Bulletin No. 2026–12

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2026–12

March 16, 2026

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.

EMPLOYMENT TAX

Rev. Proc. 2026-11, page 707.

General Rules and Specifications for Substitute Form 941,

Schedule B (Form 941), Schedule D (Form 941), Schedule R

(Form 941), and Form 8974.

This revenue procedure provides general rules and specifications from the IRS for paper and computer-generated

substitutes for Form 941; Schedule B (Form 941); Schedule

D (Form 941); Schedule R (Form 941); and Form 8974. This

revenue procedure supersedes Revenue Procedure 202411, 2024-13 I.R.B. 721.

INCOME TAX

Notice 2026-17, page 698.

Notice 2026-17 announces the Department of Treasury and

the IRS’s intent to issue proposed regulations under section

Finding Lists begin on page ii.

987 regarding the determination of taxable income or loss

and foreign currency gain or loss with respect to a qualified

business unit. Specifically, Notice 2026-17 announces forthcoming proposed regulations that would permit taxpayers

to elect the equity and basis pool method for the computation of unrecognized section 987 gain or loss, in addition to

announcing other simplifying rules related to the final section

987 regulations published in December 2024. Notice 202617 further announces forthcoming proposed regulations that

would provide an election under which controlled foreign corporations would not compute or recognize foreign currency

gain or loss under section 987(3), except in connection with

certain inbound transactions. Publication is anticipated to

occur on March 16, 2026.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

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

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

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

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

modify, or amend any of those previously published in the

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

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

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

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

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

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

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

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

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

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

Secretary (Enforcement).

Part IV.—Items of General Interest.

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

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

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

March 16, 2026 

Bulletin No. 2026–12

Part III

Modifications to Rules for

Computing Taxable Income

or Loss and Foreign

Currency Gain or Loss

Under Section 987

described more fully in future guidance.

The Treasury Department and the IRS

also intend to issue additional guidance

relating to the treatment of frequently

recurring disregarded transactions and net

investment hedges for purposes of section

987.

Notice 2026-17

SECTION 2. BACKGROUND

SECTION 1. PURPOSE

This notice announces that the Department of the Treasury (Treasury Department) and the Internal Revenue Service

(IRS) intend to issue proposed regulations

(forthcoming proposed regulations) under

section 987. The Treasury Department

and IRS expect the forthcoming proposed

regulations to include proposed rules that

are consistent with the rules described in

sections 3 through 5 of this notice. These

rules are intended to simplify the operation of the regulations under section 987,

reduce compliance burdens, and refine the

scope of certain rules under section 987 to

limit their effect on ordinary course transactions.

In particular, the rules described in section 3 of this notice would permit taxpayers to determine taxable income or loss

and foreign currency gain or loss with

respect to a qualified business unit (QBU)

using a method that is substantially similar to the method provided in regulations

proposed in 1991. In addition, the rules

described in section 4 of this notice would

(i) narrow the scope of the loss suspension

rules; (ii) simplify the loss-to-the-extentof-gain rule under which suspended section 987 loss is recognized; (iii) clarify

the definition of a successor for purposes

of the deferral rules; and (iv) expand the

definition of a section 987 hedging transaction.

Additionally, the rules described in

section 5 of this notice would provide an

election under which controlled foreign

corporations (within the meaning of section 957(a)) (CFCs) would not compute

or recognize foreign currency gain or loss

under section 987(3), except in connection with certain inbound transactions.

The rules relating to this election will be

March 16, 2026

.01 Section 987.

Section 987 generally applies to taxpayers that own a QBU with a functional

currency other than the functional currency of the QBU’s owner (section 987

QBU). Section 987(1) and (2) provide

rules for determining and translating taxable income or loss with respect to a section 987 QBU (section 987 taxable income

or loss). In addition, under section 987(3),

taxpayers must make proper adjustments

(as prescribed by the Secretary) for transfers of property between QBUs of the

taxpayer having different functional currencies.

