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Bulletin No. 1996–20

May 13, 1996

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

tion for tax-exemption under section 501(c)(3) is

provided for organizations that provide low-income

housing. The guidance includes a safe-harbor procedure

to determine qualification.

T.D. 8664, page 7.

Final regulations under section 6049 of the Code

provide rules regarding the reporting on Form 1042–S

of certain bank deposit interest paid to a U.S. bank

account for an individual who is a nonresident alien of

the U.S. and a Canadian resident.

Announcement 96–43, page 18.

A list is given of organizations now classified as private

foundations.

T.D. 8667, page 4.

Final regulations under section 168 of the Code relate

to the lease term of tax-exempt use property. These

regulations also provide guidance regarding certain likekind exchanges among related parties involving taxexempt use property.

ADMINISTRATIVE

Rev. Proc. 96–31, page 11.

Changes in computing depreciation or amortization. An

automatic consent procedure is provided for taxpayers

changing their method of accounting for depreciation or

amortization for property for which less than the

allowable depreciation or amortization is claimed. Rev.

Proc. 92–20 modified.

EXEMPT ORGANIZATIONS

Notice 96–30, page 11.

This notice provides relief from filing Form 3115,

Application for Change in Accounting Method, for

501(c) organizations that are changing their federal tax

accounting methods to comply with the provisions of

Statement of Financial Accounting Standards, No. 116,

Accounting for Contributions Received and Contributions Made (SFAS 116). This notice also discusses how

a not-for-profit organization that changes its federal tax

accounting methods to conform to SFAS 116 should

report any adjustment required by section 481(a).

Announcement 96–41, page 18.

The 1996 Form W–4, Employee’s Withholding Allowance Certificate, is now available.

Announcement 96–42, page 18.

Form 8807, Certain Manufacturers and Retailers Excise

Taxes, and Form 8645, Soil and Water Conservation

Plan Certificate, are obsolete. The IRS has determined

that taxpayers may meet the reporting and certification

requirements of these forms by reporting the required

information on other forms.

Rev. Proc. 96–32, page 14.

Low-income housing guidelines. Guidance on qualifica-

Finding Lists begin on page 22.

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Mission of the Service

The purpose of the Internal Revenue Service is to

collect the proper amount of tax revenue at the least

cost; serve the public by continually improving the

quality of our products and services; and perform in a

manner warranting the highest degree of public

confidence in our integrity, efficiency and fairness.

Statement of Principles

of Internal Revenue

Tax Administration

The function of the Internal Revenue Service is to

administer the Internal Revenue Code. Tax policy

for raising revenue is determined by Congress.

With this in mind, it is the duty of the Service to

carry out that policy by correctly applying the laws

enacted by Congress; to determine the reasonable

meaning of various Code provisions in light of the

Congressional purpose in enacting them; and to

perform this work in a fair and impartial manner,

with neither a government nor a taxpayer point of

view.

At the heart of administration is interpretation of the

Code. It is the responsibility of each person in the

Service, charged with the duty of interpreting the

law, to try to find the true meaning of the statutory

provision and not to adopt a strained construction in

the belief that he or she is ‘‘protecting the revenue.’’

The revenue is properly protected only when we ascertain and apply the true meaning of the statute.

The Service also has the responsibility of applying

and administering the law in a reasonable,

practical manner. Issues should only be raised by

examining officers when they have merit, never

arbitrarily or for trading purposes. At the same

time, the examining officer should never hesitate

to raise a meritorious issue. It is also important

that care be exercised not to raise an issue or to

ask a court to adopt a position inconsistent with

an established Service position.

Administration should be both reasonable and

vigorous. It should be conducted with as little

delay as possible and with great courtesy and

considerateness. It should never try to overreach,

and should be reasonable within the bounds of law

and sound administration. It should, however, be

vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax

devices and fraud.

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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 and may be obtained

from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are

consolidated semiannually into Cumulative Bulletins,

which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin

all 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 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.

With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in

this part, none of these announcements are consolidated in the Cumulative Bulletins.

The first Bulletin for each month includes an index for

the matters published during the preceding month.

These monthly indexes are cumulated on a quarterly

and semiannual basis, and are published in the first

Bulletin of the succeeding quarterly and semi-annual

period, respectively.

The Bulletin Index-Digest System, a research and

reference service supplementing the Bulletin, may be

obtained from the Superintendent of Documents on a

subscription basis. It consists of four Services: Service

No. 1, Income Tax; Service No. 2, Estate and Gift

Taxes; Service No. 3, Employment Taxes; Service No.

4, Excise Taxes. Each Service consists of a basic

volume and a cumulative supplement that provides (1)

finding lists of items published in the Bulletin, (2)

digests of revenue rulings, revenue procedures, and

other published items, and (3) indexes of Public Laws,

Treasury Decisions, and Tax Conventions.

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

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

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Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 167.—Depreciation

SUPPLEMENTARY INFORMATION:

If a taxpayer changes from claiming less than

the allowable depreciation to claiming the allowable depreciation for property subject to

section 167, is this change a change in method of

accounting. See Rev. Proc. 96–31, page 11.

Background

26 CFR 1.167(e)–1: Change in method.

If a taxpayer changes from claiming less than

the allowable depreciation to claiming the allowable depreciation, is this change a change in

method of accounting. See Rev. Proc. 96–31,

page 11.

Section 168.—Accelerated Cost

Recovery System

26 CFR 1.168(h)(1): Like-kind exchanges

involving tax-exempt use property.

This document contains final regulations under section 168 of the Internal

Revenue Code of 1986 (Code). The

regulations provide guidance relating to

certain exchanges of tax-exempt use

property among related parties and the

determination of lease term under

certain circumstances. Proposed regulations (IA–18–95 [1995–1 C.B. 955])

were published in the Federal Register

on April 21, 1995 (60 FR 19868). The

IRS received a number of comments on

the proposed regulations. A scheduled

public hearing was cancelled because

there were no requests to testify. After

consideration of all the comments, the

regulations proposed by IA–18–95 are

adopted as revised by this Treasury

decision. The revisions are discussed

below.

T.D. 8667

Overview

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Lease Term; Exchanges of TaxExempt Use Property

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains

final regulations relating to the lease

term of tax-exempt use property. The

final regulations also provide guidance

regarding certain like-kind exchanges

among related parties involving taxexempt use property.

DATES: These regulations are effective

April 29, 1996.

For dates of applicability see ‘‘Effective dates’’ section under the ‘‘SUPPLEMENTARY INFORMATION’’

portion of the preamble and

§§1.168(h)–1(e) and 1.168(i)–2(g).

FOR FURTHER INFORMATION

CONTACT: John M. Aramburu of the

Office of Assistant Chief Counsel

(Income Tax and Accounting) at (202)

622-4960 (not a toll-free number).

Under section 168, property used in

a trade or business, or held for the

production of income, generally may be

depreciated under the general depreciation system (GDS) using accelerated

methods over relatively short recovery

periods. However, certain property,

including ‘‘tax-exempt use property,’’

must be depreciated under the alternative depreciation system (ADS) described in section 168(g). Section

168(h)(1)(A) generally defines taxexempt use property to include tangible

property (other than nonresidential real

property) leased to a tax-exempt entity.

For this purpose, certain foreign entities and persons are considered taxexempt entities.

Congress subjected tax-exempt use

property to a slower depreciation system than GDS to prevent tax-exempt

entities from indirectly claiming tax

benefits (in the form of reduced

rentals) ‘‘from investment incentives

for which they [would] not qualify

directly, and effectively gain[ing] the

advantage of taking income tax deductions and credits while having no

corresponding liability to pay any tax

on income from the property.’’ S. Rep.

No. 169 (Vol. 1), 98th Cong., 2d Sess.

123 (1984).

In particular, section 168(g)(3)(A)

provides that tax-exempt use property

subject to a lease must be depreciated

using the straight-line method over a

period equal to the greater of the

property’s class life or 125 percent of

the lease term. Under section 168(i)(3),

options to renew generally must be

taken into account in determining the

lease term and the periods of certain

successive leases must be aggregated

with the period of an original lease.

Lease term

The proposed regulations generally

include an additional period of time

during which a lessee may not continue

to be the lessee in the lease term if the

lessee (or a related person) has agreed

that one or both of them will or could

be obligated to make a payment of

rent, or a payment in the nature of rent,

with respect to such period. The arrangements described in the proposed

regulations are frequently referred to as

‘‘replacement leases.’’ One commentator requested that the portion of the

proposed regulations dealing with replacement leases be withdrawn. The

commentator argued that Congress

would not have intended that the term

of the replacement lease be taken into

account in determining lease term. The

IRS and Treasury believe that the

proposed regulations are consistent

with Congressional intent, and thus the

final regulations retain this portion of

the proposed regulations.

Another commentator indicated that

application of the proposed regulations

was unclear where property is subject

to multiple leases, possibly involving

multiple parties. The final regulations

clarify that if property is subject to

more than one lease (including any

sublease) entered into as part of a

single transaction (or a series of related

transactions), the lease term shall include all periods described in one or

more of such leases. Thus, for example,

if one taxable corporation leases property to another taxable corporation for

a 20-year term and, as part of the same

transaction, the lessee subleases the

property to a tax-exempt entity for a

10-year term, then the lease term of the

property is 20 years, and during the

period of tax-exempt use it must be

depreciated using the straight line

method over the greater of its class life

or 25 years.

Finally, the final regulations provide

that lease term also includes any period

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during which the lessee (or a related

party) has assumed or retained any risk

of loss with respect to the property

(including, for example, by holding a

note secured by the property). The IRS

and Treasury believe that such an

arrangement is generally similar to the

replacement leases described in the

proposed regulations. As in the case of

a replacement lease, the lessee is

assuming risk with respect to the value

of the property at the termination of the

initial lease term. In addition, the term

of the debt provides an objective

indication that the useful life of the

property exceeds the original term of

the lease, in which case failure to

include the term of the debt in the

lease term could allow a tax-exempt

lessee to benefit from depreciation

deductions that exceed economic depreciation, which would be contrary to

Congressional intent.

Like-kind exchanges

The proposed regulations also address certain transactions between related persons that are designed to

circumvent the tax-exempt use property

rules through the use of a like-kind

exchange described in section 1031.

The proposed regulations provide that

property (tainted property) transferred

directly or indirectly to the taxpayer by

a related person (the related party) as

part of, or in connection with, a

transaction described in section 1031

where the related party receives taxexempt use property (related taxexempt use property) will, if the tainted

property is subject to an allowance for

depreciation, be treated in the same

manner as the related tax-exempt use

property for purposes of determining

the allowable depreciation deduction

under section 167(a). Under this rule,

the tainted property is depreciated by

the taxpayer over the remaining recovery period of, and using the same

depreciation method and convention as

that of, the related tax-exempt use

property.

The rule applies only with respect to

direct or indirect transfers of property

involving related persons where (1)

section 1031 applies to any party, and

(2) a principal purpose of the transfer

is to avoid or limit the application of

ADS. For purposes of this rule, a

person is related to another person if

they bear a relationship specified in

section 267(b) or section 707(b)(1). An

exchange between members of a con-

solidated group in a taxable year

beginning on or after July 12, 1995,

will not be subject to this provision

because section 1031 does not apply to

intercompany transactions. See

§1.1502–80(f).

No comments were received with

respect to the treatment of like-kind

exchanges under the proposed regulations. Accordingly, these provisions of

the proposed regulations are adopted

without modification by this Treasury

decision.

Effective dates

The definition of lease term is

generally applicable to leases entered

into on or after April 20, 1995. The

changes made by the final regulations

apply to leases entered into after April

26, 1996. The treatment of like-kind

exchanges is applicable to transfers

made on or after April 20, 1995. No

inference is intended by these effective

dates as to the treatment of any transaction under prior law. The regulations

do not preclude the application of

common law doctrines (such as the

substance over form or step transaction

doctrines) and other authorities to

transactions described in the regulations

(e.g., as to whether a particular transaction should be characterized as a lease

or a conditional sale for federal income

tax purposes).

Special analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It has also been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not

apply to these regulations, and therefore, a Regulatory Flexibility Analysis

is not required. Pursuant to section

7805(f) of the Internal Revenue Code,

the notice of proposed rulemaking

preceding these regulations was submitted to the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is John M. Aramburu of the

Office of Assistant Chief Counsel

(Income Tax and Accounting). However, other personnel from the IRS and

Treasury Department participated in

their development.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding entries

in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.168(h)–1 also issued under

26 U.S.C. 168. * * *

Section 1.168(i)–2 also issued under

26 U.S.C. 168. * * *

Par. 2. Sections 1.168(h)–1 and

1.168(i)–2 are added to read as follows:

§1.168(h)–1 Like-kind exchanges

involving tax-exempt use property.

(a) Scope. (1) This section applies

with respect to a direct or indirect

transfer of property among related

persons, including transfers made

through a qualified intermediary (as

defined in §1.1031(k)–1(g)(4)) or other

unrelated person, (a transfer) if—

(i) Section 1031 applies to any party

to the transfer or to any related

transaction; and

(ii) A principal purpose of the transfer or any related transaction is to

avoid or limit the application of the

alternative depreciation system (within

the meaning of section 168(g)).

(2) For purposes of this section, a

person is related to another person if

they bear a relationship specified in

section 267(b) or section 707(b)(1).

