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Bulletin No. 2000–9
February 28, 2000

Internal Revenue

bulletin
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
Rev. Rul. 2000–7, page 712.

EMPLOYMENT TAX

Removal costs, capital expenditures. This ruling holds
that if the retirement and removal of a depreciable asset occurs in connection with the installation or production of a replacement asset, the costs incurred in removing the retired
asset are not required to be capitalized under section 263
or 263A of the Code as part of the cost of the replacement
asset. Rev. Proc. 99–49 modified and amplified.

Page 721.

EMPLOYEE PLANS

Rev. Proc. 2000–18, page 722.

T.D. 8873, page 713.
Final regulations under sections 402(f), 411(a)(11), and
3405(e) of the Code provide applicable standards for transmitting certain notices and consents through electronic
media and modify the timing requirements for providing certain distribution-related notices.

Notice 2000–2, page 727.
Weighted average interest rate update. Guidelines are set
forth for determining the weighted average interest rate for
February 2000 and the resulting permissible range of interest
rates used to calculate current liability for purposes of the full
funding limitation under section 412(c)(7) of the Code.

Railroad retirement; rate determination; quarterly. The
Railroad Retirement Board has determined that the rate of
tax imposed by section 3221 of the Code shall be 26 1/2
cents for the quarter beginning January 1, 2000.

ADMINISTRATIVE
Automobile owners and lessees. This procedure provides
owners and lessees of passenger automobiles (including
electric automobiles) with tables detailing the limitations on
depreciation deductions for automobiles first placed in service during calendar year 2000 and the amounts to be included in income for automobiles first leased during calendar year 2000. In addition, this revenue procedure provides
the maximum allowable value of employer-provided automobiles first made available to employees for personal use in
calendar year 2000 for which the vehicle cents-per-mile valuation rule provided under section 1.61–21(e) of the Income
Tax Regulations may be applicable.

(Continued on next page)

Actions Relating to Court Decisions is on the page following the Introduction.
Finding Lists begin on page ii.

Department of the Treasury
Internal Revenue Service

ADMINISTRATIVE—Continued
Notice 2000–12, page 727.
Pilot pre-filing agreement program. This notice announces
a pilot program for Pre-Filing Agreements (PFAs) under which
large business taxpayers may request examination and resolution of specific issues relating to tax returns they expect to file
between September and December 2000.

Notice 2000–13, page 732.
Low-income housing tax credit. Resident population figures for the states, Puerto Rico, and the insular areas (American Samoa, Guam, Northern Mariana Islands, and the U.S.
Virgin Islands) for determining the 2000 calendar year (1)

February 28, 2000

state housing credit ceiling under section 42(h) of the Code,
and (2) private activity bond volume cap under section 146,
are reproduced.

Announcement 2000–9, page 733.
This document contains a correction to Notice 2000–4
(2000–3 I.R.B. 313) in which an erroneous address was
given for comments to be submitted electronically.

Announcement 2000–10, page 733.
This announcement contains a change to the date and time
of a public hearing relating to proposed regulations
(REG–116733–98, 1999–36 I.R.B. 392) under section
355(e) of the Code. The original public hearing on January
26, 2000, has been rescheduled for March 2, 2000.

2000–9 I.R.B.

The IRS Mission
Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities

and by applying the tax law with integrity and fairness to
all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents 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 proce-

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.
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.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
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 semiannual basis,
and are published in the first Bulletin of the succeeding 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.

2000–9 I.R.B.

February 28, 2000

Actions Relating to Court Decisions
It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in certain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on unappealed issues decided adverse to the
government. Generally, an Action on Decision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirmative statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.
Actions on Decisions shall be relied
upon within the Service only as conclusions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommendation of the Action on Decision to similar
cases where the facts are different. Moreover, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions.
Prior to 1991, the Service published ac-

quiescence or nonacquiescence only in
certain regular Tax Court opinions. The
Service has expanded its acquiescence
program to include other civil tax cases
where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings
of memorandum Tax Court opinions, as
well as those of the United States District
Courts, Claims Court, and Circuit Courts
of Appeal. Regardless of the court deciding the case, the recommendation of any
Action on Decision will be published in
the Internal Revenue Bulletin.
The recommendation in every Action
on Decision will be summarized as acquiescence, acquiescence in result only,
or nonacquiescence. Both “acquiescence” and “acquiescence in result only”
mean that the Service accepts the holding
of the court in a case and that the Service
will follow it in disposing of cases with
the same controlling facts. However, “acquiescence” indicates neither approval
nor disapproval of the reasons assigned
by the court for its conclusions; whereas,
“acquiescence in result only” indicates
disagreement or concern with some or all
of those reasons. “Nonacquiescence” signifies that, although no further review

was sought, the Service does not agree
with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a circuit
court of appeals, a “nonacquiescence” indicates that the Service will not follow
the holding on a nationwide basis. However, the Service will recognize the
precedential impact of the opinion on
cases arising within the venue of the deciding circuit.
The Actions on Decisions published in
the weekly Internal Revenue Bulletin are
consolidated semiannually and appear in
the first Bulletin for July and the Cumulative Bulletin for the first half of the
year. A semiannual consolidation also appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year.
The Commissioner NONACQUIESCES in the following decision:
Simpson v. United States,1
183 F.3d 812 (8th Cir. 1999), rev’g
17 F. Supp. 2d 972 (W.D. Mo. 1998)

1 Nonacquiescence relating to whether a transfer of property to decedent’s grandchildren, pursuant to decedent’s exercise of a general testamentary power of appointment, was exempt from the generation-skipping transfer (GST) tax under the effective date provisions in the Tax Reform Act of 1986 (TRA 86).

February 28, 2000

2000–9 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 61.—Gross Income
Defined
26 CFR 1.61–21: Taxation of fringe benefits.
This procedure provides the maximum value of employer-provided automobiles first made available to
employees for personal use in calendar year 2000 for
which the vehicle cents-per-mile valuation rule provided under §1.61–21(e) of the Income Tax Regulations
may be applicable. See Rev. Proc. 2000–18, page 722.

Section 162.—Trade or Business
Expenses
26 CFR 1.162–1: Business expenses.
If the retirement and removal of a depreciable asset
occurs in connection with the installation or production
of a replacement asset, are the costs incurred in removing the retired asset required to be capitalized under §
263(a) or 263A as part of the cost of the replacement
asset? See Rev. Rul. 2000–7, page 712.

Section 165.—Losses
26 CFR 1.165–3: Demolition of buildings.
If the retirement and removal of a depreciable
asset occurs in connection with the installation or
production of a replacement asset, are the costs incurred in removing the retired asset required to be
capitalized under § 263(a) or 263A as part of the
cost of the replacement asset? See Rev. Rul. 2000–7,
page 712.

Section 167.—Depreciation
26 CFR 1.167(a)–8: Retirements.
If the retirement and removal of a depreciable
asset occurs in connection with the installation or
production of a replacement asset, are the costs incurred in removing the retired asset required to be
capitalized under § 263(a) or 263A as part of the
cost of the replacement asset? See Rev. Rul. 2000–7,
page 712.

Section 263.—Capital
Expenditures
26 CFR 1.263(a)–1: Capital expenditures; in
general. (Also §§ 162, 165, 167, 263A; 1.165–3,
1.167(a)–8, 1.167(a)–11, 1.263A–1)

Removal costs, capital expenditures.
This ruling holds that if the retirement and
removal of a depreciable asset occurs in
connection with the installation or pro-

February 28, 2000

duction of a replacement asset, the costs
incurred in removing the retired asset are
not required to be capitalized under section 263 or 263A of the Code as part of
the cost of the replacement asset.

Rev. Rul. 2000–7
ISSUE
If the retirement and removal of a depreciable asset occurs in connection with
the installation or production of a replacement asset, are the costs incurred in removing the retired asset required to be
capitalized under section 263(a) or 263A
as part of the cost of the replacement
asset?
FACTS
The assets of X, a telephone company,
include telephone poles A and B. X
placed Pole A in service in 1979 on land it
owned. X placed Pole B in service in
1982 on land owned by Y under the terms
of an easement permitting X to have one
pole on Y’s land. In 2000, X undertakes a
project to replace telephone poles in the
service area in which Pole A is situated.
As part of that project, X incurs costs in
2000 in removing and discarding Pole A
and installing a new telephone pole, Pole
C, in the same location. X also undertakes
a second project to replace telephone
poles in the service area in which Pole B
is situated. X installs a new telephone
pole, Pole D, on Y’s land, but not in the
same location as Pole B. As part of this
second project and to comply with the
easement, X incurs costs in 2000 in removing and discarding Pole B.
LAW AND ANALYSIS
Section 162 of the Internal Revenue
Code and § 1.162–1 of the Income Tax
Regulations generally allow a deduction
for all the ordinary and necessary expenses paid or incurred during the taxable
year in carrying on any trade or business.
Section 165 allows as a deduction any
loss sustained during the taxable year and
not compensated for by insurance or otherwise. For the allowance under § 165(a)
of losses arising from the permanent withdrawal of depreciable property from use

712

in a trade or business or in the production
of income, § 1.165–2(c) cross references
§ 1.167(a)–8(a), which permits, in part, a
loss from physical abandonment of retired
property.
Under §§ 263(a) and 1.263(a)–1(a), no
deduction is allowed for capital expenditures, such as amounts paid for new buildings or for permanent improvements or
betterments made to increase the value of
any property. Section 1.263(a)–2(a) provides that capital expenditures include the
costs of acquisition, construction, or erection of buildings, machinery and equipment, furniture and fixtures, and similar
property having a useful life substantially
beyond the taxable year.
Section 263A generally requires taxpayers that are producing real or tangible
personal property to capitalize direct material costs, direct labor costs, and indirect
costs that are properly allocable to the
produced property. Section 263A(g)(1)
provides that, for purposes of § 263A, the
term “produce” includes construct, build,
install, manufacture, develop, or improve.
Under § 1.263A–1(e)(3)(i), indirect costs
are allocable to produced property under
§ 263A when the costs directly benefit or
are incurred by reason of the performance
of production activities.
The costs of removing an asset have
been historically allocable to the removed
asset and, thus, generally deductible when
the asset is retired and the costs are incurred. A deduction generally is allowed
whether a taxpayer accounts for the retired asset in a single asset account or in a
multiple asset account (e.g., a general
asset account or a mass asset account).
See § 1.165–3(b); § 1.167(a)–1(c); §
1.167(a)– 11(d)(3)(x); Rev. Rul. 74–455,
1974–2 C.B. 63; Rev. Rul. 75–150,
1975–1 C.B. 73. But see § 280B, requiring that the costs of demolishing buildings be added to the basis of the land, and
§ 1.165–3(a), requiring capitalization of
demolition costs when the taxpayer acquires an asset with the intent to demolish
it. See, e.g., Wood County Telephone Co.
v. Commissioner, 51 T.C. 72 (1968); Rev.
Rul. 69–62, 1969–1 C.B. 58.
The removal costs of Poles A and B are
not required to be capitalized under
§ 263(a). In both situations the removal
costs are properly allocable to the retired

2000–9 I.R.B.

poles, and thus do not relate to assets having a useful life in the taxpayer’s business
extending substantially beyond the taxable
year in which the removal costs are incurred. The fact that Poles A and B are retired as part of a replacement project does
not mean that the removal costs are required to be capitalized under § 263(a).
Furthermore, the removal costs are not required to be capitalized under § 263A because the costs are incurred for the purpose
of retiring Poles A and B and not by reason
of the installation of Poles C and D. The
analysis in this ruling does not apply to the
removal of a component of a depreciable
asset, the costs of which are either deductible or capitalizable based on whether
replacement of the component constitutes a
repair or an improvement. See §1.162–4
and § 1.263(a)–1(b).
HOLDING
If the retirement and removal of a depreciable asset occurs in connection with
the installation or production of a replacement asset, the costs incurred in removing
the retired asset are not required to be
capitalized under § 263(a) or 263A as part
of the cost of the replacement asset.
APPLICATION
Any change in a taxpayer’s method of accounting to conform with this revenue ruling
is a change in method of accounting to
which the provisions of §§ 446 and 481 and
the regulations thereunder apply. Except for
assets for which depreciation is determined
in accordance with § 1.167(a)–11 (ADR),
the taxpayer’s new method of treating removal costs for assets accounted for in a
multiple asset account must be consistent
with the taxpayer’s method of treating salvage proceeds. See Rev. Rul. 74– 455. (See
sections 2.01 and 2.02 of the Appendix of
Rev. Proc. 99–49, 1999–52 I.R.B. 725, for
changing a taxpayer’s present method of
treating salvage proceeds.) A taxpayer wanting to change its method of accounting to
conform with the holding in this revenue ruling must follow the automatic change in accounting method provisions of Rev. Proc.
99–49, except that the scope limitations in
section 4.02 of Rev. Proc. 99–49 do not
apply. However, if the taxpayer is under examination, before an appeals office, or before a federal court with respect to any income tax issue, the taxpayer must provide a
copy of the Form 3115, Application for

2000–9 I.R.B.