Under section 987(3), the owner of a

section 987 QBU recognizes foreign currency gain or loss (section 987 gain or

loss) when the section 987 QBU makes a

remittance. Section 989(c) provides that

the Secretary shall prescribe such regulations as may be necessary or appropriate

to carry out the purposes of subpart J of

subchapter N of Chapter 1 of Subtitle A

of the Code (which includes section 987),

including regulations limiting the recognition of foreign currency loss on certain

remittances from QBUs.

.02 The 1991 proposed regulations.

On September 25, 1991, the Treasury

Department and the IRS published proposed regulations under section 987 in

the Federal Register (56 FR 48457) (1991

proposed regulations). Under the 1991

proposed regulations, section 987 taxable

income or loss would generally be translated into the taxpayer’s functional currency at the average exchange rate for the

taxable year. See § 1.987-1(b) of the 1991

proposed regulations. Taxpayers would

determine section 987 gain or loss by

maintaining an equity pool in the QBU’s

functional currency and a basis pool in the

taxpayer’s functional currency. The equity

698

and basis pools would be adjusted for taxable income or loss of the QBU as well

as for contributions and remittances. See

§ 1.987-2(c) of the 1991 proposed regulations.

The 1991 proposed regulations used a

daily netting convention to determine the

amount of a remittance. See § 1.987-2(b)

(2)(i) and (b)(4) of the 1991 proposed

regulations. Thus, the remittance amount

would be separately computed on each

day of the taxable year in which the QBU

made a net transfer to the taxpayer. Upon

each remittance, the taxpayer would recognize section 987 gain or loss equal to

the difference between the value of the

remittance in the taxpayer’s functional

currency (translated at the spot rate on the

date of the remittance) and the portion of

the basis pool attributable to the remittance. See § 1.987-2(d)(1) of the 1991

proposed regulations.

.03 The 2006 proposed regulations and

the 2016 final regulations.

On September 7, 2006, the Treasury

Department and the IRS withdrew the

1991 proposed regulations and published

new proposed regulations (2006 proposed

regulations) in the Federal Register (71

FR 52876). The 2006 proposed regulations were finalized, with modifications

(2016 final regulations), on December 8,

2016 (TD 9794, 81 FR 88806).

.04 The 2024 final regulations.

(1) Overview. On November 14, 2023,

the Treasury Department and the IRS

published proposed regulations (REG132422-17) under sections 861, 985, 987,

988, 989, and 1502 (2023 proposed regulations) in the Federal Register (88 FR

78134). The 2023 proposed regulations

proposed to modify the 2016 final regulations. On December 11, 2024, the Treasury Department and the IRS published

Treasury Decision 10016 in the Federal

Register (89 FR 100138), which finalized

the 2023 proposed regulations, with modifications (2024 final regulations). The

2024 final regulations generally apply to

taxable years beginning after December

31, 2024, but taxpayers can choose to

apply the 2024 final regulations to earlier taxable years ending after November

9, 2023. See § 1.987-15. The 2024 final

Bulletin No. 2026–12

regulations are applicable to individuals,

domestic corporations, and foreign corporations that are CFCs. Only certain provisions of the 2024 final regulations are

applicable to partnerships and S corporations. See § 1.987-7.

(2) Section 987 taxable income or loss

and section 987 gain or loss. The 2024

final regulations provide rules for determining section 987 taxable income or loss

and section 987 gain or loss recognized

with respect to a section 987 QBU. Under

§ 1.987-3, the owner of a section 987 QBU

must determine each item of income, gain,

deduction, or loss attributable to the section 987 QBU in the section 987 QBU’s

functional currency under Federal income

tax principles and then translate these

items into the owner’s functional currency

at the appropriate exchange rate. Under

§ 1.987-4, the owner of a section 987 QBU

must determine its net unrecognized section 987 gain or loss with respect to a section 987 QBU for each taxable year. The

net unrecognized section 987 gain or loss

for a taxable year is equal to the sum of (i)

the net accumulated unrecognized section

987 gain or loss for all prior taxable years

and (ii) the unrecognized section 987 gain

or loss for the current taxable year, computed under the ten-step method provided

in § 1.987-4(d). Under § 1.987-5, in the

taxable year of a remittance, the owner

recognizes a portion of the net unrecognized section 987 gain or loss computed

under § 1.987-4.

