Bulletin No. 2006-51December 18, 2006

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

Notice 2006–100, page 1109.This notice provides guidance to employers and payers ontheir reporting and wage withholding requirements for calendaryears 2005 and 2006 with respect to deferrals of compen-sation and amounts includible in gross income under section409A of the Code. Notice 2005–1 modified. Notice 2005–94superseded.

Notice 2006–110, page 1127.Charitable contributions by payroll deductions. This no-tice explains how taxpayers that make charitable contributionsby payroll deductions may meet the recordkeeping require-ments of section 170(f)(17) of the Code, as added by the Pen-sion Protection Act of 2006. The notice also provides thattaxpayers may rely on this notice to comply with the new re-quirements until subsequent regulations are effective.

EMPLOYEE PLANS

Notice 2006–107, page 1114.Diversification; transition rules; defined contributionplans. This notice provides transitional rules with respect tothe diversification requirements of publicly traded securitiesfor certain defined contribution plans, requests commentson the transitional guidance (as well as comments for regula-tions), and contains a model notice that employers may givetheir affected employees.

EXEMPT ORGANIZATIONS

Notice 2006–109, page 1121.This notice provides interim guidance to certain section501(c)(3) organizations and related taxpayers regarding newlegislation in the Pension Protection Act of 2006 (Act) appli-cable to private foundations, supporting organizations, andcharitable organizations that maintain donor advised funds.The notice also solicits comments regarding this guidanceand other provisions under the Act that might impact similarlysituated taxpayers.

Announcement 2006–99, page 1139.A list is provided of organizations now classified as private foun-dations.

SELF-EMPLOYMENT TAX

Notice 2006–108, page 1118.This notice contains a proposed revenue ruling and requestscomments concerning the proposed holding that ConservationReserve Program (CRP) rental payments (including incentivepayments) from the United States Department of Agricultureto (1) a farmer actively engaged in the trade or business offarming who enrolls land in CRP and fulfills the CRP contrac-tual obligations personally and to (2) an individual not other-wise actively engaged in the trade or business of farming whoenrolls land in CRP and fulfills the CRP contractual obligationsby arranging for a third party to perform the required activitiesare both includible in net income from self-employment for pur-poses of the Self-Employment Contributions Act (SECA) tax andnot excluded from net income from self-employment as rentalsfrom real estate.

(Continued on the next page)

Announcements of Disbarments and Suspensions begin on page 1129.Finding Lists begin on page ii.

ADMINISTRATIVE

Announcement 2006–98, page 1139.This document contains a correction to proposed regulations(REG–103039–05, 2006–49 I.R.B. 1057) by cross-refer-ence to temporary regulations relating to the disclosure ofreportable transactions by material advisors.

Announcement 2006–100, page 1141.This announcement alerts the public regarding updated proce-dures for closing cases involving listed transactions when set-tlement on listed transactions was not able to be reached inthe Office of Appeals.

December 18, 2006 2006–51 I.R.B.

The IRS MissionProvide America’s taxpayers top quality service by helpingthem understand and meet their tax responsibilities and by

applying the tax law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis. Bulletincontents are compiled semiannually into Cumulative Bulletins,which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe 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 ofthe 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, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2006–51 I.R.B. December 18, 2006

Place missing child here.

December 18, 2006 2006–51 I.R.B.

Part III. Administrative, Procedural, and MiscellaneousReporting and WageWithholding Under InternalRevenue Code § 409A

Notice 2006–100

I. PURPOSE

This notice provides guidance to em-ployers and payers on their reporting andwage withholding requirements for cal-endar years 2005 and 2006 with respectto deferrals of compensation and amountsincludible in gross income under § 409Aof the Internal Revenue Code. This no-tice does not affect the application of§ 3121(v)(2) or an employer’s report-ing obligations under § 31.3121(v)(2)–1of the Employment Tax Regulations. Inaddition, this notice provides guidanceto service providers on their income taxreporting and tax payment requirementswith respect to amounts includible in grossincome under § 409A for 2005 and 2006.

II. BACKGROUND

A. The American Jobs Creation Act of2004

Section 885 of the American JobsCreation Act of 2004, Pub. Law No.108–357, 118 Stat. 1418 (the Act), added§ 409A, which provides, inter alia, thatall amounts deferred under a nonquali-fied deferred compensation plan for alltaxable years are currently includible ingross income to the extent not subjectto a substantial risk of forfeiture and notpreviously included in gross income, un-less certain requirements are met. Section885(b) of the Act amended the Code toimpose the following reporting and wagewithholding requirements with respectto deferrals of compensation within themeaning of § 409A.

• The Act amended §§ 6041 and 6051to require that an employer or payerreport all deferrals for the year undera nonqualified deferred compensationplan on a Form W–2 (Wage and TaxStatement) or a Form 1099–MISC(Miscellaneous Income), regardless ofwhether such deferred compensationis includible in gross income under§ 409A(a).

• The Act amended § 3401(a) to pro-vide that the term “wages” includesany amount includible in the gross in-come of an employee under § 409A.

• The Act amended § 6041 to requirethat a payer report amounts includiblein gross income under § 409A that arenot treated as wages under § 3401(a).

B. Notice 2005–1

On December 20, 2004, the IRS issuedNotice 2005–1, 2005–1 C.B. 274 (pub-lished as modified on January 6, 2005),which provides guidance with respect tothe application of § 409A. Additionally, inaccordance with the amendments made by§ 885(b) of the Act, Notice 2005–1 pro-vides the following with respect to report-ing and wage withholding requirementsfor deferred amounts:

• An employer should report to an em-ployee the total amount of deferrals forthe year under a nonqualified deferredcompensation plan in box 12 of FormW–2 using code Y. See Q&A–29.

• An employer should report amountsincludible in gross income under§ 409A and in wages under § 3401(a)in box 1 of Form W–2 as wages paidto the employee during the year andsubject to income tax withholding.An employer should also report suchamounts in box 12 of Form W–2 usingcode Z. See Q&A–33.

• A payer should report to a nonem-ployee the total amount of deferralsfor the year under a nonqualified de-ferred compensation plan in box 15aof Form 1099–MISC. See Q&A–30.

• A payer should report amounts includi-ble in gross income under § 409A andnot treated as wages under § 3401(a)as nonemployee compensation in box7 of Form 1099–MISC. A payer shouldalso report such amounts in box 15b ofForm 1099–MISC. See Q&A–35.

C. Proposed Regulations

On September 29, 2005, the IRS issuedproposed regulations (REG–158080–04,

2005–2 C.B. 786) regarding the applica-tion of § 409A. See 70 Fed. Reg. 57930(Oct. 4, 2005). The proposed regulationsincorporate and expand on the guidanceprovided in Notice 2005–1. As stated inthe preamble to the proposed regulations,taxpayers may rely on the proposed regu-lations for periods preceding the effectivedate of the final regulations. However, theproposed regulations do not affect the ap-plicability of this notice (and generally donot affect the application of other guidanceissued with respect to § 409A, includingNotice 2005–1).

D. Notice 2005–94

On December 27, 2005, the IRS issuedNotice 2005–94, 2005–2 C.B. 1208, whichprovided the following guidance to em-ployers and payers on their reporting andwithholding obligations with respect to de-ferrals of compensation and amounts in-cludible in gross income under § 409A dur-ing calendar year 2005:

• The notice waived employers’ andpayers’ reporting requirements under§§ 6041 and 6051 for calendar year2005 with respect to annual deferralsof compensation within the meaningof § 409A.

• The notice provided that for 2005 em-ployers are not required to include inthe total amount of wages as definedin § 3401(a) amounts includible ingross income of an employee under§ 409A that the employee neither actu-ally nor constructively received duringthe 2005 calendar year. Additionally,the notice suspended employers’ re-porting requirements for calendar year2005 with respect to such amounts.

• The notice suspended payers’ report-ing requirements for 2005 with respectto amounts includible in the gross in-come of a nonemployee under § 409Athat the nonemployee neither actuallynor constructively received during the2005 calendar year.

• The notice provided that future pub-lished guidance may require an em-ployer or payer to file a correctedinformation return and to furnish a

2006–51 I.R.B. 1109 December 18, 2006

corrected payee statement for calendaryear 2005 reporting any previously un-reported amounts includible in grossincome under § 409A.

• For service providers, the notice pro-vided that the IRS will not assertpenalties under §§ 6651(a)(1) and(2), 6654, and 6662, with respect toamounts includible in gross incomeunder § 409A for calendar year 2005 ifthe service provider reports and paysany taxes due with respect to suchamounts in accordance with subse-quent published guidance. The noticestated that such subsequent guidancewould provide a period during whichthe service provider may report andpay such taxes due without incurringsuch penalties.

III. INTERIM EMPLOYER ANDPAYER REPORTING AND WAGEWITHHOLDING PROVISIONS

This section provides guidance on em-ployers’ and payers’ reporting and wagewithholding requirements for calendaryears 2005 and 2006 with respect to an-nual deferrals of compensation within themeaning of § 409A and with respect toamounts includible in gross income under§ 409A.

A. 2005 and 2006 Annual Deferrals

1. Amounts Reportable on Form W–2

For calendar years 2005 and 2006, anemployer is not required to report amountsdeferred during the year under a nonquali-fied deferred compensation plan subject to§ 409A in box 12 of Form W–2 using codeY.

2. Amounts Reportable on Form1099–MISC

For calendar years 2005 and 2006, apayer is not required to report amounts de-ferred during the year under a nonquali-fied deferred compensation plan subject to§ 409A in box 15a of Form 1099–MISC.

B. Reporting and Withholding onAmounts Includible in Gross Incomeunder § 409A

Section 3401(a) provides that for in-come tax withholding purposes the term

“wages” includes any amount includiblein gross income of an employee under§ 409A, and payment of such amount istreated as having been made in the taxableyear in which the amount is includiblein gross income. Thus, for calendar year2006, an employer must treat amountsincludible in gross income under § 409Aas wages for income tax withholding pur-poses. An employer is required to reportsuch amounts as wages paid on line 2 ofForm 941, Employer’s Quarterly FederalTax Return, and in box 1 of Form W–2. Anemployer must also report such amountsas § 409A income in box 12 of FormW–2 using code Z. If the employee hasreceived other regular wages from the em-ployer during the calendar year, amountsincludible in gross income under § 409Aare supplemental wages for purposes ofdetermining the amount of income taxrequired to be deducted and withheld un-der § 3402(a). See Publication 15 for thewithholding rules with respect to supple-mental wages. The amount required tobe withheld is not increased on accountof the additional income taxes imposedunder § 409A(a)(1)(B). Employees shouldthus be aware that estimated tax paymentsmay be required to avoid penalties under§ 6654.

For nonemployees, § 6041(g)(2) re-quires a payer to report to a nonemployeeany amount that is includible in gross in-come under § 409A that is not treated aswages under § 3401(a). Thus, for calendaryear 2006, a payer must report amountsincludible in gross income under § 409Aand not treated as wages under § 3401(a)as nonemployee compensation in box 7of Form 1099–MISC. A payer must alsoreport such amounts as § 409A income inbox 15b of Form 1099–MISC.

1. Calculation of Amounts Includible inIncome under § 409A(a) — In General

Section 409A(a)(1)(A)(i) provides thatif at any time during a taxable year a non-qualified deferred compensation plan failsto meet the requirements of § 409A(a)(2),(3) or (4), all compensation deferred un-der the plan for the taxable year and allpreceding taxable years shall be includi-ble in gross income for the taxable yearto the extent not subject to a substantialrisk of forfeiture and not previously in-cluded in gross income. Accordingly, for

purposes of this notice, the amount in-cludible in gross income under § 409A(a)and required to be reported by the em-ployer or payer equals the portion of thetotal amount deferred under the plan that,as of December 31, 2006, is not subjectto a substantial risk of forfeiture as de-fined in Notice 2005–1, Q&A–10, or theproposed regulations, and has not beenincluded in income in a previous year,plus any amounts of deferred compensa-tion paid or made available to the serviceprovider under the plan during the cal-endar year 2006. For purposes of thisparagraph, an employer or payer maytreat an amount as previously included inincome if properly reported by the em-ployer or payer on a 2005 Form W–2,Form 1099–MISC, or Form W–2c or cor-rected Form 1099–MISC. Thus, amountsproperly reported on a 2005 Form W–2or Form 1099–MISC, or Form W–2c orcorrected Form 1099–MISC should not bereported again on a 2006 Form W–2 orForm 1099–MISC. For the definition of aplan, including the plan aggregation rules,see Notice 2005–1, Q&A–9, and proposed§ 1.409A–1(c).

Amounts includible in gross income un-der § 409A(a) include only amounts de-ferred that are subject to § 409A. Accord-ingly, for purposes of this section III.B.1.,references to amounts deferred under aplan, including references to account bal-ances, refer solely to amounts deferred thatare subject to § 409A and not, for exam-ple, to amounts deferred that were earnedand vested prior to January 1, 2005 andthat are not otherwise subject to § 409Adue to the application of the effective dateprovisions. For rules regarding the appli-cation of the effective date provisions of§ 409A to nonqualified deferred compen-sation plans, see Notice 2005–1, Q&A–16to Q&A–18, and proposed § 1.409A–6.

The provisions of this notice address-ing the calculation of the amounts includi-ble in income are intended as interim guid-ance only. The Treasury Department andthe IRS are currently formulating generalguidance with respect to the calculation ofthe amounts includible in income, as wellas other related issues. For informationregarding the submission of comments onthese topics, see section V. of this notice.

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2. Wage Payment Date of AmountsIncludible in Income under § 409A(a)

Amounts includible in gross incomeunder § 409A(a) in 2006 that are eitheractually or constructively received (disre-garding the application of § 409A) by anemployee during the calendar year 2006,are considered a payment of wages by theemployer when received by the employeefor purposes of withholding, depositing,and reporting the income tax at source onwages under § 3401(a).

Amounts includible in gross incomeunder § 409A(a) in 2006 that are neitheractually nor constructively received (dis-regarding the application of § 409A) bythe employee during the calendar year2006, are treated as a payment of wageson December 31, 2006 for purposes ofwithholding, depositing, and reportingthe income tax at source on wages under§ 3401(a). If as of December 31, 2006the employer does not withhold incometax from the employee on such wages,or withholds less than the amount of in-come taxes required to be withheld under§ 3402 from the employee, the employeewill receive credit under § 31 for 2006 ifthe employer follows one of two possibleoptions. Under the first option, notwith-standing § 31.6205–1(c)(4), the employerwithholds or recovers from the employeethe amount of the undercollection afterDecember 31, 2006 and before Febru-ary 1, 2007, and reports as wages for thequarter ending December 31, 2006 suchamounts that were neither actually norconstructively received but are includiblein income under § 409A on Form 941for that quarter and in box 1 of the em-ployee’s Form W–2 for 2006. Under thesecond option, the employer pays the in-come tax withholding liability on behalfof the employee (without deduction fromthe employee’s wages or other reimburse-ment by the employee), and reports thegross amount of wages and the income taxwithholding liability for the quarter end-ing December 31, 2006 as including suchamounts that were neither actually norconstructively received but are includiblein income under § 409A as well as thewages resulting from paying the incometax on the employee’s behalf on Form941 and in box 1 of the employee’s FormW–2 for 2006. See Rev. Rul. 58–113,1958–1 C.B. 362, for methods of com-

puting gross wages when paying incometax on behalf of an employee. In addition,for purposes of the deposit requirementsassociated with such wages, if the incometax withholding liability with respect tosuch wages is paid to the IRS by the duedate of the Form 941 for the quarter endingDecember 31, 2006 on which the wagesare reported, then the amount of incometax withholding liability will be consid-ered to have been deposited in accordancewith the rules of § 31.6302–1(c). Thus,penalties for failure to deposit taxes under§ 6656 will not be imposed with respect tosuch amount.

3. 2006 Amounts Includible in Incomeunder § 409A(a)

The following sections provide guid-ance for calculating the total amountdeferred under the plan as of December31, 2006 for purposes of determining theamount required to be included in grossincome under § 409A(a) in accordancewith the rules described in section III.B.1.of this notice.

a. Account Balance Plans

For plans subject to § 3121(v)(2)that are account balance plans as de-fined in § 31.3121(v)(2)–1(c)(1)(ii)(A),the amount deferred as of December31, 2006 equals the amount that wouldbe treated as an amount deferred under§ 31.3121(v)(2)–1(c)(1) on December 31,2006 if the entire account balance (in-cluding all principal amounts, adjusted forincome, gain or loss credited to the em-ployee’s account) as of December 31, 2006were treated as a principal amount creditedto the employee’s account on December31, 2006. These same rules apply for pur-poses of determining the amount reportedon Form 1099–MISC for calendar year2006 with respect to a nonemployee par-ticipating in a plan that would be subjectto § 3121(v)(2) if the nonemployee ser-vice provider were an employee and thatotherwise is an account balance plan asdefined in § 31.3121(v)(2)–1(c)(1)(ii)(A).

b. Nonaccount Balance Plans —Amounts that are ReasonablyAscertainable

For plans subject to section 3121(v)(2)that are nonaccount balance plans as

defined in § 31.3121(v)(2)–1(c)(2)(i),where the amount deferred is reason-ably ascertainable within the meaning of§ 31.3121(v)(2)–1(e)(4), the amount de-ferred as of December 31, 2006 equalsthe present value of all future pay-ments to which the employee has ob-tained a legally binding right as of De-cember 31, 2006, calculated in accor-dance with § 31.3121(v)(2)–1(c)(2) as ifthe employee had obtained all of suchrights on December 31, 2006. Section31.3121(v)(2)–1(e)(4)(i)(B) provides thatan amount deferred is considered rea-sonably ascertainable on the first date onwhich the amount, form, and commence-ment date of the benefit payments attrib-utable to the amount deferred are known,and the only actuarial or other assumptionsregarding future events or circumstancesneeded to determine the amount deferredare interest and mortality. An amount doesnot fail to be reasonably ascertainable ifalternative forms or commencement datesare available that provide an actuariallyequivalent benefit to the normal benefitcommencing at the normal commence-ment date. These same rules apply for pur-poses of determining the amount reportedon Form 1099–MISC for calendar year2006 with respect to a nonemployee par-ticipating in a plan that would be subjectto § 3121(v)(2) if the nonemployee ser-vice provider were an employee and thatotherwise is a nonaccount balance plan asdefined in § 31.3121(v)(2)–1(c)(2)(i).

c. Amounts Deferred Under StockRights Covered by § 409A

For a plan that is not subject to§ 3121(v)(2) and is a stock right as definedin proposed § 1.409A–1(l), the amount de-ferred as of December 31, 2006 equals theamount that the service provider wouldbe required to include in income if thestock right were immediately exercisableand exercised on December 31, 2006. Ingeneral, this will mean with respect to astock right outstanding as of December 31,2006, the amount deferred as of December31, 2006 equals the fair market value ofthe underlying stock less the sum of theexercise price and any amount paid by theservice provider for the stock right.