(b) Allowable depreciation deduction

for property subject to this section—(1)

In general. Property (tainted property)

transferred directly or indirectly to a

taxpayer by a related person (related

party) as part of, or in connection with,

a transaction in which the related party

receives tax-exempt use property (related tax-exempt use property) will, if

the tainted property is subject to an

allowance for depreciation, be treated

in the same manner as the related taxexempt use property for purposes of

determining the allowable depreciation

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deduction under section 167(a). Under

this paragraph (b), the tainted property

is depreciated by the taxpayer over the

remaining recovery period of, and

using the same depreciation method

and convention as that of, the related

tax-exempt use property.

(2) Limitations—(i) Taxpayer’s basis

in related tax-exempt use property. The

rules of this paragraph (b) apply only

with respect to so much of the taxpayer’s basis in the tainted property as

does not exceed the taxpayer’s adjusted

basis in the related tax-exempt use

property prior to the transfer. Any

excess of the taxpayer’s basis in the

tainted property over its adjusted basis

in the related tax-exempt use property

prior to the transfer is treated as

property to which this section does not

apply. This paragraph (b)(2)(i) does not

apply if the related tax-exempt use

property is not acquired from the taxpayer (e.g., if the taxpayer acquires the

tainted property for cash but section

1031 nevertheless applies to the related

party because the transfer involves a

qualified intermediary).

(ii) Application of section 168(i)(7).

This section does not apply to so much

of the taxpayer’s basis in the tainted

property as is subject to section

168(i)(7).

(1) For purposes of paragraph (b) of

this section, related tax-exempt use

property includes—

(i) Property that is tax-exempt use

property (as defined in section 168(h))

at the time of the transfer; and

(ii) Property that does not become

tax-exempt use property until after the

transfer if, at the time of the transfer, it

was intended that the property become

tax-exempt use property.

(2) For purposes of determining the

remaining recovery period of the related tax-exempt use property in the

circumstances described in paragraph

(c)(1)(ii) of this section, the related taxexempt use property will be treated as

having, prior to the transfer, a lease

term equal to the term of any lease that

causes such property to become taxexempt use property.

(d) Examples. The following examples illustrate the application of this

section. The examples do not address

common law doctrines or other authorities that may apply to recharacterize or alter the effects of the transactions described therein. Unless

otherwise indicated, parties to the

transactions are not related to one

another.

Example 1. (i) X owns all of the stock of two

subsidiaries, B and Z. X, B and Z do not file a

consolidated federal income tax return. On May

5, 1995, B purchases an aircraft (FA) for $1

million and leases it to a foreign airline whose

income is not subject to United States taxation

and which is a tax-exempt entity as defined in

section 168(h)(2). On the same date, Z owns an

aircraft (DA) with a fair market value of $1

million, which has been, and continues to be,

leased to an airline that is a United States

taxpayer. Z’s adjusted basis in DA is $0. The

next day, at a time when each aircraft is still

worth $1 million, B transfers FA to Z (subject to

the lease to the foreign airline) in exchange for

DA (subject to the lease to the airline that is a

United States taxpayer). Z realizes gain of $1

million on the exchange, but that gain is not

recognized pursuant to section 1031(a) because

the exchange is of like-kind properties. Assume

that a principal purpose of the transfer of DA to

B or of FA to Z is to avoid the application of the

alternative depreciation system. Following the

exchange, Z has a $0 basis in FA pursuant to

section 1031(d). B has a $1 million basis in DA.

(ii) B has acquired property from Z, a related

person; Z’s gain is not recognized pursuant to

section 1031(a); Z has received tax-exempt use

property as part of the transaction; and a

principal purpose of the transfer of DA to B or

of FA to Z is to avoid the application of the

alternative depreciation system. Accordingly, the

transaction is within the scope of this section.

Pursuant to paragraph (b) of this section, B must

recover its $1 million basis in DA over the

remaining recovery period of, and using the same

depreciation method and convention as that of,

FA, the related tax-exempt use property.

(iii) If FA did not become tax-exempt use

property until after the exchange, it would still

be related tax-exempt use property and paragraph

(b) of this section would apply if, at the time of

the exchange, it was intended that FA become

tax-exempt use property.

Example 2. (i) X owns all of the stock of two

subsidiaries, B and Z. X, B and Z do not file a

consolidated federal income tax return. B and Z

each own identical aircraft. B’s aircraft (FA) is

leased to a tax-exempt entity as defined in

section 168(h)(2) and has a fair market value of

$1 million and an adjusted basis of $500,000.

Z’s aircraft (DA) is leased to a United States

taxpayer and has a fair market value of $1

million and an adjusted basis of $10,000. On

May 1, 1995, B and Z exchange aircraft, subject

to their respective leases. B realizes gain of

$500,000 and Z realizes gain of $990,000, but

neither person recognizes gain because of the

operation of section 1031(a). Moreover, assume

that a principal purpose of the transfer of DA to

B or of FA to Z is to avoid the application of the

alternative depreciation system.

(ii) As in Example 1, B has acquired property

from Z, a related person; Z’s gain is not

recognized pursuant to section 1031(a); Z has

received tax-exempt use property as part of the

transaction; and a principal purpose of the

transfer of DA to B or of FA to Z is to avoid the

application of the alternative depreciation system.

Thus, the transaction is within the scope of this

section even though B has held tax-exempt use

property for a period of time and, during that

time, has used the alternative depreciation system

with respect to such property. Pursuant to

paragraph (b) of this section, B, which has a

substituted basis determined pursuant to section

1031(d) of $500,000 in DA, must depreciate the

aircraft over the remaining recovery period of

FA, using the same depreciation method and

convention. Z holds tax-exempt use property

with a basis of $10,000, which must be

depreciated under the alternative depreciation

system.

(iii) Assume the same facts as in paragraph (i)

of this Example 2, except that B and Z are

members of an affiliated group that files a

consolidated federal income tax return. Of B’s

$500,000 basis in DA, $10,000 is subject to

section 168(i)(7) and therefore not subject to this

section. The remaining $490,000 of basis is

subject to this section. But see §1.1502–80(f)

making section 1031 inapplicable to intercompany transactions occurring in consolidated return years beginning on or after July 12, 1995.

(e) Effective date. This section applies to transfers made on or after April

20, 1995.

§1.168(i)–2 Lease term.

(a) In general. For purposes of

section 168, a lease term is determined

under all the facts and circumstances.

Paragraph (b) of this section and

§1.168(j)–1T, Q&A 17, describe certain

circumstances that will result in a

period of time not included in the

stated duration of an original lease

(additional period) nevertheless being

included in the lease term. These rules

do not prevent the inclusion of an

additional period in the lease term in

other circumstances.

(b) Lessee retains financial obligation—(1) In general. An additional

period of time during which a lessee

may not continue to be the lessee will

nevertheless be included in the lease

term if the lessee (or a related

person)—

(i) Has agreed that one or both of

them will or could be obligated to

make a payment of rent or a payment

in the nature of rent with respect to

such period; or

(ii) Has assumed or retained any risk

of loss with respect to the property for

such period (including, for example, by

holding a note secured by the

property).

(2) Payments in the nature of rent.

For purposes of paragraph (b)(1)(i) of

this section, a payment in the nature of

rent includes a payment intended to

substitute for rent or to fund or supplement the rental payments of another.

For example, a payment in the nature

of rent includes a payment of any kind

(whether denominated as supplemental

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rent, as liquidated damages, or otherwise) that is required to be made in the

event that—

(i) The leased property is not leased

for the additional period;

(ii) The leased property is leased for

the additional period under terms that

do not satisfy specified terms and

conditions;

(iii) There is a failure to make a

payment of rent with respect to such

additional period; or

(iv) Circumstances similar to those

described in paragraph (b)(2)(i), (ii), or

(iii) of this section occur.

(3) De minimis rule. For the purposes of this paragraph (b), obligations

to make de minimis payments will be

disregarded.

property is subject to more than one

lease (including any sublease) entered

into as part of a single transaction (or a

series of related transactions), the lease

term includes all periods described in

one or more of such leases. For

example, if one taxable corporation

leases property to another taxable corporation for a 20-year term and, as part

of the same transaction, the lessee

subleases the property to a tax-exempt

entity for a 10-year term, then the lease

term of the property for purposes of

section 168 is 20 years. During the

period of tax-exempt use, the property

must be depreciated under the alternative depreciation system using the

straight line method over the greater of

its class life or 25 years (125 percent

of the 20-year lease term).

(d) Related person. For purposes of

paragraph (b) of this section, a person

is related to the lessee if such person is

described in section 168(h)(4).

(e) Changes in status. Section

168(i)(5) (changes in status) applies if

an additional period is included in a

lease term under this section and the

leased property ceases to be tax-exempt

use property for such additional period.

(f) Example. The following example

illustrates the principles of this section.

The example does not address common

law doctrines or other authorities that

may apply to cause an additional

period to be included in the lease term

or to recharacterize a lease as a

conditional sale or otherwise for federal

income tax purposes. Unless otherwise

indicated, parties to the transactions are

not related to one another.

corporation, and Y, a foreign airline whose

income is not subject to United States taxation,

enter into a lease agreement under which X

agrees to lease an aircraft to Y for a period of 10

years. The lease agreement provides that, at the

end of the lease period, Y is obligated to find a

subsequent lessee (replacement lessee) to enter

into a subsequent lease (replacement lease) of the

aircraft from X for an additional 10-year period.

The provisions of the lease agreement require

that any replacement lessee be unrelated to Y

and that it not be a tax-exempt entity as defined

in section 168(h)(2). The provisions of the lease

agreement also set forth the basic terms and

conditions of the replacement lease, including its

duration and the required rental payments. In the

event Y fails to secure a replacement lease, the

lease agreement requires Y to make a payment to

X in an amount determined under the lease

agreement.

(ii) Application of this section. The lease

agreement between X and Y obligates Y to make

a payment in the event the aircraft is not leased

for the period commencing after the initial 10year lease period and ending on the date the

replacement lease is scheduled to end. Accordingly, pursuant to paragraph (b) of this section,

the term of the lease between X and Y includes

such additional period, and the lease term is 20

years for purposes of section 168.

(iii) Facts modified. Assume the same facts as

in paragraph (i) of this Example, except that Y is

required to guarantee the payment of rentals

under the 10-year replacement lease and to make

a payment to X equal to the present value of any

excess of the replacement lease rental payments

specified in the lease agreement between X and

Y, over the rental payments actually agreed to be

paid by the replacement lessee. Pursuant to

paragraph (b) of this section, the term of the

lease between X and Y includes the additional

period, and the lease term is 20 years for

purposes of section 168.

(iv) Changes in status. If, upon the conclusion

of the stated duration of the lease between X and

Y, the aircraft either is returned to X or leased to

a replacement lessee that is not a tax-exempt

entity as defined in section 168(h)(2), the

subsequent method of depreciation will be

determined pursuant to section 168(i)(5).

(g) Effective date—(1) In general.

Except as provided in paragraph (g)(2)

of this section, this section applies to

leases entered into on or after April 20,

1995.

(2) Special rules. Paragraphs (b)(1)(ii) and (c) of this section apply to

leases entered into after April 26, 1996.

Margaret Milner Richardson,

Commissioner of Internal Revenue

Approved March 26, 1996.

Leslie Samuels,

Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on

April 26, 1996, 8:45 a.m., and published in the

issue of the Federal Register for April 29,

1996, 61 F.R. 18675)

Example. Financial obligation with respect to

an additional period—(i) Facts. X, a taxable

Section 168.—Accelerated Cost

Recovery System

If a taxpayer changes from claiming less than

the allowable depreciation to claiming the

allowable depreciation for property subject to

section 168, is this change a change in method of

accounting. See Rev. Proc. 96–31, page 11.

Section 197.—Amortization of

Goodwill and Certain Other

Intangibles

If a taxpayer changes from claiming less than

the allowable amortization to claiming the

allowable amortization for an amortizable section

197 intangible, is this change a change in method

of accounting. See Rev. Proc. 96–31, page 11.

Section 446.—General Rule for

Methods of Accounting

If a taxpayer changes from claiming less than

the allowable depreciation or amortization to

claiming the allowable depreciation or amortization, is this change a change in method of

accounting. See Rev. Proc. 96–31, page 11.

26 CFR 1.446–1: General rule for methods of

accounting.

If a taxpayer changes from claiming less than

the allowable depreciation or amortization to

claiming the allowable depreciation or amortization, is this change a change in method of

accounting. See Rev. Proc. 96–31, page 11.

Section 6049.—Returns Regarding

Payments of Interest

26 CFR 1.6049–4: Return of information as to

interest paid and original issue discount

includible in gross income after December 31,

1982.

T.D. 8664

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31 and 602

Information Reporting and Backup

Withholding

Agency: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains

final regulations that provide rules

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regarding the reporting on Form 1042–

S of certain bank deposit interest paid

with respect to a United States bank

account to an individual who is a

nonresident alien of the United States

and a resident of Canada. The IRS has

determined that information concerning

those deposits would be of significant

use in furthering its compliance efforts,

which include exchange of tax information with Canada.

EFFECTIVE DATE: January 1, 1997.

