Bulletin No. 1996–48

Agency decision

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What actually matters in this document.

Text

November 25, 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

EXEMPT ORGANIZATIONS

REG–251520–96, page 15.

Proposed regulations under section 861 of the Code

relate to the tax treatment of certain transactions

involving the transfer of computer programs. A public

hearing will be held on March 19, 1997.

Announcement 96–125, page 21.

A list is given of organizations now classified as private

foundations.

EMPLOYEE PLANS

T.D. 8685, page 4.

Final regulations under section 6302 of the Code relate

to deposits of excise taxes.

Notice 96–59, page 10.

Weighted average interest rate update. Guidelines are

set forth for determining for November 1996, the

weighted average interest rate and the resulting permissible range of interest rates used to calculate current

liability for purposes of the full funding limitation of

section 412(c)(7) of the Code as amended by the

Omnibus Budget Reconciliation Act of 1987 and by the

Uruguay Round Agreements Act (GATT).

Finding Lists begin on page 25.

Announcements of Disbarments and Suspensions begin on page 22.

EXCISE TAX

ADMINISTRATIVE

Rev. Proc. 96–52, page 10.

This procedure describes the application procedures for

becoming an acceptance agent for purposes of facilitating the issuance of certain taxpayer identifying numbers,

and the requisite agreement that an acceptance agent

must execute with the Internal Revenue Service.

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 Service also has the responsibility of applying

and administering the law in a reasonable,

practical manner. Issues should only be raised by

examining of ficers when they have merit, never

arbitrarily or for trading purposes. At the same

time, the examining officer should never hesitate

to raise a meritorious issue. It is also important

that care be exercised not to raise an issue or to

ask a court to adopt a position inconsistent with

an established Service position.

The function of the Internal Revenue Service is to

administer the Internal Revenue Code. Tax policy

for raising revenue is determined by Congress.

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

carry out that policy by correctly applying the laws

enacted by Congress; to determine the reasonable

meaning of various Code provisions in light of the

Congressional purpose in enacting them; and to

perform this work in a fair and impartial manner,

with neither a government nor a taxpayer point of view.

Administration should be both reasonable and

vigorous. It should be conducted with as little

delay as possible and with great cour tesy and

considerateness. It should never try to overreach,

and should be reasonable within the bounds of law

and sound administration. It should, however, be

vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax

devices and fraud.

At the heart of administration is interpretation of the

Code. It is the responsibility of each person in the

Service, charged with the duty of interpreting the

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

provision and not to adopt a strained construction in

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

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

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for

announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation,

court decisions, and other items of general interest. It is

published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin

contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold on a

single-copy basis.

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.

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

substantive rulings necessary to promote a uniform

application of the tax laws, including all rulings that

supersede, revoke, modify, or amend any of those

previously published in the Bulletin. All published rulings

apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management

are not published; however, statements of internal

practices and procedures that affect the rights and

duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows:

Subpart A, Tax Conventions, and Subpart B, Legislation

and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

these subjects are contained in the other Parts and

Subparts. Also included in this part are Bank Secrecy

Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the

Treasury’s Office of the Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts

stated in the revenue ruling. In those based on positions

taken in rulings to taxpayers or technical advice to

Service field offices, identifying details and information

of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory

requirements.

Part IV.—Items of General Interest.

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

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

Rulings and procedures reported in the Bulletin do not

have the force and effect of Treasury Department

Regulations, but they may be used as precedents.

Unpublished rulings will not be relied on, used, or cited

as precedents by Service personnel in the disposition of

other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations,

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.

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

Section 6302.—Mode or Time of

Collection

26 CFR 40.6302(c)–1: Use of Government depositaries.

The proposed regulations are adopted as

revised by this Treasury decision and

the corresponding temporary regulations

are removed.

T.D. 8685

Explanation of Revisions

DEPARTMENT OF THE TREASURY

Internal Revenue Service

The temporary regulations provide

rules implementing the changes made by

the Act in a separate regulations section

(§ 40.6302(c)–5T). Instead of finalizing

that section, this document incorporates

the amendments made by the temporary

regulations into the text of §§ 40.6302(c)–1 through 40.6302(c)–4.

To reflect changes in technology, the

14-day rule under § 40.6302(c)–4 is

amended to apply to deposits made by

electronic funds transfer.

In addition, the rules set forth in

§§ 601.104(a)(5) and 601.403(c)(2), relating to persons required to collect and

pay over tax, have been combined,

revised, and moved to part 49 as

§ 49.4291–1.

26 CFR Parts 40, 48, 49, 301, 601, and 602

[TD 8685]

RIN 1545–AT25

Deposits of Excise Taxes

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations relating to deposits of

excise taxes. These regulations reflect

changes to the law made by the Uruguay Round Agreements Act and affect

persons required to make deposits of

excise taxes. This document also removes obsolete excise tax regulations.

EFFECTIVE DATE: November 12,

1996

FOR FURTHER INFORMATION

CONTACT: Ruth Hoffman, (202) 622–

3130 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The Uruguay Round Agreements Act

of 1994 amended sections 6302(e) and

(f) (relating to deposits of excise taxes).

As amended, effective January 1, 1995,

these provisions require an additional

deposit in September of each year of all

excise taxes except those imposed by

section 4261 or 4271 (relating to air

transportation). The taxes imposed by

sections 4261 and 4271 are scheduled to

expire on December 31, 1996. If those

taxes are reinstated, they will be subject

to the new deposit provisions beginning

on January 1, 1997.

Temporary regulations (T.D. 8616

[1995–2 C.B. 263]) were published in

the Federal Register on August 29,

1995 (60 FR 44758), along with a

notice of proposed rulemaking (PS–8–95

[1995–2 C.B. 506]) cross-referencing

the temporary regulations (60 FR

44788). No written comments were received and no public hearing was held.

Removal of Obsolete Regulations;

Amendments to Table of OMB Control

Numbers

This document removes obsolete excise tax regulations under part 601 and

obsolete cross-references under part 301.

Also removed are obsolete regulations

relating to matters now under the jurisdiction of the Bureau of Alcohol, Tobacco, and Firearms (ATF). Generally,

regulations pertaining to ATF procedural

rules are in 27 CFR parts 70 and 71.

In addition, this document updates

various entries in the Table of OMB

Numbers contained in part 602.

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 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 Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and

Special Industries). However, other personnel from the IRS and Treasury Department participated in their development.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR parts 40, 48, 49,

301, 601, and 602 are amended as

follows:

PART 40—EXCISE TAX

PROCEDURAL REGULATIONS

Paragraph 1. The authority citation

for part 40 continues to read in part as

follows:

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

Par. 1a. Section 40.6011(a)–1 is

amended as follows:

1. Paragraph (c) is amended by adding a sentence to the end of the paragraph.

2. Paragraph (d) is removed.

The addition reads as follows:

§ 40.6011(a)–1 Returns.

obligations of a person required to collect and pay over facilities and services

excise taxes, see § 49.4291–1 of this

chapter.

Par. 2. Section 40.6011(a)–2(b)(2) is

amended by removing the reference

‘‘§ 40.6302(c)–1(e)(2)’’ and adding

‘‘§ 40.6302(c)–1(f)(2)’’ in its place.

Par. 3. Section 40.6302(c)–1 is

amended as follows:

1. Paragraph (a) is amended by removing the parenthetical ‘‘(relating to

taxes imposed on gasoline by section

4081)’’ from the last sentence and adding ‘‘(relating to section 4081 taxes)’’ in

its place.

2. Paragraph (b)(1)(i) is amended by

removing the reference ‘‘paragraph (e)’’

and adding ‘‘paragraph (f)’’ in its place.

3. Paragraph (b)(1)(ii) is removed and

paragraph (b)(1)(iii) is redesignated as

paragraph (b)(1)(ii).

4. Paragraph (b)(5)(ii) is removed and

paragraph (b)(5)(iii) is redesignated as

paragraph (b)(5)(ii).

5. Newly designated paragraph

(b)(5)(ii) is amended by removing the

reference ‘‘paragraph (e)(3)’’ and adding

‘‘paragraph (f)(3)’’ in its place.

6. Paragraph (b)(6)(ii) is amended by

removing the language ‘‘paragraph

(b)(6)(iii) of this section (relating to

deposits of gasoline tax for September)’’

and adding ‘‘paragraph (e) of this section (relating to deposits of 9-day rule

taxes for September)’’ in its place.

7. Paragraph (b)(6)(iii) is removed.

8. Paragraphs (c)(2)(i)(A) and (c)(2)

(iii)(B) are amended by removing the

parenthetical ‘‘(16.67 percent)’’.

9. Paragraph (c)(2)(iv) is removed.

10. Paragraph (c)(3)(iii) is removed

and paragraph (c)(3)(iv) is redesignated

as paragraph (c)(3)(iii).

11. Paragraph (g) is removed.

12. Paragraphs (e) and (f) are redesignated as paragraphs (f) and (g), respectively, and a new paragraph (e) is

added.

13. Newly designated paragraph

(f)(3)(ii) is amended by removing the

reference ‘‘paragraph (e)(3)’’ and adding

‘‘paragraph (f)(3)’’ in its place.

The addition reads as follows:

§ 40.6302(c)–1 Use of Government depositaries.

(e) Special rules for September—(1)

Deposits required. In the case of deposits of 9-day rule taxes for the second

semimonthly period in September, separate deposits are required for the period

September 16th-26th and the period

September 27th-30th.

(2) Amount of deposit. The deposits

of 9-day rule taxes for the period September 16th-26th and the period September 27th-30th must be not less than

the amount of net tax liability for 9-day

rule taxes incurred during the respective

periods. The net tax liability incurred

during these periods may be computed

by—

(i) Determining the amount of net tax

liability reasonably expected to be incurred during the second semimonthly

period in September;

(ii) Treating 11/15 of that amount as

the net tax liability incurred during the

period September 16th-26th; and

(iii) Treating the remainder of the

amount determined under paragraph

(e)(2)(i) of this section (adjusted to

reflect net tax liability actually incurred

through the end of September) as the

net tax liability incurred during the

period September 27th-30th.

(3) Time to deposit—(i) In general.

The deposit of 9-day rule taxes required

for the period beginning September 16th

must be made by September 29. The

deposit required for the period ending

September 30th must be made at the

time prescribed in paragraph (b)(6)(i) of

this section for making deposits for the

second semimonthly period in September.

(ii) Due date on Saturday or Sunday.

A deposit that would otherwise be due

on September 29 must be made by

September 28 if September 29 is a

Saturday and by September 30 if September 29 is a Sunday.

(4) Safe harbor rule based on lookback quarter liability. The safe harbor

rule in paragraph (c)(2)(i) of this section

does not apply to 9-day rule taxes for

the third calendar quarter unless—

(i) The deposit of 9-day rule taxes for

the period September 16th-26th is not

less than 11/90 of the net tax liability

reported for 9-day rule taxes for the

look-back quarter; and

(ii) The total deposit of 9-day rule

taxes for the second semimonthly period

in September is not less than 1/6 of the

net tax liability reported for 9-day rule

taxes for the look-back quarter.

(5) Safe harbor rule based on current

liability. The safe harbor rule of paragraph (c)(3)(i) of this section does not

apply to 9-day rule taxes for the third

calendar quarter unless—

(i) The deposit of 9-day rule taxes for

the period September 16th-26th is not

less than 69.67 percent of the net tax

liability for 9-day rule taxes for the

second semimonthly period in September; and

(ii) The total deposit of 9-day rule

taxes for the second semimonthly period

in September is not less than 95 percent

of the net tax liability for 9-day rule

taxes for that semimonthly period.

(6) Persons not required to use electronic funds transfer. In the case of a

person that is not required to deposit

excise taxes by electronic funds transfer

(a non-EFT depositor), the rules of this

paragraph (e) apply with the following

modifications:

(i) The periods for which separate

deposits must be made are September

16th-25th and September 26th-30th.

(ii) The deposit required for the period beginning September 16th must be

made by September 28. A deposit that

would otherwise be due on September

28 must be made by September 27 if

September 28 is a Saturday and by

September 29 if September 28 is a

Sunday.

(iii) The generally applicable fractions and percentage are modified to

reflect the different deposit periods in

accordance with the following table:

Generally

applicable

fractions and

percentage

Modifications for

non-EFT depositors

11/15

11/90

69.67 percent

10/15

10/90

63.33 percent

(7) Effective date. This paragraph (e)

is effective August 1, 1995, for all 9-day

rule taxes except those imposed by

section 4261 or 4271. For taxes imposed

by section 4261 or 4271, this paragraph

(e) applies beginning January 1, 1997.

Par. 4. Section 40.6302(c)–2 is

amended as follows:

1. Paragraphs (b)(2)(i)(A) and (b)(2)

(ii)(B) are amended by removing the

parenthetical ‘‘(16.67 percent)’’.

2. Paragraph (c) is revised.

The revision reads as follows:

§ 40.6302(c)–2 Special rules for use of

Government depositaries under section

4681.

Deposits required. In the case of deposits of 30-day rule taxes for the first

semimonthly period in September, separate deposits are required for the period

September 1st-11th and the period September 12th-15th.