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d. Other Deferred Amounts

For all deferred amounts not addressedin section III.B.2.a., b., or c. of this no-tice, the amount deferred as of December31, 2006 must be determined under a rea-sonable, good faith application of a rea-sonable, good faith method. For this pur-pose, a reasonable, good faith applicationof a reasonable, good faith method gener-ally must reflect reasonable, good faith as-sumptions with respect to any contingen-cies as to the timing or amount of any pay-ment. Generally, the use of an assumptionwith respect to a contingency that results inthe amount deferred being the lowest po-tential value of the future payment will bepresumed not to be a reasonable, good faithassumption unless clear and convincingevidence demonstrates that the assumptionis reasonable. For example, where a pay-ment may be made in more than one form,the assumption that the payment will bemade in the least valuable form will be pre-sumed not to be a reasonable, good faithassumption unless clear and convincingevidence demonstrates otherwise. If a por-tion of a deferred amount can be calculatedunder section III.B.2.a., b., or c. of thisnotice, a reasonable, good faith method ofcalculation will in fact be a combinationof two methods. The method applicableunder section III.B.2.a., b., or c. of thisnotice must be applied to the portion, andthe balance of the deferred amount must bedetermined under a reasonable good faithmethod.

e. Mandatory bifurcation

For purposes of the application ofthis section, the portion of a nonqual-ified deferred compensation plan thatqualifies as an account balance plan un-der § 31.3121(v)(2)–1(c)(1)(ii), or wouldqualify as an account balance plan ifthe service provider were an employee,and provides that the amount payableto the service provider under the por-tion is determined independently of theamount payable under the other por-tion of the plan, must be treated sepa-rately as an account balance plan. Cf.§ 31.3121(v)(2)–1(c)(1)(iii)(B).

4. 2005 Amounts Includible in GrossIncome under § 409A(a)

Employers and payers, including em-ployers and payers who relied on Notice2005–94 for calendar year 2005, whichsuspended employers’ and payers’ report-ing requirements with respect to deferralsof compensation includible in gross in-come under § 409A, are required to file anoriginal or a corrected information returnand furnish an original or a corrected payeestatement (Form W–2 or 1099–MISC) forcalendar year 2005 reporting any previ-ously unreported amounts includible ingross income under § 409A for calendaryear 2005 as determined under guidanceprovided by this notice for calendar year2006. (If the employer or payer paid nowages or income to the service providerin 2005 other than amounts taxable under§ 409A, the payer will be preparing anoriginal Form W–2 or Form 1099–MISC,not a Form W–2c or a corrected Form1099–MISC for 2005.) Failure to file in-formation returns and furnish payee state-ments as specified in this notice may resultin liability for penalties under §§ 6721 and6722. The original or corrected informa-tion return and the original or correctedpayee statement for calendar year 2005must be filed and furnished by the dead-lines applicable for filing an informationreturn and furnishing a payee statementreporting amounts includible in incomein calendar year 2006. (Generally, thismeans the original or corrected informa-tion return must be filed by February 28,2007, and the original or corrected payeestatement must be furnished by January31, 2007. See the 2006 instructions forForm W–2 and Form 1099.) An employeror payer who is required to file an origi-nal or a corrected information return andfurnish an original or a corrected payeestatement for calendar year 2005 mustcalculate the amounts includible in grossincome using the rules provided in thisnotice. An employer or payer is not li-able for income tax withholding under§ 3403 or penalties for 2005 with respectto any previously unreported amounts ofgross income includible under § 409A re-ported on an original Form W–2 or Form1099–MISC, or Form W–2c or a correctedForm 1099–MISC for 2005 in accordancewith the guidance provided by this notice.

5. Amounts Includible in Income under§ 409A(b)

Section 409A(b)(1) provides generallythat in the case of assets set aside (directlyor indirectly) in a trust (or other arrange-ment determined by the Secretary) for pur-poses of paying deferred compensation un-der a nonqualified deferred compensationplan, such assets shall be treated as prop-erty transferred in connection with the per-formance of services for purposes of § 83whether or not such assets are available tosatisfy claims of general creditors at thetime set aside if such assets (or such trustor other arrangement) are located outsideof the United States, or at the time trans-ferred if such assets (or such trust or otherarrangement) are subsequently transferredoutside of the United States.

Section 409A(b)(2) provides that in thecase of compensation deferred under anonqualified deferred compensation plan,there is a transfer of property within themeaning of § 83 with respect to such com-pensation as of the earlier of the date onwhich the plan first provides that assetswill become restricted to the provisionof benefits under the plan in connectionwith a change in the employer’s financialhealth, or the date on which assets areso restricted, whether or not such assetsare available to satisfy claims of generalcreditors.

Section 409A(b)(3) as amended by thePension Protection Act of 2006, PublicLaw 109–280 (120 Stat. 780), providesthat if, during a restricted period with re-spect to a single-employer defined bene-fit pension plan, assets are set aside or re-served in, or transferred to, a trust or otherarrangement for purposes of paying de-ferred compensation for an applicable cov-ered employee under a nonqualified de-ferred compensation plan of the plan spon-sor or a member of its controlled group, ora nonqualified deferred compensation planof the plan sponsor or a member of its con-trolled group provides that assets will be-come restricted to the provision of bene-fits, or assets are so restricted, in connec-tion with such restricted period (or similarfinancial measure determined by the Sec-retary), the assets are treated as a transferof property for purposes of § 83 whetheror not such assets are available to satisfyclaims of general creditors.

December 18, 2006 1112 2006–51 I.R.B.

Section 409A(b)(4), as amended by thePension Protection Act, provides that foreach taxable year that assets treated astransferred under § 409A(b) remain setaside in a trust or other arrangement sub-ject to § 409A(b)(1) or (2), any increasein value in, or earnings with respect to,such assets shall be treated as an additionaltransfer of property under this subsection(to the extent not previously included in in-come).

Notice 2006–33, 2006–15 I.R.B.754, April 10, 2006, provides transi-tion guidance related to the application of§ 409A(b) to certain arrangements out-standing as of March 21, 2006. Under thatrelief, amounts transferred to trusts underthe arrangement on or before March 21,2006 that triggered the income inclusionand additional taxes under § 409A(b),or arrangements that otherwise triggeredthe income inclusion and additional taxesunder § 409A(b) on or before March 21,2006, generally are treated as not havingtriggered the inclusion or additional taxprovisions of § 409A(b), provided thatthe arrangements become compliant with§ 409A(b) before January 1, 2008. Noth-ing in this notice is intended to modify thatrelief.

However, where amounts have beentransferred to a trust under an arrange-ment that triggers the income inclusionand additional taxes under § 409A(b), orthe arrangement otherwise triggers the in-come inclusion and additional taxes under§ 409A(b), and the transfer is not eligiblefor the relief in Notice 2006–33 (for ex-ample because the transfer occurred afterMarch 21, 2006), employers and payersmust make a reasonable, good faith appli-cation of a reasonable, good faith methodto determine the amount includible inincome for purposes of reporting. In addi-tion, employers must treat the amount aswages for purposes of § 3401. Amountsincludible in income under § 409A(b) thatare not eligible for the relief in Notice2006–33 are treated as wages paid on thedate the deemed transfer of property under§ 83 described in § 409A(b) would be re-quired to be included in income under therules of § 83, for purposes of withholding,depositing and reporting the income tax atsource on wages under § 3401(a).

C. Protection from Future AdditionalReporting or Withholding for 2005 and2006

An employer or payer who complieswith the rules of this notice regarding com-puting amounts includible in gross incomeunder § 409A and withholding and re-porting for calendar years 2005 and 2006will not be liable for additional income taxwithholding or penalties, or be requiredto file a subsequent corrected informationreturn or furnish a corrected payee state-ment, as a result of future published guid-ance with respect to the computation ofamounts includible in gross income under§ 409A. If it is subsequently determinedthat the employer did not apply the rules ofthis notice in determining amounts includi-ble in gross income under § 409A and inwages under § 3401(a) for calendar years2005 or 2006 as provided in this notice,any recalculation of these amounts will re-sult in additional liability for income taxwithholding under § 3403 for these years,plus any applicable penalties. In addition,an employer or payer who does not ap-ply the rules of this notice in determin-ing amounts includible in gross income un-der § 409A and in wages under § 3401(a)for calendar years 2005 or 2006 will berequired to file an original or a correctedinformation return and furnish an originalor a corrected payee statement. For pur-poses of determining any amount includi-ble in income under § 409A in a subse-quent year, an amount will not be treated aspreviously included in income unless theamount has been reported appropriately onan information return and payee statement,or has been included in income by the ser-vice provider in a previous year.

IV. SERVICE PROVIDERREQUIREMENTS WITH RESPECTTO AMOUNTS INCLUDIBLE INGROSS INCOME UNDER § 409A

This section provides guidance on ser-vice providers’ income tax reporting andtax payment requirements for calendaryears 2005 and 2006 with respect to defer-rals of compensation that are includible ingross income under § 409A.

A. Amounts Required to be Includedin Income

A service provider must report as in-come and pay any taxes due relating toamounts includible in gross income under§ 409A for calendar year 2006. In addi-tion, if a service provider has not reportedas income and paid any tax due relatingto amounts includible in gross income un-der § 409A for calendar year 2005, cal-culated in accordance with this notice, theservice provider must file an amended re-turn and pay any taxes due relating to suchamounts. If the service provider files anamended return and pays any taxes due re-lating to such amounts calculated in accor-dance with this notice, the IRS will not as-sert penalties under §§ 6651(a)(1) and (2),6654, and 6662. If the service provideris required to file an amended return for2005 in order to report amounts includi-ble in income under § 409A, the serviceprovider must file such amended returnand pay any additional taxes owing by thedue date for the service provider’s 2006 in-come tax return, including extensions, inorder to avoid penalties.

For purposes of determining the amountrequired to be included in income under§ 409A, the same standards apply to aservice provider as apply to an employeror payer when calculating the amount re-quired to be reported, provided that anamount is treated as previously includedin income only if the amount has beenincluded in the service provider’s incomein a previous taxable year (regardlessof whether reported on a Form W–2 or1099–MISC). Accordingly, an employeeor other service provider must calculatethe amounts required to be included ingross income under the same methodsand standards as set forth in section III.Whether a service provider has compliedwith the requirements of this notice isdetermined independently of whether theemployer or payer has complied with therequirements of this notice. Thus, if theservice provider includes in income thesame amount reported by the employer orpayer, the service provider has not nec-essarily complied with the terms of thisnotice.

If the service provider does not re-port and pay taxes due with respect toamounts includible in gross income under§ 409A for calendar year 2005 or 2006 in

2006–51 I.R.B. 1113 December 18, 2006

accordance with the guidance containedin this notice, the IRS may assert addi-tional income taxes and penalties under§§ 6651(a)(1) and (2), 6654, and 6662 ifit is determined that the amount of taxesreported and paid for calendar year 2005or 2006 was underreported or underpaid.Interest imposed under Chapter 67 of theCode will apply to any underpaymentsof tax resulting from a service provider’sfailure to include amounts includible ingross income under § 409A for calendaryear 2005 or 2006. For purposes of deter-mining the amount includible in incomeunder § 409A in a subsequent year, theservice provider may treat an amount aspreviously included in income only if theservice provider has actually included theamount in gross income in a previous year.

B. Calculation of Additional Tax under§ 409A(a)(1)(B)(i)(I)

Section 409A(a)(1)(B)(i)(I) pro-vides that if compensation is requiredto be included in gross income under§ 409A(a)(1)(A), the tax imposed onsuch income is increased by the sumof two additional taxes equal to theamount of interest determined under§ 409A(a)(1)(B)(ii) plus an amount equalto 20% of the compensation which is re-quired to be included in gross income.Section 409A(a)(1)(B)(ii) provides thatthe amount of interest is the amount ofinterest at the underpayment rate plus 1percentage point on the underpaymentsthat would have occurred had the deferredcompensation been includible in grossincome for the taxable year in which firstdeferred or, if later, the first taxable year inwhich such deferred compensation is notsubject to a substantial risk of forfeiture.

Section 885(d)(1) of the Act providesthat § 409A generally applies to amountsdeferred after December 31, 2004. Sec-tion 885(d)(2)(B) of the Act provides thatamounts deferred in taxable years be-ginning before January 1, 2005, shall betreated as amounts deferred in a taxableyear beginning on or after such date ifthe plan under which the deferral is madeis materially modified after October 3,2004. Accordingly, for purposes of thecalculation of the additional tax under§ 409A(a)(1)(B)(ii), taxpayers may treatamounts deferred under a plan that wereoriginally deferred on or before January 1,

2005 but became subject to § 409A due tothe material modification of the plan afterOctober 3, 2004 as deferred on January 1,2005.

V. REQUEST FOR COMMENTS

The provisions of this notice are in-tended as interim guidance only. TheTreasury Department and the IRS arecurrently formulating general guidancewith respect to the income inclusion re-quirements, the additional taxes, and thereporting and withholding requirements of§ 409A. The Treasury Department and theIRS request comments on all aspects ofthese requirements, including but not lim-ited to the topics addressed in this notice.

Comments must be submitted by March18, 2007. All materials submitted will beavailable for public inspection and copy-ing.

Comments may be submitted to In-ternal Revenue Service, CC:PA:LPD:RU(Notice 2006–100), Room 5203, PO Box7604, Ben Franklin Station, Washing-ton, DC 20044. Submissions may alsobe hand-delivered Monday through Fri-day between the hours of 8 a.m. and4 p.m. to the Courier’s Desk at 1111Constitution Avenue, NW, Washington,DC 20224, Attn: CC:PA:LPD:RU (Notice2006–100), Room 5203. Submissionsmay also be sent electronically via theinternet to the following email address:Notice.comments@irscounsel.treas.gov.Include the notice number (Notice2006–100) in the subject line.

VI. EFFECT ON OTHERDOCUMENTS

Notice 2005–94 is superseded. Notice2005–1 is modified.

VII. EFFECTIVE DATE

This notice is effective with respectto employers’ and payers’ reporting andwage withholding requirements and withrespect to service providers’ filing re-quirements and tax payment obligationsrelating to amounts includible in grossincome under § 409A for calendar years2005 and 2006.

VIII. DRAFTING INFORMATION

The principal author of this notice isDon M. Parkinson of the Office of Di-

vision Counsel/Associate Chief Counsel(Tax Exempt and Governments Entities),although other Treasury and IRS offi-cials participated in its development. Forfurther information on the provisionsof this notice addressing the calculationof the amount includible in income un-der § 409A, contact Stephen Tackneyat (202) 927–9639; for further informa-tion on other provisions of this notice,including the reporting and withholdingprovisions contained in this notice, con-tact Mr. Parkinson at (202) 622–6040 (nottoll-free numbers).

Diversification Requirementsfor Qualified DefinedContribution Plans HoldingPublicly Traded EmployerSecurities

Notice 2006–107

I. PURPOSE

This notice provides transitional guid-ance on § 401(a)(35) of the Internal Rev-enue Code, added by section 901 of thePension Protection Act of 2006, PublicLaw 109–280, 120 Stat. 780 (PPA ’06),which provides diversification rights withrespect to publicly traded employer secu-rities held by a defined contribution plan.This notice also states that Treasury andthe Service expect to issue regulations un-der § 401(a)(35) that incorporate the tran-sitional relief in this notice and requestscomments on the transitional guidance inthis notice and on the topics that need tobe addressed in the regulations.

II. BACKGROUND

Section 401(a)(35), as added by section901 of PPA ‘06, provides that, to remainqualified under § 401(a), a defined contri-bution plan (other than certain employeestock ownership plans) must provide ap-plicable individuals with the right to di-vest employer securities in their accountsand reinvest those amounts in certain di-versified investments. Section 901 alsoadded a parallel provision, section 204(j),to the Employee Retirement Income Se-

December 18, 2006 1114 2006–51 I.R.B.

curity Act of 1974 (ERISA).1 In addition,section 101(m) of ERISA, as added by sec-tion 507 of PPA ‘06, requires a plan to pro-vide applicable individuals with a noticedescribing diversification rights under sec-tion 204(j) of ERISA and providing infor-mation on the importance of diversifyinginvestments.

The diversification requirements of§ 401(a)(35) are generally effective withrespect to plan years beginning after De-cember 31, 2006, subject to certain specialeffective date rules, including a specialrule with respect to plans maintained pur-suant to a collective bargaining agreement.See section 901(c) of PPA ’06. The noticerequirements of section 101(m) of ERISAare effective with respect to plan yearsbeginning after December 31, 2006.

III. TRANSITIONAL GUIDANCE

This Part III provides transitional guid-ance with respect to § 401(a)(35). Thetransitional guidance provided in this PartIII applies pending the issuance of furtherguidance.

A. Scope of Application.

Section 401(a)(35) imposes diversifica-tion requirements for defined contributionplans that hold publicly traded employersecurities. Section 401(a)(35)(G)(iv)provides that the term employer secu-rity has the meaning given such termby section 407(d)(1) of ERISA. Under§ 401(a)(35)(G)(v), the term publiclytraded employer securities means em-ployer securities which are readily trad-able on an established securities market.For this purpose, if a plan holds employersecurities that are not publicly traded,then, except as provided in Treasury reg-ulations, those employer securities arenevertheless treated as publicly tradedemployer securities if any employer cor-poration, or any member of the controlledgroup of corporations that includes anemployer corporation, has issued a classof stock that is a publicly traded employersecurity. For this purpose, an employercorporation means any corporation that isan employer maintaining the plan and acontrolled group of corporations has the

meaning given under § 1563(a), exceptthat 50% is substituted for 80% whereverit occurs in § 1563.2

However, under this notice, a plan (andan investment option described in the lastparagraph of Part IIIC of this notice) isnot treated as holding employer securitiesto which § 401(a)(35) applies with respectto any securities held by either an invest-ment company registered under the Invest-ment Company Act of 1940 or a similarpooled investment vehicle that is regulatedand subject to periodic examination by aState or Federal agency and with respect towhich investment in the securities is madeboth in accordance with the stated invest-ment objectives of the investment vehicleand independent of the employer and anyaffiliate thereof, but only if the holdings ofthe investment company or similar invest-ment vehicle are diversified so as to mini-mize the risk of large losses.

In addition, § 401(a)(35) does not ap-ply to an employee stock ownership plan(ESOP) if (1) there are no contributionsheld in the plan (or earnings thereunder)which are elective deferrals, employee af-ter-tax contributions, or matching contri-butions that are subject to § 401(k) or (m)and (2) the plan is, for purposes of § 414(l)and §1.414(l)–1 of the Income Tax Reg-ulations, a separate plan from any otherplan maintained by the employer. Thus,an ESOP is subject to § 401(a)(35) if ei-ther the ESOP holds any contributions towhich § 401(k) or (m) applies (or earningsthereon) or the ESOP is a portion of a planthat holds any amounts that are not part ofthe ESOP.

B. Applicable Individuals Who HaveDiversification Rights.

Section 401(a)(35) provides applicableindividuals with diversification rights withrespect to publicly traded employer secu-rities held in the plan under subparagraphs(B) and (C) of § 401(a)(35). The diversi-fication rights under subparagraph (B) of§ 401(a)(35) apply with respect to elec-tive deferrals and employee contributions(and earnings thereon) and are required tobe available to (1) any participant, (2) anyalternate payee who has an account un-der the plan, and (3) any beneficiary of

a deceased participant. For this purpose,employee contributions include both em-ployee after-tax contributions and rollovercontributions held under the plan. Thediversification rights under subparagraph(C) of § 401(a)(35) apply with respect toother employer contributions (and earn-ings thereon) and are required to be avail-able to each applicable individual who iseither (1) a participant who has completedat least three years of service, (2) an alter-nate payee who has an account under theplan with respect to a participant who hascompleted at least three years of service,or (3) a beneficiary of a deceased partici-pant. For purposes of this notice, personswho are entitled to receive diversificationrights are termed “applicable individuals.”

