Bulletin No. 1997–34

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August 25, 1997

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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

Announcement 97–83, page 13.

Rev. Rul. 97–33, page 4.

A list is provided of organizations that no longer qualify as

organizations for which contributions are deductible under

section 170 of the Code.

Fringe benefits aircraft valuation formula. For purposes of section 1.61–21(g) of the regulations, relating to

the rule for valuing non-commercial flights on employer-provided aircraft, the Standard Industry Fare Level, cents-permile rates and terminal charges in effect for the second

half of 1997 are set forth.

Rev. Rul. 97–34, page 4.

Low-income housing credit; satisfactory bond; “bond

factor” amounts for the period July through September 1997. This ruling announces the monthly bond factor

amounts to be used by taxpayers who dispose of qualified

low-income buildings or interests therein during the period

July through September 1997.

Announcement 97–84, page 13.

A list is provided of organizations now classified as private

foundations.

EXCISE TAX

Announcement 97–78, page 11.

This announces the excise tax changes made by the

Taxpayer Relief Act of 1997 that affect Form 720, Quarterly

Federal Excise Tax Return, for the 3rd quarter.

EMPLOYEE PLANS

ADMINISTRATIVE

T.D. 8727, page 5.

Notice 97–46, page 10.

Final and temporary regulations under section 401 of the

Code relate to the remedial amendment period during which

a sponsor of a qualified retirement plan or an employer maintaining a qualified retirement plan can make retroactive

amendments to the plan to eliminate certain qualification

defects for the entire period.

T.D. 8145, 1987–2 C.B. 47, relating to the allocation of

interest expense among a taxpayer’s expenditures, is corrected.

Announcement 97–81, page 12.

Form 5310, Application for Determination for Terminating

Plan; Form 6088, Distributable Benefits From Employee

Benefit Pension Plans; and Form 5310A, Notice of Plan

Merger or Consolidation, Spinoff, or Transfer of Plan Assets

or Liabilities—Notice of Qualified Separate Lines of

Business, have been revised as of June 1997.

Rev. Proc. 97–32A, page 10.

Reproduction of forms: Forms 1096, 1098, 1099

series, 5498, and W–2G. This addendum to Rev. Proc.

97–32, 1997–27 I.R.B. 9, allows for the location of the policyholder’s name and address, and the location of the

insured’s name and address to be reversed on Copy C, Form

1099–LTC. Rev. Proc. 97–32 modified and amplified.

Announcement 97–80, page 12.

EXEMPT ORGANIZATIONS

An updated edition of Publication 1544, Reporting Cash Payments of over $10,000 (revised August 1997), is now available.

T.D. 8726, page 7.

Announcement 97–82, page 12.

Final regulations under section 501(c)(5) of the Code clarify

requirements an organization must meet in order to be

exempt from tax.

T.D. 8718, 1997–22 I.R.B. 4, relating to arbitrage and related

restrictions applicable to tax-exempt bonds issued by state

and local governments, is corrected.

Finding Lists begin on page 16.

Department of the Treasury

Internal Revenue Service

Mission of the Service

ucts and services; and perform in a manner warranting

the highest degree of public confidence in our integrity, efficiency, and fairness.

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 prod-

Statement of Principles

of Internal Revenue

Tax Administration

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.

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.

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.

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.

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.

dures 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.

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.

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).

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.

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.

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 proce-

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a quarterly and

semiannual basis, and are published in the first Bulletin of the

succeeding quarterly and semiannual period, respectively.

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

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

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

Section 42.—Low-Income

Housing Credit

Rev. Rul. 97–34

Low-income housing credit; satisfactory bond; “bond factor” amounts for

the period July through September

1997. This ruling announces the monthly

bond factor amounts to be used by taxpayers who dispose of qualified low-income buildings or interests therein during

the period July through September 1997.

In Rev. Rul. 90–60, 1990–2 C.B. 3, the

Internal Revenue Service provided guidance to taxpayers concerning the general

methodology used by the Treasury Department in computing the bond factor

amounts used in calculating the amount of

bond considered satisfactory by the Secretary under § 42(j)(6) of the Internal

Revenue Code. It further announced that

the Secretary would publish in the Internal Revenue Bulletin a table of “bond factor” amounts for dispositions occurring

during each calendar month.

This revenue ruling provides in Table 1

the bond factor amounts for calculating

the amount of bond considered satisfactory under § 42(j)(6) for dispositions of

qualified low-income buildings or interests therein during the period July

through September 1997.

TABLE 1

REV. RUL. 97–34

MONTHLY BOND FACTOR AMOUNTS FOR DISPOSITIONS EXPRESSED

AS A PERCENTAGE OF TOTAL CREDITS

CALENDAR YEAR BUILDING PLACED IN SERVICE

OR, IF SECTION 42(f)(1) ELECTION WAS MADE,

THE SUCCEEDING CALENDAR YEAR

MONTH OF

DISPOSITION

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

JUL ‘97

AUG ‘97

SEP ‘97

78.33

78.11

77.90

80.65

80.43

80.21

83.19

82.96

82.74

86.15

85.92

85.68

89.61

89.36

89.12

93.54

93.27

93.01

97.58

97.30

97.03

101.48

101.18

100.90

105.30 109.33

105.01 109.06

104.73 108.81

112.52

For a list of bond factor amounts applicable to dispositions occurring during

other calendar years, see the following

revenue rulings: Rev. Rul. 90-60, 1990–2

C.B. 3, for dispositions occurring during

calendar years 1987, 1988, and 1989;

Rev. Rul. 90–88, 1990–2 C.B. 7, for dispositions occurring during calendar year

1990; Rev. Rul. 91–67, 1991–2 C.B. 13,

for dispositions occurring during calendar

year 1991; Rev. Rul. 92–101, 1992–2

C.B. 9, for dispositions occurring during

calendar year 1992; Rev. Rul 93–83,

1993–2 C.B. 6, for dispositions occurring

during calendar year 1993; Rev. Rul.

94–71, 1994–2 C.B. 4, for dispositions

occurring during calendar year 1994; Rev.

Rul. 95–83, 1995–2 C.B. 8, for dispositions occurring during calendar year

1995; Rev. Rul. 96–16, 1996–1 C.B. 3,

for dispositions occurring during the period January through March 1996; Rev.

