Bulletin No. 2023–52

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HIGHLIGHTS

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Bulletin No. 2023–52

December 26, 2023

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

INCOME TAX

Rev. Proc. 2023-39, page 1590.

Notice 2023-80, page 1583.

This revenue procedure provides specifications for the private printing of red-ink and black-and-white substitutes for

the August 2023 revisions of Forms W-2c and W-3c. This

revenue procedure will be produced as the next revision of

Publication 1223. Rev. Proc. 2016-20, 2016-13 IRB dated

March 28, 2016, is superseded.

EMPLOYEE PLANS

Notice 2023-79, page 1581.

This notice announces that Treasury and the IRS intend to

issue proposed regulations to address the application of the

foreign tax credit and related rules and the dual consolidated

loss (DCL) rules to certain types of taxes described in the

GloBE Model Rules. This notice also extends and modifies

the temporary relief described in Notice 2023-55 for determining whether a foreign tax is eligible for a foreign tax credit

under §§ 901 and 903.

REG-132569-17, page 1616.

This notice sets forth the 2023 Required Amendments List

(2023 RA List). The 2023 RA List applies to both individually designed plans qualified under section 401(a) of

the Internal Revenue Code (qualified individually designed

plans) and individually designed plans that satisfy the

requirements of section 403(b) (section 403(b) individually

designed plans).

This document contains proposed regulations that would

amend the regulations relating to the energy credit for the

taxable year in which eligible energy property is placed in

service. This document also withdraws and reproposes, for

additional clarity, portions of previously proposed regulations

regarding the increased energy credit amount available if prevailing wage and registered apprenticeship requirements are

met.

EXEMPT ORGANIZATIONS

Rev. Proc. 2023-41, page 1607.

Announcement 2023-35, page 1615.

Revocation of IRC 501(c)(3) Organizations for failure to meet

the code section requirements. Contributions made to the

organizations by individual donors are no longer deductible

under IRC 170(c).

Finding Lists begin on page ii.

The revenue procedure sets forth the unpaid loss discount

factors for the 2023 accident year for purposes of section

846 of the Internal Revenue Code. The revenue procedure

also prescribes the salvage discount factors for the 2023

accident year, which must be used to compute discounted

estimated salvage recoverable under section 832 of the

Internal Revenue Code.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

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

December 26, 2023

Bulletin No. 2023–52

Part III

2023 Required

Amendments List

for Individually

Designed Qualified and

Section 403(b) Plans

Notice 2023-79

I. PURPOSE

This notice sets forth the 2023 Required

Amendments List (2023 RA List). The

Required Amendments List (RA List)

applies to both individually designed

plans qualified under section 401(a) of

the Internal Revenue Code (Code) (qualified individually designed plans) and

individually designed plans that satisfy

the requirements of section 403(b) (section 403(b) individually designed plans).

Pursuant to sections 5.03(1)(c) and

6.01 of Rev. Proc. 2022-40, 2022-47 IRB

487, December 31, 2025, generally is

both the last day of the remedial amendment period and the plan amendment

deadline with respect to (1) a disqualifying provision arising as a result of a

change in qualification requirements that

appears on the 2023 RA List, and (2) a

form defect arising as a result of a change

in section 403(b) requirements that

appears on the 2023 RA List. Later dates

may apply to a governmental plan within

the meaning of section 414(d) pursuant

to section 5.03(2)(c) of Rev. Proc. 202240. References to qualification requirements and to section 403(b) requirements

in Parts III and IV of this notice are

referred to, separately and collectively,

as “requirements.”1

II. BACKGROUND

Section 401(b) of the Code provides

a remedial amendment period during

which a plan may be amended retroactively to comply with the qualification

requirements under section 401(a). Treas.

Reg. § 1.401(b)-1 describes the disqualifying provisions that may be amended

retroactively and the remedial amendment

period during which retroactive amendments may be adopted. That regulation

also grants the Commissioner of Internal

Revenue the discretion to designate certain plan provisions as disqualifying

provisions and to extend the remedial

amendment period in guidance published

in the Internal Revenue Bulletin (IRB).

Section 5 of Rev. Proc. 2019-39,

2019-42 IRB 945, as modified by section

III.B.2(e) of Notice 2020-35, 2020-25

IRB 948, establishes a system of recurring remedial amendment periods for

section 403(b) individually designed plan

form defects first occurring after June 30,

2020.

Section 5.03(1)(c) of Rev. Proc. 202240 provides generally that, except as otherwise provided by statute or in regulations

or other guidance published in the IRB, in

the case of an individually designed qualified or section 403(b) plan that is not a

governmental plan within the meaning of

section 414(d), the remedial amendment

period for (1) a disqualifying provision or

(2) a form defect first occurring after June

30, 2020, that arises as a result of a change

in qualification requirements or section 403(b) requirements, as applicable,

expires on the last day of the second calendar year that begins after the issuance of

the RA List on which the change in qualification requirements or section 403(b)

requirements appears. Section 5.03(2)(c)

provides a special rule for governmental

plans that may further extend the remedial

amendment period in some cases.

Section 6.01 of Rev. Proc. 2022-40 provides that the plan amendment deadline

with respect to (1) a disqualifying provision in a qualified individually designed

plan, or (2) a form defect first occurring

after June 30, 2020, in a section 403(b)

individually designed plan is the date on

which the remedial amendment period

expires in accordance with section 5 of

Rev. Proc. 2022-40 with respect to that

disqualifying provision or form defect.

Section 7 of Rev. Proc. 2022-40 provides that the Department of the Treasury

(Treasury Department) and the IRS publish an annual RA List. In general, a change

in qualification requirements or section

403(b) requirements will not appear on

an RA List until guidance with respect to

that change (including, any model amendment, if applicable) has been provided in

regulations or in other guidance published

in the IRB. However, in the discretion

of the Treasury Department and the IRS,

a change in qualification requirements

or section 403(b) requirements may be

included on an RA List in other circumstances, such as in cases in which a statutory change is enacted and the Treasury

Department and the IRS anticipate that no

guidance will be issued.

The remedial amendment period

applicable to a disqualifying provision

or form defect arising as a result of a

change in qualification requirements

or section 403(b) requirements may be

extended beyond the date that normally

would apply to an item included on an

RA List, if, for example, a statute, regulation, or other guidance published in the

IRB provides for a later deadline. Section

501 of the SECURE 2.0 Act2 provides, in

general, that a retirement plan or annuity

contract will be treated as being operated

in accordance with the terms of the plan

during a specified period and, except

as provided by the Secretary of the

Treasury (or the Secretary’s delegate),

a retirement plan will not fail to satisfy

the anti-cutback requirements of section

411(d)(6) of the Code or section 204(g)

of the Employee Retirement Income

Security Act of 1974, Pub. L. 93-406,

88 Stat. 829, as amended (ERISA), by

reason of a plan amendment made pursuant to any amendment made by the

SECURE 2.0 Act or pursuant to any

regulation issued by the Secretary of the

In order to help plan sponsors achieve operational compliance with changes in requirements, the IRS provides the Operational Compliance List, which is a list of changes in both qualification

requirements and section 403(b) requirements that are effective during a calendar year, on the IRS website at https://www.irs.gov/retirement-plans/operational-compliance-list. See generally

section 8 of Rev. Proc. 2022-40.

Division T of the Consolidated Appropriations Act, 2023, Pub. L. 117-328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act).

Bulletin No. 2023–52

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December 26, 2023

Treasury or the Secretary of Labor (or a

delegate of either such Secretary) under

the SECURE 2.0 Act, provided that:

(1) the amendment is adopted no later

than the last day of the first plan year

beginning on or after January 1, 2025, or,

for an applicable collectively bargained

plan (a plan maintained pursuant to one

or more collective bargaining agreements

between employee representatives and

one or more employers ratified before

December 29, 2022), or for a governmental plan (within the meaning of section 414(d) of the Code), the last day of

the first plan year beginning on or after

January 1, 2027, or such later date as the

Secretary may prescribe (the section 501

date);

(2) the amendment applies retroactively to the effective date of the SECURE

2.0 Act provision or the regulations thereunder (or, in the case of an amendment not

required by a provision of the SECURE

2.0 Act or the regulations thereunder, the

effective date specified by the plan); and

(3) the plan or contract is operated as

if the amendment were in effect during

the period beginning on the effective date

of the SECURE 2.0 Act provision or the

regulations thereunder (or, in the case of

an amendment not required by a provision

of the SECURE 2.0 Act or the regulations

thereunder, the effective date specified by

the plan or contract) and ending on the

section 501 date or, if earlier, the date the

amendment is adopted.

Section 501(c) of the SECURE 2.0 Act

modifies section 601(b)(1) of the Setting

Every Community Up for Retirement

Enhancement Act of 2019 (SECURE

Act),3 sections 2202(c)(2)(A) and 2203(c)

(2)(B)(i) of the Coronavirus Aid, Relief,

and Economic Security Act, and section

302(d)(2)(A) of Title III of the Taxpayer

Certainty and Disaster Tax Relief Act of

20204 to extend plan amendment deadlines with respect to these sections to coordinate with the plan amendment deadlines

under section 501 of the SECURE 2.0 Act,

as applicable.5

III. CONTENT AND

ORGANIZATION OF RA LIST

In general, an RA List includes statutory and administrative changes in requirements that are first effective during the

plan year in which the list is published.6

However, an RA List does not include:

• Guidance issued or legislation enacted

after the list has been prepared;

• Statutory changes in requirements

for which the Treasury Department

and the IRS expect to issue guidance

that would be included on an RA List

issued in a future year;

• Changes in requirements that permit

(but do not require) optional plan

provisions, in contrast to changes

in requirements that cause existing

plan provisions (which may include

optional plan provisions previously

adopted) to become disqualifying

provisions or section 403(b) form

defects;7 or

• Changes in the tax laws affecting qualified individually designed

plans or section 403(b) individually

designed plans that do not change the

requirements (such as changes to the

tax treatment of plan distributions, or

changes to the funding requirements

for qualified individually designed

plans).

The RA List is divided into two parts.

Part A covers changes in requirements that

generally would require an amendment to

most plans or to most plans of the type

affected by the change.

Part B includes changes in requirements

that the Treasury Department and the IRS

anticipate will not require amendments to

most plans but might require an amendment because of an unusual plan provision in a particular plan. For example, if a

change affects a particular requirement that

most plans incorporate by reference, Part B

would include that change because a particular plan might not incorporate the requirement by reference and, thus, might include

language inconsistent with the change.

Annual, monthly, or other periodic

changes to (1) the various dollar limits that are adjusted for cost of living

increases as provided in section 415(d)

or other Code provisions, (2) the spot

segment rates used to determine the

applicable interest rate under section 417(e)(3), and (3) the applicable

mortality table under section 417(e)

(3), are treated as included on the RA

List for the year in which such changes

are effective even though they are not

directly referenced on that RA List. The

Treasury Department and the IRS anticipate that few plans have language that

will need to be amended on account of

these changes.

The fact that a change in a requirement

is included on the RA List does not necessarily mean that a plan must be amended

as a result of that change. Each plan sponsor must determine whether a particular change in a requirement requires an

amendment to its plan.

IV. 2023 REQUIRED AMENDMENTS

LIST

Part A. Changes in requirements that generally would require an amendment to most plans or to most

plans of the type affected by the

change.

• None

Part B. Other changes in requirements

that may require an amendment.

• None

V. DRAFTING INFORMATION

The principal author of this notice

is Tom Morgan of the Office of

Associate Chief Counsel (Employee

Benefits, Exempt Organizations, and

Employment Taxes). For further information regarding this notice, contact

Mr. Morgan at (202) 317-6700 (not a

toll-free number).

Division O of the Further Consolidated Appropriations Act, 2020, Pub. L. 116-94, 133 Stat. 2534 (2019).

Division EE of the Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat. 1182 (2020).

Section G of Notice 2020-68, 2020-38 IRB 567, extended the deadline to amend a plan to reflect section 104 of Division M of the Further Consolidated Appropriations Act, known as the

Bipartisan American Miners Act of 2019, to coordinate with the plan amendment deadlines provided in section 601 of the SECURE Act.

RA Lists also may include changes in requirements that were first effective in a prior year that were not included on a prior RA List under certain circumstances, such as changes in requirements that were issued or enacted after the prior year’s RA List was prepared.

The remedial amendment period and plan amendment deadline for discretionary changes to the terms of an individually designed qualified or section 403(b) plan are governed by sections

5.03(1)(b), 5.03(2)(b), and 6.02 of Rev. Proc. 2022-40. These deadlines for discretionary changes are not affected by the inclusion of a change in requirements on an RA List.

December 26, 2023

1582

Bulletin No. 2023–52

Guidance Regarding the

Foreign Tax Credit and

Dual Consolidated Losses

in Relation to the GloBE

Model Rules, and Extension

and Modification of

Temporary Relief in Notice

2023-55

Notice 2023-80

SECTION 1. OVERVIEW

.01 Purpose.

This notice announces that the

Department of the Treasury (Treasury

Department) and the Internal Revenue

Service (IRS) intend to issue proposed

regulations under §§ 59(l), 78, 704, 901,

903, 951A, 954, 960, and 1503(d) of the

Internal Revenue Code (Code)1 to address

the application of those provisions, including the foreign tax credit rules and the dual

consolidated loss rules, to certain types of

taxes described in the “Tax Challenges

Arising from the Digitalisation of the

Economy - Global Anti-Base Erosion

Model Rules (Pillar Two)” (GloBE Model

Rules).2 The Treasury Department and the

IRS anticipate that the proposed regulations will be consistent with the guidance

provided in sections 2 and 3 of this notice.

This notice also extends the relief

period for the temporary relief described

in Notice 2023-55 in determining whether

a foreign tax is eligible for a foreign tax

credit under §§ 901 and 903. In addition,

this notice addresses the application of the

temporary relief with respect to partnerships and their partners.

.02 Overview of the GloBE Model

Rules.

The GloBE Model Rules create a

coordinated system of minimum taxation intended to ensure that Multinational

Enterprise Groups (MNE Groups) with

annual revenue of EUR 750 million or

more pay a minimum level of tax on the

income arising in each jurisdiction in

which they operate.3 Certain jurisdictions

have enacted, and others have proposed,

legislation to implement the GloBE Model

Rules for the IIR and Qualified Domestic

Minimum Top-up Tax (QDMTT), effective for Fiscal Years beginning on or after

December 31, 2023, and for the UTPR,

effective for Fiscal Years beginning on

or after December 31, 2024.4 This notice

does not provide guidance regarding the

UTPR, except as provided in sections

2.03 and 3.03 of this notice. The Treasury

Department and the IRS continue to analyze issues related to the UTPR and intend

to issue additional guidance.

Under the GloBE Model Rules, an

in-scope MNE Group must calculate its

Effective Tax Rate (ETR) for each jurisdiction in which it operates. The ETR

determination for a jurisdiction involves

calculating the Net GloBE Income in that

jurisdiction, based on the net income or

loss reflected on financial statements with

certain adjustments, and Adjusted Covered

Taxes, which is a measure of taxes paid

with respect to that income (including,

when computing the ETR for the IIR or

UTPR, cross-border taxes such as those

imposed on income of a controlled foreign corporation (CFC) or foreign branch

located in the jurisdiction). If the ETR for

a jurisdiction is below the 15% Minimum

Rate, Top-up Tax may be imposed and collected under the QDMTT, IIR, and UTPR.

The amount of Top-up Tax is determined

by multiplying the Top-up Tax Percentage

(the excess of 15% over the ETR in the

jurisdiction) by the Excess Profits (the

Net GloBE Income in such jurisdiction

that exceeds a Substance-based Income

Exclusion).

A jurisdiction that enacts a QDMTT

will collect tax with respect to low-taxed

income in that jurisdiction. Any Top-up

Tax not collected under a QDMTT may

be collected under the IIR or UTPR.

Jurisdictions enacting the QDMTT, IIR,

and UTPR into their domestic law may

separately enact each such tax or may

amend their existing corporate income

tax.

The GloBE Model Rules operate so

that taxes are imposed on Net GloBE

Income in the following order of priority:

(1) Covered Taxes (other than Controlled

Foreign Company Tax Regimes (CFC Tax

Regimes) and certain cross-border taxes);

(2) QDMTT; (3) CFC Tax Regimes and

certain other cross-border taxes; (4) IIR;

and (5) UTPR. Thus, for example, a

QDMTT is computed without regard to

taxes paid pursuant to a CFC Tax Regime.

SECTION 2. GLOBE MODEL RULES

AND THE FOREIGN TAX CREDIT

.01 Background.

Section 901 generally allows a credit

for the amount of any income, war profits, and excess profits taxes (collectively,

foreign income taxes) paid or accrued

during the taxable year to any foreign

country or to any territory of the United

States, and in the case of a domestic corporation, the taxes deemed to have been

paid under § 960. Section 903 provides

that foreign income taxes include a tax

paid in lieu of a generally-imposed foreign income tax.

This section 2 describes rules that

would address the treatment of certain taxes, including IIRs, UTPRs, and

QDMTTs, under §§ 59(l), 78, 275, 704,

901, 903, 951A, 954, and 960. For purposes of section 2 of this notice, the term

IIR, the term UTPR, and the term QDMTT

mean a tax imposed under a foreign tax

law5 that is consistent with the IIR, UTPR,

and QDMTT, respectively, described in

the GloBE Model Rules.