For purposes of § 401(a)(35)(C) and§ 401(a)(35)(H) (the transitional rule de-scribed in paragraph E of this Part III),the date on which a participant completesthree years of service occurs immediatelyafter the end of the third vesting computa-tion period provided for under the plan thatconstitutes the completion of a third yearof service under § 411(a)(5). However, fora plan that uses the elapsed time method ofcrediting service for vesting purposes (ora plan that provides for immediate vestingwithout using a vesting computation pe-riod or the elapsed time method of deter-mining vesting), the date on which a par-ticipant completes three years of service isthe third anniversary of the participant’sdate of hire.

C. Basic Divestiture Rules.

An applicable individual is required tobe permitted to elect to direct the plan todivest any publicly traded employer secu-rities held in his or her account under theplan and to reinvest an equivalent amountin other investment options offered underthe plan with respect to the portion of theaccount that is subject to subparagraph (B)or (C) of § 401(a)(35) to the extent applica-ble. This diversification right only applieswhen publicly traded employer securitiesare held under the plan and allocated to theparticipant’s or beneficiary’s account.

Under § 401(a)(35)(D)(i), the invest-ment options offered must include not lessthan three investment options, other than

1 Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713), the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in this notice for purposesof section 204(j) of ERISA. Thus, the transitional guidance provided in this notice with respect to § 401(a)(35) also applies for purposes of section 204(j) of ERISA.

2 See §401(a)(35)(F)(ii) for an exception that applies to certain controlled groups with publicly traded securities.

2006–51 I.R.B. 1115 December 18, 2006

employer securities, to which the applica-ble individual may direct the proceeds ofthe divestment of employer securities, andeach investment option must be diversifiedand have materially different risk and re-turn characteristics. For this purpose, in-vestment options that satisfy the require-ments of § 2550.404c–1(b)(3) of the De-partment of Labor Regulations are treatedas being diversified and having materiallydifferent risk and return characteristics.

D. Restrictions or Conditions onDivestiture Rights.

1. Conditions or Restrictions. Un-der § 401(a)(35)(D)(ii)(I), a plan is nottreated as failing to meet the requirementsof § 401(a)(35) merely because the planlimits the time for divestment and reinvest-ment to periodic, reasonable opportuni-ties occurring no less frequently than quar-terly. Section 401(a)(35)(D)(ii)(II) pro-hibits a plan from imposing restrictionsor conditions with respect to the invest-ment of employer securities that are notimposed on the investment of other assetsof the plan. For purposes of this prohi-bition in § 401(a)(35)(D)(ii)(II), except asdescribed below in this Part IIID, a restric-tion or condition with respect to employersecurities includes: (1) a restriction on anapplicable individual’s rights to divest aninvestment in employer securities that isnot imposed on an investment that is notin employer securities; and (2) a benefitthat is conditioned on investment in em-ployer securities. Thus, the following areexamples of prohibited restrictions or con-ditions:

• A plan allows applicable individualsthe right to divest employer securitieson a periodic basis (such as quarterly),but permits divestiture of another in-vestment on a more frequent basis(such as daily). However, see para-graph 4 of this Part IIID for a transi-tional rule.

• A plan under which a participant whodivests his or her account of employersecurities receives less favorable treat-ment (such as a lower rate of matchingcontributions) than a participant whoseaccount remains invested in employersecurities.

Similarly, the following are examplesof restrictions or conditions that are notprohibited by § 401(a)(35)(D)(ii)(II), pro-vided that the limitations apply withoutregard to a prior exercise of rights to divestemployer securities:

• A provision that limits the extent towhich an individual’s account balancecan be invested in employer securities.Thus, a provision that does not allowmore than 10% of an individual’s ac-count balance to be invested in em-ployer securities is permitted.

• A provision under which an employersecurities investment fund is closed,i.e., other amounts invested under theplan cannot be transferred into an in-vestment in a class of employer securi-ties (and no contributions are permittedto be invested in that class of employersecurities).

However, a provision under which, if aparticipant divests his or her account bal-ance with respect to investment in a classof employer securities, the participant isnot permitted for a period of time there-after to reinvest in that class of employersecurities is a restriction that is prohibitedby § 401(a)(35)(D)(ii)(II), because thislimitation takes into account a prior exer-cise of rights to divest employer securities.

2. Permitted Restrictions. A restric-tion imposed by reason of the applicationof securities laws or a restriction thatis reasonably designed to ensure com-pliance with such laws is not an imper-missible restriction or condition under§ 401(a)(35)(D)(ii)(II). Thus, for exam-ple, for purposes of ensuring compliancewith Rule 10b–5 of the Securities andExchange Commission, a plan may limitdivestiture rights for participants who aresubject to Section 16(b) of the SecuritiesExchange Act of 1934 to a period (such as3 to 12 days) following publication of theemployer’s quarterly earnings statements.In addition, an impermissible restrictionor condition under § 401(a)(35)(D)(ii)(II)does not include the imposition of feeson other investment options under theplan merely because fees are not imposedwith respect to investments in employersecurities. Further, a plan may restrict theapplication of otherwise applicable diver-sification rights under the plan for up to 90

days following an initial public offering ofthe employer’s stock.

3. Transition Rule Through March 30,2007 for Continuation of Existing Restric-tions or Conditions. For the period fromJanuary 1, 2007, through March 30, 2007,a plan does not impose a restriction or con-dition prohibited by § 401(a)(35)(D)(ii)(II)merely because the plan restricts diversifi-cation rights with respect to employer se-curities pursuant to a plan provision thatwas in effect on December 18, 2006. How-ever, any such restriction that continues tobe imposed on or after March 31, 2007, vi-olates § 401(a)(35)(D)(ii)(II).

4. Transition Rule for 2007 for Grand-fathered Investments. For the period priorto January 1, 2008, a plan does not im-pose a restriction or condition prohibitedby § 401(a)(35)(D)(ii)(II) merely becausethe plan, as in effect on December 18,2006, (1) does not impose an otherwise ap-plicable restriction on a stable value fundor (2) allows applicable individuals theright to divest employer securities on a pe-riodic basis, but permits divestiture of an-other investment on a more frequent ba-sis, provided that the other investment isnot a generally available investment (e.g.,the other investment is only available to afixed class of participants). However, anysuch restriction that continues to be im-posed after December 31, 2007, violates§ 401(a)(35)(D)(ii)(II).

E. Transition Rule under § 401(a)(35)(H).

Section 401(a)(35)(H) provides a spe-cial transition rule under which, for em-ployer securities acquired in a plan yearbeginning before January 1, 2007, thediversification rights under subparagraph(C) of §401(a)(35) only apply to the appli-cable percentage of the number of sharesof those securities. The applicable per-centage is 33% for the first plan year towhich § 401(a)(35) applies, 66% for thesecond plan year, and 100% for all subse-quent plan years. If a plan holds more thanone class of securities, § 401(a)(35)(H)applies separately with respect to eachclass. This transition rule does not applyto a participant who, before the first planyear beginning after December 31, 2005,had attained age 55 and completed at leastthree years of service.

December 18, 2006 1116 2006–51 I.R.B.

F. Notice under Section 101(m) of ERISA.

In addition to amending the Code andERISA to provide applicable individualswith the divestiture rights discussed inthis notice, PPA ’06 also added section101(m) to ERISA, which requires plansto notify applicable individuals of theserights. Specifically, plan administratorsmust provide a notice to applicable indi-viduals not later than 30 days before thefirst date on which the individuals are el-igible to exercise their rights. The noticemust set forth the diversification rightsprovided under § 401(a)(35) and describethe importance of diversifying the invest-ment of retirement account assets. Section101(m) of ERISA is effective for planyears beginning after December 31, 2006.

Although some plans will be requiredto comply with § 401(a)(35) as early asJanuary 1, 2007, the Department of La-bor has advised Treasury and the Servicethat section 101(m) of ERISA does not re-quire plans to furnish notices before Jan-uary 1, 2007. Pursuant to this interpreta-tion, plans with plan years beginning onor after January 1, 2007, but before Feb-ruary 1, 2007, are not required to furnishthe model notice included herein (or a no-tice otherwise meeting the requirements ofsection 101(m) of ERISA) earlier than Jan-uary 1, 2007. The Department, however,encourages plans to furnish notice on theearliest possible date.

G. Model Notice.

Section 507(c) of PPA ’06 directs theSecretary of the Treasury to prescribea model notice for purposes of section101(m) of ERISA3. The model below isbeing issued pursuant to that directive.

The model may have to be adaptedto reflect particular plan provisions. Forexample, changes would generally be nec-essary if either the plan has more thanone class of employer securities, the planprovides the same diversification rightsfor participants without regard to whetherthey have three years of service, some ofthe plan’s investment options are closed,the plan receives participant electionselectronically, or the transition rule at§ 401(a)(35)(H) is being applied.

Notice of Your Rights ConcerningEmployer Securities

This notice informs you of an important change in Federal law that provides specific rights concerning investments in employersecurities (company stock). Because you may now or in the future have investments in company stock under the [insert name ofplan], you should take the time to read this notice carefully.

Your Rights Concerning Employer Securities

For plan years beginning after December 31, 2006, the Plan must allow you to elect to move any portion of your account that isinvested in company stock from that investment into other investment alternatives under the Plan. This right extends to all of thecompany stock held under the Plan, except that it does not apply to your account balance attributable to [identify any accounts towhich the rights apply only after three years of service] until you have three years of service. [Insert description of any advancenotice requirement before a diversification election becomes effective.] You may contact the person identified below for specificinformation regarding this new right, including how to make this election. In deciding whether to exercise this right, you willwant to give careful consideration to the information below that describes the importance of diversification. All of the investmentoptions under the Plan are available to you if you decide to diversify out of company stock.

The Importance of Diversifying Your Retirement Savings

To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced anddiversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rateof return, while minimizing your overall risk of losing money. This is because market or other economic conditions that causeone category of assets, or one particular security, to perform very well often cause another asset category, or another particularsecurity, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, yoursavings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy tohelp you manage investment risk.

In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savingsoutside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financialgoals, different time horizons for meeting their goals, and different tolerances for risk. Therefore, you should carefully consider therights described in this notice and how these rights affect the amount of money that you invest in company stock through the Plan.

It is also important to periodically review your investment portfolio, your investment objectives, and the investment options underthe Plan to help ensure that your retirement savings will meet your retirement goals.

For More Information

If you have any questions about your rights under this new law, including how to make this election, contact [enter nameand contact information].

3 Section 101(m) of ERISA is under the jurisdiction of the Department of Labor.

2006–51 I.R.B. 1117 December 18, 2006

IV. REGULATIONS

The Service and Treasury plan to issueregulations under § 401(a)(35) and thoseregulations will be consistent with the tran-sitional guidance issued in this notice.

V. COMMENTS REQUESTED

Comments are requested on§ 401(a)(35), including the issuesraised in Part III of this notice and issuesthat should be addressed in regulations.Any comments received on the noticerules, including the model notice above,will be provided to the Department ofLabor.

Written comments should be submittedby March 18, 2007. Send submissionsto CC:PA:LPD:DRU (Notice 2006–107),Room 5203, Internal Revenue Service,POB 7604, Ben Franklin Station, Wash-ington, D.C. 20044. Comments may behand delivered to CC:PA:LPD:DRU (No-tice 2006–107), Room 5203, Internal Rev-enue Service, 1111 Constitution Avenue,NW, Washington, DC. Alternatively, com-ments may be submitted via the Internetat notice.comments@irscounsel.treas.gov(Notice 2006–107). All comments will beavailable for public inspection.

VI. Paperwork Reduction Act

The collection of information containedin this notice has been reviewed and ap-proved by the Office of Management andBudget in accordance with the PaperworkReduction Act (44 U.S.C. 3507) undercontrol number 1545–2049. An agencymay not conduct or sponsor, and a personis not required to respond to, a collectionof information unless the collection ofinformation displays a valid OMB controlnumber.

The collection of information in this no-tice is in the model notice provision of IIIF.This information is required under section507 of PPA’06. This information will beused to allow individual plans to complywith applicable law. The likely respon-dents are businesses or other for-profit in-stitutions, and small businesses or organi-zations.

The estimated total annual reportingand/or recordkeeping burden is 7,725hours.

The estimated annual burden per re-spondent and/or recordkeeper varies from

1 minute to 3 hours, depending on individ-ual circumstances, with an estimated aver-age of 3/4’s of an hour. The estimated num-ber of respondents and/or recordkeepers is10,300.

The estimated frequency of responses isoccasional.

Books or records relating to a collectionof information must be retained as longas their contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and tax returninformation are confidential, as requiredby 26 U.S.C. § 6103.

DRAFTING INFORMATION

The principal drafter of this notice isRobert Gertner of the Employee Plans,Tax Exempt and Government Entities Di-vision. For further information regardingthis notice, please contact the EmployeePlans’ taxpayer assistance telephone ser-vice at (877) 829–5500 (a toll-free num-ber) between the hours of 8:30 a.m. and4:30 p.m. Eastern Time, Monday throughFriday. Mr. Gertner may be reached at(202) 283–9888 (not a toll-free number).

Application of theSelf-EmploymentContributions Act (SECA)Tax to Payments Made bythe U.S. Department ofAgriculture (USDA) Underthe Conservation ReserveProgram (CRP)

Notice 2006–108

I. Overview and Purpose

This notice sets forth a proposed rev-enue ruling concerning the application ofthe Self-Employment Contributions Act(SECA) tax to payments made by the U.S.Department of Agriculture (USDA) underthe Conservation Reserve Program (CRP),16 U.S.C. 3831. CRP was authorizedin 1985. It is one of several programsadministered by the USDA that providepayments in exchange for diverting landfrom agricultural use to other uses.

The Service has previously issuedan announcement addressing the SECA

tax treatment of payments made by theUSDA under land diversion programs.Announcement 83–43, 1983–10 I.R.B.29, provides guidance in a Question andAnswer format related to land diversionprograms sponsored by the USDA forpurposes of special use valuation undersection 2032A of the Code, estate tax de-ferral under section 6166 of the Code, andthe SECA tax. In Q&A 3, the Servicestated that a farmer who receives cash ora payment in kind from the USDA forparticipation in a land diversion programis liable for self-employment tax on thecash or payment in kind received. The an-nouncement was consistent with guidanceprovided in Rev. Rul. 60–32, 1960–1 C.B.23, with respect to two earlier land diver-sion programs conducted under the SoilBank Act. Both the announcement andthe revenue ruling concluded that partici-pants in the land diversion programs weresubject to SECA taxes on their paymentsif the participants were otherwise operat-ing a farm or materially participating inthe production of commodities on a farmoperated by others.

However, Rev. Rul. 60–32 also statesthat participants in land diversion pro-grams are not subject to SECA tax on thepayments, if they do not operate a farm ormaterially participate in farming activities.The material participation factor is rele-vant for SECA under these circumstancesonly with respect to the exception from netincome from self-employment providedin section 1402(a)(1) for rentals from realproperty. Some taxpayers may have readthe reference to material participation asimplying that the rental exception couldpotentially apply to payments under a landdiversion program.

More recently, the treatment of CRPpayments for purposes of SECA, and morespecifically, the potential application of therental exception under section 1402(a)(1)was addressed by the Court of Appeals forthe Sixth Circuit in Wuebker v. Commis-sioner, 205 F.3d 897 (6th Cir. 2000). TheCourt held that CRP payments were net in-come from self-employment because theywere received in exchange for perform-ing tasks “that are intrinsic to the farm-ing trade or business” such as tilling, seed-ing, fertilizing and weed control. More-over, notwithstanding the fact that the CRPstatutes labeled the payments as “rent”, thecourt concluded the payments are not rent

December 18, 2006 1118 2006–51 I.R.B.

for tax purposes because they are not pay-ments for use or occupation of the prop-erty. The court stated that “the essence ofthe program is to prevent participants fromfarming the property and to require themto perform various activities in connectionwith the land, both at the start of the pro-gram and continuously throughout the lifeof the contract, with the government’s ac-cess limited to compliance inspections.”Id. at 904. Thus, under the Court’s reason-ing, CRP payments do not fall within theexception that excludes rent from net in-come from self-employment provided bysection 1402(a).

Like the 1983 announcement and the1960 revenue ruling, Wuebker addressesCRP recipients who are engaged in thebusiness of farming while also receivingCRP payments. The IRS has receivedquestions asking whether CRP paymentsare subject to SECA if the recipient is re-tired or not otherwise actively engaged infarming. This proposed revenue ruling isintended to respond to those questions. Inaddition, in light of the fact that the USDAno longer operates programs under the SoilBank Act, and to remove any confusionthat may arise from its holding, the pro-posed revenue ruling would obsolete Rev.Rul. 60–32. The IRS and Treasury are so-liciting comments regarding the proposedrevenue ruling. The Department of theTreasury and the Internal Revenue Serviceanticipate issuing a final revenue ruling af-ter the comments have been considered.

II. Proposed Revenue Ruling

Section 1402.—Definitions

26 CFR 1.1402(a)–1: Definition of net earnings from

self-employment.

(Also: Section 1401.)

Rev. Rul. XXXX–XX

ISSUE

Whether Conservation Reserve Pro-gram (CRP) rental payments (includingincentive payments) by the U.S. Depart-ment of Agriculture (USDA) to (1) afarmer actively engaged in the trade orbusiness of farming who enrolls land inCRP and fulfills the CRP contractual obli-gations personally or to (2) an individualnot otherwise actively engaged in the

trade or business of farming who enrollsland in CRP and fulfills the CRP contrac-tual obligations by arranging for a thirdparty to perform the required activities,are included in net earnings from self-em-ployment for purposes of the Self-Em-ployment Contributions Act (SECA) taxand not excluded from net income fromself-employment as rentals from real es-tate.

FACTS

Situation 1.

A is engaged in the business of farmingon land that A owns. A farms a portion ofhis cropland and has enrolled the remain-ing portion of his cropland in the CRPprogram. The CRP, 16 U.S.C. §§ 3801,3831–3836, is a voluntary program underwhich the USDA through the Commodi-ties Credit Corporation makes annual pay-ments to participants. Participants includefarm owners and operators who agree toplace environmentally sensitive croplandin conserving uses for 10 to 15 years.Participants receive an annual “rental”payment (including incentive payments)and cost sharing assistance to establishand maintain approved groundcover, andparticipants agree to plant grasses, trees,and other conserving cover crops, restorewetlands and establish buffers. Generally,a participant is eligible to enroll land inCRP if the participant has owned or op-erated the land for at least twelve monthsprior to the close of the CRP sign up pe-riod. Land is eligible for placement inCRP if it is cropland or marginal pastureland.

