at the cell site generally consists of the antennas (with or without remote electrical tilt functionality (RET)), coaxial and jumper cables from the antennas to the base transceiver station (antenna cables), and RET equipment.

A cell site also may include a small structure (the hut) to house and shelter the cell site equipment that does not have its own weather proof enclosure or cabinet.

This revenue procedure applies to a taxpayer that has a depreciable interest in wireless telecommunication assets (as described in section 3 of this revenue procedure) used primarily to provide wireless telecommunication or broadband services by mobile phones (for example, cell phones or smartphones). This revenue procedure does not apply to a taxpayer that is primarily a cable operator. The determination of whether a taxpayer is within the scope of this revenue procedure is made by each member of a consolidated group, by a partnership, or by an S corporation.

The Service will not challenge a taxpayer’s classification of assets for depreciation purposes as specified in this section 5.

.01 The following wireless telecommunication assets located at the taxpayer’s MTSO as included in an asset class of Rev. Proc. 87-56 unless otherwise stated:

(1) MTSO building (including its structural components) as nonresidential real property with a recovery period of 39 years for purposes of § 168(a) and 40 years for purposes of § 168(g);

(2) Cabling (for example, copper T-1 lines or fiber cabling) connecting the MTSO with cell sites or the public switched telephone network as property to which § 168(e)(3)(E)(ii) applies and, therefore, with a recovery period of 15 years for purposes of § 168(a) and 24 years for purposes of § 168(g);

(3) Computer-based switching equipment and related equipment at the MTSO (including the computer-based switching equipment, base station controllers (or generational equivalent), radio network controllers, mobility managers, operations and management platforms, protocol handlers, vocoders, modems, cross-connects, optical-cross connect bays, and associated cables) in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g);

(4) Dedicated heating, ventilation, and air conditioning (HVAC) equipment and dedicated power (including battery backup system) for the computer-based switching equipment and related equipment at the MTSO in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g); and

(5) All other equipment at the MTSO that is not described in asset classes 00.11 through 00.4 as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g).

.02 The following wireless telecommunication assets located at the taxpayer’s cell sites as included in an asset class of Rev. Proc. 87-56 unless otherwise stated:

(1) The hut and its foundation:

(a) The hut itself as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g); and

(b) Cement slab or foundation upon which the hut is installed in asset class 00.3 with a recovery period of 15 years for purposes of § 168(a) and 20 years for purposes of § 168(g);

(2) Base station controller (or generational equivalent), base transceiver station (or generational equivalent), their own weather proof enclosure or cabinet (including any equipment integrated into or built into the base station controller or base transceiver station; for example, this equipment might include HVAC and power equipment, alarms, enhanced 911 service equipment, or the RET central control unit (CCU) controller), and associated cables in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g);

(3) Cabling (for example, copper T-1 lines or fiber cabling) connecting the cell site to the MTSO as property to which § 168(e)(3)(E)(ii) applies and, therefore, with a recovery period of 15 years for purposes of § 168(a) and 24 years for purposes of § 168(g);

(4) Dedicated HVAC equipment and dedicated power (including batteries and generators) for the equipment within the hut in asset class 48.121 with a recovery period of 5 years for purposes of § 168(a) and 9.5 years for purposes of § 168(g);

(5) Antenna systems (including the antenna itself, antenna cables, and RET equipment (other than the RET CCU controller described in section 5.02(2) of this revenue procedure) as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g);

(6) Antenna support structure (also known as a tower) affixed to a foundation (for example, a concrete foundation, a building rooftop, or a building wall):

(a) The antenna support structure itself, whether on a building or land, as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g); and

(b) Concrete foundation (including the bolts embedded therein) upon which the antenna support structure is installed in asset class 00.3 with a recovery period of 15 years for purposes of § 168(a) and 20 years for purposes of § 168(g);

(7) Cell site equipment that is not otherwise described in this section 5.02 (including the microwave equipment, alarms, or enhanced 911 service equipment not integrated into or built into a base station controller or base transceiver station, and associated cables) as personal property with no class life with a recovery period of 7 years for purposes of § 168(a) and 12 years for purposes of § 168(g); and

(8) Depreciable land improvements at the cell site not otherwise described in this section 5.02, such as landscaping that is replaced when a related depreciable asset is replaced, fences, and sidewalks in asset class 00.3 with a recovery period of 15 years for purposes of § 168(a) and 20 years for purposes of § 168(g).

.01 In General. A taxpayer within the scope of this revenue procedure may choose to change to the safe harbor method of accounting in section 5 of this revenue procedure for all of the assets, or one or some of the assets, listed in that section.

.02 Limitation. The safe harbor method of accounting in section 5 of this revenue procedure is limited to the assets described in section 3 of this revenue procedure and listed in section 5 of this revenue procedure for purposes of determining their classification under § 168(e) solely for depreciation purposes. The Service or taxpayers may not rely upon this safe harbor method of accounting for classifying the same or similar type of assets used in wireline telecommunications or other industries, or for determining whether the same or similar type of assets are inherently permanent structures or real property under other Code sections (for example, §§ 199, 263A, and 856).

.01 In general.

