IRB 2016-6 (Rev. February 8, 2016) · 2016-02-05 · Notice 2016–09, page 306. Notice 2016–09...

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

Rev. Rul. 2016–04, page 299.Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes ofsections 382, 642, 1274, 1288, and other sections of theCode, tables set forth the rates for February 2016.

Notice 2016–08, page 304.Notice 2016–08 announces that the Treasury Department andthe IRS intend to amend the regulations under chapter 3(sections 1441–1464) and chapter 4 (sections 1471–1474) ofthe Internal Revenue Code to: (1) Provide that a participatingFFI or reporting Model 2 FFI will submit its preexisting accountcertification to the IRS by the same date it is required to submitits first periodic certifications of compliance. (2) Specify thetime period and date for submitting a registered deemedcompliant FFI’s periodic certification of compliance describedin § 1.1471–5(f)(1)(ii)(B), and provide that local FFIs and re-stricted funds must submit their one-time preexisting accountcertifications with their first periodic certification of compli-ance. (3) Modify applicable transitional reporting rules for cal-endar year 2015 to provide that a participating FFI, reportingModel 2 FFI, or registered deemed-compliant FFI is not re-quired to report gross proceeds paid to, or with respect to, anaccount held by a nonparticipating FFI. Amendments underboth chapters 3 and 4 will specify the circumstances underwhich a withholding agent may rely upon electronically fur-nished Forms W–8 and W–9 collected by intermediaries andflow-through entities.

Notice 2016–10, page 307.This notice relates to alternative methods of compliance withthe rules under sections 853 and 905(c) as they apply when aregulated investment company (RIC) receives a refund of aforeign tax that when paid by the RIC, was treated as paid bythe RIC’s shareholders under section 853(b)(2) because anelection was made under section 853(a). The notice describes

regulations that the Treasury Department and IRS intend toissue which will allow a netting procedure that, if applied by theRICs, will greatly reduce the administrative costs and burdenson the U.S. government, RICs, and the RICs’ shareholders. Thenotice also provides guidelines for RICs wishing to obtainclosing agreements relating to tax consequences arising fromthe receipt of such refunds.

Notice 2016–11, page 312.Credit for Indian Coal Production and Inflation Adjustment Fac-tor for Calendar Year 2015: The notice reports for 2015 theinflation adjustment factor used to determine the availability ofthe section 45 credit for Indian coal production and includesthe credit amount for Indian coal production.

Notice 2016–12, page 312.This notice provides the maximum vehicle values for use withthe special valuation rules under regulation section 1.61–21(d)and (e) for 2016. These values are adjusted for inflation andmust be adjusted annually by reference to the Consumer PriceIndex.

EXEMPT ORGANIZATIONS

Announcement 2016–04, page 313.Revocation of IRC 501(c)(3) Organizations for failure to meetthe code section requirements. Contributions made to theorganizations by individual donors are no longer deductibleunder IRC 170(b)(1)(A).

(Continued on the next page)

Finding Lists begin on page ii.

Bulletin No. 2016–6February 8, 2016

Notice 2016–09, page 306.Notice 2016–09 extends the date by which social welfare orga-nizations must notify the Internal Revenue Service of intent tooperate under section 501(c)(4), as required by new section 506,added to the Internal Revenue Code by the Protecting Americansfrom Tax Hikes Act of 2015. With respect to the separate processby which an organization may, at its option, request a determina-tion that it qualifies for section 501(c)(4) tax-exempt status, theNotice states that organizations seeking IRS recognition of sec-tion 501(c)(4) status should continue using Form 1024, “Applica-tion for Recognition of Exemption Under Section 501(a),” untilfurther guidance is issued and clarifies that the filing of Form 1024will not relieve an organization of the requirement to submit thesection 506 notification.

EXCISE TAX

Notice 2016–05, page 302.This notice provides rules for claimants to make one-timeclaims for the retroactively extended 2015 biodiesel mixtureand alternative fuel excise tax credits. It also provides guidancefor claimants to claim the other retroactively extended fuelcredits for 2015, including the alternative fuel mixture excisetax credit.

ADMINISTRATIVE

Notice 2016–05, page 302.This notice provides rules for claimants to make one-timeclaims for the retroactively extended 2015 biodiesel mixtureand alternative fuel excise tax credits. It also provides guidancefor claimants to claim the other retroactively extended fuelcredits for 2015, including the alternative fuel mixture excisetax credit.

Notice 2016–10, page 307.This notice relates to alternative methods of compliance withthe rules under sections 853 and 905(c) as they apply when aregulated investment company (RIC) receives a refund of aforeign tax that when paid by the RIC, was treated as paid bythe RIC’s shareholders under section 853(b)(2) because anelection was made under section 853(a). The notice describesregulations that the Treasury Department and IRS intend toissue which will allow a netting procedure that, if applied by theRICs, will greatly reduce the administrative costs and burdenson the U.S. government, RICs, and the RICs’ shareholders. Thenotice also provides guidelines for RICs wishing to obtainclosing agreements relating to tax consequences arising fromthe receipt of such refunds.

Notice 2016–12, page 312.This notice provides the maximum vehicle values for use withthe special valuation rules under regulation section 1.61–21(d)and (e) for 2016. These values are adjusted for inflation andmust be adjusted annually by reference to the Consumer PriceIndex.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-force the 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.

It is the policy of the Service to publish in the Bulletin allsubstantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of internalmanagement are not published; however, statements of inter-nal practices and procedures that affect the rights and dutiesof taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulings totaxpayers or technical advice to Service field offices, identify-ing details and information of a confidential nature are deletedto prevent unwarranted invasions of privacy and to comply withstatutory requirements.

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 cautioned

against 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, TaxConventions and Other Related Items, and Subpart B, Legisla-tion 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 index forthe 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.

February 8, 2016 Bulletin No. 2016–6

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 1274.—Determination of IssuePrice in the Case ofCertain Debt InstrumentsIssued for Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482,483, 642, 807, 846, 1288, 7520, 7872).

Rev. Rul. 2016–04

This revenue ruling provides variousprescribed rates for federal income tax

purposes for February 2016 (the currentmonth). Table 1 contains the short-term,mid-term, and long-term applicable fed-eral rates (AFR) for the current monthfor purposes of section 1274(d) of theInternal Revenue Code. Table 2 containsthe short-term, mid-term, and long-termadjusted applicable federal rates (ad-justed AFR) for the current month forpurposes of section 1288(b). Table 3sets forth the adjusted federal long-termrate and the long-term tax-exempt ratedescribed in section 382(f). Table 4 con-tains the appropriate percentages for de-

termining the low-income housingcredit described in section 42(b)(1) forbuildings placed in service during thecurrent month. However, under section42(b)(2), the applicable percentage fornon-federally subsidized new buildingsplaced in service after July 30, 2008,shall not be less than 9%.

Finally, Table 5 contains the federalrate for determining the present value ofan annuity, an interest for life or for a termof years, or a remainder or a reversionaryinterest for purposes of section 7520.

REV. RUL. 2016–4 TABLE 1

Applicable Federal Rates (AFR) for February 2016

Period for CompoundingAnnual Semiannual Quarterly Monthly

Short-term

AFR .81% .81% .81% .81%

110% AFR .89% .89% .89% .89%

120% AFR .97% .97% .97% .97%

130% AFR 1.05% 1.05% 1.05% 1.05%

Mid-term

AFR 1.82% 1.81% 1.81% 1.80%

110% AFR 2.00% 1.99% 1.99% 1.98%

120% AFR 2.18% 2.17% 2.16% 2.16%

130% AFR 2.36% 2.35% 2.34% 2.34%

150% AFR 2.74% 2.72% 2.71% 2.70%

175% AFR 3.20% 3.17% 3.16% 3.15%

Long-term

AFR 2.62% 2.60% 2.59% 2.59%

110% AFR 2.88% 2.86% 2.85% 2.84%

120% AFR 3.14% 3.12% 3.11% 3.10%

130% AFR 3.41% 3.38% 3.37% 3.36%

REV. RUL. 2016–4 TABLE 2Adjusted AFR for February 2016

Period for CompoundingAnnual Semiannual Quarterly Monthly

Short-term adjusted AFR .61% .61% .61% .61%

Mid-term adjusted AFR 1.39% 1.39% 1.39% 1.39%

Long-term adjusted AFR 2.53% 2.51% 2.50% 2.50%

Bulletin No. 2016–6 February 8, 2016299

REV. RUL. 2016–4 TABLE 3Rates Under Section 382 for February 2016

Adjusted federal long-term rate for the current month 2.53%

Long-term tax-exempt rate for ownership changes during the current month (the highest of theadjusted federal long-term rates for the current month and the prior two months.)

2.65%

REV. RUL. 2016–4 TABLE 4Appropriate Percentages Under Section 42(b)(1) for February 2016

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in serviceafter July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.51%

Appropriate percentage for the 30% present value low-income housing credit 3.22%

REV. RUL. 2016–4 TABLE 5Rate Under Section 7520 for February 2016

Applicable federal rate for determining the present value of an annuity, an interest for life or a term ofyears, or a remainder or reversionary interest

2.2%

Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month ofFebruary 2016. See Rev. Rul. 2016–4, page 299.

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-termrates are set forth for the month of February 2016.See Rev. Rul. 2016–4, page 299.

Section 382.—Limitationon Net Operating LossCarryforwards and CertainBuilt-In Losses FollowingOwnership Change

The adjusted applicable federal long-term rate isset forth for the month of February 2016. See Rev.Rul. 2016–4, page 299.

