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ii. Adding entries (f), (f)(1), (f)(1)(i) through (iv), (f)(2), (g), and (h); and 3. Adding an entry in numerical order for §1.30D-5. The revisions and additions read as follows: §1.30D-0 Table of contents. * * * * * §1.30D-2 Definitions for purposes of section 30D. * * * * * (j) Seller report. * * * * * §1.30D-4 Special rules. * * * * * (f) Recapture rules. (1) In general. (i) Cancelled sale. (ii) Vehicle return. (iii) Resale. (iv) Other vehicle returns and resales. (2) Recapture rules in the case of a vehicle transfer election. (g) Seller registration. (h) Requirement to file a complete income tax return. §1.30D-5 Transfer of credit and recapture. (a) Definitions. (1) Advance payment program. (2) Dealer. (3) Dealer tax compliance. (4) Electing taxpayer. (5) Eligible entity. (6) Registered dealer. (7) Time of sale. (8) Vehicle registration election. (b) Dealer registration. (1) In general. (2) Effect of dealer tax non-compliance. (c) Election by electing taxpayer to transfer credit. (d) Federal income tax consequences of the vehicle transfer election. (1) Treatment of electing taxpayer. (2) Treatment of eligible entity. (3) Form of payment from eligible entity to electing taxpayer. (4) Application of certain other requirements. (5) Examples. (e) Advance payments received by eligible entities. (1) In general. (2) Requirements for a registered dealer to become an eligible entity. (3) Suspension of registered dealer eligibility. (4) Revocation of registered dealer eligibility. (f) Increase in tax. (1) Recapture where taxpayer exceeds modified adjusted gross income limitation. (2) Excessive payments. (i) In general. (ii) Reasonable cause. (iii) Excessive payment defined. (iv) Special rule for cases in which the purchaser’s modified adjusted gross income exceeds the limitation. (3) Example. (g)Requirement of return. (1) In general. (2) Income tax return. (h) Two vehicle transfer elections per year. (i) Severability. (j) Applicability date. Par 4. Section 1.30D-2, as proposed to be added at 88 FR 23370 (April 17, 2023), is amended by adding paragraph (j) to read as follows: §1.30D-2 Definitions for purposes of section 30D . * * * * * (j) Seller report . Seller report means the report described in section 30D(d)(1)(H) and provided by the seller of a vehicle to the taxpayer and the IRS in the manner provided in, and containing the information described in, guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter). The seller report must be provided to the IRS electronically. The term seller report does not include a report rejected by the IRS due to the information contained therein not matching IRS records. Par 5. Section 1.30D-4, as proposed to be added at 88 FR 23370 (April 17, 2023), is amended by adding paragraphs (f) through (h) to read as follows: §1.30D-4 Special rules . * * * * * (f) Recapture rules —(1) In general . This paragraph (f) provides rules under section 30D(f)(5) regarding the recapture of the section 30D credit. (i) Cancelled sale . If the sale of a vehicle between the taxpayer and seller is cancelled before the taxpayer places the vehicle in service, then— (A) The taxpayer may not claim the section 30D credit with respect to the vehicle; (B) The sale will be treated as not having occurred and the vehicle will be considered available for original use by another taxpayer (regardless of the cancelled sale), and the vehicle will, therefore, still be eligible
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credit with respect to the vehicle; (B) The sale will be treated as not having occurred and the vehicle will be considered available for original use by another taxpayer (regardless of the cancelled sale), and the vehicle will, therefore, still be eligible for the section 30D credit; (C) The seller report must be rescinded by the seller in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter); and (D) The taxpayer cannot make a vehicle transfer election under section 30D(g) and §1. 30D-5(c) with respect to the cancelled sale. (ii) Vehicle return . If a taxpayer returns to the seller a vehicle within 30 days of placing such vehicle in service, then— (A) The taxpayer cannot claim the section 30D credit with respect to the vehicle; (B) The vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit; (C) The seller report must be updated by the seller; and (D) A vehicle transfer election under 30D(g) and §1. 30D-5(c) , if applicable, will be treated as nullified and any advance payment made pursuant to section 30D(g) and §1. 30D-5(e) will be collected from the eligible entity as an excessive payment pursuant to §1.30D-5(f). (iii) Resale . If a taxpayer resells the vehicle within 30 days of placing the vehicle in service, then the taxpayer is treated as having purchased the new clean vehicle with the intent to resell, and— (A) The taxpayer cannot claim the section 30D credit with respect to the vehicle; (B) The vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit; (C) The seller report will not be updated; (D) A vehicle transfer election under 30D(g) and §1. 30D-5(c) , if applicable, will remain in effect and any advance payment made pursuant to section 30D(g) and §1. 30D-5(e) will not be collected from the eligible entity; and (E) The value of any transferred credit will be collected from the taxpayer. (iv) Other vehicle returns and resales . In the case of a vehicle return not described in paragraph (f)(1)(ii) of this section or a resale not described in paragraph (f)(1)(iii) of this section, the vehicle will no longer be considered available for original use by another taxpayer, and, therefore, the vehicle will no longer be eligible for the section 30D credit. (2) Recapture rules in the case of a vehicle transfer election . For additional recapture rules that apply in the case of a vehicle transfer election, see §1. 30D-5(f)(1) . For excessive payment rules that apply in the case where an advance payment is made to an eligible entity, see §1. 30D-5(f)(2) . (g) Seller registration . A seller must first register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter) for purposes of filing seller reports. (h) Requirement to file a complete income tax return. No section 30D credit is allowed unless the taxpayer claiming such credit files an income tax return for the taxable year in which the new clean vehicle is placed in service. For purpose of this paragraph (h), the term income tax return means a Form 1040, U.S. Individual Income Tax Return , with an attached Form 8936, Clean Vehicle Credits , or successor forms, and any additional forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions. Par 6. Section 1.30D-5 is added to read as follows: §1.30D-5 Transfer of credit and recapture. (a) Definitions . This paragraph (a) provides definitions that apply for purposes
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in instructions. Par 6. Section 1.30D-5 is added to read as follows: §1.30D-5 Transfer of credit and recapture. (a) Definitions . This paragraph (a) provides definitions that apply for purposes of section 30D(g) and this section. (1) Advance payment program . Advance payment program means the program described in paragraph (e)(1) of this section. (2) Dealer . Dealer has the meaning provided in section 30D(g)(8), except that, for purposes of this section, the term does not include persons licensed solely by a territory of the United States, and includes a dealer licensed in any jurisdiction (other than one licensed solely by a territory of the United States) that makes sales at sites outside of the jurisdiction in which its licensed. (3) Dealer tax compliance . Dealer tax compliance means that all required Federal information and tax returns of the dealer have been filed, including for Federal income and employment tax purposes, and all Federal tax, penalties, and interest due of the dealer as of the time of sale have been paid. A dealer who has entered into an installment agreement with the Internal Revenue Service (IRS) for which a dealer is current on its obligations is treated as in Dealer tax compliance. (4) Electing taxpayer . Electing taxpayer means the individual who purchases and places in service a new clean vehicle and elects to transfer the credit under section 30D that would otherwise be allowable to such individual to an eligible entity pursuant to section 30D(g) and paragraph (c) of this section. A taxpayer is an electing taxpayer only if the taxpayer make certain attestations to the registered dealer, pursuant to procedures provided in guidance published in the Internal Revenue Bulletin, including that the taxpayer does not anticipate exceeding the modified adjusted gross income limitations and that the taxpayer will use the vehicle predominantly for personal use. (5) Eligible entity . Eligible entity has the meaning provided in section 30D(g)(2) and paragraph (e)(2) of this section. (6) Registered dealer . A registered dealer is a dealer that has completed registration with the IRS as provided in paragraph (b) of this section. (7) Time of sale . Time of sale means the date the new clean vehicle is placed in service. A new clean vehicle is placed in service on the date the electing taxpayer takes possession of the vehicle. (8) Vehicle transfer election . Vehicle transfer election has the meaning provided in section 30D(g) and paragraph (c) of this section. (b) Dealer registration —(1) In general . A dealer must first register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(a) of this chapter) for the dealer to receive credits transferred by an electing taxpayer pursuant to section 30D(g) and paragraph (c) of this section. (2) Effect of dealer tax non-compliance . If the dealer is not in dealer tax compliance for any of the taxable periods during the last five taxable years, the dealer may complete its initial registration with the IRS, but the dealer will not be eligible for the advance payment program (and, therefore, the dealer will not be eligible to receive transferred section 30D credits) until the compliance issue is resolved. If the failure is corrected, the IRS will complete the dealer’s registration for the advance payment program, and, provided all other requirements of section 30D(g) and this section are met, the dealer will then be allowed to participate in the advance payment program. Additional procedural guidance regarding this paragraph (b)(2) will be set forth in guidance published in the Internal Revenue Bulletin. (c) Vehicle transfer election by electing taxpayer to transfer credit . For a new clean vehicle placed in service after December 31, 2023, an electing taxpayer may elect to apply the rules of section 30D(g) and this section to make a vehicle transfer election with respect to the vehicle so that the section 30D credit with respect to the vehicle is allowed to the eligible entity specified in the vehicle transfer election (and not to the electing taxpayer) pursuant to the advance payment program described in paragraph (e) of this section. The electing taxpayer, as part of the vehicle transfer election, must transfer the entire amount of the credit that would otherwise be allowable to the electing taxpayer under section 30D with respect to
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the advance payment program described in paragraph (e) of this section. The electing taxpayer, as part of the vehicle transfer election, must transfer the entire amount of the credit that would otherwise be allowable to the electing taxpayer under section 30D with respect to the vehicle, and the eligible entity specified in the vehicle transfer election must pay the electing taxpayer an amount equal to the amount of the credit included in the vehicle transfer election. A vehicle transfer election is made not later than at the time of sale in the manner set forth in guidance published in the Internal Revenue Bulletin, and, once made, the vehicle transfer election is irrevocable. No vehicle transfer election may be made to transfer an amount of credit that would otherwise be allowed to the electing taxpayer under section 38. (d) Federal income tax consequences of the vehicle transfer election —(1) Treatment of electing taxpayer . In the case of a vehicle transfer election, the Federal income tax consequences for the electing taxpayer are as follows— (i) The credit amount under section 30D that the electing taxpayer elects to transfer to the eligible entity under section 30D(g) and paragraph (c) of this section may exceed the electing taxpayer’s regular tax liability (as defined in section 26(b)(1) of the Code) for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture. (ii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section to an electing taxpayer pursuant to the vehicle transfer election is not includible in the gross income of the electing taxpayer. (iii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section is treated as repaid by the electing taxpayer to the eligible entity as part of the purchase price of the new clean vehicle. Thus, the repayment by the electing taxpayer is included in the electing taxpayer’s basis in the new clean vehicle prior to the application of the basis reduction rule in section 30D(f)(1). (2) Treatment of eligible entity . In the case of a vehicle transfer election, the Federal income tax consequences for the eligible entity are as follows— (i) The eligible entity is allowed the credit under section 30D with respect to the new clean vehicle and may receive an advance payment pursuant to section 30D(g)(7) and paragraph (e) of this section; (ii) Advance payments received by the eligible entity are not treated as a tax credit in the hands of the eligible entity and may exceed the eligible entity’s regular tax liability (as defined in section 26(b)(1)) for the taxable year in which the sale occurs; (iii) An advance payment received by the eligible entity is not included in the gross income of the eligible entity; (iv) The payment made by an eligible entity under section 30D(g)(2)(C) and paragraph (c) of this section to an electing taxpayer is not deductible by the eligible entity; (v) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (c) of this section is treated as repaid by the electing taxpayer to the eligible entity as part of the purchase price of the new clean vehicle. Thus, the repayment by the electing taxpayer is treated as an amount realized of the eligible entity under section 1001 of the Code and the regulations in this part under section 1001; and (vi) If the eligible entity is a partnership or an S corporation, then— (A) The IRS will make the advance payment to such partnership or S corporation equal to the amount of the section 30D credit allowed that is transferred to the eligible entity; (B) Such section 30D credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to such entity (and not allocated or otherwise allowed to its partners or shareholders) for such taxable year; and (C) The amount of the advance payment is not treated as tax exempt income to the partnership or S corporation for purposes of the Code. (3) Form of payment from eligible entity to electing taxpayer . The tax treatment of the payment made by the eligible entity to the electing taxpayer described in paragraphs (d)(1) and (2) of this
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S corporation for purposes of the Code. (3) Form of payment from eligible entity to electing taxpayer . The tax treatment of the payment made by the eligible entity to the electing taxpayer described in paragraphs (d)(1) and (2) of this section is the same regardless of whether the payment is made in cash or in the form of a partial payment or down payment for purchase of the new clean vehicle. (4) Application of certain other requirements . In the case of a vehicle transfer election, the following additional rules apply— (i) The requirements of section 30D(f)(1) (regarding basis reduction) and 30D(f)(2) (regarding no double benefit) apply to the electing taxpayer as if the vehicle transfer election were not made (so, for example, the electing taxpayer must reduce its basis in the vehicle by the amount of the section 30D credit, regardless of the vehicle transfer election); (ii) Section 30D(f)(6) (regarding the election not to take the credit) will not apply (in other words, by electing to transfer the credit, the electing taxpayer is electing to take the credit); and (iii) Section 30D(f)(9) (regarding the VIN requirement) will be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the IRS in the form and manner set forth in guidance published in the Internal Revenue Bulletin. (5) Examples . The following examples illustrate the rules under paragraph (d) of this section. (i) Example 1: Electing taxpayer’s regular tax liability less than value of the credit —(A) Facts . A taxpayer, who is an individual, purchases a new clean sports utility vehicle from a dealer that is a C corporation. The taxpayer satisfies the requirements to be an electing taxpayer and elects to transfer the section 30D credit to the dealer. The dealer is a registered dealer and satisfies the requirements to be an eligible entity. The purchase price for the vehicle is $57,500. The credit otherwise allowable to the electing taxpayer by section 30D with respect to the vehicle is $7,500. The eligible entity makes the payment required to be made to the electing taxpayer in the form of a cash payment of $7,500. The electing taxpayer pays back the $7,500 to the eligible entity and pays an additional $50,000 as the purchase price of the vehicle. The electing taxpayer’s regular tax liability for the year is less than $7,500. (B) Analysis . Under paragraph (d)(1) of this section, the electing taxpayer may transfer the credit even though the electing taxpayer’s regular tax liability is less than $7,500, and no amount of the credit will be recaptured from the taxpayer on the basis that the allowable credit exceeded their regular tax liability. The eligible entity’s $7,500 payment to the electing taxpayer is not included in the electing taxpayer’s gross income, and the electing taxpayer’s purchase price for the vehicle is $57,500 (including both the $7,500 payment and the additional $50,000 purchase price paid), prior to the application of the basis reduction rule of section 30D(f)(1). After application of the basis reduction, the electing taxpayer’s basis in the vehicle is $50,000. The eligible entity is eligible to receive an advance payment of $7,500 for the transferred section 30D credit as provided in section 30D(g)(7) and paragraph (e) of this section. Under paragraph (d)(2) of this section, the eligible entity may receive the advance payment regardless of whether the eligible entity’s regular tax liability is less than $7,500. The advance payment is not treated as a credit toward the eligible entity’s tax liability (if any), nor is it included in the eligible entity’s gross income, the eligible entity’s $7,500 payment to the electing taxpayer is not deductible, and the eligible entity’s amount realized is $57,500 upon the sale of the vehicle (including both the $7,500 payment and the additional $50,000 purchase price of the vehicle). (ii) Example 2: Non-cash payment by eligible entity to electing taxpayer —(A) Facts . The facts are the same as in paragraph (d)(5
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,500 payment and the additional $50,000 purchase price of the vehicle). (ii) Example 2: Non-cash payment by eligible entity to electing taxpayer —(A) Facts . The facts are the same as in paragraph (d)(5)(i)(A) of this section (facts of Example 1 ), except that the eligible entity makes the payment to the electing taxpayer in the form of a reduction in the purchase price (rather than as a cash payment). (B) Analysis . Paragraph (d)(3) of this section provides that the application of paragraphs (d)(1) and (2) of this section is not dependent on the form of payment from an eligible entity to an electing taxpayer (for example, a payment in cash or a payment in the form of a reduction in purchase price). Thus, the analysis is the same as in paragraph (d)(5)(i)(B) of this section (analysis of Example 1 ). (iii) Example 3: Eligible entity is a partnership —(A) Facts . The facts are the same as in paragraph (d)(5)(i)(A) of this section (facts of Example 1 ), except that the dealer is a partnership. (B) Analysis . The analysis as to the electing taxpayer is the same as in paragraph (d)(5)(i)(B) of this section (analysis of Example 1 ). Because the eligible entity is a partnership, paragraph (d)(2)(vi) of this section applies. Thus, the advance payment is made to the partnership, the credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to the partnership (and not allocated or otherwise allowed to its partners) for such taxable year. The amount of the advance payment is not treated as tax exempt income to the partnership for purposes of the Code. (e) Advance payments received by eligible entities —(1) In general . An eligible entity may receive advance payments from the IRS corresponding to the amount of the section 30D credit for which a vehicle transfer election was made by an electing taxpayer to the eligible entity pursuant to section 30D(g) and paragraph (c) of this section before the eligible entity files its Federal income tax return for the taxable year that includes the taxable year with respect to which the vehicle transfer election corresponds. This advance payment program is the exclusive mechanism for an eligible entity to receive any payment related to a section 30D credit pursuant to section 30D(g) and paragraph (c) of this section. The eligible entity may not claim a section 30D credit on a Federal income tax return. (2) Requirements for a registered dealer to become an eligible entity . A registered dealer qualifies as an eligible entity, and may therefore receive an advance payment, by meeting the following requirements— (i) The registered dealer submits required registration information and is in dealer tax compliance; (ii) The registered dealer retains information regarding the vehicle transfer election for three calendar years beginning with the year immediately after the year in which the vehicle is placed in service, as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter); and (iii) The registered dealer meets any other requirements of section 30D(g) and this section included in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). (3) Suspension of registered dealer eligibility . A registered dealer may be suspended from the advance payment program pursuant to the procedures as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the suspension of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review. (4) Revocation of registered dealer eligibility. A registered dealer’s registration may be revoked pursuant to the procedures as described in guidance published in the Internal Revenue Bulletin (see §601.601 of this chapter). Any decision made by the IRS relating to the revocation of a dealer’s registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review. (f) Increase in tax —(1) Recapture where taxpayer
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to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review. (f) Increase in tax —(1) Recapture where taxpayer exceeds modified adjusted gross income limitation . If the section 30D credit would otherwise (but for section 30D(g) and the rules of this section) not be allowable to a taxpayer that elected to transfer the credit under section 30D(g) and this section because the taxpayer exceeds the limitation based on modified adjusted gross income in section 30D(f)(10), then the income tax imposed on such taxpayer under chapter 1 of the Code (chapter 1) for the taxable year in which such vehicle was placed in service is increased by the amount of the payment received by the taxpayer. The taxpayer must reconcile such amounts on the tax return described in paragraph (g)(2) of this section. (2) Excessive payments —(i) In general . This paragraph (f)(2) provides rules under section 30D(g)(7)(B), under which rules similar to the rules of section 6417(d)(6) of the Code apply to the advance payment program. In the case of any advance payment that the IRS determines constitutes an excessive payment, the tax imposed on the eligible entity under chapter 1, regardless of whether such entity would otherwise be subject to tax under chapter 1, for the taxable year in which such determination is made will be increased by the sum of the following amounts— (A) The amount of the excessive payment; plus (B) An amount equal to 20 percent of such excessive payment. (ii) Reasonable cause . The amount described in paragraph (f)(2)(i)(B) of this section will not apply to an eligible entity if the eligible entity demonstrates to the satisfaction of the IRS that the excessive payment resulted from reasonable cause. In the case of a vehicle returned to the eligible entity within 30 days of being placed in service for which a vehicle transfer election was made by the electing taxpayer, as described in §1.30D-4(d)(1)(ii), the eligible entity will be treated as demonstrating reasonable cause. (iii) Excessive payment defined . Excessive payment means an advance payment made– (A) To a registered dealer that fails to meet the requirements to be an eligible entity provided in section 30D(g)(2) and paragraph (e)(2) of this section; or (B) Except as provided in paragraph (f)(2)(iv) of this section, to an eligible entity with respect to a vehicle to the extent the payment exceeds the amount of the credit that, without application of section 30D(g) and this section, would be otherwise allowable to the electing taxpayer with respect to the vehicle for such tax year. (iv) Special rule for cases in which the purchaser’s modified adjusted gross income exceeds the limitation . Any excess described in paragraph (f)(2)(iii)(B) of this section due to the purchaser exceeding the limitation based on modified adjusted gross income provided in section 30D(f)(10) is not an excessive payment. Instead, the value of the amount of the advance payment is recaptured from the purchaser under section 30D(f)(10) and paragraph (f)(1) of this section. (3) Example . This paragraph (f)(3) provides an example to illustrate the excessive payment rules provided in paragraph (f)(2) of this section. (i) Facts . In 2024, D, a registered dealer, receives an advance payment of $7,500 with respect to a credit transferred under section 30D(g)(1) and paragraph (c) of this section with respect to a new clean vehicle. In 2025, the IRS determines that the registered dealer was not an eligible entity with respect to the vehicle at the time of the receipt of the advance payment in 2024 because the registered dealer failed to satisfy a requirement in section 30D(g)(2) and paragraph (e)(2) of this section to be an eligible entity with respect to the vehicle. D is unable to show reasonable cause for the failure. (ii) Analysis . Under paragraph (f)(2)(i) of this section, the tax imposed on D is increased by the amount of the excessive payment if the advance payment received by D constitutes an excessive payment. Under paragraph (f)(2
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(ii) Analysis . Under paragraph (f)(2)(i) of this section, the tax imposed on D is increased by the amount of the excessive payment if the advance payment received by D constitutes an excessive payment. Under paragraph (f)(2)(iii) of this section, the entire amount of the $7,500 advance payment received by D is an excessive payment because D did not meet the requirements to be an eligible entity under section 30D(g)(2) and paragraph (e)(2) of this section. Additionally, because D cannot show reasonable cause for its failure to meet these requirements, the tax imposed under chapter 1 on D is increased by $9,000 in 2025 (the taxable year of the IRS determination). This is comprised of the $7,500 value of the credit plus the $1,500 penalty, calculated as 20% penalty on such $7,500 (20% * $7,500 = $1,500). This treatment applies regardless of whether D is otherwise subject to tax under chapter 1 (for example, if D is a partnership). (g) Requirement of return —(1) In general . An electing taxpayer that makes a vehicle transfer election must file an income tax return for the taxable year in which the vehicle transfer election is made and indicate such election on the return per instructions. The electing taxpayer must include the VIN of the new clean vehicle on such return, as provided for in forms and instructions. (2) Income tax return . For purposes of this section, the term income tax return means a Form 1040, U.S. Individual Income Tax Return , with an attached Form 8936, Clean Vehicle Credits , or successor forms, and any additional forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 1 that includes all of the information required on the forms and in instructions. (h) Two vehicle transfer elections per year. A taxpayer may make no more than two transfer elections per taxable year, consisting of either two section 30D credits or one section 30D credit and one section 25E credit. In the case of a joint return, each individual taxpayer may make no more than two transfer elections per taxable year. (i) Severability . The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agency’s intention that the remaining provisions will continue in effect. (j) Applicability date . This section applies to taxable years beginning after December 31, 2023. PART 301—PROCEDURE AND ADMINISTRATION Par 7. The authority citation for part 301 is amended by adding an entry in numerical order for §301.6213-2 to read, in part, as follows: Authority: 26 U.S.C. 7805. * * * * * Section 301.6213-2 also issued under 26 U.S.C. 6213. * * * * * Par 8. Section 301.6213-2 is added to read as follows: §301.6213-2 Omission of correct vehicle identification number. (a) In general . The definition of the term mathematical or clerical error in section 6213(g)(2) of the Internal Revenue Code (Code) includes: (1) Under section 6213(g)(2)(T), an omission of a correct vehicle identification number required under section 30D(f)(9) of the Code (relating to credit for new clean vehicles) to be included on a return; (2) Under section 6213(g)(2)(U), an omission of a correct vehicle identification number required under section 25E(d) of the Code (relating to credit for previously-owned clean vehicles) to be included on a return; and (3) Under section 6213(g)(2)(V), an omission of a correct vehicle identification number required under section 45W(e) of the Code (relating to commercial clean vehicle credit) to be included on a return. (b) Omission of a correct vehicle identification number . For purposes of paragraph (a) of this section, a taxpayer is treated as having omitted a correct vehicle identification number if: (1) The vehicle identification number required to be reported under section 30D(f)(9), 25E(d), or 45
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of paragraph (a) of this section, a taxpayer is treated as having omitted a correct vehicle identification number if: (1) The vehicle identification number required to be reported under section 30D(f)(9), 25E(d), or 45W(e) is not included on the return of tax; (2) The vehicle identification number included on the return of tax is not that of a vehicle eligible for a credit under section 30D, 25E, or 45W; (3) The vehicle identification number included on the return of tax is not that of a vehicle eligible for a credit under section 30D, 25E, or 45W for the year in which it is claimed; (4) The vehicle identification number included on the return of tax differs from the vehicle identification number reported to the IRS and the taxpayer under section 30D(d)(1)(H) for each new clean vehicle placed in service during the taxable year by the taxpayer who was issued the report; or (5) The vehicle identification number included on the return of tax differs from the vehicle identification number reported to the IRS and the taxpayer under section 25E(c)(1)(D)(i) for each previously-owned clean vehicle placed in service during the taxable year by the taxpayer who was issued the report. (c) Applicability date . This section applies to taxable years beginning after December 31, 2023. Douglas W. O’Donnell, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register October 6, 2023, 8:45 a.m., and published in the issue of the Federal Register for October 10, 2023, 88 FR 70310.) 1 A list of approved National Motor Vehicle Title Information System data providers can be found at: vehiclehistory.bja.ojp.gov/nmvtis_vehiclehistory. Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified , below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified , above). Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained.
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and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A —Individual. Acq. —Acquiescence. B —Individual. BE —Beneficiary. BK —Bank. B.T.A. —Board of Tax Appeals. C —Individual. C.B. —Cumulative Bulletin. CFR —Code of Federal Regulations. CI —City. COOP —Cooperative. Ct.D. —Court Decision. CY —County. D —Decedent. DC —Dummy Corporation. DE —Donee. Del. Order —Delegation Order. DISC —Domestic International Sales Corporation. DR —Donor. E —Estate. EE —Employee. E.O. —Executive Order. ER —Employer. ERISA —Employee Retirement Income Security Act. EX —Executor. F —Fiduciary. FC —Foreign Country. FICA —Federal Insurance Contributions Act. FISC —Foreign International Sales Company. FPH —Foreign Personal Holding Company. F.R. —Federal Register. FUTA —Federal Unemployment Tax Act. FX —Foreign corporation. G.C.M. —Chief Counsel’s Memorandum. GE —Grantee. GP —General Partner. GR —Grantor. IC —Insurance Company. I.R.B. —Internal Revenue Bulletin. LE —Lessee. LP —Limited Partner. LR —Lessor. M —Minor. Nonacq. —Nonacquiescence. O —Organization. P —Parent Corporation. PHC —Personal Holding Company. PO —Possession of the U.S. PR —Partner. PRS —Partnership. PTE —Prohibited Transaction Exemption. Pub. L. —Public Law. REIT —Real Estate Investment Trust. Rev. Proc. —Revenue Procedure. Rev. Rul. —Revenue Ruling. S —Subsidiary. S.P.R. —Statement of Procedural Rules. Stat. —Statutes at Large. T —Target Corporation. T.C. —Tax Court. T.D. —Treasury Decision. TFE —Transferee. TFR —Transferor. T.I.R. —Technical Information Release. TP —Taxpayer. TR —Trust. TT —Trustee. U.S.C. —United States Code. X —Corporation. Y —Corporation. Z —Corporation. Numerical Finding List 1 Numerical Finding List Bulletin 2023–43 Announcements: Article Issue Link Page 2023-18 2023-30 I.R.B. 2023-30 366 2023-19 2023-30 I.R.B. 2023-30 367 2023-20 2023-30 I.R.B. 2023-30 368 2023-17 2023-31 I.R.B. 2023-31 412 2023-21 2023-31 I.R.B. 2023-31 413 2023-22 2023-32 I.R.B. 2023-32 429 2023-23 2023-34 I.R.B. 2023-34 569 2023-24 2023-35 I.R.B. 2023-35 661 2023-25 2023-37 I
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429 2023-23 2023-34 I.R.B. 2023-34 569 2023-24 2023-35 I.R.B. 2023-35 661 2023-25 2023-37 I.R.B. 2023-37 821 2023-26 2023-37 I.R.B. 2023-37 822 2023-28 2023-37 I.R.B. 2023-37 823 2023-29 2023-41 I.R.B. 2023-41 1064 Notices: Article Issue Link Page 2023-29 2023-29 I.R.B. 2023-29 1 2023-45 2023-29 I.R.B. 2023-29 317 2023-47 2023-29 I.R.B. 2023-29 318 2023-37 2023-30 I.R.B. 2023-30 359 2023-50 2023-30 I.R.B. 2023-30 361 2023-51 2023-30 I.R.B. 2023-30 362 2023-54 2023-31 I.R.B. 2023-31 382 2023-53 2023-32 I.R.B. 2023-32 424 2023-55 2023-32 I.R.B. 2023-32 427 2023-57 2023-34 I.R.B. 2023-34 560 2023-58 2023-34 I.R.B. 2023-34 563 2023-59 2023-34 I.R.B. 2023-34 564 2023-52 2023-35 I.R.B. 2023-35 650 2023-61 2023-35 I.R.B. 2023-35 651 2023-62 2023-37 I.R.B. 2023-37 817 2023-56 2023-38 I.R.B. 2023-38 824 2023-63 2023-39 I.R.B. 2023-39 919 2023-64 2023-40 I.R.B. 2023-40 974 2023-66 2023-40 I.R.B. 2023-40 992 2023-68 2023-41 I.R.B. 2023-41 1060 2023-65 2023-42 I.R.B. 2023-42 1067 2023-67 2023-42 I.R.B. 2023-42 1074 2023-69 2023-42 I.R.B. 2023-42 1079 Proposed Regulations: Article Issue Link Page REG-124123-22 2023-30 I.R.B. 2023-30 369 REG-124930-21 2023-31 I.R.B. 2023-31 431 REG-120730-21 2023-33 I.R.B. 2023-33 491 REG-134420-10 2023-34 I.R.B. 2023-34 571 REG-109348-22 2023-35 I.R.B. 2023-35 662 REG-120727-21 2023-36 I.R.B. 2023-36 670 REG-122793-19 2023-38 I.R.B. 2023-38 829 REG-100908-23 2023-39 I.R.B. 2023-39 931 REG-115559-23 2023-42 I.R.B. 2023-42 1082 REG-106203-23 2023-43 I.R.B. 2023-43 1143 REG-113064-23 2023-43 I.R.B. 2023-43 1144 Revenue Procedures: Article Issue Link Page 2023-31 2023-25 I.R.B. 2023-25 386 2023-26 2023-33 I.R.B. 2023-33 486 2023-27 2023-35 I.R.B. 2023-35 655
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I.R.B. 2023-25 386 2023-26 2023-33 I.R.B. 2023-33 486 2023-27 2023-35 I.R.B. 2023-35 655 2023-17 2023-37 I.R.B. 2023-37 819 2023-30 2023-40 I.R.B. 2023-40 995 2023-31 2023-40 I.R.B. 2023-40 1057 2023-32 2023-41 I.R.B. 2023-41 1064 2023-35 2023-42 I.R.B. 2023-42 1079 2023-28 2023-43 I.R.B. 2023-43 1092 2023-33 2023-43 I.R.B. 2023-43 1135 Revenue Rulings: Article Issue Link Page 2023-13 2023-32 I.R.B. 2023-32 413 2023-14 2023-33 I.R.B. 2023-33 484 2023-15 2023-34 I.R.B. 2023-34 559 2023-15 2023-34 I.R.B. 2023-34 559 2023-16 2023-37 I.R.B. 2023-37 796 2023-17 2023-37 I.R.B. 2023-37 798 2023-18 2023-40 I.R.B. 2023-40 972 2023-19 2023-41 I.R.B. 2023-41 1059 Treasury Decisions: Article Issue Link Page 9976 2023-30 I.R.B. 2023-30 354 9977 2023-31 I.R.B. 2023-31 375 9978 2023-32 I.R.B. 2023-32 415 9979 2023-35 I.R.B. 2023-35 602 9980 2023-43 I.R.B. 2023-43 1087 Finding List of Current Actions on Previously Published Items 1 Bulletin 2023–43 How to get the Internal Revenue Bulletin INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page www.irs.gov ) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington , DC 20224.