Rul. 96–33, 1996–27 I.R.B. 4, for dispositions occurring during the period April

through June 1996; Rev. Rul. 96–45,

1996–39 I.R.B. 5, for dispositions occur-

August 25, 1997

ring during the period July through September 1996; Rev. Rul. 96–59, 1996–50

I.R.B. 4, for dispositions occurring during

the period October through December

1996; Rev. Rul. 97–16, 1997–13 I.R.B. 4,

for dispositions occurring during the period January through March 1997; and

Rev. Rul. 97–25, 1997–23 I.R.B. 4, for

dispositions occurring during the period

April through June 1997.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Jack Malgeri of the Office of Assistant Chief Counsel (Passthroughs and

Special Industries). For further information regarding this revenue ruling, contact

Mr. Malgeri at (202) 622-3040 (not a tollfree call).

Section 61.—Gross Income

Defined

26 CFR 1.61–21: Taxation of fringe benefits.

Fringe benefits aircraft valuation

formula. For purposes of section

1.61–21(g) of the regulations, relating to

the rule for valuing non-commercial

flights on employer-provided aircraft, the

Standard Industry Fare Level, cents-permile rates and terminal charges in effect

for the second half of 1997 are set forth.

Rev. Rul. 97–33

For purposes of the taxation of fringe

benefits under section 61 of the Internal

Revenue Code, section 1.61-21(g) of the

Income Tax Regulations provides a rule

for valuing noncommercial flights on employer-provided aircraft. Section 1.6121(g)(5) provides an aircraft valuation

formula to determine the value of such

flights. The value of a flight is determined

under the base aircraft valuation formula

(also known as the Standard Industry Fare

Level formula or SIFL) by multiplying

the SIFL cents-per-mile rates applicable

for the period during which the flight was

taken by the appropriate aircraft multiple

provided in section 1.61-21(g)(7) and

then adding the applicable terminal

1997–34 I.R.B.

charge. The SIFL cents-per-mile rates in

the formula and the terminal charge are

calculated by the Department of Transportation and are reviewed semi-annually.

The following chart sets forth the terminal charges and SIFL mileage rates:

Period During Which

the Flight Is Taken

Terminal

Charge

SIFL Mileage

Rates

7/1/97-12/31/97

$31.72

Up to 500 miles

= $.1735 per mile

501-1500 miles

= $.1323 per mile

Over 1500 miles

= $.1272 per mile

DRAFTING INFORMATION

The principal author of this revenue

ruling is Felicia A. Daniels of the Office

of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding

this revenue ruling contact, Ms. Daniels

on (202) 622-6050 (not a toll-free call).

Section 401.—Qualified

Pension, Profit-Sharing, and

Stock Bonus Plans

26 CFR 1.401(b)–1: Certain retroactive changes in

plan.

T.D. 8727

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Commissioner to provide appropriate relief for plan amendments relating to

changes to the plan qualification rules

made in the Small Business Job Protection Act of 1996 and the Uruguay Round

Agreements Act of 1994. These final

and temporary regulations affect sponsors of qualified retirement plans, and

employers that maintain qualified retirement plans. The text of the temporary

regulations also serves as the text of the

proposed regulations set forth in

REG.–106043–97.

DATES: These regulations are effective

August 1, 1997.

FOR FURTHER INFORMATION CONTACT: Linda S. F. Marshall, (202) 6226030 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Remedial Amendment Period

Background

AGENCY: Internal Revenue Service

(IRS), Treasury.

This document contains amendments

to the Income Tax Regulations (26 CFR

part 1) under section 401(b). The temporary regulations provide guidance to clarify the scope of the Commissioner’s authority to provide relief from plan

disqualification under section 401(b) and

the regulations. This guidance will enable the Commissioner to provide appropriate relief concerning the timing of plan

amendments relating to changes to the

plan qualification rules made in the Small

Business Job Protection Act of 1996,

Pub. L. No. 104–188, and the Uruguay

Round Agreements Act of 1994, Pub. L.

No. 103–465, as well as for other plan

amendments that may be needed as a result of future changes to the Internal Revenue Code.

ACTION: Final and temporary regulations.

SUMMARY: This document contains

final and temporary regulations relating

to the remedial amendment period, during which a sponsor of a qualified retirement plan or an employer that maintains

a qualified retirement plan can make

retroactive amendments to the plan to

eliminate certain qualification defects

for the entire period. These final and

temporary regulations clarify the scope

of the Commissioner’s authority to provide relief from plan disqualification

under the regulations, to enable the

1997–34 I.R.B.

Explanation of Provisions

Section 401(b) provides that a plan is

considered to satisfy the qualification requirements of section 401(a) for the period beginning with the date on which it

was put into effect, or for the period beginning with the earlier of the date on

which any amendment that caused the

plan to fail to satisfy those requirements

was adopted or put into effect, and ending

with the time prescribed by law for filing

the employer’s return for the taxable year

in which that plan or amendment was

adopted (including extensions) or such

later time as the Secretary may designate.

The relief provided under section 401(b)

applies only if all provisions of the plan

needed to satisfy the qualification requirements are in effect by the end of the specified period and have been made effective

for all purposes for the entire period.

Section 1.401(b)–1(b) lists the plan

provisions that may be amended retroactively pursuant to rules of section 401(b).

These plan provisions, termed “disqualifying provisions,” include the plan provisions listed in section 401(b), as well as

plan provisions that result in failure of a

plan to satisfy the qualification requirements of the Code by reason of a change

in those requirements effected by the legislation listed in §1.401(b)–1(b)(2)(i) and

(ii). Under §1.401(b)–1(b)(2)(ii), a disqualifying provision also includes a plan

provision that is integral to a qualification

requirement changed by specified legislation. Section 1.401(b)-1(b)(2)(iii), as in

effect prior to amendment by the final

regulations, provided that a disqualifying

provision includes a plan provision that

results in failure of the plan to satisfy the

Code’s qualification requirements by reason of a change in those requirements ef-

August 25, 1997

fected by amendments to the Code, that is

designated by the Commissioner, at the

Commissioner’s discretion, as a disqualifying provision.

Former §1.401(b)–1(c), which has been

redesignated §1.401(b)–1(d) under the

final regulations, provides rules for determining the period for which the relief provided under section 401(b) applies (the

“remedial amendment period”). Former

§1.401(b)–1(c)(1) defines the beginning

of the remedial amendment period for the

disqualifying provisions listed in

§1.401(b)–1(b)(1) and §1.401(b)–1(b)(2)(i) and (ii).