(2) Amount of deposit. The deposits

of 30-day rule taxes for the period

September 1st-11th and the period September 12th-15th must be not less than

the amount of net tax liability for 30day rule taxes incurred during the respective periods. The net tax liability

incurred during these periods may be

computed by—

(i) Determining the amount of net tax

liability incurred during the first semimonthly period in September (or, if

semimonthly liability is computed by

dividing monthly liability by two, the

amount reasonably expected to be incurred);

(ii) Treating 11/15 of that amount as

the net tax liability incurred during the

period September 1st-11th; and

(iii) Treating the remainder of the

amount determined under paragraph

(c)(2)(i) of this section (adjusted, if that

amount is based on reasonable expectations, to reflect net tax liability actually

incurred through the end of September)

as the net tax liability incurred during

the period September 12th-15th.

(3) Time to deposit—(i) In general.

The deposit required for the period

beginning September 1st and the deposit

for the second semimonthly period in

August must be made by September 29.

The deposit required for the period

ending September 15th must be made at

the time prescribed in paragraph

(b)(1)(i) of this section for making deposits for the first semimonthly period

in September.

(ii) Due date on Saturday or Sunday.

A deposit that would otherwise be due

on September 29 must be made by

September 28 if September 29 is a

Saturday and by September 30 if September 29 is a Sunday.

(4) Safe harbor rule based on lookback quarter liability. The safe harbor

rule of paragraph (b)(2)(i) of this section

does not apply for the third calendar

quarter unless—

(i) The deposit of 30-day rule taxes

for the period September 1st-11th is not

less than 11/90 of the net tax liability

reported for 30-day rule taxes for the

look-back quarter; and

(ii) The total deposit of 30-day rule

taxes for the first semimonthly period in

September is not less than 1/6 of the net

tax liability reported for 30-day rule

taxes for the look-back quarter.

(5) Safe harbor rule based on current

liability. The safe harbor rule of paragraph (b)(3) of this section does not

apply for the third calendar quarter

unless—

(i) The deposit of 30-day rule taxes

for the period September 1st-11th is not

less than 69.67 percent of the net tax

liability for 30-day rule taxes for the

first semimonthly period in September;

and

(ii) The total deposit of 30-day rule

taxes for the first semimonthly period in

September is not less than 95 percent of

the net tax liability for 30-day rule taxes

for that semimonthly period.

(6) Persons not required to use electronic funds transfer. In the case of a

person that is not required to deposit

excise taxes by electronic funds transfer

(a non-EFT depositor), the rules of this

paragraph (c) apply with the following

modifications:

(i) The periods for which separate

deposits must be made are September

1st-10th and September 11th-15th.

(ii) The deposit required for the period beginning September 1st and the

deposit required for the second semimonthly period in August must be made

by September 28. A deposit that would

otherwise be due on September 28 must

be made by September 27 if September

28 is a Saturday and by September 29 if

September 28 is a Sunday.

(iii) The generally applicable fractions and percentage are modified to

reflect the different deposit periods in

accordance with the following table:

Generally

applicable

fractions and

Modifications for

percentage

non-EFT depositors

11/15

11/90

69.67 percent

10/15

10/90

63.33 percent

(7) Effective date. This paragraph (c)

is effective August 1, 1995.

Par. 5. Section 40.6302(c)–3 is

amended as follows:

1. In paragraph (b)(1)(ii), first sentence, the language ‘‘deposits to’’ is

removed and ‘‘deposits of’’ is added in

its place.

2. In paragraph (b)(3), first sentence,

the language ‘‘durina’’ is removed and

‘‘during a’’ is added in its place.

3. Paragraphs (f) and (g) are redesignated as paragraphs (g) and (h), respectively, and a new paragraph (f) is added.

4. In newly designated paragraph (h),

first sentence, the language ‘‘This section’’ is removed and ‘‘Except as otherwise provided, this section’’ is added in

its place.

The addition reads as follows:

§ 40.6302(c)–3 Special rules for use of

Government depositaries under chapter

33.

(f) Special rules for September—(1)

Deposits required. In the case of alternative method taxes charged (that is, included in amounts billed or tickets sold)

during the first semimonthly period in

September, separate deposits are required for the taxes charged during the

period September 1st-11th and the period September 12th-15th.

(2) Time to deposit—(i) In general.

The deposit required for alternative

method taxes charged during the period

beginning September 1st must be made

by September 29. The deposit required

for alternative method taxes charged

during the period ending September

15th must be made at the time prescribed in paragraph (c) of this section

for making deposits for the first semimonthly period in October.

(ii) Due date on Saturday or Sunday.

A deposit that would otherwise be due

on September 29 must be made by

September 28 if September 29 is a

Saturday and by September 30 if September 29 is a Sunday.

(3) Amount of deposit. The deposits

of alternative method taxes required for

the period September 1st-11th and the

period September 12th-15th must be not

less than the amount of alternative

method taxes charged during the respective periods. The amount of alternative

method taxes charged during these periods may be computed by—

(i) Determining the net amount of

alternative method taxes reflected in the

separate account for the first semimonthly period in September (or onehalf of the net amount of alternative

method taxes reasonably expected to be

reflected in the separate account for the

month of September);

(ii) Treating 11/15 of that amount as

the amount of taxes charged during the

period September 1st-11th; and

(iii) Treating the remainder of the

amount determined under paragraph

(f)(3)(i) of this section (adjusted, if that

amount is based on reasonable expectations, to reflect actual taxes charged

through the end of September) as the

amount charged during the period September 12th-15th.

(4) Safe harbor rule based on lookback quarter liability. The safe harbor

rule of § 40.6302(c)–1(c)(2)(i) does not

apply for the fourth calendar quarter

unless—

(i) The deposit for alternative method

taxes charged during the period September 1st-11th is not less than 11/90 of the

net tax liability reported for alternative

method taxes for the look-back quarter;

and

(ii) The total deposit for alternative

method taxes charged during the first

semimonthly period in September is not

less than 1/6 of the net tax liability

reported for alternative method taxes for

the look-back quarter.

(5) Safe harbor rule based on current

liability. The safe harbor rule of

§ 40.6302(c)–1(c)(3)(i) does not apply

for the fourth calendar quarter unless—

(i) The deposit for alternative method

taxes charged during the period September 1st-11th is not less than 69.67

percent of the alternative method taxes

charged during the first semimonthly

period in September; and

(ii) The total deposit for alternative

method taxes charged during the first

semimonthly period in September is not

less than 95 percent of the alternative

method taxes charged during that semimonthly period.

(6) Persons not required to use electronic funds transfer. In the case of a

person that is not required to deposit

excise taxes by electronic funds transfer

(a non-EFT depositor), the rules of this

paragraph (f) apply with the following

modifications:

(i) The taxes for which separate deposits must be made are the taxes

charged during the periods September

1st-10th and September 11th-15th.

(ii) The deposit required for taxes

charged during the period beginning

September 1st must be made by September 28. A deposit that would otherwise be due on September 28 must be

made by September 27 if September 28

is a Saturday and by September 29 if

September 28 is a Sunday.

(iii) The generally applicable fractions and percentage are modified to

reflect the different deposit periods in

accordance with the following table:

Generally

applicable

fractions and

Modifications for

percentage

non-EFT depositors

11/15

11/90

69.67 percent

10/15

10/90

63.33 percent

(7) Effective date. This paragraph (f)

is effective August 1, 1995, for all taxes

except those imposed by section 4261 or

4271. For taxes imposed by section

4261 or 4271, this paragraph (f) applies

beginning January 1, 1997.

Par. 6. Section 40.6302(c)–4 is

amended as follows:

1. Paragraph (a) is amended by revising the first sentence and removing the

second sentence.

2. Paragraph (b)(1) is amended by

removing the language ‘‘transfer between accounts with the same Government depositary’’ in the first sentence

and adding ‘‘electronic funds transfer’’

in its place.

3. Paragraph (d) is redesignated as

paragraph (e) and a new paragraph (d)

is added.

4. Newly designated paragraph (e) is

amended by removing the language

‘‘Highway Act’’ and adding ‘‘Highway

Revenue Act’’ in its place.

The revision and addition read as

follows:

§ 40.6302(c)–4 Special rule for use of

Government depositaries under section

4081.

(a) Overview. This section sets forth

a special rule for deposits of taxes

imposed by section 4081. * * *

(d) Special rules for September. Deposits of 14-day rule taxes for the

second semimonthly period in September must be made in the manner prescribed by § 40.6302(c)–1(e) applied

with the following modifications:

(1) Each reference to 9-day rule taxes

is treated, instead, as a reference to

14-day rule taxes.

(2) The deposit required for the period ending September 30th must be

made at the time prescribed in paragraph (b) of this section (rather than at

the time prescribed in § 40.6302(c)–

1(b)(6)(i)).

§ 40.6302(c)–5T [Removed]

Par. 7. Section 40.6302(c)–5T is removed.

§ 40.9999–1 [Amended]

Par. 8. Section 40.9999–1 is amended

as follows:

1. Example 1(iii) is amended by removing the parenthetical ‘‘(§ 40.6302(c)–1(e)(2))’’ and adding ‘‘(§ 40.6302(c)–1(f)(2))’’ in its place.

2. Example 3 is amended by:

a. Removing the language ‘‘diesel

fuel’’ and adding ‘‘aviation fuel’’ in its

place in the following locations:

i. Example 3, heading.

ii. Example 3(i)(1), each time it appears in the first sentence.

iii. Example 3(i)(1), second and third

sentences.

iv. Example 3(i)(4), second sentence.

v. Example 3(ii), fourth and seventh

sentences.

vi. Example 3(iii), third sentence.

vii. Example 3(iv), second sentence.

b. In Example 3(iii), second sentence,

removing the parenthetical ‘‘(§ 40.6302(c)–1(e)(3))’’ and adding ‘‘(§ 40.6302(c)–1(f)(3))’’ in its place.

PART 48—MANUFACTURERS AND

RETAILERS EXCISE TAXES

Par. 9. The authority citation for part

48 continues to read in part as follows:

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

§ 48.4082–2 [Amended]

Par. 9a. In § 48.4082–2, paragraph

(a) is amended by removing the reference ‘‘section 6714’’ and adding ‘‘section 6715’’ in its place.

§ 48.4083–1 [Amended]

Par. 10. Section 48.4083–1 is

amended as follows:

1. In paragraph (b)(1) introductory

text, first sentence, the reference ‘‘section 6714(a)’’ is removed and ‘‘section

6715(a)’’ is added in its place.

2. In paragraph (d)(1), second sentence, the reference ‘‘section 6714’’ is

removed and ‘‘section 6715’’ is added in

its place.

§ 48.6427–7 [Removed]

Par. 11. Section 48.6427–7 is removed.

§ 48.6714–1 [Redesignated as

48.6715–1]

Par. 12. Section 48.6714–1 is redesignated as § 48.6715–1.

Par. 13. In newly designated

§ 48.6715–1, the first and second sentences of paragraph (a) introductory text

are amended by removing the reference

‘‘section 6714(a)’’ and adding ‘‘section

6715(a)’’ in its place.

PART 49—FACILITIES AND

SERVICES EXCISE TAXES

Par. 14. The authority citation for

part 49 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 14a. Subpart F, consisting of

§ 49.4291–1, is added to read as follows:

Subpart F—Collection of Tax By

Persons Receiving Payment

§ 49.4291–1 Persons receiving payment

must collect tax.

Except as otherwise provided in section 4263(a), every person receiving any

payment for facilities or services on

which a tax is imposed upon the payor

thereof under chapter 33 shall collect

the amount of the tax from the person

making that payment. Under section

7501, all taxes collected in this manner

are held by the collecting agent in trust

for the United States. If the person from

whom the tax is required to be collected

refuses to pay it or if for any reason it

is impossible for the collecting agent to

collect the tax from that person, the

collecting agent is required to report to

the district director the name and address of that person, the nature of the

facility provided or service rendered, the

amount paid therefor, and the date on

which paid. Upon receipt of this information the district director will proceed

against the person to whom the facilities

were provided or the services rendered

to assert the amount of tax due, affording that person the same district conference, protest, and appellate rights as are

available to other excise taxpayers. In

addition, when a field or office audit of

a collecting agent’s records, or of a

taxpayer’s records, discloses that the

collecting agent failed during prior reporting periods to collect taxes due, the

district director may assert those taxes

directly against the person to whom the

facilities were provided or the services

rendered, whether or not the collecting

agent had attempted collection or the

person liable for the tax had refused

payment thereof.

PART 301—PROCEDURE AND

ADMINISTRATION

Par. 15. The authority citation for

part 301 continues to read in part as

follows:

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

§ 301.6156–1 [Removed]

Par. 15a. Section 301.6156–1 is removed.

§ 301.6206–1 [Removed]

Par. 16. Section 301.6206–1 is removed.

§§ 301.6415–1 through 301.6421–1 and

301.6423–1 [Removed]

Par. 17. Sections 301.6415–1 through

301.6421–1 and 301.6423–1 are removed.

§ 301.6675–1 [Removed]

Par. 18. Section 301.6675–1 is removed.

Par. 19. The undesignated center

heading following § 301.6905–1 is revised to read as follows:

Licensing

Par. 20. The undesignated center

heading preceding § 301.7001–1 is removed.

Par. 21. The undesignated center

heading preceding § 301.7011–1 is removed.

§ 301.7011–1 [Removed]

Par. 22. Section 301.7011–1 is removed.

§ 301.7232–1 [Removed]

§ 601.203 [Amended]

Par. 23. Section 301.7232–1 is removed.

Par. 30. In § 601.203, paragraph

(a)(1) is amended by removing the last

sentence.

§ 301.7328–1 [Removed]

Par. 24. Section 301.7328–1 is removed.