FOR FURTHER INFORMATION

CONTACT: Teresa Burridge Hughes,

(202) 622-3880 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this final regulation has been

reviewed and approved by the Office of

Management and Budget in accordance

with the requirements of the Paperwork

Reduction Act (44 U.S.C. 3507) under

control number 1545–0096. Responses

to this collection of information are

mandatory.

An 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.

The estimated annual burden per

respondent/recordkeeper is approximately .10 hour, depending on individual circumstances.

Comments concerning the accuracy

of this burden estimate and suggestions

for reducing this burden should be

directed to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP, Washington DC 20224,

and the Office of Management and

Budget, Attn: Desk Officer for the

Department of the Treasury, Office of

Information and Regulatory Affairs,

Washington, DC 20503.

Books or records relating to this

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 26

U.S.C. 6103.

Background

This document contains final regulations to be added to the Income Tax

Regulations (26 CFR part 1) under

section 6049 of the Internal Revenue

Code (Code). The final regulations

provide rules regarding reporting on

Form 1042–S of certain bank deposit

interest paid with respect to a United

States bank account to a nonresident

alien individual who is a resident of

Canada.

Proposed regulations on this subject

were set forth, at §§1.6049–5(e)(2),

1.6049–6(e)(6), and 31.3406(a)–3(b)(1),

in a notice of proposed rulemaking

published in the Federal Register (53

FR 5991) on February 29, 1988

[INTL–52–86 (1988–1 C.B. 892)]. The

IRS received comments on the proposed regulations and held a public

hearing on June 15, 1989. Having

considered the comments and the statements made at the hearing, the IRS and

the Treasury Department adopt the

proposed regulations as modified by

this Treasury decision.

Explanation of Provisions

A. Reporting of payments to

Canadians

This Treasury decision requires reporting on a Form 1042–S of certain

interest paid on deposits maintained at

a bank’s office within the United States

when paid to a nonresident alien

individual who is a resident of Canada.

However, interest on certain bearer

certificates of deposit targeted to foreign persons is excepted from the

reporting requirement if the interest is

paid outside the United States. This

final regulation makes an exception to

the current rule, based on §1.6049–

5(b), that certain interest amounts paid

to non-U.S. persons is not subject to

reporting if a statement certifying nonU.S. status is furnished to the payor or

middleman on a Form W–8 (Certificate

of Foreign Status), as described in

§1.6049–5(b)(2)(iv). However, although

bank deposit interest paid to Canadians

is made subject to reporting under this

final regulation, backup withholding

under section 3406 is not required.

Further, in response to suggestions

from commentators that segregating

interest amounts on the basis of residence would be burdensome, this

final regulation allows payors volun-

tarily to report on a Form 1042–S

payments to all foreign persons receiving bank deposit interest without segregating on the basis of residency.

The payor determines whether a

payee is a Canadian resident based on

the address in the country of permanent

residence required to be provided on

the Form W–8. However, if the payor

has actual knowledge that the payee is

a U.S. person, Form 1099 reporting

provisions apply.

See proposed regulations published

elsewhere in this issue of the Federal

the notice of proposed rulemaking

published in the Federal Register on

February 29, 1988.

B. Comments on Canadian reporting

provisions

Commentors stated that imposing

information reporting with respect to

deposits of nonresident aliens may

undercut the competitiveness of U.S.

banks. The IRS and Treasury considered these comments but, in light of

our obligations under the United StatesCanada income tax treaty and the

reporting by Canadian banks of U.S.

depositor interest to Canadian tax authorities, have decided to finalize these

proposed regulations.

In response to comments that the

reporting requirement be delayed, or at

least that a transition period be allowed, because of the time required to

identify Canadian account holders and

to modify processing systems for reporting purposes, the new reporting

requirement will be phased in over a

three-year period, starting with payments made on or after January 1,

1997. On or after that date, payors will

identify Canadian account holders as

Forms W–8 are received from new

depositors or renewed by existing

depositors. Upon identifying account

holders as Canadians, payors must

begin reporting bank deposit interest

paid to those persons.

Commentors also requested that the

IRS develop and permit Form 1042–S

reporting on magnetic diskette, as is

allowed for Form 1099 filings; permit

the Form 1042–S to be the transmittal

document for the Form 1042–S filing;

and allow financial institutions to file

separate tapes or diskettes for each area

of the bank, rather than bank-wide.

These filing changes have previously

been made by the IRS and require no

further action.

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Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It also has been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not

apply to these regulations, and, therefore, a Regulatory Flexibility Analysis

is not required.

Drafting Information

The principal author of these regulations is Teresa Burridge Hughes, Office

of Associate Chief Counsel (International). However, other personnel from

the IRS and Treasury Department

participated in their development.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR parts 1, 31 and

602 are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority for part 1

is amended by adding entries in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Sections 1.6049–4 also issued under

26 U.S.C. 6049(a), (b), (c), and (d).

Section 1.6049–5 also issued under

26 U.S.C. 6049(a), (b), (c), and (d).

***

Par. 2. Section 1.6049–4 is amended

by:

1. Removing the reference ‘‘(b)(3)’’

and adding ‘‘(b)(3) and (b)(5)’’ in its

place in the first sentence of paragraphs

(b)(1) and (b)(2) introductory text.

2. Revising the first sentence of

paragraphs (b)(3) and (b)(4).

3. Adding paragraph (b)(5).

4. Removing the authority citation at

the end of the section.

The revisions and addition read as

follows:

§1.6049–4 Return of information as

to interest paid and original issue

discount includible in gross income

after December 31, 1982.

(b) * * *

(3) * * * Except as provided in

paragraph (b)(5) of this section, every

person acting as a middleman (as

defined in paragraph (f)(4) of this

section) shall make an information

return on Forms 1096 and 1099 for the

calendar year. * * *

(4) * * * Except as provided in

paragraph (b)(5) of this section, every

person carrying on the banking business who makes payments of interest to

another person (whether or not aggregating $10 or more) during a

calendar year with respect to a certificate of deposit issued in bearer form

shall make an information return on

Forms 1096 and 1099. * * *

(5) Interest payments to Canadian

nonresident alien individuals—(i) General rule. In the case of interest paid to

a Canadian nonresident alien individual

(as described in §1.6049–8(a)), the

payor or middleman shall make an

information return on Form 1042–S for

the calendar year in which the interest

is paid. The payor or middleman shall

prepare and transmit Form 1042–S at

the time and in the manner prescribed

by section 1461 and the regulations

under that section and by the form and

its accompanying instructions. See

§1.6049–6(e)(4) for furnishing a copy

of the Form 1042–S to the payee. To

determine whether an information return is required for original issue

discount, see §§1.6049–5(c) and

1.6049–8(a).

(ii) Effective date . Paragraph

(b)(5)(i) of this section shall be effective for payments made after December

31, 1996 with respect to a Form W–8

(Certificate of Foreign Status) furnished

to the payor or middleman after that

date.

Par. 3. Section 1.6049–5 is amended

by:

1. Revising the introductory text of

paragraph (b)(1).

2. Revising the last sentence in

paragraph (c).

3. Removing authority citation at the

end of the section.

The revisions read as follows:

§1.6049–5 Interest and original issue

discount subject to reporting after

December 31, 1982.

(b) * * * (1) * * * Subject to the

provisions of §1.6049–8, the term

interest does not include:

an obligation (including an obligation

with a maturity of not more than 6

months from the date of original issue)

held by a nonresident alien individual

or foreign corporation is interest described in paragraph (b)(1)(vi)(A) or

(B) of this section and, therefore is not

interest subject to reporting under

section 6049 unless it is described in

§1.6049–8(a) (relating to bank deposit

interest paid to a Canadian nonresident

alien individual).

Par. 4. Section 1.6049–6 is amended

by:

1. Redesignating paragraph (e)(4) as

paragraph (e)(5).

2. Adding new paragraph (e)(4).

The addition reads as follows:

§1.6049–6 Statements to recipients of

interest payments and holders of

obligations for attributed original

issue discount.

(e) * * *

(4) Special rule for amounts described in §1.6049–8(a) paid after

December 31, 1996. In the case of

amounts described in §1.6049–8(a) (relating to payments of interest to Canadian nonresident alien individuals) paid

after December 31, 1996, any person

who makes a Form 1042–S under

section 6049(a) and §1.6049–4(b)(5)

shall furnish a statement to the recipient. The statement shall include a copy

of the Form 1042–S required to be

prepared pursuant to §1.6049–4(b)(5)

and a statement to the effect that the

information on the Form is being

furnished to the United States Internal

Revenue Service and may be furnished

to Canada.

Par. 5. Section 1.6049–8 is added to

read as follows:

§1.6049–8 Interest and original issue

discount paid to residents of Canada.

(a) Interest subject to reporting requirement. For purposes of §§1.6049–4,

1.6049–6 and this section and except as

provided in paragraph (b) of this

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section, the term interest means interest

paid to a Canadian nonresident alien

individual after December 31, 1996,

where the interest is described in

section 871(i)(2)(A) with respect to a

deposit maintained at an office within

the United States. For purposes of the

regulations under section 6049, a Canadian nonresident alien individual is an

individual who resides in Canada and

is not a United States citizen. The

payor or middleman may rely upon the

permanent residence address (as defined in section 1441 and the regulations under that section) as stated on

the Form W–8 (described in section

6049 and the regulations under that

section) in order to determine whether

the payment is made to a Canadian

nonresident alien individual. Amounts

described in this paragraph (a) are not

subject to backup withholding under

section 3406. See §31.3406(g)–1(d) of

this chapter.

(b) Interest excluded from reporting

requirement. The term interest does not

include an amount that is paid by the

issuer or its agent outside the United

States with respect to an obligation that

is described in paragraph (b)(1) or (2)

of this section.

(1)(i) The obligation is not in registered form (within the meaning of

section 163(f) and the regulations

thereunder); is part of a larger single

public offering of securities; and is

described in section 163(f)(2)(B).

(ii) Unless it has actual knowledge

to the contrary, a middleman may treat

an obligation as if it is described in

section 163(f)(2)(B) if the obligation or

coupon therefrom, whichever is presented for payment, contains the statement described in section 163(f)(2)(B)(ii)(II) and the regulations thereunder.

(2)(i) The obligation has a face or

principal amount of not less than

$500,000, and satisfies the requirements described in paragraphs

(b)(2)(i)(A), (B), and (C) of this

section.

(A) The obligation satisfies the requirements of sections 163(f)(2)(B)(i)

and (ii)(I) and the regulations thereunder (as if it were a registrationrequired obligation within the meaning

of section 163(f)(2)(A)) and is issued

in accordance with the procedures of

§1.163–5(c)(2)(i)(D)).

(B) If the obligation is in registered

form, it is registered in the name of an

exempt recipient described in §1.6049–

4(c)(1)(ii).

and on any detachable coupons the following statement (or a similar statement having the same effect): ‘‘By

accepting this obligation or coupon, the

holder represents and warrants that it is

not a United States person (other than

an exempt recipient described in the

regulations under section 6049(b)(4) of

the Internal Revenue Code and the

regulations thereunder) and that it is

not acting for or on behalf of a United

States person (other than an exempt

recipient described in the regulations

under section 6049(b)(4) of the Internal

Revenue Code and the regulations

thereunder).’’

(ii) Unless the middleman has actual

knowledge to the contrary, it may treat

an obligation as satisfying the requirements of sections 163(f)(2)(B)(i) and

(ii)(I) and the regulations thereunder if

the obligation or a coupon therefrom,

whichever is presented for payment,

contains the statement in paragraph

(b)(2)(i)(C) of this section.

PART 31—EMPLOYMENT TAXES

AND COLLECTION OF INCOME

TAX AT SOURCE

Par. 6. The authority for part 31

continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 7. Section 31.3406(g)–1 is

amended by adding paragraph (d) to

read as follows:

§31.3406(g)–1 Exception for payments

to certain payees and certain other

payments.

(d) Reportable payments made to

Canadian nonresident alien individuals.

A payment of interest made to a

Canadian nonresident alien individual

under §1.6049–8(a) of this chapter is

not subject to withholding under section 3406.

PART 602—OMB CONTROL

NUMBERS UNDER THE

PAPERWORK REDUCTION ACT

Par. 8. The authority for part 602

continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 9. Section 602.101, paragraph

‘‘§31.3406(a)–1 – §31.3406(i)–1’’ and

adding entries to the table in numerical

order to read as follows:

§602.101 OMB Control numbers.