Change in Accounting Method, to the examining agent(s), appeals officer, or counsel for
the government, as appropriate, at the same
time that it files the copy of the Form 3115
with the national office. The Form 3115
must contain the name(s) and telephone
number(s) of the examining agent(s), appeals officer, or counsel for the government,
as appropriate. In addition, if the asset is
public utility property within the meaning of
§ 168(i)(10) or former § 167(l)(3)(A), the
taxpayer must comply with the terms and
conditions in section 2.01(3)(b)(vi) of the
Appendix of Rev. Proc. 99–49.

Section 411.—Minimum Vesting
Standards

EFFECT ON OTHER DOCUMENTS

AGENCY: Internal Revenue Service
(IRS), Treasury.

Rev. Proc. 99–49 is modified and amplified to include this change in accounting method in the APPENDIX.

26 CFR 1.411(a)–11: Restriction and valuation of
distributions.

T.D. 8873
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 35, and 602
New Technologies in Retirement
Plans

ACTION: Final regulations.

26 CFR 1.263A–1: Uniform capitalization of costs.

SUMMARY: This document contains
amendments to the regulations governing
certain notices and consents required in
connection with distributions from retirement plans. Specifically, these regulations set forth applicable standards for the
transmission of those notices and consents through electronic media and modify the timing requirements for providing
certain distribution-related notices. The
regulations provide guidance to plan
sponsors and administrators by interpreting the notice and consent requirements in
the context of the electronic administration of retirement plans. The regulations
affect retirement plan sponsors, administrators, and participants.

If the retirement and removal of a depreciable asset
occurs in connection with the installation or production of a replacement asset, are the costs incurred in removing the retired asset required to be capitalized
under § 263(a) or 263A as part of the cost of the replacement asset? See Rev. Rul. 2000–7, page 712.

DATES: Effective Date: These regulations are effective January 1, 2001.
Applicability Date: These regulations
apply to plan years beginning on or after
January 1, 2001.

DRAFTING INFORMATION
The principal author of this revenue
ruling is Beverly Katz of the Office of Assistant Chief Counsel (Income Tax and
Accounting). For further information regarding this revenue ruling contact Ms.
Katz on (202) 622-4950 (not a toll-free
call).

Section 263A.—Capitalization
and Inclusion in Inventory Costs
of Certain Expenses

Section 280F.—Limitation on
Depreciation for Luxury
Automobiles; Limitation where
Certain Property Used for
Personal Purposes
26 CFR 1.280F–7: Property leased after December
31, 1986.
This procedure provides owners and lessees of passenger automobiles (including electric automobiles)
with tables detailing the limitations on depreciation
deductions for automobiles first placed in service during calendar year 2000 and the amounts to be included
in income for automobiles first leased during calendar
year 2000. See Rev. Proc. 2000–18, page 722.

713

FOR FURTHER INFORMATION CONTACT: Catherine Livingston Fernandez,
(202) 622-6030 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number 15451632. Responses to this collection of information are mandatory.
An agency may not conduct or sponsor,
and a person is not required to respond to,

February 28, 2000

a collection of information unless the collection of information displays a valid
control number.
The estimated annual burden per respondent and/or recordkeeper is 76 minutes.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to the
Internal Revenue Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC 20224, and to 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 amendments to
the Income Tax Regulations (26 CFR parts
1 and 35) under sections 402(f), 411(a)(11)
and 3405(e)(10)(B). The regulations under
section 3405(e)(10)(B) (new Q/A d–35 and
d–36 of section 35.3405–1), like the regulations under sections 402(f) and 411(a)(11)
are final regulations. These regulations finalize proposed regulations that were published as a notice of proposed rulemaking
(REG–118662–98, 1999–13 I.R.B. 13) in
the Federal Register (63 FR 70071) on
December 18, 1998. A public hearing was
held on the proposed regulations on April
15, 1999.
In addition to the proposed regulations,
the IRS and Treasury issued Notice 99–1
(1999–2 I.R.B. 8), and Announcement
99–6 (1999–4 I.R.B. 24), concerning the
use of electronic media under retirement
plans. Notice 99–1 confirms that the “paperless” administration of participant enrollments, contribution elections, investment elections, beneficiary designations
(other than designations requiring spousal
consent), direct rollover elections, and
certain other transactions do not cause a
qualified plan to fail to satisfy the requirements of section 401(a) (or the requirements for a qualified cash or deferred
arrangement under section 401(k)). Announcement 99–6 authorizes the electronic transmission of Form W-4P.
The proposed regulations, Notice 99–1,

February 28, 2000

and Announcement 99–6 were issued pursuant to section 1510 of the Taxpayer Relief
Act of 1997. That section provides for the
Secretary of the Treasury to issue guidance
designed to interpret the notice, election,
consent, disclosure, time, and related
recordkeeping requirements under the Code
and the Employee Retirement Income Security Act of 1974 (ERISA) regarding the use
of new technologies by sponsors and administrators of retirement plans and to clarify the extent to which writing requirements
under the Code relating to retirement plans
permit paperless transactions. Section 1510
provides that the guidance must protect participant and beneficiary rights. Any final
regulations applicable to this guidance may
not be effective until the first plan year beginning at least six months after issuance as
final regulations.
Explanation of Provisions
General
Commentators generally praised the approach taken in the proposed regulations of
providing broad, flexible standards for the
transmission of certain notices and consent
required for distributions through electronic
media. Commentators stated that the
guidelines set forth in the proposed regulations facilitate the expanded use of new
technologies and recognize the likelihood
of future technological advances in plan administration. Accordingly, the final regulations retain this approach and:
• Permit electronic delivery of the notice
of distribution options and the right to
defer distribution under section
411(a)(11), the rollover notice under
section 402(f), and the withholding notice under section 3405(e)(10)(B);
• Permit electronic transmission of participant consent to a distribution under
section 411(a)(11); and
• Permit a plan to provide the section
411(a)(11) and section 402(f) notices
more than 90 days before a distribution,
if the plan provides a summary of the
notices within 90 days before the distribution.
Notices Under Sections 402(f),
411(a)(11), and 3405(e)(10)(B)
1. Use of electronic media for delivery of
notices
The proposed regulations provide that,
in general, a plan may furnish a notice re-

714

quired under section 402(f), 411(a)(11),
or 3405(e)(10)(B) either on a written
paper document or through an electronic
medium reasonably accessible to the participant to whom the notice is given. The
proposed regulations require that any
electronic notice be provided under a system reasonably designed to give the notice in a manner no less understandable to
the participant than a written paper document and that the participant be advised
of the right to request and to receive a
copy of the notice on a written paper document without charge. The final regulations adopt these rules without change.
One commentator noted that the proposed regulations do not define the term
reasonably accessible and suggested that
the final regulations require that participants have effective access at their place
of work to any electronic medium used to
deliver the notices under sections 402(f),
411(a)(11), and 3405(e)(10)(B). The IRS
and Treasury, after further consideration,
believe that the reasonably accessible
standard protects the interests of plan participants and, therefore, have retained the
proposed terminology.
The same commentator raised more
general concerns with the use of electronic media to transmit notices. This
commentator argued that an electronic
notice should be “actually received (not
just sent or available) and read by the participant, be permanently accessible, and
easily converted to a printed document,
by using an available printer and/or
through a request for a paper writing.” In
response to these concerns, the IRS and
Treasury reiterate the view, expressed in
the preamble to the proposed regulations,
that the legal standards for the delivery of
distribution-related notices under sections
402(f), 411(a)(11), and 3405(e)(10)(B)
should be the same regardless of the
medium of delivery. Additionally, the
IRS and Treasury note that many of the
concerns raised by this commentator
about electronic media are adequately addressed by the requirement in the regulations that participants always have the
right to request and to receive a written
paper notice without charge.
Several commentators objected to the requirement that participants be able to receive the notice on a written paper document upon request. These commentators
argued that simply making written paper

2000–9 I.R.B.

notices available through an electronic
medium (such as a printing option on an email system or a plan web site) protects the
interests of participants in having access to
written paper notices without placing the
burden of providing written paper notices
on plan sponsors and administrators. However, the IRS and Treasury believe that the
right to request and to receive a written
paper notice is an important fail-safe for paperless plan administration. The requirement ensures that no participant is denied
ready access to a usable copy of a required
distribution notice, and it limits the need for
the IRS and Treasury to regulate the manner in which written paper notices are made
available through electronic media. The
IRS and Treasury believe that the burden
for plan sponsors and administrators to
maintain a process that will generate written paper notices upon request is outweighed by the important safeguards provided by the requirement. In addition, as
indicated in the preamble to the proposed
regulations, the written paper notice provided on request need not be identical to
the electronic notice. Therefore, the written
paper notice can be either a printed version
of the electronic notice or a separate notice
prepared for distribution on paper. In light
of these considerations, the requirement is
retained in the final regulations.
One commentator requested clarification that the proposed regulations under
section 3405 would permit the electronic
delivery of the annual notice described in
section 3405(e)(10)(B)(i)(III) (which is
provided to recipients of periodic payments). The proposed regulations, as
written, apply to that annual notice; however, the final regulations make this point
expressly. One commentator asked that
the proposed regulations be amended to
provide for electronic withholding elections under section 3405 in addition to
electronic transmission of notices under
section 3405. It is unclear what, if any,
utility such a change in the regulations
would have in light of the ability to use
electronic media for transmission of Form
W-4P, as set out in Announcement 99–6.
Therefore, no change has been made to
the regulations on this point.
2. Flexibility for timing requirement in
providing notices
Commentators favored the provision in
the proposed regulations that provided
flexibility with respect to the 90-day pe-

2000–9 I.R.B.

riod under sections 402(f) and 411(a)(11)
by providing an alternative timing rule.
Under this alternative timing rule, a plan
may give the full section 402(f) and section 411(a)(11) notices more than 90 days
before the distribution and provide the
participant a summary of the notice during the 90/30-day period under those sections. The full notice is not required to be
provided on a regular periodic basis and
may be provided in connection with other
materials (for example, in the summary
plan description or in a brochure describing plan distribution features), but it must
be updated (and provided to the participant) as necessary to ensure accuracy as
of the time the summary is given. The
proposed regulations provide that the
summary notice must set out the principal
provisions of the full notice, must refer
the participant to the most recent occasion
on which the full notice was provided,
and must advise the participant of the
right to request and to receive a copy of
the full notice without charge.
Several commentators interpreted the
requirement in the proposed regulations
that the summary refer the participant to
the most recent occasion on which the full
notice was provided as requiring an indication of the precise date on which the
participant was given the full notice and
the precise location of the full notice if it
was provided in a document containing
other information (such as the summary
plan description). These commentators
argued that this information may vary on
a participant-by-participant basis and so
imposes a considerable administrative
burden on plan sponsors and administrators.1
The IRS and Treasury did not intend
for the proposed regulations to be construed as requiring individualized information about the full notice. Therefore,
the final regulations clarify, first, that the
summary must refer participants to the
most recent version of the full notice.
The purpose of this rule is to minimize
confusion among participants if more
than one version of a full notice has been
provided in the past. In many of those
1 For example, many plan sponsors provide a copy
of the summary plan description to each employee
when the employee is first hired. If the full notice is
provided through the summary plan description, the
precise date on which the full notice was last provided could differ for each participant.