PART 601—STATEMENT OF

PROCEDURAL RULES

Par. 25. The authority citation for

part 601 continues to read as follows:

Authority: 5 U.S.C. 301 and 552.

§ 601.101 [Amended]

Par. 25a. Section 601.101 is amended

as follows:

1. Paragraph (b) is amended by removing the seventh sentence and the

last sentence.

2. Paragraph (c) is removed.

Par. 26. Section 601.102 is amended

as follows:

1. Paragraphs (b)(2)(i) and (b)(2)(ii)

are revised.

2. Paragraphs (b)(2)(iii), (b)(2)(iv),

and (c) are removed.

The revisions read as follows:

§ 601.102 Classification of taxes collected by the Internal Revenue Service.

(b) * * *

(2) * * *

(i) Employment taxes.

(ii) Miscellaneous excise taxes collected by return.

§ 601.104 [Amended]

Par. 27. Section 601.104 is amended

as follows:

1. Paragraphs (a)(4) and (a)(5) are

removed.

2. Paragraph (c)(4) is amended by

removing the eighth and ninth sentences.

§ 601.201 [Amended]

Par. 28. In § 601.201, paragraph

(a)(2) is amended by removing the last

sentence.

§ 601.202 [Amended]

Par. 29. In § 601.202, paragraph

(c)(1) is amended by removing the parenthetical ‘‘(other than the manufacturers excise tax on firearms arising from

application of sections 4181 and 4182 of

the Internal Revenue Code of 1954)’’.

Subpart C [Removed and Reserved]

Par. 31. Subpart C of part 601 is

removed and reserved.

Par. 32. The heading for subpart D of

part 601 is revised to read as follows:

Subpart D—Provisions Special to

Certain Employment Taxes §§ 601.402

through 601.405 [Removed]

Par. 33. Sections 601.402 through

601.405 are removed.

Subpart J [Removed]

Par. 34. Subpart J of part 601 is

removed.

PART 602—OMB CONTROL

NUMBERS UNDER THE

PAPERWORK REDUCTION ACT

Par. 35. The authority citation for

part 602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 35a. In § 602.101, paragraph (c)

is amended by:

1. Removing the following entries

from the table:

§ 602.101 OMB Control numbers.

CFR part or section where

Current OMB

identified and described

control No.

48.0–3 . . . . . . . . . . . . . . . . . . . . 1545–0685

48.4102–1 . . . . . . . . . . . . . . . . . 1545–0023

1545–0725

48.4221–8 . . . . . . . . . . . . . . . . . 1545–0023

48.4221–9 . . . . . . . . . . . . . . . . . 1545–0023

48.6427–7 . . . . . . . . . . . . . . . . . 1545–0143

1545–0162

48.6675–1 . . . . . . . . . . . . . . . . . 1545–0723

301.7011–1 . . . . . . . . . . . . . . . . 1545–0123

601.104 . . . . . . . . . . . . . . . . . . . 1545–0023

1545–0233

601.201 . . . . . . . . . . . . . . . . . . . 1545–0819

601.402 . . . . . . . . . . . . . . . . . . . 1545–0014

601.403 . . . . . . . . . . . . . . . . . . . 1545–0023

2. Adding entries in numerical order

to the table to read as follows:

CFR part or section where

Current OMB

identified and described

control No.

§ 602.101 OMB Control numbers.

601.201 . . . . . . . . . . . . . . . . . . .

CFR part or section where

Current OMB

identified and described

control No.

601.104 . . . . . . . . . . . . . . . . . . . 1545–0233

1545–0019

1545–0819

601.401 . . . . . . . . . . . . . . . . . . . 1545–0257

601.504 . . . . . . . . . . . . . . . . . . . 1545–0150

Approved June 26, 1996.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Donald C. Lubick,

Acting Assistant Secretary of the

Treasury.

(Filed by the Office of the Federal Register on

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

issue of the Federal Register for November 12,

1996, 61 F.R. 58004)

Part III. Administrative, Procedural, and Miscellaneous

Weighted Average Interest Rate

Update

Notice 96–59

Notice 88–73 provides guidelines for

determining the weighted average interest rate and the resulting permissible

range of interest rates used to calculate

current liability for the purpose of the

full funding limitation of § 412(c)(7) of

the Internal Revenue Code as amended

by the Omnibus Budget Reconciliation

Act of 1987 and as further amended by

the Uruguay Round Agreements Act,

Pub. L. 103–465 (GATT).

The average yield on the 30-year

Treasury Constant Maturities for October 1996 is 6.81 percent.

The following rates were determined

for the plan years beginning in the

month shown below.

Month

Year

Weighted Average

90% to 108%

Permissible Range

90% to 110%

Permissible Range

November

1996

6.91

6.22 to 7.46

6.22 to 7.60

Drafting Information

SECTION 2. BACKGROUND

The principal author of this notice is

Donna Prestia of the Employee Plans

Division. For further information regarding this notice, call (202) 622–6076

between 2:30 and 4:00 p.m. Eastern

time (not a toll-free number). Ms.

Prestia’s number is (202) 622–7377

(also not a toll-free number).

Section 301.6109–1(d)(3) of the Income Tax Regulations (Regulations)

provides general procedures for obtaining an ITIN which require the submission of an application form (Form

W–7), together with documentation considered as evidence of the alien individual’s identity and alien status. Section

301.6109–1(d)(2) of the Regulations

provides general procedures for obtaining an EIN which require the submission of an application form (Form SS–

4), together with any supplementary

statement as may be required. The regulations require an applicant for an ITIN

or an EIN to furnish the information

required by the form, the accompanying

instructions, and any applicable regulations. An applicant may either submit

the application form for an ITIN or an

EIN directly to the IRS or, as provided

in § 301.6109–1(d)(3)(iv) of the Regulations, apply for an ITIN or an EIN by

using an acceptance agent.

26 CFR 301.6109–1: Guidance for qualification

as an acceptance agent, and execution of an

agreement between an acceptance agent and the

Internal Revenue Service relating to the issuance

of certain taxpayer identifying numbers.

Rev. Proc. 96–52

CONTENTS

SECTION 1.

SECTION 2.

SECTION 3.

SECTION 4.

SECTION 5.

SECTION 6.

SECTION 7.

SECTION 8.

SECTION 9.

PURPOSE

BACKGROUND

DEFINITIONS

ACCEPTANCE AGENT

AGREEMENT

CERTIFYING

ACCEPTANCE AGENT

EFFECTIVE DATE

PAPERWORK

REDUCTION ACT

DRAFTING

INFORMATION

SECTION 1. PURPOSE

This revenue procedure describes the

application procedures for becoming an

acceptance agent and the requisite

agreement that an acceptance agent must

execute with the Internal Revenue Service (IRS). Persons may wish to become

an acceptance agent for purposes of

facilitating the issuance of (1) IRS individual taxpayer identification numbers

(ITINs) to alien individuals who are

ineligible to obtain social security numbers (SSNs), or (2) employer identification numbers (EINs) to foreign persons.

SECTION 3. DEFINITIONS

For purposes of this revenue procedure, the terms listed below are defined

as follows.

.01 An acceptance agent is a person

(i.e., an individual or an entity) who,

pursuant to a written agreement with the

IRS, is authorized to assist alien individuals and other foreign persons in

obtaining ITINs or EINs from the IRS.

An acceptance agent acting in its capacity as an acceptance agent does not act

as an agent of the IRS, nor is it

authorized to hold itself out as an agent

of the IRS.

.02 An alien individual is an individual who is not a citizen or a national

of the United States.

.03 A foreign person is a nonresident

alien individual, a foreign corporation, a

foreign partnership, a foreign trust, a

foreign estate, or any other person that

is not a U.S. person, the U.S. government, or a U.S. state or the District of

Columbia.

.04 Alien status refers to an individual’s status as a non- U.S. citizen or

non-U.S. national.

.05 Identity refers to the fact of being

the same individual as is represented,

claimed, or described.

.06 TIN (taxpayer identifying number) refers to both ITINs and EINs.

SECTION 4. ACCEPTANCE AGENT

.01 Role of acceptance agent. (1) In

general. The role of an acceptance agent

is to facilitate the application process

and the issuance of TINs to alien individuals and foreign persons. An acceptance agent performs this duty by forwarding the completed Form W–7

(together with the required documentary

evidence) to the IRS, Philadelphia Service Center to obtain ITINs, or by

forwarding the completed Form SS–4

(together with any supplementary statement if required) to the IRS, Philadelphia Service Center to obtain EINs, or

by calling Tele–TIN: (215) 574– 2400 to

obtain EINs.

(2) Certifying acceptance agent. In

the case of obtaining an ITIN, if permitted under the agreement with the IRS, a

person may assume greater responsibility as a certifying acceptance agent. In

that case, the acceptance agent may

review the documentation required to

accompany Form W–7 and certify to the

IRS that it has reviewed the required

documentation and to the best of its

knowledge and belief, the documentation is authentic, complete, and accurate.

See section 6 of this revenue procedure

for further information.

.02 Application process for acceptance agent. (1) Eligible persons. Persons eligible to become acceptance

agents include, but are not limited to, a

financial institution defined in section

265(b)(5) of the Internal Revenue Code

(Code) or § 1.165–12(c)(1)(v) of the

Regulations, a college or university that

is an educational organization defined in

§ 1.501(c)(3)– 1(d)(3)(i) of the Regulations, a federal agency defined in section 6402(f) of the Code, and persons

that provide professional assistance to

taxpayers in the preparation of their tax

returns. An eligible person may be a

U.S. or a foreign person.

(2) Pre-application conference. Prior

to submitting a formal application, a

person interested in becoming an acceptance agent may request a conference

with the IRS, which may be held in

person or by telephone, to explore informally the benefits and burdens associated with the role of an acceptance

agent. Requests for pre-application conferences should be directed to the Assistant Commissioner (International), Foreign Payments Division (telephone:

(202) 874–1800, not a toll-free number).

(3) Written application. (a) Where to

apply. A person may apply to become an

acceptance agent by submitting a written

request to:

Assistant Commissioner

(International)

Foreign Payments Division CP:IN:OO:WT

950 L’Enfant Plaza South, SW

Washington, DC 20024

FAX: (202) 874–1984

(b) Content of application. The application shall indicate that the person is

requesting permission to execute an

agreement with the IRS pursuant to

§ 301.6109–1(d)(3)(iv) of the Regulations, and in accordance with this revenue procedure. The application shall

include the information listed below.

(i) The applicant’s complete name,

address, and EIN. If the applicant does

not have an EIN, a completed Form

SS–4 must be included to obtain such

number.

(ii) The reason that the applicant

wishes to become an acceptance agent,

and the type of responsibilities the applicant expects to assume.

(iii) A description of the applicant,

including the entity status of the applicant (e.g., bank, university, governmental agency, etc.) and the state (or if

outside the United States, the country)

under whose laws the applicant is created or organized.

(iv) A list of the applicant’s employees who will be responsible parties for

performance under the acceptance agent

agreement, including their title and position description.

(v) A list of the offices or branches,

if any, intended to be covered by the

agreement and their location, including

mailing address.

(vi) The business relationship the applicant has with the persons whom it

expects to assist in obtaining TINs.

(vii) An estimate of the number of

Forms W–7 and/or Forms SS–4 it expects to submit to the IRS per year.

(viii) The name and telephone number of a person the IRS can contact

regarding the application.

(4) IRS review of application. (a) Request for additional information. Upon

review of the application, the IRS may

request additional information.

(b) Determination and notification of

status. Upon completion of review of

the application, including any additional

information submitted, the IRS will determine whether the applicant qualifies

to become an acceptance agent and will

notify the applicant of this determination. If the applicant is approved as an

acceptance agent, the IRS will provide

instructions to the applicant regarding

the procedures for entering into the

acceptance agent agreement with the

IRS.

SECTION 5. ACCEPTANCE AGENT

AGREEMENT

.01 In general. An acceptance agent

agreement described under § 301.6109–

1(d)(3)(iv)(A) of the Regulations is an

agreement between the IRS and a person authorized by virtue of the agreement to act as an acceptance agent on

behalf of an alien individual or a foreign

person with respect to that individual’s

or person’s need to obtain an ITIN or an

EIN from the IRS. The Assistant Commissioner (International) shall sign the

agreement on behalf of the IRS. If the

acceptance agent is a person other than

an individual, the agreement must be

signed by an authorized representative

of the acceptance agent.

.02 Terms and procedures. The terms

of an acceptance agent agreement may

vary depending upon such factors as the

nature of the applicant (e.g., bank, university, governmental agency, etc.) and

its location (i.e., inside the United States

or outside the United States). The acceptance agent agreement will generally

contain the following terms and condi-

tions necessary to insure proper administration of the process by which the

IRS issues TINs to alien individuals and

foreign persons.

(1) Procedures for providing TIN application forms. An acceptance agent

shall agree to maintain a supply of Form

W–7 for obtaining ITINs, and of Form

SS–4 for obtaining EINs from the IRS.

The acceptance agent may use a substitute form that is approved by the IRS.

For example, if the acceptance agent is

a financial institution, the Form W–7 or

Form SS–4 may be incorporated as part

of an account opening package. In addition, an acceptance agent shall agree to

send a Form W–7 to any individual

client or customer (who is not a U.S.

citizen or national) that it knows, or has

reason to know, has been issued a

temporary tax identification number by

the IRS, and to advise the client or

customer of the need to replace the

temporary tax identification number

with an ITIN.