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Internal Revenue Bulletin: 2023-42 October 16, 2023 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ADMINISTRATIVE, EXCISE TAX REG-115559-23, page 1082. This document contains proposed regulations that would provide guidance on how taxpayers will report liability for the excise tax imposed on manufacturers, producers, or importers of certain designated drugs. The proposed regulations affect manufacturers, producers, and importers of designated drugs that sell such drugs during certain statutory periods. The proposed regulations also would except such tax from semimonthly deposit requirements. ADMINISTRATIVE, INCOME TAX Notice 2023-69, page 1079. Notice 2023-69 provides guidance on certain charitable relief to aid victims of the Hawaii wildfires that began on August 8, 2023. Under employer sponsored leave-based donation programs, employees may elect to forgo vacation, sick, or personal leave in exchange for cash payments made by the employer to tax-exempt entities described in § 170(c) of the code that provide aid to victims of the Hawaii wildfires. This notice provides that an employee making the election to forgo such leave will not be treated as having constructively received gross income or wages and cannot claim a charitable contribution deduction under § 170. The employer may deduct the cash payments as business expenses or charitable contributions if the employer otherwise meets the respective requirements of either § 162 or § 170 of the Internal Revenue Code. INCOME TAX Notice 2023-65, page 1067. This notice provides guidance on the new energy efficient home credit under § 45L of the Internal Revenue Code, as amended by § 13304 of Public Law 117-169, 136 Stat. 1818, 1952 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). The amendments made by § 13304 of the IRA apply to qualified new energy efficient homes (qualified homes) acquired after December 31, 2022. The guidance provided in this notice addresses the person that is eligible for the credit, determining the applicable amount of the credit, energy saving requirements, certification requirements, and substantiation requirements. This notice also obsoletes Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650, for qualified homes acquired after December 31, 2022. Notice 2023-67, page 1074. This notice explains the circumstances under which the four-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought. The Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending August 31, 2023. Taxpayers may use this list to determine if any extension is available. Rev. Proc. 2023-35, page 1079. This revenue procedure provides that a redemption of money market fund shares will not be treated as part of a wash sale under § 1091 of the Internal Revenue Code. 26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability. (Also: Part I, §§ 1091; 1.446-7.) The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to
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procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. Part III Section 45L New Energy Efficient Home Credit Notice 2023-65 SECTION 1. PURPOSE This notice provides guidance on the new energy efficient home credit under § 45L of the Internal Revenue Code (Code), as amended by § 13304 of Public Law 117-169, 136 Stat. 1818, 1952 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). 1 The amendments made by § 13304 of the IRA apply to qualified new energy efficient homes acquired after December 31, 2022. The guidance provided in this notice addresses: (i) the person that is eligible for the credit, (ii) determining the applicable amount of the credit, (iii) energy saving requirements, (iv) certification requirements, and (v) substantiation requirements. This notice also obsoletes Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650, which remain applicable for purposes of former § 45L. 2 SECTION 2. BACKGROUND .01 Former § 45L (1) For purposes of the general business credit under § 38, the new energy efficient home credit under § 45L (§ 45L credit) has been a current year business credit since former § 45L and § 38(b)(23) were enacted by § 1332(a) and (b) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1024 (August 8, 2005). (2) Former § 45L(a)(1) provided that, for purposes of § 38, in the case of an “eligible contractor” (defined in former § 45L(b)(1)), the new energy efficient home credit under former § 45L for the taxable year is the “applicable amount” (determined under former § 45L(a)(2)) for each “qualified new energy efficient home” (defined in former § 45L(b)(2)) that is constructed by an eligible contractor and “acquired” (as defined in former § 45L(b)(4)) by a person from such eligible contractor for use as a residence during the taxable year. Former § 45L(c) provided the energy saving requirements that a dwelling unit must have met to be a qualified new energy efficient home
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L(b)(4)) by a person from such eligible contractor for use as a residence during the taxable year. Former § 45L(c) provided the energy saving requirements that a dwelling unit must have met to be a qualified new energy efficient home, as certified using the method and in the form provided under former § 45L(d). If a credit was allowed under former § 45L in connection with any expenditure for any property, former § 45L(e) provided for certain adjustments to the basis of such property for purposes of subtitle A of the Code. In addition, former § 45L(f) provided that no expenditures taken into account under § 47 or § 48(a) could be taken into account under former § 45L. (3) As originally enacted, former § 45L(g) provided that the new energy efficient home credit under former § 45L terminated with respect to any qualified new energy efficient home acquired after December 31, 2007. Prior to the IRA, former § 45L(g) was amended 10 times between 2006 and 2020 to extend the termination of the new energy efficient home credit, with the most recent extension terminating for any qualified new energy efficient home acquired after December 31, 2021. .02 Section 45L as Amended by the IRA (1) Section 13304 of the IRA amended former § 45L in two ways. First, § 13304(a) and (f) of the IRA retroactively extend the new energy efficient home credit under former § 45L for qualified new energy efficient homes acquired after December 31, 2021, and on or before December 31, 2022. (2) Second, for qualified new energy efficient homes acquired after December 31, 2022, § 13304 of the IRA amends former § 45L in various respects. Specifically, § 13304 of the IRA: (a) Changes the applicable amount of the § 45L credit determined under § 45L(a)(2), (b) Sets new energy saving requirements under § 45L(c), (c) Adds an exception to the required basis adjustment under § 45L(e), (d) Redesignates § 45L(g) as § 45L(h) and adds a new § 45L(g) to provide certain prevailing wage requirements, and (e) Amends newly redesignated § 45L(h) to allow the § 45L credit for qualified new energy efficient homes acquired on or before December 31, 2032. (3) The IRA did not amend § 45L(a)(1), which continues to provide that, for purposes of § 38, in the case of an eligible contractor, the § 45L credit for the taxable year is the applicable amount for each qualified new energy efficient home that is constructed by an eligible contractor and acquired by a person from such eligible contractor for use as a residence during the taxable year. (4) Section 45L(a)(2) provides that, for purposes of § 45L(a)(1), the “applicable amount” is: (a) $2,500, in the case of a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program and meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)), (b) $5,000, in the case of a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program and meets the requirements of § 45L(c)(1)(B), (c) $500, in the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)), and (d) $1,000, in the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and meets the requirements of § 45L(c)(1)(B). (5) Section 45L(b) provides certain definitions for purposes of § 45L. Section 45L(b)(1) defines the term “eligible contractor” as: (a) The person that
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c)(1)(B). (5) Section 45L(b) provides certain definitions for purposes of § 45L. Section 45L(b)(1) defines the term “eligible contractor” as: (a) The person that constructed the qualified new energy efficient home, or (b) In the case of a qualified new energy efficient home that is a manufactured home, the manufactured home producer of such home. (6) Section 45L(b)(2) defines the term “qualified new energy efficient home” (qualified home) as a dwelling unit: (a) Located in the United States, (b) The construction of which is substantially completed after August 8, 2005, and (c) That meets the energy saving requirements of § 45L(c). (7) Section 45L(b)(3) provides that the term “construction” includes substantial reconstruction and rehabilitation and § 45L(b)(4) provides that the term “acquire” includes purchase. (8) Section 45L(c) provides the energy saving requirements that a dwelling unit must meet to be a qualified home. Section 45L(c)(1)(A) generally provides that a dwelling unit meets the requirements of § 45L(c)(1)(A) if such dwelling unit meets the requirements of § 45L(c)(2) or (3) (whichever is applicable). A dwelling unit meets the requirements of § 45L(c)(1)(B) if such dwelling unit is certified as a “zero energy ready home” under the “zero energy ready home program” (ZERH program) of the U.S. Department of Energy (DOE) as in effect on January 1, 2023 (or any successor program determined by the Secretary of the Treasury or her delegate (Secretary)). (9) A dwelling unit meets the requirements of § 45L(c)(2) if: (a) In the case of a dwelling unit acquired before January 1, 2025, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.1, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit was acquired), (b) In the case of a dwelling unit acquired after December 31, 2024, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.2, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit was acquired), or (c) The dwelling unit meets the most recent Energy Star Manufactured Home National Program Requirements as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired. (10) A dwelling unit meets the requirements of § 45L(c)(3) if: (a) The dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later), and (b) The dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later). (11) Section 45L(d)(1) provides that the certification described in § 45L(c) must be made in accordance with guidance prescribed by the Secretary, after consultation with the Secretary of Energy, and that such guidance is to specify procedures and methods for calculating energy and cost savings. Section 45L(d)(2) provides that any certification described in § 45L(c) must be made in writing in a manner that specifies in readily verifiable fashion the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their respective rated energy efficiency performance. (12) Section 45L(e) provides that for purposes of subtitle A of the Code (except for purposes
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in readily verifiable fashion the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their respective rated energy efficiency performance. (12) Section 45L(e) provides that for purposes of subtitle A of the Code (except for purposes of determining the adjusted basis of any building under § 42, relating to the low-income housing credit), if a § 45L credit is allowed in connection with any expenditure for any property, the increase in the basis of such property that would (but for § 45L(e)) result from such expenditure must be reduced by the amount of the § 45L credit so determined. In addition, § 45L(f) provides that for purposes of § 45L, no expenditures taken into account under § 47 or § 48(a) can be taken into account under § 45L. (13) Section 45L(g) adds a prevailing wage requirement that increases the amount of the § 45L credit allowed. Section 45L(g)(1) provides that in the case of a “qualifying residence” described in § 45L(a)(2)(B) meeting the prevailing wage requirements in § 45L(g)(2)(A), the § 45L credit amount allowed with respect to such residence is: (a) $2,500, in the case of a residence that meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)), and (b) $5,000, in the case of a residence that meets the requirements of § 45L(c)(1)(B). (14) The requirements set forth in § 45L(g)(2)(A) are that the taxpayer must ensure that any laborers and mechanics employed by the taxpayer, any contractor, or subcontractor in the construction of any qualified residence are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which the qualified residence is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code, commonly known as the Davis-Bacon Act. Section 45L(g)(2)(B) provides that rules similar to the rules of § 45(b)(7)(B), which pertains to the correction and penalty related to the failure to satisfy prevailing wage requirements, apply for purposes of the prevailing wage requirements under § 45L(g). Section 45L(g)(3) authorizes the Secretary to issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of § 45L(g), including regulations or other guidance that provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of § 45L(g). (15) As amended and redesignated by § 13304 of the IRA, § 45L(h) provides that § 45L is not applicable to any qualified home acquired after December 31, 2032. .03 Guidance under Former § 45L (1) On March 13, 2006, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published Notice 2006-27, 2006-1 C.B. 626, and Notice 2006-28, 2006-1 C.B. 628. Notice 2006-27 and Notice 2006-28 were updated by Announcement 2006-88, 2006-2 C.B. 910, published on November 13, 2006. Notice 2006-27 and Notice 2006-28, as updated, provided guidance on the calculation of a dwelling unit’s heating and cooling energy consumption, and on the public list of software programs used to calculate energy consumption. Notice 2006-28 is specific to manufactured homes. (2) On March 24, 2008, the Treasury Department and the IRS published Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650. Notice 2008-35 and Notice 2008-36 superseded Notice 2006-27 and Notice 2006-28, respectively, by substantially republishing the guidance contained in those publications while clarifying the meaning of certain terms used in Notice 2006-27 and Notice 2006-28 and the process for removing software from the list of approved software. Notice 2008-36 is specific to manufactured homes. Because Notice
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the guidance contained in those publications while clarifying the meaning of certain terms used in Notice 2006-27 and Notice 2006-28 and the process for removing software from the list of approved software. Notice 2008-36 is specific to manufactured homes. Because Notice 2008-35 and Notice 2008-36 provide guidance relating to former § 45L, this notice obsoletes Notice 2008-35 and Notice 2008-36 for qualified homes acquired after December 31, 2022. Notice 2008-35 and Notice 2008-36 remain applicable for qualified homes acquired on or before December 31, 2022. .04 Post-IRA § 45L Guidance (1) On October 24, 2022, the Treasury Department and the IRS published Notice 2022-48, 2022-43 I.R.B. 316, which included a request for comments on the amendments to § 45L by § 13304 of the IRA. Comments received in response to Notice 2022-48 were considered in the drafting of this notice. (2) On November 30, 2022, the Treasury Department and the IRS published Notice 2022-61 in the Federal Register (87 F.R. 73580, corrected in 87 F.R. 75141 (Dec. 7, 2022); 2022-52 I.R.B. 560), which contains initial guidance with respect to the prevailing wage requirements under § 45L(g). On August 30, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-100908-23) in the Federal Register (88 F.R. 60018) providing proposed regulations that would add proposed rules to the Income Tax Regulations in 26 CFR part 1 related to the prevailing wage requirements, including under § 45L(g) as provided in proposed § 1.45L-3. SECTION 3. DETERMINING THE APPLICABLE AMOUNT OF THE § 45L CREDIT .01 In General . The § 45L credit for the taxable year is the applicable amount for each qualified home that is constructed by an eligible contractor and acquired by a person from such eligible contractor after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year for which the taxpayer is claiming the credit under § 45L. The eligible contractor is the taxpayer for purposes of the § 45L credit. See section 5.02 of this notice for the definition of an eligible contractor. .02 Applicable Amount for a Dwelling Unit Meeting the Single-Family Home Requirements under § 45L(c)(2) (1) In General . The applicable amount for a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program is: (a) $2,500, for a dwelling unit that meets the requirements of § 45L(c)(2) and does not meet the requirements of § 45L(c)(1)(B), or (b) $5,000, for a dwelling unit that meets the requirements of § 45L(c)(1)(B). (2) Eligible to Participate (a) A dwelling unit is eligible to participate in the Energy Star Residential New Construction Program if it meets the eligibility requirements provided for this program on the “About ENERGY STAR – Tax Credits for Home Builders” webpage (Energy Star Webpage) 3 of the Environmental Protection Agency (EPA). (b) A dwelling unit is eligible to participate in the Energy Star Manufactured New Homes Program if it meets the eligibility requirements provided for this program on the Energy Star Webpage. .03 Applicable Amount for a Dwelling Unit Meeting the Multifamily Home Requirements under § 45L(c)(3) (1) In General . Except as described in section 3.04 of this notice, the applicable amount for a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program is: (a) $500, for a dwelling unit that meets the requirements of § 45L(c)(3) and does not meet the requirements of § 45L(c)(1)(B), or (b) $1,000, for a dwelling unit that meets the requirements of § 45L(c)(1)(B). (2) Eligible to Participate . A dwelling unit is part of a building eligible to participate in the Energy Star Multifamily New Construction Program if the building meets the
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that meets the requirements of § 45L(c)(1)(B). (2) Eligible to Participate . A dwelling unit is part of a building eligible to participate in the Energy Star Multifamily New Construction Program if the building meets the eligibility requirements provided for this program on the Energy Star Webpage. .04 Increase in Applicable Amount for Multifamily Homes Meeting Prevailing Wage Requirements . In the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and that meets the requirements of § 45L(c)(3) (and does not meet the requirements of § 45L(c)(1)(B)) and the prevailing wage requirements of § 45L(g)(2)(A) (Prevailing Wage Requirements), the applicable amount is $2,500. In the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and that meets the requirements of § 45L(c)(1)(B) and the Prevailing Wage Requirements, the applicable amount is $5,000. Guidance on the Prevailing Wage Requirements is provided in Notice 2022-61 and in the notice of proposed rulemaking (REG-100908-23) published in the Federal Register on August 30, 2023. SECTION 4. ENERGY SAVING REQUIREMENTS .01 In General . To meet the energy saving requirements of § 45L(c), a dwelling unit must meet the single-family home requirements of § 45L(c)(2) or the multifamily home requirements of § 45L(c)(3) (whichever is applicable), or meet the zero energy ready home requirements of § 45L(c)(1)(B). .02 Single-Family Home Requirements under § 45L(c)(2) (1) In General . A dwelling unit meets the energy saving requirements of § 45L(c)(2) if: (a) In the case of a dwelling unit acquired before January 1, 2025, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.1, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), (b) In the case of a dwelling unit acquired after December 31, 2024, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.2, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or (c) The dwelling unit meets the most recent Energy Star Manufactured Home National Program Requirements as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired. (2) Certification (a) In General . As provided on the Energy Star Webpage, the Energy Star Single-Family New Homes National Program Requirements 3.1 and 3.2, the Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit, and the Energy Star Manufactured Home National Program Requirements (together, the Energy Star Single-Family Home Program Requirements) each require a dwelling unit to be certified as part of meeting such requirements. A dwelling unit will be considered to meet these respective program requirements for purposes of § 45L(c)(2) if it is certified under the rules of such respective program requirements. See section 6 of this notice for more information on certification requirements. (b) Certification of Prior Versions through Later Versions . As provided on the Energy Star Webpage, a dwelling unit certified under a currently effective version of one of the Energy Star Single-Family Home Program Requirements by definition also is certified under any prior version of the same program requirements. For example, a dwelling unit certified under the Energy Star Single-Family New Homes National Program Requirements 3.2 also is considered certified under the Energy Star Single-Family New Homes National Program Requirements 3.1. All effective versions of Energy Star Single-Family Home Program Requirements are provided on the Energy Star Webpage. (c) Deemed Certification of
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.2 also is considered certified under the Energy Star Single-Family New Homes National Program Requirements 3.1. All effective versions of Energy Star Single-Family Home Program Requirements are provided on the Energy Star Webpage. (c) Deemed Certification of National and Regional Program Requirements . As provided on the Energy Star Webpage, the EPA will deem a dwelling unit certified under certain Energy Star Single-Family New Homes National Program Requirements also to be certified under certain Energy Star Single-Family New Homes Regional Program Requirements, and vice versa. To determine which deemed certifications correspond to which Energy Star Program Requirements, see the Energy Star Webpage. (3) Energy Star Single-Family New Homes National Program Requirements . Energy Star Single-Family New Homes National Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(2)(A)(ii), if a dwelling unit is not located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, then the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of the dwelling unit will be the effective Energy Star Single-Family New Homes National Program Requirements. (4) Energy Star Single-Family New Homes Regional Program Requirements . Energy Star Single-Family New Homes Regional Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(2)(A)(ii), if a dwelling unit is located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, then the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of a dwelling unit will be the Energy Star Single-Family New Homes Regional Program Requirements that apply to the dwelling unit. To determine which Energy Star Single-Family New Homes Regional Program Requirements are in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired, see the Energy Star Webpage. (5) Energy Star Manufactured Home National Program Requirements . Energy Star Manufactured Home National Program Requirements are provided on the Energy Star Webpage. To determine which Energy Star Manufactured Home National Program Requirements are in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit is acquired, see the Energy Star Webpage. (6) Examples (a) Example 1 . A dwelling unit meets the eligibility requirements provided for the Energy Star Residential New Construction Program on the Energy Star Webpage. The dwelling unit is not located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, as provided on the Energy Star Webpage. The dwelling unit is certified in accordance with section 6 of this notice under the Energy Star Single-Family New Homes National Program Requirements 3.1. The eligible contractor sells the dwelling unit to a person for use as a residence on January 1, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2). (b) Example 2 . The facts are the same as in Example 1, except that the dwelling unit is certified in accordance with section 6 of this notice under the Energy Star Single-Family New Homes National Program Requirements 3.2. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2). (c) Example 3 . The facts are the same as in Example 1, except that: (i) the dwelling unit is located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, and is certified in accordance with section 6 of this notice under the most recent of such program requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage, and (ii) the dwelling unit is deemed also to be certified under the Energy Star Single-Family New Homes National Program Requirements 3.1, as provided on the Energy Star Webpage. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2). .03 Multifamily Home Requirements under § 45L(c)(3) (1) In General . A dwelling unit meets the energy saving requirements of § 45L(c)(3) if such dwelling unit meets: (a) The most
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.03 Multifamily Home Requirements under § 45L(c)(3) (1) In General . A dwelling unit meets the energy saving requirements of § 45L(c)(3) if such dwelling unit meets: (a) The most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later), and (b) The most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later). (2) Certification (a) In General . As provided on the Energy Star Webpage, the Energy Star Multifamily New Construction National Program Requirements and the Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (together, the Energy Star Multifamily Home Program Requirements) each require a dwelling unit to be certified as part of meeting such requirements. A dwelling unit will be considered to meet these respective program requirements for purposes of § 45L(c)(3) if it is certified under the rules of such respective program requirements. See section 6 of this notice for more information on certification requirements. (b) Certification of Prior Versions through Later Versions . As provided on the Energy Star Webpage, a dwelling unit certified under a currently effective version of one of the Energy Star Multifamily Home Program Requirements by definition also is certified under any prior version of the same program requirements. For example, a dwelling unit certified under the Energy Star Multifamily New Construction National Program Requirements Version 1.2 also is considered certified under the Energy Star Multifamily New Construction National Program Requirements Version 1.1. (c) Deemed Certification of National and Regional Program Requirements . As provided on the Energy Star Webpage, the EPA will deem a dwelling unit certified under certain Energy Star Multifamily New Construction National Program Requirements also to be certified under certain Energy Star Multifamily New Construction Regional Program Requirements, and vice versa. To determine which deemed certifications correspond to which Energy Star Program Requirements, see the Energy Star Webpage. (3) Energy Star Multifamily New Construction National Program Requirements . Energy Star Multifamily New Construction National Program Requirements are provided on the Energy Star Webpage. To determine which Energy Star Multifamily New Construction National Program Requirements are in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later, see the Energy Star Webpage. (4) Energy Star Multifamily New Construction Regional Program Requirements . Effective Energy Star Multifamily New Construction Regional Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(3)(B), the Energy Star Multifamily New Construction Regional Program Requirements apply to a dwelling unit located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements. If a dwelling unit is not located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, § 45L(c)(3)(B) does not apply. To determine which Energy Star Multifamily New Construction Regional Program Requirements are in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later, see the Energy Star Webpage. (5) Examples (a) Example 1 . A dwelling unit is part of a building that meets the eligibility requirements provided for the Energy Star Multifamily New Construction Program on the Energy Star Webpage. The dwelling unit is not located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, as provided on the Energy Star Webpage. The dwelling unit is certified in accordance with section 6 of this notice under the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on January 1, 2023). The eligible contractor sells the dwelling unit to a person for use as a residence on January 1, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(3). (b) Example 2 . The facts
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The eligible contractor sells the dwelling unit to a person for use as a residence on January 1, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(3). (b) Example 2 . The facts are the same as in Example 1, except that: (i) the dwelling unit is located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, and is certified in accordance with section 6 of this notice under the most recent of such program requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage, and (ii) the dwelling unit is deemed also to be certified under the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(3). .04 Zero Energy Ready Home Program Requirements under § 45L(c)(1)(B) (1) In General . A dwelling unit meets the energy saving requirements under § 45L(c)(1)(B) if such dwelling unit is certified as a zero energy ready home under the ZERH program established by the DOE as in effect on January 1, 2023 (or any successor program determined by the Secretary). ZERH program requirements, including effective dates and certification requirements by building type, are provided on the DOE webpage, “DOE Zero Energy Ready Home (ZERH) Program Requirements” (ZERH Webpage). 4 See section 6 of this notice for more information on certification requirements. (2) ZERH Program in Effect; Determination of Successor Program . For purposes of establishing the ZERH program in effect under § 45L(c)(1)(B), the Secretary has determined: (a) That the program identified on the ZERH Webpage (or any successor DOE webpage) is in effect and that successor ZERH programs will be in effect as of the date indicated on the ZERH Webpage (or any successor DOE webpage), and (b) That should the DOE cease identifying ZERH programs on the DOE webpage and instead provide successor ZERH programs in an alternative, publicly available DOE source, that successor ZERH programs will be in effect as of the date indicated in the alternative, publicly available DOE source. (3) Example . A dwelling unit is certified on December 23, 2023, in accordance with section 6 of this notice as a zero energy ready home under the ZERH program in effect on January 1, 2023 (as provided on the ZERH Webpage, and as determined by the effective dates provided under section 4.04 of this notice). The eligible contractor sells the dwelling unit to a person for use as a residence on July 30, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(1)(B). SECTION 5. DEFINITIONS .01 Acquired . The term “acquired” includes purchased. The IRS also will consider a qualified home that is leased by a person from an eligible contractor for use as a residence during the taxable year as “acquired” for purposes of § 45L(a)(1)(B). A qualified home is not acquired by a person from an eligible contractor if the eligible contractor retains the home for use as a residence. A qualified home that is a manufactured home may be acquired directly or indirectly from an eligible contractor. A qualified home that is a manufactured home is acquired indirectly from an eligible contractor for use as a residence if the person that produced the manufactured home sells it to an intermediary (for example, a dealer of manufactured homes) and the intermediary (or the last of multiple intermediaries) sells or leases the manufactured home to another person for use as a residence. See section 7.03 of this notice for a safe harbor permitting an eligible contractor to rely on a dealer’s statement concerning a sale by the dealer of manufactured homes. .02 Eligible Contractor . An eligible contractor is the person that constructed the qualified home and owned and had a basis in the qualified home during its construction, or, in the case of a qualified home that is a manufactured home, the person that produced such home and owned and had a basis in such home during its
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constructed the qualified home and owned and had a basis in the qualified home during its construction, or, in the case of a qualified home that is a manufactured home, the person that produced such home and owned and had a basis in such home during its production. For example, if a person that owns and has a basis in a qualified home during its construction hires a third-party contractor to construct the home, the person that hires the third-party contractor is the eligible contractor and the third-party contractor is not an eligible contractor. .03 Qualified New Energy Efficient Home; Qualified Home . The terms “qualified new energy efficient home” and “qualified home” mean a dwelling unit located in the United States, the construction of which is substantially completed after August 8, 2005, that meets the energy saving requirements of § 45L(c) (see section 4 of this notice). .04 Qualifying Residence; Qualified Residence . The terms “qualifying residence” and “qualified residence” used in § 45L(g)(1) and § 45L(g)(2)(A), respectively, each refer to a dwelling unit described in § 45L(a)(2)(B). .05 United States . The term “United States” used in § 45L(b)(2)(A) means United States as defined in § 7701(a)(9), which includes only the States and the District of Columbia. SECTION 6. CERTIFICATION .01 In General . An eligible contractor must obtain any certification described in § 45L(c)(1) and sections 4.02(2), 4.03(2), and 4.04(1) of this notice with respect to a dwelling unit before claiming the § 45L credit. An eligible contractor is not required to file the certification with the return on which the credit is claimed, but should keep the certification as required under § 6001 (see section 7 of this notice for additional information on substantiation requirements). An eligible contractor must follow any procedures outlined in guidance and applicable forms and instructions provided by the IRS Commissioner with respect to § 45L. The guidance pertaining to certification in this notice was prepared after consultation with the Secretary of Energy in accordance with § 45L(d). .02 Energy Star Certification Requirements . Certification requirements for the effective Energy Star program are provided on the Energy Star Webpage. .03 ZERH Certification Requirements . Certification requirements for the effective ZERH program are provided on the ZERH Webpage. .04 Eligible Certifier . For purposes of the credit requirements in place prior to the enactment of the IRA, Notice 2008-35 and Notice 2008-36 provide that a certification must be prepared by an “eligible certifier.” Those notices do not apply for purposes of any qualified homes acquired after December 31, 2022. For purposes of preparing the certification required under Energy Star and ZERH program requirements for qualified homes acquired after December 31, 2022, rules for the person eligible to issue a certification are under the respective Energy Star and ZERH program requirements. .05 Software Programs . For purposes of the credit requirements in place prior to the enactment of the IRA, Notice 2008-35 and Notice 2008-36 include rules for approved software that may be used to calculate energy consumption for purposes of providing a certification. Those notices do not apply for purposes of any qualified homes acquired after December 31, 2022. For purposes of preparing the certification required under Energy Star and ZERH program requirements for qualified homes acquired after December 31, 2022, rules for the software to be used for purposes of providing a certification are under the respective Energy Star and ZERH program requirements. .06 Safe Harbor for Certification of Energy Star and ZERH under § 45L(d) . The IRS will deem a dwelling unit to meet any certification requirements under § 45L(d) if: (1) In the case of a dwelling unit that meets the requirements of § 45L(c)(1)(A), it is certified under the rules of the Energy Star program requirements as provided in section 6.02 of this notice, or (2) In the case of a dwelling unit that meets the requirements of § 45L(c)(1)(B), it is certified as a zero energy ready home under the ZERH program as provided in section 6.03 of this notice. SECTION 7. SUB
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case of a dwelling unit that meets the requirements of § 45L(c)(1)(B), it is certified as a zero energy ready home under the ZERH program as provided in section 6.03 of this notice. SECTION 7. SUBSTANTIATION .01 In General . An eligible contractor claiming a credit under § 45L must meet the general recordkeeping requirements under § 6001 to substantiate that the requirements of § 45L have been met. Section 6001 provides that every person liable for any tax imposed by the Code, or for the collection thereof, must keep such records as the Secretary may from time to time prescribe. Section 1.6001-1(a) provides that any person subject to income tax under the Code, or any person required to file a return of information with respect to income, must keep such permanent books of account or records as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax or information. Section 1.6001-1(e) provides that the books and records required by § 1.6001-1 must be retained so long as the contents thereof may become material in the administration of any internal revenue law. .02 Minimum Requirements . To meet the substantiation requirements described in section 7.01 of this notice, an eligible contractor must retain, at a minimum: (1) Any Energy Star or ZERH certification described in § 45L(c)(1) and section 6 of this notice including the date of such certification, (2) If applicable, a dealer’s statement described in section 7.03 of this notice, and (3) Books or records sufficient to establish the following: (a) The address of the qualified home, and that such home is located in the United States (see definition in section 5.05 of this notice), (b) That the taxpayer is an eligible contractor as defined in section 5.02 of this notice, (c) That the qualified home was acquired by a person from the eligible contractor for use as a residence during the taxable year for which the taxpayer is claiming the § 45L credit, and the name of the person that acquired it (except with respect to a manufactured home for which the eligible contractor retains a dealer’s statement described in section 7.03 of this notice), and (d) If applicable, that the prevailing wage requirements as described in section 3.04 of this notice with respect to a qualified home are met. .03 Safe Harbor for Sales to Dealers (1) In General . In the case of a manufactured home sold by an eligible contractor to a dealer of manufactured homes, the eligible contractor may rely on a statement by the dealer to establish the date on which a manufactured home was acquired, that it is located in the United States, and that it was acquired for use as a residence, if the eligible contractor retains the statement in accordance with the recordkeeping requirements of § 6001 and section 7.01 of this notice. (2) Content of Statement . The eligible contractor may not rely on the statement by the dealer unless the statement specifies the date of the retail sale of the manufactured home, that the dealer delivered the manufactured home to the purchaser at an address in the United States, and that the dealer has no knowledge of any information suggesting that the purchaser will use the manufactured home other than as a residence. The statement also must contain the following information: (a) The name, address, and telephone number of the dealer. (b) If the manufactured home was passed through any intermediaries between the initial purchase from the eligible contractor to the ultimate acquisition by the person that acquired the home for use as a residence, the name, address, and telephone number of each such intermediary. (c) A declaration, applicable to the statement made by the dealer and any accompanying documents, signed by a person currently authorized to bind the dealer in such matters, in the following form: “Under penalties of perjury, I declare that, to the best of my knowledge and belief, the facts presented with respect to this sale transaction are true, correct, and complete.” SECTION 8. PAPERWORK REDUCTION ACT The Paperwork Reduction Act of 1995 (44 U.S.C. §§ 3501-3520) (PRA) requires a Federal Agency to obtain the approval of the Office of Management and
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8. PAPERWORK REDUCTION ACT The Paperwork Reduction Act of 1995 (44 U.S.C. §§ 3501-3520) (PRA) requires a Federal Agency to obtain the approval of the Office of Management and Budget (OMB) before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. This notice contains recordkeeping requirements and third-party disclosures that are required to claim the § 45L credit. These collections of information generally would be used by the IRS for tax compliance purposes and by taxpayers to facilitate proper reporting and compliance. A Federal agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. The recordkeeping requirements provided in sections 6 and 7 of this notice are considered general tax records under § 1.6001-1. These records are required for the IRS to validate that eligible contractors have met the requirements of § 45L, including that a qualified home meets the energy saving requirements of § 45L(c). For PRA purposes, general tax records are already approved by OMB under control number 1545–0123 for business filers, control number 1545–0074 for individual filers, and control number 1545-1994 for trust/estate filers. Sections 6 and 7 of this notice contain third-party disclosures to dealers of manufactured homes, and to the DOE and EPA for purposes of obtaining the certifications required to demonstrate that a dwelling unit meets the applicable Energy Star or ZERH program requirements. These certifications are included within the instructions for Form 8908, Energy Efficient Home Credit, which is approved by the OMB under control number 1545-1979. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by § 6103. SECTION 9. EFFECT ON OTHER DOCUMENTS Notice 2008-35 and Notice 2008-36 are obsoleted for any qualified home acquired after December 31, 2022. SECTION 10. EFFECTIVE DATE This notice applies to any qualified home acquired after December 31, 2022 and before January 1, 2033. SECTION 11. DRAFTING INFORMATION The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact the Office of Associate Chief Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free number). 1 Unless otherwise specified, all “Section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1). 2 All references to “former § 45L” in this notice refer to § 45L as applicable to qualified new energy efficient homes acquired on or before December 31, 2022. 3 Available at https://www.energystar.gov/about/federal_tax_credits/federal_tax_credit_archives/tax_credits_home_builders. Should this link become inactive, visit the current https://www.energystar.gov webpage for the requirements at issue. 4 Available at https://www.energy.gov/eere/buildings/doe-zero-energy-ready-home-zerh-program-requirements. Should this link become inactive, visit the current https://www.energy.gov webpage provided for the requirements at issue. Extension of Replacement Period for Livestock Sold on Account of Drought Notice 2023-67 SECTION 1. PURPOSE This notice provides guidance regarding an extension of the replacement period under § 1033(e) of the Internal Revenue Code for livestock sold on account of drought in specified counties. SECTION 2. BACKGROUND .01 Nonrecognition of Gain on Involuntary Conversion of Livestock . Section 1033(a) generally provides for nonrecognition of gain when property is involuntarily converted and replaced with property that is similar or related in service or use. Section 1033(e)(1) provides that a sale or exchange of livestock (other than poultry) held by a taxpayer for draft, breeding, or dairy purposes in excess of the number that would be sold following the