.02 Final Top-up Tax.

(1) In general. The Treasury

Department and the IRS intend to issue

proposed regulations consistent with the

guidance provided in this section 2.02,

which describes the treatment of final

top-up taxes under §§ 59(l), 78, 275, 704,

901, 903, 951A, 954, and 960.

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

Org. for Econ. Coop. & Dev. [OECD], Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two) (Dec. 14, 2021), https://www.

oecd-ilibrary.org/taxation/tax-challenges-arising-from-digitalisation-of-the-economy-global-anti-base-erosion-model-rules-pillar-two_782bac33-en.

Capitalized terms used in this notice, but not defined herein, have the meanings ascribed to such terms under the GloBE Model Rules.

Under the European Union (EU) Directive requiring the adoption of the GloBE Model Rules, EU Member States will apply the UTPR for years beginning on or after December 31, 2023

but only in limited circumstances. See Council Directive 2022/2523, art. 50, 2022 OJ (L 328) 1, 55.

The term “foreign tax law” in this notice has the meaning in § 1.901-2(g)(4).

Bulletin No. 2023–52

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December 26, 2023

(2) Definition of final top-up tax. A

foreign income tax (tested tax) is a final

top-up tax if, in computing the tested tax,

the foreign tax law takes into account: (a)

the amount of tax imposed on the direct or

indirect owners of the entity subject to the

tested tax by other countries (including the

United States) with respect to the income

subject to the tested tax, or (b) in the case

of an entity subject to the tested tax on

income attributable to its branch in the

foreign country imposing the tested tax,

the amount of tax imposed on the entity

by its country of residence with respect to

such income.

(3) Treatment of a final top-up tax

under §§ 901 and 59(l). No credit is

allowed under §§ 901 or 59(l) to a person

for a final top-up tax if, under the foreign

tax law, any amount of United States

federal income tax liability of the person

would be taken into account in computing the final top-up tax (without regard

to whether the person has any amount of

United States federal income tax liability

that, in fact, is taken into account in such

computation).

(4) Treatment of a final top-up tax paid

by a partnership or CFC. In general, a

final top-up tax is treated as if it were a

creditable tax at the partnership and CFC

level, with the disallowance of the credit

pursuant to section 2.02(3) of this notice

applying at the level of the partner or U.S.

shareholder, as applicable. This treatment

is intended to facilitate appropriate results

where a final top-up tax is creditable as

to one partner or U.S. shareholder of a

partnership or CFC, as applicable, but not

as to another. Further, a final top-up tax

is not taken into account in determining

whether the high-tax exception to foreign

base company income in § 1.954-1(d) or

the high-tax exclusion from tested income

in § 1.951A-2(c)(7) applies.

(a) Creditable foreign tax expenditure.

A final top-up tax is treated as a creditable

foreign tax expenditure under § 1.7041(b)(4)(viii)(b).

(b) Eligible current year tax. A final

top-up tax is treated as an eligible current

year tax under § 1.960-1(b)(5).

computing the effective rate of foreign

income tax under § 1.954-1(d)(2) and

§ 1.951A-2(c)(7)(vi), a final top-up tax

December 26, 2023

is excluded from the amount of foreign

income taxes described in § 1.954-1(d)

(2)(i) and § 1.951A-2(c)(7)(vi)(A), and

increases the amount of the net item of

income described in § 1.951-1(d)(2)(ii)

and the amount of the tentative tested

income item described in § 1.951A-2(c)

(7)(vi)(B), as applicable.

(5) Application of §§ 78 and 275(a)(4).

If a taxpayer chooses with respect to any

taxable year to claim a credit for foreign

income taxes, absent a specific statutory

provision to the contrary (such as § 901(j)

(3)), the gross-up rule of § 78 and the

deduction disallowance rule of § 275(a)

(4) apply to any foreign income tax paid

or accrued in such taxable year regardless

of whether a foreign tax credit is allowed

for the particular tax. The guidance in this

section would confirm that result in the

case of a final top-up tax, such as an IIR

that is a foreign income tax. As a result,

a taxpayer who chooses to credit foreign

income taxes would be required to include

in gross income under § 78 an amount

equal to the amount of a final top-up tax

deemed paid by the taxpayer under §§

960(a), (b), and (d), and would not be able

to claim a deduction for a final top-up tax

under § 275(a)(4).

(a) Section 78 gross-up amount. Section

78 applies to a final top-up tax deemed paid

by a domestic corporation that chooses to

have the benefits of subpart A of part III of

subchapter N for any taxable year.

(b) Section 275(a)(4) deduction disallowance. Section 275 applies to deny

a deduction for a final top-up tax to any

person that chooses to take to any extent

the benefits of § 901.

(6) Examples. The following examples

illustrate the application of this section

2.02.

(a) Example 1—IIR that is a foreign income tax.

(i) Facts. Country X imposes an IIR on certain

entities resident in Country X. The IIR imposed

by Country X is a foreign income tax within the

meaning of § 1.901-2(a) and (b). Under Country

X tax law, in computing the amount of the IIR,

the foreign tax liability of the direct and indirect

owners of the Country X taxpayers that relates to

income subject to the IIR is taken into account if

those owners are part of the same MNE Group (as

defined under Country X tax law) as the Country X

taxpayers. USP is a domestic corporation that owns

all the stock of CFCX, a CFC that is organized in,

and is a tax resident of, Country X. CFCX owns all

the stock of CFCY, a CFC that is organized in, and

is a tax resident of, Country Y. Under Country X

tax law, USP is considered part of the same MNE

1584

Group as CFCX and CFCY, and, therefore, any

U.S. tax liability of USP that relates to income subject to the IIR is taken into account in computing

the IIR. In 2024, CFCX is liable for 5u (units of

Country X currency) of the Country X IIR. At all

relevant times, 1u = $1. USP is deemed to pay $4 of

the Country X IIR under § 960(d). USP chooses to

credit foreign income taxes for 2024.

(ii) Analysis. The Country X IIR is a final top-up

tax because it is a foreign income tax that takes into

account the amount of tax imposed by other countries on the direct or indirect owners of the entity

subject to the Country X IIR with respect to the

income subject to the Country X IIR. No credit is

allowed under § 901 to USP for the $4 of Country

X IIR that USP is deemed to pay because, under

Country X tax law, USP’s U.S. federal income tax

liability may be taken into account in computing

the Country X IIR. This result does not depend on

whether USP has any amount of U.S. federal income

tax liability or whether any of that liability is, in fact,

taken into account in computing the Country X IIR.

The amount included in USP’s income by reason of

§ 78 and § 1.78-1(a) is $5.

(b) Example 2—Minority U.S. shareholder.

(i) Facts. The facts are the same as in Example 1,

except that: (i) USP and USM, a domestic corporation, own 70% and 30%, respectively, of the stock of

HoldCo, a CFC that is organized in, and is a tax resident of, Country A, and HoldCo owns all the stock

of CFCX, (ii) USM is not considered part of the

same MNE Group as USP, CFCX and CFCY under

Country X tax law, (iii) CFCX is liable for 6.5u of

the Country X IIR, and (iv) under § 960(d), USP is

deemed to pay $3.64 of the Country X IIR, and USM

is deemed to pay $1.56 of the Country X IIR.

(ii) Analysis. Similar to the analysis in Example

1, the Country X IIR is a final top-up tax, and no

credit is allowed under § 901 to USP for the $3.64 of

Country X IIR that USP is deemed to pay because,

under Country X tax law, USP’s U.S. federal income

tax liability may be taken into account in computing

the Country X IIR. USM, however, may be allowed a

credit under § 901 for the $1.56 of the Country X IIR

that USM is deemed to pay under § 960(d) because,

under Country X tax law, no amount of USM’s U.S.

federal income tax liability can be taken into account

in computing the Country X IIR as USM is not

considered part of the same MNE Group as CFCX.

Under § 78 and § 1.78-1(a), the amount included in

USP’s income is $4.55, and the amount included in

USM’s income is $1.95.

tax.

(i) Facts. The facts are the same as in Example

1, except that Country Y imposes a QDMTT. The

QDMTT imposed by Country Y is a foreign income

tax within the meaning of § 1.901-2(a) and (b).

Under Country Y tax law, in computing the amount

of the QDMTT, the foreign tax liability of direct and

indirect owners of the entity subject to the QDMTT

is not taken into account. Therefore, any U.S. tax liability of USP is not taken into account in computing

the QDMTT. In 2024, CFCX is liable for no amount

of Country X IIR, and CFCY is liable for 10y (units

of Country Y currency) of Country Y QDMTT. At all

relevant times, 1y= $1. USP is deemed to pay $8 of

the Country Y QDMTT under § 960(d).

Bulletin No. 2023–52

(ii) Analysis. The Country Y QDMTT is not

a final top-up tax because Country Y tax law does

not take into account in computing the Country Y

QDMTT the amount of tax imposed by other countries on the direct and indirect owners of the entity

subject to the Country Y QDMTT. Therefore, USP

may be allowed a credit under § 901 for the $8 of

Country Y QDMTT deemed paid under § 960(d).

The amount included in USP’s income by reason of

§ 78 and § 1.78-1(a) is $10.

.03 Separate Levy Rules.

(1) In general. The Treasury

Department and the IRS intend to issue

proposed regulations consistent with the

guidance provided in this section 2.03,

which describes how the separate levy

rules of § 1.901-2(d) apply with respect

to an IIR, UTPR, and QDMTT. This treatment would reflect that the amount of tax

imposed under an IIR, UTPR, or QDMTT

is computed separately from any other

levy imposed by a foreign country, and

would ensure consistent treatment of an

IIR, UTPR, and QDMTT regardless of the

manner in which a foreign country enacts

an IIR, UTPR, or QDMTT under its foreign tax law.

(2) Application of separate levy rules.

Each of an IIR, UTPR, and QDMTT

imposed by a foreign country is a separate

levy within the meaning of § 1.901-2(d)

from any other levy imposed by that country, even if the country imposes the IIR,

UTPR, or QDMTT by adjusting the base

of any other levy (such as through an addition to income or denial of deductions).

.04 Determining the Taxpayer for a

QDMTT.

(1) In general. The Treasury

Department and the IRS intend to issue

proposed regulations consistent with the

guidance provided in this section 2.04,

which describes rules for determining the

person by whom a QDMTT is considered

paid under § 1.901-2(f) when a QDMTT

is computed by reference to the income of

two or more persons.

(2) QDMTT on income of two or more

persons. The legal lability for a QDMTT

imposed on the income of two or more

persons is determined under the rules of

this section 2.04(2) through (4) rather than

under § 1.901-2(f)(3) (regarding taxes

imposed on combined income of two or

more persons). If a QDMTT is computed

by reference to the income of two or more

persons, foreign tax law is considered to

impose legal liability for the QDMTT on

each person in proportion to the person’s

Bulletin No. 2023–52

QDMTT Allocation Key, as determined

under this section 2.04(2). A person’s

QDMTT Allocation Key is the product of

(i) the excess (if any) of the QDMTT Rate

over the person’s Separate Pre-QDMTT

ETR, and (ii) the person’s Separate

QDMTT Income (such terms as defined

in section 2.04(3)). If a person’s Separate

QDMTT Income is zero or less than zero,

then the person’s QDMTT Allocation Key

will be treated as zero. The rules of this

section 2.04 apply regardless of how the

foreign tax law allocates the QDMTT liability among two or more persons, which

person is obligated to remit the tax, which

person actually remits the tax, or which

person the foreign country could proceed

against to collect the tax in the event all or

a portion of the tax is not paid.

(3) Definitions. The following definitions apply for purposes of this section

2.04.

(a) Person. Person means an individual or an entity (including a disregarded

entity described in § 301.7701-2(c)(2)

(i)) that is subject to a QDMTT imposed

by a foreign country. In determining the

amount of the QDMTT paid by an owner

of a partnership or a disregarded entity,

the rule described in section 2.04(2) first

applies to determine the amount of the

QDMTT paid by the partnership or disregarded entity, and then § 1.901-2(f)(4)

applies to allocate the amount of such

QDMTT to the owner.

(b) QDMTT Rate. QDMTT Rate means

the minimum effective tax rate (ETR), as

stated in the foreign tax law, to which

the actual ETR of a person or persons is

compared for purposes of computing the

QDMTT.

the taxes (whether positive or negative)

of the person that are taken into account

under the foreign tax law for purposes of

computing the QDMTT.

(d) Separate QDMTT Income. A person’s Separate QDMTT Income means the

income or loss of the person that is taken

into account under the foreign tax law for

purposes of computing the QDMTT.

(e) Separate Pre-QDMTT ETR. A person’s Separate Pre-QDMTT ETR means

the person’s Separate Pre-QDMTT Taxes

(whether positive or negative) divided by

the person’s Separate QDMTT Income.

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(4) Separate QDMTT Income and

Separate Pre-QDMTT Taxes. A person’s Separate QDMTT Income and a

person’s Separate Pre-QDMTT Taxes

are determined by reference to the relevant amounts (not reduced by negative

amounts attributable to any other person)

provided on any return, schedule or other

document that, under the foreign tax law,

must be filed or maintained for purposes

of the QDMTT. If no return, schedule,

or other document that provides a person’s Separate QDMTT Income and a

person’s Separate Pre-QDMTT Taxes is

required to be filed or maintained, then,

a person’s Separate QDMTT Income and

a person’s Separate Pre-QDMTT Taxes

are determined by reference to the relevant amounts provided in the books of

account regularly maintained by or on

behalf of the person and used for purposes of computing the QDMTT.

(5) Examples. The following examples

illustrate the application of this section

2.04(2) through (4).

(a) Example 1—QDMTT imposed on two or more

persons.

(i) Facts. Country X has enacted a QDMTT.

Under Country X tax law, entities that are resident

in, or have a taxable presence in, Country X and that

are members of the same MNE Group, are jointly

and severally liable for the QDMTT. USP is a United

States person that owns all of the stock of each of

CFC1 and CFC2, each of which is a CFC that is a

tax resident of Country X. CFC1 and CFC2 are

members of the same MNE Group under Country

X tax law. In Year 1, CFC1’s Separate QDMTT

Income is 100u (units of Country X currency) and

CFC1’s Separate Pre-QDMTT Taxes is 5u. In the

same year, CFC2’s Separate QDMTT Income is

50u, and CFC2’s Separate Pre-QDMTT Taxes is 5u.

The QDMTT Rate in Country X is 15%. Country X

imposes 12.5u of QDMTT with respect to CFC1 and

CFC2 collectively.

(ii) Analysis. Under Country X tax law, the

amount of the QDMTT is computed by reference

to the income of both CFC1 and CFC2. Under section 2.04(2) through (4) of this notice, the 12.5u of

the Country X QDMTT is allocated between CFC1

and CFC2 in proportion to each person’s QDMTT

Allocation Key. CFC1’s QDMTT Allocation Key

is 10u ((15% - (5u / 100u)) x 100u), and CFC2’s

QDMTT Allocation Key is 2.5u ((15% - (5u / 50u))

x 50u). Accordingly, 10u of the Country X QDMTT

(12.5u x (10u / 12.5u)) is allocated to CFC1, and 2.5u

of the Country X QDMTT (12.5u x (2.5u / 12.5u)) is

allocated to CFC2.

(b) Example 2—Effect of SBIE.

(i) Facts. The facts are the same as in Example

1, except that CFC1 and CFC2 collectively have

15u of Substance-based Income Exclusion (SBIE)

which, under Country X tax law, can reduce an MNE

Group’s QDMTT liability. After taking into account

December 26, 2023

the SBIE, Country X imposes 11.25u of QDMTT

with respect to CFC1 and CFC2 collectively.

(ii) Analysis. The amount of SBIE (if any), and

the entity to which it may be attributable, is not

taken into account in the calculation of each person’s

QDMTT Allocation Key. The QDMTT Allocation

Key for each of CFC1 (10u) and CFC2 (2.5u) remains

the same as in Example 1 because each of CFC1

and CFC2 has the same Separate QDMTT Income

and Separate Pre-QDMTT Taxes as in Example 1.

Accordingly, 9u of the Country X QDMTT (11.25u

x (10u / 12.5u)) is allocated to CFC1, and 2.25u of

the Country X QDMTT (11.25u x (2.5u / 12.5u)) is

allocated to CFC2.

Income.

(i) Facts. The facts are the same as in Example 1,

except that USP also owns all of the stock of CFC3,

which is a CFC that is a tax resident of Country

X. CFC3 is a member of the same MNE Group as

CFC1 and CFC2 under Country X tax law. In Year

1, CFC3’s Separate QDMTT Income is a net loss

of 50u, and its Separate Pre-QDMTT Taxes is zero.

Country X imposes 5u of QDMTT with respect to

CFC1, CFC2, and CFC3 collectively.