Section 412.—MinimumFunding Standards

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof February 2016. See Rev. Rul. 2016–4, page 299.

Section 467.—CertainPayments for the Use ofProperty or Services


Section 468.—SpecialRules for Mining and SolidWaste Reclamation andClosing Costs


Section 482.—Allocation ofIncome and DeductionsAmong Taxpayers


Section 483.—Interest onCertain Deferred Payments


Section 642.—SpecialRules for Credits andDeductions


Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined



Section 1288.—Treatmentof Original Issue Discounton Tax-Exempt Obligations


Section 7520.—ValuationTables


Section 7872.—Treatmentof Loans With Below-Market Interest Rates



Part III. Administrative, Procedural, and MiscellaneousBiodiesel and AlternativeFuels; Claims for 2015;Excise Tax

Notice 2016–05

Section 1. PURPOSE

This notice provides rules claimantsmust follow to make a one-time claim forpayment of the credits and payments al-lowable under §§ 6426(c), 6426(d), and6427(e) of the Internal Revenue Code(Code) for biodiesel (including renewablediesel) mixtures and alternative fuels soldor used during calendar year 2015 (collec-tively, 2015 biodiesel and alternative fuelincentives). These rules are prescribed un-der §§ 185(b)(4) and 192(c) of the Pro-tecting Americans from Tax Hikes Act of2015 (PATH Act), Pub. L. 114–113 Div.Q (2015) (the Act). This notice also pro-vides instructions for how a claimant mayoffset its § 4081 liability with the§ 6426(e) alternative fuel mixture creditfor 2015, and provides instructions forhow a claimant may make certain incometax claims for biodiesel, second genera-tion biofuel, and alternative fuel.

Section 2. BACKGROUND

Sections 6426(a) and (c) allow ablender of a biodiesel (including renew-able diesel) mixture to claim a $1.00-per-gallon credit against its tax liability under§ 4081 (relating to the tax imposed ontaxable fuel). Similarly, §§ 6426(a) and(e) allow a blender of an alternative fuelmixture to claim a credit against its taxliability under § 4081, except that thecredit amount is $0.50 per gallon. Sec-tions 6426(a) and (d) allow a person thatsells or uses alternative fuel as a fuel in amotor vehicle or motorboat and in avia-tion to claim a $0.50-per-gallon creditagainst the claimant’s tax liability under§ 4041 (relating to the tax imposed ondiesel fuel and alternative fuel).

Blenders of biodiesel (including re-newable diesel) mixtures and persons thatsell or use alternative fuel as a fuel in amotor vehicle or motorboat and in avia-tion may claim any excess credit under§§ 6426(c) or (d) as a payment under

§ 6427(e) or as a refundable income taxcredit under § 34. As an alternative to thepayments and credits allowed under§§ 6426, 6427, and 34, a blender of abiodiesel (including renewable diesel)mixture may claim a nonrefundable in-come tax credit under § 40A (see Section8 of this notice for additional informa-tion). For federal income tax purposes, aclaimant reduces its § 4081 excise taxliability by the amount of excise tax creditallowable under § 6426(c) and its § 4041excise tax liability by the amount of ex-cise tax credit allowable under § 6426(d)in determining its deduction for those ex-cise taxes or its cost of goods sold deduc-tion attributable to those excise taxes. SeeNotice 2015–56, 2015–35 I.R.B. 235.

The Code provisions that authorizethese credits and payments expired forsales and uses after December 31, 2014,but were reinstated by the Act for salesand uses through 2016. Sections 185(b)(4)and 192(c) of the Act direct the Secretaryof the Treasury (Secretary) to issue guid-ance providing for a one-time submissionof claims under §§ 6426(c), 6426(d), and6427(e) for 2015. The Act requires theguidance to provide for a 180-day periodfor the submission of claims (in such man-ner as prescribed by the Secretary) to be-gin no later than 30 days after the guid-ance is issued.

Sections 184 and 185(a) of the Act alsoreinstated Code provisions authorizingcredits for second generation biofuel pro-ducers (§ 40(b)(6)) and biodiesel and re-newable diesel used as fuel (§ 40A), re-spectively. The second generation biofuelproducer credit expired for production af-ter December 31, 2014, and was reinstatedby the Act for production through 2016.The credit for biodiesel and renewablediesel used as fuel expired for sales anduses after December 31, 2014, and wasreinstated by the Act for sales and usesthrough 2016.

Section 3. SCOPE

This notice provides the procedure forclaiming 2015 biodiesel and alternative fuelincentives. Claimants that filed “protective”or anticipatory claims during 2015 forbiodiesel and alternative fuel incentives

covered by this notice should refile theirclaims pursuant to the procedures providedin this notice. The IRS will not treat asperfected any such protective or anticipatoryclaims previously filed with the IRS that arenot timely supplemented in accordance withthese procedures.

Except as provided by this notice, therules in Notice 2005–4, 2005–1 C.B. 289(providing guidance on alcohol andbiodiesel fuel tax credits and payments),as modified by Notice 2005–62, 2005–2C.B. 443 (providing guidance for certainbiodiesel issues not addressed in Notice2005–4), and Notice 2006–92, 2006–2C.B. 774 (providing guidance on alterna-tive fuel and alternative fuel mixturetaxes, credits, and payments), apply toclaims for 2015 biodiesel and alternativefuel incentives.

This notice prescribes a method forsubmitting claims for the alternative fuelmixture credit relating to alternative fuelmixtures sold or used during 2015.

This notice does not affect the incometax claims described in Section 8 of thisnotice.

Section 4. HOW TO MAKE A ONE-TIME CLAIM FOR CREDITS ANDPAYMENTS ALLOWABLE UNDER§§ 6426(c), 6426(d), AND 6427(e)

Claimants must follow the procedureslisted below to make a one-time claimunder this notice for payment of creditsand payments allowable under §§ 6426(c),6426(d), and 6427(e) relating to 2015biodiesel and alternative fuel incentives.

• Claimants must submit claims for2015 biodiesel and alternative fuel in-centives on Form 8849, Claim for Re-fund of Excise Taxes.

• Claimants must include Schedule 3(Form 8849), Certain Fuel Mixturesand the Alternative Fuel Credit, withtheir submission and enter amounts for2015 biodiesel and alternative fuel in-centives on Line 2 and Line 3 ofSchedule 3, as appropriate.

• Claimants must follow the instructionsto Form 8849 and Schedule 3 whenpreparing their submission to the ex-tent that those instructions do not con-flict with this notice.


• Each claimant must claim all 2015biodiesel and alternative fuel incen-tives for which the claimant is eligibleon a single Form 8849.

• Each claimant must mail its submis-sion to the address listed for Schedule3 in the instructions to Form 8849 un-der Where to File. Alternatively,claimants may electronically file Form8849 and Schedule 3 through any elec-tronic return originator, transmitter, orintermediate service provider partici-pating in the IRS e-file program forexcise taxes.

• Claimants are reminded that they mustbe registered by the IRS in order tomake alternative fuel claims under§§ 6426(d) and 6427(e) and to makealternative fuel mixture claims under§ 6426(e) (described in Section 6 ofthis notice). Claimants that are not al-ready registered by the IRS may applyto the IRS for registration by filingForm 637, Application for Registra-tion (For Certain Excise Tax Activi-ties), in accordance with the instruc-tions to Form 637.

• Claimants may not combine 2015 and2016 claims for biodiesel and alterna-tive fuel incentives. Claims for 2015biodiesel and alternative fuel incen-tives must be made in accordance withthe rules for one-time claims pre-scribed in this notice. Claims for 2016biodiesel and alternative fuel incen-tives must be made in accordance withthe normal rules for filing such claims.

Section 5. CLAIM PERIOD ANDDUE DATE FOR BIODIESEL ANDALTERNATIVE FUEL INCENTIVES

Although a claimant may submit itsclaim under this notice as early as January15, 2016, the 180-day claim period for 2015biodiesel and alternative fuel incentives be-gins on February 8, 2016. Consequently, allclaims for 2015 biodiesel and alternativefuel incentives must be filed on or beforeAugust 8, 2016. The IRS will not processclaims filed after that date. The IRS willdeem any claim that is submitted by themethod prescribed in this notice before Feb-ruary 8, 2016, as filed on February 8, 2016.

If the IRS does not pay a 2015 biodie-sel and alternative fuel incentives claimthat conforms to this notice within 60 daysafter the claim is received, the IRS will

pay the claim with interest from the claimfiling date (February 8, 2016, in the caseof claims submitted before that date) us-ing the overpayment rate and method pro-vided by § 6621 of the Code.

Section 6. HOW TO MAKE ANALTERNATIVE FUEL MIXTURECLAIM UNDER § 6426(e)

For 2015, all alternative fuel mixturecredit claims allowed by § 6426(e), includ-ing claims for the fourth quarter, must bemade on Form 720X, Amended QuarterlyFederal Excise Tax Return. The IRS is un-able to process 2015 claims on the fourthquarter Form 720 due to the timing of en-actment of the Act. Failure to file a Form720, Quarterly Federal Excise Tax Return,and remit the § 4081 tax due for any quarterin 2015 before submitting a claim allowedby § 6426(e) on Form 720X will result indelayed processing of the claim and delayedpayment of refunds resulting from thecredit. Similarly, failure to follow the claimprocedure in this section will result in de-layed processing and payment of 2015§ 6426(e) claims. Claimants are remindedthat the claim for a § 6426(e) credit for anyquarter may not exceed the § 4081 liabilityincurred in the quarter for which the credit isbeing claimed. Form 720X allows claimantsto adjust multiple quarters on a single Form720X.