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related in service or use. Section 1033(e)(1) provides that a sale or exchange of livestock (other than poultry) held by a taxpayer for draft, breeding, or dairy purposes in excess of the number that would be sold following the taxpayer’s usual business practices is treated as an involuntary conversion if the livestock is sold or exchanged solely on account of drought, flood, or other weather-related conditions. .02 Replacement Period . Section 1033(a)(2)(A) generally provides that gain from an involuntary conversion is recognized only to the extent the amount realized on the conversion exceeds the cost of replacement property purchased during the replacement period. If a sale or exchange of livestock is treated as an involuntary conversion under § 1033(e)(1) and is solely on account of drought, flood, or other weather-related conditions that result in the area being designated as eligible for assistance by the federal government, § 1033(e)(2)(A) provides that the replacement period ends four years after the close of the first taxable year in which any part of the gain from the conversion is realized. Section 1033(e)(2)(B) provides that the Secretary may extend this replacement period on a regional basis for such additional time as the Secretary determines appropriate if the weather-related conditions that resulted in the area being designated as eligible for assistance by the federal government continue for more than three years. Section 1033(e)(2) is effective for any taxable year with respect to which the due date (without regard to extensions) for a taxpayer’s return is after December 31, 2002. SECTION 3. EXTENSION OF REPLACEMENT PERIOD UNDER § 1033(e)(2)(B) Notice 2006-82, 2006-2 C.B. 529, provides for extensions of the replacement period under § 1033(e)(2)(B). If a sale or exchange of livestock is treated as an involuntary conversion on account of drought and the taxpayer’s replacement period is determined under § 1033(e)(2)(A), the replacement period will be extended under § 1033(e)(2)(B) and Notice 2006-82 until the end of the taxpayer’s first taxable year ending after the first drought-free year for the applicable region. For this purpose, the first drought-free year for the applicable region is the first 12-month period that (1) ends August 31; (2) ends in or after the last year of the taxpayer’s four-year replacement period determined under § 1033(e)(2)(A); and (3) does not include any weekly period for which exceptional, extreme, or severe drought is reported for any location in the applicable region. The applicable region is the county that experienced the drought conditions on account of which the livestock was sold or exchanged and all counties that are contiguous to that county. A taxpayer may determine whether exceptional, extreme, or severe drought is reported for any location in the applicable region by reference to U.S. Drought Monitor maps that are produced on a weekly basis by the National Drought Mitigation Center. U.S. Drought Monitor maps are archived at http://droughtmonitor.unl.edu/Maps/MapArchive.aspx. In addition, Notice 2006-82 provides that the Internal Revenue Service will publish in September of each year a list of counties 1 for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Taxpayers may use this list instead of U.S. Drought Monitor maps to determine whether exceptional, extreme, or severe drought has been reported for any location in the applicable region. The Appendix to this notice contains the list of counties for which exceptional, extreme, or severe drought was reported during the 12-month period ending August 31, 2023. Under Notice 2006-82, the 12-month period ended on August 31, 2023, is not a drought-free year for an applicable region that includes any county on this list. Accordingly, for a taxpayer who qualified for a four-year replacement period for livestock sold or exchanged on account of drought and whose replacement period is scheduled to expire at the end of 2023 (or, in the case of a fiscal year taxpayer, at the end of the taxable year that includes August 31, 2023), the replacement period will be extended under § 1033(e)(2) and Notice 2006
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the end of 2023 (or, in the case of a fiscal year taxpayer, at the end of the taxable year that includes August 31, 2023), the replacement period will be extended under § 1033(e)(2) and Notice 2006-82 if the applicable region includes any county on this list. This extension will continue until the end of the taxpayer’s first taxable year ending after a drought-free year for the applicable region. SECTION 4. DRAFTING INFORMATION The principal author of this notice is Lewis Saideman of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, please contact Mr. Saideman at (202) 317-7009 (not a toll-free call). APPENDIX Alabama Counties of Baldwin, Coffee, Colbert, Conecuh, Covington, Dale, Escambia, Geneva, Henry, Houston, Jackson, Lauderdale, Lawrence, Limestone, Madison, Marshall, Mobile, Monroe, Morgan, and Washington. Arizona Counties of Apache, Cochise, Coconino, Graham, Greenlee, La Paz, Mohave, Navajo, Pima, Santa Cruz, Yavapai, and Yuma. Arkansas Counties of Arkansas, Ashley, Baxter, Benton, Boone, Bradley, Calhoun, Carroll, Chicot, Clark, Clay, Cleburne, Cleveland, Columbia, Conway, Craighead, Crawford, Crittenden, Cross, Dallas, Desha, Drew, Faulkner, Franklin, Fulton, Garland, Grant, Greene, Hempstead, Hot Spring, Howard, Independence, Izard, Jackson, Jefferson, Johnson, Lafayette, Lawrence, Lee, Lincoln, Little River, Logan, Lonoke, Madison, Marion, Mississippi, Monroe, Montgomery, Nevada, Newton, Ouachita, Perry, Phillips, Pike, Poinsett, Polk, Pope, Prairie, Pulaski, Randolph, Saint Francis, Saline, Scott, Searcy, Sebastian, Sevier, Sharp, Stone, Union, Van Buren, Washington, White, Woodruff, and Yell. California Counties of Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, and Yuba. Colorado Counties of Adams, Alamosa, Arapahoe, Baca, Bent, Cheyenne, Conejos, Costilla, Crowley, Custer, Delta, Denver, Dolores, Elbert, El Paso, Fremont, Garfield, Huerfano, Jackson, Kiowa, Kit Carson, La Plata, Larimer, Las Animas, Lincoln, Logan, Mesa, Moffat, Montezuma, Montrose, Morgan, Otero, Phillips, Prowers, Pueblo, Rio Blanco, Rio Grande, Routt, San Miguel, Sedgwick, Teller, Washington, Weld, and Yuma. Connecticut Counties of Fairfield, Hartford, Litchfield, Middlesex, New Haven, New London, Tolland, and Windham. Delaware County of Sussex. District of Columbia District of Columbia. Florida Counties of Alachua, Baker, Bay, Bradford, Brevard, Broward, Calhoun, Charlotte, Citrus, Collier, Columbia, DeSoto, Dixie, Escambia, Flagler, Franklin, Gadsden, Gilchrist, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Indian River, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee,
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, Glades, Gulf, Hamilton, Hardee, Hendry, Hernando, Highlands, Hillsborough, Holmes, Indian River, Jackson, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Martin, Miami-Dade, Monroe, Okaloosa, Okeechobee, Orange, Osceola, Palm Beach, Pasco, Pinellas, Polk, Putnam, Saint Lucie, Santa Rosa, Sarasota, Seminole, Sumter, Suwannee, Taylor, Union, Volusia, Wakulla, Walton, and Washington. Georgia Counties of Baker, Baldwin, Banks, Barrow, Berrien, Bibb, Bleckley, Brooks, Butts, Cherokee, Clarke, Clayton, Clinch, Cobb, Colquitt, Cook, Crawford, Dawson, Decatur, DeKalb, Douglas, Early, Echols, Elbert, Fannin, Forsyth, Franklin, Fulton, Gilmer, Grady, Greene, Gwinnett, Habersham, Hall, Hancock, Hart, Henry, Houston, Jackson, Jasper, Jones, Lamar, Lanier, Laurens, Lincoln, Lowndes, Lumpkin, McDuffie, Madison, Miller, Mitchell, Monroe, Morgan, Murray, Newton, Oconee, Oglethorpe, Peach, Pickens, Pike, Pulaski, Putnam, Rabun, Rockdale, Seminole, Stephens, Taliaferro, Taylor, Thomas, Towns, Twiggs, Union, Upson, Walton, Warren, Washington, White, Wilkes, and Wilkinson. Hawaii Counties of Hawaii, Honolulu, Kalawao, Kauai, and Maui. Idaho Counties of Adams, Bannock, Bear Lake, Benewah, Blaine, Bonner, Bonneville, Boundary, Butte, Camas, Caribou, Cassia, Clearwater, Custer, Franklin, Fremont, Gooding, Idaho, Kootenai, Latah, Lemhi, Lewis, Lincoln, Minidoka, Nez Perce, Oneida, Owyhee, Power, Shoshone, Teton, Twin Falls, Valley, and Washington. Illinois Counties of Adams, Alexander, Bond, Boone, Brown, Bureau, Carroll, Cass, Champaign, Christian, Clark, Clay, Clinton, Coles, Cook, Crawford, Cumberland, DeKalb, De Witt, Douglas, DuPage, Edgar, Effingham, Fayette, Ford, Franklin, Fulton, Gallatin, Grundy, Hamilton, Hancock, Hardin, Henderson, Henry, Iroquois, Jackson, Jasper, Jefferson, Jo Daviess, Johnson, Kane, Kankakee, Kendall, Knox, Lake, La Salle, Lee, Livingston, Logan, McDonough, McHenry, McLean, Macon, Madison, Marion, Marshall, Mason, Massac, Menard, Mercer, Monroe, Morgan, Moultrie, Ogle, Peoria, Perry, Piatt, Pike, Pope, Pulaski, Putnam, Randolph, Rock Island, Saint Clair, Saline, Sangamon, Schuyler, Scott, Shelby, Stark, Stephenson, Tazewell, Union, Vermilion, Warren, Washington, Whiteside, Will, Williamson, Winnebago, and Woodford. Indiana Counties of Benton, Boone, Carroll, Cass, Clay, Clinton, DeKalb, Elkhart, Fayette, Fountain, Fulton, Hamilton, Hancock, Harrison, Hendricks, Henry, Howard, Jasper, Johnson, LaGrange, Lake, LaPorte, Madison, Marion, Miami, Montgomery, Morgan, Newton, Noble, Owen, Parke, Perry, Porter, Pulaski, Putnam, Randolph, Shelby, Starke, Steuben, Sullivan, Tippecanoe, Tipton, Union, Vermillion, Vigo, Warren, Wayne, and White. Iowa Counties of Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Bremer, Buchanan, Buena Vista, Butler, Calhoun, Carroll, Cass, Cedar, Cerro Gordo, Cherokee, Chickasaw, Clarke, Clay, Clayton, Clinton, Crawford
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Audubon, Benton, Black Hawk, Bremer, Buchanan, Buena Vista, Butler, Calhoun, Carroll, Cass, Cedar, Cerro Gordo, Cherokee, Chickasaw, Clarke, Clay, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dickinson, Dubuque, Emmet, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Ida, Iowa, Jackson, Jasper, Jefferson, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Lyon, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, O’Brien, Osceola, Page, Palo Alto, Plymouth, Pocahontas, Polk, Pottawattamie, Poweshiek, Ringgold, Sac, Scott, Shelby, Sioux, Story, Tama, Taylor, Union, Van Buren, Wapello, Warren, Washington, Wayne, Webster, Winnebago, Winneshiek, Woodbury, Worth, and Wright. Kansas Counties of Allen, Anderson, Atchison, Barber, Barton, Bourbon, Brown, Butler, Chase, Chautauqua, Cherokee, Cheyenne, Clark, Cloud, Coffey, Comanche, Cowley, Crawford, Decatur, Dickinson, Doniphan, Douglas, Edwards, Elk, Ellis, Ellsworth, Finney, Ford, Franklin, Geary, Gove, Graham, Grant, Gray, Greeley, Greenwood, Hamilton, Harper, Harvey, Haskell, Hodgeman, Jackson, Jefferson, Jewell, Johnson, Kearny, Kingman, Kiowa, Labette, Lane, Leavenworth, Lincoln, Linn, Logan, Lyon, McPherson, Marion, Marshall, Meade, Miami, Mitchell, Montgomery, Morris, Morton, Nemaha, Neosho, Ness, Norton, Osage, Osborne, Ottawa, Pawnee, Phillips, Pratt, Rawlins, Reno, Republic, Rice, Riley, Rooks, Rush, Russell, Saline, Scott, Sedgwick, Seward, Shawnee, Sheridan, Sherman, Smith, Stafford, Stanton, Stevens, Sumner, Thomas, Trego, Wabaunsee, Wallace, Washington, Wichita, Wilson, Woodson, and Wyandotte. Kentucky Counties of Adair, Allen, Anderson, Ballard, Barren, Bath, Boone, Bourbon, Boyd, Boyle, Bracken, Breckinridge, Bullitt, Butler, Caldwell, Calloway, Carlisle, Carroll, Carter, Casey, Christian, Clark, Crittenden, Daviess, Edmonson, Elliott, Estill, Fayette, Fleming, Franklin, Fulton, Gallatin, Garrard, Grant, Graves, Grayson, Green, Greenup, Hancock, Hardin, Harrison, Hart, Henry, Hickman, Hopkins, Jefferson, Jessamine, Kenton, Larue, Lawrence, Lee, Lewis, Lincoln, Livingston, Logan, Lyon, McCracken, McLean, Madison, Marion, Marshall, Mason, Meade, Menifee, Mercer, Metcalfe, Montgomery, Morgan, Muhlenberg, Nelson, Nicholas, Ohio, Oldham, Owen, Pendleton, Powell, Robertson, Rockcastle, Rowan, Scott, Shelby, Simpson, Spencer, Taylor, Todd, Trigg, Trimble, Union, Warren, Washington, Webster, Wolfe, and Woodford. Louisiana Parishes of Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, La Salle, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, Saint
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Lafourche, La Salle, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Pointe Coupee, Rapides, Red River, Richland, Sabine, Saint Bernard, Saint Charles, Saint Helena, Saint James, Saint John the Baptist, Saint Landry, Saint Martin, Saint Mary, Saint Tammany, Tangipahoa, Tensas, Terrebonne, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana, and Winn. Maine Counties of Androscoggin, Cumberland, Knox, Lincoln, Sagadahoc, Waldo, and York. Maryland City of Baltimore. Counties of Anne Arundel, Baltimore, Carroll, Frederick, Harford, Howard, Montgomery, and Prince George’s. Massachusetts Counties of Barnstable, Berkshire, Bristol, Dukes, Essex, Franklin, Hampden, Hampshire, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester. Michigan County of Allegan, Barry, Branch, Cass, Clinton, Eaton, Genesee, Gogebic, Gratiot, Hillsdale, Ingham, Ionia, Jackson, Kent, Lake, Lapeer, Lenawee, Livingston, Macomb, Manistee, Mason, Missaukee, Monroe, Montcalm, Oakland, Ontonagon, Osceola, Saint Clair, Saint Joseph, Sanilac, Shiawassee, Washtenaw, Wayne, and Wexford. Minnesota Counties of Aitkin, Anoka, Becker, Beltrami, Benton, Big Stone, Blue Earth, Brown, Carlton, Carver, Cass, Chippewa, Chisago, Clay, Clearwater, Cottonwood, Crow Wing, Dakota, Dodge, Faribault, Fillmore, Freeborn, Goodhue, Grant, Hennepin, Houston, Hubbard, Isanti, Itasca, Jackson, Kanabec, Kandiyohi, Kittson, Koochiching, Lac qui Parle, Lake, Lake of the Woods, Le Sueur, Lincoln, Lyon, McLeod, Marshall, Martin, Meeker, Mille Lacs, Morrison, Mower, Murray, Nicollet, Nobles, Norman, Olmsted, Otter Tail, Pine, Pipestone, Pope, Ramsey, Redwood, Renville, Rice, Rock, Roseau, Saint Louis, Scott, Sherburne, Sibley, Stearns, Steele, Stevens, Swift, Todd, Traverse, Wabasha, Wadena, Waseca, Washington, Watonwan, Wilkin, Winona, Wright, and Yellow Medicine. Mississippi Counties of Adams, Amite, Bolivar, Claiborne, Coahoma, Copiah, Covington, DeSoto, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Issaquena, Jackson, Jefferson, Jefferson Davis, Lafayette, Lamar, Lawrence, Leflore, Lincoln, Madison, Marion, Marshall, Panola, Pearl River, Perry, Pike, Pontotoc, Quitman, Rankin, Sharkey, Simpson, Smith, Stone, Sunflower, Tate, Tunica, Union, Walthall, Warren, Washington, Wilkinson, and Yazoo. Missouri Counties of Adair, Andrew, Atchison, Audrain, Barry, Barton, Bates, Benton, Bollinger, Boone, Buchanan, Butler, Caldwell, Callaway, Camden, Cape Girardeau, Carroll, Carter, Cass, Cedar, Chariton, Christian, Clark, Clay, Clinton, Cole, Cooper, Crawford, Dade, Dallas, Daviess, DeKalb, Dent, Douglas, Dunklin, Franklin, Gasconade, Greene, Grundy, Harrison, Henry, Hickory, Holt, Howard, Howell, Iron, Jackson, Jasper, Jefferson, Johnson, Knox, Laclede, Lafayette, Lawrence, Lewis, Lincoln, Linn, Livingston, McDonald, Macon, Madison, Maries, Marion, Mercer, Miller, Mississippi, Moniteau, Monroe, Montgomery, Morgan, New Madrid, Newton, Oregon, Osage, Ozark, Pemiscot, Perry, Pettis,
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, Macon, Madison, Maries, Marion, Mercer, Miller, Mississippi, Moniteau, Monroe, Montgomery, Morgan, New Madrid, Newton, Oregon, Osage, Ozark, Pemiscot, Perry, Pettis, Phelps, Pike, Platte, Polk, Pulaski, Putnam, Ralls, Randolph, Ray, Reynolds, Ripley, Saint Charles, Saint Clair, Sainte Genevieve, Saint Francois, Saint Louis, Saline, Schuyler, Scotland, Scott, Shannon, Shelby, Stoddard, Stone, Sullivan, Taney, Vernon, Warren, Washington, Wayne, Webster, and Wright. Montana Counties of Beaverhead, Blaine, Broadwater, Cascade, Chouteau, Custer, Daniels, Dawson, Deer Lodge, Fallon, Fergus, Flathead, Gallatin, Garfield, Glacier, Granite, Hill, Jefferson, Judith Basin, Lake, Lewis and Clark, Liberty, Lincoln, McCone, Madison, Meagher, Mineral, Missoula, Petroleum, Phillips, Pondera, Powell, Prairie, Ravalli, Richland, Roosevelt, Sanders, Sheridan, Silver Bow, Teton, Toole, Valley, Wheatland, and Wibaux. Nebraska Counties of Adams, Antelope, Arthur, Banner, Blaine, Boone, Box Butte, Boyd, Brown, Buffalo, Burt, Butler, Cass, Cedar, Chase, Cherry, Cheyenne, Clay, Colfax, Cuming, Custer, Dakota, Dawes, Dawson, Deuel, Dixon, Dodge, Douglas, Dundy, Fillmore, Franklin, Frontier, Furnas, Gage, Garden, Garfield, Gosper, Grant, Greeley, Hall, Hamilton, Harlan, Hayes, Hitchcock, Holt, Hooker, Howard, Jefferson, Johnson, Kearney, Keith, Keya Paha, Kimball, Knox, Lancaster, Lincoln, Logan, Loup, McPherson, Madison, Merrick, Morrill, Nance, Nemaha, Nuckolls, Otoe, Pawnee, Perkins, Phelps, Pierce, Platte, Polk, Red Willow, Richardson, Rock, Saline, Sarpy, Saunders, Scotts Bluff, Seward, Sheridan, Sherman, Sioux, Stanton, Thayer, Thomas, Thurston, Valley, Washington, Wayne, Webster, Wheeler, and York. Nevada City of Carson City. Counties of Churchill, Clark, Douglas, Elko, Esmeralda, Eureka, Humboldt, Lander, Lincoln, Lyon, Mineral, Nye, Pershing, Storey, Washoe, and White Pine. New Hampshire Counties of Cheshire, Hillsborough, Merrimack, Rockingham, and Strafford. New Jersey Counties of Atlantic, Bergen, Cape May, Cumberland, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Passaic, Salem, Somerset, Sussex, and Union. New Mexico Counties of Bernalillo, Catron, Chaves, Cibola, Colfax, Curry, DeBaca, Dona Ana, Eddy, Grant, Guadalupe, Harding, Hidalgo, Lea, Lincoln, Los Alamos, Luna, McKinley, Mora, Otero, Quay, Rio Arriba, Roosevelt, Sandoval, San Juan, San Miguel, Santa Fe, Sierra, Socorro, Taos, Torrance, Union, and Valencia. New York Counties of Bronx, Columbia, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Ulster, and Westchester. North Carolina Counties of Cherokee, Clay, Graham, Jackson, Macon, Swain, and Transylvania. North Dakota Counties of Barnes, Benson, Billings, Bottineau, Bowman, Burke, Burleigh, Cass, Cavalier, Dickey, Divide, Dunn, Eddy, Emmons, Foster, Golden Valley, Griggs, Hettinger, Kidder, LaMoure, Logan, McHenry, McIntosh, McKenzie, McLean, Mountrail, Nelson, Pembina, Pierce, Ramsey, Ransom, Renville, Richland, Rolette, Sargent, Sheridan,
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, LaMoure, Logan, McHenry, McIntosh, McKenzie, McLean, Mountrail, Nelson, Pembina, Pierce, Ramsey, Ransom, Renville, Richland, Rolette, Sargent, Sheridan, Sioux, Slope, Stark, Steele, Stutsman, Towner, Traill, Walsh, Ward, Wells, and Williams. Ohio Counties of Adams, Brown, Clermont, Darke, Preble, Scioto, and Williams. Oklahoma Counties of Adair, Alfalfa, Atoka, Beaver, Beckham, Blaine, Bryan, Caddo, Canadian, Carter, Cherokee, Choctaw, Cimarron, Cleveland, Coal, Comanche, Cotton, Craig, Creek, Custer, Delaware, Dewey, Ellis, Garfield, Garvin, Grady, Grant, Greer, Harmon, Harper, Haskell, Hughes, Jackson, Jefferson, Johnston, Kay, Kingfisher, Kiowa, Latimer, Le Flore, Lincoln, Logan, Love, McClain, McCurtain, McIntosh, Major, Marshall, Mayes, Murray, Muskogee, Noble, Nowata, Okfuskee, Oklahoma, Okmulgee, Osage, Ottawa, Pawnee, Payne, Pittsburg, Pontotoc, Pottawatomie, Pushmataha, Roger Mills, Rogers, Seminole, Sequoyah, Stephens, Texas, Tillman, Tulsa, Wagoner, Washington, Washita, Woods, and Woodward. Oregon Counties of Baker, Benton, Clackamas, Clatsop, Crook, Deschutes, Douglas, Gilliam, Grant, Harney, Hood River, Jackson, Jefferson, Josephine, Klamath, Lake, Lane, Lincoln, Linn, Malheur, Marion, Morrow, Multnomah, Polk, Sherman, Tillamook, Umatilla, Union, Wallowa, Wasco, Wheeler, and Yamhill. Pennsylvania Counties of Lancaster and York. Rhode Island Counties of Bristol, Kent, Newport, Providence, and Washington. South Carolina Counties of Abbeville, Anderson, Greenville, Laurens, McCormick, Oconee, Pickens, and Spartanburg. South Dakota Counties of Aurora, Beadle, Bennett, Bon Homme, Brookings, Brown, Brule, Buffalo, Campbell, Charles Mix, Clark, Clay, Codington, Corson, Custer, Davison, Day, Deuel, Dewey, Douglas, Edmunds, Fall River, Faulk, Grant, Gregory, Haakon, Hand, Hanson, Hutchinson, Jackson, Jerauld, Kingsbury, Lake, Lawrence, Lincoln, Lyman, McCook, McPherson, Marshall, Meade, Mellette, Miner, Minnehaha, Moody, Oglala Lakota, Pennington, Roberts, Sanborn, Spink, Stanley, Todd, Tripp, Turner, Union, Walworth, Yankton, and Ziebach. Tennessee Counties of Bedford, Benton, Bledsoe, Blount, Bradley, Cannon, Carroll, Chester, Coffee, Davidson, Decatur, DeKalb, Dyer, Franklin, Gibson, Giles, Grundy, Hamilton, Hardin, Henderson, Henry, Hickman, Houston, Humphreys, Lake, Lauderdale, Lawrence, Lewis, Lincoln, Loudon, McMinn, McNairy, Madison, Marion, Marshall, Meigs, Monroe, Montgomery, Moore, Obion, Perry, Polk, Rhea, Roane, Rutherford, Sequatchie, Shelby, Stewart, Sumner, Tipton, Van Buren, Warren, Wayne, Weakley, White, Williamson, and Wilson. Texas Counties of Anderson, Andrews, Angelina, Aransas, Archer, Armstrong, Atascosa, Austin, Bailey, Bandera, Bastrop, Baylor, Bee, Bell, Bexar, Blanco, Borden, Bosque, Bowie, Brazoria, Brazos, Brewster, Briscoe, Brooks, Brown, Burleson, Burnet, Caldwell, Calhoun, Callahan, Cameron, Carson, Castro, Chambers, Cherokee, Childress, Clay, Cochran, Coke, Coleman, Collin, Collingsworth, Colorado, Comal, Comanche
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leson, Burnet, Caldwell, Calhoun, Callahan, Cameron, Carson, Castro, Chambers, Cherokee, Childress, Clay, Cochran, Coke, Coleman, Collin, Collingsworth, Colorado, Comal, Comanche, Concho, Cooke, Coryell, Cottle, Crane, Crockett, Crosby, Culberson, Dallam, Dallas, Dawson, Deaf Smith, Delta, Denton, DeWitt, Dickens, Dimmit, Donley, Duval, Eastland, Ector, Edwards, Ellis, El Paso, Erath, Falls, Fannin, Fayette, Fisher, Floyd, Foard, Fort Bend, Freestone, Frio, Gaines, Galveston, Garza, Gillespie, Glasscock, Goliad, Gonzales, Gray, Grayson, Gregg, Grimes, Guadalupe, Hale, Hall, Hamilton, Hansford, Hardeman, Hardin, Harris, Harrison, Hartley, Haskell, Hays, Hemphill, Henderson, Hidalgo, Hill, Hockley, Hood, Hopkins, Houston, Howard, Hudspeth, Hunt, Hutchinson, Irion, Jack, Jackson, Jasper, Jeff Davis, Jefferson, Jim Hogg, Jim Wells, Johnson, Jones, Karnes, Kaufman, Kendall, Kenedy, Kent, Kerr, Kimble, King, Kinney, Kleberg, Knox, Lamar, Lamb, Lampasas, La Salle, Lavaca, Lee, Leon, Liberty, Limestone, Lipscomb, Live Oak, Llano, Loving, Lubbock, Lynn, McCulloch, McLennan, McMullen, Madison, Marion, Martin, Mason, Matagorda, Maverick, Medina, Menard, Midland, Milam, Mills, Mitchell, Montague, Montgomery, Moore, Motley, Nacogdoches, Navarro, Newton, Nolan, Nueces, Ochiltree, Oldham, Orange, Palo Pinto, Panola, Parker, Parmer, Pecos, Polk, Potter, Presidio, Randall, Reagan, Real, Red River, Reeves, Refugio, Roberts, Robertson, Rockwall, Runnels, Rusk, Sabine, San Augustine, San Jacinto, San Patricio, San Saba, Schleicher, Scurry, Shackelford, Shelby, Sherman, Smith, Somervell, Starr, Stephens, Sterling, Stonewall, Sutton, Swisher, Tarrant, Taylor, Terrell, Terry, Throckmorton, Tom Green, Travis, Trinity, Tyler, Upton, Uvalde, Val Verde, Van Zandt, Victoria, Walker, Waller, Ward, Washington, Webb, Wharton, Wheeler, Wichita, Wilbarger, Willacy, Williamson, Wilson, Winkler, Wise, Yoakum, Young, Zapata, and Zavala. Utah Counties of Beaver, Box Elder, Cache, Carbon, Daggett, Davis, Duchesne, Emery, Garfield, Grand, Iron, Juab, Kane, Millard, Morgan, Piute, Rich, Salt Lake, San Juan, Sanpete, Sevier, Summit, Tooele, Uintah, Utah, Wasatch, Washington, Wayne, and Weber. Vermont County of Windham. Virginia City of Falls Church. Counties of Accomack, Clarke, Fairfax, Fauquier, Frederick, Loudoun, Northampton, Rappahannock, Shenandoah, and Warren. Washington Counties of Asotin, Benton, Chelan, Clallam, Columbia, Cowlitz, Franklin, Garfield, Grays Harbor, Jefferson, King, Kitsap, Kittitas, Lewis, Mason, Okanogan, Pacific, Pend Oreille, Pierce, San Juan, Skagit, Skamania, Snohomish, Stevens, Thurston, Wahkiakum, Walla Walla, Whatcom, Whitman, and Yakima. West Virginia County of Jefferson. Wisconsin Counties of Adams, Ashland, Barron, Bayfield, Brown, Buffalo, Burnett, Calumet, Chippewa, Clark, Columbia, Crawford, Dane, Dodge, Douglas, Dunn, Fond du Lac, Forest, Grant,
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ies of Adams, Ashland, Barron, Bayfield, Brown, Buffalo, Burnett, Calumet, Chippewa, Clark, Columbia, Crawford, Dane, Dodge, Douglas, Dunn, Fond du Lac, Forest, Grant, Green, Green Lake, Iowa, Iron, Jackson, Jefferson, Juneau, Kenosha, La Crosse, Lafayette, Langlade, Lincoln, Manitowoc, Marathon, Marquette, Milwaukee, Monroe, Oneida, Outagamie, Ozaukee, Pepin, Pierce, Polk, Portage, Price, Racine, Richland, Rock, Rusk, Saint Croix, Sauk, Sawyer, Sheboygan, Taylor, Vernon, Vilas, Walworth, Washburn, Washington, Waukesha, Waupaca, Waushara, Winnebago, and Wood. Wyoming Counties of Albany, Campbell, Carbon, Converse, Fremont, Goshen, Laramie, Lincoln, Niobrara, Park, Platte, Sublette, Sweetwater, Teton, Uinta, and Weston. Federated States of Micronesia State of Kapingamarangi. Republic of the Marshall Islands Atoll of Wotje. Commonwealth of Puerto Rico Municipalities of Aibonito, Arecibo, Barranquitas, Camuy, Cayey, Cidra, Coamo, Guayama, Hatillo, Isabela, Lares, Orocovis, Quebradillas, Salinas, San Sebastian, Utuado, and Villalba. United States Virgin Islands Islands of Saint Croix, Saint John, and Saint Thomas. 1 While Notice 2006-82 uses the term “counties,” this notice lists other applicable regions as well (e.g., boroughs, parishes, etc.). Treatment of Amounts Paid to Section 170(c) Organizations under Employer Leave-Based Donation Programs to Aid Victims of the Hawaii Wildfires that Began on August 8, 2023 (2023 Hawaii Wildfires). Notice 2023-69 TREATMENT OF LEAVE-BASED DONATION PAYMENTS In response to the extreme need for charitable relief for victims of wildfires beginning on August 8, 2023, in the State of Hawaii (2023 Hawaii Wildfires), employers may have adopted or may be considering adopting leave-based donation programs. This notice provides guidance under the Internal Revenue Code (Code) 1 on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs for the relief of victims of the 2023 Hawaii Wildfires. This guidance is similar to the guidance provided in Notice 2001-69, 2001-46 IRB 491, as modified and superseded by Notice 2003-1, 2003-2 IRB 257, regarding charitable relief following the September 11, 2001, terrorist attacks. EMPLOYER LEAVE-BASED DONATION PROGRAMS Under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations described in section 170(c) (section 170(c) organizations). Cash payments made by an employer to section 170(c) organizations under an employer leave-based donation program are referred to as “employer leave-based donation payments.” TREATMENT OF QUALIFIED EMPLOYER LEAVE-BASED DONATION PAYMENTS Employer leave-based donation payments made by an employer before January 1, 2025, to section 170(c) organizations to aid victims of the 2023 Hawaii Wildfires (qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer. Similarly, employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable). Employers should not include the amount of qualified employer leave-based donation payments in Box 1, 3 (if applicable), or 5 of the electing employees’ Forms W-2. Electing employees are not eligible to claim charitable contribution deductions under section 170 for the value of the forgone leave that funds qualified employer leave-based donation payments. An employer may deduct qualified employer leave-based
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electing employees’ Forms W-2. Electing employees are not eligible to claim charitable contribution deductions under section 170 for the value of the forgone leave that funds qualified employer leave-based donation payments. An employer may deduct qualified employer leave-based donation payments under the rules of section 170 or the rules of section 162 if the employer otherwise meets the respective requirements of either section of the Code. DRAFTING INFORMATION For further information, please contact Clara L. Raymond of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 317-4718 (not a toll-free number). 1 Unless otherwise specified, all “section” or “§” references are to sections of the Code. Rev. Proc. 2023-35 SECTION 1. PURPOSE This revenue procedure amplifies and supersedes Rev. Proc. 2014-45, 2014-34 I.R.B. 388, which describes circumstances in which the Internal Revenue Service (IRS) will not treat a redemption of shares in a money market fund (MMF) as part of a wash sale for purposes of section 1091 of the Internal Revenue Code (Code). 1 This revenue procedure expands the scope of Rev. Proc. 2014-45 in response to final rules adopted by the Securities and Exchange Commission (SEC) on July 12, 2023, which amend Rule 2a-7 under the Investment Company Act of 1940 (1940 Act), 17 CFR § 270.2a-7 (2023 Amendments). See Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, Investment Company Act Release No. 34959 (July 12, 2023), 88 F.R. 51404 (Aug. 3, 2023) (2023 SEC Release). SECTION 2. BACKGROUND .01 Money Market Funds (1) An investment company that is registered under the 1940 Act and that meets the requirements of Rule 2a-7 under the 1940 Act is permitted to hold itself out as an MMF. MMFs have historically sought to keep stable (typically at $1.00) the prices at which their shares are distributed, redeemed, and repurchased. The securities that Rule 2a-7 permits an MMF to hold generally result in no more than minimal fluctuations in the value of an MMF’s portfolio as determined on a per-share basis. (2) Prior to amendments in 2014, Rule 2a-7 generally permitted an MMF to compute its price per share by using either or both of (a) the amortized cost method of valuation, and (b) the penny-rounding method of pricing. Under the amortized cost method of valuation, an MMF’s net asset value per share (NAV) was determined by valuing the fund’s portfolio securities at their acquisition cost, adjusted for amortization of premium or accretion of discount. Under the penny-rounding method of pricing, an MMF’s NAV was rounded to the nearest one percent in computing the MMF’s share price. These methods were intended to enable MMFs to maintain stable share prices under most circumstances. (3) Final rules adopted by the SEC in 2014 generally bar the use of the amortized cost method of valuation and the use of the penny-rounding method of pricing, except by government MMFs and retail MMFs 2 (2014 Amendments). See Money Market Fund Reform; Amendments to Form PF , Investment Company Act Release No. 31166 (July 23, 2014), 79 F.R. 47735 (Aug. 14, 2014). An MMF that is neither a government MMF nor a retail MMF must value its portfolio securities using market-based factors and compute its price per share by rounding the fund’s NAV to a minimum of the fourth decimal place (or, for an MMF with a share price other than $1.0000, an equivalent or greater level of precision). 17 CFR § 270.2a–7(c)(1)(ii). An MMF that uses market factors to value its securities and uses basis point rounding to price its shares for purposes of distribution, redemption, and repurchase (floating-NAV MMF) has a share price that is likely to change frequently, but usually within a narrow
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market factors to value its securities and uses basis point rounding to price its shares for purposes of distribution, redemption, and repurchase (floating-NAV MMF) has a share price that is likely to change frequently, but usually within a narrow range because of the limited types of investments that an MMF may hold. A government MMF or retail MMF that continues to use the amortized cost method and penny rounding (stable-NAV MMF) can maintain a constant share price under most market conditions. (4) The fact that stable-NAV MMFs maintain a constant share price simplifies the taxation of their shareholders. Because shareholders acquire shares from the fund for $1.00/share, have bases of $1.00/share, and redeem those shares for the same amount, they realize no gain or loss on those redemptions. On the other hand, shareholders in floating-NAV MMFs typically redeem shares for amounts slightly different from the amounts for which those shares were issued to them. Section 2.02(4) and (5) of this revenue procedure describe prior guidance intended to reduce tax compliance burdens associated with gains and losses on shares in floating-NAV MMFs. (5) The 2014 Amendments also permitted an MMF to institute a liquidity fee if certain liquid assets of the MMF fall below a specified percentage of the MMF’s total assets. If those liquid assets fall below another (lower) specified percentage, the 2014 Amendments generally required the MMF to institute a liquidity fee, unless the MMF’s board of directors (including a majority of the directors who are not interested persons of the fund) determines that imposing such a fee is not in the best interests of the MMF. When an MMF has a liquidity fee in effect, the fee reduces the proceeds received by all redeeming shareholders. Government MMFs were generally exempt from the requirements of the liquidity fee provisions but were permitted to institute liquidity fees on the same terms. .02 Wash Sale Rules (1) Section 1091(a) disallows a loss realized by a taxpayer on a sale or other disposition of shares of stock or securities if, within a period beginning 30 days before and ending 30 days after the date of such sale or disposition, the taxpayer acquires (by purchase or by an exchange on which the entire amount of gain or loss is recognized by law), or enters into a contract or option to so acquire, substantially identical stock or securities (unless the taxpayer is a dealer in stock or securities and the loss is sustained in a transaction made in the ordinary course of such business). (2) If a taxpayer acquired property and that acquisition resulted in the disallowance of a loss under section 1091(a), then under section 1091(d), the taxpayer’s basis in the property so acquired equals the basis of the stock or securities disposed of at a loss, increased or decreased to take into account any difference between the price at which the replacement property was acquired and the price at which the original stock or securities were disposed of. (3) As mentioned above, a shareholder may realize a loss upon a redemption of shares in an MMF in certain circumstances. For example, the share price of a floating-NAV fund may have declined below the price at which the shareholder acquired shares, or an MMF may impose a liquidity fee on redemptions. Because many MMF shareholders engage in frequent redemptions and purchases of MMF shares (for example, because of sweep arrangements and automatic reinvestments of distributions), a shareholder that realizes a loss on a redemption of MMF shares will often acquire shares in that MMF within 30 days before or after the redemption. (4) When the 2014 Amendments required certain MMFs to become floating-NAV MMFs, the Department of the Treasury (Treasury Department) and the IRS published guidance to mitigate in two ways the administrative burdens associated with gains and losses on those MMF shares, including those associated with wash sales. (a) First, § 1.446-7 provides a simplified method of accounting for gain or loss on MMF shares (NAV method). Under the NAV method, a taxpayer’s gain or loss on shares in an MMF is based on the change in the aggregate value of the taxpayer’s shares during a computation period and on the net amount of purchases and redemptions during the computation period. Because no gain
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�s gain or loss on shares in an MMF is based on the change in the aggregate value of the taxpayer’s shares during a computation period and on the net amount of purchases and redemptions during the computation period. Because no gain or loss is determined for particular redemptions under the NAV method, no redemption implicates the wash sale rules. The NAV method applies to floating-NAV MMFs and stable-NAV MMFs. See § 1.446-7(a). (b) Second, Rev. Proc. 2014-45 provided that the IRS will not treat a redemption of a share of a floating-NAV MMF as a part of a wash sale. Thus, Rev. Proc. 2014-45 provided relief from the wash sale rules for shareholders in floating-NAV MMFs not using the NAV method, but it did not extend the relief to stable-NAV MMFs. .03 2023 Amendments (1) The 2023 Amendments eliminate from Rule 2a-7 any link between an MMF’s liquid assets and the MMF’s ability (or obligation) to institute liquidity fees. Under Rule 2a-7(c)(2)(i), as amended, any MMF other than a government MMF must institute a liquidity fee (not to exceed two percent of the value of the shares redeemed) if the MMF’s board of directors, including a majority of the directors who are not interested persons of the MMF, determines that a liquidity fee is in the best interests of the MMF. 3 A government MMF is permitted to impose liquidity fees on the same terms. The SEC intends to increase the resilience of MMFs by providing a mechanism to allocate liquidity costs to redeeming investors in times of stress while avoiding incentives for preemptive redemptions associated with liquidity fee triggers based on liquidity levels or other criteria investors might predict. See 2023 SEC Release, 88 F.R. at 51411. (2) The provisions of the 2023 Amendments relating to liquidity fees are effective on October 2, 2023. These amendments provide a six-month compliance date for the discretionary liquidity fee provisions described in section 2.03(1) of this revenue procedure. Affected MMFs, however, including government MMFs, may begin to rely on those provisions after the October 2, 2023, effective date. See 2023 SEC Release, 88 F.R. at 51452. (3) Thus, after October 2, 2023, any MMF may impose a liquidity fee based solely on a determination of its board of directors. Thus, in some situations, the board of a stable-NAV MMF may determine that such a fee is in the best interests of the MMF and so impose it on redemptions of the MMF’s shares. For a redeeming shareholder that has not adopted the NAV method (which is the case for almost all shareholders in stable-NAV MMFs), the fee will result in a loss on the redemption. Moreover, because stable-NAV MMFs are outside the scope of Rev. Proc. 2014-45, there is no current impediment to the application of the section 1091 wash sale rules to that loss. (4) The Treasury Department and the IRS intend this revenue procedure to reduce undue tax compliance burdens resulting from the 2023 Amendments. Because of the constant value of shares in stable-NAV MMFs, the frequency with which many taxpayers continuously acquire and redeem shares in these MMFs, and the administrative and compliance burdens that would flow from applying section 1091 to these transactions, it is in the interest of sound tax administration to extend to these shares the relief that Rev. Proc. 2014-45 already provides to shares in floating-NAV MMFs. Accordingly, the IRS will not treat as part of a wash sale a redemption of a share in any MMF. SECTION 3. SCOPE This revenue procedure applies to a redemption of one or more shares in an MMF. SECTION 4. APPLICATION If a redemption is within the scope of section 3 of this revenue procedure and results in a loss, the IRS will not treat the redemption as part of a wash sale. Therefore, section 1091(a) will not disallow the deduction for the resulting loss in the year realized and section 1091(d) will not cause the basis of any property to be determined by
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the redemption as part of a wash sale. Therefore, section 1091(a) will not disallow the deduction for the resulting loss in the year realized and section 1091(d) will not cause the basis of any property to be determined by reference to the basis of the redeemed shares. SECTION 5. EFFECT ON OTHER DOCUMENTS Rev. Proc. 2014-45 is amplified and superseded for redemptions of shares in MMFs after October 2, 2023. SECTION 6. EFFECTIVE DATE This revenue procedure is effective for redemptions of shares in MMFs after October 2, 2023. SECTION 7. DRAFTING INFORMATION The principal author of this revenue procedure is Vanessa Mekpong of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Vanessa Mekpong on (202) 317-6842 (not a toll-free number). 1 Unless otherwise specified, all “Section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1). 2 A government MMF is an MMF that “invests 99.5 percent or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully.” 17 CFR § 270.2a–7(a)(14). A retail MMF is an MMF that “has policies and procedures reasonably designed to limit all beneficial owners of the fund to natural persons.” 17 CFR § 270.2a–7(a)(21). 3 The 2023 Amendments also require certain MMFs to impose liquidity fees based on levels of net redemptions. The MMFs subject to that rule, institutional prime MMFs and institutional tax-exempt MMFs, are floating-NAV MMFs. Accordingly, Rev. Proc. 2014-45 currently provides wash sale relief for transactions in their shares. Part IV Excise Tax on Designated Drugs; Procedural Requirements REG-115559-23 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains proposed regulations that would provide guidance on how taxpayers will report liability for the excise tax imposed on manufacturers, producers, or importers of certain designated drugs. The proposed regulations affect manufacturers, producers, and importers of designated drugs that sell such drugs during certain statutory periods. The proposed regulations also would except such tax from semimonthly deposit requirements. DATES: Written or electronic comments and requests for a public hearing must be received by December 1, 2023. Requests for a public hearing must be submitted as prescribed in the “ Comments and Requests for a Public Hearing ” section. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-115559-23) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS’s public docket. Send paper submissions to: CC:PA:LPD:PR (REG-115559-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, contact Jacob W. Peeples, James S. Williford, or Michael H. Beker at (202) 317-6855 (not a toll-free number); concerning the submission of comments and/or requests for a public hearing, contact Vivian Hayes by phone at (202) 317-5306 (not a toll-free number) or by email at publichearings@irs.gov (preferred). SUPPLEMENTARY INFORMATION: Background This document contains proposed regulations that would amend the Excise Tax Procedural Regulations (26 CFR part 40) and add a new part 47 to 26 CFR chapter 1 to contain the “Designated Drugs Excise Tax Regulations ” related to the excise tax imposed