715

cases, this reference could reasonably be
made by calendar year (for example, by
referring to the 1999 version of the section 402(f) notice). If more than one version of a distribution notice was provided
in a single calendar year, more precise
reference should be made (for example,
by referring to the May 1999 version of
the section 402(f) notice). Reference to
the notice by month or year would not be
necessary if only one version of the notice
had been provided in the past. If the full
notice were constantly available (for example, a notice that is available on a plan
web site and is kept up-to-date), it would
be adequate to state that fact.
Additionally, the regulations have been
modified to provide that, in the case of a
full notice provided in a document containing other information, the summary
must identify that document and must
provide a reasonable indication of where
the notice may be found in the document.
This requirement could be satisfied
through a number of means, including
identification of page number, section
heading, an index reference, the title of
the notice, or any other reference that
would reasonably direct the participant to
the notice.
One commentator objected to the alternative timing rule set out in the proposed
regulations. This commentator argued
that distribution-related notices should be
tied to a specific event (such as a participant request for a distribution) and that “it
is inappropriate to provide a notice of the
notice when using electronic or other new
technologies when it is just as easy to provide the actual notice itself.” The IRS
and Treasury agree that the information
contained in the section 402(f) and section 411(a)(11) notices should be provided to a participant in connection with
the participant’s contemplation of a distribution, but the IRS and Treasury believe
that providing a summary of a previously
provided notice and informing the participant of the right to request and to receive
the full notice adequately protect the interests of participants in this regard.
The preamble to the proposed regulations includes an example of a summary
section 402(f) notice provided through an
automated telephone system. Many commentators raised questions about this example. Several commentators argued that
the sample summary is too long and com-

February 28, 2000

plex to be of use in plan administration;
others argued that it does not include reference to every potentially applicable rule
concerning the taxation of plan distributions (for example, it does not refer to the
taxation of net unrealized appreciation on
the distribution of employer securities).
Commentators also inquired about the
legal status of the example because of its
placement in the preamble. The example
was intended merely to illustrate a summary notice that, in the view of the IRS
and Treasury, satisfies the requirements of
the proposed regulations. It was not intended as a model summary or as the exclusive form for such a summary. Although the example is not restated in
these final regulations, the IRS and Treasury are considering whether to issue additional guidance providing additional examples of summary notices. In this
regard, the IRS and Treasury will solicit
comments from interested parties regarding the development of those examples
and will invite interested parties to submit
draft summary notices to assist in the development of that guidance.
Consent Under Section 411(a)(11)
Consistent with the proposed regulations, the final regulations provide that, in
general, a plan may receive a participant’s
consent either on a written paper document or through an electronic medium
reasonably accessible to the participant.
As in the case of participant notices, the
regulations generally do not categorize
particular electronic media as either permissible or impermissible for this purpose
and do not prescribe detailed, media-specific rules. The standards are intended to
parallel the key attributes of participant
consent provided on written paper documents without imposing more stringent
requirements on electronic consents. The
proposed regulations provide that participant consent transmitted through an electronic medium must be given under a system that is reasonably designed to
preclude an individual other than the participant from giving the consent and that
provides the participant a reasonable opportunity to review and to confirm, modify, or rescind the terms of the distribution
before the consent to the distribution becomes effective. Comments on this portion of the proposed regulations were generally favorable, and no change has been

February 28, 2000

made in the final regulations.
One commentator, however, objected
outright to the use of electronic media for
the transmission of participant consent and
argued that, at a minimum, such consent
“should not be effective until after a written
confirmation is received and the participant
has a specified amount of time to revoke
it.” This commentator also argued that the
final regulations should prohibit the use of
automated telephone systems to provide
distribution-related notices and to receive
participant consent unless an automatic,
mandatory written confirmation of the participant’s election of a distribution option is
required along with a seven-day right of revocation. The IRS and Treasury concluded
that it is not advisable to impose new revocation rules based on the medium through
which a participant consents to a distribution. Both the proposed regulations and the
final regulations require that the terms of
any consent made through an electronic
medium be confirmed to the participant.
Additionally, the IRS and Treasury do not
believe that a right of revocation for a defined period after consent is given is more
necessary or appropriate in the case of consent made through an electronic medium
than it is in the case of consent made
through a written paper document. More
generally, the IRS and Treasury do not believe that the use of electronic media is improper or inappropriate for the transmission
of a participant’s consent under section
411(a)(11). If the requirements of the regulations are satisfied, consent provided in
that manner should reflect the considered
wishes of the participant as reliably as a
consent provided through a written paper
document.
Changes to the Examples in the
Regulations
Several commentators expressed concern about details in the examples illustrating the proposed regulations for distribution notices and consent. One of the
concerns involved the statement in the examples that a participant who wished to
change a PIN electronically would be unable to proceed with a distribution transaction until the plan sent a confirmation of the
change to the participant. Commentators
stated that the electronic systems maintained by plan sponsors and administrators
use an array of security features to ensure
participant identity, some of which might

716

permit an electronic transaction to proceed
after a PIN change. Although the prohibition on proceeding with an electronic transaction after a PIN change was intended
only to illustrate a commonly used system
and not as a substantive requirement, the
final regulations omit the statement from
the examples for the sake of clarity. Of
course, the examples in the final regulations presuppose that plan sponsors and administrators maintain adequate measures to
ensure participant identity when a PIN is
changed.
Notice 99–1 and Announcement 99–6
Commentators expressed support for
Notice 99–1, which indicates that a qualified plan will not fail to meet the requirements of section 401(a) (and that a qualified cash-or-deferred arrangement will
not fail to meet the requirements of section 401(k)) merely because it permits a
participant or beneficiary to use electronic
media to effect a transaction for which no
specific provision of the Code, the regulations, or other guidance of general applicability sets forth rules or standards regarding the media through which it may be
conducted. Announcement 99–6 permits
the electronic transmission of Form W-4P.
Commentators asked for clarification
whether Form W-4P may be transmitted
through a telephone system. The underlying standards for the electronic transmission of Form W-4P are intended to be the
same as those for the electronic transmission of Form W-4, as set out in
§31.3402(f)(5)–1(c). The preamble to the
proposed regulations for the electronic
transmission of Form W-4 indicates that
“[i]f an employer chooses to establish an
electronic system, the employer will be
free to determine the type of system (such
as telephone or computer) or systems
available to its employees.” (59 FR
18508 (Apr. 15, 1994)). Therefore, the
use of a telephone system for electronic
transmission of Form W-4P, if otherwise
consistent with Announcement 99–6 and
§31.3402(f)(5)–1(c), is permissible.
Commentators also asked the IRS and
Treasury to reconsider the requirement,
stated in Announcement 99–6, that the
electronic signature on Form W-4P be the
final entry in the submission of the form.
These commentators argue that this effectively requires the participant in most
cases to enter a PIN at both the beginning

2000–9 I.R.B.

and the end of a transaction that involves
the use of an electronic Form W-4P. The
IRS and Treasury are considering this
issue and anticipate issuing additional
guidance on this question.
Scope of These Regulations
These regulations do not address the application of Title I of ERISA (except for
section 203(e)) to the use of electronic
media for any plan communication or
transaction. Several commentators requested that the regulations be expanded to
include matters not covered by the proposed regulations. Most notably, commentators asked that the IRS and Treasury provide guidance on the use of electronic
media for plan loans under section 72(p),
nondiscrimination safe-harbor notices
under sections 401(k)(12) and 401(m)(11),
notices under section 204(h) of ERISA, and
distribution notices, elections, and spousal
consents governed by sections 401(a)(11)
and section 417.
The IRS and Treasury are actively considering comments submitted on regulations proposed under section 72(p) and
expect to issue additional guidance under
that section. It is anticipated that any
guidance on the use of electronic media in
connection with plan loans would be issued in connection with that additional
guidance. As the IRS and Treasury have
noted in the past, notices under sections
401(k)(12) and 401(m)(11) and ERISA
section 204(h) present legal issues distinct
from those presented by notices under
sections 402(f), 411(a)(11), and
3405(e)(10)(B). Notice 2000–3 (2000–4
I.R.B. 413) provides that, pending further
guidance, notices under sections
401(k)(12) and 401(m)(11) may be issued
through electronic media if standards set
forth in Notice 2000–3 which are similar
to those applicable to notices under these
regulations, are satisfied. Because of the
unique considerations applicable to notices under ERISA section 204(h), guidance with respect to the use of electronic
media in connection with section 204(h)
notices is not being issued at this time.
Finally, regarding notices, elections,
and spousal consents governed by sections 401(a)(11) and section 417, the IRS
and Treasury note that the statutory requirement that spousal consent be witnessed either by a notary public or a plan
representative appears to presuppose that

2000–9 I.R.B.

a spouse be in the physical presence of the
notary public or the plan representative at
the time consent is given. This appears to
place significant limitations on the utility
of electronic media in effecting spousal
consent.2 Thus, it is unclear what guidance the IRS and Treasury could issue
that would meaningfully facilitate paperless distributions in the case of plans subject to sections 401(a)(11) and 417.

Drafting Information

Reliance

Amendments to the Regulations

Plan sponsors and administrators may
rely on these final regulations for guidance for distributions made prior to the effective date.

Accordingly, 26 CFR parts 1, 35, and 602
are amended as follows:

Special Analyses

Paragraph 1. The authority citation for
part 1 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.402(f)–1 is amended
by:
1. Revising Q&A–2.
2. Adding Q&A–5 and Q&A–6.
The revision and additions read as follows:
§1.402(f)–1 Required explanation of eligible rollover distributions; questions and
answers.
*****
Q-2: When must the plan administrator
provide the section 402(f) notice to a distributee?
A-2: The plan administrator must provide the section 402(f) notice to a distributee at a time that satisfies either paragraph (a) or (b) of this Q&A-2.
(a) This paragraph (a) is satisfied if the
plan administrator provides a distributee
with the section 402(f) notice no less than
30 days and no more than 90 days before
the date of a distribution. However, if the
distributee, after having received the section 402(f) notice, affirmatively elects a
distribution, a plan will not fail to satisfy
section 402(f) merely because the distribution is made less than 30 days after the
section 402(f) notice was provided to the
distributee, provided the plan administrator clearly indicates to the distributee that
the distributee has a right to consider the
decision of whether or not to elect a direct
rollover for at least 30 days after the notice is provided. The plan administrator
may use any method to inform the distributee of the relevant time period, provided
that the method is reasonably designed to

It has been determined that this Treasury
decision is not a significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory impact analysis is
not required. It is hereby certified that
these regulations will not have a significant
economic impact on a substantial number
of small entities. This certification is based
on the fact that the regulations provide paperless alternatives to notices that otherwise must be sent as written paper documents. It is anticipated that most small
businesses affected by these regulations
will be sponsors of retirement plans. Since
these notices are provided only upon distributions and since, in the case of a small
plan, there will be relatively few distributions per year, small plans that implement a
paperless system for delivering these notices will likely contract for them as part of
a paperless system for distributions offered
by outside vendors. The paperless delivery
of the notices will not add more than a
minor increment to the cost of these distribution systems or the plan sponsor will
continue to use a paper-based system. Accordingly, a Regulatory Flexibility Analysis is not required. Pursuant to section
7805(f) of the 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.
2

One commentator suggested that electronic transmission of spousal consent be permitted if the plan
has Areasonable certainty that the spouse has consented.@ That suggested standard appears to fall far
short of the witnessing requirement specifically set
forth in the statute.