(2) Procedures for assisting in

completion of TIN application forms. An

acceptance agent shall agree to assist in

the preparation of the TIN application

form. For example, the acceptance agent

should make certain that every item

included on the application form has

been completed and should assist the

TIN applicant in understanding the information required by the application

form. The acceptance agent should contact the IRS for assistance regarding any

questions about the forms, application

process, the requirement to have TINs,

etc. that it cannot reasonably answer.

Questions regarding such matters should

be directed to the IRS at (215) 516–

ITIN (4846) (not a toll-free number).

(3) Procedures for IRS communication with acceptance agent. The applicant’s signature on the Form W–7 provides the power of attorney to the

acceptance agent, authorizing communication with the IRS regarding that particular application only. The acceptance

agent may act as an agent for the

applicant regarding any additional communication necessary with the IRS in

connection with the application form.

However, IRS communication with an

acceptance agent in connection with a

Form SS–4 application requires that the

applicant has furnished a power of attorney (e.g., Form 2848) authorizing such

communication.

(4) Procedures for submitting TIN

application forms. An acceptance agent

shall agree to submit promptly the TIN

application forms or approved substitute

forms (together with the required documentation for ITINs or the supplementary statement, if required, for EINs) to

the IRS at the mailing address for the

Philadelphia Service Center included on

Form W–7 or Form SS–4, or the following street address (for registered or

certified mail): 11601 Roosevelt Blvd.,

D.P. 426, Philadelphia, PA 19255.

(5) Procedures for collecting and reviewing required documentation for assignment of an ITIN. A Form W–7 must

be accompanied by documentary evidence of alien status and identity. The

types of acceptable documentary evidence may vary depending upon such

factors as the ITIN applicant’s country

of citizenship or nationality, the ITIN

applicant’s residency at the time of the

application (i.e., inside or outside the

United States), etc. The acceptance

agent must review the applicant’s documentation in order to determine whether

the documentation is of a type which

the IRS regards as reliable evidence of

alien status and identity. The acceptance

agent agreement will specify the various

types of documentary evidence that the

acceptance agent should accept for submission with Form W–7. Examples of

documentary evidence supporting alien

status (i.e., non-U.S. citizenship or nationality) include a foreign passport, a

foreign birth record, or a current document issued by the Immigration and

Naturalization Service (INS) in accordance with that agency’s regulations.

Examples of documentary evidence supporting identity include a driver’s license, identity card, school record,

medical record, marriage record, voter

registration card, military registration

card, passport, or a current document

issued by INS in accordance with that

agency’s regulations. Generally, one

piece of documentary evidence should

contain a picture or photo identification.

Generally, ITIN applicants must submit

the required documentation during a

personal interview with the acceptance

agent. The agreement will generally require that original (or certified copies of

original) documentation be submitted to

the IRS with Form W–7. All original

documents will be returned promptly to

the acceptance agent (i.e., no later than

3 business days from receipt of a complete application by the IRS, Philadelphia Service Center). Copies of original

documents, if allowed to be submitted

under the acceptance agent agreement,

will not be returned to the acceptance

agent.

(6) Procedures for assisting taxpayers

with notification procedures in the event

of a change of alien status. When an

acceptance agent knows that an individual assigned an ITIN has become

eligible to obtain (or has, in fact, obtained) a SSN, such acceptance agent

shall agree to inform the individual of

the obligation to (1) apply for a SSN,

(2) stop using the previously- assigned

ITIN upon receipt of the new SSN, and

(3) notify the IRS of this change in

alien status. The acceptance agent’s duty

with respect to this matter shall apply

only to the situation where the acceptance agent has a continuing business

relationship with the individual. An alien

individual may become eligible to obtain a SSN if, for example, such individual has become a U.S. citizen or a

permanent U.S. resident (i.e., ‘‘green

card’’ holder), or is lawfully permitted

by INS to work in the United States.

The ITIN holder’s notification to the

IRS should state that the individual

either is eligible to have or has a SSN,

and should include the individual’s

name, address, previously-assigned ITIN

and new SSN (if available), the current

date, and the individual’s signature. This

information may be provided to the IRS

by FAX: (215) 516–3270 or by mail:

IRS, Philadelphia Service Center, ATTN:

ITIN Unit-D.P. 426, P.O. Box 447,

Bensalem, PA 19020. Questions regarding this matter should be directed to

(215) 516–ITIN (4846) (not a toll-free

number).

(7) Procedures for IRS verification of

compliance with acceptance agent

agreement. The acceptance agent agreement will specify the procedures by

which the IRS will verify the acceptance

agent’s compliance with the agreement.

In particular, the procedures must enable

the IRS to verify that the acceptance

agent has adequate procedures in effect

to assist applicants properly. The procedures also must enable the IRS to verify

that the acceptance agent is complying

with any record retention requirements

relating to the issuance of TINs. Verification of compliance with the acceptance agent agreement does not constitute an examination of the books and

records of the acceptance agent.

(8) Procedures regarding termination

of acceptance agent agreement. An acceptance agent agreement generally is

not subject to expiration and renewal.

Either the acceptance agent or the IRS

may terminate an agreement 30 days

after delivery of notice of termination to

the other party. The decision to termi-

nate is solely at the discretion of the

party giving such notice. However, the

IRS generally will not give notice of

termination unless the acceptance agent

willfully fails to comply with procedures

required by the agreement or to perform

any duty or obligation required in the

agreement (including failing to exercise

due diligence under the agreement) and

such failure constitutes material noncompliance. In addition, the IRS may

give notice of termination where the

acceptance agent has misrepresented

material information given on its application to become an acceptance agent or

on a TIN application. Further, notice of

termination may be given where the

acceptance agent accepts a TIN application with knowledge that material information on the form is false. The acceptance agent may request that the IRS

reinstate the acceptance agent agreement

by submitting, within 30 days of receipt

of the notice of termination, a written

explanation of how the acceptance agent

proposes to correct the violation and, if

appropriate, to modify its procedures to

ensure that such violation will not occur

in the future. The IRS shall accept or

reject the request, or make a counterproposal within 20 days of receipt of the

request.

SECTION 6. CERTIFYING

ACCEPTANCE AGENT

.01 General requirements. A certifying acceptance agent is a person that is

authorized under the agreement with the

IRS to submit a Form W–7 to the IRS

on behalf of an applicant, without having to furnish supporting documentary

evidence. Instead, when submitting a

Form W–7 to the IRS, a certifying

acceptance agent certifies to the IRS

that it has reviewed the appropriate

documentation evidencing the ITIN applicant’s identity and alien status, and

that it is maintaining a record of such

documentation. In addition, the acceptance agent must certify that to the best

of its knowledge and belief, the documentation is authentic, complete, and

accurate. As part of the certification, the

acceptance agent must describe the

documentation upon which it is relying.

The certification is not binding on the

IRS, which may, in appropriate cases,

request to see appropriate documentation

before issuing an ITIN.

.02 Application process. (1) Written

application. IRS permission to act as a

certifying acceptance agent is conditioned upon the acceptance agent’s

agreeing to verify documentation supporting the identity and alien status of

an ITIN applicant, maintain certain

records, and submit certain information

to the IRS upon request. As a result, in

addition to the information required to

be submitted with an application to

become an acceptance agent as outlined

in section 4.02(3) of this revenue procedure, an applicant to become a certifying acceptance agent must also provide

the following information:

(a) If an applicant relies on local

know-your-customer practices and procedures for identifying customers or

clients, and communicating with customers or clients, then the applicant

must provide an explanation of those

practices and procedures, including (1)

the extent to which they are mandated

and verified under local law and regulations applicable at each location intended to be covered by the agreement

and (2) the penalties or sanctions that

may apply under local law in the event

of a failure to comply with such procedures. Supporting documentation must

be included.

(b) Information regarding the anticipated reason why customers or clients

need to apply for ITINs (e.g., nonresident alien ineligible for SSN, resident

alien ineligible for SSN, or U.S. person’s dependent ineligible for SSN).

(2) Pre-application conference. Prior

to submitting a formal application, a

person interested in becoming a certifying acceptance agent may request a

conference with the IRS, which may be

held in person or by telephone. This

conference will provide an opportunity

to address such matters as the scope of

the agreement, corresponding obligations

that would arise under the agreement for

the applicant, and the nature of documentation, record maintenance, and verification procedures that would arise under the agreement. Requests for preapplication conferences should be

directed to the Assistant Commissioner

(International), Foreign Payments Division (telephone: (202) 874–1800, not a

toll-free number).

.03 Agreement. The terms of a certifying acceptance agent agreement may

vary from case to case depending upon

such factors as local laws and practices,

know-your-customer procedures, supervisory controls, and the types of internal

controls and recordkeeping procedures

in effect in the normal course of business of the certifying acceptance agent.

Generally, the acceptance agent agreement will contain the terms and condi-

tions necessary to insure proper administration of the process by which the

IRS issues ITINs to alien individuals as

are described in section 5.02 of this

revenue procedure. The following terms

are in addition to those outlined in

section 5 above.

(1) Procedures for collecting, reviewing, and maintaining a record of required documentation for assignment of

an ITIN. A certifying acceptance agent

agreement will describe the procedures

by which the acceptance agent will

verify the identity and alien status of

ITIN applicants and submit a certification to the IRS. To the extent possible,

procedures already in place to identify

persons for local regulatory purposes or

as part of normal course of business will

be used to support the representations

made by the acceptance agent regarding

these matters. To the extent applicable,

an acceptance agent may use documentation evidencing citizenship, nationality,

residency, or immigration status to support its determination of the alien status

of ITIN applicants. The reliability of

any documentation should be evaluated

by the acceptance agent on the basis of

the type of information stated on the

document, the source document, if any,

used to substantiate the information on

the document, the issuance procedures

used, and the ease with which the

document can be counterfeited. Where

the IRS determines that these requirements or practices are not sufficient, it

may require that additional procedures

and documentation be established.

The acceptance agent will agree that,

for purposes of determining its compliance with the acceptance agent agreement, it will maintain a record of the

documentation obtained and reviewed

pursuant to the obligations set forth in

the agreement. If the acceptance agent

has a professional or business relationship with the ITIN applicant, the documentation with respect to the ITIN applicant shall be maintained for as long

as the ITIN applicant maintains such a

relationship with the acceptance agent

and for a reasonable period, as prescribed by the IRS in the agreement,

from the date such relationship ceases.

If the acceptance agent does not have a

professional or business relationship

with the ITIN applicant, the documentation with respect to the ITIN applicant

shall be maintained for three years after

presentation.

(2) Procedures for IRS compliance

checks of certifications. A certifying acceptance agent must also agree to fur-

nish supporting documentary evidence

to the IRS upon written request in such

manner as the IRS and the acceptance

agent will establish. In order to conduct

periodic compliance checks, the IRS

may rely on sampling techniques and/or

verification (by random selection) with

ITIN recipients to assure reliability of

the acceptance agent’s certifications

while ensuring the least amount of disruption and burden to the acceptance

agent. The acceptance agent agreement

will specify the manner in which IRS

compliance checks will take place (i.e.,

either on site or through correspondence). Where the acceptance agent resides outside of the United States, in

appropriate cases, assistance may be

obtained from the tax authorities of the

country where the acceptance agent resides.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective on

the date of publication.

SECTION 8. PAPERWORK

REDUCTION ACT

The collections of information contained in this revenue procedure have

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 1545–1499.

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 collections of information contained in this revenue procedure are in

section 4.02(3), section 5.02(6), and section 6.02(1). This information is required to assist the IRS in issuing TINs

to certain alien individuals and foreign

persons. In addition, this information

will be used to enable the IRS to

determine whether persons qualify as

acceptance agents. The collection of

information is required to obtain an

acceptance agent agreement. The likely

respondents are state or local governments, business or other for-profit institutions, federal agencies, and nonprofit

institutions.

The estimated total annual reporting/

recordkeeping burden is 41,006 hours.

The estimated average annual burden

per respondent/recordkeeper is 3 hours,

12 minutes. The estimated number of

respondents/recordkeepers is 12,825.

The estimated annual frequency of

responses is on occasion.

Books or records relating to a 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 confiden-

tial, as required by 26 U.S.C. 6103.

SECTION 9. DRAFTING

INFORMATION

The principal author of this revenue

procedure is Lilo A. Hester of the Office

of the Associate Chief Counsel (Interna-

tional). For further information regarding the acceptance agent program,

please contact Tom Logan of the Office

of the Assistant Commissioner (International) on (202) 874–1800 (not a tollfree number).

Part IV. Items of General Interest

Notice of Proposed Rulemaking

and Notice of Public Hearing

SUPPLEMENTARY INFORMATION:

Classification of Certain

Transactions Involving Computer

Programs

These regulations are proposed to

clarify the treatment under certain provisions of the Internal Revenue Code

(Code) and tax treaties of income from

transactions involving computer programs.

REG–251520–96

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the tax

treatment of certain transactions involving the transfer of computer programs.

The proposed regulations provide rules

for classifying such transactions as sales,

licenses, leases, or the provision of

services or of know-how under certain

provisions of the Internal Revenue Code

and tax treaties. This document also

provides notice of a public hearing on

the proposed regulations.