The temporary regulations make certain changes to clarify the scope of the

Commissioner’s authority to provide relief from plan disqualification under section 401(b). These changes are needed to

clarify the rules relating to the plan provisions that may be designated by the Commissioner as disqualifying provisions

based on amendments to the plan qualification requirements of the Internal Revenue Code. Section 1.401(b)–1T(b)(3)

provides that a disqualifying provision

includes a plan provision designated by

the Commissioner, at the Commissioner’s discretion, as a disqualifying

provision that either (1) results in the failure of the plan to satisfy the qualification

requirements of the Code by reason of a

change in those requirements; or (2) is integral to a qualification requirement of

the Code that has been changed. Section

1.401(b)–1T(c)(2) provides the Commissioner with explicit authority to impose

limits and provide additional rules regarding the amendments that may be

made with respect to disqualifying provisions during the remedial amendment period. Section 1.401(b)–1T(d)(1)(iv) and

(v) provide conforming rules regarding

the beginning of the remedial amendment

period for disqualifying provisions described in §1.401(b)–1T(b)(3).

Associate Chief Counsel (Employee Benefits and Exempt Organizations). However, other personnel from the IRS and

Treasury Department participated in their

development.

Special Analyses

PART 1—INCOME TAXES

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) does not

apply to these regulations and, because

the regulation does not impose a collection of information on small entities, the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) does not apply. Pursuant to

section 7805(f) of the Internal Revenue

Code, these temporary regulations will be

submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small

business.

Paragraph 1. The authority citation for

part 1 is amended by adding one entry for

§1.401(b)–1 to read in part as follows:

SECTION

1.401(b)–1 (a), first sentence

1.401(b)–1 (b)(1)

1.401(b)–1 (d)(1)(ii)

1.401(b)–1 (d)(1)(iii)

1.401(b)–1 (d)(2) introductory text

1.401(b)–1 (d)(3)

1.401(b)–1 (d)(4)

1.401(b)–1 (e)(1)(ii)(C), third sentence

1.401(b)–1 (e)(2)(ii)(C), third sentence

1.401(b)–1 (e)(3) introductory text

1.401(b)–1 (e)(4)

1.401(b)–1 (e)(5) introductory text

REMOVE

(c), (d) and (e)

effective or

earlier), or

such provision.

paragraph (d)

(c)(2)(i), (c)(2)(ii), and (c)(2)(iii)

(c)(2)

(c)(2)(i)

paragraph (d)(1)

paragraph (d)(2)

this paragraph (d)

which paragraph (d)(1) or (2)

in paragraph (d)(1) or (2)

paragraph (d)(3)

paragraph (c)

subdivisions (i), (ii) and (iii) of this

subparagraph

paragraph (c)

paragraph (d)(5)(ii)

1.401(b)–1 (e)(5) introductory text

1.401(b)–1 (e)(5)(iii)

August 25, 1997

Drafting Information

The principal author of these regulations is Linda S. F. Marshall, Office of the

Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended

as follows:

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

§1.401(b)–1 also issued under 26

U.S.C. 401(b). * * *

§1.401(b)–1 [Amended]

Par. 2. Section 1.401(b)–1 is amended

as follows:

1. Paragraphs (c), (d) and (e) are redesignated as paragraphs (d), (e) and (f), respectively.

2. Following newly redesignated paragraph (d)(2)(iv), the two undesignated

paragraphs are designated as paragraphs

(d)(3) and (d)(4), respectively.

Par. 3. In the list below, for each section indicated in the left column, remove

the language in the middle column, and

add the language in the right column.

ADD

(d), (e) and (f)

effective.

earlier),

such provision, or

paragraph (e)

(d)(2)(i), (d)(2)(ii) and (d)(2)(iii)

(d)(2)

(d)(2)(i)

paragraph (e)(1)

paragraph (e)(2)

this paragraph (e)

which paragraph (e)(1) or (2)

in paragraph (e)(1) or (2)

paragraph (e)(3)

paragraph (d)

paragraphs (e)(5)(i), (ii) and

(iii) of this section

paragraph (d)

paragraph (e)(5)(ii)

1997–34 I.R.B.

Par. 4. Section 1.401(b)–1 is further

amended as follows:

1. Paragraph (b)(2)(iii) is removed.

2. Paragraphs (b)(3), (c) and (d)(1)(iv)

are added.

The additions read as follows:

§1.401(b)–1 Certain retroactive changes

in plan.

(b) * * *

(3) A plan provision described in

§1.401(b)–1T(b)(3).

§1.401(b)–1T(c).

(d) * * *

(1) * * *

(iv) In the case of a disqualifying provision described in §1.401(b)–1T(b)(3), the

date described in §1.401(b)–1T(d)(1)(iv)

or (v), whichever applies to the disqualifying provision.

Par. 5. Section 1.401(b)–1T is added to

read as follows:

§1.401(b)–1T Certain retroactive

changes in plan (temporary).

(a) [Reserved]. For further information, see §1.401(b)–1(a).

(b) Disqualifying provisions. For purposes of §1.401(b)–1, with respect to a

plan described in §1.401(b)–1(a), the term

“disqualifying provision” means:

(1) and (2) [Reserved]. For further information, see §1.401(b)–1(b)(1) and (2).

(3) A plan provision designated by the

Commissioner, at the Commissioner’s

discretion, as a disqualifying provision

that either—

(i) Results in the failure of the plan to

satisfy the qualification requirements of

the Code by reason of a change in those

requirements; or

(ii) Is integral to a qualification requirement of the Code that has been changed.

provision. For purposes of paragraph

(b)(3) of this section and §1.401(b)–

1(b)(2), a disqualifying provision includes the absence from a plan of a provision required by, or, if applicable, integral

to the applicable change to the qualification requirements of the Internal Revenue

Code, if the plan was in effect on the date

1997–34 I.R.B.

the change became effective with respect

to the plan.

(2) Method of designating of disqualifying provisions. The Commissioner may

designate a plan provision as a disqualifying provision pursuant to paragraph (b)(3)

of this section only in revenue rulings, notices, and other guidance published in the

Internal Revenue Bulletin. See §601.601(d)(2)(ii)(b) of this chapter.