717

The principal author of these regulations
is Catherine Livingston Fernandez, Office
of the Associate Chief Counsel (Employee
Benefits and Exempt Organizations), IRS.
However, personnel from other offices of
the IRS and Treasury Department participated in their development.
* * * * *

PART 1—INCOME TAXES

February 28, 2000

attract the attention of the distributee. For
example, this information could be either
provided in the section 402(f) notice or
stated in a separate document (e.g., attached to the election form) that is provided at the same time as the notice. For
purposes of satisfying the requirement in
the first sentence of paragraph (a) of this
Q&A-2, the plan administrator may substitute the annuity starting date, within the
meaning of §1.401(a)–20, Q&A-10, for
the date of the distribution.
(b) This paragraph (b) is satisfied if the
plan administrator—
(1) Provides a distributee with the section 402(f) notice;
(2) Provides the distributee with a summary of the section 402(f) notice within
the time period described in paragraph (a)
of this Q&A-2; and
(3) If the distributee so requests after
receiving the summary described in paragraph (b)(2) of this Q&A-2, provides the
section 402(f) notice to the distributee
without charge and no less than 30 days
before the date of a distribution (or the annuity starting date), subject to the rules
for the distributee’s waiver of that 30-day
period. The summary described in paragraph (b)(2) of this Q&A-2 must set forth
a summary of the principal provisions of
the section 402(f) notice, must refer the
distributee to the most recent version of
the section 402(f) notice (and, in the case
of a notice provided in any document containing information in addition to the notice, must identify that document and
must provide a reasonable indication of
where the notice may be found in that
document, such as by index reference or
by section heading), and must advise the
distributee that, upon request, a copy of
the section 402(f) notice will be provided
without charge.
*****
Q-5: Will the requirements of section
402(f) be satisfied if a plan administrator
provides a distributee with the section
402(f) notice or the summary of the notice
described in paragraph (b)(2) of Q&A-2
of this section other than through a written paper document?
A-5: A plan administrator may provide
a distributee with the section 402(f) notice
or the summary of that notice described in
paragraph (b)(2) of Q&A-2 of this section
either on a written paper document or
through an electronic medium reasonably

February 28, 2000

accessible to the distributee. A notice or
summary provided through an electronic
medium must be provided under a system
that satisfies the following requirements:
(a) The system must be reasonably designed to provide the notice or summary
in a manner no less understandable to the
distributee than a written paper document.
(b) At the time the notice or summary is
provided, the distributee must be advised
that the distributee may request and receive the notice on a written paper document at no charge, and, upon request, that
document must be provided to the distributee at no charge.
Q-6: Are there examples that illustrate
the provisions of Q&A-2 and Q&A-5 of
this section?
A-6: The following examples illustrate
the provisions of Q&A-2 and Q&A-5 of
this section:
Example 1. (i) A qualified plan (Plan A) permits
participants to request distributions by e-mail.
Under Plan A’s system for such transactions, a participant must enter his or her account number and
personal identification number (PIN); this information must match that in Plan A’s records in order for
the transaction to proceed. If a participant requests a
distribution from Plan A by e-mail and the distribution is an eligible rollover distribution, the plan administrator provides the participant with a section
402(f) notice by e-mail. The plan administrator also
advises the participant that he or she may request the
section 402(f) notice on a written paper document
and that, if the participant requests the notice on a
written paper document, it will be provided at no
charge. To proceed with the distribution by e-mail,
the participant must acknowledge receipt, review,
and comprehension of the section 402(f) notice.
(ii) In Example 1, Plan A does not fail to satisfy
the notice requirement of section 402(f) merely because the notice is provided to the participant other
than through a written paper document.
Example 2. (i) A qualified plan (Plan B) permits
participants to request distributions through the Plan
B web site (Internet or intranet). Under Plan B’s
system for such transactions, a participant must
enter his or her account number and personal identification number (PIN); this information must match
that in Plan B’s records in order for the transaction
to proceed. A participant may request a distribution
from Plan B by following the applicable instructions
on the Plan B web site. After the participant has requested a distribution that is an eligible rollover distribution, the participant is automatically shown a
page on the web site containing a section 402(f) notice. Although this page of the web site may be
printed, the page also advises the participant that he
or she may request the section 402(f) notice on a
written paper document by calling a telephone number indicated on the web page and that, if the participant requests the notice on a written paper document, it will be provided at no charge. To proceed
with the distribution by e-mail, the participant must
acknowledge receipt, review, and comprehension of
the section 402(f) notice.

718

(ii) In this Example 2, Plan B does not fail to satisfy the notice requirement of section 402(f) merely
because the notice is provided to the participant
other than through a written paper document.
Example 3. (i) A qualified plan (Plan C) permits
participants to request distributions through Plan C’s
automated telephone system. Under Plan C’s system
for such transactions, a participant must enter his or
her account number and personal identification number (PIN); this information must match that in Plan
C’s records in order for the transaction to proceed.
Plan C provides the section 402(f) notice in the summary plan description, the most recent version of
which was distributed to participants in 1997. A participant may request a distribution from Plan C by
following the applicable instructions on the automated telephone system. In 1999, a participant,
using Plan C’s automated telephone system, requests
a distribution that is an eligible rollover distribution.
The automated telephone system refers the participant to the most recent version of the section 402(f)
notice which was provided in the summary plan description, informs the participant where the section
402(f) notice may be located in the summary plan description, and provides an oral summary of the material provisions of the section 402(f) notice. The system also advises the participant that the participant
may request the section 402(f) notice on a written
paper document and that, if the participant requests
the notice on a written paper document, it will be
provided at no charge. Before proceeding with the
distribution, the participant must acknowledge receipt, review, and comprehension of the summary.
Under Plan C’s system for processing such transactions, the participant’s distribution will be made no
more than 90 days and no fewer than 30 days after
the participant requests the distribution and receives
the summary of the section 402(f) notice (unless the
participant waives the 30-day period).
(ii) In this Example 3, Plan C does not fail to satisfy the notice requirement of section 402(f) merely
because Plan C provides a summary of the section
402(f) notice or merely because the summary is provided to the participant other than through a written
paper document.
Example 4. (i) Same facts as Example 3, except
that, pursuant to Plan C’s system for processing such
transactions, a participant who so requests is transferred to a customer service representative whose
conversation with the participant is recorded. The
customer service representative provides the summary of the section 402(f) notice by reading from a
prepared text.
(ii) In this Example 4, Plan C does not fail to satisfy the notice requirement of section 402(f) merely
because Plan C provides a summary of the section
402(f) notice or merely because the summary of the
section 402(f) notice is provided to the participant
other than through a written paper document.
Example 5. (i) Same facts as Example 3, except
that Plan C does not provide the section 402(f) notice in the summary plan description. Instead, the
automated telephone system reads the section 402(f)
notice to the participant.
(ii) In this Example 5, Plan C does not satisfy the
notice requirement of section 402(f) because oral
delivery alone of the section 402(f) notice through
the automated telephone system is not sufficient.
Example 6. (i) The facts are the same as in Example 1, except that Participant D requested a distri-

2000–9 I.R.B.

bution by e-mail, then terminated employment, and,
following the termination, no longer has reasonable
access to Plan A e-mail.
(ii) In this Example 6, Plan A does not satisfy the
notice requirement of section 402(f) because the
electronic medium through which the notice is provided is not reasonably accessible to Participant D.
Plan A must provide the section 402(f) notice to Participant D in a written paper document or by an electronic means that is reasonably accessible to Participant D.

Par. 3. Section 1.411(a)–11 is amended
by:
1. Revising paragraphs (c)(2)(i) and
(iii).
2. Removing the language “Written
consent” in paragraph (c)(2)(ii) and (c)(3)
and adding “Consent” in its place.
3. Adding paragraphs (f) and (g).
The revisions and additions read as follows:
§1.411(a)–11 Restriction and valuation of
distributions.
*****
(c) * * *
(2) Consent. (i) No consent is valid
unless the participant has received a general description of the material features of
the optional forms of benefit available
under the plan. In addition, so long as a
benefit is immediately distributable, a
participant must be informed of the right,
if any, to defer receipt of the distribution.
Furthermore, consent is not valid if a significant detriment is imposed under the
plan on any participant who does not consent to a distribution. Whether or not a
significant detriment is imposed shall be
determined by the Commissioner by examining the particular facts and circumstances.
*****
(iii) A plan must provide a participant
with notice of the rights specified in this
paragraph (c)(2) at a time that satisfies either paragraph (c)(2)(iii)(A) or (B) of this
section:
(A) This paragraph (c)(2)(iii)(A) is satisfied if the plan provides a participant
with notice of the rights specified in this
paragraph (c)(2) no less than 30 days and
no more than 90 days before the date the
distribution commences. However, if the
participant, after having received this notice, affirmatively elects a distribution, a
plan will not fail to satisfy the consent requirement of section 411(a)(11) merely
because the distribution commences less
than 30 days after the notice was provided
to the participant, provided the plan ad-

2000–9 I.R.B.

ministrator clearly indicates to the participant that the participant has a right to at
least 30 days to consider whether to consent to the distribution.
(B) This paragraph (c)(2)(iii)(B) is satisfied if the plan—
(1) Provides the participant with notice
of the rights specified in this paragraph
(c)(2);
(2) Provides the participant with a summary of the notice within the time period
described in paragraph (c)(2)(iii)(A) of
this section; and
(3) If the participant so requests after
receiving the summary described in paragraph (c)(2)(iii)(B)(2) of this section, provides the notice to the participant without
charge and no less than 30 days before the
date the distribution commences, subject
to the rules for the participant’s waiver of
that 30-day period. The summary described in paragraph (c)(2)(iii)(B)(2) of
this section must advise the participant of
the right, if any, to defer receipt of the distribution, must set forth a summary of the
distribution options under the plan, must
refer the participant to the most recent
version of the notice (and, in the case of a
notice provided in any document containing information in addition to the notice,
must identify that document and must
provide a reasonable indication of where
the notice may be found in that document,
such as by index reference or by section
heading), and must advise the participant
that, upon request, a copy of the notice
will be provided without charge.
*****
(f) Medium for notice and consent—
(1) Notice. The notice of a participant’s
rights described in paragraph (c)(2) of this
section or the summary of that notice described in paragraph (c)(2)(iii)(B)(2) of
this section may be provided either on a
written paper document or through an
electronic medium reasonably accessible
to the participant. A notice or summary
provided through an electronic medium
must be provided under a system that satisfies the following requirements:
(i) The system must be reasonably designed to provide the notice or summary
in a manner no less understandable to the
participant than a written paper document.
(ii) At the time the notice or summary
is provided, the participant must be advised that he or she may request and re-

719

ceive the notice on a written paper document at no charge, and, upon request, that
document must be provided to the participant at no charge.
(2) Consent. The consent described in
paragraphs (c)(2) and (3) of this section
may be given either on a written paper
document or through an electronic
medium reasonably accessible to the participant. A consent given through an electronic medium must be given under a system that satisfies the following
requirements:
(i) The system must be reasonably designed to preclude any individual other
than the participant from giving the consent.
(ii) The system must provide the participant with a reasonable opportunity to review and to confirm, modify, or rescind
the terms of the distribution before the
consent to the distribution becomes effective.
(iii) The system must provide the participant, within a reasonable time after the
consent is given, a confirmation of the
terms (including the form) of the distribution either on a written paper document or
through an electronic medium under a
system that satisfies the requirements of
paragraph (f)(1) of this section.
(g) Examples. The provisions of paragraph (f) of this section are illustrated by
the following examples:
Example 1. (i) A qualified plan (Plan A) permits
participants to request distributions by e-mail. Under
Plan A’s system for such transactions, a participant
must enter his or her account number and personal
identification number (PIN); this information must
match that in Plan A’s records in order for the transaction to proceed. If a participant requests a distribution
from Plan A by e-mail, the plan administrator provides
the participant with a section 411(a)(11) notice by email. The plan administrator also advises the participant by e-mail that he or she may request the section
411(a)(11) notice on a written paper document and
that, if the participant requests the notice on a written
paper document, it will be provided at no charge. To
proceed with the distribution by e-mail, the participant
must acknowledge receipt, review, and comprehension of the section 411(a)(11) notice and must consent
to the distribution within the time required under section 411(a)(11). Within a reasonable time after the
participant’s consent by e-mail, the plan administrator,
by e-mail, sends confirmation of the terms (including
the form) of the distribution to the participant and advises the participant that he or she may request the
confirmation on a written paper document that will be
provided at no charge.
(ii) In this Example 1, Plan A does not fail to satisfy
the notice or consent requirement of section
411(a)(11) merely because the notice and consent are
provided other than through written paper documents.