(3) Current rate election. Under the

default methodology of the 2024 final

regulations, certain items of a section 987

QBU (historic items) must be translated

using historic exchange rates for purposes

of computing section 987 taxable income

or loss and net unrecognized section 987

gain or loss. See § 1.987-1(c)(3) and (e).

However, the 2024 final regulations provide an election (current rate election or

CRE) under which all items of a section

987 QBU are translated at the current spot

rate or yearly average exchange rate. See

§ 1.987-1(d)(2).

In general, in a taxable year in which a

current rate election is in effect, any section

987 loss that would otherwise be recognized as a result of a remittance is treated

as suspended section 987 loss (CRE loss

suspension rule). See § 1.987-11(c)(1). A

similar rule applies to partnerships and

Bulletin No. 2026–12

S corporations under § 1.987-7(d)(1)(ii)

(partnership loss suspension rule). However, under a de minimis exception, these

loss suspension rules do not apply in a taxable year in which the amount of section

987 loss that would otherwise be recognized is less than the lesser of (i) $3 million; or (ii) 2 percent of gross income. See

§ 1.987-11(c)(2). The de minimis exception is applied collectively to all members

of the same controlled group.

(4) Recognition of suspended section

987 loss. Suspended section 987 loss is

recognized by the owner of a section 987

QBU only to the extent that the owner recognizes section 987 gain in the same taxable year or during a three-year lookback

period (loss-to-the-extent-of-gain rule).

See § 1.987-11(e). The loss-to-the-extentof-gain rule is applied separately to the

section 987 gain and suspended section

987 loss in each recognition grouping. See

§ 1.987-11(e)(2). Thus, suspended section

987 loss is not recognized until section

987 gain in the same recognition grouping

has been recognized.

(5) Recognition groupings. In general, suspended section 987 loss and section 987 gain are in the same recognition

grouping if they have the same source and,

in the case of foreign source income, are

assigned to the same section 904 category.

See § 1.987-11(f)(1). If the owner of a section 987 QBU is a CFC, the recognition

groupings are further divided between

the following subcategories: (i) tentative

tested income; (ii) each separate subpart

F income group; (iii) income effectively

connected with a U.S. trade or business

(ECI) described in section 952(b); and (iv)

other income. See § 1.987-11(f)(2).

(6) Section 987 hedging transactions.

An owner’s unrecognized section 987

gain or loss with respect to a section 987

QBU is adjusted by the amount of the

owner’s hedging gain or loss attributable

to a section 987 hedging transaction. See

§ 1.987-14. A section 987 hedging transaction is defined under § 1.987-14(b) as a

net investment hedge with respect to a section 987 QBU for which certain requirements are met. In particular, in order to

qualify as a section 987 hedging transaction, the hedge must be timely identified

under § 1.987-14(c), and foreign currency

gain or loss on the hedge must be properly

accounted for under generally accepted

699

accounting principles (GAAP) as a cumulative foreign currency translation adjustment to shareholders’ equity (the GAAP

hedging requirement). See § 1.987-14(b)

(2)(i) and (iv).

(7) Termination and deferral rules.

In a taxable year in which a section 987

QBU terminates, the section 987 QBU

is treated as though it remitted all of its

gross assets to its owner, which generally

results in the recognition of section 987

gain or loss. See § 1.987-8(e). However,

section 987 gain or loss that would otherwise be recognized upon a termination

may be deferred under § 1.987-12 if the

termination is attributable to a transaction

in which the assets of the terminated section 987 QBU are transferred to another

section 987 QBU (successor deferral

QBU) that is owned by a member of the

same controlled group. Deferred gain or

loss generally is recognized when the successor deferral QBU makes a remittance

to its owner. See § 1.987-12(c). A termination also may cause suspended section

987 loss to be recognized or attributed

to a successor suspended loss QBU. See

§ 1.987-13.