(1) Except as provided in section 7.01(2) of this revenue procedure, a change to the recovery periods described in section 5 of this revenue procedure and any collateral change to the depreciation methods for all, or some of, the assets listed in that section are a change in method of accounting to which §§ 446(e) and 481 apply. See § 1.446-1(e)(2)(ii)(d)(2). A taxpayer that wants to change to a method of accounting described in this revenue procedure must use the automatic change in method of accounting provisions in Rev. Proc. 2011-14, 2011-4 I.R.B. 330, or its successor, as modified by this revenue procedure.

(2) If a taxpayer placed in service assets listed in section 5 of this revenue procedure in a taxable year ending before December 30, 2003 (pre-2003 assets), the taxpayer may treat the change to the recovery periods described in section 5 of this revenue procedure and any collateral change to the depreciation methods for all, or some of, the pre-2003 assets as not a change in method of accounting and, therefore, the taxpayer files amended federal tax returns to implement the change in computing depreciation for these pre-2003 assets.

.02 Automatic change. Rev. Proc. 2011-14 is modified to add new section 6.26 to the APPENDIX, to read as follows:

.26 Safe harbor method of accounting for determining the depreciation of certain tangible assets used by wireless telecommunications carriers under Rev. Proc. 2011-22.

(1) Description of change. This change applies to a taxpayer that is within the scope of Rev. Proc. 2011-22 and wants to change to the recovery periods described in section 5 of Rev. Proc. 2011-22 and any collateral change to the depreciation methods for all, or some of, the assets listed in that section.

(2) Waiver of scope limitations. The scope limitations in section 4.02 of this revenue procedure do not apply to a taxpayer that changes to the safe harbor method of accounting provided in section 5 of Rev. Proc. 2011-22 for its first or second taxable year ending after December 30, 2010.

(3) Concurrent automatic change. A taxpayer that wants to make this change for more than one asset for the same year of change should file a single Form 3115 for all such assets and provide a single net § 481(a) adjustment for all the changes included in that Form 3115. If one or more of the changes in that single Form 3115 generate a negative § 481(a) adjustment and other changes in that same Form 3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single negative § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment and a single positive § 481(a) adjustment for all the changes that are included in that Form 3115 generating such adjustment.

(4) Ogden copy of Form 3115 required in lieu of national office copy. A taxpayer changing its method of accounting under section 6.26 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change numbers. The designated automatic accounting method change number for a change to the method of accounting provided in Rev. Proc. 2011-22 is “157.” See section 6.02(4) of this revenue procedure.

(6) Contact information. For further information regarding a change under this section, contact Patrick Clinton at (202) 622-4930 (not a toll-free call).

Rev. Proc. 2011-14 is modified and amplified to include the accounting method change in this revenue procedure in section 6 of the Appendix.

This revenue procedure is effective for taxable years ending on or after December 31, 2010.

The principal author of this revenue procedure is Kathleen Reed of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Patrick Clinton at (202) 622-4930 (not a toll free call).

This revenue procedure provides two alternative safe harbor approaches that taxpayers may use to determine whether expenditures to maintain, replace, or improve wireline network assets must be capitalized under § 263(a) of the Internal Revenue Code: a network asset maintenance allowance method or a units of property method. This revenue procedure also provides procedures for obtaining automatic consent to change to either safe harbor method of accounting permitted by this revenue procedure.

.01 Taxpayers that provide wireline telecommunication services incur significant expenditures to maintain, replace, and improve wireline network property. Whether these expenditures are deductible as repairs under § 162 or must be capitalized as improvements under § 263(a) depends on whether the expenditures materially increase the value of the property or substantially prolong its useful life. See § 1.162-4 of the Income Tax Regulations. Applying capitalization principles to wireline network assets can be particularly difficult, largely because the property consists of a network of interconnected items, such as central office equipment, poles, copper wire, fiber optic cable, and remote and network terminals. Taxpayers and the Internal Revenue Service often do not agree on which items within a network constitute discrete units of property and whether the replacement of a particular item materially increases the value or substantially prolongs the useful life of a unit of property.

.02 To minimize disputes regarding the deductibility or capitalization of expenditures to maintain, replace, or improve wireline network assets, this revenue procedure provides two alternative safe harbor approaches. Section 5 provides a wireline “network asset maintenance allowance method” for determining the amount of expenditures required to be capitalized under § 263(a). Section 6 defines units of property that may be adopted and to which existing principles under § 263(a) are applied.

.03 A taxpayer’s method for determining whether an expenditure is deductible or is capitalizable is a method of accounting under § 446. Except as otherwise expressly provided in the Code and the regulations thereunder, § 446(e) and § 1.446-1(e)(2) require a taxpayer to secure the consent of the Commissioner of Internal Revenue before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting. Section 7 of this revenue procedure provides the procedures by which a taxpayer may obtain automatic consent for a change in method of accounting to adopt either of the alternative safe harbor approaches provided by this revenue procedure.

This revenue procedure applies to a taxpayer that has a depreciable interest in wireline network assets (as described in section 4 of this revenue procedure) used primarily to provide wireline telecommunication or broadband services. This revenue procedure does not apply to a taxpayer that is primarily a cable operator. The determination of whether a taxpayer is within the scope of this revenue procedure is made by each member of a consolidated group, by a partnership, or by an S corporation.