CFR part or section

where identified

and described

Current OMB

control number

1.6049–6 . . . . . . . . . . . . . . . 1545–0096

31.3406(a)–1 . . . . . . . . . . . . 1545–0112

31.3406(a)–2 . . . . . . . . . . . . 1545–0112

31.3406(a)–3 . . . . . . . . . . . . 1545–0112

31.3406(a)–4 . . . . . . . . . . . . 1545–0112

31.3406(b)(2)–1 . . . . . . . . . . 1545–0112

31.3406(b)(2)–2 . . . . . . . . . . 1545–0112

31.3406(b)(2)–3 . . . . . . . . . . 1545–0112

31.3406(b)(2)–4 . . . . . . . . . . 1545–0112

31.3406(b)(2)–5 . . . . . . . . . . 1545–0112

31.3406(b)(3)–1 . . . . . . . . . . 1545–0112

31.3406(b)(3)–2 . . . . . . . . . . 1545–0112

31.3406(b)(3)–3 . . . . . . . . . . 1545–0112

31.3406(b)(3)–4 . . . . . . . . . . 1545–0112

31.3406(b)(4)–1 . . . . . . . . . . 1545–0112

31.3406(c)–1 . . . . . . . . . . . . 1545–0112

31.3406(d)–1 . . . . . . . . . . . . 1545–0112

31.3406(d)–2 . . . . . . . . . . . . 1545–0112

31.3406(d)–3 . . . . . . . . . . . . 1545–0112

31.3406(d)–4 . . . . . . . . . . . . 1545–0112

31.3406(e)–1 . . . . . . . . . . . . 1545–0112

31.3406(f)–1 . . . . . . . . . . . . 1545–0112

31.3406(g)–1 . . . . . . . . . . . . 1545–0096

1545–0112

31.3406(g)–2 . . . . . . . . . . . . 1545–0112

31.3406(g)–3 . . . . . . . . . . . . 1545–0112

31.3406(h)–1 . . . . . . . . . . . . 1545–0112

31.3406(h)–2 . . . . . . . . . . . . 1545–0112

31.3406(h)–3 . . . . . . . . . . . . 1545–0112

31.3406(i)–1 . . . . . . . . . . . . 1545–0112

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved March 27, 1996.

Leslie Samuels,

Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on

April 15, 1996, 10:24 a.m., and published in

the issue of the Federal Register for April 22,

1996, 61 F.R. 17572)

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Part III. Administrative, Procedural, and Miscellaneous

Relief from Filing Form 3115 for a

Change in Methods of Accounting

Required by Statement of Financial

Accounting Standards No. 116

Notice 96–30

The purpose of this Notice is to

provide relief from filing Form 3115,

Application for Change in Accounting

Method, to organizations described in

section 501(c) of the Internal Revenue

Code that are changing their methods

of accounting for federal income tax

purposes to comply with the provisions

of Statement of Financial Accounting

Standards No. 116, Accounting for

Contributions Received and Contributions Made (SFAS 116).

In SFAS 116 the Financial Accounting Standards Board revised certain

generally accepted accounting principles relating to contributions received

and contributions awarded by not-forprofit organizations. Not-for-profit organizations described in section 501(c)

of the Code that change to the methods

of accounting provided in SFAS 116

for federal income tax purposes, will

not be required, in this situation, to file

Form 3115, Application for Change in

Accounting Method.

Not-for-profit organizations described in section 501(c) may change

to the methods provided in SFAS 116

for federal income tax purposes for any

tax year beginning after December 15,

1994, by properly reflecting the effect

of the change, in the manner described

below, on a timely filed (including

extensions) Form 990-series return for

the tax year of the change. Any notfor-profit organization described in section 501(c) that is not required to file a

Form 990-series information return for

the tax year of the change may change

to the methods provided in SFAS 116

for federal income tax purposes without

notifying the Service of the change.

A not-for-profit organization that

changes its methods of accounting for

federal income tax purposes to conform

to the methods provided in SFAS 116

should report any adjustment required

by section 481(a) on line 20 of Form

990 or 990–EZ or in Part III of Form

990–PF as a net asset adjustment made

during the year the change is made.

The adjustment should be identified as

the effect of changing to the methods

provided in SFAS 116. The beginning

of year statement of financial position

(balance sheet) should not be restated

to reflect any prior period adjustments.

If the adjustment reflects contributions

not reported under the old methods for

year(s) preceding the year of change

and not reported under the new

methods in the year of change or any

subsequent year, any contributor of an

amount included in the adjustment who

meets the criteria described in the

instructions to line 1 of Form 990 or

990–EZ or line 1 of Part 1 of Form

990–PF should be included in the list

of contributors required to be attached

to Form 990, 990–EZ or 990–PF for

the year of the change.

For further information regarding

this notice, contact John Roman Faron

at (202) 622-7645 (not a toll free call).

26 CFR 601.204: Changes in accounting

periods and in methods of accounting.

(Also Part I, §§ 167, 168, 197, 446; 1.167(e)–

1, 1.446–1)

Rev. Proc. 96–31

SECTION 1. PURPOSE

This revenue procedure provides an

automatic consent procedure that permits a taxpayer who has claimed less

than the depreciation or amortization

allowable to change the taxpayer’s

method of accounting to claim allowable depreciation or amortization. The

omitted depreciation or amortization

from years prior to the year of change

will be taken into account through a

§ 481(a) adjustment. The taxpayer has

the option of either making the method

change under this revenue procedure or

requesting permission to make the

method change under Rev. Proc. 92–

20, 1992–1 C.B. 685 (or any successor).

SECTION 2. BACKGROUND

.01 A change from not claiming the

depreciation or amortization allowable

(hereafter, depreciation means depreciation or amortization) to claiming the

depreciation allowable is a change in

method of accounting for which the

consent of the Commissioner of Internal Revenue is required. Sections

1.167(e)–1(a) and 1.446–1(e)(2)(ii)(b)

of the Income Tax Regulations.

.02 To obtain this consent, a Form

3115, Application for Change in Accounting Method, generally must be

filed within 180 days after the beginning of the taxable year in which the

proposed change is to be made. Section

1.446–1(e)(3)(i).

.03 The Commissioner is authorized

to prescribe administrative procedures

setting forth the limitations, terms, and

conditions as the Commissioner deems

necessary to obtain consent for effecting a change in method of accounting

and to prevent amounts from being

duplicated or omitted, including the

taxable year or years in which the

§ 481(a) adjustment is to be taken into

account. Section 1.446–1(e)(3)(ii).

.04 In computing taxable income,

§ 481(a) of the Internal Revenue Code

requires a taxpayer to take into account

those adjustments necessary to prevent

amounts from being duplicated or

omitted when the taxpayer’s taxable

income is computed under a method of

accounting different from the method

used to compute taxable income for the

preceding taxable year.

.05 The basis of depreciable property is reduced by the amount of the

depreciation allowed or allowable,

whichever is greater. Section

1016(a)(2).

.06 Unless otherwise provided in

this revenue procedure, the terms ‘‘taxpayer’’, ‘‘year of change’’, and ‘‘filed’’

have the meaning given to them by

sections 3.01, 3.03, and 3.04 of Rev.

Proc. 92–20 (or any successor),

respectively.

SECTION 3. SCOPE

.01 Application of this revenue procedure. Except as provided in sections

3.02 and 3.03 of this revenue procedure, this revenue procedure applies to

any taxpayer changing to a permissible

method of accounting for depreciation

for any item of property that: (1) under

the taxpayer’s present method of accounting, the taxpayer has not taken

into account any depreciation allowance or has taken into account some

depreciation but less than the depreciation allowable (hereafter, referred to as

claimed less than the depreciation

allowable); (2) is subject to § 167,

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§ 168, § 197, or § 168 prior to its

amendment in 1986 (former § 168);

and (3) is held by the taxpayer as of

the beginning of the year of change.

.02 Non-application of this revenue

procedure. This revenue procedure

does not apply to:

(1) Any property to which § 1016(a)(3) (generally relating to property

held by a tax-exempt organization)

applies;

(2) Any intangible property subject

to § 167, except for property subject to

§ 167(f) (pertaining to certain property

excluded from § 197);

(3) Any property for which a taxpayer is seeking either to revoke a

timely election, or to make a late

election, under § 167, § 168, former

§ 168, or § 13261(g)(2) or (3) of the

Revenue Reconciliation Act of 1993

(the ‘‘1993 Act’’), 1993–3 C.B. 1, 128

(relating to amortizable § 197 intangibles). A taxpayer may request consent

to revoke or make the election by submitting a request for a letter ruling

under Rev. Proc. 96–1, 1996–1 I.R.B. 8

(or any successor);

(4) Except for property subject to

§ 167(f), any property subject to § 167

for which a taxpayer is changing only

the estimated useful life of the property. A change in the estimated useful

life of property subject to § 167 must

be made prospectively. See, e.g.,

§ 1.167(b)–2(c);

(5) Any depreciable property that

changes use but continues to be owned

by the same taxpayer. See, e.g.,

§ 168(i)(5);

(6) Any property for which a taxpayer has claimed depreciation in excess of the depreciation allowable;

(7) Any change in method of accounting involving a change from

deducting the cost or other basis of any

property as an expense to capitalizing

and depreciating the cost or other basis;

(8) Any change in method of accounting involving a change from one

permissible method of accounting for

the property to another permissible

method of accounting for the property.

For example, a:

(a) Change from the straight-line

method of depreciation to the income

forecast method of depreciation for

videocassettes. See Rev. Rul. 89–62,

1989–1 C.B. 78; or

(b) Change from charging the depreciation reserve with costs of removal and crediting the depreciation

reserve with salvage proceeds to deducting costs of removal as an expense

and including salvage proceeds in

taxable income. See Rev. Rul. 74–455,

1974–2 C.B. 63; or

(9) Any change in method of accounting for an item of income or

deduction other than depreciation even

if a taxpayer’s present method of

accounting may have resulted in the

taxpayer claiming less than the depreciation allowable. For example, a

change in accounting method involving

(a) Change in inventory costs (for

example, when property is reclassified

from inventory property to depreciable

property); or

(b) Change in the character of a

transaction from sale to lease.

.03 Taxpayer under criminal investigation or proceeding. If a criminal

investigation or proceeding is pending

concerning (1) any issue directly or

indirectly related to a taxpayer’s federal

tax liability for any taxable year, or (2)

the possibility of false or fraudulent

statements made by the taxpayer regarding any issue related to the taxpayer’s federal tax liability for any

taxable year, this revenue procedure

does not apply to the taxpayer.

.04 Procedures available when a

method change may not be made under

this revenue procedure. If a change in

accounting method is not permitted

under this revenue procedure solely by

reason of section 3.02(1), 3.02(2),

3.02(6), 3.02(7), 3.02(8), or 3.02(9) of

this revenue procedure, a taxpayer must

file a Form 3115 in accordance with

the requirements of either Rev. Proc.

92–20 (or any successor) or any other

applicable revenue procedure pertaining

to the method change. Thus, for example, if a taxpayer wants to change from

claiming more than the depreciation

allowable on some items of property

but also opts to use this revenue

procedure to change from claiming less

than the depreciation allowable on

other items of property, the taxpayer

must file two Forms 3115—one Form

3115 under Rev. Proc. 92–20 (or any

successor) for the over-depreciated

property and one Form 3115 under this

revenue procedure for the underdepreciated property. The taxpayer,

however, files one Form 3115 if the

taxpayer uses Rev. Proc. 92–20 (or any

successor) to change the method of

accounting for both the under- and

over-depreciated properties.

SECTION 4. CONSENT TO

CHANGE

.01 Consent granted. The consent of

the Commissioner under § 1.446–1(e)(2)(i) is granted to any taxpayer within

the scope of this revenue procedure to

make a method change to a permissible

method of accounting for depreciation

for any item of property within the

scope of this revenue procedure. This

consent is granted, however, only if the

taxpayer complies with section 5 of

this revenue procedure. If the taxpayer

does not comply with section 5 of this

revenue procedure, the taxpayer will be

deemed to have initiated a change in

method of accounting without obtaining

the consent of the Commissioner required under § 446(e).

.02 Effect of consent. The consent

that is granted under this revenue

procedure does not constitute an opinion of the Commissioner regarding the

propriety of a taxpayer’s proposed

method of accounting. Consequently, if

the proposed method of accounting is

an impermissible method of accounting,

the Service may change the taxpayer’s

proposed method of accounting to a

permissible method of accounting in

any open year.

SECTION 5. MANNER OF

EFFECTING AUTOMATIC

CHANGE

.01 General procedure.

(1) Complete and file a current

Form 3115. A taxpayer makes a

change in method of accounting under

this revenue procedure by completing

and filing a current Form 3115 in

duplicate. The original of the Form

3115 must be filed with the Office of

Associate Chief Counsel (Domestic)

(national office) on or before 180 days

after the beginning of the year of

change and addressed to the Commissioner of Internal Revenue, Attn:

CC:DOM:P&SI:6, Room 5112, P.O.

Box 7604, Ben Franklin Station, Washington, DC 20044. In addition, a copy

of the Form 3115 must be attached to

the taxpayer’s timely filed (including

extensions) federal income tax return

for the year of change.

The 180-day filing period begins on

the first day of any taxable year. If the

taxable year is a short taxable year

(less than 12 full months), the original

of the Form 3115 must be filed with

the national office no later than 180

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days after the beginning of the short

taxable year or, if earlier, no later than

the last day of the short taxable year.

In completing the current Form 3115

(Rev. February 1996), the taxpayer must

complete Schedule D, Part II, Change in

Depreciation or Amortization (page 7 of

the Form 3115), and any other applicable schedule. With respect to Parts I

through III on pages 1 and 2 of the

current Form 3115, the taxpayer must

provide only the information requested

on the following lines:

(a) Part I, Eligibility To Request Change (page 1)-lines 1, 2a and

b, and 6;

(b) Part II, Description of

Change (page 2)-line 8 and to the

extent not provided elsewhere on the

Form 3115, lines 10, 11, 12, 13, 17,

18a and b, and 19; and

25.

(2) Label. The taxpayer should

type or legibly print at the top of the

Form 3115: ‘‘AUTOMATIC METHOD

CHANGE UNDER REV. PROC. 96–

31.’’