February 28, 2000

Example 2. (i) Same facts as Example 1, except
that, instead of sending a confirmation of the distribution by e-mail, the plan administrator, within a reasonable time after the participant’s consent, sends the participant an account statement for the period that
includes information reflecting the terms of the distribution.
(ii) In this Example 2, Plan A does not fail to satisfy
the consent requirement of section 411(a)(11) merely
because the consent is provided other than through a
written paper document.
Example 3. (i) A qualified plan (Plan B) permits
participants to request distributions through the Plan B
web site (Internet or intranet). Under Plan B’s system
for such transactions, a participant must enter his or
her account number and personal identification number (PIN); this information must match that in Plan B’s
records in order for the transaction to proceed. A participant may request a distribution from Plan B by following the applicable instructions on the Plan B web
site. After the participant has requested a distribution,
the participant is automatically shown a page on the
web site containing a section 411(a)(11) notice. Although this page of the web site may be printed, the
page also advises the participant that he or she may request the section 411(a)(11) notice on a written paper
document by calling a telephone number indicated on
the web page and that, if the participant requests the
notice on a written paper document, it will be provided
at no charge. To proceed with the distribution by email, the participant must acknowledge receipt, review, and comprehension of the section 411(a)(11) notice and must consent to the distribution within the
time required under section 411(a)(11). The web site
requires the participant to review and confirm the
terms (including the form) of the distribution before
the transaction is completed. After the participant has
given consent via e-mail, the Plan B web site confirms
the distribution to the participant and advises the participant that he or she may request the confirmation on
a written paper document that will be provided at no
charge.
(ii) In this Example 3, Plan B does not fail to satisfy
the notice or consent requirement of section
411(a)(11) merely because the notice and consent are
provided other than through written paper documents.
Example 4. (i) A qualified plan (Plan C) permits
participants to request distributions through Plan C’s
automated telephone system. Under Plan C’s system
for such transactions, a participant must enter his or
her account number and personal identification number (PIN); this information must match that in Plan C’s
records in order for the transaction to proceed. Plan C
provides only the following distribution options: a
lump sum and annual installments over 5, 10, or 20
years. A participant may request a distribution from
Plan C by following the applicable instructions on the
automated telephone system. After the participant has
requested a distribution, the automated telephone system reads the section 411(a)(11) notice to the participant. The automated telephone system also advises
the participant that he or she may request the notice on
a written paper document and that, if the participant
requests the notice on a written paper document, it will
be provided at no charge. Before proceeding with the
distribution transaction, the participant must acknowledge receipt, review, and comprehension of the section
411(a)(11) notice and must consent to the distribution
within the time required under section 411(a)(11). The
automated telephone system requires the participant to

February 28, 2000

review and confirm the terms (including the form) of
the distribution before the transaction is completed.
After the participant has given consent, the automated
telephone system confirms the distribution to the participant and advises the participant that he or she may
request the confirmation on a written paper document
that will be provided at no charge. Because Plan C has
relatively few and simple distribution options, the provision of the section 411(a)(11) notice over the automated telephone system is no less understandable to
the participant than a written paper notice.
(ii) In this Example 4, Plan C does not fail to satisfy
the notice or consent requirement of section
411(a)(11) merely because the notice and consent are
provided other than through written paper documents.
Example 5. (i) Same facts as Example 4, except
that, pursuant to Plan C’s system for processing such
transactions, a participant who so requests is transferred to a customer service representative whose conversation with the participant is recorded. The customer service representative provides the section
411(a)(11) notice from a prepared text and processes
the participant’s distribution in accordance with predetermined instructions of the plan administrator.
(ii) In this Example 5, Plan C does not fail to satisfy
the notice or consent requirement of section
411(a)(11) merely because the notice and consent are
provided other than through written paper documents.
Example 6. (i) Same facts as Example 1, except
that Participant D requested a distribution by e-mail,
then terminated employment and, following the termination, no longer has access to e-mail.
(ii) In this Example 6, Plan A does not satisfy the
notice or consent requirement of section 411(a)(11)
because the electronic medium through which the notice is provided is not reasonably accessible to Participant D. Plan A must provide Participant D the section
411(a)(11) notice in a written paper document or by an
electronic means that is reasonably accessible to Participant D.

Par. 4. The heading for part 35 is revised to read as follows:
PART 35—EMPLOYMENT TAX AND
COLLECTION OF INCOME TAX AT
SOURCE REGULATIONS UNDER
THE TAX EQUITY AND FISCAL
RESPONSIBILITY ACT OF 1982
Par. 5. The authority citation for part
35 is revised to read as follows:
Authority: 26 U.S.C. 6047(e), 7805;
68A Stat. 917; 96 Stat. 625; Public Law
97–248 (96 Stat. 623).
Section 35.3405–1 also issued under 26
U.S.C. 3405(e)(10)(B)(iii).
Section 35.3405–1T also issued under
26 U.S.C. 3405(e)(10)(B)(iii).
Par. 6. Redesignate §35.3405–1 as
§35.3405–1T and revise the heading to
read as follows:
§35.3405–1T Questions and answers relating to withholding on pensions, annuities, and certain other deferred income
(temporary regulations).
*****

720

Par. 7. A new §35.3405–1 is added to
read as follows:
§35.3405–1 Questions and answers relating to withholding on pensions, annuities, and certain other deferred income.
The following questions and answers
relate to withholding on pensions, annuities, and other deferred income under
section 3405 of the Internal Revenue
Code of 1986, as added by section 334 of
the Tax Equity and Fiscal Responsibility
Tax Act of 1982 (Pub. L. 97–248)
(TEFRA).
a-1 through d-34 [Reserved] For further guidance, see §35.3405–1T.
*****
d-35. Q. Through what medium may
a payor provide the notice required under
section 3405 to a payee?
A. A payor may provide the notice required under section 3405 (including the
abbreviated notice described in d-27 of
§35.3405–1T and the annual notice described in d-31 of §35.3405–1T) to a
payee either on a written paper document
or through an electronic medium reasonably accessible to the payee. A notice
provided through an electronic medium
must be provided under a system that satisfies the following requirements:
(a) The system must be reasonably designed to provide the notice in a manner
no less understandable to the payee than a
written paper document.
(b) At the time the notice is provided,
the payee must be advised that the payee
may request and receive the notice on a
written paper document at no charge, and,
upon request, that document must be provided to the payee at no charge.
d-36. Q. Are there examples that illustrate the provisions of d-35 of this section?
A. The provisions of d-35 of this section
are illustrated by the following examples:
Example 1. (i) An employer deferred compensation plan (Plan A) permits participants to request distributions by e-mail. Under Plan A’s system for such
transactions, a participant must enter his or her account number and personal identification number
(PIN); this information must match that in Plan A’s
records in order for the transaction to proceed. The
plan administrator is the payor. If a participant requests a distribution from Plan A by e-mail, the plan
administrator provides the participant with the notice
required under section 3405 by e-mail. The plan administrator also advises the participant by e-mail that
he or she may request the notice on a written paper
document and that, if the participant requests the notice on a written paper document, it will be provided at
no charge. To proceed with the distribution by e-mail,

2000–9 I.R.B.

the participant must acknowledge receipt, review, and
comprehension of the notice.
(ii) In this Example 1, the plan administrator does
not fail to satisfy the notice requirement of section
3405 merely because the notice is provided to the participant other than through a written paper document.
Example 2. (i) An employer deferred compensation plan (Plan B) permits participants to request distributions through the Plan B web site (Internet or intranet). Under Plan B’s system for such transactions, a
participant must enter his or her account number and
personal identification number (PIN); this information
must match that in Plan B’s records in order for the
transaction to proceed. The plan administrator is the
payor. A participant may request a distribution from
Plan B by following the applicable instructions on the
Plan B web site. After the participant has requested a
distribution, the participant is automatically shown a
page on the web site containing the notice required by
section 3405. Although this page of the web site may
be printed, the page also advises the participant that he
or she may request the notice on a written paper document and that, if the participant requests the notice on
a written paper document, it will be provided at no
charge. To proceed with the distribution through the
web site, the participant must acknowledge receipt, review, and comprehension of the notice.
(ii) In this Example 2, the plan administrator does
not fail to satisfy the notice requirement of section
3405 merely because the notice is provided to the participant other than through a written paper document.
Example 3. (i) An employer deferred compensation plan (Plan C) permits participants to request distributions through Plan C’s automated telephone system. Under Plan C’s system for such transactions, a
participant must enter his or her account number and
personal identification number (PIN); this information
must match that in Plan C’s records in order for the

transaction to proceed. The plan administrator is the
payor. A participant may request a distribution from
Plan C by following the applicable instructions on the
automated telephone system. After the participant has
requested a distribution, the automated telephone system reads the notice required by section 3405 to the
participant. The automated telephone system also advises the participant that he or she may request the notice on a written paper document and that, if the participant requests the notice on a written paper document,
it will be provided at no charge. Before proceeding
with the distribution transaction, the participant must
acknowledge receipt, review, and comprehension of
the notice.
(ii) In this Example 3, the plan administrator does
not fail to satisfy the notice requirement of section
3405 merely because the notice is provided to the participant other than through a written paper document.
Example 4. (i) Same facts as Example 3, except
that, pursuant to the system for processing such transactions, a participant who so requests is transferred to
a customer service representative whose conversation
with the participant is recorded. The customer service
representative provides the notice required by section
3405 by reading from a prepared text.
(ii) Conclusion. In this Example 4, the plan administrator does not fail to satisfy the notice requirement
of section 3405 merely because the notice is provided
to the participant other than through a written paper
document.
Example 5. (I) Same facts as Example 1, except
that Participant D requested a distribution by e-mail
and then terminated employment. Participant D no
longer has access to e-mail.
(ii) In this Example 5, Plan A does not satisfy the
notice requirement of section 3405 because the electronic medium through which the notice is provided is
not reasonably accessible to Participant D. Plan A

CFR Part or Section Where
Identified and Described

must provide the notice required by section 3405 to
Participant D in a written paper document or by an
electronic medium that is reasonably accessible to Participant D.

PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 6. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 7. In §602.101, paragraph (b) is
amended by adding the following entry in
the table in numerical order to read as follows:
§602.101 OMB Control numbers.
*****
(b) * * *
Robert E. Wenzel,
Deputy Commissioner
of Internal Revenue.
Approved January 20, 2000.
Jonathan Talisman,
Acting Assistant Secretary
of the Treasury.
(Filed by the Office of the Federal Register on February 7, 2000, 8:45 a.m., and published in the issue
of the Federal Register for February 8, 2000, 65 F.R.
6001)

Current OMB
Control No.