Section 7. CLAIM PERIOD ANDDUE DATE FOR ALTERNATIVEFUEL MIXTURE CREDITS

The claim period for the 2015 alterna-tive fuel mixture credit begins on Febru-ary 8, 2016. The IRS will deem any claimthat is submitted by the method prescribedin section 6 of this notice before February8, 2016, as filed on February 8, 2016.Generally, claims for the § 6426(e) alter-native fuel mixture credit must be madewithin three years from the time the returnwas filed or two years from the time thetax was paid, whichever is later.

Section 8. CLAIMS NOT AFFECTEDBY THIS NOTICE

This notice does not affect 2015 claimsfor the nonrefundable income tax creditunder § 40(b)(6) for second generationbiofuel producers. Taxpayers should con-tinue to submit these claims separately on,

and in accordance with, Form 6478, Bio-fuel Producer Credit. This notice alsodoes not affect 2015 claims for the non-refundable income tax credits under§ 40A(b)(1) for biodiesel mixtures,§ 40A(b)(2) for biodiesel (including re-newable diesel), or under § 40A(b)(4) forthe small agri-biodiesel producer credit.Taxpayers should continue to submitthese claims separately on, and in accor-dance with, Form 8864, Biodiesel and Re-newable Diesel Fuels Credit. A taxpayermust submit Form 8864 with its incometax return in accordance with the instruc-tions to its income tax return form. Tax-payers are reminded that under § 40A(c),credits allowable under § 40A must bereduced to the extent that any benefit isclaimed under §§ 6426 and 6427 withrespect to the same biodiesel (includingrenewable diesel).

Similarly, this notice does not affect2015 claims for the refundable income taxcredit under § 34 for biodiesel mixtures oralternative fuel. Taxpayers should con-tinue to submit these claims separately on,and in accordance with, Form 4136,Credit for Federal Tax Paid on Fuels. Ataxpayer must submit Form 4136 with itsincome tax return in accordance with theinstructions to its income tax return form.Taxpayers are reminded that under§ 34(b), credits are not allowed under § 34for any amount properly payable under§ 6427 and claimed in a timely filed claim.For this purpose, the IRS will treat astimely filed any claim submitted foramounts payable under § 6427 that con-forms to the rules provided in this notice.

Section 9. DRAFTINGINFORMATION

The principal author of this notice isAmanda F. Dunlap of the Office of Associ-ate Chief Counsel (Passthroughs & SpecialIndustries). For further information regard-ing this notice contact Amanda F. Dunlap at(202) 317-6855 (not a toll-free number). Forfurther information regarding the incometax treatment of the 2015 biodiesel and al-ternative fuel incentives or Notice 2015–56,please contact Shareen Pflanz at (202) 317-7006 (not a toll-free number).


Timing of SubmittingPreexisting Accounts andPeriodic Certifications;Reporting of Accounts ofNonparticipating FFIs;Reliance on ElectronicallyFurnished Forms W–8 andW–9

Notice 2016–08

This notice announces that the Trea-sury Department and the Internal RevenueService (IRS) intend to amend the regula-tions under chapter 4 (sections 1471–1474of the Internal Revenue Code) to: (1)modify the date for submitting to the IRSthe preexisting account certifications re-quired of certain foreign financial institu-tions (FFIs); (2) specify the period anddate for submitting to the IRS the periodiccertification of compliance described in§ 1.1471–5(f)(1)(ii)(B) for a registereddeemed compliant FFI; and (3) modify thetransitional information reporting rules foraccounts of nonparticipating FFIs to elim-inate the requirement to report on grossproceeds for the 2015 year. The TreasuryDepartment and the IRS also intend toamend the regulations under chapters 3and 4 to specify the circumstances underwhich a withholding agent may rely onelectronically furnished Forms W–8 andW–9 collected by intermediaries andflow-through entities.

The amendments described in this no-tice will ease burdens on FFIs and respondto comments regarding certain aspects ofthe regulations under chapters 3 and 4.Prior to the issuance of these amendments,taxpayers may rely on the rules describedin this notice.

I. Participating FFIs and ReportingModel 2 FFIs Preexisting AccountCertifications

A. Background

Section 1.1471–4(c)(7) and section8.03(A) of the FFI agreement (Rev. Proc.2014–38, 2014–29 I.R.B. 131) requireparticipating FFIs and reporting Model 2FFIs to certify to the IRS that they: (1)have complied with the due diligence pro-cedures of § 1.1471–4(c) for preexisting

accounts within the applicable timeframefor complying with such procedures and(2) did not have practices and proceduresto assist account holders in the avoidanceof chapter 4 (“preexisting account certifi-cation”). The preexisting account certifi-cation must be made no later than 60 daysfollowing the date that is two years afterthe effective date of the FFI agreement.For example, a participating FFI or report-ing Model 2 FFI that has an FFI agree-ment with an effective date of June 30,2014, must submit a preexisting accountcertification to the IRS by August 29,2016.

A participating FFI or reporting Model2 FFI also is required under § 1.1471–4(f)(3) and section 8.03 of the FFI agree-ment to periodically certify to the IRS thatit has complied with the terms of the FFIagreement (“periodic certification of com-pliance”). Section 1.1471–4(f)(3)(i) pro-vides the general rules for the periodiccertification of compliance and specifiesthat it must be submitted to the IRS nolater than six months following the end ofthe certification period. Notwithstandingthe regulations, section 8.03 of the FFIagreement allows the periodic certifica-tion of compliance to be submitted on orbefore July 1 of the calendar year follow-ing the certification period. The first cer-tification period begins on the effectivedate of the FFI agreement and ends at theclose of the third full calendar year fol-lowing the effective date of the FFI agree-ment. Each subsequent certification pe-riod is every three calendar yearsfollowing the previous certification pe-riod. Thus, under the FFI agreement, if aparticipating FFI or reporting Model 2 FFIhas an FFI agreement with an effectivedate of June 30, 2014, the first certifica-tion period for the FFI ends on December31, 2017, and the FFI’s first periodic cer-tification of compliance must be made onor before July 1, 2018.

B. Modification of Timing forParticipating FFI and Reporting Model 2FFI Preexisting Account Certifications

In response to comments, and to reducecompliance burdens on stakeholders andstreamline the implementation of the certi-fication requirements, the Treasury Depart-ment and the IRS intend to amend the chap-ter 4 regulations and the FFI agreement to

provide that the preexisting account certifi-cation must be submitted to the IRS at thesame time that the participating FFI or re-porting Model 2 FFI is required to submit itsfirst periodic certification of compliance. Inaddition, the regulations under chapter 4will be modified to conform with the FFIagreement such that the periodic certifica-tion of compliance must be submitted on orbefore July 1 of the calendar year followingthe certification period, instead of no laterthan six months following the end of thecertification period. Therefore, the preexist-ing account certification will be due to theIRS by July 1, 2018, for a participating FFIor reporting Model 2 FFI that has an FFIagreement with an effective date of June 30,2014, instead of by August 29, 2016.

The changes to the preexisting accountcertification described in this notice do notaffect the deadlines for a participating FFIor reporting Model 2 FFI to complete thedue diligence procedures for preexistingaccounts under § 1.1471–4(c) and the FFIagreement, and FFIs will therefore be re-quired to certify to the completion ofthose procedures within the time required.

II. Preexisting Account Certificationsby Local FFIs and Restricted Fundsand Periodic Certifications ofCompliance by Registered Deemed-Compliant FFIs

A. Background

A registered deemed-compliant FFI thatis a local FFI or restricted fund is required tomake a one-time certification regarding itspreexisting accounts similar to the certifica-tion requirement of a participating FFI. See§§ 1.1471–5(f)(1)(i)(A)(7) and 1.1471–5(f)(1)(i)(D)(6), respectively. Restrictedfunds must make this certification by thelater of December 31, 2014, or six monthsafter the date the FFI registers as a registereddeemed-compliant FFI. The chapter 4 regu-lations do not specify a time for local FFIsto make this certification.

In addition, each registered deemed-compliant FFI must certify every three yearsto the IRS that all of the requirements for thedeemed-compliant category claimed by theFFI have been satisfied since the later of thedate the FFI registered as a registereddeemed-compliant FFI or June 30, 2014(“periodic certification of registered deemed-compliant status”). § 1.1471–5(f)(1)(ii)(B).


The chapter 4 regulations do not specify atime for submitting the periodic certifica-tion of registered deemed-compliant sta-tus or the date on which the first certifi-cation period begins.

B. Modification of Timing of PreexistingAccount Certification by Local FFIs andRestricted Funds and PeriodicCertification of Compliance byRegistered Deemed-Compliant FFIs

The chapter 4 regulations will beamended to provide that local FFIs and re-stricted funds must submit their one-timecertifications regarding preexisting accountsat the same time that they submit the firstperiodic certification of registered deemed-compliant FFI status. The chapter 4 regula-tions will also be modified to provide thatregistered deemed-compliant FFIs mustprovide the periodic certification of regis-tered deemed-compliant FFI status on orbefore July 1 of the calendar year followingthe end of the certification period. In addi-tion, the regulations will provide that thefirst certification period begins on the laterof the date the FFI registered as a deemed-compliant FFI or June 30, 2014, and ends atthe close of the third full calendar year fol-lowing such date. Subsequent certificationperiods will continue to be the three-calendar-year period following the previouscertification period. For example, a regis-tered deemed-compliant FFI that is a localFFI and that has such status on June 30,2014, will be required to make its one-timecertification regarding preexisting accountsand its first periodic certification of regis-tered deemed-compliant FFI status on orbefore July 1, 2018.