(3) No user fee and acknowledgment. No user fee is required for a

Form 3115 filed under this revenue

procedure and a Form 3115 filed

pursuant to this revenue procedure will

not be acknowledged.

.02 Permissible method of accounting for depreciation must be used. A

taxpayer must change to a permissible

method of accounting for depreciation

for the item of property. This method is

the same method that determines the

depreciation allowable for the item of

property (as determined under section 7

of this revenue procedure).

.03 Year of change. The year of

change is the taxable year for which

the original of the Form 3115 is

considered timely filed with the national office under section 5.01(1) of

this revenue procedure.

.04 Section 481(a) adjustment.

(1) In general. A change in

method of accounting under this revenue procedure is treated as a voluntary

change in method of accounting that is

initiated by the taxpayer and, therefore,

the § 481(a) adjustment is not restricted

to post-1953 items.

(2) Amount of § 481(a) adjustment. The § 481(a) adjustment is a

negative § 481(a) adjustment (decrease

in taxable income) to prevent the

omission of the allowable but unclaimed depreciation for open and

closed years prior to the year of

change. This negative § 481(a) adjustment equals the difference between the

total amount of depreciation taken into

account in computing taxable income

for the property under the taxpayer’s

present method of accounting, and the

total amount of depreciation allowable

for the property under the taxpayer’s

proposed method of accounting (as

determined under section 7 of this

revenue procedure), for any taxable

year prior to the year of change. The

amount of the negative § 481(a) adjustment, however, must be offset by any

allowable but unclaimed depreciation

that is required to be capitalized under

any provision of the Code (for example, § 263A) as of the beginning of the

year of change.

(3) Section 481(a) adjustment

period. A taxpayer must take the entire

negative § 481(a) adjustment into account in computing the taxable income

in the year of change.

.05 Basis adjustment. The basis of

depreciable property to which this

revenue procedure applies must reflect

the reductions required by § 1016(a)(2)

for the depreciation allowable for the

property (as determined under section 7

of this revenue procedure).

SECTION 6. REVIEW OF FORM

3115

The Form 3115 will be subject to

review by the national office. In

addition, the facts underlying the

method change, including the amount

of any § 481(a) adjustment and any

§ 1016(a)(2) adjustment to the basis of

the property, will be subject to verification by the district director. If the Form

3115 is reviewed and the taxpayer’s

proposed method of accounting appears

to be an impermissible method of

accounting for depreciation or the

taxpayer or property appears to be

outside the scope of this revenue

procedure, the national office or the

district director will notify the taxpayer, in writing, that consent is not

granted under this revenue procedure.

The taxpayer then may complete and

file a new Form 3115 under this

revenue procedure or Rev. Proc. 92–20

(or any successor), as applicable. The

year of change for this new Form 3115

will be determined in accordance with

the requirements of such revenue

procedure.

SECTION 7. MEANING OF

DEPRECIATION ALLOWABLE

.01 In general. This section 7 discusses the amount of the depreciation

allowable determined under § 167,

§ 168, § 197, or former § 168. This

amount, however, may be limited under

other provisions of the Code (for

example, § 280F).

.02 Section 167 property. Generally,

for any taxable year, the depreciation

allowable for property subject to § 167

is determined either: (1) under the

depreciation method adopted by a taxpayer for the property; or (2) if this

depreciation method does not result in

a reasonable allowance for depreciation

or a taxpayer has not adopted a depreciation method for the property,

under the straight-line depreciation

method. For determining the estimated

useful life and salvage value of the

property, see § 1.167(a)–1(b) and (c),

respectively. The depreciation allowable for any taxable year for property

subject to § 167(f) (pertaining to certain property excluded from § 197) is

determined by using the depreciation

method and useful life prescribed in

§ 167(f).

.03 Section 168 property. The depreciation allowable for any taxable

year for property subject to § 168 is

determined by using either: (1) the

general depreciation system in

§ 168(a); or (2) the alternative depreciation system in § 168(g) if the

property is required to be depreciated

under the alternative depreciation system pursuant to § 168(g)(1) or other

provisions of the Code (for example,

property described in § 263A(e)(2)(A)

or § 280F(b)(1)). Property required to

be depreciated under the alternative

depreciation system pursuant to

§ 168(g)(1) includes property in a class

for which the taxpayer made a timely

election under § 168(g)(7).

.04 Section 197 property. The depreciation allowable for any taxable

year for an amortizable § 197 intangible (including any property for which

a timely election under § 13261(g)(2)

of the 1993 Act was made) is determined by using the straight-line method

over a 15-year period.

.05 Former § 168 property. The depreciation allowable for any taxable

year for property subject to former

§ 168 is determined by using either: (1)

the accelerated method of cost recovery

applicable to the property (for example,

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for 5-year property, the recovery

method under former § 168(b)(1)); or

(2) the straight-line method applicable

to the property if the property is

required to be depreciated under the

straight-line method (for example,

property described in former § 168(f)(12) or former § 280F(b)(2)) or if the

taxpayer elected to determine the depreciation allowance under the optional

straight-line percentage (for example,

the straight-line method in former

§ 168(b)(3)).

SECTION 8. EFFECTIVE DATE

.01 In general. This revenue procedure is effective May 13, 1996.

.02 Form 3115 already pending with

the Service.

(1) In general. The provisions of

this revenue procedure apply to a

taxpayer with a Form 3115 (including a

Form 3115 filed under the early application provision of section 5.01(3) of

Rev. Proc. 92–20) timely filed with the

Service as of May 13, 1996, for a

method change for depreciation to

which this revenue procedure applies.

Therefore, the taxpayer has the option

to make the method change under this

revenue procedure or to request permission to make the method change under

Rev. Proc. 92–20 (or any successor). In

this regard, the taxpayer must notify

the national office, in writing, on or

before August 15, 1996, as to the

taxpayer’s decision. If the national

office is not notified by August 15,

1996, the Form 3115 will be treated as

filed under Rev. Proc. 92–20.

(2) Manner of effecting automatic

change. If the taxpayer makes the

method change under this revenue

procedure, the taxpayer’s Form 3115

timely filed as of May 13, 1996, will

be treated as being timely filed with

the national office under this revenue

procedure. The original of the Form

3115 will be retained by the national

office. The national office will return a

copy of the Form 3115 to the taxpayer

so that, as required, the taxpayer can

attach the copy to the taxpayer’s timely

filed (including extensions) original

federal income tax return, or to an

amended return, for the year of change.

The receipt of this copy is not an

opinion of the Commissioner regarding

the propriety of the taxpayer’s proposed method of accounting. See section 4.02 of this revenue procedure.

If all of the property subject to the

Form 3115 appears to be within the

scope of this revenue procedure and the

taxpayer notifies the national office in

a timely manner that the taxpayer is

making the method change under this

revenue procedure, any user fee submitted with the Form 3115 will be

returned to the taxpayer.

(3) Year of change. For a taxpayer

with a Form 3115 timely filed as of

May 13, 1996, the taxpayer may make

the method change under this revenue

procedure either for the year of change

originally requested on the Form 3115

(or if this year is a closed year, for the

first subsequent open year) or for the

taxpayer’s taxable year beginning in

1995 or 1996. If the taxpayer modifies

the year of change, the taxpayer must

submit a letter to the national office,

stating the new year of change and any

revised information on the taxpayer’s

Form 3115 to reflect the new year of

change (for example, the revised

§ 481(a) adjustment for the year of

change). This letter must be submitted

on or before August 15, 1996, to the

national office. If the national office is

not notified by August 15, 1996, the

year of change is the one originally

requested on the taxpayer’s Form 3115

(or if this year is a closed year, the

first subsequent open year).

If the taxpayer makes the method

change under this revenue procedure

for under-depreciated property but the

Form 3115 also includes items of

property for which the taxpayer, under

the taxpayer’s present method of accounting, claimed more than the depreciation allowable, the year of

change for the over-depreciated property will be the same as the year of

change for the under-depreciated

property.

(4) Submission of additional information. The additional information requested in section 8.02(1) and (3) of

this revenue procedure must be accompanied by the following penalties of

perjury statement: ‘‘Under penalties of

perjury, I declare that I have examined

this request, including accompanying

documents, and to the best of my

knowledge and belief, the facts presented in support of the requested Form

3115 are true, correct, and complete.’’

This penalties of perjury statement

must be signed and dated by the taxpayer, not the taxpayer’s representative.

Also, a stamped signature is not

permitted.

The additional information (including

the penalties of perjury statement) must

be addressed to the Commissioner of

Internal Revenue, Attn: CC:DOM:

P&SI:6, Room 5112, P.O. Box 7604,

Ben Franklin Station, Washington, DC

20044.

SECTION 9. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 92–20 is modified.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Kathleen Reed of the

Office of Assistant Chief Counsel

(Passthroughs and Special Industries).

For further information regarding this

revenue procedure, contact Ms. Reed at

(202) 622-3110 (not a toll-free

number).

26 CFR 601.201: Rulings and determination

letters.

(Also Part I, §§ 501(c)(3); 1.501(c)(3)–1.)

Rev. Proc. 96–32

SECTION 1. PURPOSE

.01 This revenue procedure sets

forth a safe harbor under which organizations that provide low-income housing will be considered charitable as

described in § 501(c)(3) of the Internal

Revenue Code because they relieve the

poor and distressed as described in

§ 1.501(c)(3)–l(d)(2) of the Income Tax

Regulations. This revenue procedure

also describes the facts and circumstances test that will apply to determine

whether organizations that fall outside

the safe harbor relieve the poor and

distressed such that they will be

considered charitable organizations described in § 501(c)(3). It also clarifies

that housing organizations may rely on

other charitable purposes to qualify for

recognition of exemption from federal

income tax as organizations described

in § 501(c)(3). These other charitable

purposes are described in § 1.501(c)(3)–l(d)(2). This revenue procedure

supersedes the application referral described in Notice 93–1, 1993–1 C.B.

290.

.02 This revenue procedure does not

alter the standards that have long been

applied to determine whether lowincome housing organizations qualify

for tax-exempt status under § 501(c)(3). Rather, it is intended to expedite

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the consideration of applications for

tax-exempt status filed by such organizations by providing a safe harbor and

by accumulating relevant information

on the existing standards for exemption

in a single document. Low-income

housing organizations that have ruling

or determination letters and have not

materially changed their organizations

or operations from how they were

described in their applications can

continue to rely on those letters.

SEC. 2. BACKGROUND OF SAFE

HARBOR

.01 Rev. Rul. 67–138, 1967–1 C.B.

129, Rev. Rul. 70–585, 1970–2 C.B.

115, and Rev. Rul. 76–408, 1976–2

C.B. 145, hold that the provision of

housing for low-income persons accomplishes charitable purposes by relieving the poor and distressed. The

Service has long held that poor and

distressed beneficiaries must be needy

in the sense that they cannot afford the

necessities of life. Rev. Ruls. 67–138,

70–585, and 76–408 refer to the needs

of housing recipients and to their

inability to secure adequate housing

under all the facts and circumstances to

determine whether they are poor and

distressed.

.02 The existence of a national

housing policy to maintain a commitment to provide decent, safe, and

sanitary housing for every American

family is reflected in several federal

housing acts. See, for example, § 2 of

the United States Housing Act of 1937,

42 U.S.C. § 1437; § 2 of the Housing

Act of 1949, 42 U.S.C. § 1441; § 2 of

the Housing and Urban Development

Act of 1968, 12 U.S.C. § 1701t; and

§§ 101, 102, and 202 of the CranstonGonzalez National Affordable Housing

Act, 42 U.S.C. §§ 12701, 12702, and

12721. Not all beneficiaries of these

housing acts, however, are necessarily

poor and distressed within the meaning

of § 1.501(c)(3)–l(d)(2).

.03 In order to support national

housing policy, the safe harbor contained in this revenue procedure identifies those low-income housing organizations that will, with certainty, be

considered to relieve the poor and

distressed. The safe harbor permits a

limited number of units occupied by

residents with incomes above the lowincome limits in order to assist in the

social and economic integration of the

poorer residents and, thereby, further

the organization’s charitable purposes.

To avoid giving undue assistance to

those who can otherwise afford safe,

decent, and sanitary housing, the safe

harbor requires occupancy by significant levels of both very low-income

and low-income families.

.04 Low-income housing organizations that fall outside the safe harbor

may still be considered organizations

that offer relief to the poor and

distressed based on all the surrounding

facts and circumstances. Some of the

facts and circumstances that will be

taken into consideration in determining

whether a low-income housing organization will be so considered are set

forth in section 4.

.05 Low-income housing organizations may also qualify for tax-exempt

status because they serve a charitable

purpose described in § 501(c)(3) other

than relief of the poor and distressed.

Exempt purposes other than relief of

the poor and distressed are discussed in

section 6.

.06 To be recognized as exempt

from income tax under § 501(c)(3), a

low-income housing organization must

not only serve a charitable purpose but

also meet the other requirements of that

section, including the prohibitions

against inurement and private benefit.

Specific concerns with respect to these

prohibitions are set forth in section 7.