(ii) Analysis. Under Country X tax law, the

amount of the QDMTT is computed by reference

to the income of CFC1, CFC2, and CFC3. Under

section 2.04(2) through (4) of this notice, the 5u

of Country X QDMTT is allocated among CFC1,

CFC2, and CFC3 in proportion to each person’s

QDMTT Allocation Key. The QDMTT Allocation

Key for CFC1 (10u) and for CFC2 (2.5u) remain

the same as in Example 1 because they have the

same Separate QDMTT Income and Separate PreQDMTT Taxes as in Example 1. CFC3’s QDMTT

Allocation Key is treated as zero because its Separate

QDMTT Income is less than zero. Accordingly, 4u

of the Country X QDMTT (5u x (10u / 12.5u)) is

allocated to CFC1, 1u of the Country X QDMTT (5u

x (2.5u / 12.5u)) is allocated to CFC2, and none of

the Country X QDMTT (5u x 0u / 12.5u) is allocated

to CFC3.

(d) Example 4—Negative Separate Pre-QDMTT

Taxes.

(i) Facts. The facts are the same as in Example

1, except that: (i) in Year 1, CFC1’s Separate PreQDMTT Taxes is -5u, representing a negative

amount of income tax expense (a tax benefit), and (ii)

Country X imposes 22.5u of QDMTT with respect to

CFC1 and CFC2 collectively.

(ii) Analysis. As in Example 1, under Country

X tax law, the amount of the QDMTT is computed

by reference to the income of both CFC1 and CFC2.

Under section 2.04(2) through (4) of this notice, the

22.5u of Country X QDMTT is allocated between

CFC1 and CFC2 in proportion to each person’s

QDMTT Allocation Key. The QDMTT Allocation

Key for CFC2 (2.5u) remains the same as in

Example 1 because CFC2 has the same Separate

QDMTT Income and Separate Pre-QDMTT Taxes

as in Example 1. However, CFC1’s QDMTT

Allocation Key is now 20u ((15% - (-5u / 100u)) x

100u), reflecting the change in CFC1’s Separate PreQDMTT Taxes. Accordingly, 20u of the Country

X QDMTT (22.5u x (20u / 22.5u)) is allocated to

CFC1, and 2.5u of the Country X QDMTT (22.5u x

(2.5u / 22.5u)) is allocated to CFC2.

December 26, 2023

.05 The Non-duplication Requirement

for In Lieu of Taxes.

(1) In general. The Treasury

Department and the IRS intend to amend

the non-duplication requirement in §

1.903-1(c)(1)(ii) as described in this section 2.05.

(2) Non-duplication requirement. A foreign tax, in order to qualify as an in lieu

of tax, need only be in substitution for a

generally-imposed net income tax and

not in substitution for all net income taxes

imposed by that country. Accordingly,

the first sentence of the non-duplication

requirement in § 1.903-1(c)(1)(ii) would

be revised as follows: “The generally-imposed net income tax for which the tested

foreign tax is imposed in substitution is not

also imposed, in addition to the tested foreign tax, on any persons with respect to any

portion of the income to which the amounts

(such as sales or units of production) that

form the base of the tested foreign tax relate

(the ‘excluded income’).” Conforming

changes to the second sentence of § 1.9031(c)(1)(ii) and the examples in § 1.903-1(d)

would be made as appropriate.

(3) Example.

(a) Facts. Country X imposes a net income tax

within the meaning of § 1.901-2(a)(3) on the income

of nonresident companies that is attributable to the

nonresident’s activities within Country X (NRCIT)

and that constitutes a generally-imposed net income

tax. The NRCIT applies to all nonresident corporations that engage in business in Country X except

for nonresident corporations that engage in activities

related to Industry B, which are instead subject to the

Industry B Tax. The NRCIT and the Industry B Tax

were enacted contemporaneously, and the statutory

language of the NRCIT expressly excludes gross

income derived by corporations engaged in activities

related to Industry B. Country X enacts a QDMTT

that is a net income tax within the meaning of

§ 1.901-2(a)(3). The Country X QDMTT is imposed

with respect to gross income that is also included in

the base of the Industry B Tax.

(b) Analysis. The Industry B Tax meets the

requirement in § 1.903-1(c)(1)(i) because Country X

has a generally-imposed net income tax, the NRCIT.

In addition, the Industry B Tax meets the requirement in § 1.903-1(c)(1)(ii), modified as described

in section 2.05(2), because the generally-imposed

net income tax for which the tested foreign tax is

imposed in substitution, the NRCIT, is not also

imposed, in addition to the Industry B Tax, on any

persons with respect to any portion of the income to

which the amounts that form the base of the Industry

B Tax relate (“excluded income”). It is not relevant

that the Country X QDMTT is also imposed on the

excluded income.

(4) Additional changes to § 1.903-1.

The Treasury Department and the IRS are

1586

considering whether additional changes

to § 1.903-1 would be needed to ensure

that foreign taxes continue to be creditable only where consistent with the scope

and purposes of § 903. These additional

changes may include defining a generally-imposed net income tax.

.06 Applicability Date and Reliance.

(1) Applicability date. It is anticipated

that the proposed regulations will provide that rules consistent with the rules

described in section 2 of this notice apply

to taxable years ending after December

11, 2023.

(2) Reliance. A taxpayer may rely on

the guidance described in sections 2.02

through 2.05 of this notice for taxable

years that end after December 11, 2023,

and on or before the date proposed regulations are published in the Federal Register,

provided that the taxpayer consistently

follows the guidance in its entirety for all

those taxable years. Additionally, for taxable years that begin on or after December

28, 2021, and end on or before December

11, 2023, a taxpayer may rely on the

guidance described in section 2.05 of this

notice.

SECTION 3. GLOBE MODEL RULES

AND DUAL CONSOLIDATED

LOSSES

.01 Background.

Section 1503(d) and the regulations

thereunder (DCL rules) prevent “double

dipping” of losses, which occurs when

the same economic loss offsets or reduces

both income subject to U.S. tax (but not

a foreign jurisdiction’s tax) and income

subject to the foreign jurisdiction’s tax

(but not U.S. tax). See S. Rep. 313, 99th

Cong., 2d Sess., at 419-20 (1986). A dual

consolidated loss (DCL) is defined as a net

operating loss of a dual resident corporation and a net loss of a domestic corporation that is attributable to certain foreign

branches or interests in hybrid entities

(separate units). See § 1.1503(d)-1(b)(5).

Under the DCL rules, a DCL cannot offset the income of a domestic affiliate (a

domestic use), subject to certain exceptions. See § 1.1503(d)-4(b).

Under one exception, a domestic use

of a DCL is permitted if the taxpayer

makes a domestic use election, which

requires the taxpayer to certify that there

Bulletin No. 2023–52

has not been, and will not be, a foreign

use of the DCL. See § 1.1503(d)-6(d)

and § 1.1503(d)-1(b)(20). In general, a

foreign use of a DCL occurs when any

portion of the DCL is made available

under the income tax laws of a foreign

country to offset or reduce, directly or

indirectly, any income that under U.S.

tax principles is income of a foreign corporation or a direct or indirect owner of

certain interests in hybrid entities. See

§ 1.1503(d)-3(a)(1). In the event of a

foreign use (or other triggering event)

during the certification period, the taxpayer must recapture the DCL as ordinary income and pay an interest charge.

§ 1.1503(d)-6(e)(1). However, among

other exceptions, a foreign use is not considered to occur if the laws of a foreign

country provide an election that would

enable a foreign use and such election

is not made. § 1.1503(d)-3(c)(2). Under

this domestic use election, a taxpayer

effectively has the choice to put a DCL

to a domestic use or a foreign use (but

not both).

.02 Interaction with GloBE Model

Rules.

Under the GloBE Model Rules, an

MNE Group whose ETR for a jurisdiction is below the 15% Minimum Rate

must compute the amount of Jurisdictional

Top-up Tax owed with respect to the jurisdiction. That Jurisdictional Top-up Tax

is based on, among other factors such as

Adjusted Covered Taxes, the Net GloBE

Income of Constituent Entities within the

jurisdiction. For this purpose, the GloBE

Model Rules take a jurisdictional blending approach under which all income and

loss of Constituent Entities in the same

jurisdiction are generally aggregated. This

aggregation can be viewed as giving rise to

double dipping concerns that the DCL rules

were intended to address. For example, if,

in determining Net GloBE Income of a

jurisdiction, a loss giving rise to a DCL is

aggregated with items that under U.S. tax

principles are items of a foreign corporation

in that jurisdiction, the loss would be available to reduce both U.S. tax (if a domestic use election were permitted) and the

Jurisdictional Top-up Tax. These concerns

could exist with respect to a DCL incurred

in a taxable year ending before the time at

which the GloBE Model Rules are anticipated to be effective (for instance, a taxable

Bulletin No. 2023–52

year ending on December 31, 2023) if timing differences between U.S. tax law and

applicable financial accounting standards

result in a portion of the loss comprising

the DCL being taken into account as an

expense under the GloBE Model Rules in

a later year.

Additionally, the GloBE Model Rules

include certain features that may differ

from traditional foreign income tax systems. For example, the GloBE Model

Rules do not include a mechanism through

which a taxpayer can decline aggregation,

with the result that the taxpayer might

effectively be required to put a DCL to a

foreign use (thereby removing what otherwise may have been a choice between a

domestic use and a foreign use). In addition, a loss may never produce a benefit

under the Jurisdictional Top-up Tax, for

example, if the ETR in the jurisdiction

is at or above the Minimum Rate (without regard to the loss) and the loss is not

carried over in determining Jurisdictional

Top-Up Tax in another year.

Accordingly, the Treasury Department

and the IRS are studying the extent to

which the DCL rules should apply with

respect to the GloBE Model Rules,

including the extent to which aggregation should result in a foreign use of a

DCL, and the extent to which the GloBE

Model Rules should cause an entity that

is not otherwise subject to an income tax

of a foreign jurisdiction to be a dual resident corporation or a hybrid entity under

§ 1.1503(d)-1(b)(2) or (3), or should prevent such an entity from being a transparent entity under § 1.1503(d)-1(b)(16).

The Treasury Department and the IRS are

also studying similar issues in the context of other provisions (for example, the

interaction of the anti-hybrid rules under

§§ 245A(e) and 267A with the GloBE

Model Rules).

.03 Treatment of Legacy DCLs.

In the interest of providing certainty

while the Treasury Department and the

IRS develop guidance addressing the interaction of the DCL rules with the GloBE

Model Rules, the Treasury Department

and the IRS intend to issue proposed regulations with respect to DCLs incurred

in (i) taxable years ending on or before

December 31, 2023, or (ii) provided the

taxpayer’s taxable year begins and ends

on the same dates as the Fiscal Year of the

1587

MNE Group that could take into account

as an expense any portion of a deduction

or loss comprising such a DCL, taxable

years beginning before January 1, 2024,

and ending after December 31, 2023

(collectively, legacy DCLs). Under this

proposed rule, a foreign use would not

be considered to occur with respect to a

legacy DCL solely because all or a portion

of the deductions or losses that comprise

the legacy DCL are taken into account in

determining the Net GloBE Income for a

particular jurisdiction. However, this proposed rule would not apply to any DCL

that was incurred or increased with a view

to reducing the Jurisdictional Top-Up

Tax or qualifying for the proposed rule

described in this notice.

.04 Reliance.

Taxpayers may rely on the guidance

described in this section 3 until proposed

regulations are published in the Federal

SECTION 4. REQUEST FOR

COMMENTS

.01 Comments.

The Treasury Department and the IRS

request comments on the rules described

in sections 2 and 3 of this notice. The

Treasury Department and the IRS specifically solicit comments on the interaction of the DCL rules with the GloBE

Model Rules, including Article 3.2.7

of the GloBE Model Rules (relating to

Intragroup Financing Arrangements).

.02 Procedures for Submitting

Comments.

(1) Deadline. Written comments

should be submitted by February 9, 2024.

Consideration will be given, however,

to any written comment submitted after

February 9, 2024, if such consideration

will not delay the issuance of proposed

regulations.

(2) Form and manner. The subject line

for the comments should include a reference to Notice 2023-80. All commenters

are strongly encouraged to submit comments electronically. However, comments

may be submitted in one of two ways:

(a) Electronically via the Federal

eRulemaking Portal at www.regulations.

gov (type IRS-2023-0060 in the search

field on the regulations.gov homepage to

find this notice and submit comments); or

December 26, 2023

(b) By mail to: Internal Revenue

Service, CC:PA:LPD:PR (Notice 202380), Room 5203, P.O. Box 7604, Ben

Franklin Station, Washington, D.C.,

20044.

(3) Publication of comments. The

Treasury Department and the IRS will

publish for public availability any comment submitted electronically and on

paper to its public docket on regulations.

gov.

SECTION 5. EXTENSION AND

MODIFICATION OF TEMPORARY

RELIEF IN NOTICE 2023-55

.01 Background.

On January 4, 2022, the Treasury

Department and the IRS published

Treasury Decision 9959 in the Federal

regulations), which contained final regulations under §§ 901 and 903. Correcting

amendments to the 2022 FTC final regulations were published in the Federal

On November 22, 2022, the Treasury

Department and the IRS published proposed regulations (REG-112096-22) in

the Federal Register (87 FR 71271), which

included proposed rules relating to the

cost recovery requirement and the substitution requirement for covered withholding taxes. On April 17, 2023, the Treasury

Department and the IRS published Notice

2023-31 in the Internal Revenue Bulletin

(IRB 2023-16) relating to proposed §

1.903-1(c)(2)(iii)(B) (the single-country

exception).

On August 7, 2023, the Treasury

Department and the IRS published Notice

2023-55 in the Internal Revenue Bulletin

(IRB 2023-32). Notice 2023-55 provides

temporary relief in determining whether a

foreign tax meets the definition of a foreign

income tax under §§ 901 and 903 for foreign taxes paid in any taxable year (a relief

year) beginning on or after December 28,

2021, and ending on or before December

31, 2023 (the relief period), provided that

the taxpayer satisfies certain requirements.

.02 Application of Temporary Relief in

Notice 2023-55 to Partnerships.

The Treasury Department and the IRS

have received questions regarding the

application of the temporary relief provided in Notice 2023-55 to partnerships,

including whether the partnership or its

partners would apply the temporary relief

with respect to foreign taxes paid or otherwise required to be reported by such

partnership.6

This section 5.02 provides that, with

respect to foreign taxes paid or otherwise

required to be reported by such partnership,7 which could include foreign taxes

paid by a CFC (collectively, the partnership’s foreign taxes), the partnership

would apply (or not apply) the temporary

relief. However, if, before December 11,

2023, a partnership did not apply the temporary relief for a partnership’s relief year

ending on or before December 31, 2022 (a

partnership 2022 tax year), a partner may

apply the temporary relief to its share of

the partnership’s foreign taxes for a partnership 2022 tax year. In certain circumstances, the IRS may make adjustments

relating to the foreign tax credits claimed

by a partner with respect to such foreign

taxes on audit of the partner.

.03 Modification and Clarification of

the Consistent Application Requirement

and Single-Benefit Requirement of Notice

2023-55.

Section 3 of Notice 2023-55 states that,

if a taxpayer applies the temporary relief,

then the taxpayer must apply the temporary relief to (1) all foreign taxes paid by

the taxpayer in the taxpayer’s relief year,

and (2) all foreign taxes (i) that are paid

by any other person in a taxable year that

begins on or after December 28, 2021 and

that ends with or within the taxpayer’s

relief year, and (ii) for which the taxpayer

would be eligible to claim a credit, as provided in § 901 (determined without regard

to the limitations described in § 1.9011(b)), if the taxpayer applied the temporary

relief to such foreign taxes (the consistent

application requirement). Additionally,

the taxpayer may not apply the temporary

relief in a relief year to claim a credit, as

provided under § 901, for any amount

of foreign tax for which a deduction is

allowed in the relief year or any other taxable year (the single-benefit requirement).

This section 5.03 modifies and clarifies

the consistent application requirement and

the single-benefit requirement in Notice

2023-55 with respect to partnerships and

their partners.

Partnerships and their partners are

each subject to the consistent application requirement. Therefore, a partnership that applies the temporary relief to

a relief year must apply the temporary

relief to all the partnership’s foreign

taxes (as defined in section 5.02 of this

notice). For a partnership’s taxable year

beginning after December 31, 2022, a

partnership’s application (or non-application) of the temporary relief for a relief

year will cause a partner to be required to

apply (or to be precluded from applying)

the temporary relief for the relief year to

all other foreign taxes for which the partner would be eligible to claim a credit as

provided in § 901 (determined without

regard to the limitations described in §

1.901-1(b)), unless the partner does not

control whether the partnership applies

(or does not apply) the temporary relief

for the relief year.8

Furthermore, partnerships and their

partners are each subject to the single-benefit requirement. Therefore, a partnership

cannot apply the temporary relief to report

any amount of foreign tax as a creditable

foreign tax expenditure if the partnership

reports the amount as a deduction in the

relief year or any other taxable year.

.04 Extension of Temporary Relief.

Section 4 of Notice 2023-55 defines

the relief period as taxable years beginning on or after December 28, 2021, and

ending on or before December 31, 2023,

and defines relief year as any taxable year

within the relief period. This section 5.04

modifies the relief period to mean taxable

years beginning on or after December 28,

2021, and ending before the date that a

notice or other guidance withdrawing or

For purposes of this section 5, references to a partnership only include partnerships with a U.S. federal tax return filing obligation under § 6031 in a relief year.