III. Transitional Reporting ofAccounts of Nonparticipating FFIs

A. Background

Under § 1.1471–4(d)(2)(ii)(F) a partic-ipating FFI that maintains an account of anonparticipating FFI (including a limitedbranch and limited FFI treated as a non-participating FFI) must provide transi-tional reporting to the IRS of all foreignreportable amounts paid to or with respectto the account for each calendar year 2015and 2016. A foreign reportable amountmeans foreign source payments describedin § 1.1471–4(d)(4)(iv) (which includesgross proceeds). Alternatively, a partici-

pating FFI may report all income, grossproceeds, and redemptions paid to or withrespect to an account held by a nonpartic-ipating FFI, instead of reporting only for-eign reportable amounts. Section 1.1471–4(d)(2)(ii)(F). Similar transitional repor-ting rules apply to reporting Model 2 FFIsfor accounts of nonparticipating FFIs forcalendar years 2015 and 2016. Section6.04 of the FFI agreement.

Under § 1.1471–4(d)(7)(ii)(B) and sec-tion 6 of the FFI agreement, participatingFFIs and reporting Model 2 FFIs are ex-cepted from reporting gross proceeds paid toU.S. accounts and accounts held by owner-documented FFIs for calendar year 2015.

B. Amendments to the TransitionalReporting Rules under§ 1.1471–4(d)(2)(ii)(F) forNonparticipating FFIs

Commenters have noted the burdens ofrequiring gross proceeds reporting for ac-counts held by nonparticipating FFIs in ad-vance of when such amounts have to bereported for a U.S. account or account of anowner-documented FFI. The transitional re-porting for accounts of nonparticipatingFFIs under § 1.1471–4(d)(2)(ii)(F) was notintended to require more information to bereported than would be required for U.S.accounts or accounts held by owner-documented FFIs under § 1.1471–4(d). Inresponse to these comments, the regula-tions will be amended to provide that,with respect to calendar year 2015, a par-ticipating FFI, reporting Model 2 FFI, orregistered deemed-compliant FFI requiredto report under the requirements of a par-ticipating FFI is not required to reportgross proceeds paid to or with respect toan account held by a nonparticipating FFI.

IV. Electronically Furnished FormsW–8 and W–9

A. Background

Section 1.1441–1(e)(4)(iv) provides thata withholding agent may establish a systemfor a beneficial owner or payee to electron-ically furnish a Form W–8, an acceptablesubstitute Form W–8, or such other form asthe IRS may prescribe, and provides re-quirements for such a system. Section1.1441–1(e)(4)(iv)(B) requires, amongother things, that the electronic system pro-vide that the Form W–8 be signed electron-

ically and under penalties of perjury by theperson whose name is on the Form W–8.When the requirements set forth in§ 1.1441–1(e)(4)(iv) are met, a withholdingagent may accept the electronic version ofthe Form W–8 as an original. These re-quirements for an electronic system also ap-ply for chapter 4 purposes as provided in§ 1.1471–3(c)(6)(iv). Announcement 98–27(1998–1 C.B. 865) provides similar stan-dards for purposes of establishing an elec-tronic system for the Form W–9.

A foreign intermediary or flow-throughentity that has not entered into a qualifiedintermediary, foreign withholding part-nership, or foreign withholding trustagreement is a nonqualified intermediary(NQI), nonwithholding foreign partner-ship (NWP), or nonwithholding foreigntrust (NWT) under the chapter 3 regula-tions. An NQI, NWP, or NWT that re-ceives a payment on behalf of its accountholders, partners, owners, or beneficiariesis required to provide documentation to itswithholding agent so that the withholdingagent may reliably associate the payment(or portion of the payment) with validdocumentation upon which it may rely todetermine its requirement to withhold un-der § 1.1441–1(b). The regulations undersection 1441 further provide that a with-holding agent that receives documentationfor a payee or beneficial owner through anNQI, NWP, or NWT (including a U.S.branch or territory financial institution de-scribed in § 1.1441–1(b)(2)(iv), other thana U.S. branch or territory financial insti-tution that is treated as a U.S. person) mayrely on such documentation unless thewithholding agent knows that the docu-mentation is unreliable or incorrect as de-scribed § 1.1441–7(b)(10) (referred to asthe standards of knowledge). Similar stan-dards of knowledge rules are provided forchapter 4 purposes in § 1.1471–3(e)(4)(vi).

B. Modification of Standards ofKnowledge Requirements

Commenters have requested that theregulations specify that a withholdingagent may rely on a Form W–8 or W–9for a beneficial owner or payee that hasbeen indirectly obtained by the withhold-ing agent through an NQI, NWP, or NWT,irrespective of whether the NQI, NWP, orNWT collects the underlying Form W–8through an electronic system described in


§ 1.1441–1(e)(4)(iv) or Form W–9 throughan electronic system described in An-nouncement 98–27. The commenters notethat, in the absence of such guidance, cur-rent industry practice is for withholdingagents to reject these forms because theycannot confirm the authenticity of the elec-tronic signature. As a result, the payee orbeneficial owner may be subject to with-holding under chapter 3 or 4 or backupwithholding under section 3406 based on anapplicable presumption rule.

To reduce burden and avoid unnecessaryoverwithholding, the Treasury Departmentand the IRS intend to provide in the stan-dards of knowledge in §§ 1.1441–7(b)(10)and 1.1471–3(e)(4)(vi)(A)(2) that a with-holding agent may rely on a Form W–8 orW–9 that has been collected from the ben-eficial owner or payee of the paymentthrough an electronic system maintained byan NQI, NWP, or NWT and furnished to thewithholding agent by such NQI, NWP, orNWT, provided that the NQI, NWP, orNWT is a direct or indirect account holderof the withholding agent and the withhold-ing agent obtains from the NQI, NWP, orNWT a written statement confirming thatthe electronic documentation was generatedfrom a system that meets the requirementsin § 1.1441–1(e)(4)(iv), § 1.1471–3(c)(6)(iv),or Announcement 98–27, as applicable, andthe withholding agent does not have actualknowledge that such statement is incorrect.

DRAFTING INFORMATION

The principal authors of this notice areNancy Lee and Tara Ferris of the Office ofAssociate Chief Counsel (International).For further information regarding this no-tice, contact Ms. Lee or Ms. Ferris at(202) 317-6942 (not a toll-free number).

Section 506 NotificationRequirement for New andCertain Existing Section501(c)(4) Organizations

Notice 2016–09

SECTION 1. PURPOSE ANDOVERVIEW

This Notice provides interim guidanceregarding section 405 of the Protecting

Americans from Tax Hikes Act of 2015 (thePATH Act), enacted on December 18, 2015,as part of the Consolidated AppropriationsAct, 2016 (Pub. L. 114–113). Specifically,this Notice addresses the due date of notifi-cations required to be submitted under newsection 506 of the Internal Revenue Code(Code) by social welfare organizations de-scribed in section 501(c)(4) and the separateprocess by which an organization may, at itsoption, request a determination that it qual-ifies for section 501(c)(4) tax-exempt status.

The section 506 notification require-ment applies to social welfare organiza-tions described in section 501(c)(4) thatare established after December 18, 2015,and to certain organizations existing onthat date. The Department of the Treasury(Treasury Department) and the InternalRevenue Service (IRS) intend to issuetemporary regulations under section 506prescribing the manner in which organi-zations described in section 501(c)(4)must notify the IRS of their intent to op-erate under section 501(c)(4). Organiza-tions will have at least 60 days from the datesuch regulations are issued to submit theinformation required under section 506, andshould wait to submit the information untilthe regulations are issued. No penalties un-der section 6652(c)(4) will apply to a sec-tion 501(c)(4) organization that provides thesection 506 notification by the due date pro-vided in the regulations.

SECTION 2. BACKGROUND

Section 501(a) of the Code generallyprovides that an organization described insection 501(c) is exempt from federal in-come tax. In particular, section 501(c)(4)describes organizations “operated exclu-sively for the promotion of social welfare.”A social welfare organization is described insection 501(c)(4) (and, therefore, exemptfrom tax under section 501(a)) if it satisfiesthe requirements applicable to such status.Although an organization may apply to theIRS for recognition that the organizationqualifies for section 501(c)(4) tax-exemptstatus, there is no requirement to do so (ex-cept as provided in section 6033(j)(2) fororganizations that fail to file required infor-mation returns or notices). Accordingly, anorganization described in section 501(c)(4)that files the required annual informationreturn or notice, as applicable, need not seek

an IRS determination of its qualification fortax-exempt status.

Section 405(a) of the PATH Act addednew section 506, requiring an organiza-tion to notify the IRS of its intent to op-erate as an organization described in sec-tion 501(c)(4), and amended sections6033(f) and 6652(c), relating to requiredannual information returns by tax-exemptorganizations and penalties for failures tofile such returns, respectively.

Section 506 requires an organizationdescribed in section 501(c)(4), no laterthan 60 days after the organization is es-tablished, to notify the Secretary (in themanner prescribed by regulations) that itis operating as a section 501(c)(4) organi-zation. For certain existing organizations,the notification is due no later than June15, 2016, 180 days after the date of en-actment of the PATH Act. Section 506(b)provides that the notification must in-clude: (1) the name, address, and taxpayeridentification number of the organization;(2) the date on which, and the State underthe laws of which, the organization wasorganized; and (3) a statement of the pur-pose of the organization. Section 506(c)requires the Secretary to send the organi-zation an acknowledgement of the receiptof its notification within 60 days. Section506(d) permits the Secretary to extend the60-day notification period for reasonablecause. Section 506(e) provides that theSecretary shall impose a reasonable userfee for submission of the notification. Fi-nally, section 506(f) provides that, uponrequest by an organization to be treated asan organization described in section501(c)(4), the Secretary may issue a de-termination with respect to treatment as asection 501(c)(4) organization, and thatthe organization’s request will be treatedas an application for exemption from tax-ation under section 501(a) subject to pub-lic inspection under section 6104.

