Highlights of This Issue Income Tax Preface The IRS Mission Introduction Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Rev. Rul. 201821 Part IV. Items of General Interest REG10347418 Definition of Terms and Abbreviations Definition of Terms Abbreviations Numerical Finding List Numerical Finding List Effect of Current Actions on Previously Published Items Finding List of Current Actions on Previously Published Items INTERNAL REVENUE BULLETIN We Welcome Comments About the Internal Revenue Bulletin Internal Revenue Bulletin: 2018-32 August 6, 2018 Highlights of This Issue These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. Income Tax Rev. Rul. 2018–21 Rev. Rul. 2018–21 Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for August 2018. REG–103474–18 REG–103474–18 This item contains proposed regulations that amend portions of previously proposed regulations related to the tax return preparer penalty under section 6695(g) of the Internal Revenue Code (Code). These amendments to the previously proposed regulations are necessary to implement a recent law change that expands the scope of the tax return preparer due diligence penalty under section 6695(g) so that it applies with respect to eligibility to file a return or claim for refund as head of household. Preface The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Rev. Rul. 2018–21 This revenue ruling provides various prescribed rates for federal income tax purposes for August 2018 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. REV. RUL. 2018–21 TABLE 1 Applicable Federal Rates (AFR) for August 2018 Period for Compounding Annual Semiannual Quarterly Monthly Short-term AFR 2.42% 2.41% 2.40% 2.40% 110% AFR 2.67% 2.65% 2.64% 2.64% 120% AFR 2.91% 2.89% 2.88% 2.87% 130% AFR 3.15% 3.13% 3.12% 3.11% Mid-term AFR 2.80% 2.78% 2.77% 2.76% 110% AFR 3.08% 3.06% 3.05% 3.04% 120% AFR 3.37% 3.34% 3.33% 3.32% 130% AFR 3.64% 3.61% 3.59% 3.58% 150% AFR 4.21% 4.17% 4.15% 4.13% 175% AFR 4.93% 4.87% 4.84% 4.82% Long-term AFR 2.95% 2.93% 2.92% 2.91% 110% AFR 3.25% 3.22% 3.21% 3.20% 120% AFR 3.55% 3.52% 3.50% 3.49% 130% AFR 3.85% 3.81% 3.79% 3.78% REV. RUL. 2018–21 TABLE 2 Adjusted AFR for August 2018 Period for Compounding Annual Semiannual Quarterly Monthly Short-term adjusted AFR 1.84% 1.83% 1.83% 1.82% Mid-term adjusted AFR 2.12% 2.11% 2.10% 2.10% Long-term adjusted AFR 2.23% 2.22% 2.21% 2.21% REV. RUL. 2018–21 TABLE 3 Rates Under Section 382 for August 2018 Adjusted federal long-term rate for the current month 2.23% Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 2.32% REV. RUL. 2018–21 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for August 2018 >Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Appropriate percentage for the 70% present value low-income housing credit 7.66% Appropriate percentage for the 30% present value low-income Housing credit 3.28% REV. RUL. 2018–21 TABLE 5 Rate Under Section 7520 for August 2018 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest .4% Part IV. Items of General Interest REG–103474–18 Tax Return Preparer Due Diligence Penalty Under Section 6695(g) AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking, partial withdrawal of notice of proposed rulemaking. SUMMARY: This document contains proposed regulations that amend portions of previously proposed regulations related to the tax return preparer penalty under section 6695(g) of the Internal Revenue Code (Code). These amendments to the previously proposed regulations are necessary to implement a recent law change that expands the scope of the tax return preparer due diligence penalty under section 6695(g) so that it applies with respect to eligibility to file a return or claim for refund as head of household. The proposed regulations affect tax return preparers. DATES: Written or electronic comments and requests for a public hearing must be received by August 17, 2018. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–103474–18), room 5207, 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–103474–18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20224, or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–103474–18). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Marshall French, 202-317-6845; concerning submissions of comments and requests for a public hearing, Regina Johnson, 202-317-6901 (not toll-free numbers). Paperwork Reduction Act The collection of information in current § 1.6695–2 was previously reviewed and approved under control number 1545-1570. Control number 1545-1570 was discontinued in 2014, as the burden for the collection of information contained in § 1.6695–2 is reflected in the burden for Form 8867, “Paid Preparer’s Due Diligence Checklist,” under control number 1545-1629. SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 6695(g) of the Code regarding the tax return preparer due diligence requirements. Prior to 2016, section 6695(g) imposed a penalty on tax return preparers who fail to comply with due diligence requirements set forth in regulations prescribed by the Secretary with respect to determining eligibility for, or the amount of, the earned income credit (EIC). For tax years beginning after December 31, 2015, the scope of section 6695(g) was expanded to apply the penalty to tax return preparers who fail to comply with due diligence requirements with respect to determining eligibility for, or the amount of, the