A meets the eligibility requirementswith respect to the portion of his land heis seeking to enroll in CRP. A enters intoa 10 year CRP contract with the USDAfor the primary purpose of earning a profitfrom the land. The terms of A’s CRP con-tract require that A will receive paymentsif A will (1) implement a conservationplan, (2) establish vegetative cover, (3)not engage in or allow grazing, harvesting,or other commercial use of the CRP land,(4) not use the land for agricultural pur-poses except as permitted by the USDA,(5) not harvest, sell, nor otherwise makecommercial use of trees on the CRP land,(6) control on the CRP land all weeds, in-sects, pests, and other undesirable species

to ensure the establishment and mainte-nance of the approved cover, and (7) fileannual CRP reports. In order to imple-ment the conservation plan, the terms ofthe contract require significantly more ac-tivities to be performed in the first year ofthe contract than in the later years. A per-sonally completes the activities requiredunder the CRP contract for tilling, seeding,fertilizing, and weed control using his ownfarm equipment. A also satisfies the otherrequirements of the contract. In return, Areceives CRP rental payments each yearduring the contract term. A also receivescost sharing payments based on the costsA incurs in performing A’s obligationsunder the CRP contract.

Situation 2.

The facts are the same as in Situation 1,except that B, who owns the land, ceasesall activities related to the business offarming in the year before he enters intothe CRP contract. In the next calendaryear B rents out a portion of his land toanother farmer and enters into a 10-yearCRP contract with respect to the remain-ing portion of his land. B arranges for athird party to perform the tilling, seed-ing, fertilizing and weed control requiredunder the CRP contract and to fulfill theother contractual requirements. In return,B receives CRP rental payments each yearduring the contract term. B also receivescost sharing payments based on the costsB incurs in implementing CRP on the land.

LAW

Section 1401 of the Internal RevenueCode (Code) imposes a tax on the self-employment income of every individual(SECA tax). The term “self-employmentincome” is defined in section 1402(b) asthe net earnings from self-employment de-rived by an individual, with certain limita-tions.

Section 1402(a) defines an individual’s“net earnings from self-employment” asthe gross income derived by an individ-ual from any trade or business carriedon by such individual, also with certainlimitations. Section 1402(a)(1) generallyexcludes from the computation of “netearnings from self-employment” rentalsfrom real estate and from personal prop-erty leased with the real estate (including

2006–51 I.R.B. 1119 December 18, 2006

such rentals paid in crop shares) togetherwith the deductions attributable thereto,unless such rentals are received in thecourse of a trade or business as a realestate dealer, with an exception. Underthis exception, any income derived by theowner or tenant of land must be includedin the computation of “net earnings fromself-employment” if—

(A) such income is derived under anarrangement, between the owner or tenantand another individual, which providesthat such other individual shall produceagricultural or horticultural commodi-ties (including livestock, bees, poultry,and fur-bearing animals and wildlife) onsuch land, and that there shall be materialparticipation by the owner or tenant (asdetermined without regard to any activi-ties of an agent of such owner or tenant)in the production or the management ofthe production of such agricultural or hor-ticultural commodities, and

(B) there is material participation by theowner or tenant (as determined without re-gard to any activities of an agent of suchowner or tenant) with respect to any suchagricultural or horticultural commodity.

Section 1402(c) provides that the term“trade or business”, when used with ref-erence to self-employment income or netearnings from self-employment, shall havethe same meaning as when used in sec-tion 162 (relating to trade or business ex-penses), less allowable deductions.

Section 1.1402(c)–1 of the Income TaxRegulations generally provides that in or-der for an individual to have net earningsfrom self-employment, he must carry on atrade or business, either as an individual oras a member of a partnership. Whether ornot he is engaged in carrying on a trade orbusiness will depend upon all of the factsand circumstances in the particular case.

In considering whether an individual isengaged in a trade or business, the UnitedStates Supreme Court has stated that “to beengaged in a trade or business, the taxpayermust be involved in the activity with con-tinuity and regularity, and the taxpayer’sprimary purpose for engaging in the activ-ity must be for income or profit. A spo-radic activity...does not qualify.” Commis-sioner v. Groetzinger, 480 U.S. 23, 35(1987). The question of whether a tax-payer is engaged in a trade or business re-quires an examination of the relevant factsin each case. Id. at 36.

In Wuebker v. Commissioner, 205 F.3d897 (6th Cir. 2000), the Sixth Circuit heldthat CRP payments received by a farmeractively engaged in the business of farm-ing were includible in self-employmentincome. The court concluded that their“agreement . . . required them to performseveral ongoing tasks with respect to theland enrolled in the CRP, the very landthey already owned and had previouslyfarmed.” The Sixth Circuit noted that thetaxpayers were required under the CRPcontract to perform tasks intrinsic to thefarming trade or business (e.g., tilling,seeding, fertilizing, and weed control) thatrequired the use of their farming equip-ment. Id. at 903. In addition, under thecourt’s view, the CRP payments were notpayments of rent for the use or occupancyof property and therefore were not rentalsfrom real estate excluded from SECA bysection 1402(a)(1). The Court observedthat the essence of the CRP program is toprevent participants from farming enrolledproperty and to require the participants toperform various activities in connectionwith the land continuously throughout thelife of the contract with the government’saccess limited to inspections. Id. at 904.Furthermore, the Sixth Circuit looked tothe “substance, rather than the form, ofthe transaction” in determining that theincome derived from the CRP contractis includible in self-employment incomeearned in lieu of farm income, for whichSECA tax was due.

Under section 126(a), gross incomedoes not include the excludable portionof payments received under certain con-servation programs. Revenue Ruling2003–59, 2003–1 C.B. 1014, holds thatall or a portion of cost sharing paymentsreceived under the CRP are eligible forthe exclusion from gross income permit-ted by section 126. The ruling also holdsthat rental payments and incentive pay-ments received under the CRP are not costsharing payments and therefore are notexcludable from gross income.

ANALYSIS

Under Groetzinger, an activity will bea trade or business if the taxpayer “is in-volved in the activity with continuity andregularity and . . . the taxpayer’s pri-mary purpose for engaging in the activitymust be for income or profit.” Participa-

tion in a CRP contract is a trade or busi-ness for both A and B. The participant isobligated to perform a number of activ-ities, including but not limited to tilling,seeding, fertilizing, and weed control. Al-though more extensive activities are re-quired at the beginning of the contract termthan later, the obligation to perform activ-ities extends throughout the ten-year pe-riod, giving participation in CRP the con-tinuity and regularity necessary to be con-sidered a trade or business. Also, both Aand B enrolled land in the CRP programto earn a profit. Participation in a CRPcontract meets the criteria to be a trade orbusiness irrespective of whether the partic-ipant performs the required activities per-sonally or arranges for his obligations tobe satisfied by a third party. Thus, thetrade or business treatment is the same forA and B even though A meets the CRPrequirements for maintenance of the landhimself whereas B arranges for someoneelse to do it. Furthermore, the CRP meetsthe criteria to be a trade or business basedon the activities required directly underthe program and without being affected bywhether the participant is otherwise en-gaged in farming or any other trade or busi-ness. Finally, although 16 U.S.C. section3801(a)(13) refers to some of these pay-ments as “rent”, the treatment of thesepayments under the Code depends upontheir substance. CRP rental payments arenot payments for the right to use or oc-cupy real property. CRP rental paymentsare made in exchange for conducting activ-ities that meet the commitments of a CRPcontract. Therefore, CRP rental paymentsare not excluded from net income fromself-employment under section 1402(a)(1)as rentals from real estate. See Wuebker.Thus, for both A and B, the CRP rentalpayments are includible in their net incomefrom self-employment.

To the extent that a cost sharing pay-ment is excluded from gross income undersection 126, that portion of the paymentwould also be excluded from the gross in-come derived by an individual from thetrade or business carried on by the individ-ual. Consequently, to the extent such pay-ment is excluded from gross income undersection 126, the payment is also excludedfrom net earnings from self-employment.

December 18, 2006 1120 2006–51 I.R.B.

HOLDING

CRP rental payments (including incen-tive payments) from USDA to a (1) farmeractively engaged in the trade or business offarming who enrolls land in CRP and ful-fills the CRP contractual obligations per-sonally and to (2) an individual not other-wise actively engaged in the trade or busi-ness of farming who enrolls land in CRPand fulfills the CRP contractual obliga-tions by arranging for a third party to per-form the required activities are both in-cludible in net income from self-employ-ment for purposes of the SECA tax and notexcluded from net income from self-em-ployment as rentals from real estate.

EFFECT ON OTHER REVENUERULINGS

Revenue Ruling 60–32 is obsoleted.

III. Request for Comments

Comments are requested regarding theinteraction of the proposed revenue rulingwith the treatment of CRP payments un-der other Code provisions, such as sec-tions 2032A and 6166. The commentswill be available for public inspection andcopying. Comments must be submitted byMarch 19, 2007. Comments should refer-ence Notice 2006–108, and be addressedto:

Internal Revenue ServiceOffice of the Associate Chief Counsel(Tax Exempt and Government Entities)

CC:TEGE1111 Constitution Ave., N.W.,

Rm. 4000Washington, DC 20224Attn: Elliot Rogers

In addition, comments may be sub-mitted electronically via the Inter-net by sending them in an e-mail tonotice.comments@irscounsel.treas.govand specifying the comments concern No-tice 2006–108.

DRAFTING INFORMATION

The principal authors of this noticeare Marie Cashman and Elliot Rogers ofthe Office of the Associate Chief Counsel(Tax Exempt and Government Entities).However, other personnel from Treasury

and the Service participated in its devel-opment. For further information regardingthis notice, contact Mr. Rogers at (202)622–6040 (not a toll-free call).

Interim Guidance RegardingSupporting Organizations andDonor Advised Funds

Notice 2006–109

Section 1. PURPOSE

This notice provides interim guidanceregarding the application of certain re-quirements enacted as part of the PensionProtection Act of 2006, Pub. L. No.109–208, 120 Stat. 780 (2006) (“PPA”),that affect supporting organizations, donoradvised funds, and private foundationsthat make grants to supporting organiza-tions.

Sections 1231, 1241, 1242, 1243, and1244 of the PPA add sections 509(f),4943(f), 4958(c)(3), 4966, and 4967, tothe Internal Revenue Code (“Code”), andamend sections 509(a)(3)(B), 4942(g)(4),and 4945(d)(4)(A) of the Code. Theamendments to section 509(a)(3) and theaddition of section 509(f) prescribe newrequirements for supporting organiza-tions. The addition of section 4943(f)defines the terms “Type III supportingorganization” and “functionally integratedType III supporting organization.” Theamendments to sections 4942 and 4945affect private foundations that make grantsor similar payments to supporting organi-zations under certain circumstances. Theamendments to section 4958, among otherthings, subject substantial contributorsand persons related to them (as describedin section 4958(c)(3)(B)) to new excisetaxes if they engage in certain types oftransactions with supporting organizationswith which they have a relationship. Newsection 4966 imposes an excise tax ona sponsoring organization that maintainsdonor advised funds if it makes certaindistributions from a donor advised fund.New section 4967 imposes excise taxes oncertain distributions from a donor advisedfund that provide more than an incidentalbenefit to a donor, a donor-advisor, orrelated persons (as described in sections4967(d) and 4958(f)(7)).

This notice provides guidance on fouraspects of the application of these newprovisions of the Code. First, Section3 provides criteria for private founda-tions that might make distributions tosupporting organizations that can be usedto determine for purposes of sections4942(g)(4) and 4945(d)(4) whether anorganization is a Type I, Type II, or func-tionally integrated Type III supportingorganization. Section 3 also provides cri-teria for determining whether a supportingorganization, or any of its supported or-ganizations, are controlled by disqualifiedpersons. Section 3 also provides similarguidance with respect to section 4966 fordonor advised funds that make grants tosupporting organizations. Second, Sec-tion 4 clarifies the date of applicabilityfor the new section 4958(c)(3) excise taxon certain excess benefit transactions in-volving supporting organizations. Third,pursuant to the authority under new sec-tion 4966(d)(2)(C), Section 5.01 excludescertain employer-sponsored disaster relieffunds from the definition of donor-advisedfund. Fourth, Section 5.02 clarifies howthe Internal Revenue Service (“Service”)will apply the new section 4966(a) excisetaxes with respect to payments made pur-suant to educational grants awarded priorto the date of enactment of the PPA.

This notice is intended to address a lim-ited number of issues which require imme-diate guidance. The Service and the De-partment of Treasury (“Treasury”) expectto issue further guidance, including regu-lations, under these provisions of the PPA.The rules provided in this notice apply un-til further guidance is issued. This noticedoes not affect the substantive standardsfor tax exemption under section 501(c)(3).This notice also invites comments fromthe public regarding this notice and sug-gestions for future guidance implementingstatutory changes under the PPA.

Section 2. BACKGROUND

Organizations that are organized andoperated exclusively for charitable, reli-gious, educational or other specified pur-poses are generally exempt from incometax under section 501(a) as organizationsdescribed in section 501(c)(3). Section509(a) divides section 501(c)(3) organi-zations into two subcategories: privatefoundations and organizations that are not

2006–51 I.R.B. 1121 December 18, 2006

private foundations, which are commonlyknown as public charities. To be catego-rized as a public charity and not a privatefoundation, an organization must be de-scribed in section 509(a). To be describedin section 509(a)(1) or (2), an organiza-tion must receive a substantial amountof public support to fund its operations.To be described in section 509(a)(3), anorganization must have a particular typeof structural relationship with a publiclysupported section 501(c)(3), (4), (5) or (6)organization.

Private foundations are subject to a dif-ferent regime of excise taxes than are pub-lic charities. For example, private foun-dations are subject to excise tax if theydo not make at least a minimum level ofqualifying distributions each year. Privatefoundations are also subject to excise taxif they make certain taxable expenditures.Taxable expenditures include, but are notlimited to, certain grants to organizationsunless the private foundation exercises ex-penditure responsibility with respect to thegrants as required by section 4945(h) andTreas. Reg. section 53.4945–5(b).

Section 170(c) describes organizationseligible to receive charitable contributionsthat are deductible for income tax pur-poses.

.01 Donor Advised Funds and SupportingOrganizations before the PPA

Donor Advised Funds

Prior to the PPA, the Code did notdefine the term donor advised fund. How-ever, the term was commonly understoodto refer to component funds of certaincommunity trusts. See Treas. Reg. sec-tion 1.170A–9(e)(10) and (11). The termwas also commonly understood to referto an account established by one or moredonors but owned and controlled by a pub-lic charity to which such donors or otherindividuals designated by the donors couldprovide nonbinding recommendations re-garding distributions from the account orregarding investment of the assets in theaccount.

Supporting Organizations

Section 509(a)(3) excludes from thedefinition of private foundation certainorganizations that support certain publiclysupported organizations. The Treasury

regulations under section 509(a)(3) referto these organizations as supporting or-ganizations. To be described in section509(a)(3), an organization must meet sev-eral tests: (1) it must be organized andoperated exclusively for the benefit ofspecified publicly supported organizations(generally, public charities); (2) it musthave one of three types of relationshipswith its publicly supported organizations;and (3) it must not be controlled, directlyor indirectly, by disqualified persons (asdefined in section 4946 other than foun-dation managers) with respect to suchsupporting organization.

In general, supporting organizationshave been identified by the type of re-lationship they have with their publiclysupported organizations. A supportingorganization that is operated, supervisedor controlled by one or more publicly sup-ported organizations is commonly knownas a Type I supporting organization. Asupporting organization supervised orcontrolled in connection with one or morepublicly supported organizations is com-monly known as a Type II supportingorganization. A supporting organizationthat is operated in connection with one ormore publicly supported organizations iscommonly known as a Type III supportingorganization.

.02 Donor Advised Funds Under the PPA

Definition of a Donor Advised Fund

Under new section 4966(d)(2), a donoradvised fund is defined as a fund or ac-count owned and controlled by a sponsor-ing organization, which is separately iden-tified by reference to contributions of adonor or donors, and with respect to whichthe donor, or any person appointed or des-ignated by such donor (“donor advisor”),has, or reasonably expects to have, advi-sory privileges with respect to the distri-bution or investment of the funds.

A sponsoring organization is definedunder new section 4966(d)(1) as a section170(c) organization that is not a govern-mental organization (referenced in section170(c)(1) and (2)(A)) or a private founda-tion and maintains one or more donor ad-vised funds.

Pursuant to new section 4966(d)(2)(B),the term donor advised fund does not in-clude a fund or account: (1) that makes

distributions only to a single identified or-ganization or governmental entity or (2)with respect to which a donor advises asponsoring organization regarding grantsfor travel, study or similar purposes if:

a. the donor’s, or the donor advisor’s,advisory privileges are performed inhis capacity as a member of a commit-tee whose members are appointed bythe sponsoring organization,

b. no combination of donors or donor ad-visors (or related persons) directly orindirectly control the committee, and

c. all grants are awarded on an objectiveand nondiscriminatory basis pursuantto a procedure approved in advance bythe sponsoring organization’s boardof directors.

Thus, a sponsoring organization thatowns and controls a fund that meets thesecriteria may award a scholarship fromthe fund to a natural person without sub-jecting the sponsoring organization or itsmanagers to excise taxes under new sec-tion 4966.

Taxable Distribution

New section 4966 imposes an excise taxon a sponsoring organization for each tax-able distribution it makes from a donor ad-vised fund. It also imposes an excise tax onthe agreement of any fund manager of thesponsoring organization to the making ofa distribution, knowing that it is a taxabledistribution. The tax on taxable distribu-tions applies to distributions occurring intaxable years beginning after August 17,2006.

In general, under new section 4966(c),a taxable distribution is any distributionfrom a donor advised fund to any naturalperson, or to any other person if (i) thedistribution is for any purpose other thanone specified in section 170(c)(2)(B), or(ii) the sponsoring organization maintain-ing the donor advised fund does not ex-ercise expenditure responsibility with re-spect to such distribution in accordancewith section 4945(h).

Under new section 4966(c)(2), a tax-able distribution does not include a dis-tribution from a donor advised fund to:(1) any organization described in section170(b)(1)(A) (other than a disqualified

December 18, 2006 1122 2006–51 I.R.B.

supporting organization), (2) the sponsor-ing organization of such donor advisedfund, or (3) any other donor advised fund.

Under new section 4966(d)(4), a dis-qualified supporting organization includesa Type III supporting organization that isnot functionally integrated and any Type I,Type II, or functionally integrated Type IIIsupporting organization where the donoror donor advisor (and any related parties)directly or indirectly controls a supportedorganization of the supporting organiza-tion.

Prohibited Benefit

New section 4967 imposes an excisetax if a donor, donor advisor, or a per-son related to a donor or donor advisorof a donor advised fund (as described insections 4967(d) and 4958(f)(7)) providesadvice as to a distribution that results inany such person receiving, directly or indi-rectly, a more than incidental benefit. Theexcise tax is imposed on any person whoadvises as to the distribution or who re-ceives the benefit. A separate excise taxmay be imposed on a fund manager whoagreed to the making of the distribution.The new excise tax under section 4967 ap-plies to taxable years beginning after Au-gust 17, 2006.

Secretarial Authority

New section 4966(d)(2)(C) grants theSecretary authority to exempt certainfunds from treatment as donor advisedfunds if either (1) the fund or account isadvised by a committee not directly orindirectly controlled by the donor or donoradvisor (and any related parties), or (2)such fund or account benefits a singleidentified charitable purpose.