Section 405(b) of the PATH Actamended section 6033(f) to require a sec-tion 501(c)(4) organization submitting thesection 506 notification to include with itsfirst annual information return filed there-after any additional information pre-scribed by regulation that supports the or-ganization’s treatment as an organizationdescribed in section 501(c)(4).

Section 405(c) of the PATH Actamended section 6652(c) to impose pen-


alties for failure to file the notification bythe date and in the manner prescribed insection 506 (and implementing regula-tions). In particular, section 6652(c)(4)(A)imposes a penalty on an organization thatfails to submit the notification equal to$20 per day for each day the failure con-tinues, up to a maximum of $5,000. Ad-ditionally, section 6652(c)(4)(B) imposesa similar penalty on persons who fail totimely submit the notification in responseto a written request by the Secretary.

Section 405(f) of the PATH Act pro-vides that, in general, the section 506 no-tification requirement and the relatedamendments to sections 6033 and 6652apply to organizations described in sec-tion 501(c)(4) that are established afterDecember 18, 2015, the date of enactmentof the PATH Act. Section 405(f)(2) of thePATH Act provides that these provisionsalso apply to any other section 501(c)(4)organization that had not, on or before thedate of enactment: (1) applied for a writ-ten determination of recognition as an or-ganization described in section 501(c)(4)(using Form 1024, “Application for Rec-ognition of Exemption Under Section501(a)”); or (2) filed at least one annualinformation return or notice required un-der section 6033(a)(1) or 6033(i) (that is,a Form 990, “Return of Organization Ex-empt From Income Tax,” or, if eligible,Form 990–EZ, “Short Form Return ofOrganization Exempt From Income Tax”or Form 990–N (e-Postcard)). Existingorganizations described in section405(f)(2) of the PATH Act have until June15, 2016 (180 days after the date of en-actment) to submit the section 506 notifi-cation.

SECTION 3. EXTENSION OFPERIOD TO NOTIFY IRS

The Treasury Department and the IRSintend to issue temporary regulations im-plementing the section 506 requirementthat organizations described in section501(c)(4) notify the IRS of their intent tooperate under section 501(c)(4). In orderto provide adequate transition time fororganizations to comply with the new pro-cedures, the Treasury Department and theIRS are extending the due date for sub-mitting the section 506 notification until atleast 60 days from the date the regulationsare issued. No penalties under section

6652(c)(4) will apply to a section501(c)(4) organization that submits the re-quired notification by the due date pro-vided in the regulations. In addition, com-ments from the public regarding the newsection 506 notification requirement andrelated provisions will be requested dur-ing the rulemaking process.

SECTION 4. REQUESTS FORDETERMINATION

Section 506(c) requires the IRS to ac-knowledge receipt of a section 506 noti-fication. This acknowledgment is not adetermination by the IRS that the organi-zation qualifies for section 501(c)(4) tax-exempt status. Rather, section 506(f) pro-vides that an organization seeking IRSrecognition of its tax-exempt status mayseparately request such a determination.Section 506(f) provides that such a re-quest will be treated as an application forexemption from taxation under section501(a) and therefore will be subject topublic inspection under section 6104. Un-til further guidance is issued, organiza-tions requesting IRS recognition of ex-empt status under section 501(c)(4)should continue to use the Form 1024.The filing of Form 1024 is optional andwill not relieve an organization of therequirement to file the section 506 notifi-cation.

SECTION 5. DRAFTINGINFORMATION

The principal author of this Notice isChelsea Rubin of the Office of AssociateChief Counsel (Tax Exempt and Govern-ment Entities). For further information re-garding this Notice, contact Chelsea Ru-bin at (202) 317-5800 (not a toll-freenumber).

Guidance Relating toRefunds of Foreign Tax forWhich an Election WasMade Under Section 853

Notice 2016–10

SECTION 1. OVERVIEW

The Department of the Treasury (Trea-sury Department) and the Internal Reve-

nue Service (IRS) are issuing this noticeto address the application of sections 853and 905(c) of the Internal Revenue Codeto the receipt by a regulated investmentcompany (RIC) of a refund of a tax thatwas eligible for a foreign tax credit undersection 901 or 903 (“foreign tax”) if thatforeign tax, when paid by the RIC, wastreated as paid by the RIC’s shareholdersunder section 853(b)(2) because an elec-tion was made under section 853(a). Thisnotice describes regulations under sec-tions 853 and 905(c) that the TreasuryDepartment and the IRS intend to issue.This notice also provides guidance on ob-taining administrative relief through clos-ing agreements.

RICs do not generally have changes totheir foreign tax liabilities, as described insection 905(c), both because foreign with-holding taxes, which RICs generally pay,are usually determinable at the time theincome from which the tax is withheld ispaid or accrued, and because section986(a)(1)(E) provides that a RIC reportingincome using an accrual method translatesforeign income taxes into dollars using theexchange rate as of the date the incomeaccrues. Therefore, both the amount of theforeign tax, as denominated in the foreigncurrency, and the appropriate exchangerate for the tax are typically ascertainablebefore the RIC furnishes statements toshareholders or files its income tax return.

Recently, however, the Court of Justiceof the European Union held that memberstates of the European Union could notimpose withholding taxes on certain for-eign investors if substantially similar do-mestic investors were not subject to tax.Numerous RICs are now seeking, andsome have received, refunds of foreigntaxes paid to these countries. In light ofthese refund claims and payments, taxpay-ers have requested that the Treasury De-partment and the IRS provide guidanceconcerning the appropriate treatment ofthese refunds by RICs that made electionsunder section 853(a) for the years inwhich the taxes were originally paid.

Although such refunds are subject tosection 905(c), the Code does not explic-itly address how section 905(c) applies toamounts that were treated as paid by aRIC’s shareholders under section 853 orthe manner in which a RIC and its share-holders may satisfy their obligations un-


der section 905(c). In general, when aforeign tax is refunded, the taxpayer mustnotify the IRS, which redetermines theamount of the taxpayer’s U.S. tax liabilityfor the year or years affected, and thetaxpayer must pay any redeterminedamount upon notice and demand. WhenRICs receive refunds of foreign taxes,however, providing adequate notificationto shareholders and the IRS may be im-practical, in part because the RICs maynot know the identities or addresses ofshareholders who claimed foreign taxcredits in previous years. Without guid-ance providing alternative procedures forthe particular situation of RICs that madeelections under section 853 and theirshareholders, the application of section905(c) could lead to significant adminis-trative costs and uncertainty for the U.S.government and for RICs and their share-holders.

The Treasury Department and the IRSbelieve that published guidance detailing al-ternative methods that RICs and their share-holders may use to satisfy their obligationsunder sections 853 and 905(c) will promoteeffective tax administration. This notice pro-vides guidance, and describes regulationsthat the Treasury Department and the IRSintend to issue, in order to help affectedtaxpayers discharge their obligations undersections 853 and 905(c).

Section 2 provides background infor-mation with respect to sections 853 and905(c). Section 3 provides that RICs andtheir shareholders may satisfy their obli-gations under sections 853 and 905(c) un-der two alternative methods—following anetting method or obtaining a closingagreement. These two alternatives are de-scribed in sections 4 and 5. Section 6describes the expected effective date ofthe regulations described in section 4 andthe effective date of the guidance in sec-tion 5. Section 7 solicits comments andprovides contact information for purposesof submitting comments. Section 8 relatesto requirements under the Paperwork Re-duction Act.

SECTION 2. BACKGROUND

.01 The Election Provided in Section 853

Section 853 allows a RIC that meetscertain requirements to make an annualelection under which the RIC’s sharehold-

ers are treated as if they paid a proportion-ate share of any foreign tax that was paidby the RIC during the RIC’s taxable yearto which the election relates. The electionis available to a RIC if: (1) more than 50percent of the value of its assets, at theclose of the taxable year, consists of stockor securities in foreign corporations, and(2) the RIC has complied with the require-ments in section 852(a) and § 1.852–1(a)of the Income Tax Regulations. If the RICmakes this election for a taxable year, itforgoes a deduction or credit for foreigntaxes. Instead, under section 853(b)(2)(A),the RIC’s shareholders are required to in-clude in their gross income and treat aspaid by them their proportionate shares ofthe foreign taxes and, accordingly, are el-igible to claim either a deduction or creditfor those foreign taxes in accordance withsections 164 and 901. In addition, eachshareholder of an electing RIC, under sec-tion 853(b)(2)(B), must treat as gross in-come from sources without the UnitedStates the sum of the shareholder’s pro-portionate share of the foreign taxes andthe portion of any dividend paid by theRIC that represents income derived fromsources without the United States.