(3) Authority to impose limitations. In

the case of a provision that has been designated as a disqualifying provision by

the Commissioner pursuant to paragraph

(b)(3) of this section, the Commissioner

may impose limits and provide additional

rules regarding the amendments that may

be made with respect to that disqualifying

provision during the remedial amendment

period. The Commissioner may impose

these limits and provide these additional

rules only in revenue rulings, notices, and

other guidance published in the Internal

Revenue Bulletin. See §601.601(d)(2)(ii)(b) of this chapter.

(d) Remedial amendment period. (1)

The remedial amendment period with respect to a disqualifying provision begins:

(i) through (iii) [Reserved]. For further

information, see §1.401(b)–1(d)(1)(i)

through (iii).

(iv) In the case of a disqualifying provision described in paragraph (b)(3)(i) of

this section, the date on which the change

effected by an amendment to the Internal

Revenue Code became effective with respect to the plan, or

(v) In the case of a disqualifying provision described in paragraph (b)(3)(ii) of

this section, the first day on which the

plan was operated in accordance with

such provision, as amended, unless another time is specified by the Commissioner in revenue rulings, notices, and

other guidance published in the Internal

Revenue Bulletin. See §601.601(d)(2)(ii)(b) of this chapter.

(2) [Reserved]

Michael P. Dolan,

Acting Commissioner of

Internal Revenue.

Approved July 22, 1997.

(Filed by the Office of the Federal Register on July

31, 1997, 8:45 a.m., and published in the issue of the

Federal Register for August 1, 1997, 62 F.R. 41272)

Section 501.—Exemption From

Tax on Corporations, Certain

Trusts, Etc.

26 CFR 1.501(c)(5)–1: Labor, agricultural, and horticultural organizations.

T.D. 8726

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Requirements for Tax Exempt

Section 501(c)(5) Organizations

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final Regulations.

SUMMARY: This document contains

final regulations clarifying certain requirements of section 501(c)(5). The requirements are clarified to provide needed

guidance to organizations on the requirements an organization must meet in order

to be exempt from tax as an organization

described in section 501(c)(5).

DATES: These regulations are effective

on December 21, 1995.

FOR FURTHER INFORMATION CONTACT: Robin Ehrenberg, (202) 622-6080

(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 21, 1995, the IRS published in the Federal Register (60 F.R.

66228 [EE–53–95, 1996–1 C.B. 766]) a

notice of proposed rulemaking under section 501(c)(5). The proposed regulations

clarified that organizations whose principal

activity is administering retirement plans

are not section 501(c)(5) organizations.

A public hearing was held on June 5,

1996. Written comments were received.

After consideration of all of the comments, the proposed regulations under

section 501(c)(5) are adopted as revised

by this Treasury Decision. The comments

and revisions are discussed below.

Explanation of Revisions and Summary of

Comments

Section 501(c)(5) describes certain

August 25, 1997

labor, agricultural and horticultural organizations. Section 401(a) sets forth the

requirements for exemption for qualified

employee benefit pension trusts. Section

501(a) exempts from federal income taxes

organizations described in section 401(a)

or section 501(c). Thus, section 401(a)

and section 501(c)(5) should be read as

enactments of Congress in pari materia,

taken together as one consistent body of

law. Pacific Co. v. Johnson, 285 U.S.

480, 495 (1932).

The Treasury and IRS believe that section 501(c)(5) should be interpreted in a

manner consistent with the Employee Retirement Income Security Act of 1974,

Pub. L. No. 93–406, 88 Stat. 829 (1974)

(ERISA), as amended. ERISA was enacted as a “comprehensive and reticulated

statute” to regulate retirement plans and

trusts, “the product of a decade of Congressional study of the Nation’s private

employee benefit system.” Mertens v.

Hewitt Assoc., 508 U.S. 248, 251 (1993),

citing Nachman v. PBGC, 446 U.S. 359,

361 (1980). Congress intended that pension trusts satisfy the comprehensive requirements of section 401(a), as amended

by ERISA, in order to be tax exempt. See

S. Rep. No. 383, 93d Cong., 1st Sess. at

33, reprinted in 1974–3 C.B. (Supp.) 112;

H. Rep. No. 807, 93d Cong., 1st Sess. at

33, reprinted in 1974–3 C.B. (Supp) 236,

266.

Accordingly, Treasury and the IRS

continue to believe that an organization

whose principal purpose is managing employer-sponsored retirement plans is not

an exempt labor organization described in

section 501(c)(5). (However, an employer-sponsored pension trust may nevertheless qualify for exemption under section 501(a) if it meets the requirements of

section 401(a).) Morganbesser v. United

States, 984 F.2d 560 (2d Cir. 1993),

nonacq. 1995–2 C.B. 2.; In re Morganbesser, AOD CC-1995-016 (Dec. 26,

1995).

Consistent with ERISA and interpreting section 401(a) and section 501(c)(5)

as part of a consistent whole, these regulations provide a general rule that an organization is not described in section

501(c)(5) if its principal activity is to receive, hold, invest, disburse or otherwise

manage funds associated with savings or

investment plans or programs, including

pension or other retirement savings plans

August 25, 1997

or programs. However, to the extent that

ERISA provides special rules for certain

types of retirement savings plans, it is appropriate to take those rules into account

in interpreting provisions of the Code relating to such plans, including section

501(c)(5).

As noted by one commentator, ERISA

excepts certain dues-financed plans from

Parts 2 and 3 of Title I of ERISA (vesting,

funding and certain other qualification requirements). Those pension trusts sponsored by labor organizations for their

members, which accept no employer contributions, do not qualify for exemption

under section 401(a) because they are not

maintained by an employer. Section

401(a), Rev. Rul. 80–306, 1980–2 C.B.

131. Accordingly, the regulations provide

that an organization (including a pension

trust) may qualify as an organization described in section 501(c)(5) if it meets all

of the following requirements:

(1) the organization is established and

maintained by another labor organization

described in section 501(c)(5) (determined without reference to the tests in

Treas. Reg. § 1.501(c)(5)–1(b)(2));

(2) the organization is not directly or

indirectly established or maintained in

whole or in part by any employer or by

any government (or any agency, instrumentality or controlled entity thereof);

(3) the organization is funded by membership dues paid to the labor organization establishing and maintaining the organization and earnings thereon; and

(4) after September 2, 1974 (the date of

enactment of ERISA, 88 Stat. 829), the

organization’s governing documents have

not permitted or provided for nor did the

organization accept, any contribution

from any employer or from any government (or any agency, instrumentality or

controlled entity thereof). Treas. Reg. §

1.501(c)(5)–1(b)(2).