child tax credit (CTC)/additional child tax credit (ACTC) and the American opportunity tax credit (AOTC). See section 207 of the Protecting Americans from Tax Hikes Act of 2015, Div. Q of Pub. L. 114–113 (129 Stat. 2242, 3082 (2015)) (PATH Act). On December 5, 2016, final and temporary regulations (TD 9799, 81 FR 87444) with cross-referencing proposed regulations (REG–102952–16, 81 FR 87502) (2016 proposed regulations) were published in the Federal Register to reflect these changes. Effective for tax years beginning after December 31, 2017, section 6695(g) was amended to further expand the scope of the penalty to tax return preparers who fail to comply with due diligence requirements with respect to determining eligibility to file as head of household (as defined in section 2(b)). See section 11001(b) of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Pub. L. 115–97 (131 Stat. 2054, 2058 (2017)) (Act). This document contains proposed regulations to reflect this change. Explanation of Provisions The proposed regulations contained in this document withdraw paragraphs (a), (b)(3), and (e) of § 1.6695–2 of the 2016 proposed regulations and propose in their place new paragraphs (a), (b)(3), and (e) of § 1.6695–2 (amended paragraphs). The amended paragraphs update the 2016 proposed regulations to reflect the recent change in the law that expands the tax return preparer due diligence requirements under section 6695(g) to apply to determining eligibility to file as head of household. Accordingly, the proposed regulations contained in this document amend paragraphs (a) and (b)(3) of § 1.6695–2 of the 2016 proposed regulations by adding a reference to determining eligibility to file as head of household where reference is made to determining eligibility for, or the amount of, the EIC, the CTC/ACTC and/or the AOTC. In addition, Example 5 in paragraph (b)(3)(ii) of § 1.6695–2 of the 2016 proposed regulations is revised to demonstrate how head of household due diligence requirements are intertwined with the rules for determining a taxpayer’s eligibility for the CTC. A new example is also added to § 1.6695–2(a)(2) to illustrate how the penalty applies if there is a failure to satisfy the due diligence requirements with respect to determining eligibility to file as head of household in addition to a failure to satisfy the due diligence requirements with respect to one of the applicable credits. As explained in the preamble of the 2016 temporary regulations, the preparation of one return or claim for refund may result in the imposition of more than one penalty under section 6695(g). That is because under section 6695(g), each failure to comply with the due diligence requirements set forth in regulations prescribed by the Secretary results in a separate penalty. To illustrate this point, a new example, Example 3, is added to proposed § 1.6695–2(a)(2) contained in this document. The applicability date in § 1.6695–2(e) is also updated to reflect the effective date of the addition of determining eligibility to file as head of household to the due diligence requirements. Accordingly, proposed § 1.6695–2(e) contained in this document provides that § 1.6695–2 applies to tax returns and claims for refund for taxable years beginning after December 31, 2015, that are prepared on or after the date of publication of the Treasury decision adopting the proposed rules as final regulations in the Federal Register. However, the rules relating to the determination of a taxpayer’s eligibility to file as head of household under section 2(b) apply to tax returns and claims for refund for taxable years beginning after December 31, 2017, that are prepared on or after the date of publication of the Treasury decision adopting the proposed rules as final regulations in the Federal Register. As part of satisfying the due diligence requirements, the regulations under § 1.6695–2 require tax return preparers to complete the Form 8867, “Paid Preparer’s Due Diligence Checklist,” and, in most cases, attach it to the relevant return or claim for refund as part of satisfying the section 6695(g) due diligence requirements. The Form 8867 underwent significant revisions for the 2016 tax year and is currently a single checklist to be used for all applicable credits (namely, the EIC, the CTC/ACTC, and the AOTC) on the return or claim for refund subject to the section 6695(g) due diligence requirements. It is anticipated that the IRS will revise the Form 8867 to include the head of household filing status in time for the 2019 filing season. Proposed Applicability Dates Proposed § 1.6695–2(e) provides that the rules in this notice of proposed rulemaking with respect to determining eligibility to file as head of household under section 2(b) will apply to tax returns and claims for refund for taxable years beginning after December 31, 2017, that are prepared on or after the date the final regulations are published in the Federal Register. Special Analyses This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations. Under the Regulatory Flexibility Act (RFA) (5 U.S.C. chapter 6), it is hereby certified that these proposed rules, if adopted, would not have a significant economic impact on a substantial number of small entities. When an agency issues a notice of proposed rulemaking, the RFA requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis” that will “describe the