The following definitions apply solely for purposes of this revenue procedure:

.01 Wireline network assets. “Wireline network assets” means all personal and real property used by a wireline carrier to provide telecommunication or broadband services. Wireline network assets include central office buildings, central office equipment, towers, poles, copper wire, fiber optic cable, service area interface boxes, and remote and network terminals. Wireline network assets do not include personal or real property not directly used to provide wireline telecommunication or broadband services, such as a corporate office building and the furniture and equipment used in an office building.

.02 Wire center. “Wire center” means the wireline network assets located in the geographic area served by a central office (but not including the central office building or central office equipment).

.03 Central office buildings. “Central office buildings” means central office buildings (including their structural components) that house network equipment necessary to provide voice or data services (including video).

.04 Central office equipment. “Central office equipment” means all switching, transmission, and support equipment at a central office building. Central office equipment includes central processors, switching modules, line cards, input/output controllers, optical line terminal equipment, routers, multiplexers, repeaters, amplifiers, digital cross-connect systems, channel banks, modulators, regenerators, signal converters, batteries, generators, HVAC’s required to keep equipment in a central office building at efficient operating levels, and frames that house the equipment where cross connections are made between the outside cable pairs and the central office equipment.

.05 Service area interface. “Service area interface” box (SAI) means an outdoor telecommunications cabinet mounted on the ground (typically on cable right-of-ways) or on telephone poles that protects splice points.

.06 Remote and network terminal. “Remote and network terminal” (RNT) means a terminal located outside the central office building that provides management and maintenance functions, and computes bandwidth profiles used for the wireline network and customer premises equipment.

.01 In general. Under the network asset maintenance allowance method, the taxpayer must determine the amount of its wireline network asset expenditures that are not required to be capitalized under section 5.02 of this revenue procedure (network asset maintenance allowance) and the amount of wireline network asset expenditures that are treated as § 263(a) capital expenditures under section 5.03 of this revenue procedure (§ 263(a) capital expenditures). A taxpayer that uses the network asset maintenance allowance method described in this section 5 must use that method for all of its wireline network asset expenditures (which includes expenditures relating to wireline network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies, even though the cost of such property is removed from the total cost of capital additions for the taxable year as provided in § 5.02(2)(b)-(c) below).

.02 Network asset maintenance allowance. The amount of the network asset maintenance allowance for a particular taxable year is determined as follows:

(1) Start with the total cost of capital additions for financial statement purposes that are placed in service (within the meaning of § 1.46-3(d)(1)(ii)) during the taxable year.

(2) Decrease the amount determined in (1) by the following amounts:

(a) the cost of property other than wireline network assets;

(b) the cost of any wireline network assets acquired in an applicable asset acquisition as defined in § 1060; and

(c) the cost of any wireline network assets acquired in a transaction to which § 338(h)(10) applies.

(3) Adjust the amount determined after applying steps (1) and (2) to determine the adjusted basis of the property under § 1011, including any adjustments described in § 1016 except for the following:

(a) Any basis adjustments attributable to changes made after December 31, 2007 to the taxpayer’s unit of property definitions used for repair versus capitalization determinations.

(b) Any adjustments described in § 1016(a)(2) and § 1016(a)(3) and any adjustments that require tax basis to be reduced before depreciation is computed ( e.g. , § 179, § 179D, or similar provisions; § 44 and § 46; and the payments for specified energy property under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Division B, Pub. L. 111-5, 123 Stat. 115 (section 1603 payments)).

(4) Using the adjusted basis determined in step (3), determine the amount attributable to 5-year, 7-year, 10-year, 15-year, and 20-year property and nonresidential real property, and multiply each of these amounts by 12%. The result is the network asset maintenance allowance for each class of property.

(5) The sum of the network asset maintenance allowances determined in (4) for each class of property is the taxpayer’s network asset maintenance allowance amount for the taxable year.

.03 § 263(a) capital expenditures. The wireline network asset capital expenditures for § 263(a) for the taxable year under the network asset maintenance allowance method are determined as follows:

(1) Start with the adjusted basis for 5-year, 7-year, 10-year, 15-year, and 20-year property and nonresidential real property determined in section 5.02(4) above.

(2) For each class of property, multiply the adjusted basis attributable to the class of property by 88%. The result is each class of property’s basis amount after taking into account the network asset maintenance allowance.

(3) For each class of property, allocate that class of property’s basis amount determined in 5.03(2) among the class of property’s wireline network assets (excluding the wireline network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies) according to the basis of each wireline network asset determined before application of the network asset maintenance allowance.

(4) The amount determined in (3) for each network asset (excluding the wireline network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies) is the basis of such asset to be used to determine the deductions allowable or income tax credits available that require tax basis to be reduced before any depreciation is computed (for example, § 179, § 179D, or similar provisions; § 44 and § 46; and section 1603 payments). The net amount for each network asset after the reduction in basis for such deductions, credits, and section 1603 payments is that property’s § 1.168(b)-1(a)(3) unadjusted depreciable basis.

(5) In addition, expenditures for wireline network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies are capital expenditures under § 263(a) to which the ordinarily applicable basis and holding period rules and regulations apply.

.04 Required schedule. A taxpayer utilizing the wireline network asset maintenance allowance method must attach a schedule to its federal income tax return for the taxable year identifying the amounts for each step of the network asset maintenance allowance method computation provided in sections 5.02(1)-(5) above.