(8) Transition rules. The 2024 final regulations contain transition rules, including

rules for determining and recognizing section 987 gain or loss that arose before the

applicability date of the 2024 final regulations (pretransition gain or loss). See

§ 1.987-10. Taxpayers can elect to recognize pretransition gain or loss ratably over

a transition period of 120 months. See

§ 1.987-10(e)(5)(ii)(A) and Notice 202572, 2025-51 I.R.B. 840.

.05 The 2024 proposed regulations.

Concurrently with the publication

of the 2024 final regulations, the Treasury Department and the IRS published

a notice of proposed rulemaking (REG117213-24) under section 987 addressing the treatment of frequently recurring

disregarded transactions (2024 proposed

regulations) in the Federal Register (89

FR 99782). The Treasury Department and

the IRS are working to develop final regulations providing for the recurring transfer

group election, taking into account comments received in response to the 2024

proposed regulations. The preamble to the

2024 proposed regulations stated that the

Treasury Department and the IRS were

exploring the possibility of modifying the

March 16, 2026

2024 final regulations to provide that section 987(3) does not apply to CFCs and

requested comments on this issue.

SECTION 3. PROPOSED

REGULATIONS TO BE ISSUED

PROVIDING AN ELECTION TO USE

THE EQUITY AND BASIS POOL

METHOD

.01 In general.

Following the publication of the 2024

final regulations, the Treasury Department

and the IRS received comments recommending that taxpayers be permitted to

apply section 987 using the methodology

set forth in the 1991 proposed regulations.

The comments explained that this would

reduce the compliance burden on taxpayers because the 1991 proposed regulations

provided a simpler framework with which

many taxpayers are already familiar.

In response to these comments, the

forthcoming proposed regulations are

expected to include rules consistent

with the rules described in this section

3, which would provide an election to

use the equity and basis pool method to

determine section 987 gain or loss and

section 987 taxable income or loss. Like

the 1991 proposed regulations, the equity

and basis pool method would utilize an

equity pool and a basis pool to track section 987 gain or loss. However, unlike

the daily netting convention provided in

the 1991 proposed regulations, the equity

and basis pool method would provide for

a single annual computation of the net

remittance from a section 987 QBU to

its owner. This approach is intended to

reduce the compliance and administrative burden of tracking daily remittances.

Taxpayers that elect to use the equity and

basis pool method also would translate

section 987 taxable income or loss at the

yearly average exchange rate, in a manner similar to the rules of the 1991 proposed regulations.

The election to use the equity and basis

pool method would be provided in lieu of

the rules for calculating QBU net value

under the alternative method provided in

§ 1.987-4(e)(2)(iii).

.02 Proposed election to use the equity

and basis pool method.

(1) In general. Taxpayers may elect

to use the equity and basis pool method,

March 16, 2026

as described in this section 3. The equity

and basis pool method may be used only

in a taxable year for which a current rate

election is in effect. In the case of a QBU

described in § 1.987-7(c)(1) (that is, a

QBU that is owned by or through a partnership or S corporation, or a partnership

that is itself treated as a QBU subject to

section 987), the rules of this section 3

do not apply. However, a method that is

consistent with these rules (or a similar

method, such as the method described in

the 1991 proposed regulations) is treated

as a reasonable method of applying section 987 that meets the requirements of

§ 1.987-7(b).

(2) Election requirements. An election

to use the equity and basis pool method

is a section 987 election subject to the

requirements of § 1.987-1(g), including

the requirement to file an election statement under § 1.987-1(g)(3)(i). The authorized person makes this election by attaching the election statement to its original,

timely filed (including extensions) return

for the taxable year for which the election

is made, without obtaining the consent of

the Commissioner under § 1.987-1(g)(3)

(ii)(A).

(3) Applicability of the 2024 final regulations. If an election to use the equity and

basis pool method is in effect—

(a) The rules of this section 3 apply in

place of the rules provided in §§ 1.987-3

through 1.987-5, except as otherwise provided in this section 3; and

(b) The other rules of the 2024 final

regulations apply (and the 2024 proposed

regulations can be relied on to the extent

provided in the preamble to the 2024 proposed regulations), except as otherwise

provided in this section 3 or in section 4

of this notice.