DATES: Comments must be received by

February 11, 1997. Requests to speak

(with outlines of oral comments) at a

public hearing scheduled for March 19,

1997, at 10 a.m. must be submitted by

February 26, 1997.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–251520–96),

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 (REG–251520–96),

Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC. Alternately, taxpayers

may submit comments electronically via

the Internet by selecting the ‘‘Tax Regs’’

option on the IRS Home Page, or by

submitting comments directly to the IRS

Internet site at http:\\www.irs.ustreas.gov\prod\tax_regs\comments.html. 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, William H. Morris, (202) 622–3880 or Carol

P. Tello, (202) 622–3880; concerning

submissions and the hearing, Christina

Vasquez, (202) 622–7180 (not toll-free

numbers).

Background

I. Introduction

Computer programs are generally protected by copyright law. Typically the

protection afforded by copyright law is

a principal source of the value of a

computer program to the owner of the

source of the value of a computer

program to the purchaser of a copy of

the program is not the protection afforded by copyright law, but the right to

use or sell the copy. In this regard,

computer programs are similar to other

copyrighted works such as books,

records, motion pictures, etc. For example, when a copy of a book is

purchased, the purchaser does not

thereby also acquire any copyright

rights. Accordingly, the proposed regulations generally distinguish between

transactions in a copyright and in the

subject of the copyright.

In developing regulations addressing

the treatment of computer programs, the

IRS and Treasury generally have been

guided by the following principles: (i)

the rules should take into account the

special features of computer programs,

such as the ability to deliver copies

electronically as well as physically, and

to make perfect copies at little or no

cost, and (ii) wherever possible, transactions that are functionally equivalent

should be treated similarly. For example,

a transaction that involves the transfer

for internal use only of fifty copies of a

computer program should generally be

treated the same as a transfer of one

copy (for internal use) with the right to

make forty-nine other copies all for

internal use. Similarly, if the right to use

a computer program is limited in time,

the transaction should generally be

treated the same irrespective of whether,

at the end of the period of permitted

use, a disk containing the computer

program must be returned, or the program automatically deactivates itself.

II. Copyright Law Principles

Distinguishing between transactions in

a copyright and in the subject of the

U.S. and foreign copyright law (e.g. EC

Directive on Legal Protection of Computer Programs, 1991 (91/250/EEC); and

the Berne Convention (Paris Text, July

24, 1971)). An overview of U.S. copyright law as it relates to computer

programs is set forth below. However,

the IRS and the Treasury do not purport

in these regulations to interpret U.S.

U.S. Copyright Office.

The Copyright Act of 1976, as

amended (17 U.S.C. 101 et seq.), provides protection against infringement of

the exclusive rights of the owner of a

expression, including literary works. (17

U.S.C. 102.) The term literary works is

defined to include: ‘‘. . . numbers, or

other verbal or numerical symbols or

indicia, regardless of the nature of the

material objects, such as books, periodicals, manuscripts, phonorecords, film,

tapes, disks, or cards, in which they are

embodied.’’ (17 U.S.C. 101.) Thus, computer programs are literary works for

purposes of the Copyright Act.

The Copyright Act grants five exclusive rights to a copyright owner. Of

these, three are most relevant in the case

of computer programs: the right to reproduce copies of the copyrighted work

(17 U.S.C. 106(1)); the right to prepare

derivative works, which may themselves

be separately copyrighted, based upon

the copyrighted work (17 U.S.C. 103

and 106(2)); and the right to distribute

copies of the copyrighted work to the

public by sale or other transfer of

ownership, or by rental, lease or lending

(17 U.S.C. 106(3)). Additionally, in certain circumstances, the right to publicly

perform the copyrighted work (17

U.S.C. 106(4)) and the right to publicly

display the copyrighted work may also

be relevant (17 U.S.C. 106(5)).

Thus, under U.S. copyright law, the

user of a computer program who does

not possess any of those five rights (or

parts of them) has obtained only rights

to use the copyrighted article it possesses. Generally, that user is treated

only as having received a copy of the

copyrighted work. Under U.S. copyright

law, a copy is a material object in which

a work is fixed by any method now

known or later developed, and from

which the work can be perceived, repro-

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I.R.B.

duced, or otherwise communicated, either directly or with the aid of a machine or device (17 U.S.C. 101.). In

these proposed regulations a copy is

also referred to as a ‘‘copyrighted article.’’ The distinction between copies

and copyrights is made most clearly in

section 202 of the Copyright Act which

provides:

Ownership of a copyright, or of any of the

exclusive rights under a copyright, is distinct from ownership of any material object

in which the work is embodied. Transfer of

ownership of any material object, including

the copy or phonorecord in which the work

is first fixed, does not of itself convey any

rights in the copyrighted work embodied in

the object; nor, in the absence of an

agreement, does transfer of ownership of a

a copyright convey property rights in any

material object.

Certain rights pass to the purchaser of

a copy of a computer program. The

most important of these is the right to

sell (but not, without permission, to

lease, rent or lend) the copy to another

person. (17 U.S.C. 109.) Additionally,

the owner of a copy of a computer

program has the right to make a copy of

that copy as an essential step in the

utilization of the program (e.g., copying

to the memory of the computer) and

may also make a copy for archival

purposes. (17 U.S.C. 117.) If, however,

the owner of the copy sells that copy, all

copies made pursuant to the 17 U.S.C.

117 right must be destroyed. III. The

Proposed Regulations and Copyright

Law Principles

Although the proposed regulations are

guided by copyright law principles in

determining whether a copyright right or

copyrighted article has been transferred,

the regulations depart in some cases

from a strict reliance on copyright law

in order to take into account the special

nature of computer programs and to

treat functionally equivalent transactions

in the same way. For example, the

proposed regulations do not treat the

transfer of a right to copy as the transfer

of a copyright right, unless it is accompanied by the right to distribute the

copies to the public.

Thus, where a corporation obtains the

right, under an agreement, to make fifty

copies of a program for use by its

employees at one location (a site license) the transaction is not, for all

practical purposes, any different from a

transaction in which fifty individual

disks are purchased. Accordingly, the

proposed regulations treat the transaction as the transfer of a copyrighted

article, rather than of a copyright right,

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I.R.B.

despite a copyright law requirement that

the corporation receive a ‘‘license’’ to

make those fifty copies. Similarly, under

the proposed regulations, the transfer of

a computer program in perpetuity for

internal use only on a single disk or set

of disks in return for a one-time payment, in a transaction styled as a license

of copyright rights (a so-called shrink

wrap license), is treated as the sale of a

copyrighted article and not the transfer

of a copyright right. Therefore, such a

transfer is classified solely as the sale of

a copyrighted article for the purposes of

the proposed regulations.

IV. Explanation of Provisions

Section 1.861–18(a)(1) of the proposed regulations describes the scope of

the proposed regulations. These proposed regulations provide rules for classifying transfers of computer programs

for the purposes of subchapter N of

chapter 1 of the Internal Revenue Code,

sections 367, 404A, 482, 551, 679,

1057, 1059A, chapter 3, chapter 5, sections 842 and 845 (to the extent involving a foreign person), and transfers to

foreign trusts not covered by section

679.

Section 1.861–18(a)(2) describes the

categories of transactions relating to

computer programs. In particular, a

transfer of a copyright right may be

either a sale or license of that right and

a transfer of a copyrighted article may

be either a sale or lease of that copyrighted article. Section 1.861– 18(a)(3)

defines the term computer program.

Section 1.861–18(b)(1) provides that a

transaction involving the transfer of a

computer program will be classified as

either the transfer of a copyright right,

the transfer of a copyrighted article, the

provision of services relating to the

development of a computer program, or

the provision of know-how.

Section 1.861–18(b)(2) provides that a

transaction involving computer programs

which consists of more than one of the

categories in paragraph (b)(1), is treated

as separate transactions. Any resulting

transaction that is de minimis, however,

taking into account all facts and circumstances, will not be treated as a separate

transaction.

Section 1.861–18(c)(1)(i) provides

that the transfer of a computer program

will be classified as the transfer of a

one or more of the rights set forth in

paragraph (c)(2).

Section 1.861–18(c)(1)(ii) provides

that if such rights are not transferred

and the transaction does not involve, or

involves to only a de minimis extent,

the provision of services or know- how,

then the transaction will be classified

solely as the transfer of a copyrighted

article.

Section 1.861–18(c)(2) identifies

those rights that will be treated as

proposed regulations. This list differs

from the list of rights set out in the

special nature of computer programs.

Specifically, the copyright law right to

copy will only be treated as a copyright

right for the purposes of the proposed

regulations if it is accompanied by the

right to distribute such copies to the

public. The copyright rights that apply

for purposes of this section are, in

addition to the right to copy and distribute to the public, the right to prepare

derivative computer programs, the right

to make a public performance of the

computer program, and the right to

publicly display the computer program.

The list of rights contained in § 1.861–

18(c)(2) rather than those contained in

the Copyright Act will apply for the

purposes of the proposed regulations.

Section 1.861–18(c)(3) defines a

copyrighted article as a copy of a computer program from which the work can

be perceived, reproduced or otherwise

communicated.

Section 1.861–18(d) of the proposed

regulations provides rules for determining whether a transaction involving a

newly- developed or modified computer

program will be treated as the provision

of services or another transaction described in paragraph (b)(1) of this section. The determination is based on all

facts and circumstances, including how

risk of loss is allocated and the intent of

the parties as to ownership of the copyright. See, e.g., Boulez v. Commissioner,

83 T.C. 584 (1984); Rev. Rul. 74–555

(1974–2 C.B. 202); Rev. Rul. 84–78

(1984–1 C.B. 173).

Section 1.861–18(e) provides rules for

determining whether a transfer of information related to a computer program

will be considered the provision of

know-how. A provision of know-how

will not be considered to occur unless a

party transfers information that (i) relates to computer programming techniques, (ii) is not capable of being

copyrighted, and (iii) is protected by

trade secret protection.

Under § 1.861–18(f)(1), if a transfer

involves copyright rights, it will be

further classified as either a sale or a

license of copyright rights. This classification will be made by examining

whether, taking into account all facts

and circumstances, all substantial rights,

under the principles of sections 1222

and 1235, have passed to the transferee.

Under § 1.861–18(f)(2), if a transfer

involves a copyrighted article, it will be

further classified as either a sale or a

lease of a copyrighted article. This classification will be made by examining

whether the benefits and burdens of

ownership have passed to the transferee.

See, e.g., Grodt & McKay Realty, Inc. v.

Commissioner, 77 T.C. 1221, 1237–38

(1981); Torres v. Commissioner, 88 T.C.

702, 720–27 (1987); Estate of Thomas v.

Commissioner, 84 T.C. 412, 431–40

(1985).

Under § 1.861–18(f)(3), the determination of the classification of a transfer

involving a copyright right or copyrighted article must appropriately consider the special nature of computer

programs in transactions that take advantage of those characteristics. For example, a transaction in which a person

acquires a copyrighted article on disk

subject to a requirement that the disk be

destroyed after a specified period is

generally the equivalent of a requirement that the disk be returned after such

period. Similarly, a transaction in which

the program deactivates itself after a

specified period may also be treated as

the equivalent of returning the copy.

Section 1.861–18(g) of the proposed

regulations provides certain additional

rules of operation. Section 1.861–

18(g)(1) provides that neither the form

adopted by the parties to a transaction

nor the classification of a transaction

under copyright law are determinative

for tax purposes. Therefore, as illustrated in Example 1, a transfer of a

computer program on a disk subject to a

shrink-wrap license will generally be a

sale of a copyrighted article.

Section 1.861–18(g)(2) provides that

the method of transferring the computer

program, for example by disk or electronically, shall not be relevant in determining whether a copyright right or a

copyrighted article has been transferred.

The foregoing rules are illustrated by

a number of examples contained in

§ 1.861–18(h).

Under § 1.861–18(i), these regulations are proposed to apply to all transactions occurring on or after the date

that is 60 days after the date the final

regulations are published in the Federal

from the proposed effective date con-

cerning the treatment of transactions

involving computer programs entered

into before the regulations are applicable.

The application of these rules for

purposes of the affected Internal Revenue Code sections may result in a

change in the method of accounting for

certain transactions involving computer

programs by certain taxpayers. If the

final regulations are adopted, the IRS

will consider issuing an automatic

change revenue procedure to address the

situation where the taxpayer is required

to change its method of accounting to

comport with the new regulations.

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) does not apply to these

regulations, and because the regulations

do not impose a collection of information on small entities, the Regulatory

Flexibility Act (5 U.S.C. chapter 6) does

not apply. Pursuant to section 7805(f) of

the Internal Revenue Code, 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 comments

that are submitted timely (in the manner

described in the ADDRESSES caption)

to the IRS. All comments will be available for public inspection and copying.

A public hearing has been scheduled

for March 19, 1997, 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

comments by February 11, 1997, and

submit an outline of the topics to be

discussed and the time to be devoted to

each topic (in the manner described in

the ADDRESSES caption) by February

26, 1997.

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 the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information

The principal authors of these regulations are William H. Morris and Carol P.

Tello, of the Office of Associate Chief

Counsel (International), 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 continues to read in part as

follows:

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

Par. 2. Section 1.861–18 is added to

read as follows:

§ 1.861–18 Classification of transactions involving computer programs.

(a) General—(1) Scope. This section

provides rules for classifying transactions relating to computer programs for

purposes of subchapter N of chapter 1

of the Internal Revenue Code, sections

367, 404A, 482, 551, 679, 1057, 1059A,

chapter 3, chapter 5, sections 842 and

845 (to the extent involving a foreign

person), and transfers to foreign trusts

not covered by section 679.