.05 Example. X is a wireline carrier with network assets used primarily to provide wireline telecommunication or broadband services. X adopts the wireline network maintenance allowance method provided in this revenue procedure. To determine the wireline network asset maintenance allowance for the taxable year, X first determines its adjusted basis attributable to wireline network assets as follows:

.01 In general. For wireline network assets, the Service will not challenge any of the following unit of property determinations for purposes of the application of § 263(a) and the regulations thereunder:

(A) all the towers and poles, and all the structures and fittings mounted on towers and poles, (“fully-dressed poles”) in a wire center constitute a single unit of property;

(B) all the copper wire and any associated devices, whether overhead or underground, in a wire center constitute a single unit of property;

(C) all the fiber optic cable and any associated devices, whether overhead or underground, in a wire center constitute a single unit of property;

(D) all the underground conduit and ducts, as well as controlled environmental vaults (“CEVs”), manholes, and handholes, in a wire center constitute a single unit of property;

(E) each central office building (including its structural components) constitutes a single unit of property;

(F) all central office equipment associated with a central office building constitutes a single unit of property;

(G) all SAI boxes in a wire center constitute a single unit of property; and

(H) all RNTs in a wire center constitute a single unit of property.

.02 Universal adoption not required. A taxpayer within the scope of this revenue procedure is not required to adopt all of the unit of property determinations provided in section 6.01 of this revenue procedure and, therefore, may adopt one or more of the unit of property determinations provided. Once adopted, however, a unit of property determination applies to all similar assets, including similar wireline network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies.

.03 Limitation. The unit of property determinations provided in this revenue procedure shall not apply for any other purpose of the Code or Regulations, including for determining the unit of property under other Code sections (for example, § 263A), or determining the asset for depreciation purposes (including placed in service, retirements, dispositions, or classification under § 168(e) or Rev. Proc. 87-56, 1987-2 C.B. 674), for the same or similar type of assets used in wireline telecommunications or other industries.

.01 In general. A change to (1) the wireline network asset maintenance allowance method or (2) adoption of all, or some, of the units of property described in this revenue procedure is a change in method of accounting to which the provisions of §§ 446 and 481, and the regulations thereunder, apply. A taxpayer that wants to change to a method of accounting described in this revenue procedure must use the automatic change in method of accounting provisions in Rev. Proc. 2011-14, 2011-4 I.R.B. 330, or its successor, as modified by this revenue procedure.

.02 Automatic change. Rev. Proc. 2011-14 is modified to add new section 3.07 to the APPENDIX, to read as follows:

.07 Wireline network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-27.

(1) Description of change. This change applies to a wireline telecommunications carrier that is within the scope of Rev. Proc. 2011-27 and wants to change its treatment of wireline network asset expenditures to adopt either (a) the wireline network asset maintenance allowance method of accounting or (b) all, or some, of the units of property described in Rev. Proc. 2011-27.

(2) Waiver of scope limitations. The scope limitations in section 4.02 of this revenue procedure do not apply to a wireline telecommunications carrier that changes to a method of accounting provided in section 5 or section 6 of Rev. Proc. 2011-27 for its first or second taxable year ending after December 30, 2010.

(3) Section 481(a) adjustment. In general, a change to the wireline network asset maintenance allowance method of accounting or adoption of all, or some, of the units of property specified in Rev. Proc. 2011-27 requires an adjustment under § 481(a). The § 481(a) adjustment shall not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2).

(4) Ogden copy of Form 3115 required in lieu of national office copy. A taxpayer changing its method of accounting under section 3.07 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See section 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change number. The designated automatic accounting method change number for a change to the method of accounting provided in Rev. Proc. 2011-27 is “158.”

(6) Contact information. For further information regarding a change under this section, contact Alan S. Williams at (202) 622-4950 (not a toll-free call).

Rev. Proc. 2011-14 is modified to include the accounting method change in this revenue procedure in section 3 of the Appendix.

This revenue procedure is effective for taxable years ending on or after December 31, 2010.

The principal author of this revenue procedure is Alan S. Williams of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Alan S. Williams at (202) 622-4950 (not a toll-free call).

This revenue procedure provides two alternative safe harbor approaches that taxpayers may use to determine whether expenditures to maintain, replace, or improve wireless network assets must be capitalized under § 263(a) of the Internal Revenue Code: a network asset maintenance allowance method or a units of property method. This revenue procedure also provides procedures for obtaining automatic consent to change to either safe harbor method of accounting permitted by this revenue procedure.

.01 Taxpayers that provide wireless telecommunication services incur significant expenditures to maintain, replace, and improve wireless network property. Whether these expenditures are deductible as repairs under § 162 or must be capitalized as improvements under § 263(a) depends on whether the expenditures materially increase the value of the property or substantially prolong its useful life. See § 1.162-4 of the Income Tax Regulations. Applying capitalization principles to wireless network assets can be particularly difficult, largely because the property consists of a network of interconnected items such as mobile telephone switching offices and property located at cell sites. Taxpayers and the Internal Revenue Service often do not agree on which items within this network constitute discrete units of property and whether the replacement of a particular item materially increases the value or substantially prolongs the useful life of a unit of property.