SEC. 3. SAFE HARBOR FOR

RELIEVING THE POOR AND

DISTRESSED

.01 An organization will be considered charitable as described in

§ 501(c)(3) if it satisfies the following

requirements:

(1) The organization establishes

for each project that (a) at least 75

percent of the units are occupied by

residents that qualify as low-income;

and (b) either at least 20 percent of the

units are occupied by residents that

also meet the very low-income limit for

the area or 40 percent of the units are

occupied by residents that also do not

exceed 120 percent of the area’s very

low-income limit. Up to 25 percent of

the units may be provided at market

rates to persons who have incomes in

excess of the low-income limit.

(2) The project is actually occupied by poor and distressed residents.

For projects requiring construction or

rehabilitation, a reasonable transition

period is allowed for an organization to

place the project in service. Whether an

organization’s transition period is reasonable is determined by reference to

all relevant facts and circumstances.

For projects that do not require substantial construction or substantial rehabilitation, a one-year transition

period to satisfy the actual occupancy

requirement will generally be considered to be reasonable. If a project

operates under a government program

that allows a longer transition period,

this longer period will be used to

determine reasonableness.

(3) The housing is affordable to

the charitable beneficiaries. In the case

of rental housing, this requirement will

ordinarily be satisfied by the adoption

of a rental policy that complies with

government-imposed rental restrictions

or otherwise provides for the limitation

of the tenant’s portion of the rent

charged to ensure that the housing is

affordable to low-income and very lowincome residents. In the case of homeownership programs, this requirement

will ordinarily be satisfied by the

adoption of a mortgage policy that

complies with government-imposed

mortgage limitations or otherwise

makes the initial and continuing costs

of purchasing a home affordable to low

and very low-income residents.

(4) If a project consists of multiple buildings and each building does

not separately meet the requirements of

sections 3.01(1), (2), and (3), then the

buildings must share the same grounds.

This requirement does not apply to

organizations that provide individual

homes or individual apartment units

located at scattered sites in the community exclusively to families with

incomes at or below 80 percent of the

area’s median income.

.02 In applying this safe harbor, the

Service will follow the provisions listed

below:

(1) Low-income families and very

low-income families will be identified

in accordance with the income limits

computed and published by the Department of Housing and Urban Development (‘‘HUD’’) in Income Limits for

Low and Very Low-Income Families

Under the Housing Act of 1937. The

term ‘‘very low-income’’ is defined by

the relevant housing statute as 50

percent of an area’s median income.

The term ‘‘low-income’’ is defined by

the same statute as 80 percent of an

area’s median income. However, these

income limits may be adjusted by HUD

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to reflect economic differences, such as

high housing costs, in each area. The

income limits are then tailored to

reflect different family sizes. If HUD’s

program terminates, the Service will

use income limits computed under such

program as is in effect immediately

before such termination. Copies of all

or part of HUD’s publication may be

obtained by calling HUD at (800)

245-2691 (HUD charges a small fee to

cover costs of reproduction).

(2) The retention of the right to

evict tenants for failure to pay rent or

other misconduct, or the right to foreclose on homeowners for defaulting on

loans will not, in and of itself, cause

the organization to fail to meet the safe

harbor.

(3) An organization originally

meeting the safe harbor will continue to

satisfy the requirements of the safe

harbor if a resident’s income increases

and causes the organization to fail the

safe harbor, provided that the resident’s

income does not exceed 140 percent of

the applicable income limit under the

safe harbor. If the resident’s income

exceeds 140 percent of the qualifying

income limit, the organization will not

fail to meet the safe harbor if it rents

the next comparable non-qualifying unit

to someone under the income limits.

(4) To be considered charitable, an

organization that provides assistance to

the aged or physically handicapped who

are not poor must satisfy the requirements set forth in Rev. Rul. 72124,

1972–1 C.B. 145, Rev. Rul. 79–18,

1979–1 C.B. 194, and Rev. Rul. 79–19,

1979–1 C.B. 195. If an organization

meets the safe harbor, then it does not

need to meet the requirements of these

rulings even if all of its residents are

elderly or handicapped residents. However, an organization may not use a

combination of elderly or handicapped

persons and low-income persons to

establish the 75-percent occupancy requirement of the safe harbor. An

organization with a mix of elderly or

handicapped residents and low-income

residents may still qualify for taxexempt status under the facts and

circumstances test set forth in section 4.

tion may demonstrate that it relieves

the poor and distressed by reference to

all the surrounding facts and circumstances.

.02 Facts and circumstances that

demonstrate relief of the poor may

include, but are not limited to, the

following:

(1) A substantially greater percentage of residents than required by

the safe harbor with incomes up to 120

percent of the area’s very low-income

limit.

(2) Limited degree of deviation

from the safe harbor percentages.

(3) Limitation of a resident’s portion of rent or mortgage payment to

ensure that the housing is affordable to

low-income and very low-income

residents.

(4) Participation in a government

housing program designed to provide

affordable housing.

(5) Operation through a

community-based board of directors,

particularly if the selection process

demonstrates that community groups

have input into the organization’s

operations.

(6) The provision of additional

social services affordable to the poor

residents.

(7) Relationship with an existing

501(c)(3) organization active in lowincome housing for at least five years

if the existing organization demonstrates control.

(8) Acceptance of residents who,

when considered individually, have

unusual burdens such as extremely high

medical costs which cause them to be

in a condition similar to persons within

the qualifying income limits in spite of

their higher incomes.

(9) Participation in a homeownership program designed to provide

homeownership opportunities for families that cannot otherwise afford to

purchase safe and decent housing.

(10) Existence of affordability

covenants or restrictions running with

the property.

SEC. 4. FACTS AND

CIRCUMSTANCES TEST FOR

RELIEVING THE POOR AND

DISTRESSED

.01 Application of the safe harbor

and the facts and circumstances test is

illustrated by the following examples:

(1) Organization N operates pursuant to a government program to

provide low and moderate income

housing projects. Seventy percent of

.01 If the safe harbor contained in

section 3 is not satisfied, an organiza-

SEC. 5. EXAMPLES

N’s residents have incomes that do not

exceed the area’s low-income limit.

Fifty percent of N’s residents have

incomes that are at or below the area’s

very low-income limit. Under the program, N restricts rents charged to

residents below the income limits to no

more than 30 percent of the applicable

low or very low-income limits for N’s

area. N is close to meeting the safe

harbor. N has a substantially greater

percentage of very low-income residents than required by the safe

harbor; it participates in a federal

housing program; and it restricts its

rents pursuant to an established government program. Although N does not

meet the safe harbor, the facts and

circumstances demonstrate that N relieves the poor and distressed.

(2) Organization O will finance a

housing project using tax-exempt bonds

pursuant to § 145(d). O will meet the

20–50 test under § 142(d)(l)(A). Another 45 percent of the residents will

have incomes at or below 80 percent of

the area’s median income. The final 35

percent of the residents will have

incomes above 80 percent of the area’s

median income. O will restrict rents

charged to residents below the income

limits to no more than 30 percent of

the residents’ incomes. O will provide

social services to project residents and

to other low-income residents in the

neighborhood. Also, O will purchase its

project through a government program

designed to retain low-income housing

stock. O does not meet the safe harbor.

However, the facts and circumstances

demonstrate that O relieves the poor

and distressed.

(3) Organization R provides affordable homeownership opportunities

to purchasers determined to be lowincome under a federal housing program. The homes are scattered throughout a section of R’s community.

Beneficiaries under the program cannot

afford to purchase housing without

assistance. R’s program makes the

initial and continuing costs of mortgages affordable to the home buyers by

providing assistance with down payments and closing costs. Homeowners

assisted by R will have the following

composition: 40 percent will not exceed 140 percent of the very lowincome limit for the area, 25 percent

will not exceed the low-income limit,

and 35 percent will exceed the lowincome limit but will not exceed 115

percent of the area’s median income. R

does not satisfy the safe harbor. How-

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ever, the facts and circumstances demonstrate that R relieves the poor and

distressed.

(4) Organization U will purchase

existing residential rental housing financed using tax-exempt bonds issued

in accordance with § 145(d). U will

meet the minimum requirements of the

40–60 test of § 142(d)(1)(B). It will

provide the balance of its units to

residents with incomes at or above area

median income levels. U has a

community-based board of directors. U

does not satisfy the safe harbor. Moreover, the facts and circumstances do

not demonstrate that U relieves the

poor and distressed.

(5) Organization V provides rental

housing in a section of the city where

income levels are well below the other

parts of the city. All of V’s residents

are below the very low-income limits

for the area, yet they pay rents that are

above 50 percent of the area’s very

low-income limits. V has not otherwise

demonstrated that the housing is affordable to its residents. Although the

residents are all considered poor and

distressed under the safe harbor, V does

not relieve the poverty of the residents.

(6) Organization W provides

homeownership opportunities to purchasers with incomes up to 115 percent

of the area’s median income. W does

not meet the income levels required

under the safe harbor. W’s board of

directors is representative of community interests, and W provides

classes and counseling services for its

residents. The facts and circumstances

do not demonstrate that W relieves the

poor and distressed.

SEC. 6. EXEMPT PURPOSES

OTHER THAN RELIEVING THE

POOR AND DISTRESSED

.01 Relief of the poor and distressed,

whether demonstrated by satisfaction of

the safe harbor described in section 3

of this Revenue Procedure or by

reference to the facts and circumstances

test described in section 4, does not

constitute the only exempt purpose that

a housing organization may have. Such

organizations may qualify for exemption without having to satisfy the

standards for relief of the poor and

distressed by providing housing in a

way that accomplishes any of the

purposes set forth in § 501(c)(3) or

§ 1.501(c)(3)–1(d)(2). Those purposes

include, but are not limited to, the

following:

(1) Combatting community deterioration is an exempt purpose, as

illustrated by Rev. Rul. 68–17, 1968–1

C.B. 247, Rev. Rul. 68–655, 1968–2

C.B. 213, Rev. Rul. 70–585, 1970–2

C.B. 115 (Situation 3), and Rev. Rul.

76–147, 1976–1 C.B. 151. An organization that combats community deterioration must (1) operate in an area with

actual or potential deterioration, and (2)

directly prevent or relieve that deterioration. Constructing or rehabilitating

housing has the potential to combat

community deterioration.

(2) Lessening the burdens of government is an exempt purpose, as

illustrated by Rev. Ruls. 85–1 and 85–

2, 1985–1 C.B. 178. An organization

lessens the burdens of government if

(a) there is an objective manifestation

by the governmental unit that it considers the activities of the organization

to be the government’s burdens, and

(b) the organization actually lessens the

government’s burdens.

(3) Elimination of discrimination

and prejudice is an exempt purpose, as

illustrated by Rev. Rul. 68–655, 1968–

2 C.B. 213, and Rev. Rul. 70–585,

1970–2 C.B. 115 (Situation 2). These

rulings describe organizations that further charitable purposes by assisting

persons in specific racial groups to

acquire housing for the purpose of

stabilizing neighborhoods or reducing

racial imbalances.

(4) Lessening neighborhood tensions is an exempt purpose, as illustrated by Rev. Rul. 68–655, 1968–2

C.B. 213, and Rev. Rul. 70–585, 1970–

2 C.B. 115 (Situation 2). It is generally

identified as an additional charitable

purpose by organizations that fight

poverty and community deterioration

associated with overcrowding in lower

income areas in which ethnic or racial

tensions are high.

(5) Relief of the distress of the

elderly or physically handicapped is an

exempt purpose, as illustrated by Rev.

Rul. 72–124, 1972–1 C.B. 145, Rev.

Rul. 79–18, 1979–1 C.B. 194, and Rev.

Rul. 79-19, 1979-1 C.B. 195. An

organization may further a charitable

purpose by meeting the special needs

of the elderly or physically handicapped.

SEC. 7. OTHER CONSIDERATIONS

If an organization furthers a charitable purpose such as relieving the poor

and distressed, it nevertheless may fail

to qualify for exemption because private interests of individuals with a

financial stake in the project are

furthered. For example, the role of a

private developer or management company in the organization’s activities

must be carefully scrutinized to ensure

the absence of inurement or impermissible private benefit resulting from real

property sales, development fees, or

management contracts.

SEC. 8. EFFECT ON OTHER

DOCUMENTS

Notice 93–1 is superseded.

SEC. 9. EFFECTIVE DATE

This revenue procedure is effective

on [date of publication].

DRAFTING INFORMATION

The principal authors of this revenue

procedure are Lynn Kawecki and Marvin Friedlander. For further information

regarding this revenue procedure, contact Mr. Kawecki at (202) 622-7305

(not a toll free number).

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Part IV. Items of General Interest

Announcement 96–41

1996 Form W–4

The IRS has approved the 1996 Form

W–4, Employee’s Withholding Allowance Certificate, for printing. The

form should be available for distribution by May 1996. Employers may

order Form W–4 by telephone or they

may use other IRS electronic information services to get copies.

Request by— Number or

Address

Telephone

1-800-TAX-FORM

(1-800-829-3676)

Computer and 703-321-8020

modem

(modem settings

are N, 8, 1)

Internet:

World Wide

Web

www.irs.ustreas.gov

FTP

ftp.irs.ustreas.gov

Telnet

iris.irs.ustreas.gov

Fax

703-487-4160

Employers should remind employees

to check their withholding to see if it is

sufficient. Employees may use Publication 919, ‘‘Is My Withholding Correct?,’’ for assistance. If an employee

submitted a 1995 Form W–4 for 1996,

he or she is not required to submit a

1996 Form W–4 but should if the

withholding is not adequate.