(2) Categories of transactions. This

section generally requires that such

transactions be treated as being solely

within one of four categories (described

in paragraph (b)(1) of this section) and

provides certain rules for categorizing

such transactions. In the case of a

transfer of a copyright right, this section

provides rules for determining whether

the transaction should be classified as

either a sale or exchange, or a license

generating royalty income. In the case

of a transfer of a copyrighted article,

this section provides rules for determining whether the transaction should be

1996–48

I.R.B.

classified as either a sale or exchange,

or a lease generating rental income.

(3) Computer program. For purposes

of this section, a computer program is a

set of statements or instructions to be

used directly or indirectly in a computer

in order to bring about a certain result.

For purposes of this paragraph (a)(3), a

computer program includes any data

base or similar item if the data base or

similar item is incidental to the operation of the computer program.

(b) Categories of transactions—

(1) General. Except as provided in

paragraph (b)(2) of this section, a transaction involving the transfer of, or the

provision of services or of know-how

with respect to, a computer program

(collectively, a transfer of a computer

program) is treated as being solely one

of the following—

(i) A transfer of a copyright right in

the computer program;

(ii) A transfer of a copy of the computer program (a copyrighted article);

(iii) The provision of services for the

development or modification of the

computer program; or

(iv) The provision of know-how relating to computer programming techniques.

(2) Transactions consisting of more

than one category. Any transaction involving computer programs which consists of more than one of the transactions described in paragraph (b)(1) of

this section shall be treated as separate

transactions, with the appropriate provisions of this section being applied to

each such transaction. However, any

transaction that is de minimis, taking

into account the overall transaction and

the surrounding facts and circumstances,

shall not be treated as a separate transaction, but as part of another transaction.

(1) Classification—(i) Transfers treated

as transfers of copyright rights. A transfer of a computer program is classified

as a transfer of a copyright right if, as a

result of the transaction, a person acquires any one or more of the rights

described in paragraphs (c)(2)(i) through

(iv) of this section. For example, if a

person receives a disk containing a copy

of a computer program which enables it

to exercise, in relation to that program,

a non-de minimis right described in

paragraphs (c)(2)(i) through (iv) of this

section (and the transaction does not

involve, or involves only a de minimis

provision of services as described in

1996–48

I.R.B.

paragraph (d) of this section or of

know-how as described in paragraph (e)

of this section), then, under paragraph

(b)(2) of this section, the transfer is

classified solely as a transfer of a copyright right.

(ii) Transfers treated solely as transfers of copyrighted articles. If a person

acquires a copy of a computer program

but does not acquire any of the rights

described in paragraphs (c)(2)(i) through

(iv) of this section (and the transaction

does not involve, or involves only a de

minimis provision of services as described in paragraph (d) of this section

or of know-how as described in paragraph (e) of this section), the transfer of

the copy of the computer program is

classified solely as a transfer of a copyrighted article.

(2) Copyright rights. The copyright

rights referred to in paragraph (c)(1) of

this section are as follows—

(i) The right to make copies of the

computer program for purposes of distribution to the public by sale or other

transfer of ownership, or by rental, lease

or lending;

(ii) The right to prepare derivative

computer programs based upon the

copyrighted computer program;

(iii) The right to make a public performance of the computer program; or

(iv) The right to publicly display the

computer program.

(3) Copyrighted article. A copyrighted article is a copy of a computer

program from which the work can be

perceived, reproduced or otherwise communicated, either directly or with the aid

of a machine or device. The copy of the

program may be fixed in the magnetic

medium of a floppy disk or in the main

memory or hard drive of a computer.

(d) Provision of services. The determination of whether a transaction involving a newly developed or modified

computer program is treated as either

the provision of services or another

transaction described in paragraph (b)(1)

of this section is based on all the facts

and circumstances of the transaction,

including, as appropriate, the intent of

the parties (as evidenced by their agreement and conduct) as to which party is

to own the copyright rights in the

computer program and how the risks of

loss are allocated between the parties.

(e) Provision of know-how. The provision of information with respect to a

computer program will not be treated as

the provision of know-how for the purposes of this section unless the information is—

(1) Information relating to computer

programming techniques;

(2) Not capable itself of being copyrighted; and

(3) Subject to trade secret protection.

(f) Further classification of transfers

involving copyright rights and copyrighted articles—(1) Transfers of copyright rights. The determination of

whether a transfer of a copyright right is

a sale or exchange of property is made

on the basis of whether, taking into

account all facts and circumstances,

there has been a transfer of all substantial rights in the copyright. A transaction

that does not constitute a sale or exchange because not all substantial rights

have been transferred will be classified

as a license generating royalty income.

For this purpose, the principles of sections 1222 and 1235 shall apply.

(2) Transfers of copyrighted articles.

The determination of whether a transfer

of a copyrighted article is a sale or

exchange is made on the basis of

whether, taking into account all facts

and circumstances, the benefits and burdens of ownership have been transferred. A transaction that does not constitute a sale or exchange because

insufficient benefits and burdens of

ownership of the copyrighted article

have been transferred, such that a person

other than the transferee is properly

treated as the owner of the copyrighted

article, will be classified as a lease

generating rental income.

(3) Special circumstances of computer programs. In connection with determinations under this paragraph (f),

consideration must be given as appropriate to the special characteristics of computer programs in transactions that take

advantage of these characteristics (such

as the ability to make perfect copies at

minimal cost). For example, a transaction in which a person acquires a copy

of a computer program on disk subject

to a requirement that the disk be destroyed after a specified period is generally the equivalent of a transaction subject to a requirement that the disk be

returned after such period. Similarly, a

transaction in which the program deactivates itself after a specified period is

generally the equivalent of returning the

copy.

(g) Rules of operation—(1) Term applied to transaction by parties. Neither

the form adopted by the parties to a

transaction, nor the classification of the

transaction under copyright law, shall be

determinative. Therefore, for example, if

there is a transfer of a computer pro-

gram on a single disk for a one-time

payment with restrictions on transfer

and reverse engineering, which the parties characterize as a license (generally

referred to as a shrink-wrap license),

application of the rules of paragraphs (c)

and (f) of this section may nevertheless

result in the transaction being classified

as the sale of a copyrighted article.

(2) Means of transfer not to be taken

into account. The rules of this section

shall be applied irrespective of the

physical or electronic medium used to

effectuate a transfer of a computer program.

(h) Examples. The provisions of this

section may be illustrated by the following examples. All of the following examples assume that all parties are unrelated to each other:

Example 1. (i) Facts. Corp A, a U.S. corporation, owns the copyright in a computer program,

Program X. It copies Program X on to disks. The

disks are placed in boxes covered with a wrapper

on which is printed what is generally referred to

as a shrink-wrap license. The license is stated to

be perpetual. Under the license no reverse engineering of the computer program is permitted. The

transferee receives, first, the right to use the

program on two of its own computers (for example, a laptop and a desktop) provided that only

one copy is in use at any one time, and, second,

the right to make one copy of the program on

each machine as an essential step in the utilization

of the program. The transferee is permitted by the

shrink-wrap license to sell the copy so long as it

destroys any other copies it has made and imposes

the same terms and conditions of the license on

the purchaser of its copy. These disks are made

available for sale to the general public in Country

Z. In return for valuable consideration, P, a

Country Z resident, receives one such disk.

(ii) Analysis. (A) Under paragraph (g)(1) of

this section, the label license is not determinative.

None of the copyright rights described in paragraph (c)(2) of this section have been transferred

in this transaction. P has received a copy of the

program, however, and, therefore, under paragraph

(c)(1)(ii) of this section, P has acquired solely a

copyrighted article.

(B) Taking into account all of the facts and

circumstances, P is properly treated as the owner

of a copyrighted article. Therefore, under paragraph (f)(2) of this section, there has been a sale

of a copyrighted article rather than the grant of a

lease.

Example 2. (i) Facts. The facts are the same as

those in Example 1, except that instead of selling

disks, Corp A, the U.S. corporation, decides to

make Program X available, for a fee, on a World

Wide Web home page on the Internet. P, the

Country Z resident, in return for payment made to

Corp A, downloads Program X (via modem) onto

the hard drive of his computer. As part of the

electronic communication, P signifies his assent to

a license agreement with terms identical to those

in Example 1, except that in this case P may make

a back-up copy of the program on to a disk.

(ii) Analysis. (A) None of the copyright rights

described in paragraph (c)(2) of this section have

passed to P. Although P did not buy a physical

copy of the disk with the program on it, paragraph

(g)(2) of this section provides that the means of

transferring the program is irrelevant. Therefore, P

has acquired a copyrighted article.

(B) As in Example 1, P is properly treated as

the owner of a copyrighted article. Therefore,

under paragraph (f)(2) of this section, there has

been a sale of a copyrighted article rather than the

grant of a lease.

Example 3. (i) Facts. The facts are the same as

those in Example 1, except that Corp A only

allows P, the Country Z resident, to use Program

X for one week. At the end of that week, P must

return the disk with Program X on it to Corp A. P

must also destroy any copies made of Program X.

If P wishes to use Program X for a further period

he must enter into a new agreement to use the

program for an additional charge.

(ii) Analysis. (A) Under paragraph (c)(2) of this

section, P has received no copyright rights. Because P has received a copy of the program under

paragraph (c)(1)(ii) of this section, he has, therefore, received a copyrighted article.

(B) Taking into account all of the facts and

circumstances, P is not properly treated as the

owner of a copyrighted article. Therefore, under

paragraph (f)(2) of this section, there has been a

lease of a copyrighted article rather than a sale.

Taking into account the special characteristics of

computer programs as provided in paragraph (f)(3)

of this section, the result would be the same if P

were required to destroy the disk at the end of the

one week period instead of returning it since Corp

A can make additional copies of the program at

minimal cost.

Example 4. (i) Facts. The facts are the same as

those in Example 2, where P, the Country Z

resident, receives Program X from Corp A’s home

page on the Internet, except that P may only use

Program X for a period of one week at the end of

which an electronic lock is activated and the

program can no longer be accessed. Thereafter, if

P wishes to use Program X, it must return to the

home page and pay Corp A to send an electronic

key to reactivate the program for another week.

(ii) Analysis. (A) As in Example 3, under paragraph (c)(2) of this section, P has not received any

program, and under paragraph (g)(2) of this section, the means of transmission is irrelevant, P has,

therefore, under paragraph (c)(1)(ii) of this section,

received a copyrighted article.

(B) As in Example 3, P is not properly treated

as the owner of a copyrighted article. Therefore,

under paragraph (f)(2) of this section, there has

been a lease of a copyrighted article rather than a

sale. While P does retain Program X on its

computer at the end of the one week period, as a

legal matter P no longer has the right to use the

program (without further payment) and, indeed,

cannot use the program without the electronic key.

Functionally, Program X is no longer on the hard

drive of P‘‘s computer. Instead, the hard drive

contains only a series of numbers which no longer

perform the function of Program X. Although in

Example 3, P was required to physically return the

disk, taking into account the special characteristics

of computer programs as provided in paragraph

(f)(3) of this section, the result in this Example 4

is the same as in Example 3.

Example 5. (i) Facts. Corp A, a U.S. corporation, transfers a disk containing Program X to

Corp B, a Country Z corporation, and grants Corp

B an exclusive license for the remaining term of

the copyright to copy and distribute an unlimited

number of copies of Program X in the geographic

area of Country Z, prepare derivative works based

upon Program X, make public performances of

Program X, and publicly display Program X. Corp

B will pay Corp A a royalty of $y a year for three

years, which is the expected period during which

Program X will have commercially exploitable

value.

(ii) Analysis. (A) Although Corp A has transferred a disk with a copy of Program X on it to

Corp B, under paragraph (c)(1)(i) of this section

because this transfer is accompanied by a copyright right identified in paragraph (c)(2)(i) of this

section, this transaction is a transfer solely of

purposes of paragraph (b)(2) of this section, the

disk containing a copy of Program X is a de

minimis component of the transaction.

(B) Applying the all substantial rights test under paragraph (f)(1) of this section, Corp A will be

treated as having sold copyright rights to Corp B.

Corp B has acquired all of the copyright rights in

Program X, has received the right to use them

exclusively within a geographic area, and has

received the rights for the remaining life of the

of this section, the fact that the agreement is

labelled a license is not controlling (nor is the fact

that Corp A receives a sum labelled a royalty).

(This would also be the case if the copy of

Program X to be used for the purposes of

reproduction were transmitted electronically to

Corp B, as a result of the application of the rule

of paragraph (g)(2) of this section.)

Example 6. (i) Facts. Corp A, a U.S. corporation, transfers a disk containing Program X to

Corp B, a Country Z corporation, and grants Corp

B the non exclusive right to reproduce and

distribute for sale to the public an unlimited

number of disks at its factory in Country Z in

return for a payment related to the number of

disks copied and sold. The term of the agreement

is two years, which is less than the remaining life

of the copyright.

(ii) Analysis. (A) As in Example 5, the transfer

of the disk containing the copy of the program

does not constitute the transfer of a copyrighted

article under paragraph (c)(1) of this section

because Corp B has also acquired a copyright

right under paragraph (c)(2)(i) of this section. For

purposes of paragraph (b)(2) of this section, the

disk containing Program X is a de minimis

component of the transaction.