.02 To minimize disputes regarding the deductibility or capitalization of expenditures to maintain, replace, or improve wireless network assets, this revenue procedure provides two alternative safe harbor approaches. Section 5 provides a wireless “network asset maintenance allowance method” for determining the amount of expenditures required to be capitalized under § 263(a). Section 6 defines units of property that may be adopted and to which existing principles under § 263(a) are applied.

.03 A taxpayer’s method for determining whether an expenditure is deductible or is capitalizable is a method of accounting under § 446. Except as otherwise expressly provided by the Code or the regulations thereunder, § 446(e) and § 1.446-1(e)(2) require a taxpayer to secure the consent of the Commissioner of Internal Revenue before changing a method of accounting for federal income tax purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting. Section 7 of this revenue procedure provides the procedures by which a taxpayer may obtain automatic consent for a change in method of accounting to adopt either of the alternative safe harbor approaches provided by this revenue procedure.

This revenue procedure applies to a taxpayer that has a depreciable interest in wireless network assets (as described in section 4 of this revenue procedure) used primarily to provide wireless telecommunication or broadband services by mobile phones (for example, cell phones or smartphones). This revenue procedure does not apply to a taxpayer that is primarily a cable operator. The determination of whether a taxpayer is within the scope of this revenue procedure is made by each member of a consolidated group, by a partnership, or by an S corporation.

The following definitions apply solely for purposes of this revenue procedure:

.01 Wireless network assets. “Wireless network assets” means all personal and real property used by a wireless telecommunications carrier to provide wireless telecommunication or broadband services by mobile phone. Wireless network assets include a mobile telephone switching office (MTSO) and property located at cell sites. Wireless network assets do not include personal or real property not directly used to provide wireless telecommunication or broadband services by mobile phone, such as a corporate office building and the furniture and equipment used in an office building.

.02 Mobile telephone switching office. “Mobile telephone switching office” (MTSO) means a central switching facility that transmits wireless voice and data (including video) communications to and from cell sites and other equipment that comprise the wireless network, and also connects the wireless network to the wireline network (public switched telephone network). The MTSO and its equipment are powered by conventional electrical service with back-up support from electric generators or battery systems.

.03 MTSO equipment. “MTSO equipment” means the equipment located at a MTSO and typically includes computer-based switching equipment and related equipment at the MTSO (including the computer-based switching equipment, base station controllers (or generational equivalent), radio network controllers, mobility managers, operations and management platforms, protocol handlers, vocoders, modems, cross-connects, optical-cross connect bays, and associated cables), dedicated heating, ventilation, and air conditioning (HVAC) equipment and dedicated power (including battery backup system) for the computer-based switching equipment and related equipment at the MTSO.

.04 Cell site transmission equipment. “Cell site transmission equipment” includes the antenna systems (including the antenna itself, antenna cables, microwave equipment, RET equipment, and the RET central control unit (CCU) controller) but does not include base transceiver station radio cabinets or cell site support and other equipment.

.05 Cell site radio equipment. “Cell site radio equipment” includes the base station controller (or generational equivalent), base transceiver station (or generational equivalent), their own weather proof enclosure or cabinet (including any equipment integrated into or built into the base station controller or base transceiver station; for example, integrated or built-in equipment might include HVAC and power equipment, alarms, enhanced 911 service equipment, or the RET CCU controller), and associated cables.

.06 Cell site support equipment. “Cell site support equipment” includes the alarms or enhanced 911 service equipment not integrated into or built into a base station controller or base transceiver station, and associated cables. This unit of property does not include general incoming power panels, general receptacles, general lighting, common cell site enclosure grounding systems, or equipment integrated into or considered part of the cell site enclosure.

.01 In general. Under the network asset maintenance allowance method, the taxpayer must determine the amount of its wireless network asset expenditures that are not required to be capitalized under section 5.02 of this revenue procedure (network asset maintenance allowance) and the amount of wireless network asset expenditures that are treated as § 263(a) capital expenditures under section 5.03 of this revenue procedure (§ 263(a) capital expenditures). A taxpayer that uses the network asset maintenance allowance method described in this section 5 must use that method for all of its wireless network asset expenditures (which includes expenditures relating to wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies, even though the cost of such property is removed from the total cost of capital additions for the taxable year as provided in § 5.02(2)(b)-(c) below).

.02 Network asset maintenance allowance. The amount of the network asset maintenance allowance for a particular taxable year is determined as follows:

(1) Start with the total cost of capital additions for financial statement purposes that are placed in service (within the meaning of § 1.46-3(d)(1)(ii)) during the taxable year.

(2) Decrease the amount determined in (1) by the following amounts:

(a) the cost of property other than wireless network assets;

(b) the cost of any wireless network assets acquired in an applicable asset acquisition as defined in § 1060; and

(c) the cost of any wireless network assets acquired in a transaction to which § 338(h)(10) applies.

(3) Adjust the amount determined after applying steps (1) and (2) to determine the adjusted basis of the property under § 1011, including any adjustments described in § 1016 except for the following:

(a) Any basis adjustments attributable to changes made after December 31, 2007 to the taxpayer’s unit of property definitions used for repair versus capitalization determinations.