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contains proposed regulations that would amend the Excise Tax Procedural Regulations (26 CFR part 40) and add a new part 47 to 26 CFR chapter 1 to contain the “Designated Drugs Excise Tax Regulations ” related to the excise tax imposed by section 5000D of the Internal Revenue Code (Code) on certain sales by manufacturers, producers, or importers of designated drugs (section 5000D tax). Section 5000D, added to chapter 50A of the Code by section 11003 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA), imposes an excise tax on the sale by the manufacturer, producer, or importer (taxpayer) of any designated drug during a day that falls within a period described in section 5000D(b). Because chapter 50A is a new chapter of the Code, the existing regulations that prescribe the procedural rules applicable to most excise taxes do not apply to chapter 50A. Notice 2023-52 (2023-35 I.R.B. 650) announces that the Treasury Department and the IRS intend to propose regulations addressing substantive and procedural issues related to the section 5000D tax. These proposed regulations address return filing and other procedural requirements related to the section 5000D tax as set forth in Notice 2023-52. The Treasury Department and the IRS will issue a separate notice of proposed rulemaking to address substantive issues related to the section 5000D tax. Explanation of Provisions I. Proposed Amendments to 26 CFR part 40 These proposed regulations would apply the Excise Tax Procedural Regulations in 26 CFR part 40 to excise taxes imposed by chapter 50A of the Code (and thus to the section 5000D tax), with some limited exceptions. A. Proposed amendments to §40.0-1 Section 40.0-1(a) provides generally that the regulations in part 40 set forth administrative rules relating to the excise taxes imposed by chapters 31 through 34, 36, 38, 39, and 49 of the Code. Proposed §40.0-1(a) would amend that provision by adding chapter 50A of the Code to the list of Code chapters subject to the part 40 regulations. B. Proposed amendments to §40.6011(a)-1 Section 40.6011(a)-1(a)(1) provides that the return of tax to which part 40 applies must be made on Form 720, Quarterly Federal Excise Tax Return , according to the instructions applicable to the form. Section 40.6011(a)-1(a)(2) provides, in part, that a return must be filed for the first calendar quarter in which liability for tax is incurred (or tax must be collected and paid over) and for each subsequent calendar quarter, whether or not liability is incurred (or tax must be collected and paid over) during that subsequent quarter, until a final return under §40.6011(a)-2 is filed. Proposed §40.6011(a)-1(d) would provide that a return that reports liability imposed by section 5000D must be made for a period of one calendar quarter, and that a return must be filed for each calendar quarter in which liability for the section 5000D tax is incurred. Therefore, under these proposed regulations, taxpayers would be required to report any section 5000D tax liability on Form 720; however, taxpayers would not be required to file subsequent returns for quarters in which they incur no section 5000D tax liability. C. Proposed amendments to §40.6302(c)-1 Section 40.6302(c)-1(a) provides that except as provided by statute or by §40.6302(c)-1(e), each person required under §40.6011(a)-1(a)(2) to file a quarterly return must make a deposit of tax for each semimonthly period (as defined in §40.0-1(c)) in which tax liability is incurred. Section 40.6302(c)-1(e) provides a list of taxes that are excepted from the semimonthly deposit requirement. Proposed §40.6302(c)-1(e)(1)(vi) would add the section 5000D tax to the list of taxes that are excepted from the semimonthly deposit requirement. Therefore, under these proposed regulations, taxpayers with
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§40.6302(c)-1(e)(1)(vi) would add the section 5000D tax to the list of taxes that are excepted from the semimonthly deposit requirement. Therefore, under these proposed regulations, taxpayers with section 5000D tax liability would not be required to make semimonthly deposits of the section 5000D tax. II. Proposed Addition of 26 CFR part 47 In addition to proposing the addition of a new part 47 to 26 CFR chapter 1, proposed §47.5000D-1 would provide an introductory provision under part 47 that would designate 26 CFR part 47 as the “Designated Drugs Excise Tax Regulations.” Proposed Applicability Dates These proposed regulations, once adopted as final regulations in a Treasury Decision published in the Federal Register , are proposed to apply to calendar quarters beginning on or after October 1, 2023. Taxpayers may rely on these proposed regulations for such returns beginning on October 1, 2023, and before the date that a Treasury Decision published in the Federal Register adopts these regulations as final regulations. Special Analyses I. Regulatory Planning and Review—Economic Analysis Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. II. Paperwork Reduction Act The collections of information contained within these proposed regulations will be submitted to the Office of Management and Budget (OMB) for review in accordance with the Paperwork Reduction Act (PRA) (44 U.S.C. 3507(d)). See 5 CFR 1320.11. The Treasury Department and the IRS request comments on the information collection burdens related to the proposed regulations. Commenters are strongly encouraged to submit public comments electronically. Written comments and recommendations for the proposed information collection should be sent to https://www.reginfo.gov/public/do/PRAMain , with copies to the IRS. To find this particular information collection, select “Currently under Review - Open for Public Comments” and then use the search function. Submit electronic submissions for the proposed information collection to the IRS via email at pra.comments@irs.gov (indicate REG-115559-23 in the subject line). Comments on the collection of information must be received by December 1, 2023. Comments are specifically requested concerning: Whether the proposed collections of information are necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility; The accuracy of the estimated burden associated with the proposed collections of information (see below); How the quality, utility, and clarity of the information to be collected may be enhanced; How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. The collections of information in these proposed regulations relate to reporting and recordkeeping requirements that will allow section 5000D taxpayers to meet their tax reporting obligations. The collections of information would generally be used by the IRS for tax compliance purposes and by taxpayers to facilitate proper tax reporting and compliance. The reporting and recordkeeping requirements are covered within the form and instructions for Form 720. IRS is seeking OMB approval on the statutorily required revisions to the form. Therefore, collection requirements will be submitted to OMB under control number 1545-0023. Because the section 5000D tax is a new tax that has never been reported to the IRS, the Treasury Department and the IRS do not have historical data on the number of affected taxpayers. The Centers for Medicare and Medicaid Services (CMS) has selected 10 drugs for price negotiation for initial price applicability year 2026. CMS will select for negotiation a limited number of drugs for each initial price applicability year after that, as outlined in the IRA. Further, manufacturers, producers, and importers of such drugs may or may not become subject to section 5000D tax liability. Based on the foregoing, the IRS estimates that there will be between 0 and 50 taxpayers during the next 3 years. If a taxpayer has a section 5000D tax liability, it would be required to file Form 720 to report such liability. Form 720 is a quarterly
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the foregoing, the IRS estimates that there will be between 0 and 50 taxpayers during the next 3 years. If a taxpayer has a section 5000D tax liability, it would be required to file Form 720 to report such liability. Form 720 is a quarterly return. A taxpayer would only be required to file Form 720 during calendar quarters in which the taxpayer has a section 5000D tax liability. Therefore, a taxpayer that has a section 5000D tax liability in one calendar quarter but not in subsequent calendar quarters would only be required to file one Form 720. The respondents with regard to the section 5000D tax are manufacturers, producers, and importers of certain drugs. The Treasury Department and the IRS estimate the annual burden of the collections of information as follows (these estimates, which are for PRA purposes only, are based on the high end of the range of possible taxpayers and the high end of the range of the frequency of responses, in which a taxpayer would have tax liability in all four calendar quarters): Estimated frequency of responses: Quarterly. Estimated number of responses: 50. Estimated burden time per respondent: 6.9 hours. Estimated total annual reporting burden: 1,380 hours. A Federal agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number assigned by OMB. Books or records relating to a collection of information must be retained if their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103. III. Regulatory Flexibility Act Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the section 5000D tax is imposed only when certain drug manufacturers, producers, and importers sell certain drugs during periods described in section 5000D(b). The periods described in section 5000D(b) relate to benchmarks in the Medicare Drug Price Negotiation Program, which involves only certain drugs with high Medicare expenditures. If any section 5000D tax liability arises, the taxpayers will primarily not be small entities. As noted earlier, data is not readily available about the number of taxpayers affected, but the number is likely to be limited, in part due to the limited number of drugs selected for the Drug Price Negotiation Program in any particular year. In addition, these proposed regulations will assist taxpayers in meeting their tax reporting obligations by providing clarity on how to report section 5000D tax liability, which will make it easier for taxpayers to comply with section 5000D. Therefore, these proposed regulations will not create additional obligations for, or impose a significant economic impact on, small entities, and a regulatory flexibility analysis under the Regulatory Flexibility Act is not required. Notwithstanding this certification, the Treasury Department and the IRS welcome comments on the impact of these proposed regulations on small entities. IV. Section 7805(f) Pursuant to section 7805(f) of the Code, these proposed regulations have been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business. V. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. These proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector, in excess of that threshold. V. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications, do not impose substantial direct compliance costs on State and local governments, and do not preempt State law within the meaning of the Executive order. Statement of Availability of IRS Documents The IRS Notice cited
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Executive order. These proposed regulations do not have federalism implications, do not impose substantial direct compliance costs on State and local governments, and do not preempt State law within the meaning of the Executive order. Statement of Availability of IRS Documents The IRS Notice cited in this preamble is published in the Internal Revenue Bulletin (or Cumulative Bulletin) and is available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov . Comments and Requests for a Public Hearing Before these proposed amendments to the regulations are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in the preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any comments submitted will be made available at https://www.regulations. gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register . Drafting Information The principal author of these regulations is Jacob W. Peeples of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects 26 CFR Part 40 Excise taxes, Reporting and recordkeeping requirements. 26 CFR Part 47 Excise taxes. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR chapter I, subchapter D, as follows: PART 40—EXCISE TAX PROCEDURAL REGULATIONS Paragraph 1. The authority citation for part 40 continues to read in part as follows: Authority: 26 U.S.C. 7805. * * * * * Par. 2. Section 40.0-1 is amended by revising paragraphs (a) and (e) to read as follows: §40.0-1 Introduction. (a) In general . The regulations in this part are designated the Excise Tax Procedural Regulations . The regulations in this part set forth administrative provisions relating to the excise taxes imposed by chapters 31 through 34, 36, 38, 39, 49, and 50A of the Internal Revenue Code (Code) (except for the chapter 32 tax imposed by section 4181 (firearms tax) and the chapter 36 taxes imposed by sections 4461 (harbor maintenance tax) and 4481 (heavy vehicle use tax)), and to floor stocks taxes imposed on articles subject to any of these taxes. Chapter 31 relates to retail excise taxes; chapter 32 to manufacturers’ excise taxes; chapter 33 to taxes imposed on communications services and air transportation services; chapter 34 to taxes imposed on certain insurance policies; chapter 36 to taxes imposed on transportation by water; chapter 38 to environmental taxes; chapter 39 to taxes imposed on registration-required obligations; chapter 49 to taxes imposed on indoor tanning services; and chapter 50A to taxes imposed on designated drugs. References in this part to taxes also include references to the fees imposed by sections 4375 and 4376 of the Code. See parts 43, 46 through 49, and 52 of this chapter for regulations related to the imposition of tax. * * * * * (e) Applicability dates --(1) Paragraph (a) . Paragraph (a) of this section applies to returns required to be filed under §40.6011(a)-1 for calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2023. (2) Paragraphs (b) and (c) . Paragraphs (b) and (c) of this section apply to returns for calendar quarters beginning after March 31, 2013. For rules that apply before March 31, 2013, see 26 CFR part 40, revised as of April 1, 2012. (3) Paragraph (d) . Paragraph (d) of this section applies to returns for calendar quarters beginning on or after January 19, 2021. For rules that apply before January 19, 2021, see 26 CFR part 40, revised as of April 1, 2020
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(d) . Paragraph (d) of this section applies to returns for calendar quarters beginning on or after January 19, 2021. For rules that apply before January 19, 2021, see 26 CFR part 40, revised as of April 1, 2020. Par. 3. Section 40.6011(a)-1 is amended by: 1. Revising the first sentence of paragraph (a)(2)(i). 2. Adding paragraphs (d) and (e). The revision and additions read as follows: §40.6011(a)-1 Returns. (a) * * * (2) * * * (i) * * * Except as provided in paragraphs (b) through (d) of this section, the return must be made for a period of one calendar quarter. * * * * * * * * (d) Tax on designated drugs . A return that reports liability imposed by section 5000D must be made for a period of one calendar quarter. A return must be filed for each calendar quarter in which liability for the tax imposed by section 5000D is incurred. There is no requirement that a return be filed for a calendar quarter in which there is no liability imposed by section 5000D. (e) Applicability dates --(1) Paragraph (a)(2)(i) . Paragraph (a)(2)(i) of this section applies to returns filed for calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2023. (2) Paragraph (c) . See paragraph (c)(2) of this section. (3) Paragraph (d) . Paragraph (d) of this section applies to returns filed for calendar quarters beginning on and after October 1, 2023. Par. 4. Section 40.6302(c)-1 is amended by: 1. Revising paragraphs (e)(1)(iv) and (v). 2. Adding paragraph (e)(1)(vi). 3. Revising paragraph (f). The revisions and addition read as follows: §40.6302(c)-1 Deposits. * * * * * (e) * * * (1) * * * (iv) Sections 4375 and 4376 (relating to fees on health insurance policies and self-insured insurance plans); (v) Section 5000B (relating to indoor tanning services); and (vi) Section 5000D (relating to designated drugs). * * * * * (f) Applicability dates --(1) Paragraphs (a) through (d). Paragraphs (a) through (d) of this section apply to deposits and payments made after March 31, 2013. For rules that apply before March 31, 2013, see 26 CFR part 40, revised as of April 1, 2012. (2) Paragraph (e) . Paragraph (e) of this section applies to calendar quarters beginning on or after October 1, 2023. For rules that apply before October 1, 2023, see 26 CFR part 40, revised as of April 1, 2023. Par. 5. Add part 47 to read as follows: PART 47—DESIGNATED DRUGS EXCISE TAX REGULATIONS Sec. 47.5000D-0 Table of contents . 47.5000D-1 Introduction. 47.5000D-2 - 47.5000D-3 [Reserved] Authority: 26 U.S.C. 7805. Section 47.5000D-1 also issued under 26 U.S.C. 5000D. §47.5000D-0 Table of contents. This section lists the table of contents for §§47.5000D-1 through 47.5000D-3. §47.5000D-1 Introduction. (a) In general. (b) Applicability date. §§47.5000D-2 and 47.5000D-3 [Reserved] §47.5000D-1 Introduction. (a) In general . The regulations in this part are designated the Designated Drugs Excise Tax Regulations . The regulations in this part relate to the tax imposed by section 5000D of the Internal Revenue Code. See part 40 of this chapter for regulations relating to returns, payments, and other procedural rules applicable to this part. (b) Applic
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Tax Regulations . The regulations in this part relate to the tax imposed by section 5000D of the Internal Revenue Code. See part 40 of this chapter for regulations relating to returns, payments, and other procedural rules applicable to this part. (b) Applicability date . This section applies to returns filed for calendar quarters beginning on or after October 1, 2023. §§47.5000D-2 - 47.5000D-3 [Reserved] Douglas W. O’Donnell, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register September 27, 2023, 11:15 a.m., and published in the issue of the Federal Register for October 02, 2023, 88 FR 67690) Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified , below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified , above). Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A —Individual. Acq. —Acquiescence. B —Individual. BE —Beneficiary. BK —Bank. B.T.A. —Board of Tax Appeals. C —Individual. C.B. —Cumulative Bulletin. CFR —Code of Federal Regulations. CI —
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. B —Individual. BE —Beneficiary. BK —Bank. B.T.A. —Board of Tax Appeals. C —Individual. C.B. —Cumulative Bulletin. CFR —Code of Federal Regulations. CI —City. COOP —Cooperative. Ct.D. —Court Decision. CY —County. D —Decedent. DC —Dummy Corporation. DE —Donee. Del. Order —Delegation Order. DISC —Domestic International Sales Corporation. DR —Donor. E —Estate. EE —Employee. E.O. —Executive Order. ER —Employer. ERISA —Employee Retirement Income Security Act. EX —Executor. F —Fiduciary. FC —Foreign Country. FICA —Federal Insurance Contributions Act. FISC —Foreign International Sales Company. FPH —Foreign Personal Holding Company. F.R. —Federal Register. FUTA —Federal Unemployment Tax Act. FX —Foreign corporation. G.C.M. —Chief Counsel’s Memorandum. GE —Grantee. GP —General Partner. GR —Grantor. IC —Insurance Company. I.R.B. —Internal Revenue Bulletin. LE —Lessee. LP —Limited Partner. LR —Lessor. M —Minor. Nonacq. —Nonacquiescence. O —Organization. P —Parent Corporation. PHC —Personal Holding Company. PO —Possession of the U.S. PR —Partner. PRS —Partnership. PTE —Prohibited Transaction Exemption. Pub. L. —Public Law. REIT —Real Estate Investment Trust. Rev. Proc. —Revenue Procedure. Rev. Rul. —Revenue Ruling. S —Subsidiary. S.P.R. —Statement of Procedural Rules. Stat. —Statutes at Large. T —Target Corporation. T.C. —Tax Court. T.D. —Treasury Decision. TFE —Transferee. TFR —Transferor. T.I.R. —Technical Information Release. TP —Taxpayer. TR —Trust. TT —Trustee. U.S.C. —United States Code. X —Corporation. Y —Corporation. Z —Corporation. Numerical Finding List 1 Numerical Finding List Bulletin 2023–42 Announcements: Article Issue Link Page 2023-18 2023-30 I.R.B. 2023-30 366 2023-19 2023-30 I.R.B. 2023-30 367 2023-20 2023-30 I.R.B. 2023-30 368 2023-17 2023-31 I.R.B. 2023-31 412 2023-21 2023-31 I.R.B. 2023-31 413 2023-22 2023-32 I.R.B. 2023-32 429 2023-23 2023-34 I.R.B. 2023-34 569 2023-24 2023-35 I.R.B. 2023-35 661 2023-25 2023-37 I.R.B. 2023-37 821 2023-26 2023-37 I.R.B. 2023-37 822 2023-28 2023-37 I.R.B. 2023-37 823 2023-29 2023-41 I.R.B. 2023-41 1064 Notices: Article Issue Link Page 2023-29 2023-29 I.R.B. 2023-29 1 2023-45 2023-29 I.R.B. 2023-29 317 2023-47 2023-29 I.R.B. 2023-29 318 2023-37 2023-30 I.R.B. 2023-30 359 2023-50 2023-30 I.R.B. 2023-30 361 2023-51 2023-30 I.R.B. 2023-30 362 2023-54 2023-31 I.R.B. 2023-31 382 2023-53 2023-32 I.R.B. 2023-32
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I.R.B. 2023-30 362 2023-54 2023-31 I.R.B. 2023-31 382 2023-53 2023-32 I.R.B. 2023-32 424 2023-55 2023-32 I.R.B. 2023-32 427 2023-57 2023-34 I.R.B. 2023-34 560 2023-58 2023-34 I.R.B. 2023-34 563 2023-59 2023-34 I.R.B. 2023-34 564 2023-52 2023-35 I.R.B. 2023-35 650 2023-61 2023-35 I.R.B. 2023-35 651 2023-62 2023-37 I.R.B. 2023-37 817 2023-56 2023-38 I.R.B. 2023-38 824 2023-63 2023-39 I.R.B. 2023-39 919 2023-64 2023-40 I.R.B. 2023-40 974 2023-66 2023-40 I.R.B. 2023-40 992 2023-68 2023-41 I.R.B. 2023-41 1060 2023-65 2023-42 I.R.B. 2023-42 1067 2023-67 2023-42 I.R.B. 2023-42 1074 2023-69 2023-42 I.R.B. 2023-42 1079 Proposed Regulations: Article Issue Link Page REG-124123-22 2023-30 I.R.B. 2023-30 369 REG-124930-21 2023-31 I.R.B. 2023-31 431 REG-120730-21 2023-33 I.R.B. 2023-33 491 REG-134420-10 2023-34 I.R.B. 2023-34 571 REG-109348-22 2023-35 I.R.B. 2023-35 662 REG-120727-21 2023-36 I.R.B. 2023-36 670 REG-122793-19 2023-38 I.R.B. 2023-38 829 REG-100908-23 2023-39 I.R.B. 2023-39 931 REG-115559-23 2023-42 I.R.B. 2023-42 1082 Revenue Procedures: Article Issue Link Page 2023-31 2023-25 I.R.B. 2023-25 386 2023-26 2023-33 I.R.B. 2023-33 486 Revenue Procedures:—Continued Article Issue Link Page 2023-27 2023-35 I.R.B. 2023-35 655 2023-17 2023-37 I.R.B. 2023-37 819 2023-30 2023-40 I.R.B. 2023-40 995 2023-31 2023-40 I.R.B. 2023-40 1057 2023-32 2023-41 I.R.B. 2023-41 1064 2023-35 2023-42 I.R.B. 2023-42 1079 Revenue Rulings: Article Issue Link Page 2023-13 2023-32 I.R.B. 2023-32 413 2023-14 2023-33 I.R.B. 2023-33 484 2023-15 2023-34 I.R.B. 2023-34 559 2023-15 2023-34 I.R.B. 2023-34 559 2023-16 2023-37 I.R.B. 2023-37 796 2023-17 2023-37 I.R.B. 2023-37 798 2023-18 2023-40 I.R.B. 2023-40 972 2023-19 2023-41 I.R.B. 2023-41
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I.R.B. 2023-37 798 2023-18 2023-40 I.R.B. 2023-40 972 2023-19 2023-41 I.R.B. 2023-41 1059 Treasury Decisions: Article Issue Link Page 9976 2023-30 I.R.B. 2023-30 354 9977 2023-31 I.R.B. 2023-31 375 9978 2023-32 I.R.B. 2023-32 415 9979 2023-35 I.R.B. 2023-35 602 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin 2023–52, dated December 27, 2023. Finding List of Current Actions on Previously Published Items 1 Bulletin 2023–42 How to get the Internal Revenue Bulletin INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page www.irs.gov ) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington , DC 20224.
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Internal Revenue Bulletin: 2023-41 October 10, 2023 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ADMINISTRATIVE Rev. Proc. 2023-32, page 1064. This procedure publishes the amounts of unused housing credit carryovers allocated to qualified states under section 42(h)(3)(D) of the Code for calendar year 2023. 26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also: Part I, §§ 6011, 6662, 6662A, 6707A; 1-6011-4.) ADMINISTRATIVE, INCOME TAX Notice 2023-68, page 1060. Optional special per diem rates. This notice provides the 2023-2024 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. The notice includes (1) the special transportation industry rate, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for the high-low substantiation method. EXEMPT ORGANIZATIONS Announcement 2023-29, page 1064. Revocation of IRC 501(c)(3) Organizations for failure to meet the code section requirements. Contributions made to the organizations by individual donors are no longer deductible under IRC 170(b)(1)(A). INCOME TAX Rev. Rul. 2023-19, page 1059. Fringe benefits aircraft valuation formula. For purposes of section 1.61-21(g) of the Income Tax Regulations, relating to the rule for valuing non-commercial flights on employer-provided aircraft, the Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charge in effect for the second half of 2023 are set forth. 26 CFR 1.61-21: Taxation of Fringe Benefits The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included
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Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. Part I Section 61. Gross Income Defined Rev. Rul. 2023-19 For purposes of the taxation of fringe benefits under section 61 of the Internal Revenue Code, section 1.61-21(g) of the Income Tax Regulations provides a rule for valuing noncommercial flights on employer-provided aircraft. Section 1.61-21(g)(5) provides an aircraft valuation formula to determine the value of such flights. The value of a flight is determined under the base aircraft valuation formula (also known as the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided in section 1.61-21(g)(7) and then adding the applicable terminal charge. The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation (DOT) and are reviewed semi-annually. The following charts set forth the terminal charge and SIFL mileage rates: Period During Which the Flight Is Taken Terminal Charge SIFL Mileage Rates 7/1/23 - 12/31/23 $52.98 Up to 500 miles = $.2898 per mile 501-1500 miles = $.2210 per mile Over 1500 miles = $.2124 per mile DRAFTING INFORMATION The principal author of this revenue ruling is Kathleen Edmondson of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations and Employment Taxes). For further information regarding this revenue ruling, contact Ms. Edmondson at (202) 317-6798 (not a toll-free number). Part III 2023-2024 Special Per Diem Rates Notice 2023-68 SECTION 1. PURPOSE This annual notice provides the 2023-2024 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method. SECTION 2. BACKGROUND Rev. Proc. 2019-48, 2019-51 I.R.B. 1392 (or successor), provides rules for using a per diem rate to substantiate, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers using the rates and list of high-cost localities provided in this notice must comply with Rev. Proc. 2019-48 (or successor). Notice 2022-44, 2022-41 I.R.B. 277, provides the rates and list of high-cost localities for the period October 1, 2022, to September 30, 2023. SECTION 3. SPECIAL M&IE RATES FOR TRANSPORTATION INDUSTRY The special M&IE rates for taxpayers in the transportation industry are $69 for any locality of travel in the continental United States (CONUS) and $74 for any locality of travel outside the continental United States (OCONUS). See section 4.04 of Rev. Proc. 2019-48 (or successor). SECTION 4. RATE FOR INCIDENTAL EXPENSES ONLY DEDUCTION The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day. See section 4.05
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or successor). SECTION 4. RATE FOR INCIDENTAL EXPENSES ONLY DEDUCTION The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day. See section 4.05 of Rev. Proc. 2019-48 (or successor). SECTION 5. HIGH-LOW SUBSTANTIATION METHOD 1. Annual high-low rates . For purposes of the high-low substantiation method, the per diem rates in lieu of the rates described in Notice 2022-44 (the per diem substantiation method) are $309 for travel to any high-cost locality and $214 for travel to any other locality within CONUS. The amount of the $309 high rate and $214 low rate that is treated as paid for meals for purposes of § 274(n) is $74 for travel to any high-cost locality and $64 for travel to any other locality within CONUS. See section 5.02 of Rev. Proc. 2019-48 (or successor). The per diem rates in lieu of the rates described in Notice 2022-44 (the meal and incidental expenses only substantiation method) are $74 for travel to any high-cost locality and $64 for travel to any other locality within CONUS. 2. High-cost localities . The following localities have a federal per diem rate of $261 or more, and are high-cost localities for the specified portion of the calendar year: Key City County or Other Defined Location Portion of Calendar Year Alabama Gulf Shores Baldwin June 1 – July 31 Arizona Phoenix/Scottsdale Maricopa February 1 – March 31 Sedona City limits of Sedona October 1 – September 30 California Mill Valley/San Rafael/Novato Marin October 1 – October 31 and June 1 – September 30 Monterey Monterey June 1 – August 31 Napa Napa October 1 – September 30 Oakland Alameda October 1 – September 30 San Diego San Diego October 1 – September 30 San Francisco San Francisco October 1 – September 30 San Luis Obispo San Luis Obispo June 1 – August 31 San Mateo/Foster City/Belmont San Mateo October 1 – September 30 Santa Barbara Santa Barbara October 1 – September 30 Santa Monica City limits of Santa Monica October 1 – September 30 Sunnyvale/Palo Alto/San Jose Santa Clara October 1 – September 30 Yosemite National Park Mariposa October 1 – September 30 Colorado Aspen Pitkin October 1 – March 31 and June 1 – September 30 Denver/Aurora Denver, Adams, Arapahoe, and Jefferson October 1 – October 31 and April 1 – September 30 Grand Lake Grand December 1 – March 31 Silverthorne/Breckenridge Summit October 1 – March 31 and June 1 – September 30 Steamboat Springs Routt December 1 – March 31 Telluride San Miguel October 1 – September 30 Vail Eagle October 1 – September 30 Delaware Lewes Sussex July 1 – August 31 District of Columbia Washington, D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George's in Maryland) (See also Maryland and Virginia) October 1 – June 30 and September 1 – September 30 Florida Boca Raton/Delray Beach/Jupiter Palm Beach and Hendry December 1 – April 30 Bradenton Manatee February 1 – March 31 Cocoa Beach Brevard February 1 – March 31 Fort Lauderdale Broward January 1 – April 30 Fort Myers Lee December 1 – March 31 Fort Walton Beach/DeFuniak Springs Okaloosa and Walton June 1 – July 31 Gulf Breeze Santa Rosa June 1 – July 31 Key West Monroe October 1 – September 30 Miami Miami-Dade December 1 – May 31 Naples Collier December 1 – April 30 Panama City Bay June 1 – July 31 Pensacola Escambia June 1 – July 31 Punta Gorda Charlotte February 1 – March 31 Sarasota Sarasota February 1 – April 30 Sebring Highlands February 1 – March 31 Stuart Martin February 1 – March 31 Tampa/St. Petersburg Pinellas and Hillsborough January 1 – April 30 Vero Beach Indian River October 1 – September 30 Georgia Atlanta Fulton and Dekalb January 1 – March 31 Jekyll Island/Brunswick Glynn March 1 – July 31 Idaho Sun Valley/Ketchum Blaine and
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– April 30 Vero Beach Indian River October 1 – September 30 Georgia Atlanta Fulton and Dekalb January 1 – March 31 Jekyll Island/Brunswick Glynn March 1 – July 31 Idaho Sun Valley/Ketchum Blaine and Elmore December 1 – March 31 and June 1 – September 30 Illinois Chicago Cook and Lake October 1 – November 30 and April 1 – September 30 Maine Bar Harbor/Rockport Hancock and Knox October 1 – October 31 and July 1 – September 30 Kennebunk/Kittery/Sanford York July 1 – August 31 Portland Cumberland and Sagadahoc October 1 – October 31 and July 1 – September 30 Maryland Ocean City Worcester July 1 – August 31 Washington, D.C. Metropolitan Area Montgomery and Prince George’s October 1 – June 30 and September 1 – September 30 Massachusetts Boston/Cambridge Suffolk and City of Cambridge October 1 – September 30 Falmouth City limits of Falmouth May 1 – August 31 Hyannis Barnstable less the City of Falmouth July 1 – August 31 Martha's Vineyard Dukes October 1 – September 30 Nantucket Nantucket October 1 – September 30 Michigan Mackinac Island Mackinac July 1 – August 31 Petoskey Emmet July 1 – August 31 Traverse City Grand Traverse July 1 – August 31 Minnesota Duluth St. Louis October 1 – October 31 and June 1 – September 30 Montana Big Sky/West Yellowstone/Gardiner Gallatin and Park June 1 – September 30 Kalispell/Whitefish Flathead July 1 – August 31 Missoula Missoula June 1 – September 30 New Jersey Toms River Ocean July 1 – August 31 New Mexico Carlsbad Eddy October 1 – September 30 New York Glens Falls Warren July 1 – August 31 Lake Placid Essex July 1 – August 31 New York City Bronx, Kings, New York, Queens, and Richmond October 1 – December 31 and March 1 – September 30 Saratoga Springs/Schenectady Saratoga and Schenectady July 1 – August 31 North Carolina Kill Devil Hills Dare April 1 – September 30 Oregon Eugene/Florence Lane June 1 – July 31 Lincoln City Lincoln July 1 – August 31 Seaside Clatsop July 1 – August 31 Pennsylvania Hershey Hershey June 1 – August 31 Philadelphia Philadelphia October 1 – November 30, March 1 – June 30, and September 1 – September 30 Rhode Island Jamestown/Middletown/Newport Newport October 1 – October 31 and June 1 – September 30 South Carolina Charleston Charleston, Berkeley, and Dorchester October 1 – September 30 Hilton Head Beaufort March 1 – August 31 Myrtle Beach Horry June 1 – August 31 Tennessee Nashville Davidson October 1 – September 30 Utah Moab Grand October 1 – October 31 and March 1 – September 30 Park City Summit October 1 – September 30 Virginia Virginia Beach City of Virginia Beach June 1 – August 31 Wallops Island Accomack July 1 – August 31 Washington, D.C. Metropolitan Area Cities of Alexandria, Falls Church, and Fairfax; Counties of Arlington and Fairfax October 1 – June 30 and September 1 – September 30 Vermont Manchester Bennington October 1 – October 31 and August 1 – September 30 Montpelier Washington October 1 – October 31 and August 1 – September 30 Washington Port Angeles/Port Townsend Clallam and Jefferson July 1 – August 31 Seattle King October 1 – October 31 and May 1 – September 30 Wyoming Cody Park June 1 – September 30 Jackson/Pinedale Teton and Sublette October 1 – September 30 3. Changes in high-cost localities . The list of high-cost localities in this notice differs from the list of high-cost localities in section 5 of Notice 2022-44. a. The following localities have been added to the list of high-cost localities: Yosemite National Park, California; Tampa/St. Petersburg, Florida; Atlanta, Georgia; Missoula, Montana; Saratoga Springs/Schenectady, New York; Eugene/Florence, Oregon; Montpelier, Vermont. b. The following localities have changed the portion of the year in which they are high-cost localities: San Diego, California; District of Columbia (see also Maryland and Virginia); Fort Lauderdale, Florida; Fort Myers, Florida; Fort Walton Beach/DeFuniak Springs, Florida; Miami, Florida; Vero Beach, Florida; Portland,
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ities: San Diego, California; District of Columbia (see also Maryland and Virginia); Fort Lauderdale, Florida; Fort Myers, Florida; Fort Walton Beach/DeFuniak Springs, Florida; Miami, Florida; Vero Beach, Florida; Portland, Maine; Washington, D.C. Metropolitan Area in Maryland (Counties of Montgomery and Prince George’s); Hilton Head, South Carolina; Manchester, Vermont; Washington, D.C. Metropolitan Area in Virginia (Cities of Alexandria, Falls Church, and Fairfax; Counties of Arlington and Fairfax); Seattle, Washington. c. The following localities have been removed from the list of high-cost localities: Los Angeles, California; Durango, Colorado; Portland, Oregon; Vancouver, Washington. SECTION 6. EFFECTIVE DATE This notice is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2023, for travel away from home on or after October 1, 2023. For purposes of computing the amount allowable as a deduction for travel away from home, this notice is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2023. See sections 4.06 and 5.04 of Rev. Proc. 2019-48 (or successor) for transition rules for the last 3 months of calendar year 2023. SECTION 7. EFFECT ON OTHER DOCUMENTS Notice 2022-44 is superseded. DRAFTING INFORMATION The principal author of this notice is C. Dylan Durham of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact Mr. Durham at (202) 317-7005 (not a toll-free number). Rev. Proc. 2023-32 SECTION 1. PURPOSE This revenue procedure publishes the amounts of unused housing credit carryovers allocated to qualified states under § 42(h)(3)(D) of the Internal Revenue Code for calendar year 2023. SECTION 2. BACKGROUND Rev. Proc. 2019-45, 2019-48 I.R.B. 524, provides guidance to state housing credit agencies of qualified states on the procedure for requesting an allocation of unused housing credit carryovers under § 42(h)(3)(D). The amount of unused housing credit carryovers allocated to qualified states for a calendar year from a national pool of unused credit authority (the National Pool) is published by the Internal Revenue Service in the Internal Revenue Bulletin. This revenue procedure publishes these amounts for calendar year 2023. SECTION 3. PROCEDURE The unused housing credit carryover amount allocated from the National Pool by the Secretary to each qualified state for calendar year 2023 is as follows: Qualified State Amount Allocated Connecticut 54,370 Delaware 15,269 Florida 333,529 Georgia 163,623 Illinois 188,649 Maryland 92,430 Massachusetts 104,684 Michigan 150,447 Minnesota 85,721 Montana 16,836 Nebraska 29,506 Nevada 47,646 New Jersey 138,866 New Mexico 31,686 New York 295,030 North Carolina 160,415 Ohio 176,265 Oregon 63,575 Pennsylvania 194,496 Rhode Island 16,399 South Dakota 13,641 Texas 450,249 Utah 50,690 Vermont 9,702 Virginia 130,198 Washington 116,736 West Virginia 26,616 Wisconsin 88,350 EFFECTIVE DATE This revenue procedure is effective for allocations of housing credit dollar amounts attributable to the National Pool component of a qualified state’s housing credit ceiling for calendar year 2023. DRAFTING INFORMATION The principal author of this revenue procedure is Dillon Taylor of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Mr. Taylor at (202) 317-4137 (not a toll-free number). Section 42—Low-Income Housing Credit. 26 CFR 1.42-14. Allocation rules for post-1989 State housing credit ceiling amounts. Guidance is provided to state housing credit agencies of qualified states that request an allocation of unused housing credit carryover under section 42(h)(3)(D) of the Internal Revenue Code. See Rev. Proc. 2023-32. Part IV Deletions From Cumulative List of Organizations, Contributions to Which are Deductible Under Section 170 of the Code Announcement 2023-29 Table of Contents
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of the Internal Revenue Code. See Rev. Proc. 2023-32. Part IV Deletions From Cumulative List of Organizations, Contributions to Which are Deductible Under Section 170 of the Code Announcement 2023-29 Table of Contents The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986. Generally, the IRS will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the IRS is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation. If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on OCTOBER 10, 2023 and would end on the date the court first determines the organization is not described in section 170(c)(2) as more particularly set for in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation. Effective Date of Revocation LOCATION SHENANDALE GUN CLUB 01/01/2020 STAUNTON, VA FIRM FOUNDATION ACADEMY 01/01/2020 CLEARWATER, FL RURAL ADVANCEMENT INSTITUTE 01/01/2020 PITTSBORO, NC Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified , below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified , above). Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate
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regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A —Individual. Acq. —Acquiescence. B —Individual. BE —Beneficiary. BK —Bank. B.T.A. —Board of Tax Appeals. C —Individual. C.B. —Cumulative Bulletin. CFR —Code of Federal Regulations. CI —City. COOP —Cooperative. Ct.D. —Court Decision. CY —County. D —Decedent. DC —Dummy Corporation. DE —Donee. Del. Order —Delegation Order. DISC —Domestic International Sales Corporation. DR —Donor. E —Estate. EE —Employee. E.O. —Executive Order. ER —Employer. ERISA —Employee Retirement Income Security Act. EX —Executor. F —Fiduciary. FC —Foreign Country. FICA —Federal Insurance Contributions Act. FISC —Foreign International Sales Company. FPH —Foreign Personal Holding Company. F.R. —Federal Register. FUTA —Federal Unemployment Tax Act. FX —Foreign corporation. G.C.M. —Chief Counsel’s Memorandum. GE —Grantee. GP —General Partner. GR —Grantor. IC —Insurance Company. I.R.B. —Internal Revenue Bulletin. LE —Lessee. LP —Limited Partner. LR —Lessor. M —Minor. Nonacq. —Nonacquiescence. O —Organization. P —Parent Corporation. PHC —Personal Holding Company. PO —Possession of the U.S. PR —Partner. PRS —Partnership. PTE —Prohibited Transaction Exemption. Pub. L. —Public Law. REIT —Real Estate Investment Trust. Rev. Proc. —Revenue Procedure. Rev. Rul. —Revenue Ruling. S —Subsidiary. S.P.R. —Statement of Procedural Rules. Stat. —Statutes at Large. T —Target Corporation. T.C. —Tax Court. T.D. —Treasury Decision. TFE —Transferee. TFR —Transferor. T.I.R. —Technical Information Release. TP —Taxpayer. TR —Trust. TT —Trustee. U.S.C. —United States Code. X —Corporation. Y —Corporation. Z —Corporation. Numerical Finding List 1 Numerical Finding List Bulletin 2023–41 Announcements: Article Issue Link Page 2023-18 2023-30 I.R.B. 2023-30 366 2023-19 2023-30 I.R.B. 2023-30 367 2023-20 2023-30 I.R.B. 2023-30 368 2023-17 2023-31 I.R.B. 2023-31 412 2023-21 2023-31 I.R.B. 2023-31 413
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30 I.R.B. 2023-30 368 2023-17 2023-31 I.R.B. 2023-31 412 2023-21 2023-31 I.R.B. 2023-31 413 2023-22 2023-32 I.R.B. 2023-32 429 2023-23 2023-34 I.R.B. 2023-34 569 2023-24 2023-35 I.R.B. 2023-35 661 2023-25 2023-37 I.R.B. 2023-37 821 2023-26 2023-37 I.R.B. 2023-37 822 2023-28 2023-37 I.R.B. 2023-37 823 2023-29 2023-41 I.R.B. 2023-41 1064 Notices: Article Issue Link Page 2023-29 2023-29 I.R.B. 2023-29 1 2023-45 2023-29 I.R.B. 2023-29 317 2023-47 2023-29 I.R.B. 2023-29 318 2023-37 2023-30 I.R.B. 2023-30 359 2023-50 2023-30 I.R.B. 2023-30 361 2023-51 2023-30 I.R.B. 2023-30 362 2023-54 2023-31 I.R.B. 2023-31 382 2023-53 2023-32 I.R.B. 2023-32 424 2023-55 2023-32 I.R.B. 2023-32 427 2023-57 2023-34 I.R.B. 2023-34 560 2023-58 2023-34 I.R.B. 2023-34 563 2023-59 2023-34 I.R.B. 2023-34 564 2023-52 2023-35 I.R.B. 2023-35 650 2023-61 2023-35 I.R.B. 2023-35 651 2023-62 2023-37 I.R.B. 2023-37 817 2023-56 2023-38 I.R.B. 2023-38 824 2023-63 2023-39 I.R.B. 2023-39 919 2023-64 2023-40 I.R.B. 2023-40 974 2023-66 2023-40 I.R.B. 2023-40 992 2023-68 2023-41 I.R.B. 2023-41 1060 Proposed Regulations: Article Issue Link Page REG-124123-22 2023-30 I.R.B. 2023-30 369 REG-124930-21 2023-31 I.R.B. 2023-31 431 REG-120730-21 2023-33 I.R.B. 2023-33 491 REG-134420-10 2023-34 I.R.B. 2023-34 571 REG-109348-22 2023-35 I.R.B. 2023-35 662 REG-120727-21 2023-36 I.R.B. 2023-36 670 REG-122793-19 2023-38 I.R.B. 2023-38 829 REG-100908-23 2023-39 I.R.B. 2023-39 931 Revenue Procedures: Article Issue Link Page 2023-31 2023-25 I.R.B. 2023-25 386 2023-26 2023-33 I.R.B. 2023-33 486 2023-27 2023-35 I.R.B. 2023-35 655 2023-17 2023-37 I.R.B. 2023-37 819 Revenue Procedures:—Continued Article Issue Link Page 2023-30 2023-40 I.R.B. 2023-40 995 2023-31 2023-40 I.