*****
1.402(f)–1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1545–1632
*****
1.411(a)–11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1545–1632
*****

Section 3221.—Rate of Tax
Determination of Quarterly Rate
of Excise Tax for Railroad
Retirement Supplemental
Annuity Program
In accordance with directions in Section
3221(c) of the Railroad Retirement Tax Act
(26 U.S.C., Section 3221(c)), the Railroad
Retirement Board has determined that the
excise tax imposed by such Section 3221(c)
on every employer, with respect to having
individuals in his employ, for each work-

2000–9 I.R.B.

hour for which compensation is paid by
such employer for services rendered to him
during the quarter beginning January 1,
2000, shall be at the rate of 26 1/2 cents.
In accordance with directions in Section
15(a) of the Railroad Retirement Act of
1974, the Railroad Retirement Board has determined that for the quarter beginning January 1, 2000, 38.7 percent of the taxes collected under Sections 3211(b) and 3221(c)
of the Railroad Retirement Tax Act shall be
credited to the Railroad Retirement Account
and 61.3 percent of the taxes collected under
such Sections 3211(b) and 3221(c) plus 100

721

percent of the taxes collected under Section
3221(d) of the Railroad Retirement Tax Act
shall be credited to the Railroad Retirement
Supplemental Account.
Dated December 2, 1999.
By Authority of the Board.
Beatrice Ezerski,
Secretary of the Board.
(Filed by the Office of the Federal Register on December 12, 1999, 8:45 a.m., and published in the
issue of the Federal Register for December 13, 1999,
64 F.R. 69575)

February 28, 2000

Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, sections 61, 280F; 1.61.21, 1.280F–7)

Rev. Proc. 2000-18
SECTION 1. PURPOSE
This revenue procedure provides: (1)
limitations on depreciation deductions for
owners of passenger automobiles first
placed in service during calendar year
2000, including separate limitations on
passenger automobiles designed to be
propelled primarily by electricity and
built by an original equipment manufacturer (electric automobiles); (2) the
amounts to be included in income by
lessees of passenger automobiles first
leased during calendar year 2000, including separate inclusion amounts for electric automobiles; and (3) the maximum
allowable value of employer-provided automobiles first made available to employees for personal use in calendar year 2000
for which the vehicle cents-per-mile valuation rule provided under § 1.61-21(e) of
the Income Tax Regulations may be applicable. The tables detailing these depreciation limitations and lessee inclusion
amounts reflect the automobile price inflation adjustments required by §
280F(d)(7) of the Internal Revenue Code.
The maximum allowable automobile
value for applying the vehicle cents-permile valuation rule reflects the automobile price inflation adjustment of §
280F(d)(7) as required by § 1.6121(e)(1)(iii)(A).
SECTION 2. BACKGROUND
For owners of automobiles, § 280F(a)
imposes dollar limitations on the depreciation deduction for the year that the automobile is placed in service and each succeeding year. In the case of electric
automobiles placed in service after August 5, 1997, and before January 1, 2005,
§ 280F(a)(1)(C) requires tripling of these
limitation amounts. Section 280F(d)(7)
requires the amounts allowable as depreciation deductions to be increased by a
price inflation adjustment amount for passenger automobiles placed in service after
1988.

February 28, 2000

For leased automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the automobile.
The reduction must be substantially
equivalent to the limitations on the depreciation deductions imposed on owners of
automobiles. Under § 1.280F-7(a), this
reduction requires the lessees to include
in gross income an inclusion amount determined by applying a formula to the
amount obtained from a table. There is a
table for lessees of electric automobiles
and a table for all other passenger automobiles. Each table shows inclusion
amounts for a range of fair market values
for each tax year after the automobile is
first leased.
For automobiles first provided by employers to employees that meet the requirements of § 1.61-21(e)(1), the value
to the employee of the use of the automobile may be determined under the vehicle
cents-per-mile valuation rule of § 1.6121(e). Section 1.61-21(e)(1)(iii)(A) provides that for an automobile first made
available after 1988 to any employee of
the employer for personal use, the value
of the use of the automobile may not be
determined under the vehicle cents-permile valuation rule for a calendar year if
the fair market value of the automobile
(determined pursuant to § 1.6121(d)(5)(i) through (iv)) on the first date
the automobile is made available to the
employee exceeds $12,800 as adjusted by
§ 280F(d)(7).
SECTION 3. SCOPE AND OBJECTIVE
01. The limitations on depreciation deductions in section 4.02 of this revenue
procedure apply to automobiles (other
than leased automobiles) that are placed
in service in calendar year 2000 and continue to apply for each tax year that the
automobile remains in service.
02. The tables in section 4.03 of this
revenue procedure apply to leased automobiles for which the lease term begins in
calendar year 2000. Lessees of such automobiles must use these tables to determine the inclusion amount for each tax
year during which the automobile is
leased.
03. See Rev. Proc. 96-25, 1996-1 C.B.
681, for information on determining in-

722

clusion amounts for automobiles first
leased before January 1, 1997; Rev. Proc.
97-20, 1997-1 C.B. 647, for automobiles
first leased during calendar year 1997, including electric automobiles first leased
on or after January 1, 1997, and before
August 6, 1997; Rev. Proc. 98-24, 1998-1
C.B. 663, for electric automobiles first
leased after August 5, 1997, and before
January 1, 1998; Rev. Proc. 98-30, 1998-1
C.B. 930, for all automobiles first leased
in calendar year 1998; and Rev. Proc. 9914, 1999-5 I.R.B. 56, for all automobiles
first leased in calendar year 1999.
04. The maximum fair market value
figure in section 4.04(2) of this revenue
procedure applies to employer-provided
automobiles first made available to any
employee for personal use in calendar
year 2000. See Rev. Proc. 97-20, for the
maximum fair market value figure for automobiles first made available in calendar
year 1997; Rev. Proc. 98-30, for the maximum fair market value figure for automobiles first made available in calendar year
1998; and Rev. Proc. 99-14, for the maximum fair market value figure for automobiles first made available in calendar year
1999.
SECTION 4. APPLICATION
01. A taxpayer placing an automobile
in service for the first time during calendar year 2000 is limited to the depreciation deduction shown in Table 1 of section 4.02(2) of this revenue procedure or,
in the case of an electric automobile,
Table 2 of this revenue procedure. A taxpayer first leasing an automobile in calendar year 2000 must determine the inclusion amount that is added to gross income
using Table 3 of section 4.03 of this revenue procedure or, in the case of an electric automobile, Table 4 of this revenue
procedure. In addition, the procedures of
§ 1.280F-7(a) must be followed. An employer providing an automobile for the
first time in calendar year 2000 for the
personal use of any employee may determine the value of the use of the automobile by using the cents-per-mile valuation
rule in § 1.61-21(e) if the fair market
value of the automobile does not exceed
the amount specified in section 4.04(2) of
this revenue procedure. If the fair market

2000–9 I.R.B.

value of the automobile exceeds the
amount specified in section 4.04(2) of this
revenue procedure, the employer may determine the value of the use of the automobile under the general valuation rules
of § 1.61-21(b) or under the special valuation rules of § 1.61-21(d) (Automobile
lease valuation) or § 1.61-21(f) (Commuting valuation) if the applicable requirements are met.
02. Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the Inflation Adjustment. Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any
calendar year is the percentage (if any) by
which the CPI automobile component for
October of the preceding calendar year
exceeds the CPI automobile component
for October 1987. The term “CPI automobile component” is defined in §

280F(d)(7)(B)(ii) as the “automobile
component” of the Consumer Price Index
for all Urban Consumers published by the
Department of Labor (the CPI). The new
car component of the CPI was 115.2 for
October 1987 and 138.8 for October
1999. The October 1999 index exceeded
the October 1987 index by 23.6. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2000 is 20.49 percent
(23.6/115.2 x 100%). This adjustment is
applicable to all automobiles that are first
placed in service in calendar year 2000.
The dollar limitations in § 280F(a) must
therefore be multiplied by a factor of
0.2049, and the resulting increases, after
rounding to the nearest $100, are added to
the 1988 limitations to give the depreciation limitations applicable to passenger
automobiles (other than electric automo-

biles) for calendar year 2000. To determine the dollar limitations applicable to
an electric automobile first placed in service during calendar year 2000, the dollar
limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are
then multiplied by a factor of 0.2049; the
resulting increases, after rounding to the
nearest $100, are added to the tripled
1988 limitations to give the depreciation
limitations for calendar year 2000.
(2) Amount of the Limitation. For
automobiles (other than electric automobiles) placed in service in calendar year
2000, Table 1 of this revenue procedure
contains the dollar amount of the depreciation limitations for each tax year. For
electric automobiles placed in service in
calendar year 2000, Table 2 of this revenue procedure contains these amounts.

REV. PROC. 2000-18, TABLE 1
DEPRECIATION LIMITATIONS FOR AUTOMOBILES
(OTHER THAN ELECTRIC AUTOMOBILES)
FIRST PLACED IN SERVICE IN CALENDAR YEAR 2000
Tax Year

Amount

1st Tax Year
2nd Tax Year
3rd Tax Year
Each Succeeding Year

$3,060
$4,900
$2,950
$1,775

REV. PROC. 2000-18, TABLE 2
DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES
FIRST PLACED IN SERVICE IN CALENDAR YEAR 2000
Tax Year

Amount

1st Tax Year
2nd Tax Year
3rd Tax Year
Each Succeeding Year

$9,280
$14,800
$8,850
$5,325

03. Inclusions in Income of Lessees of
Automobiles.
The inclusion amounts for automobiles
first leased in calendar year 2000 are cal-

2000–9 I.R.B.

culated under the procedures described in
§ 1.280F-7(a). Lessees of automobiles
other than electric automobiles should use
Table 3 of this revenue procedure in ap-

723

plying these procedures, while lessees of
electric automobiles should use Table 4 of
this revenue procedure.

February 28, 2000

REV. PROC. 2000-18, TABLE 3
DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2000
Fair Market Value
of Automobile

Tax Year During Lease

Over

Not Over

$ 15,500
15,800
16,100
16,400
16,700
17,000
17,500
18,000
18,500
19,000
19,500
20,000
20,500
21,000
21,500
22,000
23,000
24,000
25,000
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
35,000
36,000
37,000
38,000
39,000
40,000
41,000
42,000
43,000
44,000
45,000
46,000
47,000
48,000
49,000
50,000
51,000
52,000
53,000

15,800
16,100
16,400
16,700
17,000
17,500
18,000
18,500
19,000
19,500
20,000
20,500
21,000
21,500
22,000
23,000
24,000
25,000
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
35,000
36,000
37,000
38,000
39,000
40,000
41,000
42,000
43,000
44,000
45,000
46,000
47,000
48,000
49,000
50,000
51,000
52,000
53,000
54,000

February 28, 2000

1st

2nd

3rd

4th

5th and
Later

3
5
8
10
13
16
20
25
29
33
37
41
45
50
54
60
68
77
85
93
102
110
119
127
135
144
152
160
169
177
185
194
202
210
219
227
235
244
252
260
269
277
285
294
302
311
319

6
12
17
23
28
36
45
54
63
72
81
91
100
109
118
132
150
168
187
205
223
241
259
278
296
314
333
351
369
388
406
424
443
461
479
497
516
534
552
571
589
607
626
644
662
680
699

9
17
25
33
42
52
66
79
93
107
121
133
147
160
174
194
222
249
276
303
330
358
385
412
439
467
493
521
548
574
602
629
656
683
710
738
765
792
819
846
873
901
927
954
982
1,009
1,036

10
20
30
40
49
62
78
95
111
127
143
160
176
193
209
234
266
298
331
364
396
429
461
493
527
558
591
623
656
689
721
754
786
819
852
884
916
949
982
1,014
1,047
1,079
1,112
1,145
1,177
1,210
1,242

12
23
34
45
57
72
91
109
128
147
166
185
204
222
241
269
306
345
381
419
457
494
532
570
607
645
683
720
757
795
833
870
908
946
983
1,021
1,058
1,095
1,133
1,171
1,208
1,246
1,284
1,321
1,359
1,396
1,433

724

2000–9 I.R.B.

REV. PROC. 2000-18, TABLE 3 (Cont’d.)
DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2000
Fair Market Value
of Automobile

Tax Year During Lease

Over

Not Over

54,000
55,000
56,000
57,000
58,000
59,000
60,000
62,000
64,000
66,000
68,000
70,000
72,000
74,000
76,000
78,000
80,000
85,000
90,000
95,000
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000

55,000
56,000
57,000
58,000
59,000
60,000
62,000
64,000
66,000
68,000
70,000
72,000
74,000
76,000
78,000
80,000
85,000
90,000
95,000
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,000

2000–9 I.R.B.