Treas. Reg. § 1.892-2T(c) governs the

tax status of a pension trust that is wholly

owned and controlled by a foreign sovereign.

Scope

These regulations solely address the tax

exempt status of organizations under section 501(c)(5) whose principal activity is

to receive, hold, invest, disburse, or otherwise manage funds associated with savings or investment plans or programs.

Other Code sections and tax principles

apply to the tax exempt status of these organizations and the tax consequences of

these arrangements to employers and participants in these arrangements.

One commentator requested that the

IRS clarify that the regulations do not

apply to health and welfare benefits not

specifically mentioned in the regulations,

such as retiree health benefits, death benefits, and group legal services. The regulations address only savings or investment

plans or programs, (including pension or

other retirement savings plans or programs) and do not address other types of

benefits. Cf. Rev. Rul. 62–17, 1962–1

C.B. 87.

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) does not

apply to these regulations, and because

the notice of proposed rulemaking preceding the regulations was issued prior to

March 29, 1996, the Regulatory Flexibility Act, (5 U.S.C. chapter 6) does not

apply. Pursuant to section 7805(f) of the

Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is Robin Ehrenberg, Office of Associate Chief Counsel (Employee Benefits

and Exempt Organizations). 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 continues to read in part as follows:

1997–34 I.R.B.

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

Par. 2. Section 1.501(c)(5)-1 is

amended by:

1. Redesignating paragraph (b) as

paragraph (c).

2. Adding a new paragraph (b).

The addition reads as follows:

§ 1.501(c)(5)-1 Labor, agricultural, and

horticultural organizations.

(b)(1) General rule. An organization

is not a organization described in section

501(c)(5) if the principal activity of the

organization is to receive, hold, invest,

disburse or otherwise manage funds associated with savings or investment

plans or programs, including pension or

other retirement savings plans or programs.

(2) Exception. Paragraph (b)(1) of this

section shall not apply to an organization

which—

(i) Is established and maintained by another labor organization described in sec-

1997–34 I.R.B.

tion 501(c)(5), (determined without regard to this paragraph (b)(2));

(ii) Is not directly or indirectly established or maintained in whole or in part

by one or more—

(A) Employers;

(B) Governments or agencies or instrumentalities thereof; or

(iii) Is funded by membership dues

from members of the labor organization

described in this paragraph (b)(2) and

earnings thereon; and

(iv) Has not at any time after September 2, 1974 (the date of enactment of the

Employee Retirement Income Security

Act of 1974, Pub. L. 93–406, 88 Stat.

829) provided for, permitted or accepted

employer contributions.

(3) Example. The principles of this

paragraph (b) are illustrated by the following example:

Example. Trust A is organized in accordance

with a collective bargaining agreement between

labor union K and multiple employers. Trust A

forms part of a plan that is established and maintained pursuant to the agreement and which covers

employees of the signatory employers who are

members of K. Representatives of both the employers and K serve as trustees. A receives contributions

from the employers who are subject to the agreement. Retirement benefits paid to K’s members as

specified in the agreement are funded exclusively by

the employers’ contributions and accumulated earnings. A also provides information to union members

about their retirement benefits and assists them with

administrative tasks associated with the benefits.

Most of A’s activities are devoted to these functions.

From time to time, A also participates in the renegotiation of the collective bargaining agreement. A’s

principal activity is to receive, hold, invest, disburse,

or otherwise manage funds associated with a retirement savings plan. In addition, A does not satisfy all

the requirements of the exception described in paragraph (b)(2) of this section. (For example, A accepts

contributions from employers). Therefore, A is not a

labor organization described in section 501(c)(5).

Acting Commissioner of

Internal Revenue

Assistant Secretary of the Treasury

(Filed by the Office of the Federal Register on July

28, 1997, 8:45 a.m., and published in the issue of the

Federal Register for July 29, 1997, 62 F.R. 40447)

August 25, 1997

Part III. Administrative, Procedural, and Miscellaneous

Income Tax; Allocation of

Interest Expense Among

Expenditures; Correction

Notice 97–46

AGENCY: Internal Revenue Service

(IRS), Treasury.

Need for Correction

As published, temporary regulations

(T.D. 8145 [1987–2 C.B. 47]) contains an

error which may prove to be misleading

and is in need of clarification.

Correcting Amendment to Regulations

ACTION: Correcting amendment.

SUMMARY: This document contains a

correction to temporary regulations (T.D.

8145), which were published in the Federal Register on Thursday, July 2, 1987

(52 F.R. 24996) relating to the allocation

of interest expense among a taxpayer’s

expenditures.

Accordingly, 26 CFR part 1 is corrected by making the following correcting

amendment:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 continues to read in part as follows:

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

EFFECTIVE DATE: July 2, 1987.

§ 1.163-8T [Corrected]

FOR FURTHER INFORMATION CONTACT: John Fischer, (202) 622-4950,

(not a toll-free number).

Par. 2. In § 1.163-8T, paragraph (e) immediately following Example (2). in paragraph (c)(2)(iii) is redesignated as paragraph (c)(3)(i) to read as follows:

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations that are the

subject of this correction are under section 163 of the Internal Revenue Code.

August 25, 1997

§ 1.163-8T Allocation of interest expense

among expenditures (temporary).

(3) Allocation of debt; proceeds not

disbursed to borrower—(i) Third-party financing. * * *

Cynthia E. Grigsby,

Chief, Regulations Unit

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on July

25, 1997, 8:45 a.m., and published in the issue of the

Federal Register for July 28, 1997, 62 F.R. 40269)

Rev. Proc. 97–32A

This revenue procedure modifies and

amplifies Part A., Sections 3.02 and 7.03

(2) of Rev. Proc. 97–32, 1997–27 I.R.B.

9, which provides the Rules and Specifications for Private Printing of Forms

1096, 1098, 1099 Series, 5498 and

W–2G. Please add the following sentence at the end of those sections, “Note:

On Copy C, Form 1099–LTC, you may

reverse the location of the policyholder’s

name, street address, city, state, and ZIP

code with the location of the insured’s

name, street address, city, state, and ZIP

code for ease in mailing.”

Effect On Other Documents

Rev. Proc. 97–32 is modified and amplified.

1997–34 I.R.B.