A RIC that makes the election undersection 853(a) must provide certain infor-mation to its shareholders and the IRS.First, under section 853(c) and the regu-lations thereunder, the RIC must identify,in a written statement furnished to eachshareholder, each shareholder’s propor-tionate share of foreign taxes paid by theRIC and each shareholder’s proportionateshare of the RIC’s income derived fromsources without the United States. Under§ 1.853–4(a), the RIC must file a state-ment as part of its income tax return(Form 1120–RIC, “U.S. Income Tax Re-turn for Regulated Investment Compa-nies,” or its successor) that sets forth thetotal amount of income received fromsources without the United States; the to-tal amount of foreign taxes paid; theamount, if any, of the foreign taxes paidthat are not eligible for the section 853(a)election; the date, form, and contents ofthe written statement furnished to itsshareholders; and the proportionate shareof income received and taxes paid duringthe taxable year that are attributable to oneshare of its stock. Under § 1.853–4(d), theRIC must also file, as part of its return for

the taxable year, a Form 1118, “ForeignTax Credit—Corporations.”

.02 Requirements under Section 905(c)

Under section 905(c), if a taxpayerclaims a credit for taxes paid or accruedunder section 901 (or deemed paid undersection 902 or 960) and that foreign tax isrefunded, the taxpayer generally must no-tify the IRS, which shall redetermine theamount of the taxpayer’s U.S. tax liabilityfor the year or years affected. Any U.S.tax due by reason of the foreign tax refundmust be paid upon notice and demand.Interest accrues under section 6601 on theamount of tax due, but under section905(c)(5), the amount of interest is cappedfor the period prior to the receipt of therefund at the amount of interest paid bythe foreign country or possession of theUnited States on the refund.

.03 Exchange Rates and ForeignCurrency Gain or Loss

For purposes of calculating the U.S. dol-lar amount of a refund received by a RIC offoreign tax that is denominated in a foreigncurrency and the RIC’s basis in the foreigncurrency refunded, a RIC must translate therefunded foreign tax into dollars using thesame exchange rate that it used to translatethe foreign taxes into dollars when suchtaxes were originally reported as paid. Seesections 986(a)(1)(E) and 986(a)(2)(B)(ii).Upon disposition of the foreign currencyrefunded, the RIC must recognize any for-eign currency gain or loss. See section988(c)(1)(C) and the regulations under thatsection.

SECTION 3. APPLICATION

As an alternative to applying the gen-eral rules under section 905(c), a RIC andits shareholders may discharge their obli-gations under sections 853 and 905(c)with respect to foreign tax refunds de-scribed below by utilizing either themethod described in section 4 or themethod described in section 5. Failure todischarge those obligations under eitherthe general rules provided in section905(c) or one of the alternative methodsdescribed in sections 4 and 5 may result inasserted deficiencies and penalties for theRIC and any shareholders of that RIC thatclaimed a related foreign tax credit.


SECTION 4. NETTING OFFOREIGN TAXES IN REFUNDYEAR

.01 Eligibility to Use Netting

The regulations described in this sec-tion 4 are expected to apply if a RICreceives in a taxable year (the “refundyear”) a refund of foreign tax that hadbeen paid in a taxable year in which theRIC made an election under section853(a). These regulations are expected toprovide a netting method that such RICsmay apply in lieu of the general rulesunder section 905(c), if the following re-quirements are met:

(a) The economic benefit of the refundand any related interest payment receivedby the RIC primarily inures to the RIC’srefund-year shareholders (as opposed to,if different, shareholders in the year oryears in which the RIC paid the refundedforeign taxes);

(b) The RIC was not held predomi-nantly by entities described in section817(h)(4)(A) or (B) in the year in whichthe RIC paid the refunded foreign taxes;

(c) The RIC makes a valid electionunder section 853(a) for the refund year;and

(d) The RIC paid an amount of foreigntaxes in the refund year that is equal to orgreater than the amount of the foreign taxadjustment described in section 4.03 forthat year.

.02 Netting Procedure

The regulations are expected to pro-vide that, if a RIC applies the methoddescribed in this section 4, then for pur-poses of section 853, the RIC must reducethe amount of foreign taxes reported bythe RIC to its shareholders for the refundyear by the amount of the foreign taxadjustment defined in section 4.03.

.03 Foreign Tax Adjustment

(a) Components of the Foreign Tax Ad-justment

The foreign tax adjustment for a refundyear is equal to the sum of:

(1) All foreign tax refunds received bythe RIC in the refund year; and

(2) All interest adjustments, as definedin section 4.03(b).

(b) Interest Adjustment Defined

An interest adjustment period beginson the date on which the RIC made apayment of foreign tax related to the re-fund and ends on the date on which theRIC receives the refund. Each payment offoreign tax that relates to a refund pro-duces one or more separate interest adjust-ment periods. (Foreign tax amounts paidin the same taxable year may have beenrefunded on different dates during the re-fund year at issue, and foreign taxes re-funded on a single date may have beenpaid on different dates and in differenttaxable years.)

The amount of the interest adjustment,calculated for each interest adjustment pe-riod, is an amount equal to the lesser of:

(1) The amount of interest that wouldbe calculated for that period under section6601 with respect to an underpayment oftax equal to the amount of the associatedforeign tax refund; or

(2) The amount of interest paid by aforeign country or possession of theUnited States to the RIC with respect tothe associated foreign tax refund for thatperiod.

.04 Effects of Netting

(a) The RIC shall not include as in-come from sources without the UnitedStates the amount of the foreign tax ad-justment.

(b) The shareholders of the RIC shallnot include in their gross income undersection 853(b)(2)(A) and § 1.853–2(b) theamount of the current year foreign taxesthat are offset by the foreign tax refundcomponent of the foreign tax adjustment,and that amount shall be excluded fromthe amount of income reported to theshareholders under § 1.853–3. The share-holders of the RIC shall include in theirgross income under section 853(b)(2)(A)and § 1.853–2(b) the amount of the cur-rent year foreign taxes that are offset bythe interest adjustment component of theforeign tax adjustment, and that amountshall be included in the amount of incomereported to shareholders under § 1.853–3.

(c) To determine the dividends paiddeduction, the amount of the foreign taxespaid in the refund year for which an ad-dition to the dividends paid deduction oth-erwise would be allowed under section853(b)(1)(B) shall be reduced by theamount of the foreign tax adjustment as

defined in section 4.03 for that taxableyear.

.05 Notification Requirement for RICsUtilizing Netting

The regulations are expected to pro-vide that, if a RIC applies the nettingmethod described in this section 4, theRIC must notify the IRS of each refund ona statement attached to a Form 1118, or itssuccessor, for the refund year. This state-ment must include the following informa-tion:

(a) The amount of each refund;(b) The date on which each refund was

received;(c) The date or dates on which the RIC

paid the foreign tax to which each refundrelates;

(d) The taxable year or years with re-spect to which the foreign tax to whicheach refund relates was reported to share-holders;

(e) The amount of interest paid by theforeign country or possession of theUnited States with respect to each re-funded amount;

(f) The exchange rates used to translateany foreign currency amounts into dollars;and

(g) With respect to each refundedamount, the amounts included in the for-eign tax adjustment as defined in section4.03.

.06 Example: Netting Refunds AgainstForeign Taxes Paid

(a) Facts. Corporation L, a RIC, in-vests in country P stocks in each of tax-able years 1 through 6 and makes a validelection under section 853(a) for all years.In each of years 1 through 5, CorporationL earned 1,000u of dividend income fromcountry P stocks and paid 100u in foreigntax. In each of years 1 through 5, theapplicable exchange rate is 1u � $1. Withrespect to years 1 through 5, CorporationL distributed $900 to shareholders andreported to shareholders their aggregateproportionate shares of foreign source in-come and foreign taxes paid of $1,000 and$100, respectively. Corporation L also re-ported $1,000 of dividend income andclaimed $1,000 in dividends paid deduc-tions ($900 from the distribution made toshareholders and $100 under section


853(b)(1)(B) for the foreign taxes paid)with respect to each of years 1 through 5.

In year 6, Corporation L receives div-idend income of 1,000u, pays 100u inforeign taxes, and also receives a refundof 55u of the foreign tax it paid in year 1.In year 6, the applicable exchange rate is1u � $2. Country P paid to Corporation Linterest of 1u on the foreign tax refund,which was less than the amount of interestadjustment that would be calculated forthe interest adjustment period under sec-tion 6601 with respect to an underpay-ment of tax equal to $55 (55u translated atthe applicable exchange rate for year 1).Corporation L exchanges the 956u (900udividends received, net of withholdingtax, plus 55u received as a refund of for-eign tax and 1u received as interest on theforeign tax refund) for $1,912 and distrib-utes $1,912 to its shareholders with re-spect to year 6 ($1,800 from dividendsreceived that year, net of withholding tax,plus $110 received as a refund of foreigntax and $2 received as interest on theforeign tax refund). Assume that Corpo-ration L has no expenses allocated andapportioned to the dividend income andthat it meets the requirements for nettingunder section 4.01 of this notice.

(b) Results. Corporation L received arefund and applies netting under section 4.For purposes of furnishing statements toshareholders, Corporation L must reducethe $200 of foreign tax paid in year 6 bythe foreign tax adjustment as determinedunder section 4.03 of this notice. The for-eign tax adjustment is the sum of therefund and the interest adjustment, or $57(a $55 refund and a $2 interest adjust-ment).

The exchange of the refunded amountfor dollars results in $55 of foreign cur-rency gain under section 988 ($110 valueof refunded foreign currency in year 6 less$55 basis from year 1). Corporation Lmust report $2,000 of dividend incomeand $55 of foreign currency gain but doesnot include as additional income theamount of the foreign tax adjustment.

Corporation L may claim $2,055 individends-paid deductions ($1,912 fromthe actual distribution to year 6 sharehold-ers, plus $143 ($200 foreign taxes paidless $57 foreign tax adjustment) of foreigntaxes paid under section 853(b)(1)(B). Seesection 4.04 of this notice.