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R.B. 2023-37 819 Revenue Procedures:—Continued Article Issue Link Page 2023-30 2023-40 I.R.B. 2023-40 995 2023-31 2023-40 I.R.B. 2023-40 1057 2023-32 2023-41 I.R.B. 2023-41 1064 Revenue Rulings: Article Issue Link Page 2023-13 2023-32 I.R.B. 2023-32 413 2023-14 2023-33 I.R.B. 2023-33 484 2023-15 2023-34 I.R.B. 2023-34 559 2023-15 2023-34 I.R.B. 2023-34 559 2023-16 2023-37 I.R.B. 2023-37 796 2023-17 2023-37 I.R.B. 2023-37 798 2023-18 2023-40 I.R.B. 2023-40 972 2023-19 2023-41 I.R.B. 2023-41 1059 Treasury Decisions: Article Issue Link Page 9976 2023-30 I.R.B. 2023-30 354 9977 2023-31 I.R.B. 2023-31 375 9978 2023-32 I.R.B. 2023-32 415 9979 2023-35 I.R.B. 2023-35 602 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin 2023–52, dated December 27, 2023. Finding List of Current Actions on Previously Published Items 1 Bulletin 2023–41 How to get the Internal Revenue Bulletin INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page www.irs.gov ) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington , DC 20224.
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Internal Revenue Bulletin: 2023-40 October 2, 2023 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ADMINISTRATIVE Rev. Proc. 2023-30, page 995. This procedure provides specifications for the private printing of red-ink substitutes for the 2023 revisions of certain information returns. This procedure will be reproduced as the next revision of Publication 1179. Revenue Procedure 2022-25 is superseded. NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. Forms and instructions. (Also, Part 1, sections 101, 162(f), 170, 199A, 220, 223, 401(a), 403(a), 403(b), 408, 408A, 457(b), 529, 529A, 530, 853A, 892, 1400Z-1, 1400Z-2, 1441, 6041, 6041A, 6042, 6043, 6044, 6045, 6047, 6049, 6050A, 6050B, 6050D, 6050E, 6050H, 6050J, 6050N, 6050P, 6050Q, 6050R, 6050S, 6050U, 6050W, 6050X, 6050Y, 6071, 1.402A-2, 1.408-5, 1.408-7, 1.408-8, 1.408A-7, 1.1441-1 through 1.1441-5, 1.1471-4, 1.6041-1, 1.6042-2, 1.6042-4, 1.6043-4, 1.6044-2, 1.6044-5, 1.6045-1, 1.6045-2, 1.6045-4, 1.6047-1, 1.6047-2, 1.6049-4, 1.6049-6, 1.6049-7, 1.6050A-1, 1.6050B-1, 1.6050D-1, 1.6050E-1, 1.6050H-1, 1.6050H-2, 1.6050J-1T, 1.6050N-1, 1.6050P-1, 1.6050S-1, 1.6050S-3, 1.6050W-1, 1.6050W-2, 1.6050X-1, 1.6050Y-1, 1.6050Y-2, and 1.6050Y-3.) EMPLOYEE PLANS Notice 2023-66, page 992. This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for September 2023 used under § 417(e)(3)(D), the 24-month average segment rates applicable for September 2023, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv). Rev. Proc. 2023-31, page 1057. This revenue procedure supersedes Rev. Proc. 2015-47, 2015-39 IRB 419 (which sets forth procedures for filers of Forms 8955-SSA and 5500-EZ to request a hardship waiver of the requirement to file those forms electronically). Rather than set forth specific procedures, this revenue procedure refers filers to applicable publications, forms, instructions, or other guidance, including postings on the IRS.gov website, for the procedures for seeking a hardship waiver or administrative exemption from the requirements to file Forms 8955-SSA and 5500-EZ electronically. This revenue procedure is effective, and Rev. Proc. 2015-47 is superseded, with respect to Forms 8955-SSA and 5500-EZ required to be filed for plan years beginning on or after January 1, 2024. Exceptions from the Electronic Filing Requirements for Certain Filers of Forms 8955-SSA and 5
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to Forms 8955-SSA and 5500-EZ required to be filed for plan years beginning on or after January 1, 2024. Exceptions from the Electronic Filing Requirements for Certain Filers of Forms 8955-SSA and 5500-EZ INCOME TAX Notice 2023-64, page 974. This notice provides additional interim guidance that is intended to further clarify the application of the new corporate alternative minimum tax (CAMT), as added to the Code by the Inflation Reduction Act of 2022. The Treasury Department and the IRS anticipate that forthcoming proposed regulations will provide rules that are consistent with the interim guidance. Specifically, the notice describes rules for determining a taxpayer’s applicable financial statement and adjusted financial statement income (AFSI), including rules applicable to tax consolidated groups and certain foreign corporations. The notice also provides rules for AFSI adjustments for the depreciation of section 168 property, the amortization of qualified wireless spectrum, the treatment of certain taxes, and to prevent certain duplications and omissions. The notice also describes rules regarding the determination of applicable corporation status, the CAMT foreign tax credit, and financial statement net operating losses. Finally, the notice provides a request for comments and the procedure for submitting such comments. Rev. Rul. 2023-18, page 972. Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term tax exempt rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for October 2023. The IRS Mission Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each
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barment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. Part I Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property Rev. Rul. 2023-18 This revenue ruling provides various prescribed rates for federal income tax purposes for October 2023 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. REV. RUL. 2023-18 TABLE 1 Applicable Federal Rates (AFR) for October 2023 Period for Compounding Annual Semiannual Quarterly Monthly Short-term AFR 5.22% 5.15% 5.12% 5.10% 110% AFR 5.75% 5.67% 5.63% 5.60% 120% AFR 6.28% 6.18% 6.13% 6.10% 130% AFR 6.81% 6.70% 6.64% 6.61% Mid-term AFR 4.43% 4.38% 4.36% 4.34% 110% AFR 4.88% 4.82% 4.79% 4.77% 120% AFR 5.33% 5.26% 5.23% 5.20% 130% AFR 5.77% 5.69% 5.65% 5.62% 150% AFR 6.68% 6.57% 6.52% 6.48% 175% AFR 7.82% 7.67% 7.60% 7.55% Long-term AFR 4.46% 4.41% 4.39% 4.37% 110% AFR 4.91% 4.85% 4.82% 4.80% 120% AFR 5.36% 5.29% 5.26% 5.23% 130% AFR 5.81% 5.73% 5.69% 5.66% REV. RUL. 2023-18 TABLE 2 Adjusted AFR for October 2023 Period for Compounding Annual Semiannual Quarterly Monthly Short-term adjusted AFR 3.95% 3.91% 3.89% 3.88% Mid-term adjusted AFR 3.36% 3.33% 3.32% 3.31% Long-term adjusted AFR 3.38% 3.35% 3.34% 3.33% REV. RUL. 2023-18 TABLE 3 Rates Under Section 382 for October 2023 Adjusted federal long-term rate for the current month 3.38% Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 3.38% REV. RUL. 2023-18 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for October 2023 Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Appropriate percentage for the 70% present value low-income housing credit 8.03
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(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Appropriate percentage for the 70% present value low-income housing credit 8.03% Appropriate percentage for the 30% present value low-income housing credit 3.44% REV. RUL. 2023-18 TABLE 5 Rate Under Section 7520 for October 2023 Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 5.40% Section 42.—Low-Income Housing Credit The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 280G.—Golden Parachute Payments The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 382.—Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change The adjusted applicable federal long-term rate is set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 467.—Certain Payments for the Use of Property or Services The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs The applicable federal short-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 482.—Allocation of Income and Deductions Among Taxpayers The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 483.—Interest on Certain Deferred Payments The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 1288.—Treatment of Original Issue Discount on Tax-Exempt Obligations The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 7520.—Valuation Tables The applicable federal mid-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Section 7872.—Treatment of Loans With Below-Market Interest Rates The applicable federal short-term, mid-term, and long-term rates are set forth for the month of October 2023. See Rev. Rul. 2023-18, page 972. Part III Additional Interim Guidance Regarding the Application of the Corporate Alternative Minimum Tax under Sections 55, 56A, and 59 of the Internal Revenue Code Notice 2023-64 SECTION 1. OVERVIEW This notice provides additional interim guidance to further clarify the application of the new corporate alternative minimum tax (CAMT). The CAMT was added to the Internal Revenue Code (Code) 1 by the enactment of § 10101 of Public Law 117-169, 136 Stat. 1818, 1818-1828 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022 (IRA), effective for taxable years beginning after December 31, 2022. Notice 2023-7, 2023-3 I.R.B. 390, announced that the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue proposed regulations (forthcoming proposed regulations) addressing the application of the CAMT, and sections 3 through 7 of that notice provided interim guidance regarding time-sensitive CAMT issues that taxpayers may rely on until the issuance of forthcoming proposed regulations. Sections 3 through 5 of Notice 2023-20, 2023-10 I.R.B.
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3 through 7 of that notice provided interim guidance regarding time-sensitive CAMT issues that taxpayers may rely on until the issuance of forthcoming proposed regulations. Sections 3 through 5 of Notice 2023-20, 2023-10 I.R.B. 523, provided additional interim guidance that taxpayers may rely on until the issuance of forthcoming proposed regulations, including interim guidance intended to help avoid substantial unintended adverse consequences to the insurance industry arising from the application of the CAMT. Notice 2023-42, 2023-26 I.R.B. 1085, provided relief from the addition to tax under § 6655 in connection with the application of the CAMT. Section 2 of this notice provides a summary of relevant law and other information underlying the interim guidance described in sections 3 through 14 of this notice, which the Treasury Department and the IRS intend to include in forthcoming proposed regulations. Section 15 of this notice describes the intended applicability dates of forthcoming proposed regulations and requirements for relying on the interim guidance set forth in sections 3 through 14 of this notice until the issuance of forthcoming proposed regulations. Section 16 of this notice requests comments on the issues addressed in this notice and on certain additional issues. Section 17 of this notice describes the effect this notice has on other documents. Section 18 of this notice provides drafting and contact information. SECTION 2. BACKGROUND .01 Overview of the CAMT . Section 10101 of the IRA amended § 55 to impose the CAMT based on the “adjusted financial statement income” (AFSI) of an applicable corporation for taxable years beginning after December 31, 2022. As described in greater detail in section 2.01 of Notice 2023-7, a corporation is an applicable corporation subject to the CAMT for a taxable year if it meets the average annual AFSI test described in section 2.04 of this notice for one or more taxable years that (i) are before that taxable year, and (ii) end after December 31, 2021. Section 55(a) provides that, for the taxable year of an applicable corporation, the amount of CAMT imposed by § 55 equals the excess (if any) of (i) the tentative minimum tax for the taxable year, over (ii) the sum of the regular tax imposed by chapter 1 of the Code (chapter 1), within the meaning of § 55(c), for the taxable year plus the tax imposed under § 59A. Section 55(b)(2)(A) provides that, in the case of an applicable corporation, the tentative minimum tax for the taxable year is the excess of (i) 15 percent of AFSI for the taxable year (as determined under § 56A), over (ii) the CAMT foreign tax credit (CAMT FTC) for the taxable year (as determined under § 59(l)). In the case of any corporation that is not an applicable corporation, § 55(b)(2)(B) provides that the tentative minimum tax for the taxable year is zero. .02 AFSI under § 56A . (1) General definition of AFSI . Section 56A(a) provides that, for purposes of §§ 55 through 59, the term AFSI means, with respect to any corporation for any taxable year, the net income or loss of the taxpayer set forth on the taxpayer’s applicable financial statement (AFS) for that taxable year, adjusted as provided in § 56A. See section 3 of this notice for a definition of the term Taxpayer as used in sections 4 through 16 of this notice and section 5 of this notice for rules addressing the determination of AFSI generally. (2) General definition of AFS . For purposes of § 56A, the term AFS means, with respect to any taxable year, an AFS, as defined in § 451(b)(3) or as specified by the Secretary of the Treasury or her delegate (Secretary) in regulations or other guidance, that covers that taxable year. See § 56A(b). See section 4 of this notice for rules addressing the determination of a taxpayer’s AFS. (3) General authority of the Secretary . Section 56A(e) authorizes the Secretary to provide such regulations and other guidance as necessary to carry out the purposes of § 56A, including regulations and other guidance relating to the effect of the rules of § 56A on partnerships with income taken into account by an applicable corporation. .03
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Secretary to provide such regulations and other guidance as necessary to carry out the purposes of § 56A, including regulations and other guidance relating to the effect of the rules of § 56A on partnerships with income taken into account by an applicable corporation. .03 Adjustments to AFSI . Section 56A(c)(1) through (14) provide general adjustments to be made to AFSI, several of which are described in section 2.01 of Notice 2023-7 and in section 2.03(1) through (11) of this notice. 2 In addition, § 56A(c)(15) authorizes the Secretary to issue regulations or other guidance to provide for such adjustments to AFSI as the Secretary determines necessary to carry out the purposes of § 56A, including adjustments to AFSI to prevent the omission or duplication of any item and adjustments to carry out the principles of part II of subchapter C of chapter 1 (relating to corporate liquidations), part III of subchapter C of chapter 1 (relating to corporate organizations and reorganizations), and part II of subchapter K of chapter 1 (relating to partnership contributions and distributions). See section 11 of this notice for rules addressing AFSI adjustments to prevent certain duplications and omissions. (1) Special rule regarding consolidated financial statements . Section 56A(c)(2)(A) provides that, if the financial results of a taxpayer are reported on the AFS for a group of entities (AFS Group), rules similar to the rules of § 451(b)(5) apply. Section 451(b)(5) provides that in such a situation, the AFS for the AFS Group (Consolidated AFS) is treated as the AFS of the taxpayer. However, for purposes of § 451(b)(5), if the taxpayer’s financial results also are reported on a separate AFS that is of equal or higher priority to the Consolidated AFS, then the taxpayer’s AFS is the separate AFS. See § 1.451-3(h)(1)(i). Section 1.451-3(h)(2) and (3) provide rules under § 451(b)(5) for determining the extent to which income reflected on the Consolidated AFS and the underlying source documents is allocable to the taxpayer for purposes of applying the rules under § 451(b). (2) Special rule regarding Tax Consolidated Groups . Section 56A(c)(2)(B) provides a general rule applicable to a taxpayer that is part of an affiliated group of corporations that join in filing (or that are required to join in filing) a consolidated return for Federal income tax purposes (Tax Consolidated Group). Under § 56A(c)(2)(B), if a taxpayer is part of a Tax Consolidated Group for any taxable year, AFSI for that Tax Consolidated Group for that taxable year must take into account items on the Tax Consolidated Group’s AFS that are properly allocable to members of that Tax Consolidated Group. However, § 56A(c)(2)(B) provides the Secretary with authority to prescribe by regulation exceptions to that general rule. See section 6 of this notice for rules applicable to a Tax Consolidated Group. (3) Special rule regarding corporations not included on a consolidated return . Section 56A(c)(2)(C) provides that, in the case of any corporation that is not included on a consolidated return with the taxpayer, AFSI of the taxpayer with respect to that other corporation is determined by only taking into account dividends received from that other corporation (reduced to the extent provided by the Secretary in regulations or other guidance) and other amounts that are includible in gross income or deductible as a loss under chapter 1 (other than amounts required to be included under §§ 951 and 951A of the Code or such other amounts as provided by the Secretary) with respect to that other corporation. (4) AFSI of partners and partnerships . Section 56A(c)(2)(D)(i) provides that, except as provided by the Secretary, if the taxpayer is a partner in a partnership, the taxpayer’s AFSI with respect to such partnership is adjusted to take into account only the taxpayer’s distributive share of such partnership’s AFSI. Section 56A(c)(2)(D
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a partnership, the taxpayer’s AFSI with respect to such partnership is adjusted to take into account only the taxpayer’s distributive share of such partnership’s AFSI. Section 56A(c)(2)(D)(ii) provides that, for purposes of §§ 55 through 59, the AFSI of a partnership is the partnership’s net income or loss set forth on that partnership’s AFS (adjusted under rules similar to the rules set forth in § 56A). (5) AFSI of United States shareholder of a controlled foreign corporation . Section 56A(c)(3)(A) provides an adjustment to the AFSI of a taxpayer for any taxable year in which the taxpayer is a United States shareholder (within the meaning of § 951(b) or, if applicable, § 953(c)(1)(A)) (each shareholder, a U.S. Shareholder) of one or more controlled foreign corporations (each within the meaning of § 957 or, if applicable, § 953(c)(1)(B)) (CFC). Under this rule, the AFSI of the taxpayer with respect to the CFC (as determined under § 56A(c)(2)(C)) is adjusted to also take into account the taxpayer’s pro rata share (determined under rules similar to the rules under § 951(a)(2)) of items taken into account in computing the net income or loss set forth on the AFS (as adjusted under rules similar to those that apply in determining AFSI) of each CFC with respect to which the taxpayer is a U.S. Shareholder. The net income or loss of a CFC set forth on its AFS (as adjusted under rules similar to those that apply in determining AFSI) is referred to in this notice as Adjusted Net Income or Loss . Section 56A(c)(3)(B) provides that, if the adjustment determined under § 56A(c)(3)(A) would result in a negative adjustment for such year, (i) no adjustment is made to the taxpayer’s AFSI for the taxable year, and (ii) the amount of the adjustment determined under § 56A(c)(3)(A) for the succeeding taxable year is reduced by an amount equal to the negative adjustment for the taxable year. See section 7 of this notice for rules addressing the application of § 56A(c) to certain foreign corporations. (6) Effectively connected income . Section 56A(c)(4) provides that, in determining the AFSI of a foreign corporation, the principles of § 882 (which subjects a foreign corporation to Federal income tax on its taxable income that is effectively connected with the conduct of a trade or business within the United States) apply. (7) Adjustments for certain taxes . Section 56A(c)(5) provides the general rule that AFSI is appropriately adjusted to disregard any Federal income taxes, or income, war profits, or excess profits taxes (within the meaning of § 901) with respect to a foreign country or possession of the United States (Foreign Income Taxes), which are taken into account on the taxpayer’s AFS. To the extent provided by the Secretary, the general rule does not apply to Foreign Income Taxes taken into account on the taxpayer’s AFS if the taxpayer does not choose to claim a foreign tax credit under § 27 (Regular FTC). Authority is also provided to prescribe regulations or other guidance on the proper treatment of current and deferred taxes for purposes of § 56A(c)(5), including the time at which such taxes are properly taken into account. See section 8 of this notice for rules addressing the AFSI adjustment for certain income taxes. (8) Adjustments with respect to disregarded entities . Section 56A(c)(6) requires AFSI to be adjusted to take into account any AFSI of a disregarded entity owned by the taxpayer. (9) Adjustments with regard to depreciation . Section 56A(c)(13)(A) requires AFSI to be reduced by depreciation deductions allowed under § 167 with respect to property to which § 168 applies, to the extent of the amount allowed as deductions in computing taxable income for the taxable year. In addition, § 56A(c)(13)(B)(i)
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by depreciation deductions allowed under § 167 with respect to property to which § 168 applies, to the extent of the amount allowed as deductions in computing taxable income for the taxable year. In addition, § 56A(c)(13)(B)(i) requires appropriate adjustments to AFSI to disregard any amount of depreciation expense that is taken into account on the taxpayer’s AFS with respect to property to which § 168 applies. Lastly, § 56A(c)(13)(B)(ii) provides that AFSI is appropriately adjusted to take into account any other item specified by the Secretary in order to provide that the property to which § 168 applies is accounted for in the same manner as that property is accounted for under chapter 1. See section 9 of this notice for rules addressing certain AFSI adjustments with respect to property to which § 168 applies. (10) Adjustments with regard to qualified wireless spectrum . Section 56A(c)(14)(A)(i) requires AFSI to be reduced by amortization deductions allowed under § 197 with respect to qualified wireless spectrum, to the extent of the amount allowed as deductions in computing taxable income for the taxable year. In addition, § 56A(c)(14)(A)(ii)(I) requires appropriate adjustments to AFSI to disregard any amount of amortization expense that is taken into account on the taxpayer’s AFS with respect to such qualified wireless spectrum. Further, § 56A(c)(14)(A)(ii)(II) provides that AFSI is appropriately adjusted to take into account any other item specified by the Secretary in order to provide that such qualified wireless spectrum is accounted for in the same manner as that property is accounted for under chapter 1. Lastly, § 56A(c)(14)(B) defines qualified wireless spectrum as wireless spectrum that is used in the trade or business of a wireless telecommunications carrier, and was acquired after December 31, 2007, and before August 16, 2022. See section 10 of this notice for rules addressing AFSI adjustments with respect to qualified wireless spectrum. (11) Adjustment for financial statement net operating losses . Section 56A(d)(1) provides that AFSI (determined after the application of § 56A(c) but without regard to § 56A(d)) is reduced by an amount equal to the lesser of the aggregate amount of financial statement net operating loss (FSNOL) carryovers to the taxable year or 80 percent of AFSI (determined after the application of § 56A(c) but without regard to § 56A(d)). Section 56A(d)(2) provides that the amount of an FSNOL that can be carried forward to a taxable year is the FSNOL remaining (if any) after reducing AFSI in prior taxable years under § 56A(d)(1). An FSNOL is the net loss set forth on a taxpayer’s AFS, adjusted as provided by § 56A(c), but without regard to § 56A(d), for taxable years ending after December 31, 2019. See section 12 of this notice for rules addressing FSNOL carryovers. .04 Qualification as an Applicable Corporation under § 59(k) . Section 59(k)(1)(A) provides that, for purposes of §§ 55 through 59, the term Applicable Corporation means, with respect to any taxable year, any corporation (other than an S corporation, as defined in § 1361(a)(1); a regulated investment company, as defined in § 851 (RIC); or a real estate investment trust, as defined in § 856 (REIT)), that meets the average annual AFSI test under § 59(k)(1)(B) (AFSI Test) for one or more taxable years that (i) are prior to that taxable year and (ii) end after December 31, 2021. (1) AFSI Test . There are two versions of the AFSI Test under § 59(k)(1)(B): one version that applies to corporations that are members of a foreign-parented multinational group, as defined in § 59(k)(2)(B) (FPMG), and one version that applies to all other corporations. Under § 59(k)(1)(B)(i), a corporation that is not a member of a FPMG meets the AFS
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59(k)(2)(B) (FPMG), and one version that applies to all other corporations. Under § 59(k)(1)(B)(i), a corporation that is not a member of a FPMG meets the AFSI Test for a taxable year if the average annual AFSI of that corporation (determined without regard to the adjustment under § 56A(d) for FSNOLs) for the three-taxable-year period ending with that taxable year (Three-Taxable-Year Period) exceeds $1,000,000,000 (General AFSI Test). Under § 59(k)(1)(B)(ii), a corporation that is a member of a FPMG for any taxable year meets the AFSI Test for that taxable year if (i) that corporation meets the General AFSI Test (determined after applying the rule in § 59(k)(2)) (FPMG $1 Billion Test), and (ii) the average annual AFSI of that corporation (determined without regard to the rule in § 59(k)(2) and without regard to the adjustment described in § 56A(d) for FSNOLs) for the Three-Taxable-Year Period is at least $100,000,000. (2) Special aggregation rules and AFSI rules for determining Applicable Corporation status . Solely for purposes of determining whether a corporation is an Applicable Corporation under § 59(k)(1), § 59(k)(1)(D) requires that all AFSI of persons treated as a single employer with that corporation under § 52(a) or (b) is treated as AFSI of that corporation. Section 59(k)(1)(D) also provides that, solely for purposes of determining whether a corporation is an Applicable Corporation, the AFSI of such corporation must be determined without regard to the partnership distributive share adjustment under § 56A(c)(2)(D)(i) and the adjustments pertaining to covered benefit plans (as defined in § 56A(c)(11)(B)) under § 56A(c)(11). In addition, § 59(k)(2)(A) provides that, solely for purposes of determining whether a corporation that is a member of a FPMG meets the FPMG $1 Billion Test, (i) the AFSI of such corporation must include the AFSI of all members of the FPMG, and (ii) AFSI is determined without regard to the partnership distributive share adjustment under § 56A(c)(2)(D)(i), the foreign income pro rata share adjustment under § 56A(c)(3), the effectively connected income adjustment under § 56A(c)(4), and the adjustments under § 56A(c)(11) pertaining to covered benefit plans. (3) Determination of a FPMG . For purposes of applying § 59(k)(2)(A), § 59(k)(2)(B) defines a FPMG, with respect to a taxable year, as two or more entities if (i) at least one entity is a domestic corporation and another entity is a foreign corporation, (ii) the entities are included in the same AFS for the year, and (iii) either the common parent of the entities is a foreign corporation or, if there is no common parent, the entities are treated as having a common parent that is a foreign corporation under rules provided by the Secretary under the authority granted by § 59(k)(2)(D) (the common parent or the entity treated as the common parent, the FPMG Common Parent). For purposes of applying § 59(k)(2), if a foreign corporation is engaged in a trade or business in the United States, that trade or business is treated as a separate domestic corporation that is wholly owned by the foreign corporation. See § 59(k)(2)(C). (4) Authority of the Secretary to provide regulations or other guidance . Section 59(k)(2)(D) authorizes the Secretary to provide regulations or other guidance applying the principles of § 59(k)(2), including rules to determine the entities treated as having a FPMG Common Parent, the entities included in a FPMG, and the FPMG Common Parent. In addition, § 59(k)(3) authorizes
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(k)(2), including rules to determine the entities treated as having a FPMG Common Parent, the entities included in a FPMG, and the FPMG Common Parent. In addition, § 59(k)(3) authorizes the Secretary to provide regulations or other guidance for the purposes of applying § 59(k), including providing a simplified method for determining whether a corporation meets the requirements of § 59(k)(1), and addressing the application of § 59(k) to a corporation that experiences an ownership change. See section 13 of this notice for rules addressing the determination of whether a corporation is an applicable corporation subject to the CAMT, including rules that address aggregation under § 52, FPMGs, and the treatment of investments in partnerships. .05 CAMT FTC . (1) Determining the CAMT FTC . Section 59(l)(1) provides the rules for determining the amount of the CAMT FTC for a taxable year if an Applicable Corporation chooses to claim the Regular FTC for the taxable year. The CAMT FTC of the Applicable Corporation for a taxable year is the sum of two amounts. The first amount (CFC Taxes) is equal to the lesser of: (i) the aggregate of the Applicable Corporation’s pro rata share (as determined under § 56A(c)(3)) of the amount of Foreign Income Taxes that are (1) taken into account on the AFS of each CFC with respect to which the Applicable Corporation is a U.S. Shareholder and (2) paid or accrued (for Federal income tax purposes) by each such CFC, or (ii) 15 percent of the Applicable Corporation’s adjustment under § 56A(c)(3)(A) (CFC FTC Limitation). See § 59(l)(1)(A). The second amount is equal to the amount of Foreign Income Taxes that are (i) taken into account on the AFS of the Applicable Corporation, and (ii) paid or accrued (for Federal income tax purposes) by the Applicable Corporation. See § 59(l)(1)(B). (2) Carryover of excess CFC Taxes . Section 59(l)(2) provides that, for any taxable year for which an Applicable Corporation chooses to claim the Regular FTC, the amount of CFC Taxes for the taxable year in excess of the CFC FTC Limitation for the taxable year is carried forward for up to the 5 succeeding taxable years and increases the amount of CFC Taxes in any of those succeeding taxable years to the extent not taken into account in a prior taxable year. (3) Grant of authority for regulations or other guidance . Section 59(l)(3) provides the Secretary authority to provide regulations or other guidance as is necessary to carry out the purposes of the CAMT FTC rules in § 59(l). See section 14 of this notice for rules addressing the CAMT FTC. .06 Consolidated return regulations . Section 1502 authorizes the Secretary to prescribe regulations to clearly reflect the Federal income tax liability of a Tax Consolidated Group and to prevent avoidance of such tax liability. See § 1.1502-1(h) (defining the term consolidated group for Federal income tax purposes). For purposes of carrying out those objectives, § 1502 explicitly permits the Secretary to prescribe rules that may be different from the provisions of chapter 1 that would apply if the corporations composing the Tax Consolidated Group filed separate returns. SECTION 3. DEFINITION OF TAXPAYER Unless otherwise provided in this notice, for purposes of sections 4 through 16 of this notice, the term Taxpayer means any entity identified in § 7701 and the regulations thereunder (including an entity that is disregarded as an entity separate from its owner under § 301.7701-3 of the Procedure and Administration Regulations (that is, a disregarded entity)), regardless of whether the entity meets the definition of a taxpayer under § 7701(a)(14). SECTION 4. DETERMINING A TAXPAYER’S AFS .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 4, which provides Taxpayers with additional clarity in determining their AFS prior to forthcoming proposed regulations. .02 Definition of Applicable Financial Statement (AFS) . Subject to the additional rules in section 4.02
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the interim guidance provided in this section 4, which provides Taxpayers with additional clarity in determining their AFS prior to forthcoming proposed regulations. .02 Definition of Applicable Financial Statement (AFS) . Subject to the additional rules in section 4.02(2) through (5) of this notice, for purposes of §§ 56A and 59, the terms Applicable Financial Statement and AFS mean the Taxpayer’s financial statement listed in section 4.02(1) of this notice that has the highest priority, including priority within sections 4.02(1)(a), (a)(ii), (b), (b)(ii), and (d) of this notice. (1) General financial statement priority . The financial statements are, in order of descending priority: (a) GAAP statements . A financial statement that is certified, within the meaning of section 4.02(2) of this notice, as being prepared in accordance with United States generally accepted accounting principles (GAAP) and is: (i) A Form 10-K (or successor form), or annual statement to shareholders, filed with the United States Securities and Exchange Commission (SEC); (ii) An audited financial statement of the Taxpayer that is used for: (A) Credit purposes; (B) Reporting to shareholders, partners, or other proprietors, or to beneficiaries; or (C) Any other substantial non-tax purpose; or (iii) A financial statement, other than a tax return, filed with the Federal Government or any Federal agency, other than the SEC or the IRS; (b) IFRS statements . A financial statement that is certified, within the meaning of section 4.02(2) of this notice, as being prepared in accordance with international financial reporting standards (IFRS) and is: (i) Filed by the Taxpayer with an agency of a foreign government that is equivalent to the SEC, and has financial reporting standards not less stringent than the standards required by the SEC; (ii) An audited financial statement of the Taxpayer that is used for: (A) Credit purposes; (B) Reporting to shareholders, partners, or other proprietors, or to beneficiaries; or (C) Any other substantial non-tax purpose; or (iii) A financial statement, other than a tax return, filed with the Federal Government, a Federal agency, a foreign government, or an agency of a foreign government, other than the SEC, the IRS, or an agency that is equivalent to the SEC or the IRS; (c) Other government and regulatory statements . A financial statement, other than a tax return, filed with the Federal Government or any Federal agency, a state government or state agency, a foreign government or foreign agency, or a self-regulatory organization including, for example, a financial statement filed with a state agency that regulates insurance companies, or the Financial Industry Regulatory Authority, or a comparable foreign self-regulatory organization; (d) Unaudited external statements . A financial statement, other than a tax return or a financial statement described in section 4.02(1)(a)-(c) of this notice, that is unaudited (or audited but not certified, within the meaning of section 4.02(2) of this notice), prepared for an external non-tax purpose, and prepared using: (i) GAAP; (ii) IFRS; or (iii) any other accepted accounting standards that are issued by an accounting standards board charged with developing accounting standards for one or more jurisdictions; or (e) The Taxpayer’s Federal income tax return or information return filed with the IRS. (2) Certified financial statement . A financial statement is certified for purposes of section 4.02(1) of this notice if it is: (a) Certified by an independent financial statement auditor to present fairly the financial position and results of operations of a Taxpayer (or group of Taxpayers) in conformity with the relevant financial accounting standards (an unqualified or unmodified “clean” opinion); (b) Subject to a qualified or modified opinion by an independent financial statement auditor that such financial statement presents fairly the financial position and results of operations of a Taxpayer (or group of Taxpayers) in conformity with the relevant financial accounting standards, except for the effects of the matter to which the qualification or modification relates (a qualified or modified “except for�
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financial position and results of operations of a Taxpayer (or group of Taxpayers) in conformity with the relevant financial accounting standards, except for the effects of the matter to which the qualification or modification relates (a qualified or modified “except for” opinion); or (c) Subject to an adverse opinion by an independent financial statement auditor, but only if the auditor discloses the amount of the disagreement with the statement. (3) Restatements . If a Taxpayer restates its FSI (as defined in section 5.02(2) of this notice) for a taxable year prior to the date that the Taxpayer files its original Federal income tax return for such taxable year, the AFS that reflects the restated FSI (Restated AFS) must be prioritized over the first AFS that is issued for that specific accounting period (Original AFS). If a Taxpayer restates its FSI for a taxable year after the date that the Taxpayer files its original Federal income tax return for such taxable year, see section 11.02(3) of this notice. For purposes of this notice, a Restated AFS is a revised AFS for a specific accounting period that is reissued to correct the Original AFS for that accounting period. Adjustments to the financial results of a prior accounting period that are disclosed in the notes to an Original AFS for comparison purposes (for example, in the case of a change in accounting principle) do not constitute a Restated AFS for that prior accounting period for purposes of this notice. (4) Annual and periodic financial statements . If a Taxpayer with different financial accounting and taxable years is required to file both annual financial statements and periodic financial statements covering less than a 12-month period with a government or government agency, the Taxpayer must prioritize the annual financial statements over the periodic financial statements in accordance with section 4.02 of this notice. (5) AFS covering group of entities . (a) In general . If a Taxpayer’s financial results are consolidated with the financial results of one or more other Taxpayers on a Consolidated AFS (as defined in section 2.03(1) of this notice), the Taxpayer’s AFS is the Consolidated AFS. However, except as provided in section 4.02(5)(b) of this notice, if the Taxpayer’s financial results are also separately reported on an AFS that is of equal or higher priority to the Consolidated AFS under section 4.02(1) of this notice (Separate AFS), then the Taxpayer’s AFS is the Separate AFS. (b) Exceptions to use of Separate AFS . (i) Corporation that is a member of a Tax Consolidated Group . A corporation that is a member of a Tax Consolidated Group must use the Consolidated AFS that contains the financial results of the Tax Consolidated Group, regardless of whether the corporation’s financial results also are reported on a Separate AFS that is of equal or higher priority to the Consolidated AFS. (ii) Members of a FPMG . If a Taxpayer is a member of a FPMG and if the FPMG Common Parent (as defined in section 2.04(3) of this notice) prepares a Consolidated AFS (FPMG Consolidated AFS) that includes the Taxpayer, the Taxpayer must use the FPMG Consolidated AFS, regardless of whether the Taxpayer’s financial results also are reported on a Separate AFS that is of equal or higher priority to the FPMG Consolidated AFS. SECTION 5. GENERAL RULES FOR DETERMINING AFSI .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 5, which provides Taxpayers with additional clarity in determining AFSI prior to forthcoming proposed regulations. .02 Definition of AFSI and FSI . (1) Definition of AFSI . (a) General definition of AFSI . Except as provided in section 5.02(1)(b) of this notice, AFSI means, with respect to any Taxpayer for any taxable year, the Taxpayer’s financial statement income (FSI) (as defined in section 5.02(2