1st

2nd

3rd

4th

5th and
Later

327
336
344
352
361
369
381
398
415
432
448
465
482
498
515
532
561
603
644
686
749
832
916
999
1,083
1,166
1,250
1,333
1,416
1,500
1,583
1,667
1,750
1,834
1,917

717
735
754
772
790
808
836
873
909
945
982
1,019
1,055
1,092
1,129
1,165
1,229
1,320
1,412
1,504
1,641
1,824
2,006
2,190
2,372
2,556
2,738
2,921
3,105
3,287
3,470
3,653
3,836
4,019
4,202

1,063
1,090
1,117
1,145
1,172
1,199
1,240
1,294
1,348
1,403
1,457
1,511
1,566
1,620
1,673
1,728
1,823
1,959
2,095
2,230
2,433
2,705
2,977
3,248
3,520
3,790
4,062
4,334
4,605
4,877
5,148
5,419
5,691
5,962
6,233

1,275
1,308
1,340
1,372
1,405
1,438
1,486
1,551
1,617
1,681
1,747
1,811
1,876
1,942
2,007
2,072
2,186
2,349
2,511
2,674
2,918
3,243
3,569
3,894
4,219
4,545
4,871
5,196
5,521
5,846
6,172
6,498
6,823
7,148
7,474

1,471
1,508
1,546
1,584
1,621
1,659
1,715
1,790
1,865
1,941
2,016
2,092
2,166
2,241
2,317
2,392
2,523
2,711
2,899
3,087
3,369
3,745
4,120
4,496
4,872
5,248
5,623
5,998
6,374
6,750
7,126
7,501
7,877
8,253
8,629

725

February 28, 2000

REV. PROC. 2000-18, TABLE 4
DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2000
Fair Market Value
of Automobile

Tax Year During Lease

Over

Not Over

$ 47,000
48,000
49,000
50,000
51,000
52,000
53,000
54,000
55,000
56,000
57,000
58,000
59,000
60,000
62,000
64,000
66,000
68,000
70,000
72,000
74,000
76,000
78,000
80,000
85,000
90,000
95,000
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000

48,000
49,000
50,000
51,000
52,000
53,000
54,000
55,000
56,000
57,000
58,000
59,000
60,000
62,000
64,000
66,000
68,000
70,000
72,000
74,000
76,000
78,000
80,000
85,000
90,000
95,000
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,000

February 28, 2000

1st

2nd

3rd

4th

5th and
Later

7
14
20
27
33
39
46
52
59
65
72
78
85
95
107
120
133
146
159
172
185
198
211
234
266
298
331
379
444
509
574
638
703
768
833
897
962
1,027
1,092
1,156
1,221
1,286

17
31
45
59
74
88
102
116
130
145
159
173
187
208
237
266
294
322
351
379
407
436
464
514
585
656
727
834
975
1,117
1,259
1,402
1,543
1,685
1,827
1,970
2,112
2,253
2,395
2,538
2,680
2,821

26
47
69
90
110
132
153
174
195
216
237
258
279
311
353
394
437
480
521
564
606
648
690
763
869
975
1,080
1,237
1,449
1,660
1,870
2,080
2,292
2,503
2,713
2,923
3,134
3,346
3,556
3,766
3,977
4,189

32
57
82
107
133
157
183
209
234
259
284
310
335
373
423
474
524
574
625
675
727
777
828
916
1,042
1,168
1,295
1,485
1,737
1,990
2,243
2,496
2,748
3,000
3,254
3,506
3,759
4,011
4,264
4,517
4,769
5,022

36
66
95
124
153
183
211
240
270
299
328
357
387
430
489
547
606
664
723
781
838
897
955
1,058
1,204
1,350
1,495
1,714
2,006
2,297
2,589
2,881
3,173
3,465
3,756
4,049
4,340
4,632
4,924
5,215
5,507
5,798

726

2000–9 I.R.B.

04. Maximum Automobile Value for
Using the Cents-per- mile Valuation Rule.
(1) Amount of Adjustment. Under §
1.61-21(e)(1)(iii)(A), the limitation on the
fair market value of an employer-provided
automobile first made available to any employee for personal use after 1988 is to be
adjusted in accordance with § 280F(d)(7).
Accordingly, the adjustment for any calendar year is the percentage (if any) by which
the CPI automobile component for October
of the preceding calendar year exceeds the
CPI automobile component for October
1987. See, section 4.02(1) of this revenue
procedure. The new car component of the
CPI was 115.2 for October 1987 and 138.8
for October 1999. The October 1999 index
exceeded the October 1987 index by 23.6.
The Internal Revenue Service has, therefore, determined that the adjustment for
2000 is 20.49 percent (23.6/115.2 x 100%).
This adjustment is applicable to all employer-provided automobiles first made
available to any employee for personal use
in calendar year 2000. The maximum fair
market value specified in § 1.6121(e)(1)(iii)(A) must therefore be multiplied by a factor of 0.2049, and the resulting increase, after rounding to the nearest
$100, is added to $12,800 to give the maximum value for calendar year 2000.

(2) The Maximum Automobile Value.
For automobiles first made available in
calendar year 2000 to any employee of
the employer for personal use, the vehicle
cents-per-mile valuation rule may be applicable if the fair market value of the automobile on the date it is first made available does not exceed $15,400.
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to automobiles (other than leased automobiles)
that are first placed in service during calendar year 2000, to leased automobiles
that are first leased during calendar year
2000, and to employer-provided automobiles first made available to employees
for personal use in calendar year 2000.
DRAFTING INFORMATION
The principal author of this revenue procedure is Bernard P. Harvey of the Office
of the Assistant Chief Counsel
(Passthroughs and Special Industries). For
further information regarding the depreciation limitations and lessee inclusion
amounts in this revenue procedure, contact
Mr. Harvey at (202) 622-3110; for further
information regarding the maximum automobile value for applying the vehicle

Month

Year

Weighted
Average

February

2000

6.03

Drafting Information
The principal author of this notice is
Todd Newman of Employee Plans, Tax Exempt and Government Entities Division.
For further information regarding this notice, call the Employee Plans Actuarial hotline, (202) 622-6076 between 2:30 and
3:30 p.m. Eastern time (not a toll-free number). Mr. Newman’s number is (202) 6228458 (also not a toll-free number).

Pre-Filing Agreements Pilot
Program
Notice 2000-12
1. INTRODUCTION OF PILOT
PROGRAM

2000–9 I.R.B.

Weighted Average Interest Rate
Update
Notice 2000-2
Notice 88-73 provides guidelines for
determining the weighted average interest
rate and the resulting permissible range of
interest rates used to calculate current liability for the purpose of the full funding
limitation of § 412(c)(7) of the Internal
Revenue Code as amended by the Omnibus Budget Reconciliation Act of 1987
and as further amended by the Uruguay
Round Agreements Act, Pub. L. 103-465
(GATT).
The average yield on the 30-year Treasury Constant Maturities for January 2000
is 6.63 percent.
The following rates were determined
for the plan years beginning in the month
shown below.

90% to 105%
Permissible
Range

90% to 110%
Permissible
Range

5.43 to 6.34

5.43 to 6.64

This Notice announces a pilot program
for Pre-Filing Agreements (PFAs), under
which large business taxpayers may request examination and resolution of specific issues relating to tax returns they expect to file between September and
December, 2000. The purpose of the program is to enable both taxpayers and the
Internal Revenue Service (IRS) to resolve
before filing the treatment of issues otherwise likely to be disputed in post-filing
audits. Through a cooperative effort, the
program is intended to reduce the costs,
burden and delays encountered in post-filing examinations.
The program is administered by the Large
and Mid-size Business Division (LMSB)
of the IRS. In its pilot phase, the program
is open to large businesses that currently
have a Coordinated Examination Team on
site. Taxpayers interested in participating

727

cents-per-mile valuation rule, contact Ms.
Lynne Camillo of the Office of the Associate Chief Counsel (Employee Benefits and
Exempt Organizations) at (202) 622-6040
(not toll-free calls).

in the pilot program, or with questions
about the program and its suitability to
their situation, should contact their on site
Case Manager as soon as possible, and
are encouraged to apply on or before
March 15, 2000, to ensure their application will be given full consideration.
LMSB is willing to meet with taxpayers
considering participation in the program
to answer questions and explore the desirability of their participation.
During the pilot phase of the program,
LMSB plans to select approximately five
to ten taxpayers from among those requesting participation in the program.
LMSB will select participants as soon as
possible after March 15, 2000, and provide taxpayers and audit teams an orientation about the program. The team will
work with the selected taxpayer with the
expectation of resolving the designated

February 28, 2000

issue by the taxpayer’s filing deadline.
Taxpayers participating in the pilot program will be asked to assist in monitoring
and evaluating the process. After completing the pilot cases, the IRS will evaluate the program, and may then offer the
program, after further modification, on a
permanent basis.
The IRS believes that the PFA program
offers significant potential benefits for
taxpayers as well as the IRS, and invites
large business taxpayers to participate in
this program.
2. DESCRIPTION OF A PRE-FILING
AGREEMENT
A PFA is a closing agreement under § 7121
of the Internal Revenue Code between the
IRS and taxpayer relating to one or more
specific issues arising from transactions entered into by the taxpayer during a taxable
period ending prior to the date of the agreement. The agreement specifies the treatment of the transaction(s) on a tax return to
be filed by the taxpayer subsequent to the
date of the agreement. A PFA may also resolve related specific items affecting other
taxable periods. See Rev. Proc. 68-16,
1968-1 C.B. 770, which describes the
preparation of closing agreements under §
7121.
The PFA’s application of the law to the
taxpayer’s facts may result in treating an
item differently from earlier treatments of
similar items in prior taxable years (e.g.,
deducting items that previously were capitalized, such as certain ISO 9000 costs).
If so, the differing treatment may constitute a change in the method of accounting
for that item. The PFA will resolve only
the factual characterization of the items at
issue, but will not constitute the Commissioner’s consent to make any accounting
method change that may be required to
conform the agreed upon treatment of the
item with identical items in earlier years.
Permission to make any accounting
method changes required by the PFA’s
resolution of the factual and legal issues
must be obtained using the applicable administrative procedures. See Rev. Proc.
99-49, 1999-52 I.R.B. 725 (automatic
consent to change certain accounting
methods); Rev. Proc. 97-27, 1997-1 C.B.
680.
3. SUBJECT MATTER OF AN LMSB
PRE-FILING AGREEMENT

February 28, 2000

In general. The PFA program is intended
to advance the resolution of issues that are
otherwise likely to be disputed in post-filing audits. The program is intended to
reach agreement on factual issues and
apply settled legal principles to those facts.
In such cases, the presence of an LMSB
audit team on site shortly after the completion of the transaction is most likely to enhance the prospects for an agreed resolution of the issue. Questions concerning the
correct interpretation of legal rules the interpretation of which is not well settled are
more properly presented in requests for private letter rulings. See Rev. Proc. 2000-1,
2000-1 I.R.B. 4. Moreover, the program is
not available to settle disagreements between a taxpayer and the IRS over the correct interpretation of the tax laws (except as
authorized under Delegation Order No. 236
or 247 regarding settlement guidelines).
The IRS will consider entering into a PFA
on any issue involving the application of
settled legal principles requested by the taxpayer, except as noted below. Issuance of a
PFA is discretionary with the LMSB Industry Director. A PFA cannot resolve issues
for taxpayers or years outside the jurisdiction of LMSB. In evaluating whether to
proceed with the PFA process and to enter
into a PFA, the IRS will determine that the
issue presented is consistent with the overall goals of the program stated above.
Examples. The following are examples
of issues likely to be suitable for resolution through the PFA program:
(1) The valuation of assets (except in
the context of transfer pricing), and
the allocation of the purchase or
sale price of a business among the
assets acquired or sold;
(2) The identification and documentation of hedging transactions;
(3) Issues relating to in-house research
expenses under section 41;
(4) The allocation of costs among different categories of deductible and
capitalizable items in contexts in
which there is a published revenue
ruling, e.g., repairs (Rev. Rul. 9412, 1994-1 C.B. 36), advertising
(Rev. Rul. 92-80, 1992-2 C.B. 57),
and Y2K costs (Rev. Proc. 97-50,
1997-2 C.B. 525);
(5) The determination of which costs
are investigatory costs incurred to
determine whether to enter a new
business and which business to

