# SEQ 0001 JOB IRS26-001-005 PAGE-0003 COVER

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Bulletin No. 1996–26
June 24, 1996

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

INCOME TAX

relate to the reporting of nonpayment withheld income
taxes.

T.D. 8666, page 4.
Final regulations under sections 62, 132, and 274 of the
Code relate to payment by employer of expenses for meals
and entertainment, club dues, and spousal travel.

Page 7.
Railroad retirement; rate determination; quarterly. The
Railroad Retirement Board has determined that the rate
of tax imposed by section 3221(c) of the Code shall be
thirty-four cents for the quarters beginning January 1
and April 1, 1996.

T.D. 8671, page 8.
Final regulations under section 6109 of the Code relate
to requirements for furnishing a taxpayer identifying
number (TIN) on returns, statements, or other documents. These regulations also provide procedures to
request a TIN for certain alien individuals who do not
have, or are not eligible to receive, a social security
number.

ADMINISTRATIVE
Announcement 96–60, page 17.
Publication 947, Practice Before the IRS and Power of
Attorney (revised April 1996), is now available.

PS–29–95, page 15.
Proposed regulations under section 42 of the Code
relate to the low-income housing credit. A public
hearing will be held on September 17, 1996.

Rev. Proc. 96–34, page 14.
This procedure provides that the Service will not rule on
the results of a state-created plan or arrangement that
enables participants to pay for the cost of a postsecondary education for themselves or a designated
beneficiary. Rev. Proc. 96–3 amplified.

EMPLOYMENT TAX
T.D. 8672, page 7.
Final regulations under section 6011 of the Code

Finding Lists begin on page 19.

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Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the

quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.

Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to
carry out that policy by correctly applying the laws
enacted by Congress; to determine the reasonable
meaning of various Code provisions in light of the
Congressional purpose in enacting them; and to
perform this work in a fair and impartial manner,
with neither a government nor a taxpayer point of
view.
At the heart of administration is interpretation of the
Code. It is the responsibility of each person in the
Service, charged with the duty of interpreting the
law, to try to find the true meaning of the statutory
provision and not to adopt a strained construction in
the belief that he or she is ‘‘protecting the revenue.’’
The revenue is properly protected only when we ascertain and apply the true meaning of the statute.

2

The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining officers when they have merit, never
arbitrarily or for trading purposes. At the same
time, the examining officer should never hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.
Administration should be both reasonable and
vigorous. It should be conducted with as little
delay as possible and with great courtesy and
considerateness. It should never try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.

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Introduction
The Internal Revenue Bulletin is the authoritative
instrument of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the
Internal Revenue Service and for publishing Treasury
Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are
consolidated semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin
all substantive rulings necessary to promote a uniform
application of the tax laws, including all rulings that
supersede, revoke, modify, or amend any of those
previously published in the Bulletin. All published
rulings apply retroactively unless otherwise indicated.
Procedures relating solely to matters of internal
management are not published; however, statements of
internal practices and procedures that affect the rights
and duties of taxpayers are published.
Revenue rulings represent the conclusions of the
Service on the application of the law to the pivotal facts
stated in the revenue ruling. In those based on
positions taken in rulings to taxpayers or technical
advice to Service field offices, identifying details and
information of a confidential nature are deleted to
prevent unwarranted invasions of privacy and to comply
with statutory requirements.
Rulings and procedures reported in the Bulletin do not
have the force and effect of Treasury Department
Regulations, but they may be used as precedents.
Unpublished rulings will not be relied on, used, or cited
as precedents by Service personnel in the disposition of

other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be
considered, and Service personnel and others concerned are cautioned against reaching the same
conclusions in other cases unless the facts and
circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on
provisions of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows:
Subpart A, Tax Conventions, and Subpart B, Legislation
and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and
Subparts. Also included in this part are Bank Secrecy
Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the
Treasury’s Office of the Assistant Secretary
(Enforcement).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in
this part, none of these announcements are consolidated in the Cumulative Bulletins.
The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly
and semiannual basis, and are published in the first
Bulletin of the succeeding quarterly and semi-annual
period, respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.

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Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 61.—Gross Income Defined
26 CFR 1.61–7: Interest.
The Service will not issue rulings or determination letters for state-created prepaid tuition
plans, including whether any contract under the
plan is a debt instrument and, if so, how interest
or original issue discount attributable to the
contract is treated for federal tax purposes. See
Rev. Proc. 96–34, page 14.

Section 115.—Income of States,
Municipalities, etc.
The Service will not issue rulings or determination letters for state-created prepaid tuition
plans, including whether the plan is an entity
separate from a state and, if so, how the plan is
treated for federal tax purposes. See Rev. Proc.
96–34, page 14.

Section 163.—Interest
26 CFR 1.163–7: Deduction for OID on
certain debt instruments.
The Service will not issue rulings or determination letters for state-created prepaid tuition
plans, including whether any contract under the
plan is a debt instrument and, if so, how original
issue discount attributable to the contract is
treated for federal tax purposes. See Rev. Proc.
96–34, page 14.

Section 274.—Disallowance of
Certain Entertainment, Etc., Expenses
26 CFR 1.274–1: Disallowance of certain
entertainment, gift and travel expenses.

T.D. 8666
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
Payment by Employer of Expenses for
Meals and Entertainment, Club Dues,
and Spousal Travel.
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations
SUMMARY: This document contains
final regulations relating to reimbursement and other expense allowance arrangements for expenses of business
meals and entertainment that are dis-

allowed as a deduction under section
274(n), and working condition fringe
benefit treatment for expenses for club
dues and spousal travel that are disallowed as a deduction under sections
274(a)(3) and 274(m)(3). The final
regulations reflect changes to the law
made by the Omnibus Budget Reconciliation Act of 1993. The persons
affected by the final regulations are
persons who provide or receive the use
of business meals and entertainment,
club membership dues, or spousal
travel expenses.
EFFECTIVE DATE: These regulations
are effective May 30, 1996.
FOR FURTHER INFORMATION
CONTACT: Concerning regulations under sections 62 and 132, David N.
Pardys, (202) 622-6040; concerning
regulations under section 274, John T.
Sapienza, Jr., (202) 622-4920 (not tollfree numbers).
SUPPLEMENTARY INFORMATION:
Background
On December 16, 1994, a notice of
proposed rulemaking relating to payment by an employer of expenses for
business meals and entertainment, club
dues, and spousal travel was published
in the Federal Register (59 FR 64909
[IA–17–94; EE–36–94, 1995–1 C.B.
942]). A public hearing was held on
April 14, 1995.
Written comments responding to the
notice were received. After consideration of all the comments, the proposed
regulations are adopted as revised by
this Treasury decision. The significant
comments on the proposed regulations
and the principal revisions made in the
final regulations are discussed below.
Explanation of Provisions
This Treasury decision contains final
regulations to the Income Tax Regulations under sections 62(c), 132(d), and
274 of the Internal Revenue Code
(Code) to reflect changes made to
section 274 of the Code by sections
13209, 13210, and 13272 of OBRA
(107 Stat. 469, 542). The OBRA provisions amended section 274 of the
Code by (1) limiting the deductible

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portion of meal and entertainment
expenses to 50 percent; (2) eliminating
the deduction for club dues; and (3)
restricting the deduction for spousal
travel. The amendments to the regulations under sections 62 and 132 of the
Code concern the income tax consequences to employees when their
employer’s (or third party payor’s)
deduction is disallowed by the amendments to section 274 of the Code.
Comments to the proposed regulations concerned whether payment of
expenses for club dues and spousal
travel by an employer exempt from
taxation under subtitle A of the Internal
Revenue Code were eligible for the
working condition fringe exclusion.
The final regulations provide that any
reference in the regulations to an
employer’s deduction disallowed by
sections 274(a)(3) or 274(m)(3) of the
Code will be treated as a reference to
the amount which would be disallowed
as a deduction to the employer if the
employer were not exempt from
taxation.
Other comments suggested that the
final regulation extend the section
274(e)(2) option of an employer to
avoid the section 274 disallowance for
payment of spousal travel to persons
who pay expenses described in section
274(e)(9). To achieve consistent results
for payments to independent contractors and employees with respect to
spousal travel, the final regulations
adopted this suggestion.
A number of comments requested
clarification of the term other individual in section 274(m)(3). In particular,
the comments asked that the term be
clarified so as not to preclude the
deduction for travel expenses of a
business associate accompanying the
taxpayer (or an officer or employee of
the taxpayer) on business travel. The
regulation was amended to reflect these
comments.
One comment concerned the person
to whom a fringe benefit is taxable.
The rules concerning to whom a fringe
benefit is taxable are set forth in
§1.61–21(a)(4). For rules concerning
volunteers, see §1.132–5(r).
Several comments involved the
amount of the employer’s disallowed
deduction when the expenses of a
spouse, dependent, or other individual
accompanying an employee on a non-

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commercial flight qualify as a working
condition fringe benefit. This issue is
under further consideration. In addition,
other comments requested clarification
of what constitutes a deductible expenditure for spousal travel under the
general rule of section 162(a). The
rules for deducting travel expenses of a
spouse are in §1.162–2(c).
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and, therefore, a Regulatory Flexibility Analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking
preceding these regulations was submitted to the Small Business Administration for comment on its impact on
small business.
Drafting Information
The principal authors of these regulations are David N. Pardys, Office of
the Associate Chief Counsel (Employee
Benefits and Exempt Organizations),
and John T. Sapienza, Jr., Office of the
Assistant Chief Counsel (Income Tax
and Accounting), IRS. Personnel from
other offices of the IRS and Treasury
Department also participated in their
development.
*

*

*

*

*

*

Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §1.62–2, paragraph (h)(1)
is amended by adding a second sentence at the end of the paragraph to
read as follows:

§1.62–2 Reimbursements and other
expense allowance arrangements.
*

*

*

*

*

*

(h) * * * (1) * * * If an arrangement
provides advances, allowances, or reimbursements for meal and entertainment
expenses and a portion of the payment
is treated as paid under a nonaccountable plan under paragraph (d)(2) of this
section due solely to section 274(n),
then notwithstanding paragraph (h)(2)(ii) of this section, these nondeductible
amounts are neither treated as gross
income nor subject to withholding and
payment of employment taxes.
*

*

*

*

*

*

Par. 3. In §1.132–5, paragraphs (s)
and (t) are added to read as follows:
§1.132–5 Working condition fringes.
*

*

*

*

*

*

(s) Application of section 274(a)(3)—(1) In general. If an employer’s
deduction under section 162(a) for dues
paid or incurred for membership in any
club organized for business, pleasure,
recreation, or other social purpose is
disallowed by section 274(a)(3), the
amount, if any, of an employee’s
working condition fringe benefit relating to an employer-provided membership in the club is determined without
regard to the application of section
274(a) to the employee. To be excludible as a working condition fringe
benefit, however, the amount must
otherwise qualify for deduction by the
employee under section 162(a). If an
employer treats the amount paid or
incurred for membership in any club
organized for business, pleasure, recreation, or other social purpose as compensation under section 274(e)(2), then
the expense is deductible by the
employer as compensation and no
amount may be excluded from the
employee’s gross income as a working
condition fringe benefit. See §1.274–
2(f)(2)(iii)(A).
(2) Treatment of tax-exempt employers. In the case of an employer
exempt from taxation under subtitle A
of the Internal Revenue Code, any
reference in this paragraph (s) to a
deduction disallowed by section 274(a)(3) shall be treated as a reference to the
amount which would be disallowed as
a deduction by section 274(a)(3) to the
employer if the employer were not
exempt from taxation under subtitle A
of the Internal Revenue Code.