(B) Taking into account all of the facts and

circumstances, there has been a license of Program

X to Corp B, and the payments made by Corp B

are royalties. Under paragraph (f)(1) of this section, there has not been a transfer of all substantial

rights in the copyright to Program X because Corp

A has the right to enter into other licenses with

respect to the copyright of Program X, including

in Country Z (or even to sell that copyright,

subject to Corp B’s interest). Corp B has acquired

no right itself to license the copyright rights in

Program X. Finally, the term of the license is for

less than the remaining life of the copyright in

Program X.

Example 7. (i) Facts. Corp C, a distributor in

Country Z, enters into an agreement with Corp A,

a U.S. corporation, to purchase as many copies of

Program X on disk as it may from time- to-time

request. Corp C will then sell these disks to

retailers. The disks are shipped in boxes covered

by shrink-wrap licenses (identical to the license

described in Example 1).

(ii) Analysis. (A) Corp C has not acquired any

section with respect to Program X. It has acquired

individual copies of Program X, which it may sell

to others. The use of the term license is not

dispositive under paragraph (g)(1) of this section.

Under paragraph (c)(1)(ii) of this section, Corp C

has acquired copyrighted articles.

1996–48

I.R.B.

(B) Taking into account all of the facts and

circumstances, Corp C is properly treated as the

owner of copyrighted articles. Therefore, under

paragraph (f)(2) of this section, there has been a

sale of copyrighted articles.

Example 8. (i) Facts. Corp A, a U.S. corporation, transfers a disk containing Program X to

Corp D, a foreign corporation engaged in the

manufacture and sale of personal computers in

Country Z. Corp A grants Corp D the nonexclusive right to copy Program X onto the hard

drive of computers which it manufactures, and to

distribute those copies (on the hard drive) to the

public. The term of the agreement is two years,

which is less than the remaining life of the

amount based on the number of copies of Program

X it loads on to computers.

(ii) Analysis. The analysis is the same as in

Example 6. Under paragraph (c)(2)(i) of this

section, Corp D has acquired a copyright right

enabling it to exploit Program X by copying it on

to the hard drives of the computers that it

manufactures and then sells. For purposes of

paragraph (b)(2) of this section, the disk containing Program X is a de minimis component of the

transaction. Taking into account all of the facts

and circumstances, Corp D has not, however,

acquired all substantial rights in the copyright to

Program X (for example, the term of the agreement is less than the remaining life of the

this transaction is, therefore, a license of Program

X to Corp D rather than a sale and the payments

made by Corp D are royalties.

Example 9. (i) Facts. The facts are the same as

in Example 8, except that Corp D, the Country Z

corporation, receives physical disks. The disks are

shipped in boxes covered by shrink-wrap licenses

(identical to the licenses described in Example 1).

Corp D uses each individual disk only once to

load a single copy of Program X onto each

separate computer. Corp D transfers the disk with

the computer when it is sold.

(ii) Analysis. (A) As in Example 7 (unlike

Example 8) no copyright right identified in paragraph (c)(2) of this section has been transferred.

Corp D acquires the disks without the right to

reproduce and distribute publicly further copies of

Program X. This is therefore the transfer of

copyrighted articles under paragraph (c)(1)(ii) of

this section.

(B) Taking into account all of the facts and

circumstances, Corp D is properly treated as the

owner of copyrighted articles. Therefore, under

paragraph (f)(2) of this section, the transaction is

classified as the sale of a copyrighted article.

Example 10. (i) Facts. Corp A, a U.S. corporation, transfers a disk containing Program X to

Corp E, a Country Z corporation, and grants Corp

E the right to load Program X onto 50 individual

workstations for use only by Corp E employees at

one location in return for a one-time per-user fee

(generally referred to as a site license). If additional workstations are subsequently introduced,

Program X may be loaded on to those machines

for additional one-time per-user fees. The license

which grants the rights to operate Program X on

50 workstations also prohibits Corp E from selling

the disk (or any of the 50 copies) or reverse

engineering the program. The term of the license

is stated to be perpetual.

(ii) Analysis. (A) The grant of a right to copy,

unaccompanied by the right to distribute those

copies to the public, is not the transfer of a

section. Therefore, under paragraph (c)(1)(ii) of

1996–48

I.R.B.

this section, this transaction is a transfer of

copyrighted articles (50 copies of Program X).

(B) Taking into account all of the facts and

circumstances, P is properly treated as the owner

of a copyrighted article. Therefore, under paragraph (f)(2) of this section, there has been a sale

of copyrighted articles rather than the grant of a

lease. Notwithstanding the restriction on sale,

other factors such as, for example, the risk of loss

and the right to use the copies in perpetuity

outweigh, in this case, the restrictions placed on

the right of alienation.

Example 11. (i) Facts. The facts are the same

as in Example 10, except that Corp E, the Country

Z corporation, acquires the right to make Program

X available to workstation users who are Corp E

employees by way of a local area network (LAN).

The number of users that can use Program X on

the LAN at any one time is limited to 50. Corp E

pays a one-time fee for the right to have up to 50

employees use the program at the same time.

(ii) Analysis. Under paragraph (g)(2) of this

section the mode of transmission is irrelevant.

Therefore, as in Example 10, under paragraph

(c)(2) of this section, no copyright right has been

transferred and thus, under paragraph (c)(1)(ii) of

this section, this transaction will be classified as

the transfer of a copyrighted article. Under the

benefits and burdens test of paragraph (f)(2) of

this section, this transaction is a sale of copyrighted articles.

Example 12. (i) Facts. The facts are the same

as in Example 11, except that Corp E pays a

monthly fee to Corp A, the U.S. corporation,

calculated with reference to the permitted maximum number of users (which can be changed) and

the computing power of Corp E’s server. In return

for this monthly fee, Corp C receives the right to

receive upgrades of Program X when they become

available. The agreement may be terminated by

either party at the end of any month. When the

disk containing the upgrade is received, or if the

contract is terminated, Corp E must return the disk

containing the earlier version of Program X to

Corp A, and delete (or otherwise destroy) any

copies made of the current version of Program X.

The agreement specifically provides that Corp E

has not thereby been granted an option to purchase

Program X.

(ii) Analysis. (A) Corp E has received no copyright rights under paragraph (c)(2) of this section.

Under paragraph (d) of this section, based on all

the facts and circumstances of the transaction,

Corp A has not provided services to Corp E.

Therefore, under paragraph (c)(1)(ii) of this section, the transaction is a transfer of a copyrighted

article.

(B) Taking into account all facts and circumstances, under the benefits and burdens test Corp

E is not properly treated as the owner of the

copyrighted article. Corp E does not receive the

right to use Program X in perpetuity, but only for

so long as it continues to make payments. Corp E

does not have the right to purchase Program X on

advantageous (or, indeed, any) terms once a

certain amount of money has been paid to Corp A

or a certain period of time has elapsed (which

might indicate a sale). Once the agreement is

terminated, Corp E will no longer possess any

copies of Program X, current or superseded.

Therefore under paragraph (f)(2) of this section

there has been a lease of a copyrighted article.

Example 13. (i) Facts. The facts are the same

as in Example 12, except that while Corp E must

return copies of Program X as new upgrades are

received, if the agreement terminates, Corp E may

keep the latest version of Program X (although

Corp E is still prohibited from selling or otherwise

transferring any copy of Program X).

(ii) Analysis. For the reasons stated in Example

10, the transfer of the program will be treated as a

sale of a copyrighted article rather than as a lease.

Example 14. (i) Facts. Corp G, a Country Z

corporation, enters into a contract with Corp A, a

U.S. corporation, for Corp A to modify Program X

so that it can be used at Corp G’s facility in

Country Z. Under the contract, Corp G is to

acquire one copy of the program on a disk and the

right to use the program on 5,000 workstations.

The contract requires Corp A to rewrite elements

of Program X so that it will conform to Country Z

accounting standards. The services required to

perform this task are de minimis taking into

account the facts and circumstances of this transaction. The agreement between Corp A and Corp

G is otherwise identical as to rights and payment

terms as the agreement described in Example 10.

(ii) Analysis. (A) As in Example 10, no copyright rights are being transferred under paragraph

(c)(2) of this section. Under paragraph (b)(2) of

this section, the services provided are de minimis.

This transaction will be classified, therefore, as a

transfer of copyrighted articles under paragraph

(c)(1)(ii) of this section.

(B) Taking into account all facts and circumstances, Corp G is properly treated as the owner

of copyrighted articles. Therefore, under paragraph

(f)(2) of this section, there has been the sale of a

copyrighted article rather than the grant of a lease.

Example 15. (i) Facts. Corp H, a Country Z

corporation, enters into a license agreement for a

modified version of Program X only if Corp A, a

U.S. corporation, makes substantial modifications

to the program. Only the core idea of Program X

will be used and a considerable amount of labor

will be expended in rewriting Program X, which

under applicable copyright law as a derivative

work will be a separate, new program. Corp A and

Corp H agree that Corp A is modifying Program X

for Corp H and that, when modified Program X is

completed, the copyright in the modified program

will belong to Corp H. Corp H gives instructions

to Corp A programmers regarding program specifications. Corp H agrees to pay Corp A a fixed

monthly sum during development of the program.

If Corp H is dissatisfied with the development of

the program it may cancel the contract at the end

of any month. In the event of termination, Corp A

will retain all payments, while any procedures,

techniques or copyrightable interests will be the

property of Corp H. All of the payments are

labelled royalties. There is no provision in the

agreement for any continuing relationship between

Corp A and Corp H, such as the furnishing of

updates of the program, after completion of the

modification work.

(ii) Analysis. Taking into account all of the

facts and circumstances, Corp A is treated as

providing services to Corp H. Under paragraph (d)

of this section, Corp A is treated as providing

services to Corp H because Corp H bears all of

the risks of loss associated with the development

of modified Program X and is the owner of all

paragraph (g)(1) of this section, the fact that the

agreement is labelled a license is not controlling

(nor is the fact that Corp A receives a sum

labelled a royalty).

Example 16. (i) Facts. Corp A, a U.S. corporation, and Corp I, a Country Z corporation, agree

that a development engineer employed by Corp A

will travel to Country Z to provide know-how

relating to certain techniques which are not generally known to computer programmers which will

enable Corp I to more efficiently create computer

programs. These techniques represent the product

of experience gained by Corp A from working on

many computer programming projects. Such information is not capable of being copyrighted, but it

is subject to trade secret protection.

(ii) Analysis. This transaction contains the elements of know-how specified in paragraph (e) of

this section. Therefore, this transaction will be

classified as the provision of know-how.

(i) Effective date. This section applies

to transactions occurring on or after the

date that is sixty days after 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

November 7, 1996, 3:11 p.m., and published in the

issue of the Federal Register for November 13,

1996, 61 F.R. 58152)

Foundations Status of Certain

Organizations

Announcement 96–125

The following organizations have

failed to establish or have been unable

to maintain their status as public charities or as operating foundations. Accordingly, grantors and contributors may not,

after this date, rely on previous rulings

or designations in the Cumulative List

of Organizations (Publication 78), or on

the presumption arising from the filing

of notices under section 508(b) of the

Code. This listing does not indicate that

the organizations have lost their status

as organizations described in section

501(c)(3), eligible to receive deductible

contributions.

Former Public Charities. The following organizations (which have been

treated as organizations that are not

private foundations described in section

509(a) of the Code) are now classified

as private foundations:

Adopt a Cow, Montpelier, VT

Ads Against AIDS, Inc., New York, NY

Airport Gardens Resident Association,

Chapel Hill, NC

A Place for Kids, New York, NY

Blytheville Fine Arts Council,

Blytheville, AR

Children’s AIDS Network, Inc.,

Portland, ME

Christian Fellowship Alive Ministries

Inc., Lakeland, FL

Class of 1967 Scholarship Fund, Jasper,

454–458 West 35th Street Housing

Development Fund Corporation, New

York, NY

Healthier People Network, Inc., Decatur,

Holland II House for the Homeless

Handicapped, Detroit, MI

Institute on Law Firm Management,

Ann Arbor, MI

Jaga Learning Center, Little Rock, AR

Metro Ministries of Miami Inc., Miami,

Northwest Corridor Community

Development Corporation, Charlotte,

Research Education and Analysis Center

for Toxics Foundation Inc., Texas

City, TX

Royal Terrace Inc., Jackson, MS

Silas Day Care Center Inc., Silas, AL

Sonrise Retreat, Inc., East Palatka, FL

32nd Precinct Community Council Inc.,

New York, NY

If an organization listed above submits information that warrants the renewal of its classification as a public

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

issue a ruling or determination letter

with the revised classification as to

foundation status. Grantors and contributors may thereafter rely upon such ruling or determination letter as provided

in section 1.509(a)–7 of the Income Tax

Regulations. It is not the practice of the

Service to announce such revised classification of foundation status in the Internal Revenue Bulletin.

1996–48

I.R.B.

Announcement of the Disbarment, Suspension, or Consent to Voluntary

Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and

Enrolled Actuaries From Practice Before the Internal Revenue Service

Under 31 Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid the

institution or conclusion of a proceeding

for his disbarment or suspension from

practice before the Internal Revenue Service, may offer his consent to suspension

from such practice. The Director of

Practice, in his discretion, may suspend

an attorney, certified public accountant,

enrolled agent, or enrolled actuary in

accordance with the consent offered.

Attorneys, certified public accountants, enrolled agents, and enrolled actuaries are prohibited in any Internal Rev-

enue Service matter from directly or

indirectly employing, accepting assistance from, being employed by or sharing fees with, any practitioner disbarred

or suspended from practice before the

Internal Revenue Service.