For the avoidance of doubt, “required to be reported” means foreign taxes which would be required to be reported if the partnership applied the temporary relief.

Whether a partner controls the partnership’s application (or non-application) of the temporary relief will be determined based on the facts and circumstances, including the partnership

agreement. For example, a partner may control a partnership’s application (or non-application) of the temporary relief by reason of being a general partner or owning, individually or together

with related persons, a majority of the capital or profits interests in the partnership.

December 26, 2023

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Bulletin No. 2023–52

modifying the temporary relief is issued

(or any later date specified in such notice

or other guidance).

If final regulations consistent with the

guidance provided in section 2 apply in a

relief year, those final regulations apply

regardless of whether the taxpayer applies

the temporary relief described in Notice

2023-55, as modified by section 5.02

through 5.04 of this notice, for the relief

year.

Bulletin No. 2023–52

.05 Effect on Other Documents.

Sections 3 (Temporary Relief) and 4

(Relief Period) of Notice 2023-55, 202332 I.R.B. 427, are modified.

SECTION 6. DRAFTING AND

CONTACT INFORMATION

The principal author of this notice is

the Office of Associate Chief Counsel

(International). For further information

1589

concerning section 3 of this notice, contact Brady Plastaras at (202) 317-6937.

For further information regarding section 5 of this notice, contact Moshe Dlott

at (202) 317-4967 or Larry Pounders at

(202) 317-5465. For all other sections,

contact Jeffrey Cowan at (202) 317-4924

or Hayley Rassuchine at (202) 317-5282

(not toll-free number).

December 26, 2023

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1223, General Rules and Specifications for Substitute Forms W-2c and

W-3c.

26 CFR 601.602: Tax forms and instructions. (Also Part I, Sections 6041, 6051, 6071, 6081, 6091; 1.6041-1, 1.6041-2, 31.6051-1, 31.6051-2, 31.6071(a)-1, 31.6081(a)1, 31.6091-1.)

Rev. Proc. 2023-39

TABLE OF CONTENTS

Part 1 – SUBSTITUTE FORMS W-2C AND W-3C

Section 1.1 – Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1591

Section 1.2 – What’s New. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1593

Section 1.3 – Filing Forms W-2c and W-3c Electronically. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1593

Section 1.4 – Specifications for Red-Ink Substitute Forms W-2c (Copy A) and W-3c Filed With the SSA. . . . . . . . . . . . . . 1594

Section 1.5 – Specifications for Substitute Black-and-White Forms W-2c (Copy A) and W-3c Filed With the SSA. . . . . . 1596

Section 1.6 – Requirements for Substitute Privately Printed Forms W-2c (Copies B, C, and 2) Furnished to Employees. . 1599

Section 1.7 – Instructions for Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1600

Section 1.8 – OMB Requirements for Both Red-Ink and Black-and-White Copy A and W-3c Substitute Forms. . . . . . . . . 1601

Section 1.9 – Order Forms and Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1601

Section 1.10 – Effect on Other Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1602

Section 1.11 – Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1602

December 26, 2023

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Part 1

Substitute Forms W-2c and W-3c

Section 1.1 – Purpose

.01 The purpose of this revenue procedure is to state the requirements of the Internal Revenue

Service (IRS) and the Social Security Administration (SSA) regarding the preparation and use of

substitute forms for Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal

of Corrected Wage and Tax Statements.

.02 The official IRS Form W-2c is a six-part form and the official IRS Form W-3c is a one-part

form. Red-ink substitute forms that completely conform to the specifications contained in this

document may be privately printed without the prior approval of the IRS or the SSA. Only the

substitute black-and-white Form (Copy A) and substitute black-and-white W-3c forms need to be

submitted to the SSA for approval.

Note. Both paper substitute forms filed with the SSA, and those furnished to employees, that do

not totally conform to these specifications are not acceptable. Forms W-2c (Copy A) and Forms

W-3c that do not conform may be returned. In addition, penalties may be assessed by the IRS.

.03 Substitute red-ink forms should not be submitted to either the IRS or the SSA for specific

approval. If you are uncertain of any specification and want clarification, do the following.

Submit a letter to the appropriate address below citing the specification.

State your understanding of the specification; enclose an example.

Be sure to include your name, complete address, phone number, and, if applicable, your email

address with your correspondence.

.04 Any questions about the red-ink Form W-2c (Copy A) and Form W-3c, should be emailed

to substituteforms@irs.gov. Please enter “Substitute Forms” on the subject line. Or send your

questions to:

Internal Revenue Service

Attn: Substitute Forms Program

SE:W:CAR:MP:P:TP:TP

ATSC

4800 Buford Highway

Mail Stop 061-N

Chamblee, GA 30341

Note. Do not send completed forms to the Substitute Forms Program via email or mail as they are

unable to process those forms. Any examples/samples of substitute forms sent to the Substitute

Forms program should not contain taxpayer information.

Any questions about the substitute black-and-white Form W-2c (Copy A) and W-3c should be

emailed to copy.a.forms@ssa.gov or sent to:

Social Security Administration

Direct Operations Center

Attn: Substitute Black-and-White Copy A Forms, Room 341

1150 E. Mountain Drive

Wilkes-Barre, PA 18702-7997

Bulletin No. 2023–52

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December 26, 2023

Do not email or mail completed Forms W-2c (Copy A) to the SSA Substitute Black-and-White

Copy A Forms address as they are unable to process those forms. Submitters should use the

address shown on the Form W-3c.

Note. You should receive a response from either the IRS or the SSA within 30 days.

.05 Some Forms W-2c that include logos, slogans, and advertisements (including advertisements

for tax preparation software) may be considered as suspicious or altered Forms W-2c (also known

as questionable Forms W-2c). An employee may not recognize the importance of the employee

copy for tax reporting purposes due to the use of logos, slogans, and advertisements. Thus, the

IRS has determined that logos, slogans, and advertising will not be allowed on Copy A of Forms

W-2c, Forms W-3c, or any employee copies reporting wages, with the following exceptions for

the employee copies:

•

Forms may include the exact name of the employer or agent, primary trade name, trademark,

service mark, or symbol of the employer or agent.

•

Forms may include an embossment or watermark on the information return (and copies) that

is a representation of the name, a primary trade name, trademark, service mark, or symbol of

the employer or agent.

•

Presentation may be in any typeface, font, stylized fashion, or print color normally used by

the employer or agent; and used in a non-intrusive manner.

•

These items do not materially interfere with the ability of the recipient to recognize,

understand, and use the tax information on the employee copies.

The IRS e-file logo on the IRS official employee copies may be included, but it is not required, on

any of the substitute form copies.

The information return and employee copies must clearly identify the employer’s name associated

with its employer identification number (EIN).

Note. Just as with the forms, an employee may not recognize the importance (or legitimacy) of

an envelope containing employee copies of Form W-2c if logos, slogans, and advertisements

(including coupons) are on the envelope. Therefore, such items are not allowed on envelopes

containing employee copies of Form W-2c.

Forms W-2c and W-3c are subject to annual review and possible change. This revenue procedure

may be revised to state other requirements of the IRS and the SSA regarding the preparation and

use of substitute forms for Form W-2c and Form W-3c for corrections to be made at a future date.

If you have comments about the prohibition against including slogans, advertising, and logos on

information returns and employee copies, email or send your comments to: substituteforms@

irs.gov or Internal Revenue Service, Attn: Substitute Forms Program, SE:W:CAR:MP:P:TP:TP,

ATSC, 4800 Buford Highway, Mail Stop 061-N, Chamblee, GA 30341.

.06 The Internal Revenue Service/Information Returns Branch (IRS/IRB) maintains a centralized

customer service call site to answer questions related to information returns (Forms W-2, W-3,

W-2c, W-3c, 1099 series, 1096, etc.).

You can reach the call site at 866-455-7438 (toll free) or 304-263-8700 (not a toll-free number).

Deaf or hard-of-hearing customers may call any of our toll-free numbers using their choice of relay

service. You may also email questions to mccirp@irs.gov. Do not submit employee information

via email because it is not secure and the information may be compromised.

File paper or electronic Forms W-2c (Copy A) with the SSA. The IRS/IRB does not process

Forms W-2c (Copy A).

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.07 The following form instructions and publications provide more detailed filing procedures for

certain information returns.

•

General Instructions for Forms W-2 and W-3 (Including Forms W-2AS, W-2CM, W-2GU,

W-2VI, W-3SS, W-2c, and W-3c).

•

Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.

Section 1.2 – What’s New

.01 Electronic filing of returns. The Department of the Treasury and the IRS issued final

regulations (T.D. 9972) that changed the rules for mandatory electronic filing of correction forms,

including Form W-2c, as authorized under the Taxpayer First Act, enacted July 1, 2019. If you

were required to electronically file the original Form W-2, you must electronically file any Form

W-2c correcting that form. If the original Form W-2 was permitted to be filed on paper and you

filed on paper, then you must file any Form W-2c correcting that form on paper. See Regulations

section 301.6011-2 for more information.

.02 IRS address change. Inquiries about the red-ink Form W-2c (Copy A) and Form W-3c

should be sent to the IRS at: Internal Revenue Service, Attn: Substitute Forms Program,

SE:W:CAR:MP:P:TP:TP, ATSC, 4800 Buford Highway, Mail Stop 061-N, Chamblee, GA 30341.

.03 Exhibits. All of the exhibits in this publication were updated for the August 2023 revisions

of those forms.

.04 Editorial changes. We made editorial changes throughout, including to update references and

correspond more closely to Publication 1141. Redundancies were eliminated as much as possible.

Section 1.3 – Filing Forms W-2c and W-3c Electronically

.01 If an employer was required to electronically file the original Form W-2, they must

electronically file any Form W-2c correcting that form. If the original Form W-2 was permitted to

be filed on paper and was filed on paper, then the employer must file any Form W-2c correcting

that form on paper. See Regulations section 301.6011-2(c)(4)(ii) for more information. SSA

publication EFW2C, Specifications for Filing Forms W-2c Electronically, contains specifications

and procedures for filing Forms W-2c. Employers are cautioned to obtain the most recent revision

of EFW2C (and supplements) due to any subsequent changes in specifications and procedures.

Instead of the EFW2C upload format, the employer can use SSA’s W-2c Online fill-in forms to

create, save, print, and submit up to 25 Forms W-2c at a time to the SSA. For more information,

go to SSA.gov/employer/.

.02 You may obtain a copy of the EFW2C by accessing the SSA website at SSA.gov/employer/

EFW2&EFW2C.

.03 Electronic filers do not file a paper Form W-3c. See the SSA publication EFW2C for guidance

on transmitting Form W-2c (Copy A) information to the SSA electronically.

.04 Employers who do not comply with the electronic filing requirements for Form W-2c (Copy A)

and who are not granted a waiver by the IRS may be subject to penalties. Employers who file Form

W-2c information with the SSA electronically must not send the same data to the SSA on paper

Forms W-2c (Copy A). Any duplicate reporting may subject filers to unnecessary contacts by the

SSA or the IRS.

Bulletin No. 2023–52

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December 26, 2023

Section 1.4 – Specifications for Red-Ink Substitute Forms W-2c (Copy A) and W-3c Filed With the SSA

.01 The official IRS-printed red dropout ink Form W-2c (Copy A) and W-3c and their exact

substitutes are referred to as red-ink in this revenue procedure. Employers may file substitute

Forms W-2c (Copy A) and W-3c with the SSA. The substitute forms must be exact replicas of

the official IRS forms with respect to layout and content because they will be read by scanner

equipment. Even the slightest deviation can result in incorrect scanning, and may affect money

amounts reported for employees.

.02 Color and paper quality for Form W-2c (Copy A) (cut sheets and continuous pin-fed forms) and

Form W-3c must be white 100% bleached chemical wood, optical character recognition (OCR)

bond. The contractor must initiate or have a quality control program to assure OCR ink density.

• Acidity: Ph value, average, not less than . . . . . . . . . . . . . .

• Basis weight: 17 x 22 inch 500 cut sheets, pound . . . . . . . . . . .

• Metric equivalent—gm./sq. meter

(a tolerance of +5 pct. is allowed) . . . . . . . . . . . . . . . . . . .

• Stiffness: Average, each direction, not less than—milligrams

Cross direction . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Machine direction . . . . . . . . . . . . . . . . . . . . . . . . . . .

• Tearing strength: Average, each direction, not less

than—grams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• Opacity: Average, not less than—percent . . . . . . . . . . . . . . .

• Reflectivity: Average, not less than—percent . . . . . . . . . . . . .

• Thickness: Average—inch . . . . . . . . . . . . . . . . . . . . . . .

Metric equivalent—mm . . . . . . . . . . . . . . . . . . . . . . . .

(a tolerance of +0.0005 inch (0.0127 mm) is allowed). Paper cannot

vary more than 0.0004 inch (0.0102 mm) from one edge to the other.

• Porosity: Average, not less than—seconds . . . . . . . . . . . . . .

• Finish (smoothness): Average, each side—seconds . . . . . . . . . .

(for information only) the Sheffield equivalent—units . . . . . . . .

• Dirt: Average, each side, not to exceed—parts per million . . . . . .

4.5

18–20

68–75

0.0038

0.097

20–55

170-d200

Note. Reclaimed fiber in any percentage is permitted, provided the requirements of this standard

are met.

.03 All printing of substitute Forms W-2c (Copy A) and W-3c must be in Flint J-6983 red OCR

dropout ink except as specified below. The following must be printed in nonreflective black ink:

•

Identifying number “44444” for Forms W-2c (Copy A) or “55555” for Form W-3c at the top

of the forms.

•

The four (4) corner register marks on the forms.

•

The form identification number (“W-3c”) at the bottom of Form W-3c.

•

All the instructions below Form W-3c beginning with “Purpose of Form” to the end of Form

W-3c.

.04 The vertical and horizontal spacing on Forms W-2c and W-3c must meet specifications. See

Exhibits A and B.

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Bulletin No. 2023–52

•

On Form W-3c and Form W-2c (Copy A), all the perimeter rules must be 1-point (0.014inch), while all other rules must be one-half point (0.007-inch). Vertical rules must be parallel

to the left edge of the form; horizontal rules parallel to the top edge.

•

The top, left, and right margins on Form W-2c (Copy A) and Form W-3c must be 0.50 inches.

The width of a substitute Form W-2c (Copy A) or W-3c must be 7.50 inches. See Exhibits A

and B.

•

The first three columns on Form W-2c (Copy A) and Form W-3c must measure 1.90 inches

in width.

•

The last column on Form W-2c (Copy A) and Form W-3c must measure 1.80 inches in width.

.05 The official red-ink Form W-3c and Form W-2c (Copy A) are 7.50 inches wide. Employers

filing Forms W-2c (Copy A) with the SSA on paper must also file a Form W-3c. One Form W-2c

(Copy A) or Form W-3c is contained on a standard-size, 8.5 x 11-inch page.

.06 The top, left, and right margins for the Form W-2c (Copy A) and Form W-3c are 0.50 inches

(1/2 inch). All margins must be free of printing except for the words “DO NOT CUT, FOLD,

OR STAPLE THIS FORM” on red-ink Form W-2c (Copy A) and “DO NOT CUT, FOLD, OR

STAPLE” on red-ink Form W-3c.

.07 The identifying numbers are “44444” for Form W-2c and “55555” for Form W-3c. No printing

should appear anywhere near the identifying numbers.

Note. The identifying number must be printed in nonreflective black ink in OCR-A font of 10

characters per inch.

.08 Continuous pin-fed Forms W-2c (Copy A) must be separated into 11-inch deep pages. The

pin-fed strips must be removed when Forms W-2c (Copy A) are filed with the SSA.

.09 Box 12 of Form W-2c (Copy A) contains four entry boxes – 12a, 12b, 12c, and 12d. Do not

make more than one entry per box. Enter your first code in box 12a (for example, enter Code D in

box 12a, not 12d, if it is your first entry). If more than four items need to be reported in box 12, use

a second Form W-2c to report the additional items (see Multiple forms in the most recent General

Instructions for Forms W-2 and W-3). Do not report the same federal tax data to the SSA on more

than one Form W-2c (Copy A). However, repeat the identifying information (employee’s name,

address, and SSN; employer’s name, address, and EIN) on each additional form.

.10 The checkboxes in box 13 of Form W-2c (Copy A) must be 0.14 inches each. Each space

before the first checkbox is 0.20 inches; each space between the first checkbox and second

checkbox should be 0.36 inches; each space between the second and third checkboxes should be

0.44 inches; and each space between the third checkbox to the margin of box 13 should be 0.48

inches. The checkboxes in box c of Form W-3c must also be 0.14 inches.

Note. More than 50% of an applicable checkbox must be covered by an “X.”

.11 All substitute Forms W-2c (Copy A) and W-3c in the red-ink format must have the form

number and form title printed on the bottom face of each form using type identical or a close

approximation to that of the official IRS form. The red-ink substitute must have the form producer’s

(not the form filer’s) EIN entered in red in place of the Cat. No. (directly to the left of “Department

of the Treasury” on Form W-2c (Copy A) and at the bottom on Form W-3c).

.12 The words “For Privacy Act and Paperwork Reduction Act Notice, see the separate

instructions.” must be printed on all Forms W-2c (Copy A) and Forms W-3c.