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(3) Examples. The following examples illustrate this paragraph (s):
Example 1. Assume that Company X provides
Employee B with a country club membership for
which it paid $20,000. B substantiates, within the
meaning of paragraph (c) of this section, that the
club was used 40 percent for business purposes.
The business use of the club (40 percent) may be
considered a working condition fringe benefit,
notwithstanding that the employer’s deduction
for the dues allocable to the business use is
disallowed by section 274(a)(3), if X does not
treat the club membership as compensation under
section 274(e)(2). Thus, B may exclude from
gross income $8,000 (40 percent of the club
dues, which reflects B’s business use). X must
report $12,000 as wages subject to withholding
and payment of employment taxes (60 percent of
the value of the club dues, which reflects B’s
personal use). B must include $12,000 in gross
income. X may deduct as compensation the
amount it paid for the club dues which reflects
B’s personal use provided the amount satisfies
the other requirements for a salary or compensation deduction under section 162.
Example 2. Assume the same facts as Example
1 except that Company X treats the $20,000 as
compensation to B under section 274(e)(2). No
portion of the $20,000 will be considered a
working condition fringe benefit because the
section 274(a)(3) disallowance will apply to B.
Therefore, B must include $20,000 in gross
income.

(t) Application of section 274(m)(3)—(1) In general. If an employer’s
deduction under section 162(a) for
amounts paid or incurred for the travel
expenses of a spouse, dependent, or
other individual accompanying an
employee is disallowed by section
274(m)(3), the amount, if any, of the
employee’s working condition fringe
benefit relating to the employerprovided travel is determined without
regard to the application of section
274(m)(3). To be excludible as a
working condition fringe benefit, however, the amount must otherwise
qualify for deduction by the employee
under section 162(a). The amount will
qualify for deduction and for exclusion
as a working condition fringe benefit if
it can be adequately shown that the
spouse’s, dependent’s, or other accompanying individual’s presence on the
employee’s business trip has a bona
fide business purpose and if the
employee substantiates the travel within
the meaning of paragraph (c) of this
section. If the travel does not qualify as
a working condition fringe benefit, the
employee must include in gross income
as a fringe benefit the value of the
employer’s payment of travel expenses
with respect to a spouse, dependent, or
other individual accompanying the

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employee on business travel. See
§§1.61–21(a)(4) and 1.162–2(c). If an
employer treats as compensation under
section 274(e)(2) the amount paid or
incurred for the travel expenses of a
spouse, dependent, or other individual
accompanying an employee, then the
expense is deductible by the employer
as compensation and no amount may
be excluded from the employee’s gross
income as a working condition fringe
benefit. See §1.274–2(f)(2)(iii)(A).
(2) Treatment of tax-exempt employers. In the case of an employer
exempt from taxation under subtitle A
of the Internal Revenue Code, any
reference in this paragraph (t) to a
deduction disallowed by section
274(m)(3) shall be treated as a reference to the amount which would be
disallowed as a deduction by section
274(m)(3) to the employer if the
employer were not exempt from taxation under subtitle A of the Internal
Revenue Code.
Par. 4. The last sentence of §1.274–1
is revised to read as follows:
§1.274–1 Disallowance of certain
entertainment, gift and travel
expenses.
* * * For specific provisions with
respect to the deductibility of expenditures: for an activity of a type generally
considered to constitute entertainment,
amusement, or recreation, and for a
facility used in connection with such an
activity, as well as certain travel
expenses of a spouse, etc., see §1.274–
2; for expenses for gifts, see §1.274–3;
for expenses for foreign travel, see
§1.274–4; for expenditures deductible
without regard to business activity, see
§1.274–6; and for treatment of personal
portion of entertainment facility, see
§1.274–7.
Par. 5. Section 1.274–2 is amended
as follows:
1. The section heading for §1.274–2
is revised.
2. In paragraph (c)(6), a second
sentence is added at the end of the
paragraph.
3. The paragraph heading for paragraph (f)(2)(i) is revised.
4. Paragraph (f)(2)(iii) is revised.
5. Paragraph (g) is added.
The revised and added provisions
read as follows:

§1.274–2 Disallowance of deductions
for certain expenses for
entertainment, amusement, recreation,
or travel.
*

*

*

*

*

*

(c) * * *
(6) * * * This paragraph (c)(6) applies to club dues paid or incurred
before January 1, 1987.
*

*

*

*

*

*

(f) * * *
(2) * * *
(i) Business meals and similar expenditures paid or incurred before
January 1, 1987— * * *
*

*

*

*

*

*

(iii) Certain entertainment and
travel expenses treated as compensation—(A) In general. Any expenditure
by a taxpayer for entertainment (or for
use of a facility in connection therewith) or for travel described in section
274(m)(3), if an employee is the
recipient of the entertainment or travel,
is not subject to the limitations on
allowability of deductions provided for
in paragraphs (a) through (e) of this
section to the extent that the expenditure is treated by the taxpayer—
(1) On the taxpayer’s income tax
return as originally filed, as compensation paid to the employee; and
(2) As wages to the employee for
purposes of withholding under chapter
24 (relating to collection of income tax
at source on wages).
(B) Expenses includible in income of
persons who are not employees. Any
expenditure by a taxpayer for entertainment (or for use of a facility in connection therewith), or for travel described in section 274(m)(3), is not
subject to the limitations on allowability of deductions provided for in
paragraphs (a) through (e) of this
section to the extent the expenditure is
includible in gross income as compensation for services rendered, or as a
prize or award under section 74, by a
recipient of the expenditure who is not
an employee of the taxpayer. The
preceding sentence shall not apply to
any amount paid or incurred by the
taxpayer if such amount is required to
be included (or would be so required
except that the amount is less that
$600) in any information return filed
by such taxpayer under part III of subchapter A of chapter 61 and is not so
included. See section 274(e)(9).

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(C) Example. The following example
illustrates the provisions this paragraph
(f):
Example. If an employer rewards the employee
(and the employee’s spouse) with an expense
paid vacation trip, the expense is deductible by
the employer (if otherwise allowable under
section 162 and the regulations thereunder) to the
extent the employer treats the expenses as
compensation and as wages. On the other hand,
if a taxpayer owns a yacht which the taxpayer
uses for the entertainment of business customers,
the portion of salary paid to employee members
of the crew which is allocable to use of the yacht
for entertainment purposes (even though treated
on the taxpayer’s tax return as compensation and
treated as wages for withholding tax purposes)
would not come within this exception since the
members of the crew were not recipients of the
entertainment. If an expenditure of a type described in this subdivision properly constitutes a
dividend paid to a shareholder or if it constitutes
unreasonable compensation paid to an employee,
nothing in this exception prevents disallowance
of the expenditure to the taxpayer under other
provisions of the Internal Revenue Code.

*

*

*

*

*

*

(g) Additional provisions of section
274—travel of spouse, dependent or
others. Section 274(m)(3) provides that
no deduction shall be allowed under
this chapter (except section 217) for
travel expenses paid or incurred with
respect to a spouse, dependent, or other
individual accompanying the taxpayer
(or an officer or employee of the
taxpayer) on business travel, unless
certain conditions are met. As provided
in section 274(m)(3), the term other
individual does not include a business
associate (as defined in paragraph
(b)(2)(iii) of this section) who otherwise meets the requirements of sections
274(m)(3)(B) and (C).
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved March 26, 1996.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
May 29, 1996, 8:45 a.m., and published in the
issue of the Federal Register for May 30,
1996, 61 F.R. 27005)

Section 1275.—Other Definitions and
Special Rules
26 CFR 1.1275–4: Contingent payment debt
instruments.
The Service will not issue rulings or determination letters for state-created prepaid tuition

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plans, including whether any contract under the
plan is a debt instrument and, if so, how original
issue discount attributable to the contract is
treated for federal tax purposes. See Rev. Proc.
96–34, page 14.

Section 2501.—Imposition of tax
26 CFR 25.2501: Imposition of tax.
The Service will not issue rulings or determination letters for state-created prepaid tuition
plans, including whether any contract under the
plan is a debt instrument and, if so, how original
issue discount attributable to the contract is
treated for federal tax purposes. See Rev. Proc.
96–34, page 14.

Section 3221.—Rate of Tax
Determination of Quarterly Rate of
Excise Tax for Railroad Retirement
Supplemental Annuity Program
In accordance with directions in
Section 3221(c) of the Railroad Retirement Tax Act (26 U.S.C. Section
3221(c)), the Railroad Retirement
board has determined that the excise
tax imposed by such Section 3221(c)
on every employer, with respect to
having individuals in his employ, for
each work-hour for which compensation is paid by such employer for
services rendered to him during the
quarter beginning January 1, 1996,
shall be at the rate of 34 cents.
In accordance with directions in
Section 15(a) of the Railroad Retirement Act of 1974, the Railroad Retirement Board has determined that for the
quarter beginning January 1, 1996, 34.6
percent of the taxes collected under
Sections 3211(b) and 3221(c) of the
Railroad Retirement Tax Act shall be
credited to the Railroad Retirement
Account and 65.4 percent of the taxes
collected under such Sections 3211(b)
and 3221(c) plus 100 percent of the
taxes collected under Section 3221(d)
of the Railroad Retirement Tax Act
shall be credited to the Railroad
Retirement Supplemental Account.
Dated December 14, 1995.
Beatrice Ezerski,
Secretary to the Board.
(Filed by the Office of the Federal Register on
December 19, 1995, 8:45 a.m., and published
in the issue of the Federal Register for
December 20, 1995, 60 F.R. 65695)

In accordance with directions in
Section 3221(c) of the Railroad Retirement Tax Act (26 U.S.C., Section
3221(c)), the Railroad Retirement
Board has determined that the excise
tax imposed by such Section 3221(c)
on every employer, with respect to
having individuals in his employ, for
each work-hour for which compensation is paid by such employer for
services rendered to him during the
quarter beginning April 1, 1996, shall
be at the rate of 34 cents.
In accordance with directions in
Section 15(a) of the Railroad Retirement Act of 1974, the Railroad Retirement Board has determined that for the
quarter beginning April 1, 1996, 34.2
percent of the taxes collected under
Sections 3211(b) and 3221(c) of the
Railroad Retirement Tax Act shall be
credited to the Railroad Retirement
Account and 65.8 percent of the taxes
collected under such Sections 3211(b)
and 3221(c) plus 100 percent of the
taxes collected under Section 3221(d)
of the Railroad Retirement Tax Act
shall be credited to the Railroad
Retirement Supplemental Account.
Dated March 1, 1996.
Beatrice Ezerski,
Secretary to the Board.
(Filed by the Office of the Federal Register on
March 3, 1996, 8:45 a.m., and published in the
issue of the Federal Register for March 11,
1996, 61 F.R. 9737)

Section 6011.—General Requirement
of Return, Statement, or List
26 CFR 31.6011(a)–4: Returns of income tax
withheld.