.03 Supporting Organizations Under thePPA

Supporting Organization Definition

The PPA incorporates the previouslyinformal nomenclature used to distin-guish among types of supporting orga-nizations into the statute. Thus, newsection 4966(d)(4)(B)(i) defines a Type Isupporting organization as a supportingorganization that is operated, supervised,or controlled by one or more section

509(a)(1) or 509(a)(2) organizations. Newsection 4966(d)(4)(B)(ii) defines a TypeII supporting organization as a supportingorganization that is supervised or con-trolled in connection with one or moresection 509(a)(1) or 509(a)(2) organiza-tions. (See also sections 4942(g)(4)(B)(i)and (ii) for parallel definitions of TypeI and Type II supporting organizations).Finally, new section 4943(f)(5)(A) definesa Type III supporting organization as asupporting organization that is operated inconnection with a section 509(a)(1) or (2)organization.

New section 4943(f)(5)(B) definesa functionally integrated Type III sup-porting organization as one which is notrequired under regulations established bythe Secretary to make payments to sup-ported organizations due to the activitiesof the organization related to performingthe functions of, or carrying out the pur-poses of, such supported organizations.

New section 509(f)(2), which is effec-tive August 17, 2006, prohibits certainsupporting organizations from acceptinggifts or contributions from certain personsassociated with the supported organizationof such supporting organization. This pro-vision provides that any organization thatwould otherwise meet the requirements ofa Type I or Type III supporting organiza-tion will be excluded under this provisionif it accepts any gift or contribution from aperson who directly or indirectly controls(either alone or together with related per-sons described in section 509(f)(2)(B)(ii)and (iii)) the governing body of a sup-ported organization of such supportingorganization or from a related person de-scribed in section 509(f)(2)(B).

New Rules Regarding Section 4958 ExcessBenefit Transactions and SupportingOrganizations

Section 4958 imposes an excise tax oncertain persons if they engage in one ormore excess benefit transactions. Newsection 4958(c)(3) provides that any grant,loan, compensation, or other similar pay-ment from a supporting organization to asubstantial contributor or persons relatedto the substantial contributor (as describedin section 4958(c)(3)(B)) is treated as anexcess benefit transaction. In addition,any loan from a supporting organizationto certain disqualified persons is treated

as an excess benefit transaction. The en-tire amount of the payment to such personsconstitutes an excess benefit subject to anexcise tax under section 4958. This excisetax applies to transactions occurring afterJuly 25, 2006.

Under new section 4958(c)(3)(C), asubstantial contributor includes any per-son who contributed or bequeathed anaggregate amount of more than $5,000 tothe organization, if such amount is morethan 2 percent of the total contributionsand bequests received by the organizationbefore the close of the taxable year of theorganization in which the contribution orbequest is received. A substantial contrib-utor also includes the creator of a trust.

.04 New Restrictions on Grants Madeby Private Foundations to SupportingOrganizations

The PPA amended section 4942(g) todeny qualifying distribution treatment togrants by non-operating private founda-tions to (1) Type III supporting organiza-tions that are not functionally integratedand (2) to Type I, Type II, and function-ally integrated Type III supporting organi-zations if a disqualified person of the pri-vate foundation directly or indirectly con-trols such supporting organization or a sup-ported organization of the supporting or-ganization. The PPA also amended section4945(d)(4)(A) to treat grants to the aboveentities by all private foundations as tax-able expenditures unless the private foun-dation exercises expenditure responsibilitywith respect to the grants.

Section 3. GRANTOR RELIANCESTANDARDS FOR GRANTSTO CERTAIN SUPPORTINGORGANIZATIONS

.01 Treatment of Grants from PrivateFoundations or Donor Advised Funds toSupporting Organizations

As stated in Section 2.04, the enactmentof the PPA imposes certain limitations ifa private foundation makes a grant to (1)a Type III supporting organization that isnot functionally integrated, or (2) a Type I,Type II, or functionally integrated Type IIIsupporting organization if one or more dis-qualified persons of the private foundationdirectly or indirectly controls such sup-porting organization or one of its supported

2006–51 I.R.B. 1123 December 18, 2006

organizations. Specifically, for non-oper-ating foundations, the grant is not a quali-fying distribution under section 4942. Forall private foundations, the grant is a tax-able expenditure under section 4945 if theprivate foundation does not exercise ex-penditure responsibility with respect to thegrant.

Similarly, the PPA treats as a taxabledistribution any distribution from a donoradvised fund to (1) a Type III supportingorganization that is not functionally inte-grated, or (2) any other supporting organi-zation if the fund’s donor or donor advisor(and any related parties) directly or indi-rectly controls a supported organization ofthe grantee if the sponsoring organizationdoes not exercise expenditure responsibil-ity with respect to such distribution.

Until further guidance is issued, forpurposes of sections 4942, 4945, and 4966(as applicable) a grantor, acting in goodfaith, may rely on information from theIRS Business Master File (“BMF”) orthe grantee’s current IRS letter recogniz-ing the grantee as exempt from federalincome tax and indicating the grantee’spublic charity classification in determin-ing whether the grantee is a public charityunder section 509(a)(1), (2), or (3). Inaddition, a grantor, acting in good faith,may rely on a written representation froma grantee and specified documents asdescribed in A. and B. below in deter-mining whether the grantee is a Type I,Type II, or functionally integrated Type IIIsupporting organization. The good faithrequirement is not satisfied if the collectedspecified documents are inconsistent withthe written representation. In each case,the grantor must verify that the grantee islisted in Publication 78, Cumulative List ofOrganizations described in Section 170(c)of the Internal Revenue Code of 1986,or obtain a copy of the current IRS letterrecognizing the grantee as exempt fromfederal income tax.

A. To establish that a grantee is a Type Ior a Type II supporting organization,a grantor, acting in good faith, mayrely on a written representation signedby an officer, director or trustee of thegrantee that the grantee is a Type I orType II supporting organization, pro-vided that:

i. the representation describes howthe grantee’s officers, directors,or trustees are selected, and ref-erences any provisions in gov-erning documents that establish aType I (operated, supervised, orcontrolled by) or a Type II (super-vised or controlled in connectionwith) relationship (as applicable)between the grantee and its sup-ported organization(s); and

ii. the grantor collects and reviewscopies of governing documents ofthe grantee (and, if relevant, ofthe supported organization(s)).

B. To establish that a grantee is a func-tionally integrated Type III support-ing organization a grantor, acting ingood faith, may rely on a written rep-resentation signed by an officer, di-rector or trustee of the grantee thatthe grantee is a functionally integratedType III supporting organization, pro-vided that:

i. the grantee’s representation iden-tifies the one or more supportedorganizations with which thegrantee is functionally integrated;

ii. the grantor collects and reviewscopies of governing documentsof the grantee (and, if relevant,of the supported organization(s)),and any other documents thatset forth the relationship of thegrantee to its supported organiza-tions, if such relationship is notreflected in the governing docu-ments; and

iii. the grantor collects and reviews awritten representation signed byan officer, director or trustee ofeach of the supported organiza-tions with which the grantee rep-resents that it is functionally in-tegrated describing the activitiesof the grantee and confirming,consistent with Section 3.02 ofthis notice, that but for the in-volvement of the grantee engag-ing in activities to perform thefunctions of, or to carry out thepurposes of, the supported organ-ization, the supported organiza-

tion would normally be engagedin those activities itself.

As an alternative to relying on a writ-ten representation from a grantee and spec-ified documents as described in A. or B.above, a grantor may rely on a reasonedwritten opinion of counsel of either thegrantor or the grantee concluding that thegrantee is a Type I, Type II, or function-ally integrated Type III supporting organi-zation.

A private foundation considering agrant to a Type I, Type II, or functionallyintegrated Type III supporting organi-zation may need to obtain a list of thegrantee’s supported organizations fromthe grantee to determine whether any ofthe supported organizations is controlledby disqualified persons of the private foun-dation. See Section 3.02, below, for thedefinition of control that may be used. Ifsuch control exists, the grant may not be aqualifying distribution and the foundationmay be required to exercise expenditureresponsibility with respect to the grant.

Similarly, a sponsoring organizationconsidering a grant from a donor advisedfund to a Type I, Type II, or functionallyintegrated Type III supporting organi-zation may need to obtain a list of thegrantee’s supported organizations fromthe grantee to determine whether any ofthe supported organizations is controlledby the fund’s donor or donor advisor (andany related parties). See Section 3.02,below, for the definition of control thatmay be used. If such control exists, thesponsoring organization will be requiredto exercise expenditure responsibility.

.02 Standards for Determining Controland for Defining “Functionally IntegratedType III Supporting Organization”

The Service and the Treasury Depart-ment intend to issue regulations regardingthe meaning of “control” under sections4942(g)(4)(A) and 4966(d)(4)(A) and thedefinition of a “functionally integratedType III supporting organization” undersection 4943(f)(5)(B). Until those regula-tions are issued, a grantor may rely on thestandards described below for purposes ofsections 4942, 4945 and 4966 (as appli-cable). Although regulations may adoptdifferent standards from those referencedbelow, those regulations will apply to

December 18, 2006 1124 2006–51 I.R.B.

grants made by private foundations andsponsoring organizations no sooner thanthe date that the regulations are proposed.The standards set forth below will applywith respect to any grants made prior tothat date.

In determining whether a disqualifiedperson with respect to a private founda-tion controls a supporting organization orone of its supported organizations, the con-trol standards established in Treas. Reg.section 53.4942(a)–3(a)(3) will apply. Un-der these standards, an organization is con-trolled by one or more disqualified personswith respect to a foundation if any suchpersons may, by aggregating their votesor positions of authority, require the sup-porting or supported organization to makean expenditure, or prevent the supportingorganization or the supported organizationfrom making an expenditure, regardless ofthe method by which the control is exer-cised or exercisable.

Similarly, in determining whether adonor or donor advisor or a person relatedto a donor or donor advisor (as describedin sections 4967(d) and 4958(f)(7)) of anydonor advised fund controls a supportedorganization of the grantee, the controlstandards established in Treas. Reg. sec-tion 53.4942(a)–3(a)(3) will apply. Underthese standards, a supported organizationis controlled by one or more donor ordonor advisors (and any related parties)of any donor advised fund if any suchpersons may, by aggregating their votes orpositions of authority, require a supportedorganization to make an expenditure, orprevent a supported organization frommaking an expenditure, regardless of themethod by which the control is exercisedor exercisable.

Also, solely for purposes of a represen-tation or opinion of counsel on which agrantor may rely, an organization will beconsidered a functionally integrated TypeIII supporting organization if it would meetthe test set forth in Treas. Reg. section1.509(a)–4(i)(3)(ii).

Section 4. APPLICABILITY DATE FOREXCESS BENEFIT TRANSACTIONSBY SUPPORTING ORGANIZATIONS

As stated in Section 2.03, under sec-tion 4958(c), as amended by the PPA, anygrant, loan, compensation, or other similarpayment by a supporting organization to a

substantial contributor or a person relatedto a substantial contributor (as described insection 4958(c)(3)(B)), and any loan pro-vided by a supporting organization to cer-tain disqualified persons, is treated auto-matically as an excess benefit transaction,with the entire amount paid to the substan-tial contributor or disqualified person andthose related to them treated as an excessbenefit. The statute provides that this newrule applies to transactions occurring afterJuly 25, 2006.

Treasury and the IRS understand thatbefore the PPA was enacted on August 17,2006, a supporting organization may haveentered into a binding contract or other le-gal obligation to pay substantial contribu-tors, or persons related to substantial con-tributors, for goods or services, or to pro-vide a loan to a disqualified person. Atthe time the supporting organization en-tered into these contracts or other legalobligations, the payments required underthem were not necessarily considered ex-cess benefit transactions.

To address the change to the law un-der the PPA, the IRS will not consider anypayment made pursuant to a written con-tract that was binding on August 17, 2006as an excess benefit transaction under newsection 4958(c)(3), provided that (1) suchcontract was binding at all times after Au-gust 17, 2006 and before payment is made,(2) the contract is not modified during suchperiod, and (3) the payment under the con-tract is made on or before August 17, 2007.Termination of the contract does not con-stitute a modification for this purpose.

Similarly, relief is provided with re-spect to certain arrangements that are notgoverned by a binding written contract de-scribed in the preceding paragraph. Withrespect to any such arrangement involvingan employment relationship in existence,or other legal obligation in effect, on Au-gust 17, 2006, the IRS will not considerany payment pursuant to such an arrange-ment as an excess benefit transaction un-der new section 4958(c)(3), provided that(1) the terms of such arrangement are notmodified after August 17, 2006, (2) anyservices are performed and any goods aredelivered as required by the arrangementno later than December 31, 2006, and (3)the payment is made no later than August17, 2007. Termination of the arrangementdoes not constitute a modification for thispurpose.

The applicability dates set forth in thissection affect only liability for excise taxesunder new section 4958(c)(3). Notwith-standing any relief provided in this section,if the supporting organization pays in ex-cess of reasonable compensation for ser-vices or in excess of fair market value forgoods, it jeopardizes continued tax exemp-tion under section 501(c)(3), and the in-dividuals receiving the payments may besubject to excise taxes under section 4958.In addition, any relief provided by this sec-tion does not alter whether a transaction isan excess benefit transaction under section4958(c)(1).

Section 5. DONOR ADVISED FUNDS

New section 4966(c)(1)(A) imposes anexcise tax on all distributions to naturalpersons from donor advised funds effec-tive for taxable years beginning after Au-gust 17, 2006. However, pursuant to theauthority described in Section 2.02 above,certain funds or accounts are exceptedfrom the definition of donor advised fund.

.01 Employer-Sponsored Disaster ReliefAssistance Programs

The definition of donor advised fundin section 4966(d)(2)(A) encompasses allfunds and accounts owned or controlled bya sponsoring organization separately iden-tified with reference to the contribution ofa donor or donors for which the donor,or anyone appointed by the donor, has orreasonably expects to have, advisory priv-ileges. Section 4966(d)(2)(C) grants theSecretary the authority to exempt a fundor account (a “fund”) from the definitionof donor advised fund.

Certain employers may establish disas-ter relief funds at a community foundationor other public charity to provide disas-ter relief grants to employees or their fam-ily members who are the victims of a ma-jor disaster. The sponsoring organizationmay receive contributions to these fundsfrom both the employer and its employees.If these employer-sponsored disaster relieffunds are within the definition of donoradvised funds, any distribution from thesefunds to employees or their family mem-bers would be subject to excise tax undernew section 4966.

Pursuant to the authority under4966(d)(2)(C), the IRS and Departmentof Treasury exclude from the definition of

2006–51 I.R.B. 1125 December 18, 2006

donor advised fund any employer-spon-sored disaster relief fund that meets thefollowing requirements:

a. the fund serves a single identifiedcharitable purpose, which is to pro-vide relief from one or more qualifieddisasters within the meaning of sec-tion 139(c)(1), (2), or (3);1

b. the fund serves a large or indefiniteclass (a “charitable class”);

c. recipients of grants from the fund areselected based on objective determi-nations of need;

d. the selection of recipients of grantsfrom the fund is made using eitheran independent selection committeeor adequate substitute procedures toensure that any benefit to the em-ployer is incidental and tenuous. Theselection committee is independentif a majority of the members of thecommittee consists of persons whoare not in a position to exercise sub-stantial influence over the affairs ofthe employer;

e. no payment is made from the fund toor for the benefit of:

i. any director, officer, or trusteeof the sponsoring organization ofthe fund, or

ii. members of the fund’s selectioncommittee; and

f. the fund maintains adequate recordsthat demonstrate the recipients’ needsfor the disaster relief assistance pro-vided.

Satisfaction of these requirements doesnot affect the determination of whether anypayments made from the fund might resultin taxable compensation to the employees.

.02 Applicability Date for EducationalGrants

As provided in Section 2.02 above, un-der new section 4966, distributions to nat-ural persons from a donor advised fund

are subject to an excise tax. The PPAprovides that section 4966 applies to cer-tain distributions (including certain educa-tional grants) made in taxable years begin-ning after August 17, 2006. The excise taxapplies irrespective of whether the grant isexcludable from the recipient’s income asa scholarship or fellowship under section117.

The IRS and Department of Treasuryunderstand that certain educational grantsmay have been committed to an individ-ual on or before the date of enactment, thepayments of which extend beyond August17, 2006. Pursuant to this notice, section4966(c)(1)(A) shall not apply to paymentsmade after August 17, 2006, with respectto an educational grant, if the payment ismade pursuant to a grant commitment en-tered into on or before August 17, 2006.A commitment will be considered enteredinto on or before August 17, 2006, if:

a. the educational grant was awarded onan objective and nondiscriminatorybasis and is reasonable in amount inlight of the purposes of the educa-tional grant;

b. the educational grant was not awardedto, nor are payments made pursuantto that grant, to a donor, donor advi-sor, or any person related to a donoror donor advisor (as described in sec-tions 4967(d) and 4958(f)(7));

c. on or before August 17, 2006: (1)(a) the name of the educational grantrecipient, the nature of the educa-tional grant, the amount of the educa-tional grant, the date on which it wasawarded, and the educational grantperiod, were entered on the records ofthe sponsoring organization or wereotherwise adequately evidenced, or(b) notice of the payments to bereceived was communicated to thepayee in writing, and (2) the spon-soring organization keeps a recordof such information or notice for aperiod that ends no earlier than threeyears after the close of the taxableyear in which the last payment ismade under the grant; and

d. there is no material change in theamount or in the conditions of theeducational grant, such as a requiredreapplication for the grant.

Notwithstanding the above, section4967 may apply to any grant that oth-erwise fits within the criteria specified.Thus, if a sponsoring organization makesan educational grant distribution that re-sults in more than an incidental benefit toa donor, donor advisor, or a person relatedto a donor or donor advisor, the grant willbe subject to excise tax.

Section 6. REQUEST FOR COMMENTS

The IRS and the Department of Trea-sury request comments regarding this no-tice and suggestions for future guidancewith respect to changes in requirementsfor donor advised funds and supportingorganizations or other changes affectingtax-exempt organizations under the PPA.

Comments should refer to Notice2006–109 and be submitted by Febru-ary 1, 2007, to:

Internal Revenue ServiceSE:T:EO:RA:G (Notice 2006–109)P.O. Box 7604Ben Franklin StationWashington, DC 20044

Submissions may be hand deliveredMonday through Friday between the hoursof 8 a.m. and 4:00 p.m. to:

SE:T:EO:RA:T:G (Notice 2006–109)Courier’s DeskInternal Revenue Service1111 Constitution Ave., N.W.Washington, DC 20224

Alternatively, taxpayers may sub-mit comments electronically toeoppa@irs.gov. Please include “No-tice 2006–109” in the subject line of anyelectronic communications.

All comments will be available for pub-lic inspection and copying.

1 Under sections 139(c)(1), (2) and (3), a qualified disaster means a disaster that results from a terroristic or military action (as defined in section 692(c)(2)), a Presidentially declared disaster(as defined in section 1033(h)(3)), and a disaster that results from an accident involving a common carrier or from any other event which the Secretary determines to be of a catastrophic nature.

December 18, 2006 1126 2006–51 I.R.B.

Section 7. PAPERWORK REDUCTIONACT

The collection of information containedin this notice has been reviewed and ap-proved by the Office of Management andBudget in accordance with the PaperworkReduction Act (44 U.S.C. 3507) undercontrol number 1545–2050. An agencymay not conduct or sponsor, and a personis not required to respond to, a collectionof information unless the collection ofinformation displays a valid OMB controlnumber.