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December 26, 2023

.13 The Office of Management and Budget (OMB) Number must be printed on substitute Forms

W-3c and W-2c (Copy A) (on each ply) in the same location as on the official IRS forms.

.14 All substitute Forms W-3c must include the instructions that are printed on the same sheet

below the official IRS form.

.15 The appropriate SSA filing address information must be printed on the front of Form W-3c

below the body of the form as shown below.

Send this entire page with Copy A of Form W-2c to:

Social Security Administration

Direct Operations Center

P.O. Box 3333

Wilkes-Barre, PA 18767-3333

Note: If you use “Certified Mail” or an IRS-approved private delivery service to file, add

“Attn: W-2c Process, 1150 E. Mountain Dr.” to the address and change the ZIP code to

“18702-7997.” See Pub. 15 (Circular E), Employer’s Tax Guide, for a list of IRS-approved

private delivery services.

.16 The back of substitute Form W-2c (Copy A) and Form W-3c must be free of all printing.

.17 All copies must be clearly legible. Fading must be minimized to assure legibility.

.18 Chemical transfer paper is permitted for Form W-2c (Copy A) only if the following standards

are met:

•

Only chemically backed paper is acceptable for Form W-2c (Copy A). Front and back

chemically treated paper cannot be processed properly by scanning equipment.

•

Chemically transferred images must be black.

•

Carbon-coated forms are not permitted.

.19 The Government Printing Office (GPO) symbol and the Catalog Number (Cat. No.) must be

deleted from substitute Form W-2c (Copy A) and Form W-3c.

.20 The sequence for assembling the copies of Form W-2c is as follows.

•

Copy A—For Social Security Administration

•

Copy 1—For State, City, or Local Tax Department

•

Copy B—To Be Filed With Employee’s FEDERAL Tax Return

•

Copy C—For EMPLOYEE’S RECORDS

•

Copy 2—To Be Filed With Employee’s State, City, or Local Income Tax Return

•

Copy D—For Employer

Section 1.5 – Specifications for Substitute Black-and-White Forms W-2c (Copy A) and W-3c Filed With the SSA

.01 The SSA-approved substitute black-and-white Forms W-2c (Copy A) and W-3c are referred

to as substitute black-and-white Form W-2c (Copy A) and W-3c. Specifications for the substitute

December 26, 2023

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Bulletin No. 2023–52

black-and-white Form W-2c (Copy A) and W-3c are similar to the red-ink forms (Section 4)

except for the items that follow (see Exhibits C and D). You may contact the SSA via email at

copy.a.forms@ssa.gov for more information.

Note. Exhibits are samples only and may not show the required typeface and/or font. Exhibits

must not be downloaded to meet tax obligations.

Forms must be printed on 8.5 x 11-inch single-sheet paper only, not on continuous pin-fed

paper. There must be one Form W-2c (Copy A) or W-3c printed on a page.

All forms and data must be printed in nonreflective black ink only.

The data and forms must be programmed to print simultaneously. Forms cannot be produced

separately from wage data entries.

The forms must not contain corner register marks.

The forms must not contain any shaded areas including those boxes that are entirely shaded

on the red-ink forms.

Identifying numbers on both Form W-2c (“44444”) and Form W-3c (“55555”) must be

preprinted in 14-point Arial bold font or a close approximation.

The form numbers (“W-2c” and “W-3c”) must be in 18-point Arial font or a close

approximation.

No part of the box titles or the data printed on the forms may touch any of the vertical or

horizontal lines, nor should any of the data intermingle with the box titles. The data should be

centered in the boxes.

Do not print any information in the margins of the black-and-white forms (for example, do

not print “DO NOT CUT, FOLD, OR STAPLE” in the top margin of Form W-3c).

10. The word “Code” must not appear in box 12 on Form W-2c (Copy A).

11. A 4-digit vendor code (not filer code) preceded by four zeros and a slash (for example,

0000/9876) must appear in 12-point Arial font, or a close approximation, in place of the Cat.

No. to the left of “Department of the Treasury” on Form W-2c (Copy A) and in the bottom

right corner of Form W-3c.

Note. Do not display the form producer’s EIN. The vendor code will be used to identify the

form producer.

12. Do not print Catalog Numbers (Cat. No.) on either Form W-2c (Copy A) or Form W-3c.

13. Do not print dollar signs. If there are no money amounts being reported, the entire field should

be left blank.

Note. Although substitute Copy 1 of Form W-2c can be printed in black instead of the red dropout

ink, it should conform as closely as possible to Copy A of the official IRS form in content, format,

and layout in order to satisfy state and local reporting requirements.

.02 The dimensions for the substitute black-and-white Forms W-2c (Copy A) and W-3c are as

follows. See Exhibits C and D.

Bulletin No. 2023–52

The top, left, and right margins on Form W-2c (Copy A) and Form W-3c must measure 1/2

(0.50) inch.

The distance from the top line of Form W-3c to the bottom line of the form must measure

7 3/16 (7.19) inches.

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December 26, 2023

The distance from the top line of Form W-2c (Copy A) to the bottom line of the form must

measure 9 1/3 (9.33) inches.

Each box on Form W-2c (Copy A) and Form W-3c must measure 1/3 (0.33) inch in height

except as otherwise established.

Box b on Form W-3c must measure one (1.00) inch in height.

Box a on Form W-2c (Copy A) must measure 1 1/3 (1.33) inches in height and box 14 must

measure 5/6 (0.83) inch in height.

The first three columns on the right of Form W-2c (Copy A) and Form W-3c must measure

1 9/10 (1.90) inches in width.

The last column on the right of Form W-2c (Copy A) and Form W-3c must measure 1 8/10

(1.80) inches in width.

The “Explain decreases here” box must measure 1/3 (0.33) inch and the “Signature” box on

Form W-3c must measure 1/2 (0.50) inch in height.

.03 You must submit samples of your black-and-white substitute Forms W-2c (Copy A) and W-3c

to the SSA. Only black-and-white substitute Forms W-2c (Copy A) and W-3c will be accepted for

approval by the SSA. All checkboxes on the dummy-data substitute black-and-white Form W-3c

must be electronically checked in box c (Kind of Payer, Kind of Employer, and Third-party sick

pay). Questions regarding other forms (that is, red-ink Forms W-2, W-2c, W-3, W-3c, 1099 series,

1096, etc.) must be directed to the IRS. Also, see IRS Publications 1141 and 1179.

.04 You will be required to send one set of blank and one set of dummy-data substitute blackand-white Form W-2c (Copy A) and W-3c for approval. Sample data entries should be filled in to

the maximum length for each box entry, preferably using numeric data or alpha data, depending

upon the type required to be entered. Include in your submission the name, telephone number, fax

number, and email address of a contact person who can answer questions regarding your sample

forms.

.05 To receive approval, you may first contact the SSA at copy.a.forms@ssa.gov to obtain a

template and further instructions. You can either submit your sample substitute black-and-white

Forms W-2c (Copy A) and Forms W-3c in a PDF version electronically for approval to the

copy.a.forms@ssa.gov or send your paper sample substitute black-and-white Forms W-2c (Copy

A) and Forms W-3c to:

Social Security Administration

Direct Operations Center

Attn: Substitute Black-and-White Copy A Forms, Room 341

1150 E. Mountain Drive

Wilkes-Barre, PA 18702-7997

Send your sample forms via private mail carrier or certified mail in order to verify their receipt.

You can expect approval (or disapproval) by the SSA within 30 days of receipt of your sample

forms.

Do not mail completed Forms W-2c (Copy A) and W-3c to the Substitute Black-and-White

Forms (Copy A) address. Submitters should use the address shown on the Form W-3c.

.06 Vendor codes from the National Association of Computerized Tax Processors (NACTP) are

required by those companies producing the W-2 family of forms as part of a product for resale to

be used by multiple employers and payroll professionals. Employers developing Forms W-2c or

W-3c to be used only for their individual company require a vendor code issued by the SSA.

December 26, 2023

1598

Bulletin No. 2023–52

.07 The 4-digit vendor code preceded by four zeros and a slash (0000/9876) must be preprinted

on the sample black-and-white substitute Forms W-2c and W-3c. Forms not containing a vendor

code will be rejected and will not be submitted for testing or approval. If you have a valid vendor

code provided to you through the NACTP, you should use that code. If you do not have a valid

vendor code, contact the SSA at copy.a.forms@ssa.gov to obtain an SSA-issued code. (Additional

information on vendor codes may be obtained from the SSA or the NACTP via email at president@

nactp.org.)

.08 If you use forms produced by a vendor and have questions concerning approval, do not

send the forms to the SSA for approval. Instead, you may contact the software vendor to obtain a

copy of SSA’s dated approval notice supplied to that vendor.

Section 1.6 – Requirements for Substitute Privately Printed Forms W-2c (Copies B, C, and 2) Furnished to Employees

Note. Rules in Section 1.6 apply only to employee copies of Form W-2c (Copies B, C, and

2). Printers are cautioned that the paper filers who send Forms W-2c (Copy A) to the SSA must

follow the requirements in Sections 1.4 and/or 1.5 above.

.01 All employers (including those who file electronically) must furnish employees with at least

two copies of Form W-2c (three or more for employees required to file a state, city, or local income

tax return). Employee copies do not require approval as long as these requirements are followed.

.02 Chemical transfer paper for employee copies must be clearly legible, have the capability to be

photocopied, and not fade to such a degree as to preclude legibility and the ability to photocopy.

.03 The paper for all copies must be white and printed in black ink. The substitute Copy B (or its

equal), which employees are instructed to attach to their federal income tax returns, as well as all

other copies furnished to employees, should be at least 9-pound paper (basis 17 x 22-500). See

Section 1.4.02.

.04 Type must be substantially identical in size and shape to that on the official form.

.05 Substitute forms for employees need to contain only the payment boxes and captions that

are applicable. These boxes, box numbers, and box titles must, when applicable, match the IRSprinted form. In all cases, the employee name, address, and SSN, as well as the employer name,

address, and EIN, must be present.

.06 The dimensions of the boxes on these copies (Copies B, C, and 2), but not Copy A, may be

adjusted to allow space for conveying additional information. This may permit the employer to

eliminate other statements or notices that would otherwise be furnished to employees.

.07 The maximum allowable dimensions for employee copies of Form W-2c are no more than

11.00 inches deep by 8.50 inches wide. The minimum allowable dimensions for employee copies

of Form W-2c are 2.67 inches deep by 4.25 inches wide.

Note. These maximum and minimum size specifications are subject to future change.

.08 Either horizontal or vertical format is permitted for substitute employee copies of Forms W-2c.

That is, the width of the form may be either greater or less than the depth of the form.

.09 All copies of Form W-2c must clearly and prominently display the form number and the form

title together in one area of the form. It is recommended (but not required) that this be located

on the bottom left of Form W-2c. The reference to the “Department of the Treasury – Internal

Revenue Service” must be on all copies of Form W-2c. It is recommended (but not required) that

this be located on the bottom right of Form W-2c.

Bulletin No. 2023–52

1599

December 26, 2023

.10 If the substitute Forms W-2c are not labeled as to the disposition of the copies, then written

notification must be provided to each employee as specified below.

•

The first copy of Form W-2c (Copy B) is filed with the employee’s federal tax return.

•

The second copy of Form W-2c (Copy C) is for the employee’s records.

•

If applicable, the third copy (Copy 2) of Form W-2c is filed with the employee’s state, city,

or local income tax return.

If the substitute Forms W-2c are labeled, the forms must contain the applicable description as

stated on the official form.

.11 Instructions similar to those on the back of Form W-2c (Copy C) of the official form must be

provided to each employee.

Section 1.7 – Instructions for Employers

.01 Privately printed substitute Forms W-2c are not required to contain a copy to be retained by

employers (Copy D). However, employers must retain copies of the Forms W-2c (Copy A) filed

with SSA or have the ability to reconstruct the data for at least four years. Employers must be able

to generate a facsimile of Form W-2c (Copy A), in case of loss.

.02 If Copy D is provided for the employer, instructions contained on the back of Copy D of the

official form must appear on the back of the substitute form. If Copy D is not provided, these

instructions must be furnished to the employer on a separate statement.

.03 Only originals or compliant substitute copies of Forms W-2c (Copy A) and Forms W-3c may

be filed with the SSA. Carbon copies and photocopies are unacceptable.

.04 Employers should type or machine-print entries on plain paper forms whenever possible and

provide good quality data entries by using a high quality type face, inserting data in the middle of

blocks that are well separated from other printing and guidelines, and taking any other measures

that will guarantee clear, sharp images.

.05 Because employers must file a machine-scannable Form W-2c, they should meet the following

requirements.

•

Use 12-point Courier font or a close approximation for data entries.

•

Proportional-spaced fonts are unacceptable.

•

Do not print any data in the top margin of the forms.

.06 The employer must also provide employee copies of Forms W-2c (Copies B, C, and 2) that are

legible and able to be photocopied (by the employee).

.07 When Forms W-2c or W-3c are typed, black ink must be used with no script type, inverted

font, italics, or dual-case alpha characters.

.08 Forms W-2c (Copy A) require decimal entries for wage data. Do not print dollar signs with

money amounts on Forms W-2c (Copy A) and Form W-3c.

.09 The filer’s employer identification number (EIN) must be entered in box (b) of Form W-2c

and box (e) of Form W-3c.

December 26, 2023

1600

Bulletin No. 2023–52

.10 The employer’s name, address, EIN, and state ID number may be preprinted.

.11 Employers must not truncate the employee’s SSN on Copy A of Forms W-2c. See the General

Instructions for Forms W-2 and W-3 for more information.

Section 1.8 – OMB Requirements for Both Red-Ink and Black-and-White Copy A and W-3c Substitute Forms

.01 The Paperwork Reduction Act (the Act) of 1995 (Public Law 104-13) requires the following.

•

The Office of Management and Budget (OMB) approves all IRS tax forms that are subject to

the Act.

•

Each IRS form contains (in or near the upper right corner) the OMB approval number, if

assigned—the official OMB numbers may be found on the official IRS printed forms and are

also shown on the forms in the exhibits.

•

Each IRS form (or its instructions) states:

Why the IRS needs the information,

How it will be used, and

Whether or not the information is required to be furnished to the IRS.

.02 This information must be provided to any users of official or substitute IRS forms or

instructions.

.03 The OMB requirements for substitute IRS Form W-2c and Form W-3c are the following.

•

Any substitute form or substitute statement to a recipient must show the OMB number as it

appears on the official IRS form.

•

The OMB number for both Form W-2c (Copy A) and Form W-3c is 1545-0008 and must

appear exactly as shown on the official IRS form.

•

For any copy of Form W-2c, other than Copy A, the OMB number must use one of the

following formats.

OMB No. 1545-xxxx (preferred) or

OMB # 1545-xxxx (acceptable).

.04 Any substitute Form W-3c and Form W-2c (Copy A only) must state “For Privacy Act and

Paperwork Reduction Act Notice, see the separate instructions.” If no instructions are provided to

users of your forms, you must furnish them with the exact text of the Privacy Act and Paperwork

Reduction Act Notice in the General Instructions for Forms W-2 and W-3.

Section 1.9 – Order Forms and Instructions

.01 You can order official IRS Forms W-2c, Forms W-3c, and the General Instructions for Forms

W-2 and W-3 (Including Forms W-2AS, W-2CM, W-2GU, W-2VI, W-3SS, W-2c, and W-3c),

online at IRS.gov/OrderForms.

Only contact the IRS, not the SSA, for forms.

Bulletin No. 2023–52

1601

December 26, 2023

.02 Copies of Form W-2c (Copy A) and Form W-3c downloaded from IRS.gov cannot be used

for filing with the SSA. These copies of Forms W-2c and W-3c are for information purposes only.

Section 1.10 – Effect on Other Documents

.01 Revenue Procedure 2016-20, 2016-13 I.R.B. dated March 28, 2016, (reprinted as Publication

1223, Revised 03-2016), is superseded.

Section 1.11 – Exhibits

Exhibits A through D provide the general measurements for Forms W-2c and W-3c as discussed

in this revenue procedure. Exhibits are samples only and may not show the required typeface and/

or font. Exhibits must not be downloaded to meet tax obligations. Certain exhibits show a 0000/

in the location designated for your vendor code. See Section 1.5.01, item 11, and Section 1.5.06

for more information.

Exhibit A — Form W-2c (Copy A) (Red-Ink) 08-2023

Exhibit B — Form W-3c (Red-Ink) 08-2023

Exhibit C — Form W-2c (Copy A) (Substitute Laser/ Black-and-White) 08-2023

Exhibit D — Form W-3c (Substitute Laser/Black-and-White) 08-2023

December 26, 2023

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Bulletin No. 2023–52

1603

December 26, 2023

1604

Bulletin No. 2023–52

1605

December 26, 2023

1606

Bulletin No. 2023–52

26 CFR 601.201: Rulings and determination letters.

(Also: Part I, Sections 832, 846; 1.832-4, 1.846-1.)