T.D. 8672
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 31 and 602
Reporting of Nonpayroll Withheld Tax
Liabilities
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.

taxes under section 6011 of the Internal
Revenue Code. The final regulations
require a person to file Form 945,
Annual Return of Withheld Federal
Income Tax, only for a calendar year in
which the person is required to withhold Federal income tax from nonpayroll payments.
EFFECTIVE DATE: These regulations
are effective May 30, 1996.
FOR FURTHER INFORMATION
CONTACT: Vincent G. Surabian,
202-622-6232 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1413. Responses to
this collection of information are required by the IRS to monitor compliance with the Federal tax rules
related to the reporting and deposit of
nonpayroll withheld income taxes.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
Estimates of the reporting burden in
these final regulations are reflected in
the burden of Form 945.
Comments concerning the accuracy
of this burden estimate and suggestions
for reducing this burden should be sent
to the Internal Revenue Service, Attn:
IRS Reports Clearance Officer, T:FP,
Washington, DC 20224, and to the
Office of Management and Budget,
Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington,
DC 20503.
Books or records relating to this
collection of information must be retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background

SUMMARY: This document contains
final regulations relating to the reporting of nonpayroll withheld income

7

On October 16, 1995, final and
temporary regulations (TD 8624 [1995–

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2 C.B. 258]) relating to the reporting of
nonpayroll withheld income taxes under section 6011 were published in the
Federal Register (60 FR 53509). A
notice of proposed rulemaking (IA–30–
95 [1995–2 C.B. 479]) crossreferencing the temporary regulations
was published in the Federal Register
for the same day (60 FR 53561).
The IRS received no written comments responding to the notice. Accordingly, the regulations proposed by
IA–30–95 are adopted as proposed with
a minor editorial change.
Explanation of Provisions
These final regulations remove the
requirement that, once a person files a
Form 945 for a calendar year, the
person must file a Form 945 every
subsequent year until the person files a
final return. Under these final regulations, a person must file a Form 945
only for a calendar year in which the
person is required to withhold Federal
income tax from nonpayroll payments.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and, therefore, a Regulatory Flexibility Analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking
preceding these regulations was submitted to the Small Business Administration for comment on its impact on
small business.
Drafting Information
The principal author of these regulations is Vincent G. Surabian, Office of
the Assistant Chief Counsel (Income
Tax & Accounting). However, other
personnel from the IRS and Treasury
Department participated in their
development.

*

*

*

*

*

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 31 and
602 are amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME
TAX AT SOURCE
Paragraph 1. The authority citation
for part 31 is amended by removing the
citation for ‘‘Section 31.6011(a)–4T’’
as follows:
Authority: 26 U.S.C. 7805 * * *
Par 2. Section 31.6011(a)–4 is
amended by revising paragraph (b) to
read as follows:
§31.6011(a)–4 Returns of income tax
withheld.
*

*

*

*

*

*

(b) Withheld from nonpayroll payments. Every person required to withhold tax from nonpayroll payments for
calendar year 1994 must make a return
for calendar year 1994 and for any
subsequent calendar year in which the
person is required to withhold such tax
until the person makes a final return in
accordance with §31.6011(a)–6. Every
person not required to withhold tax
from nonpayroll payments for calendar
year 1994 must make a return for the
first calendar year after 1994 in which
the person is required to withhold such
tax and for any subsequent calendar
year in which the person is required to
withhold such tax until the person
makes a final return in accordance with
§31.6011(a)–6. Form 945, Annual Return of Withheld Federal Income Tax,
is the form prescribed for making the
return required under this paragraph
(b). Nonpayroll payments are—
(1) Certain gambling winnings
subject to withholding under section
3402(q);
(2) Retirement pay for services in
the Armed Forces of the United States
subject to withholding under section
3402;
(3) Certain annuities as described
in section 3402(o)(1)(B);
(4) Pensions, annuities, IRAs, and
certain other deferred income subject to
withholding under section 3405; and
(5) Reportable payments subject
to backup withholding under section
3406.
*

*

*

8

*

*

§31.6011(a)–4T [Removed]
Par. 3. Section 31.6011(a)–4T is
removed.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
§602.101 [Amended]
Par. 5. Section 602.101, paragraph
(c) is amended in the table by removing the entry ‘‘31.6011(a)–4T . . . 1545–
1413’’.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved April 5, 1996.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
May 29, 1996, 8:45 a.m., and published in the
issue of the Federal Register for May 30,
1996, 61 F.R. 27007)

Section 6109.—Identifying Numbers
26 CFR 301.6109–1: Identifying numbers.

T.D. 8671
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 301 and 602
Taxpayer Identifying Numbers (TINs)
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations relating to requirements for furnishing a taxpayer identifying number on returns, statements, or
other documents. These regulations set
forth procedures for requesting a taxpayer identifying number for certain
alien individuals for whom a social
security number is not available. These
numbers are called ‘‘IRS individual
taxpayer identification numbers.’’

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These regulations also require foreign
persons to furnish a taxpayer identifying number on their tax returns.
DATES: These regulations are effective
May 29, 1996.
For dates of applicability of these
regulations, see §301.6109–1(h).
FOR FURTHER INFORMATION
CONTACT: Lilo A. Hester, (202)
874-1490 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545–1461.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number.
The estimated annual burden for the
collection of information contained in
§301.6109–1(d) is reflected in the
burden of Form W–7.
Comments concerning the accuracy
of this burden estimate and suggestions
for reducing this burden should be sent
to the Internal Revenue Service, Attn:
IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the
Office of Management and Budget,
Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington,
DC 20503.
Books or records relating to this
collection of information must be retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
On June 8, 1995, the IRS published
in the Federal Register (60 FR 30211)
the withdrawal of the notice of proposed rulemaking published in the
Federal Register on September 27,
1990 at 55 FR 39427, a notice of
proposed rulemaking, and a notice of

public hearing relating to taxpayer
identifying numbers as contained in the
Income Tax Regulations (26 CFR part
301) under section 6109 of the Internal
Revenue Code (Code).
Written comments responding to the
notice of proposed rulemaking were
received, and a public hearing was held
on September 28, 1995. After consideration of all the comments, the proposed regulations under 6109 of the
Code are adopted as revised by this
Treasury decision. The comments and
revisions are discussed below.
Explanation of Provisions and
Revisions
A. Principal changes
Section 6109 of the Code generally
provides that, when required by regulations, a person must furnish a taxpayer
identifying number (TIN) for securing
proper identification of that person on
any return, statement, or other document made under the Code. The notice
of proposed rulemaking contains two
principal changes to the existing regulations. The first change is the introduction of a new IRS-issued TIN,
called an IRS individual taxpayer identification number (ITIN), for use by
alien individuals, whether resident or
nonresident, who currently do not have,
and are not eligible to obtain, social
security numbers. The Social Security
Administration generally limits its assignment of social security numbers to
individuals who are U.S. citizens and
alien individuals legally admitted to the
United States for permanent residence
or under other immigration categories
which authorize U.S. employment.
Therefore, this change is designed to
help taxpayers (who need a TIN but
cannot qualify for a social security
number) maintain compliance with TIN
requirements under the Code and regulations.
The second change is to modify the
existing rule set forth in §301.6109–
1(g) that currently excludes from the
general requirement of providing a
TIN, foreign persons that do not have
either (1) income effectively connected
with the conduct of a U.S. trade or
business or (2) a U.S. office or place of
business or a U.S. fiscal or paying
agent. Under these regulations, the
exclusion is modified to require that
any foreign person who makes a return
of tax (i.e., income, gift, and estate tax

9

returns, amended returns, or refund
claims, but excluding information returns) furnish its TIN on that return.
This change is intended to address the
IRS’ and Treasury’s concern that,
without TINs, taxpayers cannot be
identified efficiently and tax returns
cannot be processed effectively.
B. Comments
Regarding the assignment of ITINs
under §301.6109–1(d)(3)(iii) of the
proposed regulations, commentators
suggested that the IRS develop a
process whereby either (1) the Social
Security Administration (SSA) issues
the ITIN when the individual is not
eligible for a social security number, or
(2) the Immigration and Naturalization
Service (INS) (within the Department
of Justice) and the U.S. consulate
offices (within the Department of State)
issue the ITIN when issuing a U.S.
visa. These suggestions were not
adopted. The IRS is the most appropriate federal agency to assign the ITIN
because the number is intended for tax
use only. Having the IRS as the sole
issuer of ITINs will facilitate the
general public’s acceptance of the fact
that the assignment of an ITIN creates
no inference regarding the immigration
status of an alien individual or the right
of that individual to be legally
employed in the United States. Over
the past few years, the IRS has had
extensive discussions with the SSA, the
INS, and the State Department regarding the IRS’ development of a new
numbering system. These agencies concur that the IRS is the appropriate
initiator of a numbering system dedicated solely for tax purposes, and have
expressed a willingness to support the
IRS’ efforts to develop the system, to
disseminate information about obtaining an ITIN, and to otherwise facilitate
IRS’ assignment of the ITINs.
Regarding the IRS’ solicitation of
comments and suggestions regarding
the type of documents that could be
accepted to verify reliably a taxpayer’s
identity and foreign status, the commentators suggested passports and immigration documentation. This suggestion is already included partially in the
proposed regulations which state that
examples of acceptable documentary
evidence may include items such as
‘‘passport, driver’s license, birth certificate, identity card or U.S. visa.’’
However, the proposed regulations use
the term U.S. visa rather than the term