The requirements to collect informationare in Sections 3 and 5 of this notice. Col-lecting the required information providesprivate foundations and sponsoring orga-nizations of donor advised funds with re-lief from excise taxes imposed by sections4942, 4945 and 4966 of the Code.

The estimated total annual reportingand/or recordkeeping burden is 612,294hours.

The estimated annual burden per re-spondent/recordkeeper varies from 7hours, 53 minutes to 9 hours, 48 minutes,depending on individual circumstances,with an estimated average of 81/2 hours.The estimated total number of respondentsand/or recordkeepers is 65,000.

The estimated frequency of collectionof such information is occasional.

Books or records relating to a collectionof information must be retained as longas their contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and tax returninformation are confidential, as requiredby 26 U.S.C. section 6103.

Section 8. DRAFTING INFORMATION

The principal authors of this notice areMary Jo Salins and Robert Fontenrose ofthe Exempt Organizations, Tax Exemptand Government Entities Division. Forfurther information regarding this notice,contact Ms. Salins at (202) 283–9453, orMr. Fontenrose at (202) 283–9484 (not atoll-free call).

Recordkeeping Requirementsfor Charitable ContributionsMade by Payroll Deduction

Notice 2006–110

SECTION 1. PURPOSE

This notice provides guidance on howcharitable contributions made by payrolldeduction may meet the requirements of§ 170(f)(17) of the Internal Revenue Code.

Taxpayers claiming charitable contri-bution deductions for cash, check, or othermonetary gifts made in taxable years be-ginning after August 17, 2006, are subjectto the new recordkeeping requirements of§ 170(f)(17), as added by section 1217of the Pension Protection Act of 2006,P.L. 109–280, 120 Stat. 780 (2006) (PPA).To substantiate a deduction, § 170(f)(17)requires a taxpayer to maintain a bankrecord or a written communication fromthe donee showing the name of the doneeorganization, the date of the contribution,and the amount of the contribution. Fora charitable contribution made by payrolldeduction, a pay stub, Form W–2, or otheremployer-furnished document that setsforth the amount withheld for payment toa donee organization, along with a pledgecard prepared by or at the direction of thedonee organization, will be deemed to bea “written communication from the doneeorganization” that satisfies the require-ments of § 170(f)(17).

The Internal Revenue Service andthe Treasury Department expect to is-sue regulations under § 170 incorporat-ing the recordkeeping requirements of§ 170(f)(17). Taxpayers making chari-table contributions by payroll deductionmay rely on this notice to comply with thenew requirements until those regulationsare effective.

SECTION 2. BACKGROUND

Section 170 generally allows a deduc-tion, subject to certain limitations, forany charitable contribution (as defined in§ 170(c)) payment of which is made duringthe taxable year. For any contribution of$250 or more, § 170(f)(8) provides that nodeduction is allowed unless the taxpayersubstantiates the contribution by a con-temporaneous written acknowledgmentof the contribution by the donee organ-

ization. The contemporaneous writtenacknowledgment must contain the amountof cash and a description of any propertyother than cash contributed; a statementwhether the donee organization providedany goods or services in consideration forthe contribution; and a description andgood faith estimate of the value of anygoods or services provided in considera-tion for the contribution, or, if the goodsor services consist solely of intangible re-ligious benefits, a statement to that effect.

Section 1.170A–13(f)(11)(i) of the In-come Tax Regulations provides that acontribution made by means of withhold-ing from a taxpayer’s wages and paymentby the taxpayer’s employer to a doneeorganization (i.e., a contribution made bypayroll deduction) may be substantiated,for purposes of § 170(f)(8), by both: (1)a pay stub, Form W–2, or other docu-ment furnished by the employer that setsforth the amount withheld by the em-ployer for the purpose of payment to adonee organization; and (2) a pledge cardor other document prepared by or at thedirection of the donee organization thatincludes a statement to the effect thatthe organization does not provide goodsor services in whole or partial consider-ation for any contribution made to theorganization by payroll deduction. Sec-tion 1.170A–13(f)(11)(ii) provides that thecontribution amount withheld from eachpayment of wages to a taxpayer is treatedas a separate contribution for purposes ofapplying the $250 threshold in § 170(f)(8)to charitable contributions made by pay-roll deduction.

Section 1.170A–13(f)(12) provides,in relevant part, that an organization de-scribed in § 170(c), or an organizationdescribed in 5 CFR 950.105 (a PrincipalCombined Fund Organization for purposesof the Combined Federal Campaign) andacting in that capacity, that receives a pay-ment made as a contribution is treated asa donee organization solely for purposesof § 170(f)(8), even if the organization(pursuant to the donor’s instructions orotherwise) distributes the amount receivedto one or more organizations described in§ 170(c).

Section 1217 of the PPA adds§ 170(f)(17), effective for contributionsmade in taxable years beginning afterAugust 17, 2006. Section 170(f)(17) pro-vides that no deduction is allowed under

2006–51 I.R.B. 1127 December 18, 2006

§ 170(a) for any contribution of a cash,check, or other monetary gift, unless thetaxpayer maintains as a record of thecontribution a bank record or a writtencommunication from the donee showingthe name of the donee organization andthe date and the amount of the contri-bution. Unlike § 170(f)(8), which onlyapplies to contributions of $250 or more,§ 170(f)(17) applies to any contribution ofa cash, check, or other monetary gift.

Any contribution of $250 or more madeby cash, check, or other monetary gift issubject to §§ 170(f)(8) and (f)(17). No de-duction for a contribution of $250 or moremade by payroll deduction is allowed un-less the taxpayer satisfies the substantia-tion requirements of each section.

SECTION 3. APPLICATION OF§ 170(f)(17) TO CONTRIBUTIONSMADE BY PAYROLL DEDUCTION

A deduction for a contribution made bypayroll deduction in taxable years begin-ning after August 17, 2006, will not beallowed unless the recordkeeping require-ments of § 170(f)(17) are met. In the caseof a contribution made by payroll deduc-tion, a “written communication from thedonee organization” within the meaningof § 170(f)(17) will be deemed to include(1) a pay stub, Form W–2, or other docu-ment furnished by the employer that setsforth the amount withheld during a tax-able year by the employer for the purposeof payment to a donee organization, to-

gether with (2) a pledge card or other doc-ument prepared by or at the direction of thedonee organization that shows the name ofthe donee organization. An organizationdescribed in § 170(c), or an organizationdescribed in 5 CFR 950.105 (a PrincipalCombined Fund Organization for purposesof the Combined Federal Campaign) andacting in that capacity, that receives a pay-ment made as a contribution will be treatedas a donee organization for purposes of§ 170(f)(17).

To substantiate a contribution of $250or more made by payroll deduction, thepledge card or other document prepared bythe donee organization also must includea statement to the effect that the organiza-tion does not provide goods or services inwhole or partial consideration for any con-tributions made to the organization by pay-roll deduction.

The Service and the Treasury De-partment expect to issue revised regu-lations under § 170 that will incorpo-rate the recordkeeping requirements of§ 170(f)(17). Taxpayers may rely on thisnotice to substantiate contributions madeby payroll deduction in taxable years be-ginning after August 17, 2006, until thoseregulations are effective.

SECTION 4. PAPERWORKREDUCTION ACT

The collections of information refer-enced in this notice have been previouslyreviewed and approved by the Office of

Management and Budget (OMB) as part ofthe promulgation of Section 1.170A–13 inaccordance with the Paperwork ReductionAct (44 U.S.C. 3507) under control num-ber 1545–0754. This notice merely clari-fies the substantiation required for a contri-bution of a cash, check, or other monetarygift subject to § 170(f)(17).

An agency may not conduct or sponsor,and a person is not required to respondto, a collection of information unless thecollection of information displays a validOMB control number.

Books or records relating to a collectionof information must be retained as longas their contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and return in-formation are confidential, as required by§ 6103.

SECTION 5. DRAFTINGINFORMATION

The principal authors of this notice areNancy J. Lee and Patricia M. Zweibel ofthe Office of Associate Chief Counsel (In-come Tax & Accounting). For furtherinformation regarding this notice, contactNancy J. Lee at (202) 622–5020 (not atoll-free call).

December 18, 2006 1128 2006–51 I.R.B.

Part IV. Items of General Interest

Announcement of Disciplinary Actions InvolvingAttorneys, Certified Public Accountants, Enrolled Agents,and Enrolled Actuaries — Suspensions, Censures,Disbarments, and ResignationsAnnouncement 2006-94

Under Title 31, Code of Federal Regu-lations, Part 10, attorneys, certified publicaccountants, enrolled agents, and enrolledactuaries may not accept assistance from,or assist, any person who is under disbar-ment or suspension from practice beforethe Internal Revenue Service if the assis-tance relates to a matter constituting prac-tice before the Internal Revenue Serviceand may not knowingly aid or abet another

person to practice before the Internal Rev-enue Service during a period of suspen-sion, disbarment, or ineligibility of suchother person.

To enable attorneys, certified publicaccountants, enrolled agents, and enrolledactuaries to identify persons to whomthese restrictions apply, the Director, Of-fice of Professional Responsibility, willannounce in the Internal Revenue Bulletin

their names, their city and state, their pro-fessional designation, the effective dateof disciplinary action, and the period ofsuspension. This announcement will ap-pear in the weekly Bulletin at the earliestpracticable date after such action and willcontinue to appear in the weekly Bulletinsfor five successive weeks.

Consent Suspensions From Practice Before the InternalRevenue Service

Under Title 31, Code of Federal Regu-lations, Part 10, an attorney, certified pub-lic accountant, enrolled agent, or enrolledactuary, in order to avoid the institutionor conclusion of a proceeding for his orher disbarment or suspension from prac-tice before the Internal Revenue Service,

may offer his or her consent to suspensionfrom such practice. The Director, Officeof Professional Responsibility, in his dis-cretion, may suspend an attorney, certifiedpublic accountant, enrolled agent, or en-rolled actuary in accordance with the con-sent offered.

The following individuals have beenplaced under consent suspension frompractice before the Internal Revenue Ser-vice:

Name Address Designation Date of Suspension

Tomasulo, Maria V. Wantagh, NY CPA IndefinitefromAugust 7, 2006

Maloy, Jr., Robert J. Galion, OH CPA IndefinitefromAugust 15, 2006

Pate, Janet M. Broadview, NM CPA IndefinitefromAugust 15, 2006

Scott, Howard Miami, FL Attorney IndefinitefromAugust 15, 2006

Adamic, Jonathan E. San Lorenzo, CA CPA IndefinitefromAugust 18, 2006

2006–51 I.R.B. 1129 December 18, 2006

Name Address Designation Date of Suspension

Becker, Ira S. Wilmette, IL CPA August 22, 2006toAugust 21, 2008

Snigur, Virginia Iaquinta Warwick, NY Attorney IndefinitefromAugust 31, 2006

Galpern, Joel G. North Miami, FL CPA IndefinitefromSeptember 1, 2006

DiSiena, Frank E. Katonah, NY CPA IndefinitefromSeptember 4, 2006

Carusona, Thomas M. Huntington, NY Attorney IndefinitefromSeptember 15, 2006

Shaikh, Firoz A. Melville, NY CPA IndefinitefromSeptember 15, 2006

Wickline, Ella L. Ronceverte, WV Enrolled Agent IndefinitefromSeptember 15, 2006

Smith, Daniel B. Garden City, NY CPA IndefinitefromSeptember 18, 2006

Carlin, Charles R. South Bend, IN CPA IndefinitefromOctober 1, 2006

Devine, Daniel M. Boca Raton, FL CPA IndefinitefromOctober 1, 2006

Dupont, Hewitt, J. Daytona Beach, FL CPA IndefinitefromOctober 1, 2006

Farrell, Raymond J. Matawan, NJ Attorney IndefinitefromOctober 1, 2006

Kelligrew, John R. White Plains, NY Attorney IndefinitefromOctober 1, 2006

Klein, Robert B. Bardonia, NY Enrolled Agent IndefinitefromOctober 1, 2006

Long, Gregory S. Hutchinson, KS Attorney IndefinitefromOctober 1, 2006

December 18, 2006 1130 2006–51 I.R.B.

Name Address Designation Date of Suspension

Moore, Ronald L. Cayce, SC CPA IndefinitefromOctober 1, 2006

Schaffer, Robert J. Calverton, NY CPA IndefinitefromOctober 1, 2006

Berlin, Stanley Erie, PA Attorney IndefinitefromOctober 15, 2006

Briscoe, Jack Drexel Hill, PA Attorney IndefinitefromOctober 15, 2006

Buzzeo, Michael V. New Canaan, CT CPA IndefinitefromOctober 15, 2006

Sacco, John M. Pound Ridge, NY CPA IndefinitefromOctober 15, 2006

Sheiman, Alan P. Sherman Oaks, CA Enrolled Agent IndefinitefromOctober 15, 2006

Tourin, Mark Miami, FL CPA IndefinitefromOctober 15, 2006

Burns, William J. Randolph, MA Attorney IndefinitefromOctober 16, 2006

Webb, Norman R. Daphne, AL CPA IndefinitefromOctober 16, 2006

Brown, Guia EP Hobe Sound, FL Enrolled Agent October 20, 2006toApril 19, 2008

Gram, John A. Gainesville, GA Attorney IndefinitefromNovember 1, 2006

Herzog, Samuel A. Jericho, NY CPA IndefinitefromNovember 1, 2006

Kellicker, John F. Cleveland, OH CPA IndefinitefromNovember 1, 2006

Krieger, Robert M. Hampton, NH CPA IndefinitefromNovember 1, 2006

Minsky, Neil J. Randolph, NJ CPA IndefinitefromNovember 1, 2006

2006–51 I.R.B. 1131 December 18, 2006

Name Address Designation Date of Suspension

O’Brien, Timothy Newton Center, MA Attorney IndefinitefromNovember 1, 2006

Sukenik, Martin Kew Gardens, NY Attorney IndefinitefromNovember 1, 2006

Savoy, Cassandra East Orange, NJ Attorney IndefinitefromNovember 7, 2006

Bonner, Charles B. Athens, GA CPA IndefinitefromNovember 15, 2006

Levine, Barton P. New York, NY Attorney IndefinitefromNovember 15, 2006

Taves, Joseph G. Provincetown, MA CPA IndefinitefromNovember 15, 2006

Young, Ronald Fairfield, CT CPA IndefinitefromNovember 16, 2006

Brush, Charles, H. Southbury, CT CPA IndefinitefromDecember 1, 2006

Jacob, Robert T. Tucson, AZ CPA IndefinitefromDecember 15, 2006

Expedited Suspensions From Practice Before the InternalRevenue Service

Under Title 31, Code of Federal Regu-lations, Part 10, the Director, Office of Pro-fessional Responsibility, is authorized toimmediately suspend from practice beforethe Internal Revenue Service any practi-tioner who, within five years from the date

the expedited proceeding is instituted (1)has had a license to practice as an attor-ney, certified public accountant, or actuarysuspended or revoked for cause or (2) hasbeen convicted of certain crimes.

The following individuals have beenplaced under suspension from practice be-fore the Internal Revenue Service by virtueof the expedited proceeding provisions:

Name Address Designation Date of Suspension

Williams, Donna M. York, PA CPA IndefinitefromJuly 25, 2006

Foushee, Wayne H. Winston-Salem, NC Attorney IndefinitefromAugust 3, 2006

December 18, 2006 1132 2006–51 I.R.B.

Name Address Designation Date of Suspension

Kronegold, Sheldon H. Englewood, NJ Attorney IndefinitefromAugust 3, 2006

Norman, Clarence Brooklyn, NY Attorney IndefinitefromAugust 3, 2006

Chin, Arnold San Francisco, CA Attorney IndefinitefromAugust 31, 2006

McCann, Thomas Des Moines, IA Attorney IndefinitefromAugust 31, 2006

Whaley, Daniel P. Hood, CA Attorney IndefinitefromAugust 31, 2006

Chukumba, Stephen C. Montclair, NJ Attorney IndefinitefromSeptember 12, 2006

Katz, Edward C. New York, NY Attorney IndefinitefromSeptember 12, 2006

Kadunce, Darrell L. Butler, PA Attorney IndefinitefromSeptember 18, 2006

Allen, Robert W. Torrance, CA CPA IndefinitefromSeptember 21, 2006

Brown, Davin W. Raleigh, NC CPA IndefinitefromSeptember 21, 2006

Cunningham, R. Scott Dalton, GA Attorney IndefinitefromSeptember 21, 2006

Eilers, Tom D. Raleigh, NC CPA IndefinitefromSeptember 21, 2006

Gerdes, Roger A. Carpinteria, CA Attorney IndefinitefromSeptember 21, 2006

Kurth, Richard Frederick Danville, IL Attorney IndefinitefromSeptember 21, 2006

Mitchell, McArthur D. Charlotte, NC CPA IndefinitefromSeptember 21, 2006

2006–51 I.R.B. 1133 December 18, 2006

Name Address Designation Date of Suspension

Ragusa, Patricia A. Spring, TX CPA IndefinitefromSeptember 21, 2006

Wulfsberg, David E. Murrieta, CA Attorney IndefinitefromSeptember 21, 2006

Cox, Brian J. Plymouth, MI CPA IndefinitefromSeptember 25, 2006

Mandelman, Michael D. Mequon, WI Attorney IndefinitefromSeptember 25, 2006

Miller, Steven L. Canal Winchester, OH Attorney IndefinitefromSeptember 25, 2006

Felli, Jay A. Mequon, WI Attorney IndefinitefromOctober 2, 2006

Schoch V, Arch K. High Point, NC Attorney IndefinitefromOctober 2, 2006

Andre, Patrick F. Manchester, MO Attorney IndefinitefromOctober 12, 2006

Brill, Kevin Michael Downers Grove, IL Attorney IndefinitefromOctober 12, 2006

Day, Richard G. Largo, FL Attorney IndefinitefromOctober 12, 2006

Dull, Kay E. Miami Shores, FL Attorney IndefinitefromOctober 12, 2006

Frank, Arthur J. Chicago, IL Attorney IndefinitefromOctober 12, 2006

Gackle, Thomas E. Plymouth, MI Attorney IndefinitefromOctober 12, 2006

Hamilton, Howard D. Fort Dodge, IA Attorney IndefinitefromOctober 12, 2006

Hodge, Robert M. Lafayette, LA Attorney IndefinitefromOctober 12, 2006

Lesyshen, Donna P. Waterloo, IA Attorney IndefinitefromOctober 12, 2006

December 18, 2006 1134 2006–51 I.R.B.