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.02(1)(b) of this notice, AFSI means, with respect to any Taxpayer for any taxable year, the Taxpayer’s financial statement income (FSI) (as defined in section 5.02(2) of this notice) for such taxable year, adjusted as provided in § 56A or regulations or other guidance issued under § 56A. A Taxpayer otherwise may not make any adjustments to FSI in determining AFSI. For purposes of § 59(k), certain modifications to AFSI, including aggregation modifications, apply as provided in § 59(k) or regulations or other guidance issued under § 59(k), including in section 13 of this notice. (b) AFSI exception for certain Taxpayers. If, pursuant to section 4.02(1)(e) of this notice, a Taxpayer determines that its AFS for a taxable year is a Federal income tax return or information return filed with the IRS, the AFSI of such Taxpayer for such taxable year is the Taxpayer’s taxable income for such taxable year. (2) Definition of FSI . FSI means, with respect to any Taxpayer for any taxable year, the net income or loss of the Taxpayer set forth on the income statement (sometimes referred to as the statement of earnings, the statement of operations, or the statement of profit and loss) included in the Taxpayer’s AFS (as defined in section 4.02 of this notice) for such taxable year. FSI includes all of the Taxpayer’s items of income, expense, gain, and loss reflected in the net income or loss set forth on such income statement for the taxable year, including nonrecurring items and net income or loss from discontinued operations. FSI does not include amounts reflected elsewhere in the Taxpayer’s AFS, including in equity accounts such as retained earnings and other comprehensive income. (3) General rules for determining FSI and AFSI . (a) Federal income tax treatment not relevant for FSI . FSI includes all items of income, expense, gain, and loss reflected in the net income or loss of a Taxpayer set forth on the income statement included in the Taxpayer’s AFS regardless of whether such amounts are realized, recognized, or otherwise taken into account for purposes of determining the Taxpayer’s regular tax liability, as defined in § 26(b) (Regular Tax). For example, FSI includes income reported on the income statement included in a Taxpayer’s AFS for a taxable year even if such income would not be taken into account as AFS revenue for that taxable year under § 1.451-3(b)(2). Similarly, FSI includes gain or loss reported on the income statement included in a Taxpayer’s AFS for a taxable year even if such gain or loss is deferred or not recognized for Regular Tax purposes (for example, gain on a like-kind exchange that qualifies for nonrecognition treatment under § 1031). (b) Federal income tax treatment not relevant for AFSI except as otherwise provided in the statute or other guidance . Except as otherwise provided in § 56A or § 59(k) (as applicable), regulations, or other guidance, AFSI includes all items of income, expense, gain, and loss reflected in the Taxpayer’s FSI regardless of whether such amounts are realized, recognized, or otherwise taken into account for Regular Tax purposes. Accordingly, if FSI reflects gain or loss from a transaction that qualifies for nonrecognition treatment for Regular Tax purposes, and no provision of § 56A or § 59(k) (as applicable), regulations, or other guidance provides for an adjustment to apply nonrecognition treatment for AFSI purposes, then such gain or loss is recognized in AFSI. (c) Determining FSI from a Consolidated AFS . If a Taxpayer’s AFS is a Consolidated AFS (as determined under section 4.02(5) of this notice), the Taxpayer must determine the amount of the portion of the net income or loss of the AFS Group (as defined in section 2.03(1) of this notice) set forth on the income statement included in the Consolidated AFS (Consolidated FSI) that is the Taxpayer
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the net income or loss of the AFS Group (as defined in section 2.03(1) of this notice) set forth on the income statement included in the Consolidated AFS (Consolidated FSI) that is the Taxpayer’s FSI. Except as provided in section 6 of this notice, the Taxpayer’s FSI is determined in accordance with this section 5.02(3)(c). (i) In general . The portion of Consolidated FSI that is the Taxpayer’s FSI must be supported by the Taxpayer’s separate books and records (including trial balances) used to create the Consolidated AFS and generally would equal the FSI that the Taxpayer would have reported had the Taxpayer prepared a Separate AFS. (ii) No netting losses against income within the Consolidated AFS . The portion of Consolidated FSI that is the Taxpayer’s FSI is determined without regard to the financial results of other Taxpayers that are members of the same AFS Group. Accordingly, if two or more Taxpayers are members of the same AFS Group, the loss of one such Taxpayer may not be netted against the income of another such Taxpayer for purposes of determining the FSI of either Taxpayer, notwithstanding that such amounts are reflected in Consolidated FSI on a net basis. (iii) Elimination journal entries . The portion of Consolidated FSI that is the Taxpayer’s FSI is determined without regard to any AFS Consolidation Entries (as defined in section 5.02(3)(c)(vi) of this notice) that-- (A) eliminate the effect of transactions between the Taxpayer and another Taxpayer that is a member of the same AFS Group unless such transactions are between a disregarded entity and its owner or between disregarded entities that have the same owner; or (B) eliminate FSI of the Taxpayer with respect to its investment in another Taxpayer that is a member of the AFS Group unless the investment is in a disregarded entity. In the case of a Taxpayer that has an investment in a partnership, the FSI of the Taxpayer with respect to such investment must be determined as though the Taxpayer prepared a Separate AFS in which such investment was properly accounted for under the relevant accounting standards for investments in other entities (for example, under the equity method described in Accounting Standards Codification (ASC) 323), when the Taxpayer does not so account for the investment in its separate books and records used to prepare the Consolidated AFS. (iv) Consolidation entries other than elimination entries . AFS Consolidation Entries, other than elimination entries described in section 5.02(3)(c)(iii)(A) and (B) of this notice, that relate to one or more Taxpayers that are members of the AFS Group and that are not reflected in the separate books and records of such Taxpayers, such as for shared expenses, must be allocated to each Taxpayer to which the AFS Consolidation Entries relate and taken into account in each Taxpayer’s FSI. (v) Reconciliation requirement . The Taxpayer must maintain books and records sufficient to demonstrate how its FSI (as determined under this section 5.02(3)(c)) reconciles to Consolidated FSI. (vi) Definition of AFS Consolidation Entries . For purposes of this section 5.02(3)(c), the term AFS Consolidation Entries means the financial accounting journal entries that are made for AFS purposes in order to present the financial results of an AFS Group as though all members of the AFS Group were a single company, including journal entries to eliminate the effect of transactions between members of the AFS Group, to report amounts that are not recorded in the separate books and records of one or more members of the AFS Group, and to correct or otherwise adjust amounts that are reported in the separate books and records of one or more members of the AFS Group. (vii) Example . (A) Facts . The financial results of Taxpayer X are consolidated with the financial results of Taxpayer Y on a Consolidated AFS (XY Consolidated AFS) for the financial reporting period beginning January 1, 2023, and ending December 31, 2023. X and Y are the only Tax
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are consolidated with the financial results of Taxpayer Y on a Consolidated AFS (XY Consolidated AFS) for the financial reporting period beginning January 1, 2023, and ending December 31, 2023. X and Y are the only Taxpayers whose financial results are reflected in the XY Consolidated AFS. X and Y are both calendar year Taxpayers. Under section 4.02(5) of this notice, X’s AFS and Y’s AFS is the XY Consolidated AFS. X is a domestic corporation. Y is a domestic partnership, and X has a 40 percent interest in Y. The XY Consolidated AFS reflects Consolidated FSI of $1.65 billion. The books and records used to prepare the XY Consolidated AFS disclose that X had separate net income of $2 billion and that Y had a separate net loss of $500 million. Further, the $2 billion net income of X includes $1 million of income for services rendered to Y and a loss of $200 million reflecting X’s share of Y’s net loss, determined under the equity method of accounting. These two amounts were eliminated from Consolidated FSI through AFS Consolidation Entries made in preparing the XY Consolidated AFS. Y’s loss of $500 million includes $1 million of expense that Y incurred for services provided by X. The $1 million expense was also eliminated from Consolidated FSI through AFS Consolidation Entries made in preparing the Consolidated AFS. An AFS Consolidation Entry was also made to take into account in Consolidated FSI $50 million of expenses incurred by X to a third party and not reflected in its separate books and records. Accordingly, the information from X’s and Y’s source documents, the AFS Consolidation Entries, and Consolidated FSI for the XY Consolidated AFS are summarized as follows (all amounts are stated in U.S. dollars): X Y AFS Consolidation Entries Consolidated FSI Net income or loss from transactions outside AFS Group 2,199,000,000 (499,000,000) - 1,700,000,000 Income from transactions between X and Y (services) 1,000,000 - (1,000,000) - Expenses from transactions between X and Y (services) - (1,000,000) 1,000,000 - Investment in Y (X’s 40% share of Y’s 500,000,000 loss) (200,000,000) - 200,000,000 - Expense of X recorded in consolidation - - (50,000,000) (50,000,000) Net Income or Loss 2,000,000,000 (500,000,000) 150,000,000 1,650,000,000 (B) Analysis . X and Y must determine their portion of the Consolidated FSI set forth on the XY Consolidated AFS by applying the principles set forth in section 5.02(3)(c) of this notice. Accordingly, the portion of Consolidated FSI that is X’s FSI is based upon X’s separate books and records used in preparing the XY Consolidated AFS. These disclose net income of $2 billion. In determining X’s FSI, this amount is not reduced by the net loss reflected in Y’s separate books and records (even though Consolidated FSI is reduced by such net loss). Further, pursuant to section 5.02(3)(c)(iii) of this notice, the AFS Consolidation Entries eliminating the $1 million of income from services rendered to Y and the $200 million loss from X’s investment in Y determined under the equity method are both disregarded. That is, X’s FSI includes these two amounts. Finally, pursuant to section 5.02(3)(c)(iv) of this notice, X must reduce its FSI by $50 million, the AFS Consolidation Entry for administrative costs of X that were not reflected in its separate books and records. Accordingly, the portion of Consolidated FSI that is X’s FSI is $1.950 billion ($2 billion - $50 million). The portion of Consolidated FSI that is Y’s FSI
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books and records. Accordingly, the portion of Consolidated FSI that is X’s FSI is $1.950 billion ($2 billion - $50 million). The portion of Consolidated FSI that is Y’s FSI is similarly determined. Y’s separate books and records disclose a net loss of $500 million. In determining Y’s FSI, this amount is not offset by any portion of X’s separate net income of $2 billion (even though the amounts are netted in Consolidated FSI). Further, pursuant to section 5.02(3)(c)(iii) of this notice, the AFS Consolidation Entry eliminating $1 million of expense for services provided by X is disregarded. That is, such expense is included in Y’s FSI. Accordingly, the portion of Consolidated FSI that is Y’s FSI is a net loss of $500 million. Pursuant to section 5.02(3)(c) of this notice, the portions of Consolidated FSI that are X’s FSI and Y’s FSI are determined as follows: FSI of X FSI of Y Separate net income or Loss 2,000,000,000 (500,000,000) Expenses of X recorded in consolidation (50,000,000) - FSI 1 1,950,000,000 (500,000,000) SECTION 6. DETERMINING FSI, AFSI, AND TAX IMPOSED FOR TAX CONSOLIDATED GROUPS .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 6, which provides Taxpayers with additional clarity in determining, prior to forthcoming proposed regulations-- (1) the FSI and AFSI of a Tax Consolidated Group ( see section 6.03 of this notice), and (2) the amount of tax imposed by § 55 on a Tax Consolidated Group ( see section 6.04 of this notice). .02 Priority of Consolidated AFS . For rules regarding the priority of the Consolidated AFS of a Tax Consolidated Group, see section 4.02(5)(b)(i) of this notice. .03 Calculation of FSI of a Tax Consolidated Group . The FSI of a Tax Consolidated Group for a taxable year is determined based on the Consolidated AFS of the Tax Consolidated Group as follows: (1) Consolidated AFS comprising solely Tax Consolidated Group members . If the Consolidated AFS of the Tax Consolidated Group comprises solely the members (as defined in § 1.1502-1(b)) of the Tax Consolidated Group and any disregarded entities owned by such members (each, a Tax Consolidated AFS Member), the FSI of the Tax Consolidated Group for the taxable year equals the Consolidated FSI set forth in the Consolidated AFS of the Tax Consolidated Group (that is, the FSI of all Tax Consolidated AFS Members) for the taxable year under section 5.02 of this notice. (2) Consolidated AFS comprising Tax Consolidated AFS Members and other Taxpayers . If a Consolidated AFS comprises all of the Tax Consolidated AFS Members of a single Tax Consolidated Group, as well as one or more Taxpayers that are not Tax Consolidated AFS Members of the Tax Consolidated Group, the FSI of the Tax Consolidated Group for the taxable year must be determined from the Consolidated AFS under section 5.02(3)(c) of this notice by treating the Tax Consolidated Group as the Taxpayer. Treating a Tax Consolidated Group as a Taxpayer does not change the Federal tax classification of an entity classified as a partnership owned only by Tax Consolidated AFS Members of the Tax Consolidated Group. Accordingly, for example, the FSI of the Tax Consolidated Group must-- (a) disregard each AFS Consolidation Entry regarding-- (i) a transaction between a Tax Consolidated AFS Member and another Taxpayer, (ii) a Tax Consolidated AFS Member’s investment in another Taxpayer, or (iii) another Taxpayer’s investment in a Tax Consolidated AFS Member, and (b) take into account each AFS Consolidation Entry
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) a Tax Consolidated AFS Member’s investment in another Taxpayer, or (iii) another Taxpayer’s investment in a Tax Consolidated AFS Member, and (b) take into account each AFS Consolidation Entry regarding-- (i) a transaction between Tax Consolidated AFS Members, or (ii) a Tax Consolidated AFS Member’s investment in another Tax Consolidated AFS Member. .04 Calculation of tax imposed by § 55 . The tax imposed by § 55(a) on a Tax Consolidated Group is calculated based on the Tax Consolidated Group’s-- (1) tentative minimum tax, (2) regular consolidated tax liability, and (3) tax imposed by § 59A (under § 1.1502-59A). .05 Example . The following example illustrates the rules set forth in section 6.03 of this notice. (1) Facts . X, Y, and Z are domestic corporations that each have only one class of stock outstanding. X owns 90 percent of the stock of Y and 60 percent of the stock of Z. The remaining Y and Z stock is held by unrelated persons. X and Y form an affiliated group (XY Tax Consolidated Group) and file a consolidated tax return (XY Consolidated Return), with X as the common parent. The financial results of domestic corporations X, Y, and Z are consolidated on a Consolidated AFS (XYZ Consolidated AFS) for all relevant financial reporting periods. X, Y, and Z are the only taxpayers the financial results of which are reflected in the XYZ Consolidated AFS. X, Y, and Z are all calendar year taxpayers. Under section 4.02(5) of this notice, the XYZ Consolidated AFS is the AFS of X, Y, and Z. In 2023, X sold Asset N to Y for $10 million. Books and records used to prepare the XYZ Consolidated AFS, including trial balances, show that X had gain of $2 million on the sale of Asset N. The gain was eliminated from Consolidated FSI through AFS Consolidation Entries made in preparing the XYZ Consolidated AFS. In 2024, Y sold Asset N to Z for $13 million. Books and records used to prepare the XYZ Consolidated AFS, including trial balances, show that Y had gain of $3 million on the sale of Asset N. As in 2023, the gain was eliminated from Consolidated FSI through AFS Consolidation Entries made in preparing the XYZ Consolidated AFS. (2) Analysis --(a) In general . The FSI of the XY Tax Consolidated Group is determined under section 6.03 of this notice. The XYZ Consolidated Group includes an entity (Z) that is not a member of the XY Tax Consolidated Group. Therefore, section 6.03(2) of this notice applies. As a result, the XY Consolidated Group’s FSI is determined from the XYZ Consolidated AFS by applying section 5.02(3)(c) of this notice, treating the XY Tax Consolidated Group as a single taxpayer. Accordingly, the XY Tax Consolidated Group’s FSI is based upon X’s and Y’s books and records used in preparing the XYZ Consolidated AFS. AFS Consolidation Entries eliminating transactions between Z and a member of the XY Tax Consolidated Group are disregarded in determining the FSI of the XY Tax Consolidated Group, but AFS Consolidation Entries eliminating transactions between X and Y are taken into account. (b) Analysis for 2023 . In 2023, because the AFS Consolidation Entries eliminate a transaction between X and Y, the AFS Consolidation Entries are taken into account. Therefore, X’s $2 million gain on the sale of Asset N is not included in the XY Tax Consolidated Group’s FSI in 2023. (c) Analysis for 2024 . In 2024, because the AFS Consolidation Entries eliminate a transaction between Y (a member of the XY Tax Consolidated Group) and Z (a non-member), these AFS Consolidation Entries are disregarded. However, the effect of the 2023 AFS Consolidation Entries on the basis of Asset N is taken into account.
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XY Tax Consolidated Group) and Z (a non-member), these AFS Consolidation Entries are disregarded. However, the effect of the 2023 AFS Consolidation Entries on the basis of Asset N is taken into account. Therefore, the XY Tax Consolidated Group’s FSI in 2024 includes $5 million of gain on the sale of Asset N. SECTION 7. DETERMINING AFSI WITH RESPECT TO CERTAIN FOREIGN CORPORATIONS .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 7, which provides Taxpayers with additional clarity in determining AFSI with respect to certain foreign corporations prior to forthcoming proposed regulations. .02 Application of § 56A(c) in respect of certain foreign corporations . (1) Interaction of § 56A(c)(2)(C) and (c)(3) . A Taxpayer that is a U.S. Shareholder (as defined in section 2.03(5) of this notice) of a CFC (as defined in section 2.03(5) of this notice) must apply both § 56A(c)(2)(C) and (c)(3) to determine its AFSI with respect to such CFC. (2) Section 56A(c)(3) adjustment determined on aggregate basis . A Taxpayer that is a U.S. Shareholder of multiple CFCs makes a single adjustment under § 56A(c)(3)(A) that is equal to the sum of its pro rata share of the Adjusted Net Income or Loss (as defined in section 2.03(5) of this notice) of each CFC of which the Taxpayer is a U.S. Shareholder. If the amount of such single adjustment would be negative, no amount is taken into account under § 56A(c)(3) for such taxable year. See § 56A(c)(3)(B)(i). (3) Financial statement income or loss of a CFC that is a partner in any partnership or the owner of any disregarded entity . If a CFC is a partner in any partnership or the owner of any disregarded entity, the items taken into account in computing the CFC’s Adjusted Net Income or Loss must include the CFC’s distributive share of AFSI of any such partnership (as determined under § 56A(c)(2)(D), regulations, or other guidance) and the FSI of any such disregarded entity, as adjusted under rules similar to those that apply in determining AFSI. (4) Application of income tax treaties . For purposes of applying § 56A(c)(4), in the case of a foreign corporation that qualifies for and claims the benefits of the business profits provisions of an applicable income tax treaty, the principles of those provisions apply in determining the foreign corporation’s AFSI. (5) Interaction of § 56A(c)(3) and (c)(4) . A CFC’s Adjusted Net Income or Loss is not limited to the amount of AFSI of the CFC that would be determined if only § 56A(c)(4) and application of section 7.02(4) of this notice were taken into account. Additionally, if a CFC is an Applicable Corporation, the CFC’s Adjusted Net Income or Loss is reduced by the amount of AFSI of the CFC (determined by taking into account § 56A(c)(4) as applied by taking into account section 7.02(4) of this notice). SECTION 8. AFSI ADJUSTMENT FOR CERTAIN TAXES .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 8, which provides Taxpayers with additional clarity in determining the AFSI adjustment for certain taxes under § 56A(c)(5) prior to forthcoming proposed regulations. .02 Adjustments for certain taxes under § 56A(c)(5) . (1) Timing of appropriate adjustment . An appropriate adjustment to AFSI described in § 56A(c)(5) with respect to any Federal income taxes or Foreign Income Taxes (as defined in section 2.03(7)
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) . (1) Timing of appropriate adjustment . An appropriate adjustment to AFSI described in § 56A(c)(5) with respect to any Federal income taxes or Foreign Income Taxes (as defined in section 2.03(7) of this notice) that are taken into account on the Taxpayer’s AFS, including Federal income taxes or Foreign Income Taxes accounted for as deferred tax expense (benefit), as current tax expense (benefit), or through increases or decreases to other AFS accounts (such as those that are used to account for FSI from investments in other entities under the equity method), is made in the taxable year or years in which such taxes increase or decrease the Taxpayer’s FSI or are included as a component of an adjustment to AFSI described in section 11.02 of this notice. (2) Taxes treated as taken into account on an AFS . For purposes of sections 8.02 and 14.02 of this notice, a Federal income tax or Foreign Income Tax is considered taken into account on an AFS of a Taxpayer if any journal entry has been recorded in the journal used to determine the amounts on the AFS of the Taxpayer for any year, or another AFS that includes the Taxpayer, to reflect the income tax, even if the income tax does not increase or decrease the Taxpayer’s FSI at the time of the journal entry. An income tax that is taken into account on a partnership’s AFS is also considered taken into account on any AFS of its partners. SECTION 9. AFSI ADJUSTMENTS FOR SECTION 168 PROPERTY .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 9, which provides Taxpayers with additional clarity in determining AFSI adjustments for Section 168 Property (as defined in section 4.02(5) of Notice 2023-7) prior to forthcoming proposed regulations. .02 Modifications and clarifications to Notice 2023-7. This section 9.02 modifies and clarifies certain provisions in section 4 of Notice 2023-7. Taxpayers that choose to rely on the interim guidance in section 4 of Notice 2023-7 on or after September 12, 2023, must apply the guidance in section 4 of Notice 2023-7, as modified and clarified by this notice. (1) Adjustments for accounting method changes . If a Taxpayer changes its method of accounting for depreciation for any item of Section 168 Property for Regular Tax purposes, the Taxpayer must adjust AFSI to reflect the adjustment required under § 481(a) for such change to prevent depreciation from being duplicated or omitted under § 56A(c)(13). Section 9.02(5) and (6) of this notice modifies and clarifies sections 4.02 and 4.03 of Notice 2023-7 to take into account this § 481(a) adjustment. Section 9.02(8) of this notice modifies and clarifies section 4.08 of Notice 2023-7 to provide an example of this rule. (2) Adjustments for Tax Depreciation capitalized and subsequently deducted . If a Taxpayer capitalizes Tax Depreciation, as defined in section 4.02(7) of Notice 2023-7, and recovers the amount capitalized through one or more deductions allowed in computing taxable income, AFSI is reduced by such deductions, even if such deductions are allowed under a provision of the Code other than § 167. For example, if a Taxpayer capitalizes and amortizes Tax Depreciation under § 174(a)(2), AFSI is reduced by the amortization deductions allowed under § 174 in computing taxable income. Section 9.02(5) and (6) of this notice modifies and clarifies sections 4.02 and 4.03 of Notice 2023-7 to take into account the deductions described in this section 9.02(2). (3) Adjustments for Tax Depreciation capitalized to non-inventory property held for sale . If a Taxpayer capitalizes Tax Depreciation to property described in § 1221(a)(1) that is not inventory and recovers the amount capitalized as part of the computation of gain or loss from the sale or exchange of such property in computing taxable income, AFSI is reduced
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reciation to property described in § 1221(a)(1) that is not inventory and recovers the amount capitalized as part of the computation of gain or loss from the sale or exchange of such property in computing taxable income, AFSI is reduced by such amount. Section 9.02(5) and (6) of this notice modifies and clarifies sections 4.02 and 4.03 of Notice 2023-7 to take into account the amounts described in this section 9.02(3). (4) Adjustments related to dispositions of Section 168 Property that occur for AFS purposes before they occur for Regular Tax purposes . If a Taxpayer takes a disposition loss, including an abandonment loss, into account in its FSI with respect to Section 168 Property for a taxable year that is earlier than the taxable year in which the disposition event occurs for Regular Tax purposes, the Taxpayer must adjust AFSI for such earlier taxable year to disregard the disposition loss included in its FSI for that taxable year. The Taxpayer must wait until the taxable year in which the disposition event occurs for Regular Tax purposes to take the disposition loss (as redetermined under section 4.07 of Notice 2023-7, as modified by this notice) into account for AFSI purposes. Section 9.02(5) and (6) of this notice modifies and clarifies sections 4.02 and 4.03 of Notice 2023-7 to reflect this adjustment. Additionally, section 9.02(7) of this notice modifies section 4.07 of Notice 2023-7 to clarify that the rules in such section apply in the taxable year in which Section 168 Property is disposed of for Regular Tax purposes. Section 9.02(7) of this notice also modifies and clarifies section 4.07 of Notice 2023-7 to provide additional rules regarding adjustments to the AFS basis of Section 168 Property for purposes of redetermining the FSI gain or loss from the disposition of such property. Finally, section 9.02(8) of this notice modifies and clarifies the example in section 4.08 of Notice 2023-7 to illustrate these rules. (5) Modifications to section 4.02 of Notice 2023-7 . In accordance with sections 9.02(1) through (4) of this notice, section 4.02 of Notice 2023-7 is modified and clarified to read as follows: .02 Defined Terms . For purposes of this section 4: (1) Covered Book COGS Depreciation . The term Covered Book COGS Depreciation means depreciation expense, disposition loss (including from an abandonment) that occurs prior to the taxable year in which the disposition occurs for regular tax purposes, impairment loss, or impairment loss reversal that is taken into account as cost of goods sold (or as part of the computation of gain or loss from the sale or exchange of other property held for sale) in the net income or loss set forth on the taxpayer’s AFS with respect to Section 168 Property (as defined in section 4.02(5) of this notice). (2) Covered Book Depreciation Expense . The term Covered Book Depreciation Expense means depreciation expense, disposition loss (including from an abandonment) that occurs prior to the taxable year in which the disposition occurs for regular tax purposes, impairment loss, or impairment loss reversal other than Covered Book COGS Depreciation that is taken into account in the net income or loss set forth on the taxpayer’s AFS with respect to Section 168 Property. (3) Covered Book Expense . The term Covered Book Expense means an amount, other than Covered Book COGS Depreciation and Covered Book Depreciation Expense, that is-- (a) recognized as an expense or loss in the net income or loss set forth on the taxpayer’s AFS, and (b) reflected in the unadjusted depreciable basis, as defined in § 1.168(b)-1(a)(3), of Section 168 Property for purposes of the regular tax liability, as defined in § 26(b) (Regular Tax). (4) Deductible Tax Depreciation . The term Deductible Tax Depreciation means Tax Depreciation (as defined in section 4.02(7) of this notice) that is allowed as a deduction in computing taxable income, including Tax
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(4) Deductible Tax Depreciation . The term Deductible Tax Depreciation means Tax Depreciation (as defined in section 4.02(7) of this notice) that is allowed as a deduction in computing taxable income, including Tax Depreciation that is capitalized and subsequently allowed as a deduction in computing taxable income (even if such deduction is allowed under a provision of the Code other than § 167). (5) Section 168 Property . The term Section 168 Property means property to which § 168 applies, as described in section 4.04 of this notice. (6) Tax COGS Depreciation . The term Tax COGS Depreciation means Tax Depreciation that is capitalized to inventory under § 263A and recovered as part of cost of goods sold in computing gross income, and Tax Depreciation that is capitalized to property described in § 1221(a)(1) that is not inventory and recovered as part of the computation of gain or loss from the sale or exchange of such property in computing taxable income. (7) Tax Depreciation . The term Tax Depreciation means depreciation deductions allowed under § 167, with respect to Section 168 Property. (8) Tax Depreciation Section 481(a) Adjustment . The term Tax Depreciation Section 481(a) Adjustment means those adjustments that are required under § 481(a) for a change in method of accounting for depreciation for any item of Section 168 Property. (6) Modifications to section 4.03 of Notice 2023-7 . In accordance with section 9.02(1) through (4) of this notice, section 4.03 of Notice 2023-7 is modified and clarified to read as follows: .03 Adjustments for Depreciation (Including Depreciation Capitalized to Inventory) . For purposes of § 56A(c)(13), AFSI is-- (1) reduced by Tax COGS Depreciation, but only to the extent of the amount recovered: (a) as part of cost of goods sold in computing taxable income for the taxable year, or (b) as part of the computation of gain or loss from the sale or exchange of non-inventory property described in § 1221(a)(1) that is included in taxable income, or deducted in computing taxable income, respectively, for the taxable year, as applicable, (2) reduced by Deductible Tax Depreciation, but only to the extent of the amount allowed as a deduction in computing taxable income for the taxable year, (3) adjusted to disregard Covered Book COGS Depreciation, Covered Book Depreciation Expense, and Covered Book Expense, (4) reduced by any Tax Depreciation Section 481(a) Adjustment that is negative, but only to the extent of the amount of such Tax Depreciation Section 481(a) Adjustment that is taken into account in computing taxable income for the taxable year, (5) increased by any Tax Depreciation Section 481(a) Adjustment that is positive, but only to the extent of the amount of such Tax Depreciation Section 481(a) Adjustment that is taken into account in computing taxable income for the taxable year, and (6) adjusted for other items as provided in regulations or other guidance. (7) Modifications to section 4.07 of Notice 2023-7 . In accordance with section 9.02(1) and (4) through (6) of this notice, section 4.07 of Notice 2023-7 is modified and clarified to read as follows: .07 AFSI adjustments for dispositions . If a taxpayer disposes of Section 168 Property for Regular Tax purposes, the taxpayer must adjust AFSI for the taxable year in which such disposition occurs to redetermine any gain or loss taken into account in the net income or loss set forth on the taxpayer’s AFS with respect to such disposition for such year (including a gain or loss of zero) by adjusting the remaining AFS basis of such property by the amounts described in sections 4.07(1) through (4) of this notice with respect to such property, including those amounts attributable to taxable years prior to the effective date of the CAMT. For purposes of the preceding sentence, the remaining AFS basis of such property is-- (1) decreased by the full amount of Tax Depreciation with respect to such property (regardless of whether
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years prior to the effective date of the CAMT. For purposes of the preceding sentence, the remaining AFS basis of such property is-- (1) decreased by the full amount of Tax Depreciation with respect to such property (regardless of whether any amount of such Tax Depreciation was capitalized and not yet taken into account as a reduction to AFSI through an adjustment described in sections 4.03(1) or (2) of this notice), (2) increased by the cumulative adjustments described in section 4.03(3) of this notice with respect to such property, (3) increased by the full amount of any Tax Depreciation Section 481(a) Adjustment with respect to such property that is positive and decreased by the full amount of any Tax Depreciation Section 481(a) Adjustment with respect to such property that is negative (regardless of whether any portion of such Tax Depreciation Section 481(a) Adjustment has yet to be taken into account in AFSI through an adjustment described in sections 4.03(4) or (5) of this notice), and (4) increased or decreased, as appropriate, by any other adjustments to AFS basis required under § 56A, regulations, or other guidance with respect to such property (for example, AFS basis adjustments required under section 3.03(2) of this notice). (8) Modifications to section 4.08 of Notice 2023-7 . In accordance with section 9.02(1) and (4) through (6) of this notice, section 4.08 of Notice 2023-7 is modified and clarified to read as follows: .08 Examples . The following examples illustrate certain rules set forth in section 4 of this notice. (1) Example 1 – Section 481(a) adjustment . (a) Facts . X is an Applicable Corporation for the calendar year ending December 31, 2023. X timely files a Form 3115, Application for Change in Accounting Method, under Rev. Proc. 2015-13, 2015-5 I.R.B. 419, for the calendar year ending December 31, 2023, to change its method of accounting for depreciation for an item of Section 168 Property, and the Secretary consents to the change. The adjustment required under § 481(a) to implement such change is positive because the total amount of depreciation taken by X with respect to the Section 168 Property under its present method was $1,000x greater than the total amount of depreciation allowable under the new method of accounting. X takes the $1,000x net positive § 481(a) adjustment into account in computing taxable income ratably over the § 481(a) adjustment period of 4 taxable years, beginning with the year of change (2023 through 2026). (b) Analysis for taxable years 2023 through 2026 . Pursuant to section 9.02(1) of this notice, X must take the $1,000x net positive Tax Depreciation Section 481(a) Adjustment into account in determining AFSI under § 56A(c)(13) for taxable years 2023 through 2026. Because the adjustment is positive, X would increase AFSI by $250x each year. (2) Example 2 – Property placed in service prior to 2023 and disposition adjustments . (a) Facts . Taxpayer is an Applicable Corporation for the calendar year ending December 31, 2023. On January 1, 2018, Taxpayer purchased and placed in service Property A, which is Section 168 Property, at a cost of $1,000x. Property A qualified for, and Taxpayer claimed, the 100-percent additional first year depreciation deduction allowable under § 168(k) for its taxable year ending December 31, 2018. For AFS purposes, Taxpayer depreciates Property A over 40 years on a straight-line method and recognizes $25x ($1,000x cost / 40 years) of Covered Book Depreciation Expense in 2018 and each year thereafter until it sells Property A (a disposition for Regular Tax and AFS purposes) on January 1, 2024, for $900x. For 2024, Taxpayer takes into account $50x of net gain for the sale of Property A in the net income or loss set forth on its AFS ($900x proceeds - $850x of AFS basis
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, for $900x. For 2024, Taxpayer takes into account $50x of net gain for the sale of Property A in the net income or loss set forth on its AFS ($900x proceeds - $850x of AFS basis ($1,000x cost - $150x accumulated Covered Book Depreciation Expense as of January 1, 2024)). (b) Analysis for taxable year 2023 . In determining AFSI for the taxable year ending December 31, 2023, Taxpayer does not have any Deductible Tax Depreciation or Tax COGS Depreciation in computing taxable income with respect to Property A, and thus, the adjustments under section 4.03(1) and (2) of this notice would be zero. In addition, Taxpayer would adjust AFSI under section 4.03(3) of this notice to disregard the $25x of Covered Book Depreciation Expense with respect to Property A. (c) Analysis for taxable year 2024 . To determine the AFSI adjustment for the gain or loss from the sale of Property A under section 4.07 of this notice, Taxpayer must adjust the remaining AFS basis of such property by the amounts described in section 4.07(1) through (4) of this notice with respect to such property, including those amounts attributable to taxable years prior to the effective date of the CAMT. Accordingly, the redetermined basis of Property A for AFSI purposes is zero ($850x remaining AFS basis + $150x accumulated Covered Book Depreciation Expense - $1,000x of accumulated Tax Depreciation). Thus, the redetermined gain on the sale of Property A for AFSI purposes is $900x ($900x proceeds - $0 redetermined AFSI basis), and a positive adjustment to AFSI of $850x ($900x redetermined gain - $50x net gain set forth on the AFS) is made to reflect the redetermined gain. .03 Other AFSI rules for Section 168 Property . (1) Section 56A(c)(13) does not apply to property not depreciated under §§ 167 and 168 . If a Taxpayer owns property that is not subject to depreciation under §§ 167 and 168 for Regular Tax purposes (for example, because the Taxpayer is not subject to U.S. taxation), then AFSI of that Taxpayer is not adjusted under § 56A(c)(13) with respect to such property. Further, the rules for determining Applicable Corporation status of members of a FPMG in § 59(k)(2)(A), including the rule that disregards the AFSI adjustment described in § 56A(c)(4), do not change this result. (2) Amounts recognized in FSI for the disposition of Section 168 Property . Section 5.02(3)(b) of this notice provides that except as otherwise provided in § 56A or § 59(k) (as applicable), regulations, or other guidance, AFSI includes all items of income, expense, gain, and loss reflected in the Taxpayer’s FSI regardless of whether such amounts are realized, recognized, or otherwise taken into account for Regular Tax purposes. Section 56A(c)(13) does not provide for an adjustment to AFSI to apply nonrecognition or gain deferral provisions that apply to certain dispositions of Section 168 Property for Regular Tax purposes (for example, like-kind exchanges under § 1031 or installment sales under § 453). However, other provisions under § 56A or guidance issued by the Treasury Department and the IRS may provide for such an adjustment in certain situations (for example, see section 3 of Notice 2023-7, which provides an adjustment to AFSI if Section 168 Property was disposed of in a Covered Nonrecognition Transaction). Accordingly, except as otherwise provided in other provisions under § 56A, regulations, or other guidance, if a Taxpayer disposes of Section 168 Property for Regular Tax purposes and recognizes gain or loss from the disposition in its FSI, such gain or loss (as redetermined under section 4.07 of Notice 2023-7, as modified and clarified by this notice) is recognized for AFSI purposes, regardless of whether any gain or loss with respect to such disposition is realized, recognized, or otherwise taken into account for Regular Tax purposes.