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immigration documentation. The term
immigration documentation is broader
in scope than the term U.S. visa, and
encompasses various identifying documents (including a U.S. visa) required
by U.S. immigration laws to support an
alien’s request for entry, and entry, into
the United States. As such, §301.6109–
1(d)(3)(iii) of the final regulations has
been revised to substitute the term
immigration documentation for the
term U.S. visa.
Regarding the role of acceptance
agents under §301.6109–1(d)(3)(iv) of
proposed regulations, some commentators suggested that acceptance agents
should only be required to provide the
necessary forms to the ITIN applicant
and to forward the completed forms,
together with copies of required documentation, to the IRS in order to avoid
being held responsible for applicant’s
errors or being considered as the applicant’s tax advisor. The adoption of
this suggestion was not necessary because, under the proposed regulations,
the precise role of an acceptance agent
is a matter to be decided by written
agreement between the particular person and the IRS. Under an agreement
with the IRS, an acceptance agent
could act as a conduit of information
between the IRS and the applicant as
suggested by the commentators or
could take a more active role in the
process by assuming responsibility for
reviewing the required documentation
and providing the necessary representations to the IRS for the issuance of a
number. In the latter case, the acceptance agent would generally not be
required to furnish any underlying
documentation to the IRS, except as
part of a verification process by which
the IRS may periodically verify the
agent’s compliance with the agreement.
Even in that case, the acceptance agent
would not be considered a tax return
preparer for purposes of section 7216 if
it acted within the terms of the
agreement with the IRS. In addition,
under this agreement, an acceptance
agent would not be responsible for an
ITIN applicant’s errors as long as the
acceptance agent exercises due diligence under the agreement. The IRS is
preparing further guidance on acceptance agent agreements.
The rule proposed in §301.6109–
1(b)(2)(iv) that would require foreign
persons to furnish a TIN when making
a return of tax has been restated to
clarify that making a return of tax
includes filing an amended return or a

claim for refund. In addition, regarding
this rule, commentators asked whether
Form SS–4, Application for Employer
Identification Number, is a return of
tax for this purpose. For purposes of
this rule, a return of tax includes
income, estate, and gift tax returns,
amended returns, or refund claims but
excludes information returns, statements or other documents. Form SS–4
is a statement or document but not a
return of tax; therefore, the foreign
persons described in §301.6109–1(b)(2)(iv) of the proposed regulations are
not required to obtain an ITIN in order
to sign a Form SS–4. For example, a
foreign individual signing Form SS–4
as a principal officer of a corporation
need not obtain an ITIN for the sole
purpose of signing the form. See for
comparison, however, §301.6109–1(d)(4)(ii) regarding the requirement to
furnish a previously-issued ITIN on
Form SS–4 when a foreign individual
is required to obtain an employer
identification number for such individual’s own business purposes. No further clarification is needed in these
regulations.
Regarding the proposed regulations
becoming effective for any return,
statement, or other document filed after
December 31, 1995, commentators suggested that the effective date be delayed. This suggestion was adopted.
Accordingly, the final regulations are
generally effective after May 29, 1996,
of publication in the Federal Register,
except that the requirement for an
estate to obtain an employer identification number applies on and after
January 1, 1984, and the requirement
for a foreign person as described in
§301.6109–1(b)(2)(iv) to furnish a TIN
on a tax return is effective for tax
returns filed after December 31, 1996.
The IRS will begin accepting applications for ITINs (Form W–7) on or after
July 1, 1996.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not
apply to these regulations, and therefore, a Regulatory Flexibility Analysis
is not required. Pursuant to section

10

7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking
preceding these final regulations has
been submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regulations is Lilo A. Hester of the Office of
Associate Chief Counsel (International), IRS. However, other personnel
from the IRS and Treasury Department
participated in their development.
*

*

*

*

*

*

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 301 and
602 are amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 is amended by adding an
entry in numerical order to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6109–1 also issued under 26 U.S.C. 6109(a), (c), and (d).
***
Par. 2. Section §301.6109–1 is
amended as follows:
1. Paragraphs (a)(1), (b), (c), and
(d)(2) are revised.
2. Paragraphs (d)(3) and (4) are
added.
3. Paragraphs (f), (g), and (h) are
revised.
The revisions and additions read as
follows:
§301.6109–1 Identifying numbers.
(a) In general—(1) Taxpayer identifying numbers—(i) Types. There are
generally three types of taxpayer identifying numbers: social security numbers,
Internal Revenue Service (IRS) individual taxpayer identification numbers,
and employer identification numbers.
Social security numbers take the form
000-00-0000, IRS individual taxpayer
identification numbers take the form
000-00-0000 but begin with a specific
number designated by the IRS, and
employer identification numbers take

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the form 00-0000000. Both social
security numbers and IRS individual
taxpayer identification numbers identify
individual persons. For the definition of
social security number and employer
identification number, see §§301.7701–
11 and 301.7701–12, respectively. For
the definition of IRS individual taxpayer identification number, see paragraph (d)(3) of this section.
(ii) Uses. Except as otherwise
provided in applicable regulations under this title or on a return, statement,
or other document, and related instructions, taxpayer identifying numbers
must be used as follows:
(A) Except as otherwise provided in
paragraphs (a)(1)(ii)(B) and (D) of this
section, an individual required to furnish a taxpayer identifying number
must use a social security number.
(B) Except as otherwise provided in
paragraph (a)(1)(ii)(D) of this section,
an individual required to furnish a
taxpayer identifying number but who is
not eligible to obtain a social security
number, must use an IRS individual
taxpayer identification number.
(C) Any person other than an individual (such as corporations, partnerships, nonprofit associations, trusts,
estates, and similar nonindividual persons) that is required to furnish a
taxpayer identifying number must use
an employer identification number.
(D) An individual, whether U.S. or
foreign, who is an employer or who is
engaged in a trade or business as a sole
proprietor should use an employer
identification number as required by
returns, statements, or other documents
and their related instructions.
*

*

*

*

*

*

(b) Requirement to furnish one’s
own number—(1) U.S. persons. Every
U.S. person who makes under this title
a return, statement, or other document
must furnish its own taxpayer identifying number as required by the forms
and the accompanying instructions. A
U.S. person whose number must be
included on a document filed by
another person must give the taxpayer
identifying number so required to the
other person on request. For penalties
for failure to supply taxpayer identifying numbers, see sections 6721 through
6724. For provisions dealing specifically with the duty of employees with
respect to their social security numbers,
see §31.6011(b)–2(a) and (b) of this
chapter (Employment Tax Regulations).

For provisions dealing specifically with
the duty of employers with respect to
employer identification numbers, see
§31.6011(b)–1 of this chapter (Employment Tax Regulations).
(2) Foreign persons. The provisions
of paragraph (b)(1) of this section
regarding the furnishing of one’s own
number shall apply to the following
foreign persons—
(i) A foreign person that has income
effectively connected with the conduct
of a U.S. trade or business at any time
during the taxable year;
(ii) A foreign person that has a U.S.
office or place of business or a U.S.
fiscal or paying agent at any time
during the taxable year;
(iii) A nonresident alien treated as a
resident under section 6013(g) or (h);
and
(iv) Any other foreign person who,
with respect to taxes imposed under
this title (including income, estate, and
gift taxes), makes a return of tax, an
amended return, or a refund claim, but
excluding information returns, statements, or documents.
(c) Requirement to furnish another’s
number. Every person required under
this title to make a return, statement, or
other document must furnish such taxpayer identifying numbers of other U.S.
persons and foreign persons that are
described in paragraph (b)(2)(i), (ii), or
(iii) of this section as required by the
forms and the accompanying instructions. If the person making the return,
statement, or other document does not
know the taxpayer identifying number
of the other person, such person must
request the other person’s number. A
request should state that the identifying
number is required to be furnished
under authority of law. When the
person making the return, statement, or
other document does not know the
number of the other person, and has
complied with the request provision of
this paragraph, such person must sign
an affidavit on the transmittal document forwarding such returns, statements, or other documents to the
Internal Revenue Service, so stating. A
person required to file a taxpayer
identifying number shall correct any
errors in such filing when such person’s attention has been drawn to them.
(d) * * *
(2) Employer identification number.
Any person required to furnish an
employer identification number must
apply for one, if not done so pre-

11

viously, on Form SS–4. A Form SS–4
may be obtained from any office of the
Internal Revenue Service, U.S. consular
office abroad, or from an acceptance
agent described in paragraph (d)(3)(iv)
of this section. The person must make
such application far enough in advance
of the first required use of the
employer identification number to permit issuance of the number in time for
compliance with such requirement. The
form, together with any supplementary
statement, must be prepared and filed
in accordance with the form, accompanying instructions, and relevant regulations, and must set forth fully and
clearly the requested data.
(3) IRS individual taxpayer identification number—(i) Definition. The
term IRS individual taxpayer identification number means a taxpayer identifying number issued to an alien individual by the Internal Revenue Service,
upon application, for use in connection
with filing requirements under this title.
The term IRS individual taxpayer identification number does not refer to a
social security number or an account
number for use in employment for
wages. For purposes of this section, the
term alien individual means an individual who is not a citizen or national of
the United States.
(ii) General rule for obtaining number. Any individual who is not eligible
to obtain a social security number and
is required to furnish a taxpayer
identifying number must apply for an
IRS individual taxpayer identification
number on Form W–7, Application for
IRS Individual Taxpayer Identification
Number, or such other form as may be
prescribed by the Internal Revenue
Service. Form W–7 may be obtained
from any office of the Internal Revenue
Service, U.S. consular office abroad, or
any acceptance agent described in
paragraph (d)(3)(iv) of this section. The
individual shall furnish the information
required by the form and accompanying
instructions, including the individual’s
name, address, foreign tax identification number (if any), and specific
reason for obtaining an IRS individual
taxpayer identification number. The
individual must make such application
far enough in advance of the first
required use of the IRS individual
taxpayer identification number to permit issuance of the number in time for
compliance with such requirement. The
application form, together with any
supplementary statement and documentation, must be prepared and filed in

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accordance with the form, accompanying instructions, and relevant regulations, and must set forth fully and
clearly the requested data.
(iii) General rule for assigning number. Under procedures issued by the
Internal Revenue Service, an IRS individual taxpayer identification number
will be assigned to an individual upon
the basis of information reported on
Form W–7 (or such other form as may
be prescribed by the Internal Revenue
Service) and any such accompanying
documentation that may be required by
the Internal Revenue Service. An applicant for an IRS individual taxpayer
identification number must submit such
documentary evidence as the Internal
Revenue Service may prescribe in
order to establish alien status and
identity. Examples of acceptable documentary evidence for this purpose may
include items such as an original (or a
certified copy of the original) passport,
driver’s license, birth certificate, identity card, or immigration documentation.
(iv) Acceptance agents—(A) Agreements with acceptance agents. A person described in paragraph (d)(3)(iv)(B) of this section will be accepted by
the Internal Revenue Service to act as
an acceptance agent for purposes of the
regulations under this section upon
entering into an agreement with the
Internal Revenue Service, under which
the acceptance agent will be authorized
to act on behalf of taxpayers seeking to
obtain a taxpayer identifying number
from the Internal Revenue Service. The
agreement must contain such terms and
conditions as are necessary to insure
proper administration of the process by
which the Internal Revenue Service
issues taxpayer identifying numbers to
foreign persons, including proof of
their identity and foreign status. In
particular, the agreement may
contain—
(1) Procedures for providing Form
SS–4 and Form W–7, or such other
necessary form to applicants for obtaining a taxpayer identifying number;
application form together with a certification that the acceptance agent has
reviewed the required documentation
and that it has no actual knowledge or
reason to know that the documentation
is not complete or accurate;
(2) Procedures for providing assistance to applicants in completing the
application form or completing it for
them;