Corporation L must attach a statementto its Form 1118 for year 6 that includesthe information listed in section 4.05 ofthis notice. After netting, Corporation L’sshareholders are deemed to have paid for-eign taxes in year 6 of $143 ($200 foreigntaxes paid less $57 foreign tax adjust-ment). Corporation L must report to itsyear 6 shareholders $2,057 of gross for-eign source income ($1,912 from the dis-tribution plus $145 from the foreign taxespaid in year 6 ($200 foreign taxes paid inyear 6 less $55 foreign tax refund undersection 4.04(b) of this notice)) and $143of foreign tax, and Corporation L’s year 6shareholders must include such income intheir gross income and treat such foreigntax as paid by them.

SECTION 5. CLOSINGAGREEMENTS

.01 General Rules for ClosingAgreements under this Notice

Under this section, a RIC that receivesa refund of foreign tax that had been paidin a prior taxable year in which an electionwas made under section 853(a) may re-quest a closing agreement addressing thetreatment of the refund. A request for aclosing agreement will be granted whensuch an agreement is determined by theIRS to be in the interest of sound taxadministration.

A closing agreement generally will beconsidered to be in the interest of soundtax administration when:

(a) the RIC has demonstrated that ei-ther it is precluded from applying, or it isnot reasonably practical for it to apply, thegeneral rules under section 905(c) or themethod described in section 4; and

(b) the RIC can provide informationthat is sufficient to establish, to the satis-faction of the IRS, a reasonable estimateof the aggregate adjustments that wouldbe due under section 905(c) with respectto the foreign tax credits claimed by itsshareholders (including former sharehold-ers) who were treated under section 853 aspaying the foreign tax.

.02 Requirements for, and Timing of,Requesting a Closing Agreement

A request for a closing agreement mustcomply with applicable guidance relatingto such requests, including, but not limited

to, Revenue Procedure 2016–1, 2016–1I.R.B. 1, or its successor, as well as anyfuture guidance published in the InternalRevenue Bulletin applicable to closingagreements on this issue. Due to applica-ble deadlines for tax reporting, a tentativerequest for a closing agreement under thissection 5 should be initially submitted inaccordance with the pre-submission con-ference procedures provided in RevenueProcedure 2016–1 or other applicableguidance in the Internal Revenue Bulletin,as soon as possible after the receipt of therefund of foreign tax. The tentative re-quest should propose a method for calcu-lating the aggregate adjustment andshould include details regarding the infor-mation available to make such calcula-tions and the information that reasonablycould be obtained.

.03 Notification Requirement for RICsRequesting Closing Agreements

If a RIC has submitted a request for aclosing agreement but the IRS has not yetdetermined whether a closing agreementis in the interest of sound tax administra-tion, then the RIC must attach a statementto its Form 1118 for the refund year con-taining the information required in para-graphs (a) through (f) of section 4.05,along with a statement that a closingagreement has been requested, that therequest has not been withdrawn or denied,and the date on which the request wassubmitted.

SECTION 6. EFFECTIVE DATES

.01 In General

Except as otherwise provided in thissection 6, the regulations described in sec-tion 4 are expected to apply to any refundyear ending on or after February 8, 2016.

The guidance described in section 5applies to requests for closing agreementsfiled on or after February 8, 2016.

.02 Taxpayer Reliance on Section 4

For refund years ending before the is-suance of any proposed regulations ortemporary regulations described in thisnotice, taxpayers may rely on the rulesdescribed in section 4.


.03 Special Rules for TaxpayersApplying the Rules Described in Section4 to Refund Years Ending BeforeFebruary 8, 2016

The regulations described in section 4are expected to provide that a RIC mayapply the regulations to refund years end-ing before February 8, 2016.

The regulations also are expected toprovide that, if a RIC applies the nettingmethod described in section 4 with respectto refund years ending before February 8,2016, then for such refund years the RICmay, as an alternative to applying therules described in section 4.04(b):

(a) apply the rules described in section4.04(b) by excluding from the amount in-cluded in the shareholder’s gross incomeunder section 853(b)(2)(A) and § 1.853–2(b) the full amount of the current yearforeign taxes that are offset by the foreigntax adjustment, rather than just the amountof the current year foreign taxes that areoffset by the foreign tax refund compo-nent of the foreign tax adjustment; or

(b) apply an approach that is expectedto produce substantially the same U.S.Federal income tax liability that the RIC’sshareholders would have had, in the ag-gregate, under either section 4.04(b) or6.03(a).

An example of a possible approach un-der section 6.03(b) would be for the RICto include the interest adjustment in theshareholders’ gross income, but reducethe amount of the foreign tax adjustmentassociated with such interest by anamount that reasonably approximates theU.S. income tax that would be collectedfrom the RIC’s shareholders on that in-come. This approach would only be per-missible, however, if it was expected toproduce substantially the same U.S. Fed-eral income tax liability that the RIC’sshareholders would have had, in the ag-gregate, under section 6.03(a).

SECTION 7. REQUEST FORCOMMENTS AND CONTACTINFORMATION

The Treasury Department and the IRSsolicit comments on the rules described inthis notice. The Treasury Department andthe IRS specifically solicit comments onwhether, and to what extent, netting of arefund should be permitted if the foreign

tax adjustment exceeds the foreign taxespaid in the refund year, and whether ex-cess refunds should be allowed to carryover to a subsequent year or years andnetted against foreign taxes paid in thoseyears.

The Treasury Department and the IRSalso solicit comments on the principles tobe applied to interest adjustments for pe-riods prior to and after the date on whichthe refund of foreign tax is received by theRIC. In order to approximate the U.S. taxconsequences that would arise had the for-eign tax refunds been paid directly to theshareholders who originally claimed theforeign tax credits, the interest adjustmentwould need to account for the fact thatinterest generally would run on a redeter-mination under section 905(c) from thedue date of the taxpayer’s return on whichthe credit was claimed until the date onwhich the redetermined amount is actuallypaid. This period is divided into two sep-arate periods under section 905(c) — the“pre-refund” period (which is subject tothe limitation under section 905(c)(5)) andthe “post-refund” period. This Notice onlyaddresses interest during the pre-refundperiod. Accordingly, the Treasury Depart-ment and the IRS are considering whetheran approach should be developed to takepost-refund interest into account and howto make any such approach administrablefor both the IRS and for RICs and theirshareholders. In that respect, the TreasuryDepartment and the IRS request com-ments regarding the date on which theunderpayment should be deemed to besatisfied under the netting method (such asApril 15 of the following calendar year)and how interest could be calculated forthe period between the date on which therefund is received by the RIC and the dateon which the underpayment is deemed tobe satisfied under the netting method.

The Treasury Department and the IRSalso solicit comments on whether and inwhat respects closing agreements relatingto these issues could be standardized andwhat information, if any, can be reason-ably and uniformly relied upon for calcu-lating the aggregate adjustment relating tosuch refunds at the RIC level, as opposedto at the shareholder level, when such acalculation is appropriate.

In addition, the Treasury Departmentand the IRS solicit comments as to

whether guidance is needed to clarify howthe generally applicable rules of section905(c) operate with respect to both a RICthat makes an election under section853(a) and its shareholders.

Written comments may be submitted tothe Office of Associate Chief Counsel (In-ternational), Attention: Larry R. Pounders,Internal Revenue Service, IR-4549, 1111Constitution Avenue, NW, Washington,DC 20224. Alternatively, taxpayers maysubmit comments electronically [email protected] will be available for publicinspection and copying. For further infor-mation regarding this notice, contact Mr.Pounders of the Office of Associate ChiefCounsel (International) at (202) 317-5465(not a toll-free number).

SECTION 8. PAPERWORKREDUCTION ACT

The collection of information con-tained in this notice has been reviewedand approved by the Office of Manage-ment and Budget in accordance with thePaperwork Reduction Act (44 U.S.C.3507) under control number 1545-0123.An agency may not conduct or sponsor,and a person is not required to respond to,a collection of information unless the col-lection of information displays a validOMB control number.

The collection of information in thisrevenue procedure is under sections 4.05and 5.03.

This information is required to allowthe IRS to verify the calculations made bythe RIC, and to verify the appropriateamount of gross foreign source incomeand foreign tax credits available to share-holders. The likely respondents are RICsthat invest in foreign securities. The esti-mated total annual reporting recordkeep-ing burden is 15,000 hours. The estimatedannual burden per respondent/record-keeper is 10 hours. The estimated numberof respondents/recordkeepers is 1,500.

The estimated frequency of responsesis occasional.

Books or records relating to a collec-tion of information must be retained aslong as their contents may become mate-rial in the administration of any internalrevenue law. Generally, tax returns andtax return information are confidential asrequired by 26 U.S.C. § 6103.


Credit for Indian CoalProduction and InflationAdjustment Factor forCalendar Year 2015

Notice 2016–11

This notice publishes the inflation ad-justment factor for calendar year 2015 forthe Indian coal production credit undersection 45 of the Internal Revenue Code.The 2015 inflation adjustment factor isused in determining the availability of thecredit and applies to calendar year 2015sales of Indian coal produced in theUnited States or a possession thereof. Theinflation adjustment factor for Indian coalfor calendar year 2015 was published inthe Federal Register on January 20, 2016.Section 186 of Division Q of the Consol-idated Appropriations Act, 2016 (Pub. L.No. 114–113) extends the credit periodfor the Indian coal production credit froma 9-year period beginning on January 1,2006, to an 11-year period beginning onJanuary 1, 2006. This provision is effec-tive for coal produced in the United Statesor a possession thereof after December 31,2014.