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of Notice 2023-7, as modified and clarified by this notice) is recognized for AFSI purposes, regardless of whether any gain or loss with respect to such disposition is realized, recognized, or otherwise taken into account for Regular Tax purposes. (3) Examples . The following examples illustrate the rules set forth in sections 5.02(3)(b) and 9.03(2) of this notice and the application of § 56A(c)(13) in taxable years following a transaction described in section 9.03(2) of this notice. (a) Example of installment sale under § 453 . (i) Facts . X is a calendar year Taxpayer and also issues its AFS on a calendar year basis. On January 1, 2018, X purchased for $550x and placed in service residential rental property (Real Property A), which is Section 168 Property. For Regular Tax purposes, X depreciates Real Property A under the general depreciation system by using the straight-line method and a 27.5-year recovery period. X becomes an Applicable Corporation for the calendar year ending December 31, 2024. On January 1, 2024, X sells Real Property A to Y, an unrelated Taxpayer, for $1,000x with the following payment structure: $100x payable at closing and the remainder payable in equal annual installments over the next 9 years, together with adequate stated interest. As of the date of the installment sale, X’s adjusted basis for Regular Tax purposes, remaining AFS basis, and redetermined basis for AFSI purposes (as determined under section 4.07 of Notice 2023-7, as modified and clarified by this notice) for Real Property A is $430x. X does not elect out of the installment method under § 453. The gross profit to be realized on the sale is $570x ($1,000x selling price - $430x basis). The gross profit percentage is 57% (gross profit of $570x / $1,000x contract price). No provision in § 56A, regulations, or other guidance provides for an adjustment to AFSI to apply the gain deferral rules under § 453. (ii) Analysis . For taxable year 2024, X realizes $570x ($1,000x selling price - $430x basis) of gain for both Regular Tax and FSI purposes from the disposition of Real Property A in the installment sale. X recognizes $570x of the gain in FSI, but for Regular Tax purposes, X recognizes only $57x (57% of $100x) of the gain and the remaining $513x of gain will be recognized as payments are received under the installment method. Pursuant to section 9.03(2) of this notice, the gain deferral provisions in § 453 do not apply for purposes of determining the AFSI gain or loss on the disposition of Real Property A. Accordingly, X must recognize the entire $570x gain in AFSI, notwithstanding that $513x was deferred under § 453 for Regular Tax purposes. (b) Example of like-kind exchange under § 1031 . (i) Facts . The facts are the same as section 9.03(3)(a)(i) of this notice, except that on January 1, 2024, X transfers Real Property A to Y in exchange for Real Property B with a fair market value of $440x and $20x in cash. The exchange qualifies as an exchange of real property held for productive use or investment under § 1031. As of the date of the exchange, X’s adjusted basis for Regular Tax purposes, remaining AFS basis, and redetermined basis for AFSI purposes (as determined under section 4.07 of Notice 2023-7, as modified and clarified by this notice) for Real Property A is $430x. No provision in § 56A, regulations, or other guidance provides for an adjustment to AFSI to apply the nonrecognition rules under § 1031. (ii) Analysis . For taxable year 2024, X realizes $30x of gain under § 1001(a) (amount realized of $460x [$440x fair market value of replacement Real Property B plus $20x cash], less $430x adjusted Regular Tax basis of relinquished property). Of the realized gain, only $20x is recognized by X
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amount realized of $460x [$440x fair market value of replacement Real Property B plus $20x cash], less $430x adjusted Regular Tax basis of relinquished property). Of the realized gain, only $20x is recognized by X under § 1031(b) for Regular Tax purposes, as this is the amount of non-like-kind consideration (cash of $20x). For AFS purposes, X recognizes $30x of gain in its FSI (amount realized of $460x [$440x fair market value of Real Property B plus $20x cash], less $430x remaining AFS basis of Real Property A). Pursuant to section 9.03(2) of this notice, the nonrecognition rules in § 1031 do not apply for purposes of determining the AFSI gain or loss on the disposition of Real Property A. Accordingly, for AFSI purposes, X must recognize the entire redetermined gain of $30x ($460x amount realized less $430x of redetermined AFSI basis under section 4.07 of Notice 2023-7, as modified and clarified by this notice) for purposes of computing AFSI, notwithstanding that X recognized only $20x of the $30x gain realized for Regular Tax purposes. (c) Example illustrating the treatment of replacement property received in a like-kind exchange . (i) Facts . The facts are the same as section 9.03(3)(b)(i) of this notice. In addition, X’s Regular Tax exchanged basis in the replacement Real Property B as of the date of the exchange is $430x ($430x adjusted Regular Tax basis of relinquished Real Property A, less $20x cash, plus $20x gain realized). X’s AFS basis of Real Property B as of the date of the exchange is $440x , which is the fair market value of Real Property B as of the date of the exchange. The recovery period, depreciation method, and convention prescribed under § 168 for Real Property B are the same as Real Property A. Under § 1.168(i)-6(c)(3)(ii) and (c)(4)(v)(A), X depreciates Real Property B over the remaining recovery period of, and using the same depreciation method and convention as that of, Real Property A for Regular Tax purposes. Except for taxable year 2024 and the taxable year in which Real Property B is disposed of, Tax Depreciation with respect to Real Property B is $20x ($430x / 21.5) for each year, which X deducts in computing taxable income. Under the mid-month convention, Real Property B is deemed placed in service on January 15, 2024. Therefore, in 2024, Tax Depreciation for Real Property B is $19x ($20x multiplied by [11.5 / 12]), which X deducts in computing taxable income. For AFS purposes, X depreciates Real Property B using the straight-line method and a 27.5-year recovery period and recognizes $16x ($440x / 27.5) of Covered Book Depreciation Expense each year. On January 1, 2032, X sold Real Property B with a Regular Tax adjusted exchanged basis of $270x ($430x exchange basis - $160x accumulated Tax Depreciation [8 years multiplied by ($430x cost / 21.5 recovery period), which includes $20x multiplied by (11.5 / 12) of depreciation for 2024 or $19x and (0.5 / 12) of depreciation for 2032 or $1x]) and a remaining AFS basis of $312x ($440x cost - $128x accumulated book depreciation [8 years multiplied by ($440x cost / 27.5 recovery period)]) to Z for $500x in cash. (ii) Analysis for taxable year 2032 . For Regular Tax purposes, X recognizes a gain on the sale of Real Property B of $230x (amount realized of $500x - $270x Regular Tax adjusted exchanged basis). For AFS purposes, X recognizes a gain of $188x in its FSI (amount realized of $500x - $312x remaining AFS basis). Pursuant to section 4.07 of Notice 2023-7 (as modified and clarified by this notice), X must adjust AFSI for taxable
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its FSI (amount realized of $500x - $312x remaining AFS basis). Pursuant to section 4.07 of Notice 2023-7 (as modified and clarified by this notice), X must adjust AFSI for taxable year 2032 to redetermine the AFS gain or loss of $188x from the disposition of Real Property B by adjusting the remaining AFS basis of Real Property B to take into account the amounts described in section 4.07(1) through (4) of Notice 2023-7 (as modified and clarified by this notice) with respect to such property, including those amounts attributable to taxable years prior to the effective date of the CAMT. Accordingly, the redetermined basis of Real Property B for AFSI purposes is $280x ($312x AFS basis + $128x accumulated Covered Book Depreciation Expense - $160x of accumulated Tax Depreciation). Thus, the redetermined gain on the sale of Real Property B for AFSI purposes is $220x ($500x proceeds - $280x redetermined AFSI basis). SECTION 10. AFSI ADJUSTMENTS FOR QUALIFIED WIRELESS SPECTRUM .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 10, which provides interim guidance to facilitate the application of the qualified wireless spectrum adjustment rules in § 56A(c)(14) prior to forthcoming proposed regulations. .02 Defined Terms . For purposes of this section 10: (1) Covered Book Amortization Expense . The term Covered Book Amortization Expense means amortization expense, disposition loss (including from an abandonment) that occurs prior to the taxable year in which the disposition occurs for Regular Tax purposes, impairment loss, or impairment loss reversal that is taken into account in the Taxpayer’s FSI with respect to Qualified Wireless Spectrum (as defined in section 10.02(4) of this notice). (2) Covered Book Wireless Spectrum Expense . The term Covered Book Wireless Spectrum Expense means an amount, other than Covered Book Amortization Expense, that is-- (a) recognized as an expense or loss in the Taxpayer’s FSI, and (b) reflected in the basis for depreciation, as defined in §§ 1.167(g)-1 and 1.197-2(f)(1)(ii) (without regard to any adjustments described in § 1016(a)(2) and (3)), of Qualified Wireless Spectrum for Regular Tax purposes. (3) Deductible Tax Amortization . The term Deductible Tax Amortization means Tax Amortization (as defined in section 10.02(6) of this notice) that is allowed as a deduction in computing taxable income. (4) Qualified Wireless Spectrum . The term Qualified Wireless Spectrum means wireless spectrum which is used in the trade or business of a wireless telecommunications carrier, is an amortizable section 197 intangible under § 197(c)(1) and (d)(1)(D), and was acquired after December 31, 2007, and before August 16, 2022. (5) Section 481(a) Adjustment for Amortization . The term Section 481(a) Adjustment for Amortization means those adjustments that are required under § 481(a) for a change in method of accounting for amortization of any item of Qualified Wireless Spectrum. (6) Tax Amortization . The term Tax Amortization means amortization deductions allowed under § 197, with respect to Qualified Wireless Spectrum. .03 Adjustments for Qualified Wireless Spectrum . For purposes of § 56A(c)(14), AFSI is-- (1) reduced by Deductible Tax Amortization, but only to the extent of the amount allowed as a deduction in computing taxable income for the taxable year, (2) adjusted to disregard Covered Book Amortization Expense and Covered Book Wireless Spectrum Expense, (3) reduced by any Section 481(a) Adjustment for Amortization that is negative, but only to the extent of the amount of such Section 481(a) Adjustment for Amortization that is taken into account in computing taxable income for the taxable year, (4) increased by any Section
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Amortization that is negative, but only to the extent of the amount of such Section 481(a) Adjustment for Amortization that is taken into account in computing taxable income for the taxable year, (4) increased by any Section 481(a) Adjustment for Amortization that is positive, but only to the extent of the amount of such Section 481(a) Adjustment for Amortization that is taken into account in computing taxable income for the taxable year, and (5) adjusted for other items as provided in regulations or in other guidance. .04 Section 56A(c)(14) does not apply to property not depreciated under § 197 . If a Taxpayer has wireless spectrum property that is not subject to amortization under § 197 for Regular Tax purposes (for example, because the Taxpayer is not subject to U.S. taxation), then AFSI of that Taxpayer is not adjusted under § 56A(c)(14) with respect to such property. Further, the special rules for determining Applicable Corporation status of members of a FPMG in § 59(k)(2)(A), including the rule that disregards the AFSI adjustment described in § 56A(c)(4), do not change this result. .05 AFSI adjustments for dispositions . If a Taxpayer disposes of Qualified Wireless Spectrum for Regular Tax purposes, the Taxpayer must adjust AFSI for the taxable year in which such disposition occurs to redetermine any gain or loss taken into account in the Taxpayer’s FSI with respect to such disposition for such year (including a gain or loss of zero) by adjusting the remaining AFS basis of such property by the amounts described in section 10.05(1) through (4) of this notice with respect to such property, including those amounts attributable to taxable years prior to the effective date of the CAMT. Pursuant to this section 10.05, the remaining AFS basis of such property is-- (1) decreased by the cumulative adjustments described in section 10.03(1) of this notice with respect to such property, (2) increased by the cumulative adjustments described in section 10.03(2) of this notice with respect to such property, (3) increased by the full amount of any Section 481(a) Adjustment for Amortization with respect to such property that is positive and decreased by the full amount of any Section 481(a) Adjustment for Amortization with respect to such property that is negative (regardless of whether any portion of such Section 481(a) Adjustment for Amortization has yet to be taken into account in AFSI through an adjustment described in section 10.03(3) or (4) of this notice), and (4) increased or decreased, as appropriate, by any other adjustments to AFS basis required under § 56A, regulations, or other guidance (for example, basis adjustments required under section 3.03(2) of Notice 2023-7) with respect to such property. .06 Example . The following example illustrates the rules set forth in sections 10.03 and 10.05 of this notice. (1) Facts . X is an Applicable Corporation for the calendar year ending December 31, 2023. On January 1, 2018, X acquired Wireless Spectrum A, which is Qualified Wireless Spectrum, at a cost of $1,000x. For AFS purposes, X does not amortize Wireless Spectrum A. For Regular Tax purposes, X amortizes Wireless Spectrum A ratably over 15 years and recognizes $67x ($1,000x cost / 15 years) of Deductible Tax Amortization in 2018 and each year thereafter until it sells Wireless Spectrum A (a disposition for Regular Tax and AFS purposes) on January 1, 2024, for $900x. For 2024, X takes into account $100x of net loss from the sale of Wireless Spectrum A in its FSI ($900x proceeds - $1,000x of AFS basis ($1,000x cost - $0 accumulated Covered Book Amortization Expense as of January 1, 2024)). (2) Analysis for taxable year 2023 . In determining AFSI for the taxable year ending December 31, 2023, X does not have any Covered Book Amortization
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Book Amortization Expense as of January 1, 2024)). (2) Analysis for taxable year 2023 . In determining AFSI for the taxable year ending December 31, 2023, X does not have any Covered Book Amortization Expense or Covered Book Wireless Spectrum Expense in computing the Taxpayer’s FSI with respect to Wireless Spectrum A, and thus, the adjustment to disregard such amounts under section 10.03(2) of this notice would be zero. In addition, X would reduce AFSI under section 10.03(1) of this notice for the $67x of Deductible Tax Amortization with respect to Wireless Spectrum A. (3) Analysis for taxable year 2024 . To redetermine the FSI gain or loss from the sale of Wireless Spectrum A for AFSI purposes under section 10.05 of this notice, X must adjust the remaining AFS basis of such property by the amounts described in section 10.05(1) through (4) of this notice with respect to such property, including those amounts attributable to taxable years prior to the effective date of the CAMT. Accordingly, the redetermined basis of Wireless Spectrum A for AFSI purposes is $598x ($1,000x remaining AFS basis + $0 accumulated Covered Book Amortization Expense - $402x of accumulated Deductible Tax Amortization). Thus, the redetermined gain on the sale of Wireless Spectrum A for AFSI purposes is $302x ($900x proceeds - $598x redetermined AFSI basis) and a positive adjustment to AFSI of $402x ($100x net loss in FSI + $302x redetermined gain) is made to reflect the redetermined gain. SECTION 11. AFSI ADJUSTMENTS TO PREVENT CERTAIN DUPLICATIONS AND OMISSIONS. .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 11, which provides Taxpayers with additional clarity in determining adjustments to prevent certain duplications and omissions of AFSI prior to forthcoming proposed regulations. .02 Adjustments to prevent certain duplications and omissions . (1) In general . In order to prevent duplications or omissions, AFSI must be adjusted for the items described in this section 11.02 and for such other items as required or permitted in regulations or in other guidance. See section 13.04(2) of this notice for modifications to AFSI to prevent duplications that apply solely for purposes of § 59(k). (2) Change in financial accounting principle . (a) In general . AFSI must be adjusted to take into account any cumulative adjustment to the retained earnings of the Taxpayer on its AFS if such adjustment results from a change in financial accounting principle (Accounting Principle Change Adjustment). Except as otherwise provided in regulations or in other guidance, such adjustment must be taken into account in the Taxpayer’s AFSI during the period provided in section 11.02(2)(b) of this notice (Adjustment Spread Period Rule). An Accounting Principle Change Adjustment may be subject to further adjustment if it relates to FSI items for which other AFSI adjustments under § 56A, regulations, or other guidance apply (Net Accounting Principle Change Adjustment). For example, to the extent the Accounting Principle Change Adjustment includes a Federal income tax component, § 56A(c)(5) may apply. In such case, the Adjustment Spread Period Rule applies to the Net Accounting Principle Change Adjustment. (b) Adjustment Spread Period Rule . (i) Duplications . In the case of an Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, that is necessary to prevent the duplication of an item of income, expense, gain, or loss for AFSI purposes, such adjustment must be taken into account in AFSI ratably over the four-taxable-year period beginning with the taxable year for which the change in financial accounting principle is implemented in the Taxpayer’s AFS. However, if the Taxpayer is able to demonstrate that the duplication is reasonably anticipated to occur over a different period, then the corresponding Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, may be taken into account in AFS
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However, if the Taxpayer is able to demonstrate that the duplication is reasonably anticipated to occur over a different period, then the corresponding Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, may be taken into account in AFSI ratably over such period (not to exceed fifteen years) beginning with the taxable year for which the change in financial accounting principle is implemented in the Taxpayer’s AFS. (ii) Omissions . In the case of an Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, that is (A) necessary to prevent the omission of an item of income, expense, gain, or loss for AFSI purposes, and (B) results in an increase to AFSI, such adjustment must be taken into account in AFSI ratably over the four-taxable-year period beginning with the taxable year for which the change in financial accounting principle is implemented in the Taxpayer’s AFS. In the case of an Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, that is (A) necessary to prevent the omission of an item of income, expense, gain, or loss for AFSI purposes, and (B) results in a decrease to AFSI, such adjustment must be taken into account in AFSI in full in the taxable year for which the change in financial accounting principle is implemented in the Taxpayer’s AFS. (c) Acceleration of financial accounting principle adjustment . If, in any taxable year, a Taxpayer ceases to engage in the trade or business that is the subject of an Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment, as applicable, the Taxpayer must take into account in AFSI for such taxable year any portion of the adjustment not taken into account in AFSI for a previous taxable year. (d) Use of different priority AFSs in consecutive taxable years . If the priority of a Taxpayer’s AFS (as determined under the rules of section 4.02 of this notice) for the current taxable year is different than the priority of the Taxpayer’s AFS for the preceding taxable year, the Taxpayer will be treated as having implemented a change in financial accounting principle and must adjust AFSI to the extent required under the rules of section 11.02(2) of this notice. (3) Restatement of a prior year’s AFS . (a) In general . Except as provided in section 11.02(3)(b) of this notice, if a Taxpayer restates an AFS and, as a result, the Taxpayer’s FSI for a taxable year is restated after the Taxpayer filed its original Federal income tax return for such taxable year, the Taxpayer must account for the restatement by adjusting its AFSI for the first taxable year after such taxable year for which the Taxpayer has not filed an original return as of the restatement date. The restatement adjustment must take into account the cumulative effect of the restatement on FSI, including any restatement of the beginning balance of retained earnings for the period being restated. The restatement adjustment described in the preceding sentence may be subject to further adjustment if an FSI item being restated is subject to adjustment under § 56A, regulations, or other guidance. For example, to the extent such restatement adjustment includes a Federal tax component, § 56A(c)(5) may apply. See section 4.02(3) of this notice for what constitutes a restatement and for rules relating to the restatement of an AFS prior to the date the Taxpayer’s return for the taxable year is filed. (b) Exception for amended return . If, after restating an AFS for a taxable year, a Taxpayer files an amended return or an administrative adjustment request under § 6227 (AAR), as applicable, for such taxable year to adjust regular taxable income as a result of the restatement, the Taxpayer must use the Restated AFS for purposes of determining AFSI on the amended return or AAR, as applicable, rather than make the adjustment set forth in section 11.02(3)(a) of this notice. (c) Reconciliation of retained earnings in
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FS for purposes of determining AFSI on the amended return or AAR, as applicable, rather than make the adjustment set forth in section 11.02(3)(a) of this notice. (c) Reconciliation of retained earnings in AFS . The Taxpayer will be deemed to have restated its AFS for the preceding taxable year described in section 11.02(3)(c)(i) of this notice and section 11.02(3)(a) or (b) of this notice, as applicable, will apply, if-- (i) The beginning balance of retained earnings on the Taxpayer’s AFS for the current taxable year is adjusted to be different than the ending balance of retained earnings on the Taxpayer’s AFS for the preceding taxable year (for example, as a result of a prior period adjustment), (ii) Such difference is attributable to items that would otherwise be reflected in the Taxpayer’s FSI under the relevant accounting standards, and (iii) The Taxpayer is not otherwise subject to the adjustment rules in sections 11.02(2) or (3)(a) or (b) of this notice. (d) Example . The following example illustrates the rule set forth in section 11.02(3)(a) of this notice. (i) Facts . X is a calendar year Taxpayer and issues its AFS on a calendar year basis. On September 15, 2024, X files its Federal income tax return for taxable year 2023 and reports FSI of $1.580 billion, which is the FSI set forth on X’s Original AFS for 2023, and AFSI of $2 billion (FSI of $1.580 billion adjusted to add back $420 million of Federal income tax expense under § 56A(c)(5)). On November 1, 2024, X issues a Restated AFS for 2023 that reflects an FSI of $2.370 billion (which includes a reduction for Federal income tax expense of $630 million). The Restated AFS also includes an adjustment to increase the 2023 beginning balance of retained earnings by $70 million ($100 million of income less $30 million of Federal income tax expense) related to income from a prior period that was underreported. X is not amending its taxable year 2023 Federal income tax return. X is not subject to any AFSI adjustments other than the AFSI adjustment under § 56A(c)(5). (ii) Analysis . X has restated its AFS and FSI for 2023 after having filed its original 2023 Federal income tax return. Pursuant to section 11.02(3)(a) of this notice, X must account for the restatement by adjusting its AFSI for taxable year 2024. On X’s 2024 Federal income tax return, X will increase AFSI by $1.1 billion for taxable year 2024, which is the first taxable year for which X has not filed an original return as of the November 1, 2024, restatement date. The $1.1 billion adjustment represents the cumulative effect of the restatement on FSI, including any restatement of the beginning balance of retained earnings for the period being restated (2023). The $1.1 billion comprises $790 million (the difference between FSI reported on the Restated AFS of $2.370 billion and the FSI reported on the Original AFS of $1.580 billion), plus $210 million (the difference between Federal income tax expense reported on the Restated AFS of $630 million and the Federal income tax expense reported on the Original AFS of $420 million, which is required to be added back under § 56A(c)(5) in determining AFSI), plus $100 million (the adjustment to the 2023 beginning balance of retained earnings reported on the Restated AFS for 2023 of $70 million increased under § 56A(c)(5) by the $30 million of related Federal income tax expense). (4) Adjustment for amounts disclosed in an auditor’s opinion . AFSI must be adjusted to take into account amounts disclosed in an auditor’s opinion described in section 4.02(2)(b) or (c) of this notice to the extent such amounts would have increased FSI had they been
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AFSI must be adjusted to take into account amounts disclosed in an auditor’s opinion described in section 4.02(2)(b) or (c) of this notice to the extent such amounts would have increased FSI had they been reported in the Taxpayer’s AFS. No AFSI adjustment is required to the extent the disclosed amounts were included in FSI for a prior year. Moreover, if FSI for a subsequent year includes amounts included in AFSI pursuant to an adjustment made under this paragraph, AFSI for the subsequent year must be adjusted to prevent any duplication of income. (5) No adjustment for timing differences . Differences between when an item is taken into account in FSI and when that item is taken into account for Regular Tax purposes do not give rise to duplications or omissions within the meaning of § 56A(c)(15)(A) or section 11.02 of this notice, even if the timing difference originated before the effective date of the CAMT and reversed after such effective date. Thus, for example, the inclusion of an item in FSI prior to the effective date of the CAMT and the inclusion of the item in regular taxable income after the effective date of the CAMT does not result in a duplication or omission. SECTION 12. FINANCIAL STATEMENT NET OPERATING LOSSES. .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 12, which provides corporations with additional clarity in determining use of FSNOL carryovers prior to forthcoming proposed regulations. .02 FSNOL carryover . The amount of an FSNOL described in § 56A(d)(3) carried forward to the first taxable year a corporation is an Applicable Corporation (and subsequent taxable years) is determined under § 56A(d)(2) without regard to whether the Taxpayer was an Applicable Corporation for any prior taxable year. .03 Example . The following example illustrates the rule set forth in section 12.02 of this notice. (1) Facts . X is a calendar year Taxpayer. For taxable year 2020, X generated an FSNOL of $3 billion. For taxable years 2021, 2022, and 2023, X’s AFSI (without taking into account the adjustment under § 56A(d)(1)) was $900 million, $1.1 billion, and $1.2 billion, respectively. X first becomes an Applicable Corporation in taxable year 2024. (2) Analysis . X will calculate its FSNOL carryover to taxable year 2024 by first determining how much of the 2020 FSNOL is absorbed in taxable years 2021 through 2023. In taxable year 2021, $720 million (80% of $900 million) of the FSNOL carryover is absorbed, resulting in an FSNOL carryover to taxable year 2022 of $2.280 billion ($3 billion - $720 million). In taxable year 2022, $880 million (80% of $1.1 billion) of the FSNOL carryover is absorbed, resulting in an FSNOL carryover to taxable year 2023 of $1.4 billion ($2.280 billion - $880 million). In taxable year 2023, $960 million (80% of $1.2 billion) of the FSNOL carryover is absorbed resulting in an FSNOL carryover to taxable year 2024 of $440 million ($1.4 billion - $960 million). SECTION 13. DETERMINING APPLICABLE CORPORATION STATUS .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 13, which provides corporations with additional clarity in determining whether they are an Applicable Corporation under § 59(k) prior to forthcoming proposed regulations. .02 Aggregation rules under § 59(k)(1)(D) . (1) In general . Section 59(k)(1)(D) provides that, solely for purposes of determining whether a corporation is an Applicable Corporation, all AFSI of persons treated as a single employer with the corporation under § 52(a) or (b) is treated as AFSI of that corporation (Section 52 Aggregation). (2) Application of § 52(a) to aggregation of corporations . (a) In general . Section 52(
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corporation under § 52(a) or (b) is treated as AFSI of that corporation (Section 52 Aggregation). (2) Application of § 52(a) to aggregation of corporations . (a) In general . Section 52(a) generally provides that corporations that are members of a controlled group of corporations are treated as a single employer. Section 52(a) provides that a controlled group of corporations is defined with reference to § 1563(a), with certain modifications. 4 Section 1563(a)(1), (2), and (3) provide that a controlled group of corporations may be a parent-subsidiary controlled group, a brother-sister controlled group, or a combined group of corporations. (b) Section 1563(d) sets forth the rules for determining stock ownership under § 1563(a) and provides that stock owned directly or indirectly by application of the constructive ownership rules under § 1563(e) is taken into account in determining whether an organization is a member of a controlled group. Section 1563(d)(1) provides that in the case of a parent-subsidiary group, the constructive ownership rules under § 1563(e)(1), (2), and (3), relating to options, partnerships, and estates or trusts, respectively, are taken into account. 5 Under § 1563(e)(2), stock owned, directly or indirectly, by or for a partnership is considered to be owned by any partner having an interest of five percent or more in either the capital or profits of the partnership in proportion to the partner’s interest in capital or profits, whichever such proportion is the greater. Thus, under § 52(a), a corporate partner with an interest of five percent or more in the capital or profits of a partnership is considered to own stock owned by the partnership based on the application of the constructive ownership rules under § 1563(d)(1) and (e)(2). For example, if Corporation A owns an interest of five percent or more in the profits of a partnership and the partnership owns stock in Corporation B, then Corporation A would be deemed to own the stock of Corporation B, in proportion to Corporation A’s profits interest in the partnership, in determining whether Corporation A and Corporation B are treated as a single employer for purposes of applying § 59(k)(1)(D). (c) Section 52(a) applies to the members of a controlled group, and not to the component members of a controlled group defined in § 1563(b). In particular, § 1563(b)(1)(A) and (b)(2) do not apply to exclude certain corporate members from the controlled group, including foreign corporations subject to Federal income tax under § 881. See § 1563(b)(2)(C). Under § 1.1563-1(a)(1)(ii), in determining whether a corporation is included in a controlled group of corporations, § 1563(b) and § 1.1563-1(b), relating to component members of a controlled group of corporations, are not taken into account. Thus, under § 52(a), a foreign corporation may be a member of a controlled group that is treated as a single employer for purposes of applying § 59(k)(1)(D). (3) Application of § 52(b) to partnerships and other noncorporate organizations . (a) Section 52(b) generally provides that trades or businesses that are partnerships, trusts, estates, corporations, or sole proprietorships under common control are members of a controlled group and are treated as a single employer. See § 1.52-1(b). Section 52(b) also requires the regulations under § 52(b) to be based on principles similar to the principles that apply for purposes of § 52(a). Section 52(b) and § 1.52-1 provide rules similar to those under § 52(a) but with certain modifications to account for different types of ownership interests. (b) The constructive ownership rules under § 1563(d) and (e) described in section 13.02(2) of this notice also apply for purposes of § 52(b) in determining members of the controlled group. In addition, just as § 52(a) does not exclude foreign corporations, an organization that is a foreign entity (such as a foreign partnership or foreign
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notice also apply for purposes of § 52(b) in determining members of the controlled group. In addition, just as § 52(a) does not exclude foreign corporations, an organization that is a foreign entity (such as a foreign partnership or foreign trust) may be aggregated under § 52(b) in determining whether it is a member of a controlled group that is treated as single employer under § 52(b) for purposes of applying § 59(k)(1)(D). (4) Application of § 52 to S corporations, RICs, and REITs . As described in section 2.01(4)(a) of Notice 2023-7, S corporations, RICs, and REITs are excluded from the definition of an Applicable Corporation for purposes of §§ 55 through 59. However, § 52(a), the regulations under § 1563, and the regulations under § 52(b) do not exclude S corporations, RICs, or REITs from being members of a controlled group. 6 Because § 52 and the regulations thereunder do not exclude S corporations, RICs, or REITs, these organizations are taken into account in determining whether members of a controlled group are treated as a single employer under § 52 for purposes of applying § 59(k)(1)(D). .03 Determining Applicable Corporation status of members of a FPMG . (1) Aggregation rule for corporations that are members of a FPMG . For purposes of applying the FPMG $1 Billion Test (as defined in section 2.04(1) of this notice), the AFSI of a Taxpayer being evaluated for Applicable Corporation status (Tested Corporation) that is a member of a FPMG includes both (i) the AFSI of all other members of the FPMG (FPMG Aggregation), and (ii) the AFSI of all persons treated as a single employer with the Tested Corporation by reason of Section 52 Aggregation to the extent such AFSI is not AFSI of a member of the FPMG. (2) Calculation of AFSI for purposes of applying the FPMG $1 Billion Test . Under § 59(k)(2)(A), for purposes of applying the FPMG $1 Billion Test, the AFSI of a Taxpayer that is a member of a FPMG is calculated without regard to § 56A(c)(2)(D)(i), (c)(3), (c)(4), and (c)(11). As a result, in applying both Section 52 Aggregation and FPMG Aggregation for purposes of determining whether a Tested Corporation meets the FPMG $1 Billion Test, AFSI of all relevant persons, including persons that are not members of the Tested Corporation’s FPMG but that are treated as a single employer with the Tested Corporation under § 52(a) or (b), is determined without regard to § 56A(c)(2)(D)(i), (c)(3), (c)(4), and (c)(11). .04 Disregarding the distributive share adjustment . (1) In general . Section 7 of Notice 2023-7 provides that the adjustment to AFSI in § 56A(c)(2)(D)(i) is inapplicable in all circumstances in determining whether a corporation that is a partner in a partnership (whether directly or indirectly) is an Applicable Corporation. Accordingly, solely for purposes of § 59(k), a Taxpayer that is a partner in a partnership includes in its AFSI the FSI amount it reports with respect to its partnership investment (for example, under the fair value method or equity method), rather than its “distributive share” of the AFSI of the partnership under § 56A(c)(2)(D)(i). See sections 5.02(3)(c)(iii)(B) and (vii) of this notice for the determination of a partner’s FSI with respect to its partnership investment when the partner and the partnership are members of the same AFS Group and the partner’s AFS is the Consolidated AFS of that AFS Group. (2) Duplication of income or loss . If a Taxpayer is a partner in a