impact of the proposed rule on small entities.” (5 U.S.C. 603(a)). Section 605 of the RFA provides an exception to this requirement if the agency certifies that the proposed rulemaking will not have a significant economic impact on a substantial number of small entities. The proposed rules affect paid tax return preparers who determine a taxpayer is eligible to file as head of household, in addition to those tax return preparers who determine eligibility for, or the amount of, the EIC, the CTC/ACTC, and/or the AOTC. The North American Industry Classification System (NAICS) code that relates to tax return preparation services (NAICS code 541213) is the appropriate code for tax return preparers subject to this notice of proposed rulemaking. Entities identified as tax return preparation services are considered small under the Small Business Administration size standards (13 CFR 121.201) if their annual revenue is less than $20.5 million. The IRS estimates that approximately 75 to 85 percent of the 505,000 persons who work at firms or are self-employed tax return preparers are operating as or employed by small entities. The IRS has therefore determined that these proposed rules will have an impact on a substantial number of small entities. The IRS has further determined, however, that the economic impact on entities affected by the proposed rules will not be significant. The current final and temporary regulations under section 6695(g) already require tax return preparers to complete the Form 8867 when a return or claim for refund includes a claim of the EIC, the CTC/ACTC, and/or the AOTC. Tax return preparers also must currently maintain records of the checklists and computations, as well as a record of how and when the information used to compute the credits was obtained by the tax return preparer. The information needed to document a taxpayer’s eligibility to file as head of household is information the preparer must gather to file the return. Even if certain preparers are required to maintain the checklists and complete Form 8867 for the first time, the IRS estimates that the total time required should be minimal for these tax return preparers. Further, the IRS does not expect that the requirements in these proposed regulations would necessitate the purchase of additional software or equipment in order to meet the additional information retention requirements. Based on these facts, the IRS hereby certifies that the collection of information contained in this notice of proposed rulemaking will not have a significant economic impact on a substantial number of small entities. Accordingly, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact on small business. Comments and Requests for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written and electronic comments that are timely submitted to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register. Drafting Information The principal author of these regulations is Rachel Gregory of the Office of the Associate Chief Counsel (Procedure and Administration). * * * * * Partial Withdrawal of a Notice of Proposed Rulemaking Accordingly, under the authority of 26 U.S.C. 7805, § 1.6695–2(a), (b)(3), and (e) of the notice of proposed rulemaking (REG–102952–16) published in the Federal Register on December 5, 2016 (81 FR 87502) are withdrawn. Proposed Amendments to the Regulations Accordingly, 26 CFR Part 1 is proposed to be amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.6695–2 is amended by revising the section heading, and paragraphs (a), (b)(3), and (e) to read as follows: § 1.6695–2 Tax return preparer due diligence requirements for certain returns and claims. (a) Penalty for failure to meet due diligence requirements—(1) In general. A person who is a tax return preparer (as defined in section 7701(a)(36)) of a tax return or claim for refund under the Internal Revenue Code who determines the taxpayer’s eligibility to file as head of household under section 2(b), or who determines the taxpayer’s eligibility for, or the amount of, the child tax credit (CTC)/additional child tax credit (ACTC) under section 24, the American opportunity tax credit (AOTC) under section 25A(i), or the earned income credit (EIC) under section 32, and who fails to satisfy the due diligence requirements of paragraph (b) of this section will be subject to a penalty as prescribed in section 6695(g) (indexed for inflation under section 6695(h)) for each failure. A separate penalty applies to a tax return preparer with respect to the head of household filing status determination and to each applicable credit claimed on a return or claim for refund for which the due diligence requirements of this section are not satisfied and for which the exception to penalty provided by paragraph (d) of this section does not apply. (2) Examples. The provisions of paragraph (a)(1) of this section are illustrated by the following examples: Example 1. Preparer A prepares a federal income tax return for a taxpayer claiming the CTC and the AOTC. Preparer A did not meet the due diligence requirements under this section with respect to the CTC or the AOTC claimed on the taxpayer’s return. Unless the exception to penalty provided by paragraph (d) of this section applies, Preparer A is subject to two penalties under section 6695(g): one for failure to meet the due diligence requirements for the CTC and a second penalty