(b) Any adjustments described in § 1016(a)(2) and § 1016(a)(3) and any adjustments that require tax basis to be reduced before depreciation is computed ( e.g. , § 179, § 179D, or similar provisions; § 44 and § 46; and the payments for specified energy property under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Division B, Pub. L. 111-5, 123 Stat. 115 (section 1603 payments)).

(4) Using the adjusted basis determined in step (3), determine the amount attributable to 5-year, 7-year, and 15-year property and nonresidential real property, and multiply each of these amounts by 5%. The result is the network asset maintenance allowance for each class of property.

(5) The sum of the network asset maintenance allowances determined in (4) for each class of property is the taxpayer’s network asset maintenance allowance amount for the taxable year.

.03 § 263(a) capital expenditures. The wireless network asset capital expenditures for § 263(a) for the taxable year under the network asset maintenance allowance method are determined as follows:

(1) Start with the adjusted basis for 5-year, 7-year, and 15-year property and nonresidential real property determined in section 5.02(4) above.

(2) For each class of property, multiply the adjusted basis attributable to the class of property by 95%. The result is each class of property’s basis amount after taking into account the network asset maintenance allowance.

(3) For each class of property, allocate that class of property’s basis amount determined in 5.03(2) among the class of property’s wireless network assets (excluding wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies) according to the basis of each wireless network asset determined before application of the network asset maintenance allowance.

(4) The amount determined in (3) for each network asset (excluding wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies) is the basis of such asset to be used to determine the deductions allowable or income tax credits available that require tax basis to be reduced before any depreciation is computed (for example, § 179, § 179D, or similar provisions; § 44 and § 46; and section 1603 payments). The net amount for each network asset after the reduction in basis for such deductions, credits, and section 1603 payments is that property’s § 1.168(b)-1(a)(3) unadjusted depreciable basis.

(5) In addition, expenditures for wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies are capital expenditures under § 263(a) to which the ordinarily applicable basis and holding period rules and regulations apply.

.04 Required schedule. A taxpayer utilizing the network asset maintenance allowance method must attach a schedule to its federal income tax return for the taxable year identifying the amounts for each step of the network asset maintenance allowance method computation provided in sections 5.02(1)-(5) above.

.05 Example. X is a wireless telecommunications carrier with wireless network assets used primarily to provide wireless telecommunication or broadband services by mobile phones. X adopts the wireless network asset maintenance allowance method provided in this revenue procedure. To determine the wireless network asset maintenance allowance for the taxable year, X first determines its adjusted basis attributable to wireless network assets as follows:

.01 In general. For wireless network assets, the Service will not challenge any of the following unit of property determinations for purposes of the application of § 263(a) and the regulations thereunder:

(A) the MTSO building (including its structural components) constitutes a single unit of property;

(B) all of the MTSO equipment constitutes a single unit of property;

(C) all cell site transmission equipment at a cell site constitutes a single unit of property;

(D) all cell site radio equipment at a cell site constitutes a single unit of property;

(E) all cell site support equipment at a cell site constitutes a single unit of property;

(F) the antenna support structure (also known as a tower) affixed to a foundation (for example, a concrete foundation, a building rooftop, or a building wall) at a cell site constitutes a single unit of property;

(G) the concrete foundation upon which the antenna support structure is installed, including the bolts embedded therein and other depreciable assets associated with the platform or other forms of anchoring to affix a tower to a foundation, constitutes a single unit of property;

(H) the cell site enclosure (hut) and the cement slab or foundation upon which the hut is installed constitute a single unit of property; and

(I) all depreciable land improvements at a cell site constitute a single unit of property. Depreciable land improvements include landscaping that is replaced when a related depreciable asset is replaced, fences, and sidewalks, but exclude enclosures or buildings suitable for occupation and any improvements properly capitalized to the land.

.02 Universal adoption not required. A taxpayer within the scope of this revenue procedure is not required to adopt all of the unit of property determinations provided in section 6.01 of this revenue procedure and, therefore, may adopt one or more of the unit of property determinations provided. Once adopted, however, a unit of property determination applies to all similar assets, including similar wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies.

.03 Limitation. The unit of property determinations provided in this revenue procedure shall not apply for any other purpose of the Code or Regulations, including for determining the unit of property under other Code sections (for example, § 263A), or determining the asset for depreciation purposes (including placed in service, retirements, dispositions, or classification under § 168(e) or Rev. Proc. 87-56, 1987-2 C.B. 674), for the same or similar type of assets used in wireless telecommunications or other industries.

.01 In general. A change to (1) the wireless network asset maintenance allowance method or (2) adoption of all, or some, of the units of property described in this revenue procedure is a change in method of accounting to which the provisions of §§ 446 and 481, and the regulations thereunder, apply. A taxpayer that wants to change to a method of accounting described in this revenue procedure must use the automatic change in method of accounting provisions in Rev. Proc. 2011-14, 2011-4 I.R.B. 330, or its successor, as modified by this revenue procedure.

.02 Automatic change. Rev. Proc. 2011-14 is modified to add new section 3.08 to the APPENDIX, to read as follows:

.08 Wireless network asset maintenance allowance and units of property methods of accounting under Rev. Proc. 2011-28.