(3) Procedures for collecting, reviewing, and maintaining, in the normal course of business, a record of the
required documentation for assignment
of a taxpayer identifying number;
(4) Procedures for submitting the
application form and required documentation to the Internal Revenue
Service, or if permitted under the
agreement, submitting the application
form together with a certification that
the acceptance agent has reviewed the
required documentation and that it has
no actual knowledge or reason to know
that the documentation is not complete
or accurate;
(5) Procedures for assisting taxpayers with notification procedures described in paragraph (g)(2) of this
section in the event of change of
foreign status;
(6) Procedures for making all documentation or other records furnished by
persons applying for a taxpayer identifying number promptly available for
review by the Internal Revenue Service, upon request; and
(7) Provisions that the agreement
may be terminated in the event of a
material failure to comply with the
agreement, including failure to exercise
due diligence under the agreement.
(B) Persons who may be acceptance
agents. An acceptance agent may include any financial institution as defined in section 265(b)(5) or §1.165–
12(c)(1)(v) of this chapter, any college
or university that is an educational
organization as defined in §1.501(c)(3)–1(d)(3)(i) of this chapter, any federal agency as defined in section
6402(f) or any other person or categories of persons that may be authorized
by regulations or Internal Revenue
Service procedures. A person described
in this paragraph (d)(3)(iv)(B) that
seeks to qualify as an acceptance agent
must have an employer identification
number for use in any communication
with the Internal Revenue Service. In
addition, it must establish to the
satisfaction of the Internal Revenue
Service that it has adequate resources
and procedures in place to comply with
the terms of the agreement described in
paragraph (d)(3)(iv)(A) of this section.
(4) Coordination of taxpayer identifying numbers—(i) Social security
number. Any individual who is duly
assigned a social security number or
who is entitled to a social security
number will not be issued an IRS
individual taxpayer identification num-

12

ber. The individual can use the social
security number for all tax purposes
under this title, even though the individual is, or later becomes, a nonresident alien individual. Further, any
individual who has an application
pending with the Social Security Administration will be issued an IRS
individual taxpayer identification number only after the Social Security
Administration has notified the individual that a social security number cannot
be issued. Any alien individual duly
issued an IRS individual taxpayer
identification number who later becomes a U.S. citizen, or an alien
lawfully permitted to enter the United
States either for permanent residence or
under authority of law permitting U.S.
employment, will be required to obtain
a social security number. Any individual who has an IRS individual taxpayer
identification number and a social
security number, due to the circumstances described in the preceding
sentence, must notify the Internal Revenue Service of the acquisition of the
social security number and must use
the newly-issued social security number
as the taxpayer identifying number on
all future returns, statements, or other
documents filed under this title.
(ii) Employer identification number.
Any individual with both a social
security number (or an IRS individual
taxpayer identification number) and an
employer identification number may
use the social security number (or the
IRS individual taxpayer identification
number) for individual taxes, and the
employer identification number for
business taxes as required by returns,
statements, and other documents and
their related instructions. Any alien
individual duly assigned an IRS individual taxpayer identification number
who also is required to obtain an
employer identification number must
furnish the previously-assigned IRS
individual taxpayer identification number to the Internal Revenue Service on
Form SS–4 at the time of application
for the employer identification number.
Similarly, where an alien individual has
an employer identification number and
is required to obtain an IRS individual
taxpayer identification number, the individual must furnish the previouslyassigned employer identification number to the Internal Revenue Service on
Form W–7, or such other form as may
be prescribed by the Internal Revenue
Service, at the time of application for
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*

*

*

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*

(f) Penalty. For penalties for failure
to supply taxpayer identifying numbers,
see sections 6721 through 6724.
(g) Special rules for taxpayer identifying numbers issued to foreign
persons—(1) General rule—(i) Social
security number. A social security
number is generally identified in the
records and database of the Internal
Revenue Service as a number belonging to a U.S. citizen or resident alien
individual. A person may establish a
different status for the number by
providing proof of foreign status with
the Internal Revenue Service under
such procedures as the Internal Revenue Service shall prescribe, including
the use of a form as the Internal
Revenue Service may specify. Upon
accepting an individual as a nonresident alien individual, the Internal Revenue Service will assign this status to
the individual’s social security number.
(ii) Employer identification number.
An employer identification number is
generally identified in the records and
database of the Internal Revenue Service as a number belonging to a U.S.
person. However, the Internal Revenue
Service may establish a separate class
of employer identification numbers
solely dedicated to foreign persons
which will be identified as such in the
records and database of the Internal
Revenue Service. A person may establish a different status for the number
either at the time of application or
subsequently by providing proof of
U.S. or foreign status with the Internal
Revenue Service under such procedures
as the Internal Revenue Service shall
prescribe, including the use of a form
as the Internal Revenue Service may
specify. The Internal Revenue Service
may require a person to apply for the
type of employer identification number
that reflects the status of that person as
a U.S. or foreign person.
(iii) IRS individual taxpayer identification number. An IRS individual
taxpayer identification number is generally identified in the records and
database of the Internal Revenue Service as a number belonging to a nonresident alien individual. If the Internal
Revenue Service determines at the time

of application or subsequently, that an
individual is not a nonresident alien
individual, the Internal Revenue Service may require that the individual
apply for a social security number. If a
social security number is not available,
the Internal Revenue Service may
accept that the individual use an IRS
individual taxpayer identification number, which the Internal Revenue Service will identify as a number belonging
to a U.S. resident alien.
(2) Change of foreign status. Once a
taxpayer identifying number is identified in the records and database of the
Internal Revenue Service as a number
belonging to a U.S. or foreign person,
the status of the number is permanent
until the circumstances of the taxpayer
change. A taxpayer whose status
changes (for example, a nonresident
alien individual with a social security
number becomes a U.S. resident alien)
must notify the Internal Revenue Service of the change of status under such
procedures as the Internal Revenue
Service shall prescribe, including the
use of a form as the Internal Revenue
Service may specify.
(3) Waiver of prohibition to disclose
taxpayer information when acceptance
agent acts. As part of its request for an
IRS individual taxpayer identification
number or submission of proof of
foreign status with respect to any
taxpayer identifying number, where the
foreign person acts through an acceptance agent, the foreign person will
agree to waive the limitations in
section 6103 regarding the disclosure
of certain taxpayer information. However, the waiver will apply only for
purposes of permitting the Internal
Revenue Service and the acceptance
agent to communicate with each other
regarding matters related to the assignment of a taxpayer identifying number
and change of foreign status.
(h) Effective date—(1) General rule.
Except as otherwise provided in this
paragraph (h), the provisions of this
section are generally effective for information that must be furnished after
April 15, 1974. However, the provisions relating to IRS individual taxpayer identification numbers apply after
May 29, 1996. An application for an

13

IRS individual taxpayer identification
number (Form W–7) may be filed at
any time on or after July 1, 1996.
(2) Special rules—(i) Employer
identification number of an estate. The
requirement under paragraph (a)(1)(ii)(C) of this section that an estate obtain
an employer identification number applies on and after January 1, 1984.
(ii) Taxpayer identifying numbers of
certain foreign persons. The requirement under paragraph (b)(2)(iv) of this
section that certain foreign persons
furnish a TIN on a return of tax is
effective for tax returns filed after
December 31, 1996.
PART 602—OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT
Par 3. The authority for part 602
continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, the table in
paragraph (c) is amended by revising
the entry for 301.6109–1 to read as
follows:
301.6109–1 . . . . . . . . . . . 1545–0003
1545–0295
1545–0367
1545–0387
1545–0957
1545–1461
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved May 20, 1996.
Leslie Samuels,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
May 23, 1996, 12:23 p.m., and published in
the issue of the Federal Register for May 29,
1996, 61 F.R. 26788)

Section 7701.—Definitions
26 CFR 301.7701–2: Associations.
The Service will not issue rulings or determination letters for state-created prepaid tuition
plans, including whether the plan is an entity
separate from a state and, if so, how the plan is
treated for federal tax purposes. See Rev. Proc.
96–34, page 14.

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Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.201: Rulings and determination
letters
(Also Part I, §§ 61, 115, 163, 1275, 2501,
7701; 1.61–7, 1.163–7, 1.1275–4, 25.2501–1,
301.7701–2)

study. This revenue procedure adds a
subparagraph for state-created prepaid
tuition plans.

treated for federal tax purposes. (Also
§§ 61, 163, 1275, 2501 and 7701)
SECTION 4. EFFECTIVE DATE

SECTION 3. PROCEDURE
Rev. Proc. 96–34
SECTION 1. PURPOSE
This revenue procedure amplifies
Rev. Proc. 96–3, 1996–1 I.R.B. 82,
which sets forth areas of the Internal
Revenue Code under the jurisdiction of
the Associate Chief Counsel (Domestic) in which the Internal Revenue
Service will not issue advance rulings
or determination letters.
SECTION 2. BACKGROUND
Rev. Proc 96–3, section 5, lists
specific areas in which rulings or
determination letters will not be issued
because the areas are under extensive

Rev. Proc. 96–3 is amplified by
adding to section 5 the following:
Section 115.—Income of states, municipalities, etc.—The results of transactions pursuant to a plan or arrangement
created by state statute a primary
objective of which is to enable participants to pay for the costs of a postsecondary education for themselves or
a designated beneficiary, including: (i)
whether the plan or arrangement, itself,
is an entity separate from a state and, if
so, how the plan or arrangement is
treated for federal tax purposes; and (ii)
whether any contract under the plan or
arrangement is a debt instrument and, if
so, how interest or original issue
discount attributable to the contract is

14

This revenue procedure applies to all
ruling requests, including any pending
in the National Office on June 11,
1996.
SECTION 5. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 96–3 is amplified.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Craig Wojay of the Office
of Assistant Chief Counsel (Financial
Institutions and Products). For further
information regarding this revenue procedure, contact Mr. Wojay at (202)
622-3920 (not a toll-free number).