for failure to meet the due diligence requirements for the AOTC. Example 2. Preparer B prepares a federal income tax return for a taxpayer claiming the CTC and the AOTC. Preparer B did not meet the due diligence requirements under this section with respect to the CTC claimed on the taxpayer’s return, but Preparer B did meet the due diligence requirements under this section with respect to the AOTC claimed on the taxpayer’s return. Unless the exception to penalty provided by paragraph (d) of this section applies, Preparer B is subject to one penalty under section 6695(g) for the failure to meet the due diligence requirements for the CTC. Preparer B is not subject to a penalty under section 6695(g) for failure to meet the due diligence requirements for the AOTC. Example 3. Preparer C prepares a federal income tax return for a taxpayer using the head of household filing status and claiming the CTC and the AOTC. Preparer C did not meet the due diligence requirements under this section with respect to the head of household filing status and the CTC claimed on the taxpayer’s return. Preparer C did meet the due diligence requirements under this section with respect to the AOTC claimed on the taxpayer’s return. Unless the exception to penalty provided by paragraph (d) of this section applies, Preparer C is subject to two penalties under section 6695(g) for the failure to meet the due diligence requirements: one for the head of household filing status and one for the CTC. Preparer C is not subject to a penalty under section 6695(g) for failure to meet the due diligence requirements for the AOTC. (b) * * * (3) Knowledge—(i) In general. The tax return preparer must not know, or have reason to know, that any information used by the tax return preparer in determining the taxpayer’s eligibility to file as head of household or in determining the taxpayer’s eligibility for, or the amount of, any credit described in paragraph (a) of this section and claimed on the return or claim for refund is incorrect. The tax return preparer may not ignore the implications of information furnished to, or known by, the tax return preparer, and must make reasonable inquiries if a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that the information furnished to the tax return preparer appears to be incorrect, inconsistent, or incomplete. The tax return preparer must also contemporaneously document in the preparer’s paper or electronic files any inquiries made and the responses to those inquiries. (ii) Examples. The provisions of paragraph (b)(3)(i) of this section are illustrated by the following examples: Example 1. In 2018, Q, a 22 year-old taxpayer, engages Preparer C to prepare Q’s 2017 federal income tax return. Q completes Preparer C’s standard intake questionnaire and states that she has never been married and has two sons, ages 10 and 11. Based on the intake sheet and other information that Q provides, including information that shows that the boys lived with Q throughout 2017, Preparer C believes that Q may be eligible to claim each boy as a qualifying child for purposes of the EIC and the CTC. However, Q provides no information to Preparer C, and Preparer C does not have any information from other sources, to verify the relationship between Q and the boys. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer C must make reasonable inquiries to determine whether each boy is a qualifying child of Q for purposes of the EIC and the CTC, including reasonable inquiries to verify Q’s relationship to the boys, and Preparer C must contemporaneously document these inquiries and the responses. Example 2. Assume the same facts as in Example 1 of this paragraph (b)(3)(ii). In addition, as part of preparing Q’s 2017 federal income tax return, Preparer C made sufficient reasonable inquiries to verify that the boys were Q’s legally adopted children. In 2019, Q engages Preparer C to prepare her 2018 federal income tax return. When preparing Q’s 2018 federal income tax return, Preparer C is not required to make additional inquiries to determine the boys relationship to Q for purposes of the knowledge requirement in paragraph (b)(3) of this section. Example 3. In 2018, R, an 18 year-old taxpayer, engages Preparer D to prepare R’s 2017 federal income tax return. R completes Preparer D’s standard intake questionnaire and states that she has never been married, has one child, an infant, and that she and her infant lived with R’s parents during part of the 2017 tax year. R also provides Preparer D with a Form W–2 showing that she earned $10,000 during 2017. R provides no other documents or information showing that R earned any other income during the tax year. Based on the intake sheet and other information that R provides, Preparer D believes that R may be eligible to claim the infant as a qualifying child for the EIC and the CTC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer D must make reasonable inquiries to determine whether R is eligible to claim these credits, including reasonable inquiries to verify that R is not a qualifying child of her parents (which would make R ineligible to claim the EIC) or a dependent of her parents (which would make R ineligible to claim the CTC), and Preparer D must contemporaneously document these inquiries and the responses. Example 4. The facts are the same as the facts in Example 3 of this paragraph (b)(3)(ii). In