BACKGROUND

For calendar year 2015, section45(e)(10)(A) provides in the case of aproducer of Indian coal, the credit deter-mined under section 45 for any taxableyear is an amount equal to the applicabledollar amount per ton of Indian coal (i)produced by the taxpayer at an Indian coalproduction facility during the 11-year pe-riod beginning on January 1, 2006, and(ii) sold by the taxpayer (I) to an unrelatedperson, and (II) during such 11-year pe-riod and such taxable year.

Section 45(e)(10)(B)(i) defines “appli-cable dollar amount” for any taxable yearas (I) $1.50 in the case of calendar years2006 through 2009, and (II) $2.00 in thecase of calendar years beginning after2009.

For calendar year 2015, section45(d)(10) provides in the case of a facilitythat produces Indian coal, the term “In-dian coal production facility” means a fa-cility which is placed in service beforeJanuary 1, 2009.

Section 45(e)(2)(B) defines the infla-tion adjustment factor for a calendar yearas the fraction the numerator of which isthe GDP implicit price deflator for thepreceding calendar year and the denomi-nator of which is the GDP implicit pricedeflator for the calendar year 1992. Theterm “GDP implicit price deflator” meansthe most recent revision of the implicitprice deflator for the gross domestic prod-uct as computed and published by theDepartment of Commerce before March15 of the calendar year.

Under section 45(e)(10)(B)(ii), in thecase of any calendar year after 2006, eachof the dollar amounts under section45(e)(10)(B)(i) shall be equal to the prod-uct of such dollar amount and the inflationadjustment factor determined under sec-tion 45(e)(2)(B) for the calendar year, ex-cept that section 45(e)(2)(B) shall be ap-plied by substituting 2005 for 1992.

INFLATION ADJUSTMENTFACTOR

The inflation adjustment factor for cal-endar year 2015 for Indian coal produc-tion is 1.1772.

CREDIT AMOUNT FOR INDIANCOAL PRODUCTION

The credit for Indian coal productionfor calendar year 2015 under section45(e)(10)(B) is $2.354 per ton on the saleof Indian coal.

DRAFTING AND CONTACTINFORMATION

The principal author of this notice isJennifer A. Records of the Office of As-sociate Chief Counsel (Passthroughs &Special Industries). For further informa-tion regarding this notice contact Ms. Re-cords on (202) 317-6853 (not a toll-freenumber).

Maximum Vehicle Valuesfor 2016 for Use WithVehicle Cents-Per-Mile andFleet-Average ValuationRulesNotice 2016–12

PURPOSE

This notice provides the maximum ve-hicle values for 2016 that taxpayers needto determine the value of personal use ofemployer-provided vehicles under thespecial valuation rules provided undersection 1.61–21 (d) and (e) of the IncomeTax Regulations.

MAXIMUM VEHICLE VALUES

The maximum value of employer-provided vehicles first made available toemployees for personal use in calendaryear 2016 for which the vehicle cents-per-mile valuation rule provided under Regu-lation section 1.61–21(e) may be applica-ble is $15,900 for a passenger automobileand $17,700 for a truck or van.

The maximum value of employer-provided vehicles first made available toemployees for personal use in calendaryear 2016 for which the fleet-average val-uation rule provided under Regulationsection 1.61–21(d) may be applicable is$21,200 for a passenger automobile and$23,100 for a truck or van.

EFFECTIVE DATE

This notice applies to employer-provided passenger automobiles firstmade available to employees for personaluse in calendar year 2016.

DRAFTING INFORMATION

The principal author of this notice isKathleen Edmondson of the Office of theDivision Counsel/Associate Chief Coun-sel (Tax Exempt & Government Entities).For further information on this notice con-tact Ms. Edmondson on (202) 317-6798(not a toll-free number).


Part IV. Items of General InterestDeletions From CumulativeList of Organizations,Contributions to Which areDeductible Under Section170 of the Code

Announcement 2016–04

Table of Contents

The Internal Revenue Service has re-voked its determination that the organiza-tions listed below qualify as organizationsdescribed in sections 501(c)(3) and170(c)(2) of the Internal Revenue Code of1986.

Generally, the IRS will not disallowdeductions for contributions made to a

listed organization on or before the date ofannouncement in the Internal RevenueBulletin that an organization no longerqualifies. However, the IRS is not pre-cluded from disallowing a deduction forany contributions made after an organiza-tion ceases to qualify under section170(c)(2) if the organization has nottimely filed a suit for declaratory judg-ment under section 7428 and if the con-tributor (1) had knowledge of the revoca-tion of the ruling or determination letter,(2) was aware that such revocation wasimminent, or (3) was in part responsiblefor or was aware of the activities or omis-sions of the organization that broughtabout this revocation.

If on the other hand a suit for declara-tory judgment has been timely filed, con-

tributions from individuals and organiza-tions described in section 170(c)(2) thatare otherwise allowable will continue tobe deductible. Protection under section7428(c) would begin on February 8, 2016and would end on the date the court firstdetermines the organization is not de-scribed in section 170(c)(2) as more par-ticularly set for in section 7428(c)(1). Forindividual contributors, the maximum de-duction protected is $1,000, with a hus-band and wife treated as one contributor.This benefit is not extended to any indi-vidual, in whole or in part, for the acts oromissions of the organization that werethe basis for revocation.

NAME OF ORGANIZATION Effective Date of Revocation LOCATION

The Ameridream Inc. February 5, 1999 Bethesda, MD

The Pencil Project January 1, 2009 Austin, TX

Estes Family Educational and Charitable Foundation January 1, 2010 Lufkin, TX

American Friends of Yeshiva Shaare Chaim, Inc. May 1, 2008 Edison, NJ

Arseny and Olga Kovshar Private Charitable Memorial Foundation April 30, 2004 San Francisco, CA

World Wide Water Foundation, Ltd. January 1, 2011 Dahlonega, GA

Community Alliance for the Ethical Treatment of Youth, Inc. January 1, 2012 Portland, OR

Birmingham Business Development Initiative, Inc. June 1, 2010 Birmingham, AL

Yes I Can Ministry January 1, 2013 Rialto, CA


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

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds thatthe same principle also applies to B, theearlier ruling is amplified. (Compare withmodified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling 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 thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the newruling does more than restate the sub-

stance of a prior ruling, a combination ofterms is used. For example, modified andsuperseded 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 isself contained. In this case, the previouslypublished ruling is first modified and then,as modified, 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 namesin subsequent rulings. After the originalruling has been supplemented severaltimes, a new ruling may be published thatincludes the list in the original ruling andthe additions, and supersedes all prior rul-ings in the series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in currentuse and formerly used will appear in ma-terial published in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.ER—Employer.

ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.PRS—Partnership.

PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D.—Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z—Corporation.

Bulletin No. 2016–6 February 8, 2016i

Numerical Finding List1

Bulletins 2016–1 through 2016–6

Announcements:

2016-1, 2016-3 I.R.B. 2832016-2, 2016-3 I.R.B. 2832016-3, 2016-4 I.R.B. 2942016-4, 2016-6 I.R.B. 313

Notices:

2016-1, 2016-2 I.R.B. 2652016-2, 2016-2 I.R.B. 2652016-3, 2016-3 I.R.B. 2782016-4, 2016-3 I.R.B. 2792016-5, 2016-6 I.R.B. 3022016-6, 2016-4 I.R.B. 2872016-7, 2016-5 I.R.B. 2962016-8, 2016-6 I.R.B. 3042016-9, 2016-6 I.R.B. 3062016-10, 2016-6 I.R.B. 3072016-11, 2016-6 I.R.B. 3122016-12, 2016-6 I.R.B. 312

Proposed Regulations:

REG-138344-13, 2016-4 I.R.B. 294

Revenue Procedures:

2016-1, 2016-1 I.R.B. 12016-2, 2016-1 I.R.B. 1022016-3, 2016-1 I.R.B. 1262016-4, 2016-1 I.R.B. 1422016-5, 2016-1 I.R.B. 1882016-6, 2016-1 I.R.B. 2002016-7, 2016-1 I.R.B. 2392016-8, 2016-1 I.R.B. 2432016-10, 2016-2 I.R.B. 2702016-11, 2016-2 I.R.B. 2742016-13, 2016-4 I.R.B. 290

Revenue Rulings:

2016-1, 2016-2 I.R.B. 2622016-2, 2016-4 I.R.B. 2842016-3, 2016-3 I.R.B. 2822016-4, 2016-6 I.R.B. 299

Treasury Decisions:

9745, 2016-2 I.R.B. 256

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–27 through 2015–52 is in Internal Revenue Bulletin2015–52, dated December 28, 2015.

February 8, 2016 Bulletin No. 2016–6ii

Finding List of Current Actions onPreviously Published Items1

Bulletins 2016–1 through 2016–6

Announcements:

2007-21Modified byAnn. 2016-1, 2016-3 I.R.B. 283

Notices:

2005-50Modified byNotice 2016-2, 2016-2 I.R.B. 265

2014-79Superseded byNotice 2016-1, 2016-2 I.R.B. 265

Revenue Procedures:

2015-1Superseded byRev. Proc. 2016-2, 2016-1 I.R.B. 1









2015-53Modified byRev. Proc. 2016-11, 2016-2 I.R.B. 274

Revenue Rulings:

2008-15Revoked byRev. Rul. 2016-3, 2016-3 I.R.B. 282

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–27 through 2015–52 is in Internal Revenue Bulletin2015–52, dated December 28, 2015.

Bulletin No. 2016–6 February 8, 2016iii

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue BulletinIf you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.NW, IR-6230 Washington, DC 20224.

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