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Part IV. Items of General Interest
Notice of Proposed Rulemaking and
Notice of Public Hearing

SUPPLEMENTARY INFORMATION:
Background

Available Unit Rule
PS–29–95
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
SUMMARY: This document contains
proposed regulations concerning the
low-income housing credit. The proposed regulations provide rules for
determining the treatment of lowincome housing units in a building that
are occupied by individuals whose
incomes increase above 140 percent of
the income limitation applicable under
section 42(g)(1). The proposed regulations affect owners of those buildings.
This document also provides notice of
public hearing on these proposed
regulations.
DATES: Written comments and outlines of topics to be discussed at the
public hearing scheduled for September
17, 1996, must be received by August
27, 1996.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (PS–29–95), Room
5228, Internal Revenue Service, POB
7604, Ben Franklin Station, Washington, DC 20044. In the alternative,
submissions may be hand delivered
between the hours of 8 a.m. and 5 p.m.
to: CC:DOM:CORP:R (PS–29–95),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,
Washington, DC. The public hearing
will be held in the NYU Classroom,
room 2615, Internal Revenue Building,
1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations, David Selig, (202) 622-3040;
concerning submissions and the hearing, Christina Vasquez, (202) 622-7180
(not toll-free numbers).

This document contains proposed
amendments to the Income Tax Regulations (26 CFR Part 1) under section 42.
These amendments are proposed to
provide guidance under section
42(g)(2)(D), as amended by section
7108(e)(1) of the Omnibus Budget and
Reconciliation Act of 1989, and section
11701(a)(3)(A) and (a)(4) of the Omnibus Budget and Reconciliation Act of
1990. Section 42(g)(2)(D) provides
rules for determining the treatment of
low-income housing units that are
occupied by individuals whose incomes
rise above the income limitation applicable under section 42(g)(1).
The general rule in section 42(g)(2)(D)(i) provides that if the income of an
occupant of a low-income unit increases above the income limitation
applicable under section 42(g)(1), the
unit continues to be treated as a lowincome unit. This general rule only
applies if the occupant’s income initially met the income limitation and the
unit continues to be rent-restricted.
Section 42(g)(2)(D)(ii), however, provides an exception to the general rule
in section 42(g)(2)(D)(i). The unit
ceases being treated as a low-income
unit when two conditions occur. The
first condition is that the occupant’s
income increases above 140 percent of
the income limitation applicable under
section 42(g)(1), or above 170 percent
for a deep rent-skewed project described in section 142(d)(4)(B) (applicable income limitation). When this
occurs, the unit becomes an overincome unit. The second condition is
that a new resident, whose income
exceeds the applicable income limitation (nonqualified resident), occupies
any residential unit in the building of a
comparable or smaller size (comparable
unit).
Explanation of Provisions
All available units must be rented to
qualified residents
The heading of section 42(g)(2)(D)(ii) indicates that the next available
unit must be rented to a low-income
tenant to maintain the low-income

15

status of an over-income unit. Although
the heading of section 42(g)(2)(D)(ii)
refers to the next available unit, the
body of section 42(g)(2)(D)(ii) clarifies
that if any available comparable unit is
occupied by a nonqualified resident,
the over-income unit ceases to be
treated as a low-income unit. Therefore, all available comparable units in
the building, not only the next available unit, must be rented to qualified
residents to maintain the low-income
status of the over-income unit.
A current resident may move within
the same low-income building
The proposed regulations define a
qualified resident under the available
unit rule as any person whose income
does not exceed the applicable income
limitation or any current resident, regardless of the income level of the
current resident. Thus, a current resident may move to a different unit in
the same low-income building without
causing a violation of the available unit
rule even if the current resident’s
income exceeds the applicable income
limitation. When a current resident
moves to a different unit within the
same low-income building, the new
unit adopts the status of the vacated
unit.
Rule applies to each building
separately
The rules of section 42 generally
apply on a building-by-building basis.
For example, the amount of credit
allowable under section 42(a) is determined for each building in a qualified
low-income housing project. The recapture of credit under section 42(j) is
determined by examining the qualified
basis of each building. In addition,
section 42(g)(2)(D)(ii) uses the phrase
‘‘any residential rental unit in the
building’’ to identify residential rental
units that must be rented to qualified
residents to preserve the low-income
status of an over-income unit. The
proposed regulations provide, therefore,
that in a project containing more than
one low-income building, the available
unit rule applies separately to each
building.

1996 – 26 I.R.B.

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Effect of violation of available unit
rule
The proposed regulations further
provide that all over-income units in
the building lose their status as lowincome units if an owner violates the
available unit rule. A violation of the
rule occurs when a building has one or
more over-income units and the owner
of the building rents an available
comparable unit in the building to a
nonqualified resident.
Over-income unit counts toward
minimum set-aside requirement
The proposed regulations also clarify
whether an over-income unit counts
towards satisfying the applicable minimum set-aside requirement of section
42(g)(1). The available unit rule
provides that an over-income unit
maintains its status as a low-income
unit as long as the owner does not rent
an available comparable unit to a
nonqualified resident. Section 42(i)(3),
which defines a low-income unit, and
section 42(g)(2)(D), which contains
rules for increases in the income of
existing low-income tenants, work together to treat an over-income unit as a
low-income unit when determining
whether a project satisfies the applicable minimum set-aside requirement.
This treatment helps diminish any
incentive a project owner may have to
evict from a rent-restricted unit those
tenants who originally qualified as lowincome tenants. See 2 H.R. Conf. Rep.
No. 841, 99th Cong., 2d Sess. II–97
(1986), 1986–3 (Vol. 4) C.B. 97.
Therefore, the proposed regulations
provide that an over-income unit may
continue to be included in the numerator and the denominator of the ratio
used to determine whether a project
satisfies the applicable minimum setaside requirement of section 42(g)(1).
Relationship to tax-exempt bond
provisions
Financing arrangements using obligations that purport to be exempt facility
bonds under section 142 must meet the
requirements of sections 103 and 141
through 150 for interest on the obligations to be excluded from gross income
under section 103(a). The requirements
under section 142(d) may differ from
those under section 42. For example,
section 142(d)(1) is applied on a

1996 – 26 I.R.B.

project rather than on a building-bybuilding basis. The rules set forth in
these proposed regulations are not
intended as an interpretation of the
applicable rules under section 142.
The rules contained in the proposed
regulations are proposed to be effective
on the date final regulations are published in the Federal Register.
Special Analyses
It has been determined that this
notice of proposed rulemaking is not a
significant regulatory action as defined
in EO 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) and the Regulatory
Flexibility Act (5 U.S.C. chapter 6) do
not apply to these regulations, and,
therefore, a Regulatory Flexibility
Analysis is not required. Pursuant to
section 7805(f) of the Internal Revenue
Code, this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
Comments and Public Hearing
Before these proposed regulations
are adopted as final regulations, consideration will be given to any written
comments (a signed original and eight
(8) copies) that are submitted timely to
the IRS. All comments will be available for public inspection and copying.
A public hearing has been scheduled
for September 17, 1996, at 10 a.m. in
the NYU Classroom, Room 2615, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
Because of access restrictions, visitors
will not be admitted beyond the Internal Revenue Building lobby more than
15 minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing.
Persons that wish to present oral
comments at the hearing must submit
written comments and outlines of
topics to be discussed and the time
devoted to each topic (signed original
and eight (8) copies by August 27,
1996.
A period of 10 minutes will be
allotted to each person for making
comments.
An agenda showing the scheduling
of the speakers will be prepared after

16

the deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regulations is David Selig, Office of the
Assistant Chief Counsel (Passthroughs
and Special Industries), IRS. However,
other personnel from the IRS and
Treasury Department participated in
their development.
*

*

*

*

*

*

Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding a new
citation in numerical order to read as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.42–15 is also issued under 26
U.S.C. 42(n). * * *
Par. 2. Section 1.42–15 is added to
read as follows:
§1.42–15 Available unit rule.
(a) Definitions. The following definitions apply to this section:
Applicable income limitation means
the limitation applicable under section
42(g)(1) or, for deep rent-skewed projects described in section 142(d)(4)(B),
40 percent of area median gross
income.
Available unit rule means the rule in
section 42(g)(2)(D)(ii).
Comparable unit means a residential
unit in a low-income building that is
comparably sized or smaller than an
over-income unit or, for deep rentskewed projects described in section
142(d)(4)(B), any low-income unit.
Low-income resident means a person
whose income does not exceed the
applicable income limitation.
Low-income unit is defined by section 42(i)(3)(A).
New resident means a person who
currently is not living in the lowincome building.
Nonqualified resident means a new
resident whose income exceeds the
applicable income limitation.

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Over-income unit means a lowincome unit in which the income of the
occupants of the unit increases above
140 percent of the applicable income
limitation under section 42(g)(1), or
above 170 percent of the applicable
income limitation for deep rent-skewed
projects described in section
142(d)(4)(B).
Qualified resident means a lowincome resident or a current resident.
(b) General section 42(g)(2)(D)(i)
rule. Except as provided in paragraph
(c) of this section, notwithstanding an
increase in the income of the occupants
of a low-income unit above the applicable income limitation, if the income
of the occupants initially met the
applicable income limitation, and the
unit continues to be rent-restricted—
(1) The unit continues to be treated
as a low-income unit; and
(2) The unit continues to be included
in the numerator and the denominator
of the ratio used to determine whether
a project satisfies the applicable minimum set-aside requirement of section
42(g)(1).
(c) Exception. A unit ceases to be
treated as a low-income unit if it
becomes an over-income unit and a
nonqualified resident occupies any
comparable unit that is available or that
subsequently becomes available in the
same low-income building. Thus, to
continue treating the over-income unit
as a low-income unit, the owner of a
low-income building must rent to
qualified residents all comparable units
that are available or that subsequently
become available in the same building.
(d) Effect of current resident moving
within building. When a current resident moves to a different unit within
the building, the newly occupied unit
adopts the status of the vacated unit.
Thus, if a current resident, whose
income exceeds the applicable income
limitation, moves from an over-income
unit to a vacant unit in the same
building, the newly occupied unit is
treated as an over-income unit.