Part IV. Items of General Interest

Changes to Excise Taxes

Announcement 97–78

Purpose

To announce excise tax changes made by the Taxpayer Relief Act of 1997 (P.L. 105-34) that take

effect during August of 1997. These changes affect:

• The tax on the use of international air travel facilities

• Deposits of certain air transportation taxes

• Vaccine taxes

Taxpayers need to follow the procedures in this announcement to report these taxes on the Form

720 for the 3rd quarter. The Form 720 for the 4th quarter will reflect these changes and others that

take effect later.

Note: A separate announcement will be released at a later date to cover changes made by the Act

that take effect on October 1, 1997, or later.

Use of international

air travel facilities,

IRS No. 27

Rate. The rate is increased to $12.00 per person for the use of international air travel facilities.

This tax applies to arrivals as well as departures. For domestic flight segments that begin

or end in Alaska or Hawaii there is no change; the tax remains at $6.00 and applies only to departures.

Effective date. Tax is imposed at the new rate for amounts paid after August 12, 1997, for transportation that begins after September 30, 1997.

How to report. Report the total of both the $6 and the $12 rate for the quarter on the line for IRS No. 27.

Delayed deposits

Any deposit of taxes for IRS No. 26, transportation of persons by air, and IRS No. 27, use of international air travel facilities, that would otherwise be due after August 14, 1997, and before October

1, 1997, is due October 10, 1997.

Vaccine taxes

Rate. A uniform tax on all taxable vaccines is imposed at $.75 per dose. The tax liability at the

new rate is reported under IRS No. 97.

Effective date. The changes to vaccine taxes are effective for sales after August 5, 1997.

Taxable vaccines. After August 5, 1997, the vaccine is taxable if it:

• Contains diphtheria toxoid;

• Contains tetanus toxoid;

• Contains pertussis bacteria, extracted or partial cell bacteria, or specific pertussis antigens;

• Contains polio virus;

• Is against measles;

• Is against mumps;

• Is against rubella;

• Is any HIB vaccine;

• Is against hepatitis B; or

• Is against chicken pox.

Combination vaccines. If any taxable vaccine is combined with one or more additional taxable

vaccines, then the amount of tax imposed is the sum of the amounts for the vaccines included in the

combination.

How to report. For sales after June 30, 1997, and before August 6, 1997, report the vaccine tax liability under IRS Nos. 81, 82, 83, and 84. For sales after August 5, 1997, report your vaccine tax liability on a separate sheet and attach it to Form 720 for the 3rd quarter. Include the following information on the sheet:

1997–34 I.R.B.

August 25, 1997

• The words “VACCINE TAX” across the top of the sheet;

• Your name (as shown on the return) and employer identification number (EIN);

• IRS No. 97; and

• The amount of tax.

On Form 720, include the tax liability for IRS No. 97 in the total line for Part I taxes on page 2.

Availability of Publication 1544,

Reporting Cash Payments of

Over $10,000 (Revised Aug.

1997)

Announcement 97–80

Publication 1544, recently updated, is

now available from the Internal Revenue

Service. This publication is also available

in Spanish as Publication 1544SP.

The publication is for persons who may

receive large cash payments in the course

of their business. Generally, any person in

a trade or business who receives more than

$10,000 in cash in a single transaction or in

related transactions must file Form 8300,

Report of Cash Payments Over $10,000

Received in a Trade or Business.

You can get a copy of Publication 1544

(or Publication 1544SP) by calling 1-800829-3676. You can also write to the IRS

Forms Distribution Center nearest you.

If you have access to a personal computer and modem, you can also get the

publication electronically. You can get

the publication at:

1) World Wide Web - www.irs.ustreas.gov,

2) FTP - ftp.irs.ustreas.gov, and

3) Direct Dial (by Modem) - IRIS at

FEDWORLD - (703)321-8020.

Revision of Forms 5310,

5310A, and 6088

Announcement 97–81

Form 5310, Application for Determination for Terminating Plan; Form 6088,

Distributable Benefits From Employee

Pension Benefit Plans; and Form 5310A,

Notice of Plan Merger or Consolidation,

Spinoff, or Transfer of Plan Assets or Liabilities—Notice of Qualified Separate

Lines of Business have been revised. The

new revision date for all forms is June

1997 (Rev. 6/97).

Form 6088 and information only copies

August 25, 1997

of Forms 5310 and 5310A will available

through IRS electronic information services by July 25, 1997 at the following

addresses:

Modem: 703-321-8020 (modem settings

are N,8,1)

Internet: http://www.irs.ustreas.gov

However, except for Form 6088, these

forms are printed in special ink suitable

for use with optical reading equipment.

Therefore, copies downloaded from the

bulletin board are for information only

and are not acceptable for submission to

Covington or Brooklyn. The official versions will be available by the end of August by calling 1-800-TAX-FORM.

Except for the revision date, no significant changes have been made to Form

5310 and Form 6088. Therefore, the current revision (Rev. 1/96) may continue to

be used until the form is next revised.

Persons having approval to computer

generate this form may continue to use

existing programs. Alternatively, the revision date may be changed from 1/96 to

6/97 without requesting reapproval, if no

other changes are made to the OCR data

sheet. The original SAN approval number must be transferred to the revised

OCR data sheet.

Significant changes have been made to

Form 5310A. Therefore, the 6/97 revision must be used for submissions after

January 1, 1998. All Form 5310A submissions must now be filed with the IRS

at P.O. Box 192, Covington, KY 410120192. Persons having approval to computer generate this form must update their

programs to incorporate the changes

made to this application. The revised

OCR data sheet must be resubmitted for

reapproval to: EP OCR Coordinator,

CP:E:EP:FC, Room 2232, 1111 Constitution Ave., Washington, DC 20224.

As stated in Announcement 96-54,

1996-23 IRB 12, persons using IRS software to computer generate Form 5307

may continue to do so until further notice.

Form 5307 produced by IRS software has

a 5/93 revision date and the approval

number “SAN 50000”.

Arbitrage Restrictions on TaxExempt Bonds; Correction

Announcement 97–82

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Correction to final regulations.

SUMMARY: This document contains

corrections to final regulations (T.D.

8718) which were published in the Federal Register on Friday, May 9, 1997 (62

F.R. 25502 [1997–22 I.R.B. 4]). The final

regulations relate to arbitrage and related

restrictions applicable to tax-exempt

bonds issued by State and local governments.