(1) Description of change. This change applies to a wireless telecommunications carrier that is within the scope of Rev. Proc. 2011-28 and wants to change its treatment of wireless network asset expenditures to adopt either (a) the wireless network asset maintenance allowance method of accounting or (b) all, or some, of the units of property described in Rev. Proc. 2011-28.

(2) Waiver of scope limitations. The scope limitations in section 4.02 of this revenue procedure do not apply to a wireless telecommunications carrier that changes to a method of accounting provided in section 5 or section 6 of Rev. Proc. 2011-28 for its first or second taxable year ending after December 30, 2010.

(3) Section 481(a) adjustment. In general, a change to the wireless network asset maintenance allowance method of accounting or adoption of all, or some, of the units of property specified in Rev. Proc. 2011-28 requires an adjustment under § 481(a). The § 481(a) adjustment shall not include any amount attributable to property for which the taxpayer elected to apply the repair allowance under § 1.167(a)-11(d)(2).

(4) Ogden copy of Form 3115 required in lieu of national office copy. A taxpayer changing its method of accounting under section 3.08 of the APPENDIX must file a signed copy of its completed Form 3115 with the IRS in Ogden, UT, (Ogden copy) in lieu of filing the national office copy no earlier than the first day of the year of change and no later than the date the taxpayer files the original Form 3115 with its federal income tax return for the year of change. See sections 6.02(3)(a)(ii)(B) (providing the general rules) and section 6.02(7)(b) (providing the mailing address) of this revenue procedure.

(5) Designated automatic accounting method change numbers. The designated automatic accounting method change number for a change to the method of accounting provided in Rev. Proc. 2011-28 is “159.”

(6) Contact information. For further information regarding a change under this section, contact Alan S. Williams at (202) 622-4950 (not a toll-free call).

Rev. Proc. 2011-14 is modified to include the accounting method change in this revenue procedure in section 3 of the Appendix.

This revenue procedure is effective for taxable years ending on or after December 31, 2010.

The principal author of this revenue procedure is Alan S. Williams of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Alan S. Williams at (202) 622-4950 (not a toll-free call).

This revenue procedure provides a safe harbor election for allocating success-based fees paid in business acquisitions or reorganizations described in § 1.263(a)-5(e)(3) of the Income Tax Regulations. In lieu of maintaining the documentation required by § 1.263(a)-5(f), this safe harbor permits electing taxpayers to treat 70 percent of the success-based fee as an amount that does not facilitate the transaction. The remaining portion of the fee must be capitalized as an amount that facilitates the transaction.

.01 Section 263(a)(1) of the Internal Revenue Code and § 1.263(a)-2(a) provide that no deduction shall be allowed for any amount paid out for property having a useful life substantially beyond the taxable year. In the case of an acquisition or reorganization of a business entity, costs that are incurred in the process of acquisition and that produce significant long-term benefits must be capitalized. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 89-90 (1992); Woodward v. Commissioner, 397 U.S. 572, 575-576 (1970).

.02 Under § 1.263(a)-5, a taxpayer must capitalize an amount paid to facilitate a business acquisition or reorganization transaction described in § 1.263(a)-5(a). An amount is paid to facilitate a transaction described in § 1.263(a)-5(a) if the amount is paid in the process of investigating or otherwise pursuing the transaction.

.03 Section 1.263(a)-5(f) provides that an amount that is contingent on the successful closing of a transaction described in § 1.263(a)-5(a) (“success-based fee”) is presumed to facilitate the transaction. A taxpayer may rebut the presumption by maintaining sufficient documentation to establish that a portion of the fee is allocable to activities that do not facilitate the transaction.

.04 A taxpayer’s method for determining the portion of a success-based fee that facilitates a transaction and the portion that does not facilitate the transaction is a method of accounting under § 446.

.05 The Internal Revenue Service and the Treasury Department are aware that the treatment of success-based fees continues to be the subject of controversy between taxpayers and the Service. In particular, numerous disagreements have arisen regarding the type and extent of documentation required to establish that a portion of a success-based fee is allocable to activities that do not facilitate a business acquisition or reorganization transaction described in § 1.263(a)-5(e)(3) (“covered transaction”). The Service and the Treasury Department expect that much of this controversy can be eliminated by providing taxpayers a simplified method for allocating a success-based fee paid in a covered transaction between facilitative and non-facilitative activities. Accordingly, this revenue procedure provides a safe harbor election for allocating a success-based fee between activities that facilitate a covered transaction and activities that do not facilitate a covered transaction.

This revenue procedure applies to a taxpayer that—

(1) pays or incurs a success-based fee for services performed in the process of investigating or otherwise pursuing a transaction described in § 1.263(a)-5(e)(3); and

(2) makes the safe harbor election described in section 4 of this revenue procedure.

.01 The Service will not challenge a taxpayer’s allocation of a success-based fee between activities that facilitate a transaction described in § 1.263(a)-5(e)(3) and activities that do not facilitate the transaction if the taxpayer—

(1) treats 70 percent of the amount of the success-based fee as an amount that does not facilitate the transaction;

(2) capitalizes the remaining 30 percent as an amount that does facilitate the transaction; and

(3) attaches a statement to its original federal income tax return for the taxable year the success-based fee is paid or incurred, stating that the taxpayer is electing the safe harbor, identifying the transaction, and stating the success-based fee amounts that are deducted and capitalized.