Rev. Proc. 2023-41

SECTION 1. PURPOSE

This revenue procedure prescribes discount factors for the 2023 accident year

for use by insurance companies in computing discounted unpaid losses under

§ 846 of the Internal Revenue Code and

discounted estimated salvage recoverable

under § 832. This revenue procedure also

provides, for convenience, discount factors for losses incurred in the 2022 accident year and earlier accident years for use

in taxable years beginning in 2023. The

discount factors for accident years before

2023 were prescribed in earlier revenue

procedures. See, e.g., Rev. Proc. 202310, 2023-3 I.R.B. 411. For background

concerning the loss payment patterns and

application of the discount factors, see

Rev. Proc. 2023-10.

SECTION 2. SCOPE

This revenue procedure applies to any

insurance company that is required to

discount unpaid losses under § 846 for a

line of business using the discount factors

published by the Secretary. This revenue

procedure also applies to any insurance

company that is required to discount estimated salvage recoverable under § 832.

SECTION 3. DISCOUNT FACTORS

FOR THE 2023 ACCIDENT YEAR

.01 The tables in this section 3 separately present for each line of business

the discount factors for losses incurred in

the 2023 accident year for use by insurance companies in computing discounted

unpaid losses under § 846 and estimated

salvage recoverable under § 832. The discount factors presented in this section are

generally determined by using the applicable interest rate for 2023 under § 846(c),

which is 2.90 percent, determined using

semiannual compounding. The exceptions

are the discount factors for long-tail lines

of business determined using the composite method described in section V of

Notice 88-100, 1988-2 C.B. 439. These

discount factors are to be used in taxable years beginning in 2033 for losses

incurred in accident years not separately

reported on the annual statement for 2033.

For taxable years beginning after 2033,

the discount factors to be used for losses

incurred in the 2023 accident year will

be those determined using the composite

method for later accident years. These

discount factors will be published in later

years. All discount factors are determined

by assuming that all loss payments occur

in the middle of the calendar year.

.02 Section V of Notice 88-100 sets

forth a composite method for computing

discounted unpaid losses for accident

years that are not separately reported on

the annual statement. Tables 1 and 2 separately provide discount factors for insurance companies that have elected to use

the composite method of Notice 88-100.

See Rev. Proc. 2002-74, 2002-2 C.B. 980.

The discount factors computed using the

composite method are unrelated to the

composite discount factors referred to in

§ 1.846-1(b)(1)(ii) and (4) of the Income

Tax Regulations, which apply to lines of

business for which the Secretary has not

published discount factors. The composite discount factors for use with respect

to such lines of business are labelled

“Short-Tail Composite” (in Table 1, part

B) and “Long-Tail Composite” (in Table

2, part B). The “Miscellaneous Casualty”

discount factors referenced in § 1.8461(b)(2) are not set forth in tables but are

equivalent to the “Short-Tail Composite”

discount factors.

Table 1 (part A)

Discount Factors Under Section 846 (percent)

For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business

Taxable Year

Beginning in

Auto Physical

Damage

Fidelity/Surety

Financial

Guaranty/

Mortgage

Guaranty

2023

98.3826

95.7477

95.2511

95.8842

96.9968

2024

97.1719

98.5707

International

Other*

Taxpayer Not Using Composite Method

Years after 2024

98.5707

Taxpayer Using the Composite Method

2025

Years after 2025

98.5707

Use composite method discount factors published for the relevant accident year.**

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount

factor for taxable year 2023 is 98.5707 percent. This is also the discount factor used in later taxable years for taxpayers

not using the composite method. For taxpayers using the composite method, the discount factor for losses incurred in

2023 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year

coinciding with the taxable year.

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Bulletin No. 2023–52

1607

December 26, 2023

Table 1 (part B)

Discount Factors Under Section 846 (percent)

For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business

Taxable

Year

Beginning

Reinsurance Nonproportional

Assumed

Financial Lines

Reinsurance Nonproportional

Assumed

Liability

Reinsurance Nonproportional

Assumed

Property

Special Property

(Fire,

Allied Lines,

Inland Marine,

Earthquake,

Burglary & Theft)

2023

95.8574

94.9260

96.2110

97.5931

98.3742

97.2238

2024

97.1719

98.5707

Warranty

Short-Tail

Composite

Taxpayer Not Using Composite Method

Years after

2024

98.5707

Taxpayer Using the Composite Method

2025

98.5707

Years after

2025

Use composite method discount factors published for the relevant accident year.**

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

December 26, 2023

1608

Bulletin No. 2023–52

Table 2 (part A)

Discount Factors Under Section 846 (percent)

For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

Taxable Year

Beginning in

Commercial

Auto/Truck

Liability/

Medical

Professional

Liability Claims-Made

Medical

Professional

Liability Occurrence

Multiple Peril

Lines

Other

Liability Claims-Made

Other

Liability Occurrence

2023

94.0669

91.7012

86.8831

95.4382

91.4237

90.0155

2024

94.6657

92.7807

88.7877

93.8732

92.3628

90.8746

2025

95.2185

93.1025

90.1803

93.9066

92.4061

91.5784

2026

95.5234

93.9577

91.5512

93.8414

92.6133

91.9264

2027

95.4250

93.7878

92.3543

93.6275

92.5473

92.2284

2028

94.9588

94.4205

92.7420

93.8836

92.5915

91.2169

2029

94.9803

93.9949

93.1270

93.9644

92.2397

91.1996

2030

95.4526

94.8602

92.9930

95.7120

93.9160

91.9425

2031

96.4116

96.1752

94.7992

96.5370

96.4131

92.9346

2032

98.2559

97.6318

96.4691

97.9721

96.9986

94.7538

Taxpayer Not Using Composite Method

2033

98.5707

97.7548

98.5707

98.3447

96.0789

2034

98.5707

97.3969

Years after

2034

98.5707

97.9643

98.5876

98.3699

97.0305

Taxpayer Using the Composite Method

2033

98.5707

Years after

2033

Use composite method discount factors published for the relevant accident year.**

**The relevant accident year is the accident year that is ten years prior to the specified taxable year.

Bulletin No. 2023–52

1609

December 26, 2023

Table 2 (part B)

Discount Factors Under Section 846 (percent)

For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

Taxable

Year Beginning

Private

Passenger

Auto Liability/

Medical

Products

Liability Claims-Made

Products

Liability Occurrence

Workers'

Compensation

Long-Tail

Composite

2023

95.8562

89.1780

88.5317

88.9551

93.4051

2024

95.5202

90.4947

89.9028

87.4781

92.7019

2025

95.6012

90.7369

91.0112

86.8945

92.4617

2026

95.5203

89.7998

91.5875

86.4217

91.8247

2027

94.6286

91.2853

91.9130

86.7149

91.5295

2028

94.0135

92.8707

92.3814

86.1127

91.0702

2029

94.5794

94.5952

93.2984

86.7030

91.3120

2030

94.7253

95.0313

93.5893

88.1853

92.6078

2031

95.4710

96.2767

94.6085

89.5932

93.9475

2032

97.6138

97.9342

96.6089

90.5104

95.2242

Taxpayer Not Using Composite Method

2033

98.5707

97.8975

91.7803

96.5456

2034

98.5707

93.0739

97.8319

2035

98.5707

94.3915

98.5707

2036

98.5707

95.7327

98.5707

2037

98.5707

97.0957

98.5707

2038

98.5707

98.4690

98.5707

Years after 2038

98.5707

96.6888

98.2220

92.8090

96.9820

Taxpayer Using the Composite Method

2033

Years after 2033

98.5707

Use composite method discount factors published for the relevant accident year.**

**The relevant accident year is the accident year that is ten years prior to the specified taxable year.

SECTION 4. DISCOUNT FACTORS

FOR TAXABLE YEARS BEGINNING

IN 2023

.01 The tables in this section 4 present separately for each line of business

discount factors for losses incurred in the

2023 accident year and earlier accident

years for use by insurance companies in

computing discounted unpaid losses under

§ 846 and estimated salvage recoverable

December 26, 2023

under § 832 in taxable years beginning in

2023.

.02 Tables 3 and 4 separately provide

discount factors for insurance companies

that have elected to use the composite

method of Notice 88-100. See Rev. Proc.

2002-74. The discount factors computed

using the composite method are unrelated to the composite discount factors

referred to in § 1.846-1(b)(1)(ii) and

(4), which apply to lines of business for

1610

which the Secretary has not published

discount factors. The composite discount factors for use with respect to such

lines of business are labelled “ShortTail Composite” (in Table 3, part B)

and “Long-Tail Composite” (in Table 4,

part B). The “Miscellaneous Casualty”

discount factors referenced in § 1.8461(b)(2) are not set forth in tables but are

equivalent to the “Short-Tail Composite”

discount factors.

Bulletin No. 2023–52

Table 3 (part A)

Discount Factors Under Section 846 (percent)

For Taxable Year(s) Beginning in 2023

Short-Tail Lines of Business

Accident Year

Auto Physical

Damage

Fidelity/Surety

Financial

Guaranty/

Mortgage

Guaranty

2023

98.3826

95.7477

95.2511

95.8842

96.9968

2022

97.3911

International

Other*

Taxpayer Not Using Composite Method

2021

98.5999

2020

98.4834

2019

98.4785

Years before 2019

98.5513

98.5999

Taxpayer Using the Composite Method

Years before 2022

98.5999

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount

factor for taxable year 2023 is 98.5707 percent.

Bulletin No. 2023–52

1611

December 26, 2023

Table 3 (part B)

Discount Factors Under Section 846 (percent)

For Taxable Year(s) Beginning in 2023

Short-Tail Lines of Business

Accident

Year

Reinsurance Nonproportional

Assumed

Financial Lines

Reinsurance Nonproportional

Assumed

Liability

Reinsurance Nonproportional

Assumed

Property

Special

Property

(Fire,

Allied Lines,

Inland

Marine,

Earthquake,

Burglary &

Theft)

2023

95.8574

94.9260

96.2110

97.5931

98.3742

97.2238

2022

97.3911

Warranty

Short-Tail

Composite

Taxpayer Not Using Composite Method

2021

98.5999

2020

98.4834

2019

98.4785

Years

before 2019

98.5513

98.5999

Taxpayer Using the Composite Method

Years

before 2022

98.5999

December 26, 2023

1612

Bulletin No. 2023–52

Table 4 (part A)

Discount Factors Under Section 846 (percent)

For Taxable Year(s) Beginning in 2023

Long-Tail Lines of Business

Accident Year

Commercial

Auto/Truck

Liability/

Medical

Professional

Liability Claims-Made

Medical

Professional

Liability Occurrence

Multiple Peril

Lines

Other

Liability Claims-Made

Other

Liability Occurrence

2023

94.0669

91.7012

86.8831

95.4382

91.4237

90.0155

2022

95.0679

93.3168

89.6041

94.3300

92.9253

91.5404

2021

95.4344

93.0842

90.7809

94.1554

92.4448

91.0405

2020

95.1096

92.8346

91.4580

92.9075

91.9007

90.5269

2019

94.9707

92.9600

92.4216

91.0050

91.7240

90.2502

2018

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2017

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2016

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2015

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2014

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using the Composite Method

2013

98.5513

96.1895

98.0033

95.8511

2012

98.5513

97.5045

98.5513

97.2176

Years before

2012

98.5513

96.9185

98.0920

96.7300

Taxpayer Using the Composite Method

Years before

2014

98.5513

Bulletin No. 2023–52

1613

December 26, 2023

Table 4 (part B)

Discount Factors Under Section 846 (percent)

For Taxable Year(s) Beginning in 2023

Long-Tail Lines of Business

Accident Year

Private

Passenger

Auto Liability/

Medical

Products

Liability Claims-Made

Products

Liability Occurrence

Workers'

Compensation

Long-Tail

Composite

2023

95.8562

89.1780

88.5317

88.9551

93.4051

2022

95.8589

91.1883

90.6396

88.3566

93.2372

2021

95.4048

88.4963

90.1990

85.8758

91.7095

2020

94.6635

83.1315

90.8125

83.3180

89.8805

2019

93.9560

84.4151

89.4118

82.6909

88.2413

2018

94.2824

86.4184

89.9309

82.8905

88.6421

2017

94.5205

87.8040

90.8527

83.2567

88.6258

2016

95.0550

89.0388

91.8072

84.1036

89.1661

2015

95.6473

90.2969

92.1992

84.7150

90.3858

2014

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using the Composite Method

2013

98.5513

92.8838

95.7739

87.8065

93.4541

2012

98.5513

94.2124

97.1571

89.0414

94.7812

2011

98.5513

95.5629

98.5513

90.2995

96.1195

2010

98.5513

96.9299

98.5513

91.5813

97.4421

2009

98.5513

98.2868

98.5513

92.8867

98.5513

2008

98.5513

94.2154

98.5513

2007

98.5513

95.5661

98.5513

2006

98.5513

96.9334

98.5513

2005

98.5513

98.2913

98.5513

Years before 2005

98.5513

94.7288

96.6903

91.2579

95.0968

Taxpayer Using the Composite Method

Years before 2014

98.5513

SECTION 5. DRAFTING

INFORMATION

The principal author of this revenue

December 26, 2023

procedure is James G. Carpino of the Office

of Associate Chief Counsel (Financial

Institutions & Products). For further information regarding this revenue procedure

1614

contact Mr. Carpino at (202) 317-6995

(not a toll-free number).

Bulletin No. 2023–52

Part IV

Deletions From Cumulative

List of Organizations,

Contributions to Which are

Deductible Under Section

170 of the Code

Announcement 2023-35

The Internal Revenue Service has

revoked its determination that the organization listed below qualifies as an organization described in sections 501(c)(3) and

170(c)(2) of the Internal Revenue Code of

1986.

Generally, the IRS will not disallow

deductions for contributions made to a

listed organization on or before the date

of announcement in the Internal Revenue

Bulletin that an organization no longer

qualifies. However, the IRS is not precluded from disallowing a deduction for

any contributions made after an organization ceases to qualify under section 170(c)

(2) if the organization has not timely filed

a suit for declaratory judgment under section 7428 and if the contributor (1) had

knowledge of the revocation of the ruling

or determination letter, (2) was aware that

such revocation was imminent, or (3) was

in part responsible for or was aware of the

activities or omissions of the organization

that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed,

contributions from individuals and organizations described in section 170(c)(2)

NAME OF ORGANIZATION

CHILDRENS CANCER COOPERATIVE INC

Bulletin No. 2023–52

that are otherwise allowable will continue

to be deductible. Protection under section

7428(c) would begin on and would end

on the date the court first determines the

organization is not described in section

170(c)(2) as more particularly set for in

section 7428(c)(1). For individual contributors, the maximum deduction protected

is $1,000, with a husband and wife treated

as one contributor. This benefit is not

extended to any individual, in whole or in

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

The Following organization is no longer qualified as an organization exempt

from income tax under Internal Revenue

Code (the “Code”) Section 501(a) as an

organization described in Section 501(c)

(3) of the Code:

EFFECTIVE DATE OF

REVOCATION

1/1/2020

1615

LOCATION

SUMMERVILLE, SC

December 26, 2023

Definition of Energy

Property and Rules

Applicable to the Energy

Credit

REG-132569-17

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking, public hearing, and partial withdrawal

of notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that would amend the

regulations relating to the energy credit

for the taxable year in which eligible

energy property is placed in service. This

document also withdraws and reproposes,

for additional clarity, portions of previously proposed regulations regarding the

increased energy credit amount available if

prevailing wage and registered apprenticeship requirements are met. In connection

with the Inflation Reduction Act of 2022,

the proposed regulations would: update the

types of energy property eligible for the

energy credit, including additional types of

energy property added by that law; clarify

the application of new credit transfer rules

to the energy credit recapture rules applicable to failures to satisfy the prevailing

wage requirements, including notification

requirements for eligible taxpayers; and

include qualified interconnection costs

in the basis of some lower-output energy

properties. The proposed regulations would

also provide additional requirements and

rules generally applicable to energy property, such as rules regarding: functionally

interdependent components; property that

is an integral part of an energy property;

application of an “80/20 Rule” to retrofitted

energy property; dual use property; separate ownership of components of an energy

property; property that could be eligible

for multiple Federal income tax credits;

and the election to treat qualified facilities

eligible for the renewable electricity production credit instead as property eligible

for the energy credit. The proposed regulations would impact taxpayers who invest

in energy property eligible for the energy

credit.

December 26, 2023

DATES: Written or electronic comments

must be received by January 22, 2024. A

public hearing on these proposed regulations is scheduled to be held on February

20, 2024, at 10 a.m. ET. Requests to speak

and outlines of topics to be discussed

at the public hearing must be received

by January 22, 2024. If no outlines are

received by January 22, 2024, the public

hearing will be cancelled. Requests to

attend the public hearing must be received

by 5 p.m. on February 15, 2024. The public hearing will be made accessible to

people with disabilities. Requests for special assistance during the hearing must be

received by 5 p.m. on February 14, 2024.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically. Submit electronic submissions via the Federal eRulemaking Portal

at www.regulations.gov (indicate IRS and

REG-132569-17) by following the online

instructions for submitting comments.

Once submitted to the Federal eRulemaking Portal, comments cannot be edited or

withdrawn. The Department of Treasury

(Treasury Department) and the IRS will

publish for public availability any comments submitted, whether electronically

or on paper, to the IRS’s public docket.

Send

paper

submissions

to:

CC:PA:LPD:PR

(REG-132569-17),

Room 5203, Internal Revenue Service,

P.O. Box 7604, Ben Franklin Station,

Washington DC 20044.