(4) Definitions. Except as otherwise

provided, terms used in this section 3

have the meaning provided in §§ 1.987-1

through 1.987-15.

.03 Proposed calculation of section

987 taxable income or loss.

(1) In general. If an election to use

the equity and basis pool method is in

effect, the owner of a section 987 QBU

must determine its section 987 taxable

income or loss by computing each item

of income, gain, deduction or loss attributable to the section 987 QBU in the section 987 QBU’s functional currency. The

700

net amount of section 987 taxable income

or loss for a taxable year is translated into

the owner’s functional currency at the

yearly average exchange rate. However,

the owner must make the adjustments

described in § 1.987-3(c)(2)(v) (relating

to foreign income taxes attributable to a

section 987 QBU), if applicable.

(2) Section 988 mark-to-market

method of accounting. A taxpayer may

elect to apply the section 988 mark-tomarket method of accounting described

in § 1.987-3(b)(4)(ii) for a taxable year

in which an election to use the equity and

basis pool method is in effect.

.04 Proposed computation of net unrecognized section 987 gain or loss.

(1) In general. For a taxable year of an

owner of a section 987 QBU in which an

election to use the equity and basis pool

method is in effect, net unrecognized section 987 gain or loss with respect to the

section 987 QBU is equal to—

(a) The equity pool on the last day of

the taxable year, translated into the owner’s functional currency at the spot rate on

the last day of the taxable year; minus

(b) The basis pool on the last day of the

taxable year.

(2) Taxable year in which a section 987

QBU is terminated. In a taxable year in

which a section 987 QBU is terminated,

the termination date is treated as the last

day of the taxable year for purposes of this

section 3.

(3) Section 987 hedging transactions. If the owner of a section 987 QBU

has entered into a section 987 hedging

transaction in a taxable year in which an

election to use the equity and basis pool

method is in effect, the net unrecognized

section 987 gain or loss determined under

section 3.04(1) of this notice is adjusted

by the amount of the adjustment to unrecognized section 987 gain or loss for the

taxable year described in § 1.987-14(d)

(2). For purposes of applying § 1.98714(d)(2), unrecognized section 987 gain

or loss with respect to a section 987 QBU

for a taxable year is equal to—

(a) Net unrecognized section 987 gain

or loss (determined without regard to

§ 1.987-14) for the current taxable year;

minus

(b) Net unrecognized section 987 gain

or loss for the preceding taxable year, net

of section 987 gain or loss that was recog-

Bulletin No. 2026–12

nized or suspended in the preceding taxable year.

.05 Equity pool.

(1) In general. The equity pool is maintained in the functional currency of the

section 987 QBU.

(2) Opening balance of the equity pool.

In the first taxable year of a section 987

QBU, the opening balance of the equity

pool is zero. See sections 3.08 and 3.09 of

this notice for rules relating to the determination of the opening balance of the

equity pool in the taxable year beginning

on the transition date or the first taxable

year in which an election to use the equity

and basis pool method is in effect.

(3) Increases to the equity pool. In

a taxable year of the owner of a section

987 QBU, the equity pool is increased

by the following amounts, determined in

the functional currency of the section 987

QBU:

(a) The amount of each item of income

and gain (including tax-exempt income

described in § 1.987-4(d)(8)) attributable

to the section 987 QBU for the taxable

year, other than items of income or gain

described in § 1.987-4(d)(9).

(b) The amount of each transfer from

the owner to the section 987 QBU during

the taxable year, determined under section

3.07 of this notice.

(4) Decreases to the equity pool. In

a taxable year of the owner of a section

987 QBU, the equity pool is decreased

by the following amounts, determined in

the functional currency of the section 987

QBU:

(a) The amount of each item of deduction or loss (including non-deductible

expenses described in § 1.987-4(d)(7))

attributable to the section 987 QBU for the

taxable year, other than items of deduction

or loss described in § 1.987-4(d)(9).