Obsolete Federal Tax Forms

Announcement 96–42

Form 8807 and Form 8645 are

obsolete. The IRS has determined that

taxpayers may meet the reporting and

certification requirements of these

forms by reporting the required information on other forms, as noted below.

Form 8807, Certain Manufacturers

and Retailers Excise Taxes. Beginning

with the second quarter of 1996,

taxpayers must only summarize these

taxes on Form 720, Quarterly Federal

Excise Tax Return. Rates and other

information on these taxes are included

1996 – 26 I.R.B.

on Form 720 and in the Instructions for

Form 720.

Form 8645, Soil and Water Conservation Plan Certificate. For tax years

beginning after 1995, taxpayers will no

longer need to file Form 8645. However, the soil and water conversation

expenses reported on the following

forms must be consistent with an

approved plan: Schedule F (Form

1040), Farming Expenses; Form 4835,

Farm Rental Income and Expenses;

Form 1040–SS, U.S. Self-Employment

Tax Return (Virgin Islands, Guam,

American Samoa, and the Northern

Mariana Islands); and Form 1040–PR,

Planilla Para La Declaracion De La

Contribusion Federal Sobre El Trabajo

Por Cuenta Propia-Puerto Rico.

Foundations Status of Certain

Organizations

Announcement 96–43

The following organizations have

failed to establish or have been unable

to maintain their status as public

charities or as operating foundations.

Accordingly, grantors and contributors

may not, after this date, rely on

previous rulings or designations in the

Cumulative List of Organizations (Publication 78), or on the presumption

arising from the filing of notices under

section 508(b) of the Code. This listing

does not indicate that the organizations

have lost their status as organizations

described in section 501(c)(3), eligible

to receive deductible contributions.

Former Public Charities. The following organizations (which have been

treated as organizations that are not

private foundations described in section

509(a) of the Code) are now classified

as private foundations:

A G Cox Orchestra Booster Club

Inc., Winterville, NC

Ahoskie Civic Association Inc.,

Ahoskie, NC

Aid To Inmate Mothers, Montgomery,

AIDS Service Agency of Orange

County, Chapel Hill, NC

Alabama Rural Heritage Foundation

Inc., Thomaston, AL

Alabamians for Quality Education

Inc., Birmingham, AL

Arcadia Wildlife Preserve Inc.,

Atlanta, GA

Arkansas Housing Partnership Inc.,

Little Rock, AR

Athens Peace Coalition Inc., Athens,

Barefoot Ballet Inc., Atlanta, GA

Bethesda, Oneonta, AL

Black Swan Center, The, Black

Mountain, NC

Bokwes Cultural Group, Durham, NC

Boys and Girls Club of Putnam

County, Cookeville, TN

Calvin Peete Golf Foundation Inc.,

Atlanta, GA

Care-ag Inc., Charlotte, NC

Carolina Hispanic Community Inc.,

Wilmington, NC

Cars for Kids-Southern Style Inc.,

Selmer, TN

Catholic Education Foundation for

Northwest Arkansas Inc.,

Fayetteville, AR

Central Arkansas Fund for Veterans

Inc., North Little Rock, AR

Central Carolinas Citizens Forum,

Charlotte, NC

Chain of Hope Ministries, Clarksville,

Chapel Hill-Carrboro Community

Foundation, Chapel Hill, NC

Charlotte Philharmonic SocietyOrchestra, Charlotte, NC

Chatom Dixie Youth Baseball Inc.,

Chatom, AL

Chelsea Farms Inc., Memphis, TN

Childrens Rights of America National

Fund Inc., Atlanta, GA

Coastal Georgia Soccer Association

Inc., Savannah, GA

Committee for Public Art Inc.,

Hickory, NC

Committee to Feed the Hungry Inc.,

Atlanta, GA

Community Apartments Corporation

of Rutherford City, Raleigh, NC

Community Housing Development

Services Inc., Nashville, TN

Comprehensive Learning Laboratory

Corp., Fayetteville, NC

Confederate Brass Inc., The, Athens,

Conyers Cherry Blossom Festival

Foundation Inc., Conyers, GA

Cornerstone Foundation, The,

Memphis, TN

Creative Childrens Learning Center

Inc., Birmingham, AL

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Creative Educational Consulting

Services Inc., Reidsville, GA

Credit Wise Company Inc., The,

Memphis, TN

Crime Stoppers of Lexington Inc.,

Lexington, TN

Culturally Specific Treatment

Enhancement Programs Inc.,

Atlanta, GA

David Gries Memorial Foundation

Inc., Montgomery, AL

Decatur County Families in Action,

Parsons, TN

Doulos Fellowship Inc., Hertford, NC

Drug Awarness of Newton County

Inc., Covington, GA

Easley Place Inc., Millington, TN

Eastern Correctional Institution

Community Resource, Maury, NC

Easy Riders Therapeutic

Horsemanship Inc., McCalla, AL

Echo 1 Community Outreach

Services, Roanoke, AL

Economic Development Learning

Center, The, Chocowinity, NC

Ecumenical Consulting Associates

Inc., Atlanta, GA

Ed Care Inc., Brentwood, TN

E H Wilbourn Scholarship Fund of

Huntsville-Madison, Gurley, AL

Em-Art Inc., Kennesaw, GA

End of the Line Inc., The, Memphis,

Envistas Corporation, Blue Ridge, GA

Euclid Arts Collective Inc., Decatur,

Exeter Association of Georgia Inc.,

The, Atlanta, GA

Faith & Culture Society Inc., Grand

Rapids, MI

Family Management Inc.,

Montgomery, AL

First Amazing Grace Ministries Inc.,

Atlanta, GA

Flotilla 17–08 Inc., Charlotte, NC

Forrce Inc., Hamlet, NC

Frayser-Raleigh Community Theatre

Inc., Memphis, TN

Friends of Grandfather Mountain,

Sugar Grove, NC

Friends of Gravette Medical Center

Hospital Inc., The, Gravette, AR

Friends of Jazz Inc., Chattanooga,

Frye Regional Medical Center

Auxiliary, Hickory, NC

Georgia Rails Into Trails Society

Inc., Marietta, GA

Georgia Sentencing Alternatives Inc.,

Marietta, GA

Girls Traveling Softball Association

of Georgia, Douglasville, GA

Gospel Team Outreach International

Ministries Inc., Renoldsburg, OH

Granville Residents Opposed to

Waste Inc., Oxford, NC

Great 100 Inc., The, Laurel Hill, NC

Greater Hamilton County Soccer

Council Inc., Chattanooga, TN

Green Hill Church of Christ Child

Care Center Inc., Mount Juliet, TN

Guardian Ad Litem Volunteer

Association Inc., Jacksonville, NC

Healthcare Transportation Foundation

Inc., Birmingham, AL

Help Our Planet Earth Inc., Atlanta,

Hendersonville Filmmakers Club Inc.,

Hendersville, TN

Henry County Horsemans Assoc.,

McDonough, GA

Hickorys Committee for a Secure

Tomorrow Inc., Hickory, NC

Higher Education Addiction

Prevention Prof of NC Inc.,

Greensboro, NC

H O P E in Cobb Inc., Marietta, GA

Hospice of Johnston County Inc.,

Selma, NC

Hospice of Peach County Inc., Fort

Valley, GA

Host Christian Ministries Inc., The,

Gainesville, GA

House of Sunshine Inc., Asheville,

Huntsville Academy and Forum,

Huntsville, TN

Hunstville Folk Dancers, Huntsville,

In Time Ministries Inc., Memphis,

Institute for Advanced Studies in Life

Support Inc., Huntsville, AL

Institute for Urological Research Inc.,

Nashville, TN

Institute for Wholistic Education Inc.,

Raleigh, NC

Jack Fowler Park, Dr., Walnut Cove,

Jackson Community Housing

Resource Board Inc. Community

Counsel, Jackson, TN

Jobs for Stars Inc., Memphis, TN

Keep Saying No Inc., Fayette, AL

Kentucky-Tennessee Water Pollution

Control Assoc., Nashville, TN

Knox County Task Force Against

Domestic Violence, Knoxville, TN

Knoxville Smokies Baseball Team,

Knoxville, TN

Kurt Einstein Foundation Inc., Cary,

L Anguille Arts Council, Forrest

City, AR

LA Sociedad Panamena De Atlanta

Georgia Inc., Stone Mountain, GA

Leadership Lowdes Inc., Valdosta,

Lebanon High School Blue Devil

Booster Club Inc., The, Lebanon,

Life Way Ministries, Hayden, AL

Main Street Camden Inc., Camden,

Masters Place Inc., The, Atlanta, GA

Maury County Public Education

Foundation, Columbia, TN

Mental Health Association of

Columbus Georgia Inc., Columbus,

Mobile Area African American

Summit, Mobile, AL

Mobile Area Teen Resource Center,

Inc., Mobile, AL

Municipal Park Youth Football

Assoc. Inc., Mobile, AL

Music City Endurance Athletes Inc.,

Nashville, TN

National Committee for Drug

Awareness Inc., Atlanta, GA

NC Association of Plumbing,

Heating, Cooling Contractors

Education FDN Inc., Raleigh, NC

Newborns in Need Foundation Inc.,

Auburn, GA

North Carolina Arboretum Society,

The, Asheville, NC

North Carolina Hunger Network,

Raleigh, NC

North Carolina Partners for

Democracy Foundation, Raleigh,

North Fayette County Volunteer Fire

Department, Mason, TN

North Raleigh Athletic Association

Inc., Raleigh, NC

Northwest Flight Attendants

Emergency Fund, Cordova, TN

Northwestern Carolina Education &

Development Association Inc.,

Boone, NC

Old Fort Community Club, Old Fort,

Orleans Care Home, Memphis, TN

Ozark Therapeutic Weight Training

Center Inc., Marby, AR

1996 – 26 I.R.B.

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Percussionistic Corporation, Durham,

Persian Commuity Center Inc.,

Atlanta, GA

Phoenix House of Raleigh Inc.,

Raleigh, NC

Pickens Respite Inc., Fairfield, AL

Piedmont Aid Corp., High Point, NC

Pinnacle Ministries, Gatlinburg, TN

Police Athletic League of

Chattanooga Inc., Chattanooga, TN

Power Over Panic Inc., Atlanta, GA

Predator Control and Conservation,

Mobile, AL

Progressive Southeast Arkansas

Housing Development Corp., Pine

Bluff, AR

PWA Inc., Ranger, GA

Radio Reading Services Corp.,

Kingsport, TN

Ralph David Abernathy Foundation

Inc., Atlanta, GA

RE Builders Action Council, Little

Rock, AR

Red Carpet Industry FDN Inc.,

Dalton, GA

Reduce Infant Deaths Foundation,

Winston Salem, NC

1996 – 26 I.R.B.

Region 1 Football Officials

Scholarship Endowment Bowl,

Johnson City, TN

Ricky Fountain Educational

Foundation Inc., Wilmington, NC

R K Enterprise Child Care Food

Program Inc., Decatur, GA

Robeson County Dispute Resolution

Center, Lumberton, NC

ROHI Inc., Bufford, GA

Rolling Hills Lakes Volunteer Fire

Department, Montgomery, AL

Rowan Environmental Action

Partners—REAP, Salisbury, NC

Roy Bolton Patton JR Scholarship

Endowment Fund, Athens, AL

Royal Pavilions of Creedmoor Inc.,

Creedmoor, NC

Ruth Faison Shaw Memorial

Committee, Chapel Hill, NC

Savannah State College Community

Booster Club Inc., Savannah, GA

Serenity Thru Recovery of

Fayetteville Inc., Fayetteville, NC

Shambhala Institute and Foundation

Inc., Asheville, NC

Society for the Advancement of

Social Psychology Inc., Macon, GA

Society of Parrot Breeders and

Exhibitors Inc., Marietta, GA

South Arkansas County Fine Arts

Council Inc., The, Dewitt, AR

Spavinaw Valley Boy Scout Boosters

Inc., Gravette, AR

Spavinaw Valley United Way,

Gravette, AR

SSS Band Backers Inc., Smithfield,

Stiles Foundation, Statesville, NC

Student Awareness for Environment

in North Carolina, Wrightsville

Beach, NC

Sumner County Minority Historical

Corp., The, Gallatin, TN

If an organization listed above submits information that warrants the

renewal of its classification as a public

charity or as a private operating foundation, the Internal Revenue Service

will issue a ruling or determination

letter with the revised classification as

to foundation status. Grantors and

contributors may thereafter rely upon

such ruling or determination letter as

provided in section 1.509(a)-7 of the

Income Tax Regulations. It is not the

practice of the Service to announce

such revised classification of foundation status in the Internal Revenue

Bulletin.

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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 law 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 the 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

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution 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.—Statements 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.

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.