(e) Buildings accounted for separately. In a project containing more
than one low-income building, the
available unit rule applies separately to
each building.
(f) Result of violation of available
unit rule. If any comparable unit that
subsequently becomes available is
rented to a nonqualified resident, all
over-income units within the same
building lose their status as low-income
units.
(g) Examples. The following examples illustrate this section.
Example 1. This example illustrates a violation
of the available unit rule in a low-income
building containing three over-income units. On
January 1, 1997, a qualified low-income housing
project, consisting of one building containing ten
identically sized residential units, received a
housing credit dollar amount allocation from a
state housing credit agency for five low-income
units. To avoid recapture of credit, the Project
owner must maintain five of the units as lowincome units. The project satisfied the minimum
set-aside requirement of section 42(g)(1)(B).
Units 1, 2, 3, 4, and 5 were occupied by
individuals whose incomes did not exceed the
income limitation applicable under section
42(g)(1) (low-income residents). Units 6, 7, 8,
and 9 were occupied by market-rate tenants. Unit
10 was vacant. On November 21, 1997, the
annual incomes of the individuals in Units 1, 2,
and 3 increased above 140 percent of the income
limitation applicable under section 42(g)(1),
causing those units to become over-income units.
On November 30, 1997, Units 8 and 9 became
vacant. On December 1, 1997, the project owner
rented Units 8 and 9 to qualified residents at
rates meeting the rent restriction requirements of
section 42(g)(2). On December 31, 1997, the
Project owner rented Unit 10 to a market-rate
tenant. Because Unit 10, an available comparable
unit, was leased to a market-rate tenant, Units 1,
2, and 3 ceased to be treated as low-income
units. On that date, Units 4, 5, 8, and 9 were the
only remaining low-income units. Because the
Project owner did not maintain five of the
residential units as low-income units, the
qualified basis in the building is reduced, and
credit must be recaptured. If the project owner
had rented Unit 10 to a qualified resident, eight
of the units would be low-income units. Units 1,
2, and 3, the over-income units, could then be
rented to market-rate tenants because the building would still contain five low-income units.
Example 2. This example illustrates the
provisions of paragraph (d) of this section. A
low-income project consists of one six-floor
building. The residential units in the building are

17

identically sized. The building contains two overincome units on the sixth floor and two vacant
units on the first floor. The project owner,
desiring to maintain the over-income units as
low-income units, wants to rent the available
units to qualified residents. J, a resident of one
of the over-income units, wishes to occupy a unit
on the first floor. J’s income has recently
increased above the applicable income limitation.
The project owner permits J to move into one of
the units on the first floor. Despite the increase
in J’s income, J is a qualified resident under the
available unit rule because J is a current resident
of the building. The unit occupied by J becomes
an over-income unit under the available unit rule.
The over-income units in the building continue
to be treated as low-income units.

(h) Effective date. This section is
effective on the date final regulations
are published in the Federal Register.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
May 29, 1996, and published in the issue of
the Federal Register for May 30, 1996, 61 F.R.
27036)

Availability of Publication 947,
Practice Before the IRS and Power
of Attorney (Revised April 1996)
Announcement 96–60
The recently updated Publication 947
is now available from the Internal
Revenue Service.
The publication discusses who can
represent a taxpayer before the IRS and
what forms or documents are used to
authorize a person to represent a
taxpayer.
You can get a copy of this publication by calling 1-800-829-3776. You
can also write to the IRS Forms
Distribution Center nearest you. Check
your income tax package for the
address. Your local library or post
office also may have a copy.
If you have access to a personal
computer and modem, you also can get
the publication electronically. Check
your income tax package for details.

1996 – 26 I.R.B.

SEQ 0018 JOB IRS26-051-002 PAGE-0018 TERMS
REVISED 29JUL96 AT 22:06 BY LR DEPTH: 65.01 PICAS WIDTH 46 PICAS
COMPOSITE COLOR
778/20051/29JUL96/IRS26-051

Definition of Terms
Revenue rulings and revenue procedures (hereinafter referred to as ‘‘rulings’’) that have an effect on previous
rulings use the following defined terms
to describe the effect:
Amplified describes a situation where
no change is being made in a prior
published position, but the prior position is being extended to apply to a
variation of the fact situation set forth
therein. Thus, if an earlier ruling held
that a principle applied to A, and the
new ruling holds that the same principle also applies to B, the earlier ruling
is amplified. (Compare with modified,
below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confusion. It is not used where a position in
a prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously
published ruling and points out an
essential difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but
not to B, and the new ruling holds that
it applies to both A and B, the prior

ruling is modified because it corrects a
published position. (Compare with amplified and clarified, above).
Obsoleted describes a previously
published ruling that is not considered
determinative with respect to future
transactions. This term is most commonly used in a ruling that lists
previously published rulings that are
obsoleted because of changes in law or
regulations. A ruling may also be
obsoleted because the substance has
been included in regulations subsequently adopted.
Revoked describes situations where
the position in the previously published
ruling is not correct and the correct
position is being stated in the new
ruling.
Superseded describes a situation
where the new ruling does nothing
more than restate the substance and
situation of a previously published
ruling (or rulings). Thus, the term is
used to republish under the 1986 Code
and regulations the same position published under the 1939 Code and regulations. The term is also used when it is
desired to republish in a single ruling a
series of situations, names, etc., that
were previously published over a
period of time in separate rulings.

If the new ruling does more than
restate the substance of a prior ruling, a
combination of terms is used. For
example, modified and superseded describes a situation where the substance
of a previously published ruling is
being changed in part and is continued
without change in part and it is desired
to restate the valid portion of the
previously published ruling in a new
ruling that is self contained. In this
case the previously published ruling is
first modified and then, as modified, is
superseded.
Supplemented is used in situations in
which a list, such as a list of the names
of countries, is published in a ruling
and that list is expanded by adding
further names in subsequent rulings.
After the original ruling has been
supplemented several times, a new
ruling may be published that includes
the list in the original ruling and the
additions, and supersedes all prior
rulings in the series.
Suspended is used in rare situations
to show that the previous published
rulings will not be applied pending
some future action such as the issuance
of new or amended regulations, the
outcome of cases in litigation, or the
outcome of a Service study.

Abbreviations

E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.

PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

The following abbreviations in current use and
formerly used will appear in material published
in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.

18

SEQ 0019 JOB IRS26-052-002 PAGE-0019 FINDING LIST
REVISED 29JUL96 AT 22:06 BY LR DEPTH: 65.01 PICAS WIDTH 42.04 PICAS
COMPOSITE COLOR
778/20051/29JUL96/IRS26-052

Numerical Finding List1
Bulletins 1996–1 through 1996–25
Announcements:
96–1, 1996–2 I.R.B. 57
96–2, 1996–2 I.R.B. 57
96–3, 1996–2 I.R.B. 57
96–4, 1996–3 I.R.B. 50
96–5, 1996–4 I.R.B. 99
96–6, 1996–5 I.R.B. 43
96–7, 1996–5 I.R.B. 44
96–8, 1996–7 I.R.B. 56
96–9, 1996–8 I.R.B. 30
96–10, 1996–8 I.R.B. 30
96–11, 1996–9 I.R.B. 11
96–12, 1996–11 I.R.B. 30
96–13, 1996–12 I.R.B. 33
96–14, 1996–12 I.R.B. 35
96–15, 1996–11 I.R.B. 9
96–16, 1996–13 I.R.B. 22
96–17, 1996–13 I.R.B. 22
96–18, 1996–15 I.R.B. 15
96–19, 1996–15 I.R.B. 15
96–20, 1996–15 I.R.B. 15
96–21, 1996–15 I.R.B. 15
96–22, 1996–15 I.R.B. 16
96–23, 1996–18 I.R.B. 7
96–24, 1996–16 I.R.B. 35
96–25, 1996–17 I.R.B. 13
96–26, 1996–17 I.R.B. 13
96–27, 1996–17 I.R.B. 16
96–28, 1996–17 I.R.B. 16
96–29, 1996–17 I.R.B. 17
96–30, 1996–17 I.R.B. 17
96–31, 1996–17 I.R.B. 18
96–32, 1996–17 I.R.B. 18
96–33, 1996–18 I.R.B. 12
96–34, 1996–18 I.R.B. 13
96–35, 1996–18 I.R.B. 13
96–36, 1996–18 I.R.B. 13
96–37, 1996–18 I.R.B. 14
96–38, 1996–19 I.R.B. 84
96–39, 1996–19 I.R.B. 84
96–40, 1996–19 I.R.B. 85
96–41, 1996–20 I.R.B. 18
96–42, 1996–20 I.R.B. 18
96–43, 1996–20 I.R.B. 18
96–44, 1996–21 I.R.B. 10
96–45, 1996–21 I.R.B. 10
96–46, 1996–21 I.R.B. 10
96–47, 1996–22 I.R.B. 10
96–48, 1996–22 I.R.B. 10
96–49, 1996–22 I.R.B. 10
96–50, 1996–22 I.R.B. 11
96–51, 1996–22 I.R.B. 11
96–52, 1996–22 I.R.B. 12
96–53, 1996–23 I.R.B. 12
96–54, 1996–23 I.R.B. 12
96–55, 1996–23 I.R.B. 12
96–56, 1996–24 I.R.B. 29

Announcements—Continued

Proposed Regulations—Continued

96–57, 1996–25 I.R.B. 20
96–58, 1996–25 I.R.B. 21
96–59, 1996–25 I.R.B. 22

IA–41–93, 1996–11 I.R.B. 29
INTL–52–86, 1996–19 I.R.B. 26
INTL–62–90, 1996–19 I.R.B. 26
INTL–32–93, 1996–19 I.R.B. 26
INTL–52–94, 1996–19 I.R.B. 26
INTL–3–95, 1996–6 I.R.B. 29
INTL–9–95, 1996–5 I.R.B. 25
INTL–54–95, 1996–14 I.R.B. 39
PS–2–95, 1996–7 I.R.B. 50
PS–6–95, 1996–16 I.R.B. 27
PS–43–95, 1996–24 I.R.B. 20
PS–4–96, 1996–18 I.R.B. 5
PS–5–96, 1996–25 I.R.B. 17

Delegations Orders:
232 (Rev. 2), 1996–7 I.R.B. 49
236 (Rev. 2), 1996–21 I.R.B. 7
239 (Rev. 1), 1996–7 I.R.B. 49
247, 1996–21 I.R.B. 7
Notices:
96–2, 1996–2 I.R.B. 15
96–1, 1996–3 I.R.B. 30
96–4, 1996–4 I.R.B. 69
96–5, 1996–6 I.R.B. 22
96–6, 1996–5 I.R.B. 27
96–7, 1996–6 I.R.B. 22
96–8, 1996–6 I.R.B. 23
96–9, 1996–6 I.R.B. 26
96–10, 1996–7 I.R.B. 47
96–11, 1996–8 I.R.B. 19
96–12, 1996–10 I.R.B. 29
96–13, 1996–10 I.R.B. 29
96–14, 1996–12 I.R.B. 11
96–15, 1996–13 I.R.B. 19
96–16, 1996–13 I.R.B. 20
96–17, 1996–13 I.R.B. 20
96–18, 1996–14 I.R.B. 27
96–19, 1996–14 I.R.B. 28
96–20, 1996–14 I.R.B. 30
96–21, 1996–14 I.R.B. 30
96–22, 1996–14 I.R.B. 30
96–23, 1996–16 I.R.B. 23
96–24, 1996–16 I.R.B. 23
96–25, 1996–17 I.R.B. 11
96–26, 1996–18 I.R.B. 4
96–27, 1996–18 I.R.B. 4
96–28, 1996–19 I.R.B. 7
96–29, 1996–19 I.R.B. 7
96–30, 1996–20 I.R.B. 11
96–31, 1996–22 I.R.B. 7
96–32, 1996–22 I.R.B. 7
96–33, 1996–22 I.R.B. 8
96–34, 1996–24 I.R.B. 15
96–35, 1996–25 I.R.B. 8
Proposed Regulations:
DL–1–95, 1996–6 I.R.B. 28
EE–20–95, 1996–5 I.R.B. 15
EE–34–95, 1996–3 I.R.B. 49
EE–35–95, 1996–5 I.R.B. 19
EE–53–95, 1996–5 I.R.B. 23
EE–55–95, 1996–12 I.R.B. 12
EE–106–82, 1996–10 I.R.B. 31
EE–142–87, 1996–12 I.R.B. 13
EE–148–81, 1996–11 I.R.B. 29
GL–1–96, 1996–21 I.R.B. 7
IA–3–94, 1996–17 I.R.B. 12
IA–33–95, 1996–4 I.R.B. 99

See footnote at the end of list.

