The IRS is announcing a change in procedures for individual payees to follow to obtain validation of social security numbers (SSNs) from the Social Security Administration (SSA) to prevent or stop backup withholding under section 3406 of the Code following receipt of a second “B notice” from a payor.

Proposed regulations under section 1001 of the Code clarify the extent to which the deterioration in an issuer’s financial condition is taken into account to determine whether a modified debt instrument will be recharacterized as an instrument that is not debt. A public hearing is scheduled for September 8, 2010.

Changes to cost-of-living adjustments for 2010. This procedure modifies the inflation adjusted amounts in Rev. Proc. 2009-50, 2009-45 I.R.B. 617, that apply to taxpayers who elect to expense certain depreciable assets under section 179 of the Code. The modification reflects statutory amendments enacted subsequent to the publication of Rev. Proc. 2009-50 made by the Hiring Incentives to Restore Employment Act of 2010 (the HIRE Act). Section 3.20 of Rev. Proc. 2009-50 modified and superseded.

The IRS has revoked its determination that Christian Credit Counseling Center of San Antonio, TX; Gullahorn Family Supporting Organization of Naples, FL; and Visual Credit Counseling, Inc., of Tucson, AZ, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.

The IRS is announcing a change in procedures for individual payees to follow to obtain validation of social security numbers (SSNs) from the Social Security Administration (SSA) to prevent or stop backup withholding under section 3406 of the Code following receipt of a second “B notice” from a payor.

This revenue procedure modifies the inflation adjusted amounts in Rev. Proc. 2009-50, 2009-45 I.R.B. 617, that apply to taxpayers who elect to expense certain depreciable assets under § 179 of the Internal Revenue Code. This modification reflects statutory changes enacted subsequent to the publication of Rev. Proc. 2009-50.

Prior to the enactment of the Hiring Incentives to Restore Employment Act of 2010, Pub. L. No.111-147, 124 Stat. 71 (2010) (the HIRE Act), § 179(b)(1) prescribed a $125,000 limitation (the $125,000 amount) on the aggregate cost of § 179 property that could be treated as an expense for taxable years beginning after 2006 and before 2011. For those same taxable years, § 179(b)(2) provided that the $125,000 amount is reduced by the amount by which the cost of § 179 property placed in service during the taxable year exceeds $500,000 (the $500,000 amount). Both the $125,000 amount and the $500,000 amount were adjusted for inflation annually under § 179(b)(5). For taxable years beginning in 2010, section 3.20 of Rev. Proc. 2009-50 provides that the $125,000 amount and the $500,000 amount, adjusted for inflation, are $134,000 and $530,000, respectively.

Section 102 of the Economic Stimulus Act of 2008, Pub. L. No.110-185, 122 Stat. 613 (2008), changed the $125,000 amount and the $500,000 amount to $250,000 and $800,000, respectively, for taxable years beginning in 2008 and 2009, and also provided that these amounts will not be adjusted for inflation.

Similarly, § 201 of the HIRE Act changes the $125,000 amount and the $500,000 amount to $250,000 and $800,000, respectively, for taxable years beginning in 2010. Section 201 of the Act also provides that these amounts will not be adjusted for inflation for taxable years beginning in 2010.

To reflect the statutory changes made to § 179 by § 201 of the HIRE Act, section 3.20 of Rev. Proc. 2009-50 is modified to read as follows:

.20 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2010, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense cannot exceed $250,000. Under § 179(b)(2), the $250,000 limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2010 taxable year exceeds $800,000.

Section 3.20 of Rev. Proc. 2009-50 is modified and superseded.

This revenue procedure is effective for taxable years beginning in 2010.

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

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking and notice of public hearing.

This document contains proposed regulations relating to the modification of debt instruments. The regulations clarify the extent to which the deterioration in the financial condition of the issuer is taken into account to determine whether a modified debt instrument will be recharacterized as an instrument or property right that is not debt. The regulations provide needed guidance to issuers and holders of debt instruments. This document also provides notice of a public hearing on these proposed regulations.