Name Address Designation Date of Suspension

Peiss, John H. Downers Grove, IL Attorney IndefinitefromOctober 12, 2006

Petty, James E. Austin, TX CPA IndefinitefromOctober 12, 2006

Ruffin-Hudson, Linda C. Saint Louis, MO Attorney IndefinitefromOctober 12, 2006

Schaefer, James E. St. Louis Park, MN Attorney IndefinitefromOctober 12, 2006

Schmitt, Martha G. Minneapolis, MN Attorney IndefinitefromOctober 12, 2006

Shannon, Terrance J. Mission Viejo, CA Attorney IndefinitefromOctober 12, 2006

Smith, Matthew S. Denver, CO Attorney IndefinitefromOctober 12, 2006

Swanson, Richard West Chicago, IL CPA IndefinitefromOctober 12, 2006

Thomas, Kenneth A. Farmers Branch, TX Attorney IndefinitefromOctober 12, 2006

Tomasa, Ryan H. Honolulu, HI Attorney IndefinitefromOctober 12, 2006

Williams, Jr., Harry D. San Antonio, TX Attorney IndefinitefromOctober 12, 2006

Wilson, Jr., Robert N. Ayer, MA Attorney IndefinitefromOctober 12, 2006

Yum, Chris Chulho Woodbridge, VA Attorney IndefinitefromOctober 12, 2006

Dunham, Richard G. Irvine, CA Enrolled Agent IndefinitefromOctober 15, 2006

Housman, David Albuquerque, NM Attorney IndefinitefromOctober 15, 2006

Malitz, Charles P. Beachwood, OH CPA IndefinitefromOctober 15, 2006

2006–51 I.R.B. 1135 December 18, 2006

Name Address Designation Date of Suspension

Emig, Robert W. Houston, TX CPA IndefinitefromOctober 24, 2006

Freese, Scott D. Norfolk, NE Attorney IndefinitefromOctober 24, 2006

Rambo, Byron L. Sanford, FL EA IndefinitefromOctober 24, 2006

Ask, Ronald W. Riverside, CA Attorney IndefinitefromOctober 30, 2006

Berry, Richard S. Tempe, AZ Attorney IndefinitefromOctober 30, 2006

Burkhardt, William R. Canyon Lake, TX CPA IndefinitefromOctober 30, 2006

Callaway, Jr., Paul F. Greensboro, NC CPA IndefinitefromOctober 30, 2006

Doyle, David W. Arvada, CO Attorney IndefinitefromOctober 30, 2006

Elmore, III, Virgil Birmingham, AL Attorney IndefinitefromOctober 30, 2006

Grandt, Lawrence E. Gurnee, IL CPA IndefinitefromOctober 30, 2006

Hanson, Steven G. Lodi, CA Attorney IndefinitefromOctober 30, 2006

Omodele, Boluwaji Houston, TX CPA IndefinitefromOctober 30, 2006

Rahden, Horst R. Fort Wayne, IN CPA IndefinitefromOctober 30, 2006

Censoprano, Salvatore Foster City, CA CPA IndefinitefromOctober 31, 2006

Powell, James S. Lakewood, CO Attorney IndefinitefromOctober 31, 2006

Allen, Leonard G. Mesa, AZ CPA IndefinitefromNovember 1, 2006

December 18, 2006 1136 2006–51 I.R.B.

Name Address Designation Date of Suspension

Parker, Donald A. Benson, NC Attorney IndefinitefromNovember 6, 2006

Rogers, James M. Tulsa, OK Attorney IndefinitefromNovember 6, 2006

Coopet, Michael W. Saint Paul, MN Attorney IndefinitefromNovember 8, 2006

Day, Jr., John Taylor Hingham, MA Attorney IndefinitefromNovember 8, 2006

Grella, Paul J. Canton, MA Attorney IndefinitefromNovember 8, 2006

Meggers, Theodore M. Des Moines, IA Attorney IndefinitefromNovember 8, 2006

Tolbert, James L. Los Angeles, CA Attorney IndefinitefromNovember 8, 2006

Suspensions From Practice Before the Internal RevenueService After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Reg-ulations, Part 10, after notice and an op-portunity for a proceeding before an ad-

ministrative law judge, the following indi-viduals have been placed under suspension

from practice before the Internal RevenueService:

Name Address Designation Effective Date

Lazaro, Charles Visalia, CA Attorney July 20, 2006toJanuary 19, 2010

Wasilowski, Ronald Natrona Heights, PA CPA July 21, 2006toJuly 20, 2011

Wellbery, William J. Deerfield Beach, FL CPA October 12, 2006toOctober 11, 2008

Clapper, Gary L. La Mesa, CA Enrolled Agent November 2, 2006toNovember 1, 2008

2006–51 I.R.B. 1137 December 18, 2006

Consent Disbarments From Practice Before the InternalRevenue Service

Under Title 31, Code of Federal Regu-lations, Part 10, an attorney, certified pub-lic accountant, enrolled agent, or enrolledactuary, in order to avoid institution or con-clusion of a proceeding for his or her dis-barment or suspension from practice be-

fore the Internal Revenue Service, may of-fer his or her consent to disbarment fromsuch practice. The Director, Office of Pro-fessional Responsibility, in his discretion,may disbar an attorney, certified public ac-

countant, enrolled agent, or enrolled actu-ary in accordance with the consent offered.

The following individuals have beenplaced under consent disbarment frompractice before the Internal Revenue Ser-vice:

Name Address Designation Date of Disbarment

Grossman, Robert S. Ardmore, PA Attorney IndefinitefromOctober 4, 2006

Disbarments From Practice Before the Internal RevenueService After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Regu-lations, Part 10, after notice and an oppor-

tunity for a proceeding before an adminis-trative law judge, the following individu-

als have been disbarred from practice be-fore the Internal Revenue Service:

Name Address Designation Effective Date

Hubbard, Murphy Springfield, MO CPA September 20, 2006

Kardos, Sandra E. Van Nuys, CA CPA October 2, 2006

Jewett, Jerry A. Fremont, OH Enrolled Agent November 2, 2006

Censure Issued by ConsentUnder Title 31, Code of Federal Reg-

ulations, Part 10, in lieu of a proceedingbeing instituted or continued, an attorney,certified public accountant, enrolled agent,

or enrolled actuary, may offer his or herconsent to the issuance of a censure. Cen-sure is a public reprimand.

The following individuals have con-sented to the issuance of a Censure:

Name Address Designation Date of Censure

Applegate, William F. Madison, NJ CPA September 12, 2006

Vigliotti, Anthony J. East Haven, CT Enrolled Agent September 12, 2006

Bolgiani, Janette A. Brooklyn, NY Enrolled Agent September 14, 2006

Cheney, James E. Phelps, NY CPA September 18, 2006

Dollinger, Douglas Middletown, NY Attorney October 2, 2006

Reeves, Zak E. Denver, CO Enrolled Agent October 2, 2006

December 18, 2006 1138 2006–51 I.R.B.

Name Address Designation Date of Censure

Castiglione, John Pittsfield, MA Attorney October 4, 2006

Shannon, James P. Rochester, NH Attorney October 4, 2006

Kuller, Mark A. Bethesda, MD Attorney October 6, 2006

Resignations of Enrolled AgentsUnder Title 31, Code of Federal Regu-

lations, Part 10, an enrolled agent, in or-der to avoid the institution or conclusionof a proceeding for his or her disbarmentor suspension from practice before the In-

ternal Revenue Service, may offer his orher resignation as an enrolled agent. TheDirector, Office of Professional Responsi-bility, in his discretion, may accept the of-fered resignation.

The Director, Office of ProfessionalResponsibility, has accepted offers of res-ignation as an enrolled agent from thefollowing individuals:

Name Address Date of Resignation

Schwartz, Judy Las Vegas, NV October 13, 2006

AJCA Modifications to theSection 6111 Regulations;Correction

Announcement 2006–98

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Correction to notice of pro-posed rulemaking by cross-reference totemporary regulations.

SUMMARY: This document contains acorrection to notice of proposed rule-making by cross-reference to temporaryregulations (REG–103039–05, 2006–49I.R.B. 1057) that were published in theFederal Register on Thursday, Novem-ber 2, 2006 (71 FR 64496) relating to thedisclosure of reportable transactions bymaterial advisors.

FOR FURTHER INFORMATIONCONTACT: Tara P. Volungis orCharles Wien, 202–622–3070 (not atoll-free number).

SUPPLEMENTAL INFORMATION:

Background

The notice of proposed rulemaking bycross-reference to temporary regulations(REG–103039–05) that is the subject ofthis correction is under sections 6111 and6112 of the Internal Revenue Code.

Need for Correction

As published, the notice of proposedrulemaking by cross-reference to tempo-rary regulations (REG–103039–05) con-tains an error that may prove to be mislead-ing and is in need of clarification.

Correction of Publication

Accordingly, the notice of proposedrulemaking by cross-reference to tempo-rary regulations (REG–103039–05) thatwas the subject of FR Doc. E6–18321 iscorrected as follows:

§301.6111–3 [Corrected]

On page 64499, column 1,§301.6111–3(b)(2)(ii)(B), first para-graph of the column, lines 4 and 5, thelanguage “disclosure of the tax structureor tax aspects of the transaction is limitedin” is corrected to read “disclosure of

the tax treatment or tax structure of thetransaction is limited in”.

LaNita Van Dyke,Branch Chief,

Publications and Regulations Branch,Legal Processing Division,

Associate Chief Counsel(Procedure and Administration).

(Filed by the Office of the Federal Register on December 1,2006, 8:45 a.m., and published in the issue of the FederalRegister for December 4, 2006, 71 F.R. 70335)

Foundations Status of CertainOrganizations

Announcement 2006–99

The following organizations have failedto establish or have been unable to main-tain their status as public charities or as op-erating foundations. Accordingly, grantorsand contributors may not, after this date,rely on previous rulings or designationsin the Cumulative List of Organizations(Publication 78), or on the presumptionarising from the filing of notices under sec-tion 508(b) of the Code. This listing doesnot indicate that the organizations have losttheir status as organizations described insection 501(c)(3), eligible to receive de-ductible contributions.

2006–51 I.R.B. 1139 December 18, 2006

Former Public Charities. The follow-ing organizations (which have been treatedas organizations that are not private foun-dations described in section 509(a) of theCode) are now classified as private foun-dations:

Act of Change, Dallas, TXAfrican Federation, Inc., Ossining, NYAlliance for Consumer Housing

and Educational Services, Inc.,Stone Mountain, GA

American Flyers Special DevelopmentSport Team, Springfield, OH

American Foundation for AbusedChildrens Therapy, Raleigh, NC

American Society for Education &Training in Aviation, Las Vegas, NV

Aseonyn Opportunity Center, Inc.,Fort Lauderdale, FL

Asian Community of California, Inc.,Richmond, CA

Aspirations Center CommunityDevelopment Corporation,East St. Louis, IL

Bicycle for Everyones Earth USA,Phoenix, AZ

Big Horn Lenape Fed, Martinsville, OHBless the Children, Dallas, TXBlessed to Bless Phase II, Berkley, MOBoston Institute for the Advancement of

Science, Inc., Hyde Park, MACalligraphy Education Group,

Silver Spring, MDCCD of Texas, Inc., Richardson, TXCenter for Universal Understanding, Inc.,

Charlotte, SCCharles Livingston Family Research

Association, Salt Lake City, UTClover Housing and Redevelopment

Services, Clover, SCCollaboration of Creation, Inc.,

Sacramento, CAColorado Business Roundtable,

Denver, COCommunity Care Service,

Warner Robins, GACommunity for Humanity Agency,

La Habra, CACommunity Outreach Ministries, Inc.,

Safford, AZConsciousness, Inc., Milwaukee, WICorenet Global Community Reinvestment

Challenge, Atlanta, GACornerstone Counseling and Learning

Center, Inc., Bronx, NYCultural Community Care, Inc.,

Sherman, TX

Cutting Edge of Medical InventionFoundation, Malibu, CA

David B. and Eileen M. KinneyMemorial Childhood Foundation,Los Angeles, CA

Delphi Foundation, Middleburg, VADerrick E. Houston Ministries, Inc.,

Birmingham, ALDespite the Odds, Inc., Miami, FLDicarlo Corporation, Newton, MADisciples of Christ Community

Development Center, Tuscaloosa, ALD-One Education and Sports Foundation,

Inc., Greensboro, NCEdna Travis Helping Hands Foundation,

Inc., Baton Rouge, LAFoundation of Family Happiness,

Arlington, VAFriends of Fun Shop Foundation,

Springfield, ILFrontline Bible Ministries, Inc.,

Ypsilanti, MIGathering Point, Chicago, ILGolden Years, Hattiesburg, MSGood Shephard Holy Cross Apostolate,

Inc., Elyria, OHGoodbyebills, Inc., El Paso, TXHarvest for Haiti, Oakland, CAHep C Advocated Network, Inc.,

Longview, TXIlluminated Life Foundation, Honolulu, HIImmunogenic Research Foundation, Inc.,

Pompano Beach, FLIndiana Assisted Living Foundation, Inc.,

Indianapolis, INInternational Tcm Center, Pittsburgh, PAInternational Word Outreach Ministries,

Inc., Chicago, ILJeffrey Sealey, Tuscaloosa, ALJoshua & Caleb Community Development

Corporation, Baton Rouge, LAJus Tus, Inc., Rancho Cucamonga, CAKicking Kids, Inc., Douglasville, GAKingdom House Therapeutic Treatment

Center, Haslet, TXKiwanis Club of North Mason Foundation

Trust Fund, Belfair, WALakemor Foundation for Breast Cancer

Research, Inc., Reno, NVLampkin-Asam Cancer Institute, Inc.,

Deltona, FLLast Day Plea Publications,

Baltimore, MDLaw Street Economic Development

Corporation, New Orleans, LALear Charitable Foundation,

Garden Grove, CALegacy Foundation, Shorewood, MN

LFC Recreation Center for the Aged andDisabled Adults, Houston, TX

Living Word Affordable HousingCommunities, Incorporated,Nashville, TN

Local Organizing Committee, Fresno, CALubbock Area Children Empowerment,

Lubbock, TXMalcolm Foundation, Inc., Madison, MSManjui Foundation, Inc., Baltimore, MDMetro Mustangs Basketball Foundation,

Dallas, TXNew Foundation Church,

Philadelphia, MSNewport Housing Authority Development

Corporation, Newport, TNNorthey Foundation, Morrison, COOlen C. and Carmen Hendrix Foundation,

Prescott, AROpen Heart of Love Non Profit

Organization, Matteson, ILOrder of the Dragon, Bakersfield, CAOut of Pain, Inc.,

Montgomery Village, MDOutdoors for All, Lansing, MIPatrajsha Connection, Los Angeles, CAPeniel Family Resource Center, Inc.,

Lithonia, GAPeople Caring for People Through

Technology PCP Group Community,Odenton, MD

Percussion for Kids Association,Seattle, WA

Philant, San Diego, CAPiller Family Foundation in Memory

of Raizy Rivky and Eli Piller,Brooklyn, NY

P L I E, Greensboro, NCPotter’s Center for the Homeless, Inc.,

Norwalk, CTPower Training Academy, Inc.,

Columbus, OHPresidio Films Foundation, Inc.,

Newport Beach, CAPrima Sounds Foundation, Inc.,

Winter Park, FLProvidence Baptist Church Foundation,

Inc., Opelika, ALQuiet Environment Society, Inc.,

Tewksbury, MAReaching You Resource Center, Inc.,

Thomasville, GARestoration Dream Center, Inc.,

Mabelvale, ARRevelation Enterprise, Los Angeles, CARhema Sports Park and Learning Center,

Virginia Beach, VA

December 18, 2006 1140 2006–51 I.R.B.

Rivers of Living Water Ministries, Inc.,Monroe, NC

San Juan Island Farm and Retreat Center,Seattle, WA

Second Chance a Sober Living Facility,Tucson, AZ

Sewickley Township CommunityAmbulance Service, Herminie, PA

Shantivanam Northern Knights Camp andConference Center, Inc., Glover, VT

Social Venture Network,San Francisco, CA

Solid Oak Accessible Resources, Inc.,Nacogdoches, TX

Solid Rock Productions, Inc.,Scottsdale, AZ

South Florida Community DevelopmentCorporation, Miami, FL

St. Francois Society, St. Louis, MOSteps Vocational Services,

Marysville, WAStudent Image & Career Consulting, Inc.,

Mableton, GATennessee Ministries, Madisonville, TNThis-Story, Inc., Portland, ORTriumph Empowerment Center, Inc.,

Erwin, NCUnited States Colored Troops Institute of

Suffolk County, Amityville, NYVictory Enterprises and Ministries,

Reseda, CAVolunteer Refugee Aid International, Inc.,

Temple City, CAWell – Spring Prevention, Inc., Miami, FLWhitemarsh Continuing Care Retirement

Community, Plymouth Meeting, PAWilliam H. McDonald Community

Outreach Center, Inc., Kansas City, KSWith One Accord, Durham, NCWomen Ministering Women, Inc.,

Kechi, KS

Yellow Cross AELS, Beaverton, ORYoungblood Enterprises, Inc.,

Montgomery, AL

If an organization listed above submitsinformation that warrants the renewal ofits classification as a public charity or asa private operating foundation, the Inter-nal Revenue Service will issue a ruling ordetermination letter with the revised clas-sification as to foundation status. Grantorsand contributors may thereafter rely uponsuch ruling or determination letter as pro-vided in section 1.509(a)–7 of the IncomeTax Regulations. It is not the practice ofthe Service to announce such revised clas-sification of foundation status in the Inter-nal Revenue Bulletin.

Appeals Closing CasesInvolving Unsettled ListedTransactions

Announcement 2006–100

The Internal Revenue Service an-nounced today that it is updating itsprocedures relating to cases involvinga listed transaction with respect to whichthe Office of Appeals and the taxpayer areunable to reach a satisfactory settlement.The new procedures take effect today andare part of a continuing effort by the IRSto ensure the efficiency and integrity oftax administration, while at the same timesuccessfully combating abusive tax avoid-ance transactions.

When a settlement cannot be reachedby the Office of Appeals in a case that isnot docketed in the Tax Court, it is ex-

pected that the case will proceed to liti-gation. The Service wants to ensure thatit has fully developed the limited num-ber of unagreed cases that involve listedtransactions (within the meaning of Treas.Reg. § 1.6011–4) before it sends a statu-tory notice of deficiency (or other deter-mination notice triggering litigation rights)to the taxpayer. Consequently, the Serviceis revising its procedures to provide thatwhen the Office of Appeals and the tax-payer are unable to reach a satisfactory set-tlement in a nondocketed case involvinga listed transaction, the Office of Appealswill close out its consideration, notify thetaxpayer, and send the case to the appro-priate Operating Division for further han-dling. The process by which a taxpayerseeks consideration of the case by the Of-fice of Appeals, and the manner in whichAppeals and the taxpayer attempt to settlethe case remain unchanged.

After the case is closed by the Office ofAppeals, the Operating Division will de-termine whether the unsettled adjustmentsrelating to the listed transaction merit fur-ther development. If not, a statutory noticeof deficiency (or other appropriate notice)will be issued to the taxpayer by the Op-erating Division. If further case develop-ment is deemed necessary, additional de-velopment of the case will proceed andthe statutory notice of deficiency (or otherappropriate notice) will be issued to thetaxpayer by the Operating Division afterthe development is completed. The deci-sion to further develop a case is expectedto rarely occur and will be made by theCommissioner of the Operating Divisionafter consultation with the Office of ChiefCounsel to ensure national consistency.

2006–51 I.R.B. 1141 December 18, 2006

Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds that thesame principle also applies to B, the earlierruling is amplified. (Compare with modi-fied, below).