19

Revenue Procedures:
96–1, 1996–1 I.R.B. 8
96–2, 1996–1 I.R.B. 60
96–3, 1996–1 I.R.B. 82
96–4, 1996–1 I.R.B. 94
96–5, 1996–1 I.R.B. 129
96–6, 1996–1 I.R.B. 151
96–7, 1996–1 I.R.B. 185
96–8, 1996–1 I.R.B. 187
96–8A, 1996–9 I.R.B. 10
96–9, 1996–2 I.R.B. 15
96–10, 1996–2 I.R.B. 17
96–11, 1996–2 I.R.B. 18
96–12, 1996–3 I.R.B. 30
96–13, 1996–3 I.R.B. 31
96–14, 1996–3 I.R.B. 41
96–15, 1996–3 I.R.B. 41
96–16, 1996–3 I.R.B. 45
96–17, 1996–4 I.R.B. 69
96–18, 1996–4 I.R.B. 73
96–19, 1996–4 I.R.B. 80
96–20, 1996–4 I.R.B. 88
96–21, 1996–4 I.R.B. 96
96–22, 1996–5 I.R.B. 27
96–23, 1996–5 I.R.B. 27
96–24, 1996–5 I.R.B. 28
96–24A, 1996–15 I.R.B. 12
96–25, 1996–8 I.R.B. 19
96–26, 1996–8 I.R.B. 22
96–27, 1996–11 I.R.B. 27
96–28, 1996–14 I.R.B. 31
96–29, 1996–16 I.R.B. 24
96–30, 1996–19 I.R.B. 8
96–31, 1996–20 I.R.B. 11
96–32, 1996–20 I.R.B. 14
96–33, 1996–22 I.R.B. 8
96–35, 1996–25 I.R.B. 8
Revenue Rulings:
96–1, 1996–1 I.R.B. 7
96–2, 1996–2 I.R.B. 5
96–3, 1996–2 I.R.B. 14
96–6, 1996–2 I.R.B. 8
96–4, 1996–3 I.R.B. 16
96–5, 1996–3 I.R.B. 29

SEQ 0020 JOB IRS26-052-002 PAGE-0020 FINDING LIST
REVISED 29JUL96 AT 22:06 BY LR DEPTH: 65.01 PICAS WIDTH 32.08 PICAS
COMPOSITE COLOR
778/20051/29JUL96/IRS26-052

Numerical Finding List1—Continued
Bulletins 1996–1 through 1996–25
Revenue Rulings—Continued
96–7, 1996–3 I.R.B. 12
96–8, 1996–4 I.R.B. 62
96–9, 1996–4 I.R.B. 5
96–10, 1996–4 I.R.B. 27
96–11, 1996–4 I.R.B. 28
96–12, 1996–9 I.R.B. 4
96–13, 1996–10 I.R.B. 19
96–14, 1996–6 I.R.B. 20
96–15, 1996–11 I.R.B. 9
96–16, 1996–11 I.R.B. 4
96–17, 1996–13 I.R.B. 5
96–18, 1996–13 I.R.B. 4
96–19, 1996–14 I.R.B. 24
96–20, 1996–15 I.R.B. 5
96–21, 1996–15 I.R.B. 7
96–22, 1996–15 I.R.B. 9
96–23, 1996–15 I.R.B. 11
96–24, 1996–19 I.R.B. 5
96–25, 1996–19 I.R.B. 4
96–26, 1996–21 I.R.B. 9
96–27, 1996–24 I.R.B. 9
96–28, 1996–24 I.R.B. 11
96–29, 1996–24 I.R.B. 5
96–30, 1996–24 I.R.B. 4
96–31, 1996–25 I.R.B. 4
96–32, 1996–25 I.R.B. 5

Treasury Decisions—Continued
8652, 1996–11 I.R.B. 11
8653, 1996–12 I.R.B. 4
8654, 1996–11 I.R.B. 14
8655, 1996–12 I.R.B. 9
8656, 1996–13 I.R.B. 9
8657, 1996–14 I.R.B. 4
8658, 1996–14 I.R.B. 13
8659, 1996–16 I.R.B. 4
8660, 1996–17 I.R.B. 4
8661, 1996–17 I.R.B. 7
8662, 1996–23 I.R.B. 5
8663, 1996–23 I.R.B. 4
8664, 1996–20 I.R.B. 7
8665, 1996–21 I.R.B. 4
8667, 1996–20 I.R.B. 4
8668, 1996–22 I.R.B. 4
8669, 1996–23 I.R.B. 6
8670, 1996–24 I.R.B. 6

Treasury Decisions:
8630, 1996–3 I.R.B. 19
8631, 1996–3 I.R.B. 7
8632, 1996–4 I.R.B. 6
8633, 1996–4 I.R.B. 20
8634, 1996–3 I.R.B. 17
8635, 1996–3 I.R.B. 5
8636, 1996–4 I.R.B. 64
8637, 1996–4 I.R.B. 29
8638, 1996–5 I.R.B. 5
8639, 1996–5 I.R.B. 12
8640, 1996–2 I.R.B. 10
8641, 1996–6 I.R.B. 4
8642, 1996–7 I.R.B. 4
8643, 1996–11 I.R.B. 4
8644, 1996–7 I.R.B. 16
8645, 1996–8 I.R.B. 4
8646, 1996–8 I.R.B. 10
8647, 1996–9 I.R.B. 7
8648, 1996–10 I.R.B. 23
8649, 1996–9 I.R.B. 5
8650, 1996–10 I.R.B. 5
8651, 1996–11 I.R.B. 24

1A cumulative list of all Revenue Rulings,
Revenue Procedures, Treasury Decisions, etc.,
published in Internal Revenue Bulletins 1995–
27 through 1995–52 will be found in Internal
Revenue Bulletin 1996–1, dated January 2,
1996.

20

SEQ 0021 JOB IRS26-052-002 PAGE-0021 FINDING LIST
REVISED 29JUL96 AT 22:06 BY LR DEPTH: 65.01 PICAS WIDTH 41.11 PICAS
COMPOSITE COLOR
778/20051/29JUL96/IRS26-052

Finding List of Current Action on
Previously Published Items1

Revenue Procedures—Continued

Revenue Procedures—Continued

96–31, 1996–20 I.R.B. 11

Bulletins 1996–1 through 1996–25

92–85
Modified by
96–1, 1996–1 I.R.B. 8

95–66
Modified by
96–25, 1996–19 I.R.B. 4

*Denotes entry since last publication
Delegation Orders:
232 (Rev. 1)
Superseded by
232 (Rev. 2), 1996–7 I.R.B. 49
236 (Rev. 1)
Superseded by
236 (Rev. 2), 1996–21 I.R.B. 7*
239
Amended by
239 (Rev. 1), 1996–7 I.R.B. 49

93–16
Superseded by
96–11, 1996–2 I.R.B. 18
93–46
Superseded in part by
96–17, 1996–4 I.R.B. 69
Superseded by
96–18, 1996–4 I.R.B. 73

Revenue Procedures:

94–16
Modified by
96–29, 1996–16 I.R.B. 24

65–17
Modified by
96–14, 1996–3 I.R.B. 41

94–18
Superseded in part by
96–17, 1996–4 I.R.B. 69

66–49
Modified by
96–15, 1996–3 I.R.B. 41

Superseded by
96–18, 1996–4 I.R.B. 73

88–32
Obsoleted by
96–15, 1996–3 I.R.B. 41
88–33
Obsoleted by
96–15, 1996–3 I.R.B. 41
89–19
Superseded by
96–17, 1996–4 I.R.B. 69
89–48
Superseded in part by
96–17, 1996–4 I.R.B. 69
91–22
Modified by
96–1, 1996–1 I.R.B. 8
91–22
Amplified by
96–13, 1996–3 I.R.B. 31

95–7
Superseded by
96–7, 1996–1 I.R.B. 185
95–8
Superseded by
96–8, 1996–1 I.R.B. 187
95–13
Superseded by
96–20, 1996–4 I.R.B. 88
95–20
Superseded by
96–24, 1996–5 I.R.B. 28
95–50
Superseded by
96–3, 1996–1 I.R.B. 82
96–3
Amplified by
96–12, 1996–3 I.R.B. 30
Revenue Rulings:

94–59
Superseded in part by
96–17, 1996–4 I.R.B. 69

66–307
Obsoleted by
96–3, 1996–2 I.R.B. 14

Superseded by
96–18, 1996–4 I.R.B. 73

72–437
Modified by
96–13, 1996–3 I.R.B. 31

94–62
Modified by
96–29, 1996–16 I.R.B. 24
94–77
Superseded by
96–28, 1996–14 I.R.B. 31
95–1
Superseded by
96–1, 1996–1 I.R.B. 8
95–2
Superseded by
96–2, 1996–1 I.R.B. 60

78–294
Obsoleted by
8665, 1996–21 I.R.B. 4
80–80
Obsoleted by
96–3, 1996–2 I.R.B. 14
82–80
Modified by
96–14, 1996–3 I.R.B. 41
92–19
Supplemented in part
96–2, 1996–2 I.R.B. 5

95–3
Superseded by
96–3, 1996–1 I.R.B. 82

92–75
Clarified by
96–13, 1996–3 I.R.B. 31

91–24
Superseded by
96–14, 1996–3 I.R.B. 41

95–4
Superseded by
96–4, 1996–1 I.R.B. 94

95–10
Supplemented and superseded by
96–4, 1996–3 I.R.B. 16

91–26
Superseded by
96–13, 1996–3 I.R.B. 31

95–5
Superseded by
96–5, 1996–1 I.R.B. 129

95–11
Supplemented and superseded by
96–5, 1996–3 I.R.B. 29

92–20
Modified by
96–1, 1996–1 I.R.B. 8

95–6
Superseded by
96–6, 1996–1 I.R.B. 151

96–24
Modified and amplified by
96–24A, 1996–15 I.R.B. 12

91–23
Superseded by
96–13, 1996–3 I.R.B. 31

1A cumulative finding list for previously
published items mentioned in Internal Revenue
Bulletins 1995–27 through 1995–52 will be
found in Internal Revenue Bulletin 1996–1, dated
January 2, 1996.

21

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Aa48176a48f67825c. Public record. Not legal advice.