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and the partnership are members of the same AFS Group and the partner’s AFS is the Consolidated AFS of that AFS Group. (2) Duplication of income or loss . If a Taxpayer is a partner in a partnership and all the AFSI of the partnership is treated as the AFSI of the Taxpayer under § 59(k)(1)(D) or § 59(k)(2)(A), as applicable, then solely for purposes of § 59(k), and in order to prevent duplication of income or loss from the partnership investment, the Taxpayer does not include in its AFSI the FSI amount it reports with respect to the partnership investment. SECTION 14. CAMT FTC .01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 14, which provides corporations with additional clarity in determining their CAMT FTC. .02 CAMT FTC . (1) Definition of Eligible Tax . A Foreign Income Tax is eligible to be claimed as a CAMT FTC (Eligible Tax) in the taxable year in which it is paid or accrued for Federal income tax purposes by either an Applicable Corporation or a CFC with respect to which the Applicable Corporation is a U.S. Shareholder, provided the Foreign Income Tax has been taken into account on the AFS of such Applicable Corporation or CFC. (2) When a tax is treated as taken into account on an AFS . For purposes of the CAMT FTC, a Foreign Income Tax is considered taken into account on an AFS of an Applicable Corporation or CFC as provided in section 8.02(2) of this notice. (3) Foreign tax redetermination . A Foreign Income Tax paid or accrued as a result of a foreign tax redetermination (as defined in § 1.905-3(a)) is an Eligible Tax only if the Taxpayer is an Applicable Corporation in the taxable year to which the foreign tax redetermination relates (Relation-Back Year). An Eligible Tax in this instance may be claimed as a CAMT FTC only in the Relation-Back Year, even if the tax is reflected in a journal entry on an AFS within a taxable year that is later than the Relation-Back Year. (4) CFC Taxes and CFC FTC Limitation determined on an aggregate basis . For purposes of the CAMT FTC, a Taxpayer determines the amount of CFC Taxes (as defined in section 2.05(a) of this notice) and the CFC FTC Limitation (as defined in section 2.05(a) of this notice) for a taxable year on an aggregate basis with respect to all CFCs in which it is a U.S. Shareholder. (5) Treatment of partnership taxes . For purposes of the CAMT FTC, if an Applicable Corporation or a CFC is a partner in a partnership (or an indirect partner in the partnership through another partnership or pass-through entity), Foreign Income Taxes paid or accrued by such partner include its share of any Foreign Income Taxes paid or accrued by the partnership. SECTION 15. APPLICABILITY DATES .01 The Treasury Department and the IRS intend to publish forthcoming proposed regulations in the Federal Register regarding the application of the CAMT that would include proposed rules consistent with the interim guidance provided in-- (a) Sections 3 through 7 of Notice 2023-7, as modified and clarified by this notice, (b) Sections 3 through 5 of Notice 2023-20, and (c) Sections 3 through 14 of this notice. It is anticipated that forthcoming proposed regulations would apply for taxable years beginning on or after January 1, 2024. .02 A Taxpayer may rely on the interim guidance described in section 15.01 of this notice for taxable years ending on or before the date forthcoming proposed regulations are published in the Federal Register. However, in any event, a Taxpayer may rely on the interim guidance described in section 15.01 of this notice for any taxable year that begins before January 1, 2024. SECTION 16. REQUEST FOR COMMENTS .01 Comments regarding interim guidance provided in this notice . The Treasury Department and the IRS request comments on any questions arising from the interim guidance provided in this notice. Commenters are encouraged to specify the issues on which additional guidance (including additional interim guidance) is needed most
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regarding interim guidance provided in this notice . The Treasury Department and the IRS request comments on any questions arising from the interim guidance provided in this notice. Commenters are encouraged to specify the issues on which additional guidance (including additional interim guidance) is needed most quickly, as well as the most important issues on which guidance is needed. In addition to general comments regarding the provisions of this notice, the Treasury Department and the IRS request comments to address the following specific questions. (1) Depreciation adjustments (section 9 of this notice) . The Treasury Department and the IRS have received helpful comments and continue to study whether simplified methods or safe harbors should be provided for applying the depreciation adjustment rules under § 56A(c)(13). The Treasury Department and the IRS continue to welcome comments on such simplified methods and safe harbors for consideration in forthcoming proposed regulations. In addition to comments regarding the use of simplified methods or safe harbors, the Treasury Department and the IRS request comments on the following issues: (a) How should a change in the treatment of an item that involves the proper time for taking such item into account for AFSI purposes be treated for AFSI purposes when such change is not otherwise treated as a change in method of accounting for Regular Tax purposes because it does not affect taxable income (AFSI-Only Change)? For example, what if a Taxpayer consistently does not make a required AFSI adjustment under § 56A(c)(13) or makes a change in financial accounting principle? Should rules similar to those in §§ 446 and 481, and the method change procedures in Rev. Proc. 2015-13, 2015-5 I.R.B. 419, apply? Should the result depend on whether the AFSI-Only Change was discretionary or mandated by financial accounting standards? Should Taxpayers be required to file a Form 3115, Application for Change in Accounting Method , to obtain consent for AFSI-Only Changes? (b) If a Taxpayer changes its method of accounting for Regular Tax purposes from deducting amounts paid or incurred to capitalizing and depreciating such amounts under §§ 167 or 168, or vice versa, how should such change be taken into account for AFSI purposes? For example, what if a Taxpayer deducted an amount paid or incurred as a repair under its present method of accounting but later changed its accounting method to capitalize the amount paid or incurred as an improvement that is Section 168 Property? How, if at all, should the Taxpayer account for the adjustments that would have been made under § 56A(c)(13) in prior years had the proposed method been used instead? Or what if a Taxpayer capitalized an amount paid or incurred as an improvement that is Section 168 Property under its present method of accounting but later changed its method to deduct the amount paid or incurred as a repair? How should the Taxpayer take into account the adjustments that were made under § 56A(c)(13) in prior years, but that would not have been made had the proposed method been used instead? (2) Qualified Wireless Spectrum adjustments (section 10 of this notice) . Should the term “wireless telecommunication carrier” in § 56A(c)(14)(B)(i) be defined? If so, should the classification in the North American Industry Classification System (NAICS) for Wireless Telecommunication Carriers (except Satellite) 517112 be used? (That NAICS classification describes a wireless telecommunications carrier as an establishment primarily engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves that has spectrum licenses and provides services using that spectrum, such as cellular phone services, paging services, wireless Internet access, and wireless video services.) (3) AFSI adjustments to prevent duplications and omissions (section 11 of this notice) . (a) Can Accounting Principle Change Adjustments or Net Accounting Principle Change Adjustments be traced to a separate trade or business (within the meaning of § 1.446-1(d))? (b) What events should be considered a cessation of a trade or business for purposes of accelerating inclusion of an Accounting Principle Change Adjustment or Net Accounting Principle Change Adjustment? Should rules similar to those in section 7.03(4) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, apply? .02 Comments regarding rules not included in this notice . The Treasury Department
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? Should rules similar to those in section 7.03(4) of Rev. Proc. 2015-13, 2015-5 I.R.B. 419, apply? .02 Comments regarding rules not included in this notice . The Treasury Department and the IRS continue to study CAMT issues that are not addressed in this notice, including but not limited to, the scope of § 56A(c)(2)(C), the extent to which any unrealized marked-to-market gains and losses that are recognized in the Taxpayer’s FSI should be adjusted in determining the Taxpayer’s AFSI, and the manner in which a partner in a partnership determines its distributive share of partnership AFSI. The Treasury Department and the IRS intend to address these issues in forthcoming proposed regulations. In addition to comments on these issues, the Treasury Department and the IRS request comments on the following specific CAMT issues not addressed by this notice: (1) Whether there are circumstances in which adjustments to AFSI are required to clearly reflect income; for example, in a situation in which, under the relevant accounting standard, a transaction between related entities is accounted for at the selling entity’s cost instead of at an arm’s-length value, such that no income, gain, loss, or deduction is recognized in the financial accounts of the seller, and the buying entity records the transaction in its financial accounts at the seller’s cost. (2) Section 56A(c)(11) provides that AFSI may be adjusted in connection with a defined benefit plan that is a covered benefit plan, as defined in § 56A(c)(11)(B). The Treasury Department and the IRS are considering the scope of the portion of the definition of Covered Benefit Plan set forth in § 56A(c)(11)(B)(iii) (“any other defined benefit plan which provides post-employment benefits other than pension benefits”). Comments are requested regarding § 56A(c)(11)(B)(iii), including (i) whether an account-based group health plan, as defined in § 54.9815-2711(d)(6) of the Pension Excise Tax Regulations (such as a health reimbursement arrangement) that is treated as a retiree-only plan under § 9831(a)(2) that makes payments for retirees from an aggregated account, rather than from assets that have been allocated to individual retirees’ accounts, meets the definition of a defined benefit plan, as required for the plan to be a Covered Benefit Plan under § 56A(c)(11)(B)(iii); and (ii) whether a plan that provides post-employment benefits in a lump sum or over a short period of time (for example, 24 months) is a plan that provides benefits other than pension benefits, as required for the plan to be a Covered Benefit Plan under § 56A(c)(11)(B)(iii). (3) The Treasury Department and the IRS are considering the treatment of dividends received from, and gains or losses from dispositions of stock of, foreign corporations for purposes of computing a Taxpayer’s AFSI. The Treasury Department and the IRS request comments on the treatment of those items, including comments that address the following questions: What approach(es) should be considered to address the potential duplication of income with respect to a CFC by reason of the application of § 56A(c)(2)(C) and (c)(3)? How would each approach address the potential duplication or omission of items from a Taxpayer’s AFSI? What would be the relative administrative and compliance burden of each approach, and how could those burdens be minimized? (4) Section 5.02(3)(c)(iii)(A) provides that the portion of Consolidated FSI that is the Taxpayer’s FSI is determined without regard to any AFS Consolidation Entries that eliminate the effect of transactions between the Taxpayer and another Taxpayer that is a member of the same AFS Group unless such transactions are between a disregarded entity and its owner or between disregarded entities that have the same owner. Further, section 5.02(3)(c)(iii)(B) provides that the portion of Consolidated FSI that is the Taxpayer’s FSI is determined without regard to any AFS Consolidation
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that have the same owner. Further, section 5.02(3)(c)(iii)(B) provides that the portion of Consolidated FSI that is the Taxpayer’s FSI is determined without regard to any AFS Consolidation Entries that eliminate FSI of the Taxpayer with respect to its investment in another Taxpayer that is a member of the AFS Group unless the investment is in a disregarded entity. (a) Comments are requested on whether a branch that is not a disregarded entity should be treated the same as a disregarded entity when applying the rules in section 5.02(3)(c)(iii). Specific comments are requested on whether a branch can be treated as a member of the AFS Group separate from its owner for financial accounting purposes and, if so, the ways in which a financial accounting branch differs from, or compares to, a branch for U.S. tax purposes. (b) Comments are requested on whether the rule in section 5.02(3)(c)(iii) to eliminate transactions with a disregarded entity and investments in a disregarded entity is appropriate in the cross-border context. For example, if the disregarded entity is organized or incorporated in a foreign country and its owner is organized or incorporated in a different country, to what extent should transactions between such disregarded entity and its owner be taken into account for purposes of determining the owner’s or the disregarded entity’s FSI or AFSI? .03 Procedures for submitting comments . (1) Deadline . Written comments should be submitted by October 12, 2023. Consideration will be given, however, to any written comment submitted after October 12, if such consideration will not delay the issuance of forthcoming proposed regulations. (2) Form and manner . The subject line for the comments should include a reference to Notice 2023-64. All commenters are strongly encouraged to submit comments electronically. However, comments may be submitted in one of two ways: (a) Electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS-2023-0043 in the search field on the regulations.gov homepage to find this notice and submit comments); or (b) By mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2023-64), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044. (3) Publication of comments . The Treasury Department and the IRS will publish for public availability any comment submitted electronically and on paper to its public docket on regulations.gov. SECTION 17. EFFECT ON OTHER DOCUMENTS Sections 3, 4, and 7 of Notice 2023-7 are modified and clarified. SECTION 18. DRAFTING AND CONTACT INFORMATION The principal author of this notice is James Yu of the Office of the Associate Chief Counsel (Income Tax and Accounting). Other personnel from the Treasury Department and the IRS participated in its development. For further information regarding section 7 of this notice, please contact Alfred H. Bae at (202) 317-6934 (not a toll-free number). For further information regarding section 13.03 of this notice, please contact Karen Walny at (202) 317-6938 (not a toll-free number). For further information regarding section 14 of this notice, please contact John J. Lee at (202) 317-6936 (not a toll-free number). For further information regarding all other aspects of this notice, please contact Mr. Yu at (202) 317-4718 (not a toll-free number). 1 Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1). 2 These include adjustments that take into account the relationship between entities (§ 56A(c)(2)) and certain items of foreign income (§ 56A(c)(3)); effectively connected income (§ 56A(c)(4)); certain taxes (§ 56A(c)(5)); AFSI of disregarded entities (§ 56A(c)(6)); cooperatives (§ 56A(c)(7)); certain amounts with respect to Alaska native corporations (§ 56A(c)(8)); payments against tax under §§ 48D(d) or 6417 (§ 56A(c
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)(6)); cooperatives (§ 56A(c)(7)); certain amounts with respect to Alaska native corporations (§ 56A(c)(8)); payments against tax under §§ 48D(d) or 6417 (§ 56A(c)(9)); and certain amounts with respect to certain mortgage servicing contracts (§ 56A(c)(10)), defined benefit pensions (§ 56A(c)(11)), tax-exempt entities (§ 56A(c)(12)), certain depreciation (§ 56A(c)(13)) and qualified wireless spectrum (§ 56A(c)(14)). 3 Given the application of section 5.02(3)(c)(iii)(B) to disregard the AFS Consolidation Entry eliminating the $200,000,000 loss from X’s investment in Y, the sum of the separate portions of Consolidated FSI that are X’s FSI and Y’s FSI [$1,950,000,000 + (500,000,000) = $1,450,000,000] is $200,000,000 less than the Consolidated FSI for the XY Consolidated AFS [$1,650,000,000]. 4 The clause “more than 50 percent” is substituted for the clause “at least 80 percent” each place “at least 80 percent” appears in § 1563(a)(1). In addition, § 1563(a)(4) (relating to certain insurance companies) and (e)(3)(C) (relating to certain estate or trust attribution rules) are disregarded. 5 Section 1563(d)(2)(B) and (e) provide that, for brother-sister groups, in addition to attribution from options, partnerships, estates, or trusts, attribution from corporations, spouses, and children, grandchildren, parents, and grandparents also applies. 6 Section 1.1563-1(b)(2)(ii)(C) provides that S corporations are not component members of a controlled group in certain limited circumstances (regarding the accumulated earnings credit under § 1561). However, as noted in section 13.02(2)(c) of this notice, § 1.1563-1(b) is not taken into account in determining whether an S corporation is included in a controlled group of corporations. Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates Notice 2023-66 This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I). YIELD CURVE AND SEGMENT RATES Section 430 specifies the minimum funding requirements that apply to single-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. 1 However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. Notice 2007-81, 2007-44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007-81, the monthly corporate bond yield curve derived from August 2023 data is in Table 2023-8 at the end of
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bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007-81, the monthly corporate bond yield curve derived from August 2023 data is in Table 2023-8 at the end of this notice. The spot first, second, and third segment rates for the month of August 2023 are, respectively, 5.45, 5.52, and 5.43. The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For this purpose, any 25-year average segment rate that is less than 5% is deemed to be 5%. The 25-year average segment rates for plan years beginning in 2022 and 2023 were published in Notice 2021-54, 2021-41 I.R.B. 457 and Notice 2022-40, 2022-40 I.R.B. 266, respectively. For plan years beginning in 2024, based on the segment rates applicable for October 1998 to September 2023, the 25-year averages for the period ending September 30, 2023, of the first, second, and third segment rates are 3.33, 5.13, and 5.88 percent, respectively. The applicable minimum and maximum percentages are 95% and 105% for plan years beginning in 2022, 2023 and 2024. 24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES The three 24-month average corporate bond segment rates applicable for September 2023 without adjustment for the 25-year average segment rate limits are as follows: 24-Month Average Segment Rates Without 25-Year Average Adjustment Applicable Month First Segment Second Segment Third Segment September 2023 3.62 4.46 4.52 The adjusted 24-month average segment rates set forth in the chart below reflect § 430(h)(2)(C)(iv) of the Code. The 24-month averages applicable for September 2023, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates in accordance with § 430(h)(2)(C)(iv) of the Code, are as follows: Adjusted 24-Month Average Segment Rates For Plan Years Beginning In Applicable Month First Segment Second Segment Third Segment 2022 September 2023 4.75 5.18 5.92 2023 September 2023 4.75 5.00 5.74 2024 September 2023 4.75 4.87 5.59 30-YEAR TREASURY SECURITIES INTEREST RATES Section 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for August 2023 is 4.28 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in May 2053 determined each day through August 9, 2023 and the yield on the 30-year Treasury bond maturing in August 2053 determined each day for the balance of the month. For plan years beginning in September 2023, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows: Treasury Weighted Average Rates For Plan Years Beginning In 30-Year Treasury Weighted Average Permissible Range 90% to 105% September 2023 2.85 2.56 to 2.99 MINIMUM PRESENT VALUE SEGMENT RATES In general, the applicable interest rates under § 417(e
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Year Treasury Weighted Average Permissible Range 90% to 105% September 2023 2.85 2.56 to 2.99 MINIMUM PRESENT VALUE SEGMENT RATES In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007-81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for August 2023 are as follows: Minimum Present Value Segment Rates Month First Segment Second Segment Third Segment August 2023 5.45 5.52 5.43 DRAFTING INFORMATION The principal author of this notice is Tom Morgan of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 626-927-1475 (not toll-free numbers). Table 2023-8 Monthly Yield Curve for August 2023 Derived from August 2023 Data Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield 0.5 5.80 20.5 5.56 40.5 5.42 60.5 5.38 80.5 5.35 1.0 5.71 21.0 5.55 41.0 5.42 61.0 5.38 81.0 5.35 1.5 5.63 21.5 5.55 41.5 5.41 61.5 5.37 81.5 5.35 2.0 5.54 22.0 5.54 42.0 5.41 62.0 5.37 82.0 5.35 2.5 5.45 22.5 5.53 42.5 5.41 62.5 5.37 82.5 5.35 3.0 5.37 23.0 5.52 43.0 5.41 63.0 5.37 83.0 5.35 3.5 5.30 23.5 5.52 43.5 5.41 63.5 5.37 83.5 5.35 4.0 5.25 24.0 5.51 44.0 5.41 64.0 5.37 84.0 5.35 4.5 5.22 24.5 5.51 44.5 5.41 64.5 5.37 84.5 5.35 5.0 5.21 25.0 5.50 45.0 5.40 65.0 5.37 85.0 5.35 5.5 5.21 25.5 5.49 45.5 5.40 65.5 5.37 85.5 5.35 6.0 5.22 26.0 5.49 46.0 5.40 66.0 5.37 86.0 5.35 6.5 5.25 26.5 5.49 46.5 5.40 66.5 5.37 86.5 5.35 7.0 5.28 27.0 5.48 47.0 5.40 67.0 5.37 87.0 5.35 7.5 5.32 27.5 5.48 47.5 5.40 67.5 5.37 87.5 5.35 8.0 5.36 28.0 5.47 48.0 5.40 68.0 5.37 88.0 5.35 8.5 5.39 28.5 5.47 48.5 5.40 68.5 5.37 88.5 5.35 9.0 5.43 29.0 5.47 49.0 5.40 69.0 5.37 89.0 5.35 9.5 5.47 29.5 5.46 49.5 5.39 69.5 5.36 89.5 5.35 10.0 5.50 30.0 5.46 50.0 5.39 70.0 5.36 90.0 5.35 10.5 5.53 30.5 5.46 50.5 5.39 70.5 5.36 90.5 5.35 11.0 5.55 31.0 5
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0 5.36 90.0 5.35 10.5 5.53 30.5 5.46 50.5 5.39 70.5 5.36 90.5 5.35 11.0 5.55 31.0 5.46 51.0 5.39 71.0 5.36 91.0 5.35 11.5 5.58 31.5 5.45 51.5 5.39 71.5 5.36 91.5 5.35 12.0 5.59 32.0 5.45 52.0 5.39 72.0 5.36 92.0 5.35 12.5 5.61 32.5 5.45 52.5 5.39 72.5 5.36 92.5 5.35 13.0 5.62 33.0 5.45 53.0 5.39 73.0 5.36 93.0 5.35 13.5 5.63 33.5 5.44 53.5 5.39 73.5 5.36 93.5 5.35 14.0 5.63 34.0 5.44 54.0 5.39 74.0 5.36 94.0 5.35 14.5 5.63 34.5 5.44 54.5 5.39 74.5 5.36 94.5 5.35 15.0 5.63 35.0 5.44 55.0 5.38 75.0 5.36 95.0 5.35 15.5 5.63 35.5 5.44 55.5 5.38 75.5 5.36 95.5 5.34 16.0 5.63 36.0 5.43 56.0 5.38 76.0 5.36 96.0 5.34 16.5 5.62 36.5 5.43 56.5 5.38 76.5 5.36 96.5 5.34 17.0 5.61 37.0 5.43 57.0 5.38 77.0 5.36 97.0 5.34 17.5 5.61 37.5 5.43 57.5 5.38 77.5 5.36 97.5 5.34 18.0 5.60 38.0 5.43 58.0 5.38 78.0 5.36 98.0 5.34 18.5 5.59 38.5 5.42 58.5 5.38 78.5 5.36 98.5 5.34 19.0 5.59 39.0 5.42 59.0 5.38 79.0 5.36 99.0 5.34 19.5 5.58 39.5 5.42 59.5 5.38 79.5 5.36 99.5 5.34 20.0 5.57 40.0 5.42 60.0 5.38 80.0 5.36 100.0 5.34 1 Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount of the full funding limitation under § 433(c)(7)(C)). Rev. Proc. 2023-30 TABLE OF CONTENTS Part 1 – GENERAL INFORMATION Section 1.1 – Overview of Revenue Procedure 2023-30 / What’s New 996 Section 1.2 – Definitions 1000 Section 1.3 – General Requirements for Acceptable Substitute Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S 1001 Part 2 – SPECIFICATIONS FOR SUBSTITUTE FORMS 1096 AND COPIES A OF FORMS 1098, 1099, 3921, 3922, AND 5498 (ALL FILED WITH THE IRS) Section 2.1 – Specifications 1004 Section 2.2 – Instructions for Preparing Paper Forms That Will Be Filed With the IRS 1009 Part 3 – SPECIFICATIONS FOR SUBSTITUTE FORM W-2G (FILED WITH THE IRS) Section 3.1 – General 1011 Section 3.2 – Specifications for Copy A of Form W-2G 1011 Part 4 – SUBSTITUTE STATEMENTS
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STITUTE FORM W-2G (FILED WITH THE IRS) Section 3.1 – General 1011 Section 3.2 – Specifications for Copy A of Form W-2G 1011 Part 4 – SUBSTITUTE STATEMENTS TO FORM RECIPIENTS AND FORM RECIPIENT COPIES Section 4.1 – Specifications 1012 Section 4.2 – Composite Statements 1016 Section 4.3 – Additional Information for Substitute and Composite Forms 1099-B 1018 Section 4.4 – Required Legends 1018 Section 4.5 – Miscellaneous Instructions for Copies B, C, D, E, 1, and 2 1020 Section 4.6 – Electronic Delivery of Recipient Statements 1022 Part 5 – ADDITIONAL INSTRUCTIONS FOR SUBSTITUTE FORMS 1097- BTC, 1098, 1099, 5498, W-2G, AND 1042-S Section 5.1 – Paper Substitutes for Form 1042-S 1023 Section 5.2 – OMB Requirements for All Forms in This Revenue Procedure 1025 Section 5.3 – Ordering Forms and Instructions 1026 Section 5.4 – Effect on Other Revenue Procedures 1026 Part 6 – EXHIBITS Section 6.1 – Exhibits of Forms in This Revenue Procedure 1027 Part 1 General Information Section 1.1 – Overview of Revenue Procedure 2023-30 / What’s New 1.1.1 Purpose The purpose of this revenue procedure is to set forth the 2023 requirements for: Using official Internal Revenue Service (IRS) forms to file information returns with the IRS, Preparing acceptable substitutes of the official IRS forms to file information returns with the IRS, and Using official or acceptable substitute forms to furnish information to recipients. 1.1.2 Which Forms Are Covered? This revenue procedure contains specifications for the following information returns. Form Title 1096 Annual Summary and Transmittal of U.S. Information Returns 1097-BTC Bond Tax Credit 1098 Mortgage Interest Statement 1098-C Contributions of Motor Vehicles, Boats, and Airplanes 1098-E Student Loan Interest Statement 1098-F Fines, Penalties, and Other Amounts 1098-MA Mortgage Assistance Payments 1098-Q Qualifying Longevity Annuity Contract Information 1098-T Tuition Statement 1099-A Acquisition or Abandonment of Secured Property 1099-B Proceeds From Broker and Barter Exchange Transactions 1099-C Cancellation of Debt 1099-CAP Changes in Corporate Control and Capital Structure 1099-DIV Dividends and Distributions 1099-G Certain Government Payments 1099-H Health Coverage Tax Credit (HCTC) Advance Payments 1099-INT Interest Income 1099-K Payment Card and Third Party Network Transactions 1099-LS Reportable Life Insurance Sale 1099-LTC Long-Term Care and Accelerated Death Benefits 1099-MISC Miscellaneous Information 1099-NEC Nonemployee Compensation 1099-OID Original Issue Discount 1099-PATR Taxable Distributions Received From Cooperatives 1099-Q Payments From Qualified Education Programs (Under Sections 529 and 530) 1099-QA Distributions From ABLE Accounts 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1099-S Proceeds From Real Estate Transactions 1099-SA Distributions From an HSA, Archer MSA, or Medicare Advantage MSA 1099-SB Seller's Investment in Life Insurance Contract 3921 Exercise of an Incentive Stock Option Under Section 422(b) 3922 Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c) 5498 IRA Contribution Information 5498-ESA Coverdell ESA Contribution Information 5498-QA ABLE Account Contribution Information 5498-SA HSA, Archer MSA, or Medicare Advantage MSA Information W-2G Certain Gambling Winnings 1042-S Foreign Person’s U.S. Source Income Subject to Withholding 1.1.3 Scope For purposes of this revenue procedure, a substitute form or statement is one that is not published by the IRS. For a substitute form or statement to be acceptable to the IRS, it must conform to the official form or the specifications outlined in this revenue procedure. Do not submit any substitute forms or statements
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form or statement is one that is not published by the IRS. For a substitute form or statement to be acceptable to the IRS, it must conform to the official form or the specifications outlined in this revenue procedure. Do not submit any substitute forms or statements listed above to the IRS for approval. Privately published forms may not state, “This is an IRS approved form.” Filers making payments to certain recipients during a calendar year are required by the Internal Revenue Code (the Code) to file information returns with the IRS for these payments. These filers must also provide this information to their recipients. In some cases, this also applies to payments received. See Part 4 for specifications that apply to recipient statements (generally Copy B). In general, section 6011 of the Code authorizes the Secretary of Treasury to publish regulations that require filers to file information returns according to those regulations and the corresponding forms and instructions. A filer who is required to file 10 or more information returns during a calendar year must file those returns electronically. See Electronic filing of returns , later, for more information. Caution. Financial institutions that are required to report payments made under chapter 3 or 4 must file Forms 1042-S electronically, regardless of the number of returns required to be filed. Note. If you file electronically, do not file the same returns on paper. Filers required to file fewer than 10 information returns during a calendar year are encouraged to file the information returns electronically. See the requirements for filing information returns (and providing a copy to a payee) in the 2023 General Instructions for Certain Information Returns and the 2023 Instructions for Form 1042-S. In addition, see the current revision of Pub. 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, for electronic filing through the IRS Filing Information Returns Electronically (FIRE) system. 1.1.4 For More Information The IRS prints and provides the forms on which various payments must be reported. See Section 5.3 for ordering forms and instructions. Alternately, filers may prepare substitute copies of these IRS forms and use such forms to report payments to the IRS. The Internal Revenue Service/Information Returns Branch (IRS/IRB) maintains a centralized customer service call site to answer questions related to information returns (Forms W-2, W-3, W-2c, W-3c, 1099 series, 1096, etc.). You can reach the call site at 866-455-7438 (toll free) or outside the United States at 304-263-8700 (not a toll-free number). Deaf or hard-of-hearing customers may call any of our toll-free numbers using their choice of relay service. You may also send questions to the call site via the Internet at mccirp@irs.gov. Do not submit employee information via email because it is not secure and the information may be compromised. The IRS/IRB does not process information returns which are filed on paper forms. See Pub. 1220 for information on waivers and extensions of time. For other tax information related to business returns or accounts, call 800-829-4933. Deaf or hard-of-hearing customers may call any of our toll-free numbers using their choice of relay service. Further information impacting Pub. 1179, such as issues arising after its final release, will be posted on IRS.gov at IRS.gov/Pub1179. 1.1.5 What’s New The following changes have been made to this year’s revenue procedure. For further information about each form listed below, see the separate reporting instructions. Electronic filing of returns. The Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return e-file threshold. T.D. 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024. Go to IRS.gov/InfoReturn for e-file options. Electronic filing of Forms 1099. Under section 2102 of The Taxpayer First Act, the IRS developed an online portal, the Information Return Intake System (
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January 1, 2024. Go to IRS.gov/InfoReturn for e-file options. Electronic filing of Forms 1099. Under section 2102 of The Taxpayer First Act, the IRS developed an online portal, the Information Return Intake System (IRIS), that allows taxpayers to electronically file Forms 1099 for tax years 2022 and later, as an alternative to using the FIRE system. Users should follow the specifications in Pub. 5717, IRIS Taxpayer Portal User Guide. See Part F in the 2023 General Instructions for Certain Information Returns or go to IRS.gov/ IRIS for additional information and updates. Form 1099-H. The Health Coverage Tax Credit expired on December 31, 2021. The form is listed for reference purposes only. Continuous use conversion. Form 1099-PATR and its instructions have been converted from annual updates to continuous use. The form and its instructions will be updated as needed. Exhibits. All of the exhibits in this publication were updated to include all of the 2023 revisions of those forms that have been revised. Editorial changes. We made editorial changes throughout, including updated references. Redundancies were eliminated as much as possible. Available Instructions In addition to the general instructions, which contain general information concerning Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, specific form instructions are provided separately. Use the instructions to prepare acceptable substitutes of the official IRS forms to file information returns with the IRS. Instructions for Form 1097-BTC. Instructions for Form 1098. Instructions for Form 1098-C. Instructions for Forms 1098-E and 1098-T. Instructions for Form 1098-F. Instructions for Form 1098-Q. Instructions for Forms 1099-A and 1099-C. Instructions for Form 1099-B. Instructions for Form 1099-CAP. Instructions for Form 1099-DIV. Instructions for Form 1099-G. Instructions for Form 1099-H. Instructions for Forms 1099-INT and 1099-OID. Instructions for Form 1099-K. Instructions for Form 1099-LS. Instructions for Form 1099-LTC. Instructions for Forms 1099-MISC and 1099-NEC. Instructions for Form 1099-PATR. Instructions for Form 1099-Q. Instructions for Forms 1099-QA and 5498-QA. Instructions for Forms 1099-R and 5498. Instructions for Form 1099-S. Instructions for Form 1099-SB. Instructions for Forms 3921 and 3922. Instructions for Form 5498-ESA. Instructions for Forms W-2G and 5754. You can also obtain the latest developments for each of the forms and instructions listed here by visiting their information pages at IRS.gov. See the separate instructions for each form on the webpage via the link. Section 1.2 – Definitions 1.2.1 Form Recipient Form recipient means the person to whom you are required by law to furnish a copy of the official form or information statement. The form recipient may be referred to by different names on various Forms 1099 and related forms (beneficiary, borrower, debtor, donor, employee, filer, homeowner, insured, participant, payee, payer, payer/borrower, payment recipient, policyholder, seller, shareholder, student, transferor, or, in the case of Form W-2G, the winner). See Section 1.3.4 . 1.2.2 Filer Filer means the person or organization required by law to file with the IRS a form listed in Section 1.1.2 . A filer may be a payer, creditor, payment settlement entity, recipient of mortgage or student loan interest payments, educational institution, broker, barter exchange, or person reporting real estate transactions; a trustee or issuer of any educational or ABLE Act savings account, individual retirement arrangement, or medical savings account; a lender who acquires an interest in secured property or who has reason to know that the property has been abandoned; a corporation reporting a change in control and capital structure or transfer of stock to an employee; certain donees of motor vehicles, boats, and airplanes; or an acquirer or issuer of a life insurance contract. 1.2.3 Substitute Form Substitute form means a paper substitute of Copy A
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