(b) The amount of each transfer from

the section 987 QBU to the owner during

the taxable year, determined under section

3.07 of this notice.

.06 Basis pool.

(1) In general. The basis pool is maintained in the functional currency of the

owner.

(2) Opening balance of the basis pool.

In the first taxable year of a section 987

QBU, the opening balance of the basis

pool is zero. See sections 3.08 and 3.09

for rules relating to the determination of

Bulletin No. 2026–12

the opening balance of the basis pool in

the taxable year beginning on the transition date or the first taxable year in which

an election to use the equity and basis pool

method is in effect.

(3) Increases to the basis pool. In a

taxable year of the owner of a section

987 QBU, the basis pool is increased by

the following amounts, determined in the

functional currency of the owner:

(a) The amount of each item of income

and gain (including tax-exempt income

described in § 1.987-4(d)(8)) attributable

to the section 987 QBU for the taxable

year, other than items of income or gain

described in § 1.987-4(d)(9). For this

purpose, items of income or gain are

translated into the owner’s functional

currency at the yearly average exchange

rate.

(b) The amount of each transfer from

the owner to the section 987 QBU, determined under section 3.07 of this notice.

(c) The amount of section 987 gain

that was recognized under section 3.10

of this notice in the previous taxable year.

An adjustment is made under this section

3.06(3)(c) only if an election to use the

equity and basis pool method was in effect

in the previous taxable year.

(4) Decreases to the basis pool. In

a taxable year of the owner of a section

987 QBU, the basis pool is decreased by

the following amounts, determined in the

functional currency of the owner:

(a) The amount of each item of deduction or loss (including non-deductible

expenses described in § 1.987-4(d)(7))

attributable to the section 987 QBU for the

taxable year, other than items of deduction

or loss described in § 1.987-4(d)(9). For

this purpose, items of deduction or loss

are translated into the owner’s functional

currency at the yearly average exchange

rate.

(b) The amount of each transfer from

the section 987 QBU to its owner, determined under section 3.07 of this notice.

(c) The amount of section 987 loss that

was recognized under section 3.10 of this

notice or was suspended in the previous

taxable year. An adjustment is made under

this section 3.06(4)(c) only if an election

to use the equity and basis pool method

was in effect in the previous taxable year.

.07 Determination of transferred

amounts.

701

(1) Assets. In the case of a transfer of an

asset, the amount of the transfer is equal to

the amount of functional currency transferred or the adjusted basis of other property transferred (determined immediately

before the transfer and adjusted for any

gain or loss recognized under § 1.988-1(a)

(10)). The amount of the transfer is translated (if necessary) at the spot rate applicable on the date of the transfer.

(2) Liabilities. The transfer of a liability from an owner to its section 987 QBU

is treated as a transfer of an asset from

the section 987 QBU to its owner with an

adjusted basis equal to the amount of the

liability (determined immediately before

the transfer and adjusted for any gain or

loss recognized under § 1.988-1(a)(10)).

The transfer of a liability from a section

987 QBU to its owner is treated as a

transfer of an asset from the owner to the

section 987 QBU with an adjusted basis

equal to the amount of the liability (determined immediately before the transfer and

adjusted for any gain or loss recognized

under § 1.988-1(a)(10)). In each case, the

amount of the transfer is translated (if necessary) at the spot rate applicable on the

date of the transfer. This section 3.07(2)

applies solely for purposes of this section

3.

(3) Determination of the basis of transferred assets and the amount of transferred

liabilities in the hands of the transferee.

The basis of an asset or the amount of a

liability that is transferred from an owner

to its section 987 QBU is translated (after

taking into account any gain or loss recognized under § 1.988-1(a)(10)) into the

section 987 QBU’s functional currency

at the spot rate applicable on the date of

the transfer. The basis of an asset or the

amount of a liability that is transferred

from a section 987 QBU to its owner is

translated (after taking into account any

gain or loss recognized under § 1.988-1(a)

(10)) into the owner’s functional currency

at the spot rate applicable on the date of

the transfer.