FOR FURTHER INFORMATION

CONTACT: Concerning the proposed regulations, Office of Associate

Chief Counsel (Passthroughs & Special

Industries) at (202) 317-6853 (not a tollfree number); concerning submissions of

comments or the public hearing, Vivian

Hayes, (202) 317-6901 (not toll-free number) or by email to publichearings@irs.

gov (preferred).

SUPPLEMENTARY INFORMATION:

Background

This notice of proposed rulemaking

consists of several proposed amendments

to the existing Income Tax Regulations

(26 CFR part 1) under section 48 of the

1616

Internal Revenue Code (Code) addressing

the energy credit determined under section 48 (section 48 credit) for purposes of

sections 38 and 46 of the Code (proposed

regulations). This notice of proposed

rulemaking also withdraws and reproposes

portions of another notice of proposed

rulemaking (REG-100908-23) proposing

regulations under section 48 that were

published in the Federal Register (88 FR

60018) on August 30, 2023. This notice of

proposed rulemaking would also propose

additional regulations under section 6418

of the Code to supplement a notice of

proposed rulemaking (REG-101610-23)

published in the Federal Register (88 FR

40496) on June 21, 2023.

Section 38 allows certain business

credits against the Federal income tax

imposed by chapter 1 of the Code (chapter 1). Among the credits allowed by

section 38 are the investment credit determined under section 46, which includes

the energy credit determined under section 48. See sections 38(b)(1) and 46(2).

Section 48(a)(1) generally provides that

the energy credit for any taxable year is

the energy percentage of the basis of each

energy property placed in service during

such taxable year. For most types of

energy property, eligibility for the section

48 credit and, in some cases, the amount

of the section 48 credit for which energy

property is eligible, are dependent upon

meeting certain deadlines for beginning

construction of the energy property and

for placing the energy property in service.

Section 48 was originally enacted by

section 2 of the Revenue Act of 1962,

Public Law 87-834, (76 Stat. 960, 963)

to spur economic growth by encouraging investments in various capital projects across many industries including

energy, transportation, and communications. Section 48 has been amended many

times since its enactment, most recently

by section 13102 of Public Law 117-169,

136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction

Act of 2022 (IRA). The IRA amended

section 48 in several ways, including by

making additional types of energy property eligible for the section 48 credit,

providing a special rule to allow certain

lower-output energy properties to include

qualified interconnection costs in the

basis of associated energy property, and

Bulletin No. 2023–52

providing an increased credit amount for

energy projects that satisfy prevailing

wage and apprenticeship requirements,

a domestic content bonus credit amount,

and an increase in credit rate for energy

communities.

The current Income Tax Regulations

at §1.48-9, which provide definitions and

eligibility rules for determining whether

property is energy property eligible for

the section 48 credit, were published on

January 23, 1981 (T.D. 7765, 46 FR 7287).

Those regulations were amended on July

21, 1987 (T.D. 8147, 52 FR 27336), to

provide rules for dual use property, but

have not been updated since 1987, before

many of the current types of energy property became eligible for the section 48

credit.

Prior to proposing amendments to the

existing regulations under section 48, the

Treasury Department and the IRS have

twice requested comments on issues to

be addressed. On October 26, 2015, the

Treasury Department and the IRS published Notice 2015-70, 2015-43 I.R.B.

604, to request comments regarding statutory updates to section 48 preceding

those made by the IRA. On October 24,

2022, in response to the passage of the

IRA, the Treasury Department and the

IRS published Notice 2022-49, 2022-43

I.R.B. 321, to request general as well as

specific comments on issues arising under

section 48, among other sections, that

were amended or added by the IRA. After

consideration of comments submitted in

response to Notice 2015-70 and Notice

2022-49, and after consultation with

the Department of Energy, the Treasury

Department and the IRS propose the revisions to the existing regulations under

section 48 contained in this notice of proposed rulemaking.

On August 30, 2023, the Treasury

Department and the IRS published in

the Federal Register (88 FR 60018) a

notice of proposed rulemaking (REG100908-23) proposing rules regarding

the increased credit amount available for

taxpayers satisfying prevailing wage and

registered apprenticeship requirements

established by the IRA (August Proposed

Regulations). The August Proposed

Regulations provided rules addressing

the recapture under section 48(a)(10)(C)

of increased credit amounts from only

Bulletin No. 2023–52

initially satisfying the prevailing wage

requirements under section 48(a)(10)(A)

and (B). Comments were requested and

a public hearing has been scheduled for

November 21, 2023. This notice of proposed rulemaking withdraws certain portions of the August Proposed Regulations

and reproposes regulations that would

provide additional guidance on the prevailing wage and apprenticeship requirements under section 48, including the

statutory exception for energy projects

with a maximum output of less than one

megawatt (MW) and the recapture rules

under section 48(a)(10)(C) related to the

prevailing wage requirements.

Although this notice of proposed

rulemaking withdraws certain portions

of the August Proposed Regulations,

the Explanation of Provisions section

in the preamble to the August Proposed

Regulations generally remains relevant.

Therefore, to the extent not inconsistent

with the Summary of Comments and

Explanation of Provisions section of this

preamble, the Explanation of Provisions

section of the August Proposed Regulations

is incorporated by reference in this notice

of proposed rulemaking. This notice of

proposed rulemaking does not address

written comments that were submitted in

response to the regulations proposed in

the August Proposed Regulations. Any

comments received in response to this

notice of proposed rulemaking, including

comments on the reproposed regulations,

will be addressed in the Treasury Decision

adopting these regulations as final regulations. This notice of proposed rulemaking does not extend the comment period

or affect the scheduled hearing for the

August Proposed Regulations.

On June 21, 2023, the Treasury

Department and the IRS published in

the Federal Register (88 FR 40496) a

notice of proposed rulemaking (REG101610-23) proposing rules concerning

the election under section 6418 of the

Code established by the IRA to transfer

certain Federal income tax credits, including the section 48 credit (June Proposed

Regulations). The June Proposed

Regulations provided proposed rules

addressing notification requirements and

the impact of credit recapture rules under

sections 50(a), 49(b), and 45Q(f)(4) of the

Code in proposed §1.6418-5. Comments

1617

were requested and a public hearing on the

June Proposed Regulations was held on

August 23, 2023. This document amends

those June Proposed Regulations to add

guidance to proposed §1.6418-5 that

describes the recapture rules relating to

failing to satisfy the prevailing wage and

apprenticeship requirements under section

48(a)(10) and (11), including the statutory

exception for energy projects with a maximum output of less than 1 MW in section 48(a)(9)(B)(i), and the recapture rules

under section 48(a)(10)(C) related to the

prevailing wage requirements. This notice

of proposed rulemaking does not address

written comments that were submitted

in response to the regulations proposed

in the June Proposed Regulations. Any

comments received in response to this

notice of proposed rulemaking, including the amendments to the June Proposed

Regulations, will be addressed in the

Treasury Decision adopting these regulations as final regulations. This notice of

proposed rulemaking does not otherwise

extend the comment period for the June

Proposed Regulations.

Summary of Comments and

Explanation of Provisions

I. Requirements for Energy Property

For purposes of the section 48 credit,

energy property consists of all the components of property that meet the statutory requirements for an energy property

as defined by section 48. Components of

an energy property are those that would

be included in a unit of energy property

because they are functionally interdependent (as described in proposed §1.48-9(f)

(2)(ii)) as well as property owned by the

same taxpayer that is an integral part of

such energy property (as described in proposed §1.48-9(f)(3)). Additionally, components of property must not be a type

of property specifically excluded from

energy property (as described in proposed

§1.48-9(d)).

Section 48(a)(3)(B)-(D) provides general requirements for all types of energy

property. Section 48(a)(3)(B)(i) defines

energy property as property that is constructed, reconstructed, or erected by

the taxpayer. Alternatively, section 48(a)

(3)(B)(ii) provides that energy property

December 26, 2023

can also include property which the taxpayer acquires if the original use of such

property commences with the taxpayer.

Section 48(a)(3)(C) provides that to be

eligible as energy property, depreciation (or amortization in lieu of depreciation) must be allowable for the property.

Section 48(a)(3)(D) provides that to be

eligible as energy property, the property

must also meet any performance and quality standards that have been prescribed by

the Secretary of the Treasury or her delegate (Secretary), after consultation with

the Secretary of Energy, and are in effect

at the time of the taxpayer’s acquisition

of the property. Under section 48(a)(3),

energy property does not include property

that is part of a qualified facility the production from which is allowed a renewable

electricity production credit determined

under section 45 (section 45 credit) for

the taxable year or any prior taxable year.

Lastly, where section 48 provides dates

by which construction of energy property

must begin or when energy property must

be placed in service, such energy property must meet those deadlines to be eligible for the section 48 credit at specified

energy percentages. Proposed §1.48-9(a)

would provide this general overview of

the definition of energy property.

A. Definitions related to requirements for

energy property

Before 1990, section 48 defined the

term “section 38 property” to include,

among other types of property, energy

property eligible for the section 48 credit.

The Revenue Reconciliation Act of 1990,

Public Law 101-508, 104 Stat. 1388

(November 5, 1990) removed the term

“section 38 property” in amending section 48. However, section 48 is one of the

credits that comprise the investment credit

for any taxable year determined under

section 46, which is included in section

38(b)(1) and remains subject to the general business credit rules under section

38. As a result, rules related to “section

38 property” remain generally applicable to the section 48 credit. The Treasury

Department and the IRS published regulations under §§1.48-1 and 1.48-2 to provide guidance with respect to section 38

property. Section 1.48-1 was last substantially revised on October 11, 1988 (T.D.

December 26, 2023

8233, 53 FR 39592) and §1.48-2 was last

revised on June 28, 1985 (T.D. 8031, 50

FR 26698). Although subsequent amendments to section 48 have made some of the

rules provided by these regulations inapplicable, those rules continue to provide

useful definitions, some of which §1.48-9

of these proposed regulations (proposed

§1.48-9) would adopt.

1. Construction, Reconstruction, or

Erection of Energy Property

Section 48(a)(3)(B)(i) defines energy

property as property that is constructed,

reconstructed, or erected by the taxpayer.

Existing §1.48-2(b)(1) provides that

property is considered as constructed,

reconstructed, or erected by the taxpayer

if the work is performed for the taxpayer

in accordance with the taxpayer’s specifications. Proposed §1.48-9(b)(1) would

largely adopt the definition of the term

“constructed, reconstructed, or erected”

from existing §1.48-2(b)(1) while modifying it to address energy property.

2. Acquisition and Original Use of

Energy Property

Section 48(a)(3)(B)(ii) provides that

energy property includes property that

is acquired by the taxpayer if the original use of such property commences

with the taxpayer. Existing §1.48-2(b)

(6) provides that property is deemed to

be acquired when reduced to physical

possession or control by the taxpayer.

Proposed §1.48-9(b)(2) would adopt the

concepts from existing §1.48-2(b)(6),

and provide additional clarification that

the term “acquisition of energy property” means a transaction by which a taxpayer obtains rights and obligations with

respect to energy property, including

title to the energy property under the law

of the jurisdiction in which the energy

property is placed in service, unless the

property is possessed or controlled by the

taxpayer as a lessee, and physical possession or control of the energy property. In

addition, existing §1.48-2(b)(7) defines

the term “original use” as the first use

to which the property is put, whether or

not such use corresponds to the use of

such property by the taxpayer. Proposed

§1.48-9(b)(3) largely would adopt the

1618

§1.48-2(b)(7) definition of original use

while modifying it to address energy

property.

3. Depreciation Allowable

Section 48(a)(3)(C) requires that

energy property be property with respect

to which depreciation (or amortization

in lieu of depreciation) is allowable, and

existing §1.48-1(b) explains when depreciation is allowable with respect to section 38 property. Specifically, §1.48-1(b)

provides that a deduction for depreciation

is allowable if the property is of a character subject to the allowance for depreciation under section 167 of the Code

and the basis (or cost) of the property is

recovered through a method of depreciation, including, for example, the unit of

production method and the retirement

method as well as methods of depreciation that measure the life of the property

in terms of years. Proposed §1.48-9(b)

(4)(i) generally would adopt the §1.481(b) rule for determining whether depreciation is “allowable” under section 48,

with certain modifications to update

the described methods of depreciation

and to make the definition specific to

energy property as defined in section 48.

Proposed §1.48-9(b)(4)(i) would also

clarify that the 100-percent additional

first year depreciation provided by section 168(k) of the Code is considered a

method of depreciation.

In addition, existing §1.48-1(b)(3) provides language describing when depreciation is not allowable to the taxpayer for

purposes of defining section 38 property.

Section 1.48-1(b)(3) provides that if the

cost of property is not recovered through

a method of depreciation but through a

deduction of the full cost in one taxable

year, for purposes of §1.48-1(b)(1) a

deduction for depreciation with respect

to such property is not allowable to the

taxpayer. However, if an adjustment with

respect to the income tax return for such

taxable year requires the cost of such

property to be recovered through a method

of depreciation, a deduction for depreciation will be considered as allowable to the

taxpayer.

Proposed §1.48-9(b)(4)(ii) generally

would adopt this rule from §1.48-1(b)

(3) to determine when depreciation is

Bulletin No. 2023–52

not allowable, with certain modifications to update the described methods of

depreciation and to make the definition

specific to energy property as defined

in section 48. Proposed §1.48-9(b)(4)

would provide that if the basis or cost of

energy property is not recovered through

a method of depreciation but through a

deduction of the full cost in one taxable

year, a deduction for depreciation with

respect to such property is not allowable

to the taxpayer.

However, proposed §1.48-9(b)(4)(i)

would provide that if an IRS adjustment

with respect to an income tax return or

information return for such taxable year

requires the basis or cost of such property

to be recovered using a method of depreciation, including any additional first year

depreciation deduction provision in the

Code, a deduction for depreciation will be

considered as allowable to the taxpayer.

4. Performance and Quality Standards for

Energy Property

Section 48(a)(3)(D) provides that

energy property is property that meets the

performance and quality standards (if any)

that have been prescribed by the Secretary

by regulations (after consultation with the

Secretary of Energy), and are in effect at

the time of the acquisition of the property. Existing §1.48-9(m)(1) provides that

“energy property must meet quality and

performance standards, if any, that have

been prescribed by the Secretary (after

consultation with the Secretary of Energy)

and are in effect at the time of acquisition.”

Proposed §1.48-9(c)(2) would adopt this

rule for performance and quality standards

for energy property from §1.48-9(m)(1).

After consultation with the Department

of Energy, proposed §1.48-9(c)(2)(ii)

would provide special rules for performance and quality standards with respect

to both small wind and electrochromic

glass property. These clarifications are

needed to ensure that the intended energy

production or savings occurs.

a. Performance and quality standards for

small wind energy property

Proposed §1.48-9(c)(2)(ii)(A) would

provide that small wind energy property

must meet the performance and quality

Bulletin No. 2023–52

standards in effect at the time of acquisition of the small wind turbine set forth

in one of the following: the American

Wind Energy Association Small Wind

Turbine Performance and Safety Standard

9.1-2009, or subsequent revisions

(AWEA); International Electrotechnical

Commission 61400-1, 61400-2, 6140011, 61400-12, or subsequent revisions

(IEC); or the ANSI/ACP 101-1-2021,

the Small Wind Turbine Standard, or

subsequent revisions (ACP). Proposed

§1.48-9(c)(2)(ii)(A) would also provide

that certification requirements applicable

to such performance and quality standards for small wind energy property are

provided in guidance published in the

Internal Revenue Bulletin, such as Notice

2015-4, 2015-5 I.R.B. 407, and its successor, Notice 2015-51, 2015-31 I.R.B. 133.

b. Performance and quality standards for

electrochromic glass property

As described in part I.C.2.b of this

Summary of Comments and Explanation

of Provisions, electrochromic glass is

incorporated into either an electrochromic

window or secondary glazing product.

Accordingly windows, including secondary glazings, that incorporate electrochromic glass are electrochromic glass property

for purposes of the section 48 credit.

Proposed §1.48-9(c)(2)(ii)(B) would also

adopt the requirement that windows that

incorporate electrochromic glass must

be rated in accordance with the National

Fenestration Rating Council (NFRC) and

would provide that secondary glazing

systems must be rated in accordance with

the Attachments Energy Rating Council

(AERC) Rating and Certification Process,

or subsequent revisions.

c. Time of acquisition

Existing §1.48-9(m)(2) provides that

the time of acquisition for purposes of

applying quality and performance standards for energy property is either (i) the

date the taxpayer enters into a binding

contract to acquire the property; or (ii)

for property constructed, reconstructed, or

erected by the taxpayer, the earlier of the

date that the taxpayer begins construction,

reconstruction, or erection of the property,

or the date the taxpayer and another person

1619

enter into a binding contract requiring the

other person to construct, reconstruct, or

erect property and place the property in

service for an agreed upon use. Proposed

§1.48-9(c)(2)(iii) would adopt the rule for

the “time of acquisition” from §1.48-9(m)

(2) only for purposes of applying the performance and quality standards for energy

property.

d. Binding contract

Section 1.168(k)-2(b)(5)(iii)(A) provides the following definition of a binding

contract in the context of the acquisition

of qualified property for the allowance of

additional first year depreciation under

section 168(k) of the Code:

contract is binding only if it is

enforceable under State law against the

taxpayer or a predecessor, and does not

limit damages to a specified amount

(for example, by use of a liquidated

damages provision). For this purpose,

a contractual provision that limits damages to an amount equal to at least five

percent of the total contract price will

not be treated as limiting damages to a

specified amount.