728

enter for purposes of qualifying as
start-up costs under § 195 (see Rev.
Rul. 99-23, 1999-20 I.R.B. 3);
(6) The determination of ‘market’ for
taxpayers using the lower of cost or
market method of inventory valuation in situations involving inactive
markets. See § 1.471-4(b);
(7) Whether a taxpayer ’s financial
statement preparation of its last-in,
first-out (LIFO) inventory is consistent with the LIFO conformity requirement under § 1.472-2(e);
(8) Whether a taxpayer’s inventory
contains ‘sub-normal’ goods within
the meaning of § 1.471-2(c) and the
valuation placed thereon;
(9) Whether a taxpayer is considered
the tax owner of the property being
produced under § 1.263A2(a)(1)(ii)(A);
(10) Whether a manufacturing contract
newly entered into by a taxpayer is
required to be accounted for as a
long-term contract under § 460; and
(11) The determination of appropriate
asset classes for depreciable property placed in service during the
taxable period.
Excluded subjects. A PFA will not be
entered into with respect to the following
issues:
(1) Issues that can be included in an
Advance Pricing Agreement under
Rev. Proc. 96-53, 1996-2 C.B. 375,
(e.g., transfer pricing);
(2) Issues that can be resolved by requesting a change in accounting
method on Form 3115;
(3) Issues under the jurisdiction of the
Commissioner, Tax Exempt and
Government Entities Division (e.g.,
employee plans);
(4) Issues regarding transactions that
lack a bona fide business purpose or
have as their principal purpose the
reduction of federal taxes;
(5) The satisfaction, for purposes of
Subtitle F (Procedure and Administration), of reasonable cause, due
diligence, good faith, clear and convincing evidence, or any similar
standard; and
(6) The applicability of any penalty or
criminal sanction.
Excluded circumstances. In addition,
the IRS will not entertain a request for a
PFA in the following circumstances:

2000–9 I.R.B.

(1)

The issue (for the taxpayer) involves a partnership item as defined
in § 6231, or is subject to the procedures set forth in § 6221 through §
6233.
(2) The issue is or will be the subject of
a pending or contemporaneous request for a private letter ruling or a
change in accounting method by the
taxpayer;
(3) The taxpayer’s proposed resolution
of the issue is contrary to a private
letter ruling, technical advice memorandum, or closing agreement previously issued to or regarding the
taxpayer;
(4) The taxpayer’s proposed resolution
of the issue is contrary to a position
adverse to the taxpayer proposed by
the IRS in response to a private letter ruling (or accounting method
change) request that was withdrawn
by the taxpayer; or
(4) The issue is the subject of litigation
(or has been designated for litigation by the Office of Chief Counsel)
between the IRS and the taxpayer
with respect to an earlier taxable
period.
For the purposes of these excluded circumstances, any reference to the taxpayer also
includes a related taxpayer and any predecessor of the taxpayer or a related taxpayer.
A related taxpayer is one related within the
meaning of § 267 or a member of an affiliated group within the meaning of § 1504
that includes the taxpayer. A predecessor is
an entity the tax liability of which the taxpayer or a related taxpayer is or was primarily or secondarily liable.
4. PROCEDURES FOR
REQUESTING AN LMSB PREFILING AGREEMENT
Before initiating a formal request. Taxpayers interested in participating in the
pilot program, or with questions about the
program and its suitability to their situation, should contact the LMSB Case Manager supervising the audit of the return
currently under examination as soon as
possible. Taxpayers also may contact
John Petrella, the PFA Program Manager,
at (202) 283-8390 (not a toll-free number), for further information about the
PFA program.
Initiating the request. After discussing
the proposed request with their Case

2000–9 I.R.B.

Manager, the taxpayer must submit a request for a PFA in writing through the
Case Manager to the LMSB Industry Director. Taxpayers are encouraged to submit the request on or before March 15,
2000, to ensure their application will be
given full consideration. The PFA Program Manager and the Case Manager are
available to assist in the preparation of the
submission.
Contents of the request. The written
statement requesting a PFA should concisely:
(1) Provide the taxpayer’s name, EIN,
and address and the name, title, address and telephone number of a
person to contact;
(2) Provide the Case Manager’s name
and telephone number;
(3) Identify the taxable period for
which the PFA is sought, the last
date on which the taxpayer may file
(with extensions) a timely return for
that period, and (if earlier) the date
on which the taxpayer intends to
file that return;
(4) Describe the issue(s) for which the
PFA is sought. Summarize the material facts and state the legal
issue(s) involved. For the purpose
of ascertaining that the issue involves the application of settled
law, discuss the taxpayer’s interpretation of these legal rules and their
proposed application to the facts in
question;
(5) Discuss the suitability of the issue
for the PFA program in light of the
purposes and criteria set forth in
section 3, above;
(6) Represent that the issue is not described in any of the “Excluded Circumstances” listed in section 3,
above;
(7) Discuss whether the resolution of
this issue will have any effect in
taxable periods either before or
after the taxable period for which
the PFA is sought;
(8) State whether the taxpayer has ever
applied, or intends to apply, for
Competent Authority assistance
with respect to the issue for the year
in question or any prior year;
(9) Discuss whether the issue identified
can be resolved through a PFA by
the date on which the taxpayer intends to file its return for the tax-

729

able period in question;
(10) Describe the organization and location of the records and other evidence that substantiate the taxpayer’s proposed position on the
issue;
(11) State that the taxpayer agrees that
the inspection of records and testimony under the PFA procedures
will not preclude or impede (under
§ 7605(b) or any administrative
provisions adopted by the IRS) a
later examination of a return or inspection of records with respect to
any tax year needed to resolve the
issue(s) in the request for a PFA,
and that the IRS need not comply
with any applicable procedural restrictions (such as providing notice
under § 7605(b)) before beginning
such examination or inspection; and
(12) Indicate the taxpayer’s willingness
to participate in a pilot program and
to assist in monitoring and evaluating the process.
Perjury statement. A request for a PFA,
and any supplemental submission (including additional documents), must include a
declaration, signed by a person currently
authorized to sign the taxpayer’s federal
income tax return, in the following form:
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 request for the Pre-Filing Agreement are true, correct and complete.
Signature. The request for a PFA must
be signed by the taxpayer or the taxpayer’s authorized representative. If the
request is signed by an authorized representative, a copy of Form 2848, Power of
Attorney and Declaration of Representative, must accompany the request.
No user fee. During the pilot phase of
this program, no user fee is required to request a PFA.
5. PROCEDURES FOR SELECTING
TAXPAYERS FOR THE PILOT
PROGRAM
Case Manager’s role. Case Managers will
inform the PFA Program Manager of all instances in which taxpayers express interest
in participation in the program, and will
forward a copy of any written request to the
LMSB Industry Director and the PFA Pro-

February 28, 2000

gram Manager. The Case Manager will
also submit to the LMSB Industry Director
a recommendation as to whether LMSB
should proceed with the PFA request. The
Case Manager should discuss, in particular,
the IRS resources required (including any
specialists or outside consultants), the ability to coordinate the PFA process with the
examination of the taxpayer’s previously
filed returns, the availability of taxpayer
records and personnel, and the probability
of completing examination of the issue in a
timely manner. If the Case Manager plans
to recommend against proceeding with
consideration of the PFA request, the Case
Manager will discuss the proposed recommendation with the taxpayer before submitting the recommendation.
LMSB Industry Director’s decision. The
LMSB Industry Director with jurisdiction
over the taxpayer will make the final decision as to whether to proceed with the taxpayer’s request towards resolution through
the PFA program. Criteria for selecting
taxpayers to participate in the pilot phase of
the PFA program include:
(1) The suitability of the issue presented for the program;
(2) The direct or indirect impact of a
PFA upon other years, issues, taxpayers, or related cases;
(3) Providing a cross-section of issues
and industries for the pilot; and
(4) The probability of completing the
examination of the issue and entering into a PFA by the target date.
Communication with taxpayer. The
LMSB Industry Director or Field Operations Director will contact the taxpayer
within 14 days of receipt of the request to
discuss the potential suitability of the requested issue for inclusion in the pilot
program. Thereafter, LMSB will inform
the taxpayer in writing of LMSB Industry
Director’s decision to accept or reject the
issue(s) for consideration in the PFA pilot
program. A taxpayer is not entitled to a
conference to appeal an LMSB Industry
Director’s decision not to go forward with
the PFA process. A taxpayer not selected
for the pilot program remains eligible for
other procedures for early issue resolution, including the Accelerated Issue Resolution (AIR) program (see Rev. Proc. 9467, 1994-2 C.B. 800).
6. PROCESSING A REQUEST FOR
AN LMSB PRE-FILING
AGREEMENT

February 28, 2000

Consultation with taxpayer. If the IRS
accepts the request for consideration, the
LMSB Industry Director or Field Operations Director, will contact the taxpayer to
discuss scheduling an orientation program
about the PFA process with the taxpayer
and the audit team. This will initiate a
planning process for factual development
and issue resolution with respect to the
issue(s) accepted for consideration. In
this planning process, the IRS and the taxpayer will seek to agree on a proposed
time-frame, the identification of relevant
records and testimony, IRS access to
records and testimony, and, ultimately, the
potential scope and nature of the proposed
agreement(s),
Factual and issue development. After
acceptance by the LMSB Industry Director, the Case Manager will contact the
taxpayer to discuss any questions that the
IRS may have, to ask for any additional
information needed to process the request, to verify data supplied, or to request additional supporting data. True
copies of all contracts, agreements, instruments and other documents, as well as
testimony pertaining to a request for a
PFA must be submitted by the taxpayer
upon request. The issues will be developed and facts confirmed consistent with
auditing standards and all other applicable
rules and regulations in effect regarding
proper auditing techniques. The audit
team will work closely with the taxpayer
to resolve the issue.
Audit Team recommendation. After developing the facts and issues, the Case
Manager will prepare a recommendation
for the LMSB Industry Director about entering into a PFA with the taxpayer. Before submitting the recommendation to
the LMSB Industry Director, the Case
Manager will provide the proposed recommendation to the taxpayer. If the taxpayer disagrees with the Case Manager’s
proposed recommendation, the Case
Manager will offer the taxpayer an opportunity for a conference before submitting
the recommendation to the LMSB Industry Director.
Coordination with other functions. In
considering the request for a PFA, the
LMSB Industry Director will obtain approval from, or coordinate with, all appropriate IRS functions as necessary or, in
his judgment, desirable.
Program Manager and Chief Counsel

730

review. The LMSB Industry Director
will submit any proposed PFA to the PFA
Program Manager, and through the PFA
Program Manager to the Office of Chief
Counsel, for review before it is executed.
Conference with LMSB Industry Director. If the Case Manager recommends
entering into a PFA on terms agreed to by
the taxpayer, but the LMSB Industry Director is tentatively unwilling to enter into
such a agreement, the LMSB Industry Director will offer the taxpayer an opportunity for a conference before rejecting all
or part of a proposed PFA. In all other
cases, the LMSB Industry Director is not
obligated to offer the taxpayer such a conference, although the taxpayer may request one.
Executing the PFA. The LMSB Industry
Director may execute a PFA if the LMSB
Industry Director determines:
(1) That entering into the PFA is consistent with the goals of the PFA
program as stated in this Notice;
(2) That the tax results provided for in
the PFA reflect settled legal principles and correctly apply those principles (or positions authorized
under Delegation Order No. 236 or
247) to the facts found by the Audit
Team; and
(3) That there appears to be an advantag

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A567468fa670997e3. Public record. Not legal advice.