SEQ 0023 JOB D45-052-002 PAGE-0022 FINDING LIST

REVISED 01JUL96 AT 02:57 BY LR DEPTH: 65.01 PICAS WIDTH 41.11 PICAS

COMPOSITE COLOR

778/20051/1JUL96/D45-052

Numerical Finding List1

Bulletins 1996–1 through 1996–19

Announcements:

96–1, 1996–2 I.R.B. 57

96–2, 1996–2 I.R.B. 57

96–3, 1996–2 I.R.B. 57

96–4, 1996–3 I.R.B. 50

96–5, 1996–4 I.R.B. 99

96–6, 1996–5 I.R.B. 43

96–7, 1996–5 I.R.B. 44

96–8, 1996–7 I.R.B. 56

96–9, 1996–8 I.R.B. 30

96–10, 1996–8 I.R.B. 30

96–11, 1996–9 I.R.B. 11

96–12, 1996–11 I.R.B. 30

96–13, 1996–12 I.R.B. 33

96–14, 1996–12 I.R.B. 35

96–15, 1996–11 I.R.B. 9

96–16, 1996–13 I.R.B. 22

96–17, 1996–13 I.R.B. 22

96–18, 1996–15 I.R.B. 15

96–19, 1996–15 I.R.B. 15

96–20, 1996–15 I.R.B. 15

96–21, 1996–15 I.R.B. 15

96–22, 1996–15 I.R.B. 16

96–23, 1996–18 I.R.B. 7

96–24, 1996–16 I.R.B. 35

96–25, 1996–17 I.R.B. 13

96–26, 1996–17 I.R.B. 13

96–27, 1996–17 I.R.B. 16

96–28, 1996–17 I.R.B. 16

96–29, 1996–17 I.R.B. 17

96–30, 1996–17 I.R.B. 17

96–31, 1996–17 I.R.B. 18

96–32, 1996–17 I.R.B. 18

96–33, 1996–18 I.R.B. 12

96–34, 1996–18 I.R.B. 13

96–35, 1996–18 I.R.B. 13

96–36, 1996–18 I.R.B. 13

96–37, 1996–18 I.R.B. 14

96–38, 1996–19 I.R.B. 84

96–39, 1996–19 I.R.B. 84

96–40, 1996–19 I.R.B. 85

Delegations Orders:

232 (Rev. 2), 1996–7 I.R.B. 49

239 (Rev. 1), 1996–7 I.R.B. 49

Notices:

96–2, 1996–2 I.R.B. 15

96–1, 1996–3 I.R.B. 30

96–4, 1996–4 I.R.B. 69

96–5, 1996–6 I.R.B. 22

96–6, 1996–5 I.R.B. 27

96–7, 1996–6 I.R.B. 22

96–8, 1996–6 I.R.B. 23

96–9, 1996–6 I.R.B. 26

96–10, 1996–7 I.R.B. 47

96–11, 1996–8 I.R.B. 19

Notices—Continued

Revenue Procedures—Continued

96–12, 1996–10 I.R.B. 29

96–13, 1996–10 I.R.B. 29

96–14, 1996–12 I.R.B. 11

96–15, 1996–13 I.R.B. 19

96–16, 1996–13 I.R.B. 20

96–17, 1996–13 I.R.B. 20

96–18, 1996–14 I.R.B. 27

96–19, 1996–14 I.R.B. 28

96–20, 1996–14 I.R.B. 30

96–21, 1996–14 I.R.B. 30

96–22, 1996–14 I.R.B. 30

96–23, 1996–16 I.R.B. 23

96–24, 1996–16 I.R.B. 23

96–25, 1996–17 I.R.B. 11

96–26, 1996–18 I.R.B. 4

96–27, 1996–18 I.R.B. 4

96–28, 1996–19 I.R.B. 7

96–29, 1996–19 I.R.B. 7

96–18, 1996–4 I.R.B. 73

96–19, 1996–4 I.R.B. 80

96–20, 1996–4 I.R.B. 88

96–21, 1996–4 I.R.B. 96

96–22, 1996–5 I.R.B. 27

96–23, 1996–5 I.R.B. 27

96–24, 1996–5 I.R.B. 28

96–24A, 1996–15 I.R.B. 12

96–25, 1996–8 I.R.B. 19

96–26, 1996–8 I.R.B. 22

96–27, 1996–11 I.R.B. 27

96–28, 1996–14 I.R.B. 31

96–29, 1996–16 I.R.B. 24

Revenue Rulings:

DL–1–95, 1996–6 I.R.B. 28

EE–20–95, 1996–5 I.R.B. 15

EE–34–95, 1996–3 I.R.B. 49

EE–35–95, 1996–5 I.R.B. 19

EE–53–95, 1996–5 I.R.B. 23

EE–55–95, 1996–12 I.R.B. 12

EE–106–82, 1996–10 I.R.B. 31

EE–142–87, 1996–12 I.R.B. 13

EE–148–81, 1996–11 I.R.B. 29

IA–3–94, 1996–17 I.R.B. 12

IA–33–95, 1996–4 I.R.B. 99

IA–41–93, 1996–11 I.R.B. 29

INTL–3–95, 1996–6 I.R.B. 29

INTL–9–95, 1996–5 I.R.B. 25

INTL–54–95, 1996–14 I.R.B. 39

INTL–62–90; INTL–32–93; INTL–52–86;

INTL–52–94, 1996–19 I.R.B. 26

PS–2–95, 1996–7 I.R.B. 50

PS–4–96, 1996–18 I.R.B. 5

PS–6–95, 1996–16 I.R.B. 27

96–1, 1996–1 I.R.B. 7

96–2, 1996–2 I.R.B. 5

96–3, 1996–2 I.R.B. 14

96–6, 1996–2 I.R.B. 8

96–4, 1996–3 I.R.B. 16

96–5, 1996–3 I.R.B. 29

96–7, 1996–3 I.R.B. 12

96–8, 1996–4 I.R.B. 62

96–9, 1996–4 I.R.B. 5

96–10, 1996–4 I.R.B. 27

96–11, 1996–4 I.R.B. 28

96–12, 1996–9 I.R.B. 4

96–13, 1996–10 I.R.B. 19

96–14, 1996–6 I.R.B. 20

96–15, 1996–11 I.R.B. 9

96–16, 1996–11 I.R.B. 4

96–17, 1996–13 I.R.B. 5

96–18, 1996–13 I.R.B. 4

96–19, 1996–14 I.R.B. 24

96–20, 1996–15 I.R.B. 5

96–21, 1996–15 I.R.B. 7

96–22, 1996–15 I.R.B. 9

96–23, 1996–15 I.R.B. 11

96–24, 1996–19 I.R.B. 5

96–25, 1996–19 I.R.B. 4

Revenue Procedures:

Treasury Decisions:

96–1, 1996–1 I.R.B. 8

96–2, 1996–1 I.R.B. 60

96–3, 1996–1 I.R.B. 82

96–4, 1996–1 I.R.B. 94

96–5, 1996–1 I.R.B. 129

96–6, 1996–1 I.R.B. 151

96–7, 1996–1 I.R.B. 185

96–8, 1996–1 I.R.B. 187

96–8A, 1996–9 I.R.B. 10

96–9, 1996–2 I.R.B. 15

96–10, 1996–2 I.R.B. 17

96–11, 1996–2 I.R.B. 18

96–12, 1996–3 I.R.B. 30

96–13, 1996–3 I.R.B. 31

96–14, 1996–3 I.R.B. 41

96–15, 1996–3 I.R.B. 41

96–16, 1996–3 I.R.B. 45

96–17, 1996–4 I.R.B. 69

8630, 1996–3 I.R.B. 19

8631, 1996–3 I.R.B. 7

8632, 1996–4 I.R.B. 6

8633, 1996–4 I.R.B. 20

8634, 1996–3 I.R.B. 17

8635, 1996–3 I.R.B. 5

8636, 1996–4 I.R.B. 64

8637, 1996–4 I.R.B. 29

8638, 1996–5 I.R.B. 5

8639, 1996–5 I.R.B. 12

8640, 1996–2 I.R.B. 10

8641, 1996–6 I.R.B. 4

8642, 1996–7 I.R.B. 4

8643, 1996–11 I.R.B. 4

8644, 1996–7 I.R.B. 16

8645, 1996–8 I.R.B. 4

8646, 1996–8 I.R.B. 10

8647, 1996–9 I.R.B. 7

Proposed Regulations:

See footnote at the end of list.

SEQ 0024 JOB D45-052-002 PAGE-0023 FINDING LIST

REVISED 01JUL96 AT 02:57 BY LR DEPTH: 65.01 PICAS WIDTH 32.08 PICAS

COMPOSITE COLOR

778/20051/1JUL96/D45-052

Numerical Finding List1—Continued

Bulletins 1996–1 through 1996–19

Treasury Decisions—Continued

8648, 1996–10 I.R.B. 23

8649, 1996–9 I.R.B. 5

8650, 1996–10 I.R.B. 5

8651, 1996–11 I.R.B. 24

8652, 1996–11 I.R.B. 11

8653, 1996–12 I.R.B. 4

8654, 1996–11 I.R.B. 14

8655, 1996–12 I.R.B. 9

8656, 1996–13 I.R.B. 9

8657, 1996–14 I.R.B. 4

8658, 1996–14 I.R.B. 13

8659, 1996–16 I.R.B. 4

8660, 1996–17 I.R.B. 4

8661, 1996–17 I.R.B. 7

1A cumulative list of all Revenue Rulings,

Revenue Procedures, Treasury Decisions, etc.,

published in Internal Revenue Bulletins 1995–

27 through 1995–52 will be found in Internal

Revenue Bulletin 1996–1, dated January 2,

1996.

SEQ 0025 JOB D45-052-002 PAGE-0024 FINDING LIST

REVISED 01JUL96 AT 02:57 BY LR DEPTH: 65.01 PICAS WIDTH 41.11 PICAS

COMPOSITE COLOR

778/20051/1JUL96/D45-052

Revenue Procedures—Continued

92–85

Modified by

96–1, 1996–1 I.R.B. 8

95–66

Modified by

96–25, 1996–19 I.R.B. 4

93–16

Superseded by

96–11, 1996–2 I.R.B. 18

95–7

Superseded by

96–7, 1996–1 I.R.B. 185

93–46

Superseded in part by

96–17, 1996–4 I.R.B. 69

95–8

Superseded by

96–8, 1996–1 I.R.B. 187

239

Amended by

239 (Rev. 1), 1996–7 I.R.B. 49

Superseded by

96–18, 1996–4 I.R.B. 73

Revenue Procedures:

94–16

Modified by

96–29, 1996–16 I.R.B. 24

95–13

Superseded by

96–20, 1996–4 I.R.B. 88

Finding List of Current Action on

Previously Published Items1

Bulletins 1996–1 through 1996–19

*Denotes entry since last publication

Delegation Orders:

232 (Rev. 1)

Superseded by

232 (Rev. 2), 1996–7 I.R.B. 49

65–17

Modified by

96–14, 1996–3 I.R.B. 41

66–49

Modified by

96–15, 1996–3 I.R.B. 41

88–32

Obsoleted by

96–15, 1996–3 I.R.B. 41

88–33

Obsoleted by

96–15, 1996–3 I.R.B. 41

89–19

Superseded by

96–17, 1996–4 I.R.B. 69

94–18

Superseded in part by

96–17, 1996–4 I.R.B. 69

Superseded by

96–18, 1996–4 I.R.B. 73

94–59

Superseded in part by

96–17, 1996–4 I.R.B. 69

Superseded by

96–18, 1996–4 I.R.B. 73

94–62

Modified by

96–29, 1996–16 I.R.B. 24

95–20

Superseded by

96–24, 1996–5 I.R.B. 28

95–50

Superseded by

96–3, 1996–1 I.R.B. 82

96–3

Amplified by

96–12, 1996–3 I.R.B. 30

Revenue Rulings:

66–307

Obsoleted by

96–3, 1996–2 I.R.B. 14

72–437

Modified by

96–13, 1996–3 I.R.B. 31

89–48

Superseded in part by

96–17, 1996–4 I.R.B. 69

94–77

Superseded by

96–28, 1996–14 I.R.B. 31

91–22

Modified by

96–1, 1996–1 I.R.B. 8

95–1

Superseded by

96–1, 1996–1 I.R.B. 8

82–80

Modified by

96–14, 1996–3 I.R.B. 41

91–22

Amplified by

96–13, 1996–3 I.R.B. 31

95–2

Superseded by

96–2, 1996–1 I.R.B. 60

92–19

Supplemented in part

96–2, 1996–2 I.R.B. 5

91–23

Superseded by

96–13, 1996–3 I.R.B. 31

95–3

Superseded by

96–3, 1996–1 I.R.B. 82

92–75

Clarified by

96–13, 1996–3 I.R.B. 31

91–24

Superseded by

96–14, 1996–3 I.R.B. 41

95–4

Superseded by

96–4, 1996–1 I.R.B. 94

95–10

Supplemented and superseded by

96–4, 1996–3 I.R.B. 16

91–26

Superseded by

96–13, 1996–3 I.R.B. 31

95–5

Superseded by

96–5, 1996–1 I.R.B. 129

95–11

Supplemented and superseded by

96–5, 1996–3 I.R.B. 29

92–20

Modified by

96–1, 1996–1 I.R.B. 8

95–6

Superseded by

96–6, 1996–1 I.R.B. 151

96–24

Modified and amplified by

96–24A, 1996–15 I.R.B. 12

1A cumulative finding list for previously

published items mentioned in Internal Revenue

Bulletins 1995–27 through 1995–52 will be

found in Internal Revenue Bulletin 1996–1, dated

January 2, 1996.

80–80

Obsoleted by

96–3, 1996–2 I.R.B. 14

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.