DATES: This correction is effective May

9, 1997.

FOR FURTHER INFORMATION CONTACT: David White, (202) 622-3980 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subject of these corrections are under section

148 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (T.D.

8718) contain errors that may prove to be

misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of final

regulations (T.D. 8718) which are the

subject of F.R. Doc. 97–12062 is corrected as follows:

1. On page 25505, column 3, in the pre-

1997–34 I.R.B.

amble, under the paragraph heading “F.

Effective Dates”, line 2, the language “effective for bonds issued on or after” is

corrected to read “effective for bonds sold

on or after”.

2. On page 25505, column 3, in the preamble, under the paragraph heading “F.

Effective Dates”, the last line, the language “issued before July 8, 1997.” is

corrected to read “sold before July 8,

1997.”

Cynthia E. Grigsby,

Chief, Regulations Unit

Assistant Chief Counsel (Corporate)

and would end on the date the court first

determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1).

For individual contributors, the maximum

deduction protected is $1,000, with a husband and wife treated as one contributor.

This benefit is not extended to any individual who was responsible, in whole or in

part, for the acts or omissions of the organization that were the basis for revocation.

(Filed by the Office of the Federal Register on July

25, 1997, 8:45 a.m., and published in the issue of

the Federal Register for July 28, 1997, 62 F.R.

40270)

Jack and Jill Day Care Center

Chicago, IL

Deletions From Cumulative List

of Organizations Contributions

to Which Are Deductible Under

Section 170 of the Code

Announcement 97–83

The name of an organization that no

longer qualifies as an organization described in section 170(c)(2) of the Internal

Revenue Code of 1986 is listed below.

Generally, the Service will not disallow

deductions for contributions made to a

listed organization on or before the date

of announcement in the Internal Revenue

Bulletin that an organization no longer

qualifies. However, the Service is not

precluded from disallowing a deduction

for any contributions made after an organization ceases to qualify under section

170(c)(2) if the organization has not

timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter,

(2) was aware that such revocation was

imminent, or (3) was in part responsible

for or was aware of the activities or omissions of the organization that brought

about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that

are otherwise allowable will continue to

be deductible. Protection under section

7428(c) would begin on August 25, 1997,

1997–34 I.R.B.

The Fern Leigh Equine Research Foundation

Staunton, VA

Foundations Status of Certain

Organizations

Announcement 97–84

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:

African Awareness Expos, Inc., Aurora,

African Children Fund, Columbus, OH

Associates of Chicago Urban Day School,

Chicago, IL

Bahamian American Cultural Society,

New York, NY

Ben Rose Softball League, Inc., New

Bedford, MA

Beth Meir Yehuda Foundation, Inc.,

Brooklyn, NY

Bird Island Trust Inc., Boynton Beach, FL

Bishop Cheverus Society, Inc., Boston,

Booker T. Anderson Scholarship Fund,

Lower Hills, MA

BPD Inc., Kapaa, HI

Bridge Homes, Inc., New York, NY

Bronx Residents Against Grafitti, Bronx,

Broomstones Curling Foundation,

Framingham, MA

Chaim Foundation, Chicago, IL

Citizens Against Pollution Northwest, Inc.,

Torrington, CT

Clowns on Rounds, Inc., Albany, NY

Connecticut Youth Theatre, Inc., Tolland,

Constantin Brancust International

Foundation, Inc., New York, NY

Council for Equal Rights in Adoption,

Inc., New York, NY

District 26 Foundation for Education,

Flushing, NY

Divers Environmental Survey, Inc.,

Billerica, MA

East Longmeadow Athletic Booster Club,

East Longmeadow, MA

East New York Partnership Housing

Development Fund Company, Inc.,

New Rochelle, NY

Edgartown Patrolmens Association, Inc.,

Edgartown, MA

Ellen Gilman Sylvia Solomon Scholarship

Fund, Inc., Chestnut Ridge, NY

Falmouth Youth Initiatives, North

Falmouth, MA

Feminist Network of Western Maine,

Farmington, ME

F.G.P., Inc., Warwick, RI

Foundation for Chinese Humanistic

Studies, Honolulu, HI

Franklin Housing Alliance, Inc.,

Greenfield, MA

Friends and Alumni of the Mendon

Upton Regional School District,

Mendon, MA

Friends of Maine’s Natural Areas, Inc.,

Augusta, ME

Friends of the Playgound of Shelton,

Shelton, CT

Friends of the Rochester Senior Center,

Inc., Rochester, MA

Friends of the Society for Coptic

Archaeology, Inc., New York, NY

Friends of Westborough State Hospital,

Inc., Westborough, MA

Good Shephards Christmas, Inc.,

Needham, MA

Greenwich Citizens Committee, Inc.,

Greenwich, NY

Guard & Reserve Family Relief Fund,

East Hebron, NH

Hartford Late Night, Inc., Hartford, CT

August 25, 1997

Health Care Professional Association, Inc.,

Brooklyn, NY

Hearn Historical and Preservation Society,

Inc., New York, NY

Heritage Initiative for Responsible

Economic Development-Hired, Bar

Harbor, ME

Hope Community House, Inc.,

Morganville, NJ

Imani House, Brooklyn, NY

Information Consolidation Bureau, Inc.,

Boston, MA

Insight Mediation Center, Inc., Newbury,

Institution of Housing and Community

Development, Maywood, IL

International Center for Jewish Christian

Understanding, Inc., New York, NY

International Student Education Fund,

New York, NY

King Spike Theatre, Inc., New York, NY

Kollel Zichron Brocha, Brooklyn, NY

Kurdistan Forum, Inc., New York, NY

La Candelaria East Harlem Community

Center, Inc., New York, NY

Language & Learning Intervention in a

Family Environment, Inc., Dobbs Ferry,

La Primera Orquesta De Cuatro De

Connecticut, Inc., Hartford, CT

Lifelearn Center for Lifelong Learning,

San Anselmo, CA

Loon Preservation Committee, Laconia,

Loradore Institute, Bronx, NY

Louis Latimer Garden Community Center,

Flushing, NY

August 25, 1997

Maine Paramedic Association, Waterville,

The Matlovich Society, Portland, ME

Maywood Renaissance Center Inc.,

Maywood, IL

Mission Metro New York, Inc.,

Saddlebrook, NJ

Nassau Placement Network, Inc., Valley

Stream, NY

National Center to Save Our Schools,

Westbury, NY

National Committee for the Rights of the

Child, Durham, NC

Neighbor Care, Dover, MA

New Century Conservation Trust, Inc.,

Brunswick, ME

New England Microfocus Users Group,

Inc., Boston, MA

New York State Science Education

Leadership Association, Clinton

Corners, NY

Prototype Housing, Inc., New York, NY

Public Compound-7, Inc., New York, NY

Restore Olmsteds Waterway Coalition,

Brookline, MA

Rhino Realty, Inc., Boston, MA

Rhode Island Childrens Advocacy Center,

Providence, RI

Rhode Island Securities Awareness

Corporation, Inc., Providence, RI

Right Side Up, Divide, CO

River Side Peers Assisting Peers, Inc., Port

Jervis, NY

Robertson Scientific Research, Inc., Tulsa,

Roots of Evangelism, Mt. Vernon, NY

Roots Revisited, Inc., Brooklyn, NY

Safety at Sea Institute, Newport, RI

Salisbury Historical Society, Inc.,

Salisbury, MA

Santa Claus Anonymous, Inc., Cambridge,

Saratoga Teen and Recreation Foundation,

Inc., Saratoga Springs, NY

Save American Manufacturing

Foundation, Inc., Tonawanda, NY

Save Our Schwarzmanns Mill, Inc.,

Burlington, CT

Schuyler Village Day Care, Inc.,

Schuylerville, NY

Seed & Harvest Ministries, Inc., Flagler,

Shadagee Hill, Inc., Holland, NY

Sikh Education Foundation of North

America, Pittsford, NY

Toras Olam, Brooklyn, NY

Ysleta Education Foundation, El Paso, TX

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.

1997–34 I.R.B.

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 ap-

plies 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 Procedral 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.

1997–34 I.R.B.

August 25, 1997

Numerical Finding List1

Bulletins 1997–27 through 1997–33

Announcements:

97–61, 1997–29 I.R.B. 13

97–67, 1997–27 I.R.B. 37

97–68, 1997–28 I.R.B. 13

97–69, 1997–28 I.R.B. 13

97–70, 1997–29 I.R.B. 14

97–71, 1997–29 I.R.B. 15

97–72, 1997–29 I.R.B. 15

97–73, 1997–30 I.R.B. 86

97–74, 1997–31 I.R.B. 16

97–75, 1997–32 I.R.B. 28

97–76, 1997–32 I.R.B. 28

97–77, 1997–33 I.R.B. 58

Court Decisions:

2061, 1997–31 I.R.B. 5

2062, 1997–32 I.R.B. 8

Delegation Orders:

172 (Rev. 5), 1997–28 I.R.B. 6

Notices:

97–37, 1997–27 I.R.B. 4

97–38, 1997–27 I.R.B. 8

97–39, 1997–27 I.R.B. 8

97–40, 1997–28 I.R.B. 6

97–41, 1997–28 I.R.B. 6

97–42, 1997–29 I.R.B. 12

97–43, 1997–30 I.R.B. 9

97–44, 1997–31 I.R.B. 15

97–45, 1997–33 I.R.B. 7

Railroad Retirement Quarterly Rate:

1997–28 I.R.B. 5

Proposed Regulations:

REG–104893–97, 1997–29 I.R.B. 13

REG–107644–97, 1997–32 I.R.B. 24

Revenue Procedures:

97–32, 1997–27 I.R.B. 9

97–33, 1997–30 I.R.B. 10

97–34, 1997–30 I.R.B. 14

97–35, 1997–33 I.R.B. 11

97–36, 1997–33 I.R.B. 14

97–37, 1997–33 I.R.B. 18

97–38, 1997–33 I.R.B. 43

97–39, 1997–33 I.R.B. 48

97–40, 1997–33 I.R.B. 50

97–41, 1997–33 I.R.B. 5

97–42, 1997–33 I.R.B. 57

Revenue Rulings:

97–27, 1997–27 I.R.B. 4

97–28, 1997–28 I.R.B. 4

97–29, 1997–28 I.R.B. 4

97–30, 1997–31 I.R.B. 12

97–31, 1997–32 I.R.B. 4

97–32, 1997–33 I.R.B. 4

Treasury Decisions:

8722, 1997–29 I.R.B. 4

8723, 1997–30 I.R.B. 4

A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1997–1 through 1997–26

will be found in Internal Revenue Bulletin 1997–27,

dated July 7, 1997.

August 25, 1997

1997–34 I.R.B.

Finding List of Current Action on

Previously Published Items

Bulletins 1997–27 through 1997–33

*Denotes entry since last publication

Revenue Procedures:

96–36

Superseded by

97–34, 1997–30 I.R.B. 14

96–42

Superseded by

97–27, 1997–27 I.R.B. 9

Revenue Rulings:

89–42

Supplemented by

97–31, 1997–32 I.R.B. 4

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1997–1 through 1997–26 will be found in Internal

Revenue Bulletin 1997–27, dated July 7, 1997.

1997–34 I.R.B.

August 25, 1997

Notes

August 18, 1997

1997–33 I.R.B.

Notes

1997–33 I.R.B.

August 18, 1997

Notes

August 18, 1997

1997–33 I.R.B.

Notes

1997–33 I.R.B.

August 18, 1997

Notes

August 18, 1997

1997–33 I.R.B.

INTERNAL REVENUE BULLETIN

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on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of

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CUMULATIVE BULLETINS

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sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print

and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the

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allow two to six weeks, plus mailing time, for delivery.

WE WELCOME COMMENTS ABOUT THE

INTERNAL REVENUE BULLETIN

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page

(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC

20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.

Internal Revenue Service

Washington, DC 20224

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First Class Mail

Postage and Fees Paid

IRS

Permit No. G–48

INTERNAL REVENUE BULLETIN

The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold

on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of

Documents when their subscriptions must be renewed.

CUMULATIVE BULLETINS

The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are

and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the

Superintendent of Documents.

HOW TO ORDER

Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,

detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please

allow two to six weeks, plus mailing time, for delivery.

WE WELCOME COMMENTS ABOUT THE

INTERNAL REVENUE BULLETIN

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page

(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC

20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.

Superintendent of Documents

U.S. Government Printing Office

Washington, DC 20402

Official Business

Penalty for Private Use, $300

First Class Mail

Postage and Fees Paid

GPO

Permit No. G–26

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.