(4) Transfers, including disregarded

transactions. For purposes of applying the

equity and basis pool method described

in this section 3, the rules of § 1.987-2

apply in determining whether a transfer

is made between a section 987 QBU and

its owner, including the rules relating to

transfers made in connection with disre-

March 16, 2026

garded transactions. If a recurring transfer

group election is in effect under proposed

§ 1.987-2(f), recurring transfers between a

section 987 QBU and its owner are translated under the rules of proposed § 1.9872(f)(4). However, proposed § 1.987-2(f)

(5) (under which certain transfers are disregarded for purposes of determining net

unrecognized section 987 gain or loss)

does not apply if an election to use the

equity and basis pool method is in effect.

.08 Opening balance of the equity and

basis pools in the taxable year beginning

on the transition date.

(1) Transition rules. In the taxable year

beginning on the transition date, the owner

of a section 987 QBU must compute pretransition gain or loss under § 1.987-10.

For purposes of this section 3, the term

transition date means the transition date

described in § 1.987-10(c)(1).

(2) Equity pool. In the taxable year

beginning on the transition date, the opening balance of the equity pool equals the

aggregate adjusted basis of the section

987 QBU’s assets on the day before the

transition date, less the aggregate amount

of the section 987 QBU’s liabilities on the

day before the transition date, determined

in the section 987 QBU’s functional currency. Alternatively, the owner of a section 987 QBU may determine the opening

balance of the equity pool by making the

adjustments described in section 3.05 of

this notice for all taxable years beginning

with the first taxable year in which the

section 987 QBU existed.

(3) Basis pool. In the taxable year

beginning on the transition date, the

opening balance of the basis pool equals

the opening balance of the equity pool,

translated into the owner’s functional currency at the spot rate on the day before

the transition date, reduced by the amount

of any pretransition gain that is treated

as net accumulated unrecognized section

987 gain with respect to the section 987

QBU, or increased by the amount of any

pretransition loss that is treated as net

accumulated unrecognized section 987

loss with respect to the section 987 QBU

under § 1.987-10(e)(5)(i). Thus, no adjustment is made for pretransition gain or loss

under this section 3.08(3) if a taxpayer

elects to recognize pretransition gain or

loss ratably over the transition period

under § 1.987-10(e)(5)(ii). In the case of

March 16, 2026

a section 987 QBU described in § 1.98710(f)(1), the opening balance of the basis

pool is determined under section 3.09(2)

of this notice.

.09 Opening balance of the equity and

basis pools in the first taxable year in

which an election to use the equity and

basis pool method is in effect.

(1) Equity pool. Except as provided in

section 3.08 of this notice with respect to

the taxable year beginning on the transition date, in the first taxable year in which

an election to use the equity and basis pool

method is in effect, the opening balance

of the equity pool equals the aggregate

adjusted basis of the section 987 QBU’s

assets on the last day of the preceding taxable year, less the aggregate amount of the

section 987 QBU’s liabilities on the last

day of the preceding taxable year, determined in the section 987 QBU’s functional currency.

(2) Basis pool. Except as provided in

section 3.08 of this notice with respect to

the taxable year beginning on the transition date, in the first taxable year in which

an election to use the equity and basis pool

method is in effect, the opening balance of

the basis pool equals the owner functional

currency net value of the section 987 QBU

on the last day of the preceding taxable

year (as determined under § 1.987-4(e)

based on the elections in effect in the preceding taxable year), adjusted as follows-(a) The basis pool is reduced by the

amount of net accumulated unrecognized

section 987 gain for all prior taxable years,

as determined under § 1.987-4(c) for the

first taxable year in which the election to

use the equity and basis pool method is in

effect; or

(b) The basis pool is increased by the

amount of net accumulated unrecognized

section 987 loss for all prior taxable years,

as determined under § 1.987-4(c) for the

first taxable year in which the election to

use the equity and basis pool method is in

effect.