.02 An election under this revenue procedure applies only to the transaction for which the election is made and, once made, is irrevocable. The election applies with respect to all success-based fees paid or incurred by the taxpayer in the transaction for which the election is made.

.03 An election under this revenue procedure for any transaction does not constitute a change in method of accounting for success-based fees generally. Accordingly, a § 481(a) adjustment is neither permitted nor required.

This revenue procedure is effective for success-based fees paid or incurred in taxable years ending on or after April 8, 2011.

The principal author of this notice is Nancy J. Lee of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Nancy J. Lee or Jason D. Kristall of the Office of Associate Chief Counsel (Income Tax & Accounting) at (202) 622-5020 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of public hearing on proposed rulemaking.

This document provides notice of public hearing on a notice of proposed rulemaking relating to the payment of rewards under section 7623(a) of the Internal Revenue Code and awards under section 7623(b). The guidance is necessary to clarify the definition of proceeds of amounts collected and collected proceeds under section 7623. This regulation provides needed guidance to the general public as well as officers and employees of the IRS who review claims under section 7623.

The public hearing is being held on Wednesday, May 11, 2011, at 10 a.m. The IRS must receive outlines of the topics to be discussed at the hearing by Tuesday, April 19, 2011.

The public hearing is being held in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Send submissions to: CC:PA:LPD:PR (REG-131151-10), 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-131151-10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit electronic outlines of oral comments via the Federal eRulemaking Portal at http://www.regulations.gov.

Concerning the proposed regulations, Kirsten N. Witter at (202) 927-0900; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard A. Hurst at Richard.A.Hurst@irscounsel.treas.gov or (202) 622-7180 (not toll-free numbers).

The subject of the public hearing is the notice of proposed rulemaking (REG-131151-10) that was published in the Federal Register on Tuesday, January 18, 2011 (76 FR 2852).

Persons, who wish to present oral comments at the hearing that submitted written comments, 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 Tuesday, April 19, 2011.

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 or in the Freedom of Information Reading Room (FOIA RR) (Room 1621) which is located at the 11^th and Pennsylvania Avenue NW entrance, 1111 Constitution Avenue, NW, Washington, DC.

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.

In Announcement 2010-81, 2010-45 I.R.B 638, the IRS delayed the renewal period under section 10.6(d) of the regulations governing practice before the IRS, Treasury Department Circular No. 230, 31 CFR part 10 (Circular 230), for enrolled agents whose social security number or tax identification number ends in 4, 5, or 6. This announcement reinstates the renewal period for affected enrolled agents beginning June 1, 2011, which is thirty days after the publication of this announcement.

Section 10.6(d) of Circular 230 requires that, to maintain active enrollment to practice before the IRS, enrolled agents must renew enrollment every third year after initial enrollment is granted. The renewal period for enrolled agents whose social security number or tax identification number ends in 4, 5, or 6 was scheduled to begin on November 1, 2010, and end on January 31, 2011.

On October 14, 2010, the Treasury Department and the IRS released Announcement 2010-81, which delayed the renewal period for enrolled agents whose social security number or tax identification number ends in 4, 5, or 6. The Treasury Department and the IRS delayed the renewal period at that time because it anticipated issuing guidance that reduced the initial enrollment and renewal of enrollment user fees for enrolled agents and enrolled retirement plan agents. The reduction in these user fees resulted from the reallocation of portions of the enrolled agent and enrolled retirement plan agent initial enrollment and renewal of enrollment processes to the PTIN application and renewal process, which are recovered by a $50 user fee to the IRS to apply for or renew a preparer tax identification number (PTIN). See Treas. Reg. § 300.9. On April 19, 2011, the Treasury Department and the IRS published final regulations (T.D. 9523, 76 FR 21805) that reduce the enrolled agent and enrolled retirement plan agent initial enrollment and renewal of enrollment user fees to $30.

Accordingly, the Treasury Department and the IRS now announce that the renewal period for enrolled agents is reinstated beginning June 1, 2011. The renewal period will conclude 90 days later on August 30, 2011. Enrolled agents whose social security number or tax identification number ends in 4, 5, or 6 must submit their application for renewal of enrollment, along with the $30 renewal fee, to the IRS during this period. The IRS expects to process these applications and issue enrollment cards before November 28, 2011, 90 days after the end of the enrollment period.

The enrollment status of enrolled agents who come within the provisions of Announcement 2010-81 is not affected due to the delay announced in that document. Renewal of enrollment will be retroactive to April 1, 2011, for enrolled agents who come within the provisions of Announcement 2010-81 and who properly renew their enrollment before August 31, 2011. These enrolled agents must still complete all continuing professional education hours as provided in section 10.6(e) of Circular 230.

Enrolled agents not affected by Announcement 2010-81 should refer to sections 10.6(d)(2) and (3) in Circular 230 to determine their renewal of enrollment periods. Enrolled agents whose social security numbers do not end in 4, 5, or 6, whose renewal of enrollment period was prior to January 31, 2011, and who are delinquent in renewing their enrollment must pay the $125 renewal fee.

The principal author of this announcement is Emily M. Lesniak of the Office of the Associate Chief Counsel (Procedure & Administration). For further information regarding this notice, contact Emily M. Lesniak at (202) 622-4570 (not a toll-free call).