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused, or may cause, some confusion.It is not used where a position in a priorruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings). Thus,the term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations. The term is also used whenit is desired to republish in a single rul-ing a series of situations, names, etc., thatwere previously published over a period oftime in separate rulings. If the new rul-ing does more than restate the substance

of a prior ruling, a combination of termsis used. For example, modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained. In this case, the previously pub-lished ruling is first modified and then, asmodified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further names insubsequent rulings. After the original rul-ing has been supplemented several times, anew ruling may be published that includesthe list in the original ruling and the ad-ditions, and supersedes all prior rulings inthe series.

Suspended is used in rare situationsto show that the previous published rul-ings will not be applied pending somefuture action such as the issuance of newor amended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished 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.

December 18, 2006 i 2006–51 I.R.B.

Numerical Finding List1

Bulletins 2006–27 through 2006–51

Announcements:

2006-42, 2006-27 I.R.B. 48

2006-43, 2006-27 I.R.B. 48

2006-44, 2006-27 I.R.B. 49

2006-45, 2006-31 I.R.B. 121

2006-46, 2006-28 I.R.B. 76

2006-47, 2006-28 I.R.B. 78

2006-48, 2006-31 I.R.B. 135

2006-49, 2006-29 I.R.B. 89

2006-50, 2006-34 I.R.B. 321

2006-51, 2006-32 I.R.B. 222

2006-52, 2006-33 I.R.B. 254

2006-53, 2006-33 I.R.B. 254

2006-54, 2006-33 I.R.B. 254

2006-55, 2006-35 I.R.B. 342

2006-56, 2006-35 I.R.B. 342

2006-57, 2006-35 I.R.B. 343

2006-58, 2006-36 I.R.B. 388

2006-59, 2006-36 I.R.B. 388

2006-60, 2006-36 I.R.B. 389

2006-61, 2006-36 I.R.B. 390

2006-62, 2006-37 I.R.B. 444

2006-63, 2006-37 I.R.B. 445

2006-64, 2006-37 I.R.B. 447

2006-65, 2006-37 I.R.B. 447

2006-66, 2006-37 I.R.B. 448

2006-67, 2006-38 I.R.B. 509

2006-68, 2006-38 I.R.B. 510

2006-69, 2006-37 I.R.B. 449

2006-70, 2006-40 I.R.B. 629

2006-71, 2006-40 I.R.B. 630

2006-72, 2006-40 I.R.B. 630

2006-73, 2006-42 I.R.B. 745

2006-74, 2006-42 I.R.B. 746

2006-75, 2006-42 I.R.B. 746

2006-76, 2006-42 I.R.B. 746

2006-77, 2006-42 I.R.B. 748

2006-78, 2006-42 I.R.B. 748

2006-79, 2006-43 I.R.B. 792

2006-80, 2006-45 I.R.B. 840

2006-81, 2006-44 I.R.B. 821

2006-82, 2006-44 I.R.B. 821

2006-83, 2006-44 I.R.B. 822

2006-84, 2006-45 I.R.B. 873

2006-85, 2006-45 I.R.B. 873

2006-86, 2006-45 I.R.B. 842

2006-87, 2006-44 I.R.B. 822

2006-88, 2006-46 I.R.B. 910

2006-89, 2006-44 I.R.B. 826

2006-90, 2006-47 I.R.B. 953

2006-91, 2006-47 I.R.B. 953

2006-92, 2006-48 I.R.B. 1014

2006-93, 2006-48 I.R.B. 1017

Announcements— Continued:

2006-94, 2006-48 I.R.B. 1017

2006-95, 2006-50 I.R.B. 1105

2006-96, 2006-50 I.R.B. 1108

2006-97, 2006-50 I.R.B. 1108

2006-98, 2006-51 I.R.B. 1139

2006-99, 2006-51 I.R.B. 1139

2006-100, 2006-51 I.R.B. 1141

Notices:

2006-56, 2006-28 I.R.B. 58

2006-57, 2006-27 I.R.B. 13

2006-58, 2006-28 I.R.B. 59

2006-59, 2006-28 I.R.B. 60

2006-60, 2006-29 I.R.B. 82

2006-61, 2006-29 I.R.B. 85

2006-62, 2006-29 I.R.B. 86

2006-63, 2006-29 I.R.B. 87

2006-64, 2006-29 I.R.B. 88

2006-65, 2006-31 I.R.B. 102

2006-66, 2006-30 I.R.B. 99

2006-67, 2006-33 I.R.B. 248

2006-68, 2006-31 I.R.B. 105

2006-69, 2006-31 I.R.B. 107

2006-70, 2006-33 I.R.B. 252

2006-71, 2006-34 I.R.B. 316

2006-72, 2006-36 I.R.B. 363

2006-73, 2006-35 I.R.B. 339

2006-74, 2006-35 I.R.B. 339

2006-75, 2006-36 I.R.B. 366

2006-76, 2006-38 I.R.B. 459

2006-77, 2006-40 I.R.B. 590

2006-78, 2006-41 I.R.B. 675

2006-79, 2006-43 I.R.B. 763

2006-80, 2006-40 I.R.B. 594

2006-81, 2006-40 I.R.B. 595

2006-82, 2006-39 I.R.B. 529

2006-83, 2006-40 I.R.B. 596

2006-84, 2006-41 I.R.B. 677

2006-85, 2006-41 I.R.B. 677

2006-86, 2006-41 I.R.B. 680

2006-87, 2006-43 I.R.B. 766

2006-88, 2006-42 I.R.B. 686

2006-89, 2006-43 I.R.B. 772

2006-90, 2006-42 I.R.B. 688

2006-91, 2006-42 I.R.B. 688

2006-92, 2006-43 I.R.B. 774

2006-93, 2006-44 I.R.B. 798

2006-94, 2006-43 I.R.B. 777

2006-95, 2006-45 I.R.B. 848

2006-96, 2006-46 I.R.B. 902

2006-97, 2006-46 I.R.B. 904

2006-98, 2006-46 I.R.B. 906

2006-99, 2006-46 I.R.B. 907

2006-100, 2006-51 I.R.B. 1109

2006-101, 2006-47 I.R.B. 930

Notices— Continued:

2006-102, 2006-46 I.R.B. 909

2006-103, 2006-47 I.R.B. 931

2006-104, 2006-48 I.R.B. 995

2006-105, 2006-50 I.R.B. 1093

2006-106, 2006-49 I.R.B. 1033

2006-107, 2006-51 I.R.B. 1114

2006-108, 2006-51 I.R.B. 1118

2006-109, 2006-51 I.R.B. 1121

2006-110, 2006-51 I.R.B. 1127

Proposed Regulations:

REG-208270-86, 2006-42 I.R.B. 698

REG-121509-00, 2006-40 I.R.B. 602

REG-135866-02, 2006-27 I.R.B. 34

REG-140379-02, 2006-44 I.R.B. 808

REG-142599-02, 2006-44 I.R.B. 808

REG-146893-02, 2006-34 I.R.B. 317

REG-159929-02, 2006-35 I.R.B. 341

REG-148864-03, 2006-34 I.R.B. 320

REG-168745-03, 2006-39 I.R.B. 532

REG-105248-04, 2006-43 I.R.B. 787

REG-103038-05, 2006-49 I.R.B. 1049

REG-103039-05, 2006-49 I.R.B. 1057

REG-103043-05, 2006-49 I.R.B. 1063

REG-109512-05, 2006-30 I.R.B. 100

REG-110405-05, 2006-48 I.R.B. 1004

REG-141901-05, 2006-47 I.R.B. 947

REG-142270-05, 2006-43 I.R.B. 791

REG-145154-05, 2006-39 I.R.B. 567

REG-148576-05, 2006-40 I.R.B. 627

REG-109367-06, 2006-41 I.R.B. 683

REG-112994-06, 2006-27 I.R.B. 47

REG-118775-06, 2006-28 I.R.B. 73

REG-118897-06, 2006-31 I.R.B. 120

REG-120509-06, 2006-39 I.R.B. 570

REG-124152-06, 2006-36 I.R.B. 368

REG-125071-06, 2006-36 I.R.B. 375

REG-127819-06, 2006-48 I.R.B. 1013

REG-136806-06, 2006-47 I.R.B. 950

Revenue Procedures:

2006-29, 2006-27 I.R.B. 13

2006-30, 2006-31 I.R.B. 110

2006-31, 2006-27 I.R.B. 32

2006-32, 2006-28 I.R.B. 61

2006-33, 2006-32 I.R.B. 140

2006-34, 2006-38 I.R.B. 460

2006-35, 2006-37 I.R.B. 434

2006-36, 2006-38 I.R.B. 498

2006-37, 2006-38 I.R.B. 499

2006-38, 2006-39 I.R.B. 530

2006-39, 2006-40 I.R.B. 600

2006-40, 2006-42 I.R.B. 694

2006-41, 2006-43 I.R.B. 777

2006-42, 2006-47 I.R.B. 931

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2006–1 through 2006–26 is in Internal Revenue Bulletin2006–26, dated June 26, 2006.

2006–51 I.R.B. ii December 18, 2006

Revenue Procedures— Continued:

2006-43, 2006-45 I.R.B. 849

2006-44, 2006-44 I.R.B. 800

2006-45, 2006-45 I.R.B. 851

2006-46, 2006-45 I.R.B. 859

2006-47, 2006-45 I.R.B. 869

2006-48, 2006-47 I.R.B. 934

2006-49, 2006-47 I.R.B. 936

2006-50, 2006-47 I.R.B. 944

2006-51, 2006-47 I.R.B. 945

2006-52, 2006-48 I.R.B. 995

2006-53, 2006-48 I.R.B. 996

2006-54, 2006-49 I.R.B. 1035

Revenue Rulings:

2006-35, 2006-28 I.R.B. 50

2006-36, 2006-36 I.R.B. 353

2006-37, 2006-30 I.R.B. 91

2006-38, 2006-29 I.R.B. 80

2006-39, 2006-32 I.R.B. 137

2006-40, 2006-32 I.R.B. 136

2006-41, 2006-35 I.R.B. 331

2006-42, 2006-35 I.R.B. 337

2006-43, 2006-35 I.R.B. 329

2006-44, 2006-36 I.R.B. 361

2006-45, 2006-37 I.R.B. 423

2006-46, 2006-39 I.R.B. 511

2006-47, 2006-39 I.R.B. 511

2006-48, 2006-39 I.R.B. 516

2006-49, 2006-40 I.R.B. 584

2006-50, 2006-41 I.R.B. 672

2006-51, 2006-41 I.R.B. 632

2006-52, 2006-43 I.R.B. 761

2006-53, 2006-44 I.R.B. 796

2006-54, 2006-45 I.R.B. 834

2006-55, 2006-45 I.R.B. 837

2006-56, 2006-46 I.R.B. 874

2006-57, 2006-47 I.R.B. 911

2006-58, 2006-46 I.R.B. 876

2006-59, 2006-48 I.R.B. 992

2006-60, 2006-48 I.R.B. 977

2006-61, 2006-49 I.R.B. 1028

Social Security Contribution and BenefitBase; Domestic Employee CoverageThreshold:

2006-102, 2006-46 I.R.B. 909

Tax Conventions:

2006-80, 2006-45 I.R.B. 840

2006-86, 2006-45 I.R.B. 842

Treasury Decisions:

9265, 2006-27 I.R.B. 1

9266, 2006-28 I.R.B. 52

9267, 2006-34 I.R.B. 313

9268, 2006-30 I.R.B. 94

9269, 2006-30 I.R.B. 92

9270, 2006-33 I.R.B. 237

Treasury Decisions— Continued:

9271, 2006-33 I.R.B. 224

9272, 2006-35 I.R.B. 332

9273, 2006-37 I.R.B. 394

9274, 2006-33 I.R.B. 244

9275, 2006-35 I.R.B. 327

9276, 2006-37 I.R.B. 423

9277, 2006-33 I.R.B. 226

9278, 2006-34 I.R.B. 256

9279, 2006-36 I.R.B. 355

9280, 2006-38 I.R.B. 450

9281, 2006-39 I.R.B. 517

9282, 2006-39 I.R.B. 512

9283, 2006-41 I.R.B. 633

9284, 2006-40 I.R.B. 582

9285, 2006-41 I.R.B. 656

9286, 2006-43 I.R.B. 750

9287, 2006-46 I.R.B. 896

9288, 2006-44 I.R.B. 794

9289, 2006-45 I.R.B. 827

9290, 2006-46 I.R.B. 879

9291, 2006-46 I.R.B. 887

9292, 2006-47 I.R.B. 914

9293, 2006-48 I.R.B. 957

9294, 2006-48 I.R.B. 980

9295, 2006-49 I.R.B. 1030

9296, 2006-50 I.R.B. 1078

9297, 2006-50 I.R.B. 1089

December 18, 2006 iii 2006–51 I.R.B.

Finding List of Current Actions onPreviously Published Items1

Bulletins 2006–27 through 2006–51

Announcements:

2004-38

Modified by

Notice 2006-105, 2006-50 I.R.B. 1093

2004-43

Amplified and modified by

Notice 2006-105, 2006-50 I.R.B. 1093

2005-59

Updated and superseded by

Ann. 2006-45, 2006-31 I.R.B. 121

2006-61

Corrected by

Ann. 2006-97, 2006-50 I.R.B. 1108

Notices:

88-128

Supplemented by

Notice 2006-95, 2006-45 I.R.B. 848

2002-45

Amplified by

Rev. Rul. 2006-36, 2006-36 I.R.B. 353

2003-69

Amplified and superseded by

Notice 2006-101, 2006-47 I.R.B. 930

2004-59

Amplified by

Notice 2006-105, 2006-50 I.R.B. 1093

2004-61

Modified and superseded by

Notice 2006-95, 2006-45 I.R.B. 848

2005-1

Modified by

Notice 2006-100, 2006-51 I.R.B. 1109

2005-94

Superseded by

Notice 2006-100, 2006-51 I.R.B. 1109

2006-20

Supplemented and modified by

Notice 2006-56, 2006-28 I.R.B. 58

2006-27

Modified by

Ann. 2006-88, 2006-46 I.R.B. 910

2006-28

Modified by

Ann. 2006-88, 2006-46 I.R.B. 910

2006-53

Modified by

Notice 2006-71, 2006-34 I.R.B. 316

Notices— Continued:

2006-67

Modified and superseded by

Notice 2006-77, 2006-40 I.R.B. 590

Proposed Regulations:

REG-135866-02

Corrected by

Ann. 2006-64, 2006-37 I.R.B. 447Ann. 2006-65, 2006-37 I.R.B. 447

REG-103039-05

Corrected by

Ann. 2006-98, 2006-51 I.R.B. 1139

REG-134317-05

Corrected by

Ann. 2006-47, 2006-28 I.R.B. 78

REG-112994-06

Corrected by

Ann. 2006-79, 2006-43 I.R.B. 792

REG-118775-06

Corrected by

Ann. 2006-71, 2006-40 I.R.B. 630

REG-124152-06

Corrected by

Ann. 2006-90, 2006-47 I.R.B. 953

Revenue Procedures:

99-35

Modified and superseded by

Rev. Proc. 2006-40, 2006-42 I.R.B. 694

2002-9

Modified and amplified by

Notice 2006-67, 2006-33 I.R.B. 248Notice 2006-77, 2006-40 I.R.B. 590Rev. Proc. 2006-43, 2006-45 I.R.B. 849

2002-37

Clarified, modified, amplified, and superseded by

Rev. Proc. 2006-45, 2006-45 I.R.B. 851

2002-38

Clarified, modified, amplified, and superseded by

Rev. Proc. 2006-46, 2006-45 I.R.B. 859

2002-41

Modified by

Rev. Proc. 2006-53, 2006-48 I.R.B. 996

2002-52

Modified and superseded by

Rev. Proc. 2006-54, 2006-49 I.R.B. 1035

2004-63

Superseded by

Rev. Proc. 2006-34, 2006-38 I.R.B. 460

2005-41

Superseded by

Rev. Proc. 2006-29, 2006-27 I.R.B. 13

Revenue Procedures— Continued:

2005-49

Superseded by

Rev. Proc. 2006-33, 2006-32 I.R.B. 140

2005-67

Superseded by

Rev. Proc. 2006-41, 2006-43 I.R.B. 777

2005-70

Amplified by

Rev. Proc. 2006-51, 2006-47 I.R.B. 945

2005-78

Superseded by

Rev. Proc. 2006-49, 2006-47 I.R.B. 936

2006-9

Amplified by

Rev. Proc. 2006-54, 2006-49 I.R.B. 1035

2006-12

Modified by

Rev. Proc. 2006-37, 2006-38 I.R.B. 499

2006-26

Modified and superseded by

Rev. Proc. 2006-54, 2006-49 I.R.B. 1035

2006-33

Updated and clarified by

Ann. 2006-73, 2006-42 I.R.B. 745

2006-35

Modified by

Notice 2006-90, 2006-42 I.R.B. 688

2006-41

Corrected by

Ann. 2006-96, 2006-50 I.R.B. 1108

Revenue Rulings:

72-238

Obsoleted by

REG-109367-06, 2006-41 I.R.B. 683

73-558

Obsoleted by

REG-109367-06, 2006-41 I.R.B. 683

75-296

Distinguished by

Rev. Rul. 2006-52, 2006-43 I.R.B. 761

80-31

Distinguished by

Rev. Rul. 2006-52, 2006-43 I.R.B. 761

81-35

Amplified and modified by

Rev. Rul. 2006-43, 2006-35 I.R.B. 329

81-36

Amplified and modified by

Rev. Rul. 2006-43, 2006-35 I.R.B. 329

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2006–1 through 2006–26 is in Internal Revenue Bulletin 2006–26, dated June 26, 2006.

2006–51 I.R.B. iv December 18, 2006

Revenue Rulings— Continued:

87-10

Amplified and modified by

Rev. Rul. 2006-43, 2006-35 I.R.B. 329

92-75

Clarified by

Rev. Proc. 2006-54, 2006-49 I.R.B. 1035

2002-41

Amplified by

Rev. Rul. 2006-36, 2006-36 I.R.B. 353

2003-43

Amplified by

Notice 2006-69, 2006-31 I.R.B. 107

2005-24

Amplified by

Rev. Rul. 2006-36, 2006-36 I.R.B. 353

Treasury Decisions:

9244

Corrected by

Ann. 2006-91, 2006-47 I.R.B. 953

9254

Corrected by

Ann. 2006-44, 2006-27 I.R.B. 49Ann. 2006-66, 2006-37 I.R.B. 448

9258

Corrected by

Ann. 2006-46, 2006-28 I.R.B. 76

9260

Corrected by

Ann. 2006-67, 2006-38 I.R.B. 509

9262

Corrected by

Ann. 2006-56, 2006-35 I.R.B. 342

9264

Corrected by

Ann. 2006-46, 2006-28 I.R.B. 76

9272

Corrected by

Ann. 2006-68, 2006-38 I.R.B. 510

9274

Corrected by

Ann. 2006-89, 2006-44 I.R.B. 826

9276

Corrected by

Ann. 2006-83, 2006-44 I.R.B. 822Ann. 2006-85, 2006-45 I.R.B. 873

9277

Corrected by

Ann. 2006-72, 2006-40 I.R.B. 630

9280

Corrected by

Ann. 2006-78, 2006-42 I.R.B. 748

Treasury Decisions— Continued:

9281

Corrected by

Ann. 2006-82, 2006-44 I.R.B. 821Ann. 2006-84, 2006-45 I.R.B. 873

December 18, 2006 v 2006–51 I.R.B.

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