To enable attorneys, certified public

accountants, enrolled agents, and enrolled actuaries to identify practitioners

under consent suspension from practice

before the Internal Revenue Service, the

Director of Practice will announce in the

Internal Revenue Bulletin the names and

addresses of practitioners who have

been suspended from such practice, their

designation as attorney, certified public

accountant, enrolled agent, or enrolled

actuary, and date or period of suspension. This announcement will appear in

the weekly Bulletin at the earliest practicable date after such action and will

continue to appear in the weekly Bulletins for five successive weeks or for as

many weeks as is practicable for each

attorney, certified public accountant, enrolled agent, or enrolled actuary so

suspended and will be consolidated and

published in the Cumulative Bulletin.

The following individuals have been

placed under consent suspension from

practice before the Internal Revenue

Service:

Name

Address

Designation

Date of Suspension

Lamb, Gordon W.

Anderson, Randall S.

Broderick, William J.

Ruggiero, John M.

Eklund, Mark

Stayner, G. Craig

Allen, Lehman D.

Hardgrove, David L.

Trader, John H.

Schmertz, Carl D.

Bengston, Wessel

Pullman, WA

Arlington Hgts, IL

Farmington Hills, MI

Rutland, VT

Portland, OR

Salt Lake City, UT

Lubbock, TX

Amarillo, TX

Kansas City, MO

Wilmette, IL

Chicago, IL

CPA

Attorney

CPA

Attorney

CPA

September 1, 1996 to January 31, 1997

September 1, 1996 to February 28, 1998

September 1, 1996 to November 30, 1996

September 1, 1996 to October 31, 1996

September 1, 1996 to February 28, 1997

September 15, 1996 to June 14, 1997

September 20, 1996 to September 19, 1998

September 21, 1996 to June 20, 1997

September 30, 1996 to March 29, 1997

October 1, 1996 to March 31, 1999

October 15, 1996 to April 14, 1997

Announcement of the Expedited Suspension of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Before The

Internal Revenue Service

Under title 31 of the Code of Federal

Regulations, section 10.76, the Director

of Practice is authorized to immediately

suspend from practice before the Internal

Revenue Service any practitioner who,

within five years, from the date the

expedited proceeding is instituted, (1)

has had a license to practice as an

attorney, certified public accountant, or

actuary suspended or revoked for cause;

or (2) has been convicted of any crime

under title 26 of the United States Code

or, of a felony under title 18 of the

United States Code involving dishonesty

or breach of trust.

Attorneys, certified public accountants, enrolled agents, and enrolled actu-

aries are prohibited in any Internal Revenue Service matter from directly or

indirectly employing, accepting assistance from, being employed by, or sharing fees with, any practitioner disbarred

or suspended from practice before the

Internal Revenue Service.

To enable attorneys, certified public

accountants, enrolled agents, and enrolled actuaries to identify practitioners

under expedited suspension from practice before the Internal Revenue Service,

the Director of Practice will announce in

the Internal Revenue Bulletin the names

and addresses of practitioners who have

been suspended from such practice, their

designation as attorney, certified public

accountant, enrolled agent, or enrolled

actuary, and date or period of suspension. This announcement will appear in

the weekly Bulletin at the earliest practicable date after such action and will

continue to appear in the weekly Bulletins for five successive weeks or for as

many weeks as is practicable for each

attorney, certified public accountant, enrolled agent, or enrolled actuary so

suspended and will be consolidated and

published in the Cumulative Bulletin.

The following individuals have been

placed under suspension from practice

before the Internal Revenue Service by

virtue of the expedited proceeding provisions of the applicable regulations:

Name

Address

Designation

Date of Suspension

Alleva, Donald

Rose, Robert M.

McGrath, Gregory

Finch, Kenneth L. Jr.

Mount Vernon, NY

Dallas, TX

New Smyrna Bch, FL

Pelham, AL

Enrolled Agent

Attorney

CPA

Indefinite from September 5, 1996

Indefinite from September 8, 1996

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.

PHC—Personal Holding Company.

PO—Possession of the U.S.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

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.

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.

M—Minor.

U.S.C.—United States Code.

Nonacq.—Nonacquiescence.

X—Corporation.

O—Organization.

Y—Corporation.

P—Parent 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.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Numerical Finding List1

Court Decisions:

Revenue Procedures—Continued

Bulletins 1996–27 through 1996–47

2058, 1996–34 I.R.B. 13

2059, 1996–34 I.R.B. 10

2060, 1996–34 I.R.B. 5

96–37, 1996–29 I.R.B. 16

96–39, 1996–33 I.R.B. 11

96–40, 1996–32 I.R.B. 8

96–41, 1996–32 I.R.B. 9

96–42, 1996–32 I.R.B. 14

96–43, 1996–35 I.R.B. 6

96–44, 1996–35 I.R.B. 7

96–45, 1996–35 I.R.B. 12

96–46, 1996–38 I.R.B. 144

96–47, 1996–39 I.R.B. 10

96–48, 1996–39 I.R.B. 10

96–49, 1996–43 I.R.B. 74

96–50, 1996–47 I.R.B. 10

96–51, 1996–47 I.R.B. 10

Announcements:

96–61, 1996–27 I.R.B. 72

96–62, 1996–28 I.R.B. 55

96–63, 1996–29 I.R.B. 18

96–64, 1996–29 I.R.B. 18

96–65, 1996–29 I.R.B. 18

96–66, 1996–29 I.R.B. 19

96–67, 1996–30 I.R.B. 27

96–68, 1996–31 I.R.B. 45

96–69, 1996–32 I.R.B. 38

96–70, 1996–32 I.R.B. 40

96–71, 1996–33 I.R.B. 16

96–72, 1996–33 I.R.B. 16

96–73, 1996–33 I.R.B. 18

96–74, 1996–33 I.R.B. 19

96–75, 1996–34 I.R.B. 29

96–76, 1996–34 I.R.B. 29

96–77, 1996–35 I.R.B. 15

96–78, 1996–35 I.R.B. 15

96–79, 1996–35 I.R.B. 15

96–80, 1996–35 I.R.B. 16

96–81, 1996–36 I.R.B. 13

96–82, 1996–36 I.R.B. 14

96–83, 1996–36 I.R.B. 14

96–84, 1996–36 I.R.B. 14

96–85, 1996–37 I.R.B. 20

96–86, 1996–37 I.R.B. 21

96–87, 1996–37 I.R.B. 21

96–88, 1996–38 I.R.B. 150

96–89, 1996–37 I.R.B. 22

96–90, 1996–37 I.R.B. 22

96–91, 1996–37 I.R.B. 23

96–92, 1996–38 I.R.B. 151

96–93, 1996–38 I.R.B. 151

96–94, 1996–38 I.R.B. 153

96–96, 1996–39 I.R.B. 41

96–97, 1996–39 I.R.B. 41

96–98, 1996–39 I.R.B. 42

96–99, 1996–39 I.R.B. 42

96–100, 1996–40 I.R.B. 10

96–101, 1996–40 I.R.B. 10

96–102, 1996–40 I.R.B. 11

96–103, 1996–40 I.R.B. 12

96–104, 1996–41 I.R.B. 10

96–105, 1996–42 I.R.B. 19

96–106, 1996–42 I.R.B. 23

96–107, 1996–42 I.R.B. 27

96–108, 1996–44 I.R.B. 15

96–109, 1996–43 I.R.B. 76

96–110, 1996–43 I.R.B. 77

96–111, 1996–44 I.R.B. 16

96–112, 1996–45 I.R.B. 7

96–113, 1996–44 I.R.B. 18

96–114, 1996–45 I.R.B. 7

96–115, 1996–45 I.R.B. 9

96–116, 1996–46 I.R.B. 12

96–117, 1996–46 I.R.B. 12

96–118, 1996–46 I.R.B. 12

96–119, 1996–46 I.R.B. 13

96–120, 1996–47 I.R.B. 12

96–121, 1996–47 I.R.B. 12

96–122, 1996–47 I.R.B. 13

Delegation Orders:

155 (Rev. 4), 1996–40 I.R.B. 9

Notices:

96–36, 1996–27 I.R.B. 11

96–37, 1996–31 I.R.B. 29

96–38, 1996–31 I.R.B. 29

96–39, 1996–32 I.R.B. 8

96–40, 1996–33 I.R.B. 11

96–41, 1996–35 I.R.B. 6

96–42, 1996–35 I.R.B. 6

96–43, 1996–36 I.R.B. 7

96–44, 1996–36 I.R.B. 7

96–45, 1996–39 I.R.B. 7

96–46, 1996–39 I.R.B. 7

96–47, 1996–39 I.R.B. 8

96–48, 1996–39 I.R.B. 8

96–49, 1996–41 I.R.B. 6

96–50, 1996–41 I.R.B. 6

96–51, 1996–42 I.R.B. 6

96–52, 1996–42 I.R.B. 8

96–54, 1996–44 I.R.B. 13

96–55, 1996–47 I.R.B. 7

96–56, 1996–47 I.R.B. 7

96–57, 1996–47 I.R.B. 9

Proposed Regulations:

CO–9–96, 1996–34 I.R.B. 20

CO–24–96, 1996–30 I.R.B. 22

CO–25–96, 1996–31 I.R.B. 30

CO–26–96, 1996–31 I.R.B. 31

FI–59–94, 1996–30 I.R.B. 23

FI–32–95, 1996–34 I.R.B. 21

FI–48–95, 1996–31 I.R.B. 36

FI–28–96, 1996–31, I.R.B. 33

GL–7–96, 1996–33 I.R.B. 13

IA–292–84, 1996–28 I.R.B. 38

IA–26–94, 1996–30 I.R.B. 24

IA–29–96, 1996–33 I.R.B. 14

INTL–4–95, 1996–36 I.R.B. 8

PS–39–93, 1996–34 I.R.B. 27

PS–22–96, 1996–33 I.R.B. 15

REG–208215–91, 1996–38 I.R.B. 145

REG–209803–95, 1996–44 I.R.B. 14

REG–209826–96, 1996–42 I.R.B. 10

REG–209827–96, 1996–37 I.R.B. 19

REG–245562–96, 1996–41 I.R.B. 8

Public Laws:

104–117, 1996–34 I.R.B. 19

104–134, 1996–38 I.R.B. 7

104–168, 1996–38 I.R.B. 8

104–191, 1996–43 I.R.B. 7

104–193, 1996–46 I.R.B. 4

Railroad Retirement Quarterly Rate

1996–29 I.R.B. 14

Revenue Procedures:

96–36, 1996–27 I.R.B. 11

A cumulative list of all Revenue Rulings, Revenue Procedures, Treasury Decisions, etc., published in Internal Revenue Bulletins 1996–1

through 1996–26 will be found in Internal Revenue Bulletin 1996–27, dated July 1, 1996.

Revenue Rulings:

96–33, 1996–27 I.R.B. 4

96–34, 1996–28 I.R.B. 4

96–35, 1996–31 I.R.B. 4

96–36, 1996–30 I.R.B. 6

96–37, 1996–32 I.R.B. 4

96–38, 1996–33 I.R.B. 4

96–39, 1996–34 I.R.B. 4

96–41, 1996–45 I.R.B. 4

96–42, 1996–35 I.R.B. 4

96–43, 1996–36 I.R.B. 4

96–44, 1996–38 I.R.B. 4

96–45, 1996–39 I.R.B. 5

96–46, 1996–39 I.R.B. 5

96–47, 1996–40 I.R.B. 7

96–48, 1996–40 I.R.B. 4

96–49, 1996–41 I.R.B. 4

96–50, 1996–42 I.R.B. 4

96–51, 1996–43 I.R.B. 5

96–52, 1996–45 I.R.B. 5

96–53, 1996–47 I.R.B. 4

96–54. 1996–47 I.R.B. 5

Tax Conventions:

1996–28 I.R.B. 36

1996–36 I.R.B. 6

1996–40 I.R.B. 8

Treasury Decisions:

8673, 1996–27 I.R.B. 4

8674, 1996–28 I.R.B. 7

8675, 1996–29 I.R.B. 5

8676, 1996–30 I.R.B. 4

8677, 1996–30 I.R.B. 7

8678, 1996–31 I.R.B. 11

8679, 1996–31 I.R.B. 4

8680, 1996–33 I.R.B. 5

8681, 1996–37 I.R.B. 17

8682, 1996–37 I.R.B. 4

8683, 1996–44 I.R.B. 9

8684, 1996–44 I.R.B. 4

Finding List of Current Action on

Previously Published Items1

Bulletins 1996–27 through 1996–47

*Denotes entry since last publication

Revenue Procedures:

80–27

Modified by

96–40, 1996–32 I.R.B. 8

87–32

Modified by

TD 8680, 1996–33 I.R.B. 5

92–20

Modified by

TD 8680, 1996–33 I.R.B. 5

95–16

Superseded by

96–48, 1996–39 I.R.B. 10

95–29

Superseded by

96–36, 1996–27 I.R.B. 11

95–29A

Superseded by

96–36, 1996–27 I.R.B. 11

95–30

Superseded by

96–42, 1996–32 I.R.B. 14

95–46

Superseded by

96–48, 1996–39 I.R.B. 10

96–41

Modified by

Notice 96–49, 1996–41 I.R.B. 6

96–46

Supplemented by

96–51, 1996–47 I.R.B. 10

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1996–1 through 1996–26 will be found in Internal

Revenue Bulletin 1996–27, dated July 1, 1996.

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