Proposed §1.48-9(c)(2)(iv) would

adopt this definition of the term “binding

contract” from §1.168(k)-2(b)(5)(iii)(A)

for purposes of applying the performance

and quality standards for energy property.

5. Placed in Service

Section 48(a) provides that the energy

credit for any taxable year is the energy

percentage of the basis of each energy

property placed in service during such

taxable year. As part of the regulations

under section 46 for the investment credit,

§1.46-3(d)(1) provides general rules for

determining when a taxpayer has placed

a property in service for the section 48

credit. Property is considered placed in

service in the earlier of the taxable year

in which, under the taxpayer’s depreciation practice, the period for depreciation

with respect to such property begins; or

the taxable year in which the property is

placed in a condition or state of readiness

and availability for a specifically assigned

function, whether in a trade or business, in

December 26, 2023

the production of income, in a tax-exempt

activity, or in a personal activity.

Proposed §1.48-9(b)(5) largely would

adopt the general rules from §1.46-3(d)

(1) for determining whether a taxpayer

has placed an energy property in service

with certain modifications. As discussed

previously, to be eligible for the section

48 credit, energy property must be property with respect to which depreciation

(or amortization in lieu of depreciation)

is allowable. Further, one requirement for

determining if depreciation is allowable

with respect to energy property is that

the basis or cost of such energy property

is recovered using a method of depreciation. Accordingly, proposed §1.48-9(b)(5)

(i) clarifies that the taxable year in which

energy property is placed in service would

be the earlier of the taxable year in which

the period for depreciation of such property begins, or the taxable year in which

the energy property is placed in a condition or state of readiness and availability

for a specifically assigned function in

either a trade or business or in the production of income.

In addition, section 50(b)(3) of the

Code provides that tax-exempt organizations cannot determine an investment

tax credit, including the section 48 credit,

unless the property is used predominantly

in an unrelated trade or business, so the

proposed regulations do not include a rule

applicable to tax-exempt use. However,

section 6417(d)(2) of the Code provides

that an applicable entity (as defined

in section 6417(d)(1), and including a

tax-exempt organization) making an

elective payment election under section

6417 can determine an applicable credit

(defined in section 6417(b), and including the section 48 credit) without regard

to section 50(b)(3), by treating any

property with respect to which the section 48 credit is determined as used in a

trade or business of the applicable entity.

(See the rules of proposed §1.6417-2(c)

(2) contained in the notice of proposed

rulemaking (REG-101607-23) published

in the Federal Register (88 FR 40528) on

June 21, 2023.) Thus, if the rules under

section 6417(d)(2) apply, the general

rule adopted in proposed §1.48-9(b)(5)

(i) would apply to determine when the

energy property is placed in service by

an applicable entity.

December 26, 2023

Section 1.46-3(d)(3) provides that notwithstanding the provisions of §1.46-3(d)

(1), property with respect to which an

election is made under §1.48-4 to treat the

lessee as having purchased such property

is considered placed in service by the lessor in the taxable year in which possession

is transferred to such lessee. Proposed

§1.48-9(b)(5)(ii) would adopt the special

rule from §1.46-3(d)(3) for determining

when a leased property has been placed in

service.

B. Property excluded from energy

property

Section 48(a)(5) generally provides

an election to treat certain types of qualified facilities as defined in section 45(d),

referred to as a “qualified investment

credit facility,” as energy property for

purposes of section 48. However, section

48(a)(5)(B) provides that no section 45

credit is allowed for any taxable year with

respect to any qualified investment credit

facility. Section 48(a)(5)(C) provides,

in part, that the term “qualified investment credit facility” means any qualified

facility with respect to which no section

45 credit has been allowed for which

the taxpayer makes an irrevocable election. Accordingly, proposed §1.48-9(d)

would exclude from energy property any

property that is part of a qualified facility

with respect to which a section 45 credit

is allowed for any taxable year, including

any prior taxable year.

The Treasury Department and the IRS

understand that energy storage technologies eligible for the section 48 credit are

often co-located with qualified facilities

eligible for the section 45 credit and may

share power conditioning and transfer

equipment. In consideration of this practice, the proposed rules would provide that

power conditioning and transfer equipment that is shared by a qualified facility

(as defined in section 45(d)) and an energy

property may be treated as an integral part

of the section 48 energy property. Such

shared property is not considered part of a

qualified facility and, therefore, the sharing of such property will not impact the

ability of a taxpayer to claim the section

48 credit for the energy property or the

section 45 credit for the qualified facility. The Treasury Department and the

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IRS request comments regarding whether

additional guidance is needed on this rule.

C. Types of energy property

Proposed §1.48-9(e) would expand

upon the definitions of energy property

provided in existing §1.48-9 to account

for new technologies that were added by

amendments to section 48, including by

section 13102 of the IRA. Generally, the

definitions of the types of energy property provided in the proposed regulations

do not provide specific beginning of construction or placed in service deadlines.

Taxpayers should refer to the current statutory language of section 48 for specific

requirements applicable to each type of

energy property with respect to any particular taxable year. The following definitions in proposed §1.48-9(e) for the

different types of energy properties were

developed by the Treasury Department

and the IRS in consultation with the

Department of Energy.

1. Solar Energy Property

Section 48(a)(3)(A)(i) provides that

energy property includes solar energy

property and defines solar energy property as any property that is equipment that

uses solar energy to generate electricity, to

heat or cool (or provide hot water for use

in) a structure, or to provide solar process

heat, excepting property used to generate

energy for the purposes of heating a swimming pool.

Existing §1.48-9(d)(1) defines solar

energy property as including equipment

and materials (and parts related to the functioning of such equipment) that use solar

energy directly to (i) generate electricity,

(ii) heat or cool a building or structure,

or (iii) provide hot water for use within

a building or structure. Further, existing

§1.48-9(d)(3), in part, defines solar electric generation equipment as equipment

that uses solar energy to generate electricity through a process that involves the

transformation of sunlight into electricity

through the use of such devices as solar

cells or other collectors.

In response to Notice 2015-70, commenters requested that the Treasury

Department and the IRS provide guidance regarding specific components that

Bulletin No. 2023–52

may be considered solar energy property,

including in photovoltaic (PV) systems

(including concentrated PV systems),

non-PV concentrated solar power systems

(passive solar), solar process, and thermal

systems. Several commenters requested

that the regulations explicitly list certain

types of technologies as solar energy

property, such as integrated thermoplastic roofing and racking systems. Other

commenters requested that the regulations simply define solar energy property

to include common components such as

controllers to manage use of solar energy,

mounting structures, energy storage technology, power conditioning equipment,

and step-up transformers.

Proposed §1.48-9(e)(1)(i) would

depart from the existing definition of

solar energy property at §1.48-9(d)(1) by

adopting a modified version of the current statutory definition, which provides

that solar energy property is equipment

that uses solar energy to generate electricity, to heat or cool a structure, or to

provide solar process heat, and parts

related to the functioning of such equipment. Proposed §1.48-9(e)(1)(ii) would

define the term “solar electric generation

equipment” as equipment that converts

sunlight into electricity through the use

of devices such as solar cells or other collectors, while adopting the current statutory exclusion for any property used to

generate energy for the purposes of heating a swimming pool. The proposed regulations would eliminate the exclusion

for passive solar in existing §1.48-9(d)

(2) because section 48 does not distinguish between passive and active solar

energy systems. Finally, the proposed

regulations would apply the functional

interdependence test as described in part

I.D.2 of this Summary of Comments and

Explanation of Provisions to determine

whether components are included as part

of solar energy property.

Existing §1.48-9(d)(7) provides that

solar energy property does not include

equipment that uses solar energy to generate steam at high temperatures for use in

industrial or commercial processes (solar

process heat). This definition conflicts

with section 48(a)(3)(A)(i). Accordingly,

the proposed regulations would adopt the

statutory language by explicitly including

solar process heat within the definition of

Bulletin No. 2023–52

the term “solar energy property.” After

consultation with the Department of

Energy, proposed §1.48-9(e)(1)(iii) would

define “solar process heat equipment” as

equipment that uses solar energy to generate heat for use in industrial or commercial processes.

2. Fiber-optic Solar Energy Property and

Electrochromic Glass Property

a. Fiber-optic solar energy property

Section 48(a)(3)(A)(ii) provides that

energy property includes equipment that

uses solar energy to illuminate the inside

of a structure using fiber-optic distributed sunlight. The Treasury Department

and the IRS received no comments in

response to Notice 2022-49 regarding fiber-optic solar energy property.

Accordingly, proposed §1.48-9(e)(2)

(i) would adopt the statutory definition

of fiber-optic solar energy property.

Additionally, the proposed regulations

would apply the functional interdependence test as described in part I.D.2 of this

Summary of Comments and Explanation

of Provisions to determine whether components are included as part of fiber-optic

solar energy property.

b. Electrochromic glass property

Section 48(a)(3)(A)(ii) was modified

by the IRA to add electrochromic glass

property as a type of energy property.

That provision defines electrochromic

glass property as equipment that uses

electricity to change its light transmittance properties in order to heat or cool a

structure. The Treasury Department and

IRS consulted with the Department of

Energy to determine the types of property

eligible as electrochromic glass property.

Accordingly, §1.48-9(e)(2)(ii) would

provide that there are only two types of

electrochromic glass property: (i) electrochromic glass incorporated into a full

window that is installed directly into a

building or (ii) electrochromic glass incorporated into a secondary window (known

as secondary glazing) that is installed on

top of an existing window. For each type

of electrochromic glass property, there is

a separate control package consisting of

electronics, power supply, sensors, and

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software necessary to control the operations of the electrochromic glass property. Thus, electrochromic glass property

is not only comprised of electrochromic

glass but also the relevant window or

secondary glazing property that incorporates the electrochromic glass property.

Therefore, in addition to the electronic

controls package that includes the power

electronics, sensors, wires, and software

systems, the electrochromic window or

secondary glazing also includes the electrochromic glass coating and the balance

of window and installation components

including glass, flashing, framing, and

sealants, as applicable, to the type of

electrochromic glass property.

In response to Notice 2022-49, several commenters provided input on the

definition of electrochromic glass property. Several commenters requested a

narrow definition. Other commenters

suggested adopting a broader definition

of electrochromic glass property. One

commenter stated that interpretations

of the terms “electrochromic glass” or

“dynamic glass” should be expanded to

include any material or technology that

meets or exceeds the performance criteria

for such components established by the

most recent Energy Star or International

Energy Conservation Code (IECC) standards in effect at the time such component

is placed in service.

In response to the comments and after

consultation with the Department of

Energy, the proposed regulations would

clarify the definition of electrochromic

glass property. Proposed §1.48-9(e)(2)

(ii) would adopt the statutory definition

of electrochromic glass property while

providing that light transmittance properties include both visible light and near

infrared light. Additionally, as mentioned

previously, proposed §1.48-9(c)(2)(ii)(B)

would adopt the performance and quality standards that new electrochromic

windows must be rated in accordance

with the NFRC and secondary glazing

systems must be rated in accordance

with the AERC Rating and Certification

Process, or subsequent revisions. The

application of these performance and

quality standards are needed to ensure

that the intended energy savings occurs

from the installation of electrochromic

glass property.

December 26, 2023

The Treasury Department and the IRS

received comments requesting guidance

concerning the eligible components of

electrochromic glass property. Similar to

the other energy properties, the proposed

regulations would apply the functional

interdependence test as described in part

I.D.2 of this Summary of Comments and

Explanation of Provisions to determine

whether components are included as part

of electrochromic glass property. This

approach provides a technology-neutral

way to determine what is considered

included in the energy property that is

broad enough to encompass technological changes. In the case of electrochromic glass property, for example, an

electrochromic glass system includes

the full controls package, the electrochromic glass coating, and the balance

of window and installation components

including glass, flashing, framing, and

sealants.

3. Geothermal Energy Property

Section 48(a)(3)(A)(iii) provides that

energy property includes geothermal

property, and defines geothermal property

as equipment used to produce, distribute,

or use energy derived from a geothermal

deposit (within the meaning of section

613(e)(2) of the Code), but only, in the

case of electricity generated by geothermal power, up to (but not including) the

electrical transmission stage.

Existing §1.48-9(c)(10)(i) defines

“geothermal equipment” as equipment

that produces, distributes, or uses energy

derived from a geothermal deposit.

Existing §1.48-9(c)(10) generally provides that geothermal property includes

production and distribution equipment.

Proposed §1.48-9(e)(3)(i) would adopt

this definitional framework by providing

that geothermal energy property is equipment used to produce, distribute, or use

energy derived from a geothermal deposit

(within the meaning of section 613(e)(2)),

and includes production equipment (as

defined in proposed §1.48-9(e)(3)(ii)) and

distribution equipment (as defined in proposed §1.48-9(e)(3)(iii)).

Proposed §1.48-9(e)(3)(ii) would adopt

a modified definition of production equipment from existing §1.48-9(c)(10)(ii) in

three respects. First, proposed §1.48-9(e)

December 26, 2023

(3)(ii) would provide, in part, that production equipment includes equipment necessary to bring geothermal energy from

the subterranean deposit to the surface.

Second, while existing §1.48-9(c)(10)(ii)

provides that reinjection wells required

for production may qualify as production equipment, proposed §1.48-9(e)(3)

(ii) would expand the types of wells that

may qualify as production equipment to

production, injection, and monitoring

wells. Third, proposed §1.48-9(e)(3)(ii)

would also include the electricity generating equipment as production equipment

for those projects that convert geothermal

energy to electricity.

Proposed §1.48-9(e)(3)(iii) would

adopt a modified definition of distribution

equipment from existing §1.48-9(c)(10)

(iii). The existing regulations provide that

distribution equipment includes components of a heating system, such as pipes

and ductwork that distribute the energy

derived from the geothermal deposit

within a building. Proposed §1.48-9(e)

(3)(iii) would also add components of a

building’s heating or cooling system as

distribution equipment. The proposed

regulations would apply the functional

interdependence test as described in part

I.D.2 of this Summary of Comments and

Explanation of Provisions to determine

whether components are included as part

of geothermal energy property.

In response to Notice 2015-70, one

commenter requested that the regulations

be modified to include as credit eligible

costs incurred to drill failed or non-producing wells, and in some scenarios, for

the margin or contingency that a subsidiary contractor requires to be paid to perform under an engineering, procurement,

and construction (EPC) contract. While

the proposed regulation would expand the

types of wells that may be considered production equipment, it would not specifically include costs incurred to drill failed

or non-producing wells. In many cases

costs incurred to drill failed or non-producing geothermal wells are already

recoverable through intangible drilling

costs under §1.612-5. It is also unclear

whether the margin or contingency that a

subsidiary contractor requires to be paid

to perform under an EPC contract can

be recovered by a taxpayer. However, if

such costs are recoverable, such recovery

1622

would likely occur through capitalizing

the costs to the underlying mineral interest

and claiming depletion deductions under

section 613(e). Therefore, the Treasury

Department and the IRS have determined

that these costs cannot be included in the

basis of the geothermal energy property

for purposes of calculating the section 48

credit.

4. Qualified Fuel Cell Property

Section 48(a)(3)(A)(iv) provides that

energy property includes qualified fuel

cell property. As modified by the IRA,

section 48(c)(1) defines “qualified fuel

cell property” as a fuel cell power plant

that has a nameplate capacity of at least

0.5 kilowatt (kW) (1 kW in the case of a

fuel cell power plant with a linear generator assembly) of electricity using an electrochemical process or electromechanical

process and an electricity-only generation efficiency greater than 30 percent.

Electricity-only generation efficiency

may be calculated by dividing the heat

rate of the fuel cell (for example, kilowatt-hours (kWh) electricity produced

per kilogram (kg) of fuel consumed) by

the higher heating value of the fuel (for

example, kWh per kg). Section 48(c)

(1)(C) defines the term “fuel cell power

plant” as an integrated system comprised

of a fuel cell stack assembly, or linear

generator assembly, and associated balance of plant components that converts

a fuel into electricity using electrochemical or electromechanical means.

The Treasury Department and the IRS

received few comments regarding qualified fuel cell property in response to

Notice 2022-49. As discussed, the proposed regulations are intended to provide

a technology-neutral way to determine

what is included in energy property that

is broad enough to encompass technological changes and do not include rules for

a particular type of product. As a result,

proposed §1.48-9(e)(4) would adopt the

statutory definition of qualified fuel cell

property. The proposed regulations would

also apply the functional interdependence

test as described in part I.D.2 of this

Summary of Comments and Explanation

of Provisions to determine whether components are included as part of qualified

fuel property.

Bulletin No. 2023–52

5. Qualified Microturbine Property

Section 48(a)(3)(A)(iv) provides that

energy property includes qualified microturbine property. Section 48(c)(2) defines

“qualified microturbine property” as a stationary microturbine power plant that has

a nameplate capacity of less than 2,000

kW and an electricit

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