Written or electronic comments must be received by August 3, 2010. Outlines of topics to be discussed at the public hearing scheduled for Wednesday, September 8, 2010, at 10 a.m. must be received by Wednesday, August 11, 2010.

Send submissions to: CC:PA:LPD:PR (REG-106750-10), room 5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-106750-10), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent electronically, via the Federal eRulemaking Portal at www.regulations.gov (IRS and REG-106750-10).

Concerning the proposed regulations, Diana Imholtz, at (202) 622-3930; concerning submission of comments, the hearing, and/or to be placed on the building access list to attend the hearing, Richard.A.Hurst@irscounsel.treas.gov, at (202) 622-7180 (not toll-free numbers).

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

The principal author of these regulations is Diana Imholtz, Office of Associate Chief Counsel (Financial Institutions & Products). However, other personnel from the IRS and the Treasury Department participated in their development.

* * * * *

The Internal Revenue Service (“IRS”) is announcing a change in procedures for individual payees to follow to obtain validation of social security numbers (“SSNs”) from the Social Security Administration (“SSA”) to prevent or stop backup withholding under section 3406 of the Internal Revenue Code following receipt of a second “B notice” from a payor.

Pursuant to section 3406 and the regulations thereunder, a payor (such as a bank) must send certain notices under section 3406(a)(1)(B) (“B notices”) to a payee after being notified by the IRS or a broker that the payee has provided an incorrect name and taxpayer identification number (“TIN”) combination with respect to an account. Following the first notification from the IRS or broker, the payor must send a first B notice to a payee directing the payee to certify the TIN on Form W-9 in order to stop or prevent backup withholding on reportable payments by the payor. If the payor receives a second notice of incorrect TIN from the IRS or broker within three years, the payor must send a second B notice to the payee requiring the payee to provide TIN validation. After the second B notice, the payor cannot accept a TIN certification on Form W-9 but must receive validation of the payee’s TIN from the SSA or the IRS. Absent receipt of proper validation, the payor must backup withhold from future reportable payments it makes to the payee.

The rules concerning the form, content and manner of delivery of B notices are set forth in Rev. Proc. 93-37, 1993-2 C.B. 477. That revenue procedure sets forth specific instructions regarding TIN validation, which must be included in the second B notice sent to payees. Pursuant to the instructions in Rev. Proc. 93-37, a payee who needs to validate an SSN must contact the local SSA office to inquire about SSN validation, provide a copy of the B notice to SSA, and request and authorize SSA to send Form SSA-7028, Notice to Third Party of Social Security Number Assignment, to the payor to validate the payee’s SSN.

Effective January 1, 2010, SSA discontinued the availability of Form SSA-7028 for purposes of verifying SSNs to avoid backup withholding. This announcement updates the instructions for TIN validation given that Form SSA-7028 is no longer available.

To obtain validation of the payee’s SSN from the SSA for purposes of responding to a second B notice, each individual payee should now contact the local SSA office and request a Social Security Number Printout. The Social Security Number Printout will validate the SSN of the individual and will serve as acceptable validation of the individual’s TIN for purposes of the requirements of section 3406. An individual may request one free copy of the Social Security Number Printout, which will verify the SSN assigned to that individual. The individual should provide a copy of the Social Security Number Printout to the payor who sent the second B notice. A payor who receives a copy of the Social Security Number Printout validating the SSN of a payee will not be required to commence backup withholding, and may stop backup withholding, on reportable payments made to that payee.

A payor sending a second B notice to an individual payee should inform the payee of this change in procedure. The following language is acceptable:

These interim procedures may be used until additional forthcoming guidance, including a revision of Rev. Proc. 93-37, is published.

The principal author of this Announcement is Nancy Rose of the Office of the Associate Chief Counsel (Procedure and Administration). For further information regarding this announcement, contact Ms. Rose at (202) 622-4940 (not a toll-free call).

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986.

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

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on June 21, 2010 and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.