addition, Preparer D previously prepared the 2017 joint federal income tax return for R’s parents. Based on information provided by R’s parents, Preparer D has determined that R is not eligible to be claimed as a dependent or as a qualifying child for purposes of the EIC or CTC on R’s parents’ return. Therefore, for purposes of the knowledge requirement in paragraph (b)(3) of this section, Preparer D is not required to make additional inquiries to determine that R is not her parents’ qualifying child or dependent. Example 5. In 2019, S engages Preparer E to prepare his 2018 federal income tax return. During Preparer E’s standard intake interview, S states that he has never been married and that his niece and nephew lived with him for part of the 2018 taxable year. Preparer E believes S may be eligible to file as head of household and claim each of these children as a qualifying child for purposes of the EIC and the CTC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer E must make reasonable inquiries to determine whether S is eligible to file as head of household and whether each child is a qualifying child for purposes of the EIC and the CTC, including reasonable inquiries about the children’s residency, S’s relationship to the children, the children’s income, the sources of support for the children, and S’s contribution to the payment of costs related to operating the household, and preparer E must contemporaneously document these inquiries and the responses. Example 6. W engages Preparer F to prepare her federal income tax return. During Preparer F’s standard intake interview, W states that she is 50 years old, has never been married, and has no children. W further states to Preparer F that during the tax year she was self-employed, earned $10,000 from her business, and had no business expenses or other income. Preparer F believes W may be eligible for the EIC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer F must make reasonable inquiries to determine whether W is eligible for the EIC, including reasonable inquiries to determine whether W’s business income and expenses are correct, and Preparer F must contemporaneously document these inquiries and the responses. Example 7. Y, who is 32 years old, engages Preparer G to prepare his federal income tax return. Y completes Preparer G’s standard intake questionnaire and states that he has never been married. As part of Preparer G’s client intake process, Y provides Preparer G with a copy of the Form 1098–T Y received showing that University M billed $4,000 of qualified tuition and related expenses for Y’s enrollment or attendance at the university and that Y was at least a half-time undergraduate student. Preparer G believes that Y may be eligible for the AOTC. To meet the knowledge requirements in paragraph (b)(3) of this section, Preparer G must make reasonable inquiries to determine whether Y is eligible for the AOTC, as Form 1098–T does not contain all the information needed to determine eligibility for the AOTC or to calculate the amount of the credit if Y is eligible, and contemporaneously document these inquiries and the responses. * * * * * (e) Applicability date. The rules of this section apply to tax returns and claims for refund for taxable years beginning after December 31, 2015, that are prepared on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. However, the rules relating to the determination of a taxpayer’s eligibility to file as head of household under section 2(b) apply to tax returns and claims for refund for taxable years beginning after December 31, 2017, that are prepared on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. Kirsten Wielobob, Deputy Commissioner for Services and Enforcement. Note (Filed by the Office of the Federal Register on July 13, 2018, 4:15 p.m., and published in the issue of the Federal Register for July 18, 2018, 83 F.R. 33875) Definition of Terms and Abbreviations Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D.—Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. Numerical Finding List Numerical Finding List A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–01 through 2018–26 is in Internal Revenue Bulletin 2018–26, dated June 27, 2018. Bulletin 2018–27 through 2018–32 Announcements: Article Issue Link Page 2018-09 2018-28 I.R.B. 2018-28 206 2018-12 2018-30 I.R.B. 2018-30 232 Notices: Article Issue Link Page 2018-48 2018-28 I.R.B. 2018-28 9 2018-56 2018-27 I.R.B. 2018-27 3 2018-59 2018-28 I.R.B. 2018-28 196 2018-60 2018-31 I.R.B. 2018-31 275 2018-61 2018-31 I.R.B. 2018-31 278 Proposed Regulations: Article Issue Link Page REG-103474-18 2018-32 I.R.B. 2018-32 282 REG-106977-18 2018-27 I.R.B. 2018-27 6 Revenue Procedures: Article Issue Link Page 2018-35 2018-28 I.R.B. 2018-28 204 2018-37 2018-29 I.R.B. 2018-29 210 2018-38 2018-31 I.R.B. 2018-31 280 Revenue Rulings: Article Issue Link Page 2018-19 2018-27 I.R.B. 2018-27 1 2018-20 2018-28 I.R.B. 2018-28 8 2018-21 2018-32 I.R.B. 2018-32 282 Treasury Decisions: Article Issue Link Page 9834 2018-31 I.R.B. 2018-31 233 Effect of Current Actions on Previously Published Items Finding List of Current Actions on Previously Published Items A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–01 through 2018–26 is in Internal Revenue Bulletin 2018–26, dated June 27, 2018. Bulletin 2018–27 through 2018–32 INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.