.10 Recognition of section 987 gain

or loss. Except as otherwise provided in

§§ 1.987-11 through 1.987-13 (as modified by the rules described in section

4 of this notice), the amount of section

987 gain or loss recognized by an owner

of a section 987 QBU for a taxable year

is equal to the owner’s net unrecognized

section 987 gain or loss (determined under

702

section 3.04 of this notice) multiplied by

the remittance proportion described in

section 3.10(1) of this notice. For purposes of applying the 2024 final regulations (including the rules of §§ 1.987-11

through 1.987-13), amounts recognized

under this section 3.10 are treated as recognized under § 1.987-5.

(1) Remittance proportion.

(a) Except as provided in section

3.10(1)(b) of this notice, the remittance

proportion with respect to a section 987

QBU for a taxable year is equal to the

amount of the remittance (determined

under section 3.10(2) of this notice)

divided by the sum of the following

amounts (each determined in the section

987 QBU’s functional currency)—

(i) The equity pool on the last day of

the taxable year;

(ii) The aggregate amount of the section 987 QBU’s liabilities on the last day

of the taxable year (expressed as a positive

number); and

(iii) The amount of the remittance.

(b) An annual recognition election can

be made under § 1.987-5(b)(2) for a taxable year in which an election to use the

equity and basis pool method is in effect.

In a taxable year in which an annual recognition election is in effect, the remittance proportion with respect to the section 987 QBU is one. See § 1.987-11(d)

(1) for adjustments required in the first

taxable year in which an annual recognition election is in effect.

(2) Remittance. The amount of the

remittance for a taxable year is equal to

the excess (if any) of the aggregate of all

amounts transferred by the section 987

QBU to its owner for the taxable year over

the aggregate of all amounts transferred

by the owner to the section 987 QBU for

the taxable year, each determined in the

functional currency of the section 987

QBU under section 3.07 of this notice.

.11 Example.

The following example illustrates the application

of this section 3, as proposed.

(1) Facts. U.S. Corp is a domestic corporation

that uses the calendar year as its taxable year and

has the dollar as its functional currency. U.S. Corp

makes a current rate election under § 1.987-1(d)

(2) and an election to use the equity and basis pool

method under section 3.02 of this notice. On July 1,

year 1, U.S. Corp establishes Japan Branch, a section

987 QBU that has the yen as its functional currency,

and U.S. Corp transfers to Japan Branch ¥100,000

with a basis of $1,000 and land with a basis of $500.

Bulletin No. 2026–12

On the same day, Japan Branch borrows ¥10,000

from a bank. In year 1, Japan Branch earns ¥12,000

for providing services and incurs ¥2,000 of related

deductible expenses. The spot rate on July 1, year 1,

is $1 = ¥100; the spot rate on December 31, year 1,

is $1 = ¥120; and the average rate for the period of

July 1, year 1, to December 31, year 1, is $1 = ¥110.

(2) Analysis--(a) Section 987 taxable income or

loss. Under section 3.03 of this notice, U.S. Corp

must determine each item of income, gain, deduction, or loss attributable to Japan Branch in yen. In

year 1, Japan Branch earns ¥12,000 of income and

incurs ¥2,000 of related deductible expenses. Japan

Branch thus earns ¥10,000 of net income in year 1.

This amount is translated into dollars at the yearly

average exchange rate ($1 = ¥110), resulting in

$90.91 of section 987 taxable income.

(b) Net unrecognized section 987 gain or loss. In

order to compute net unrecognized section 987 gain

or loss with respect to Japan Branch under the equity

and basis pool method, U.S. Corp must maintain an

equity pool in yen and a basis pool in dollars.

(i) Equity pool. Under section 3.05(2) of this

notice, the opening balance of the equity pool is zero.

Under sections 3.05(3) and 3.05(4) of this notice,

the equity pool is increased by Japan Branch’s net

income of ¥10,000 and by amounts transferred

from U.S. Corp to Japan Branch in year 1. The total

amount transferred to Japan Branch in year 1 is

¥150,000: ¥100,000 cash, and land with a yen basis

of ¥50,000 (equal to U.S. Corp’s basis of $500, translated at the spot rate on July 1, year 1, of $1 = ¥100).

Therefore, Japan Branch’s equity pool at the end of

year 1 is equal to ¥160,000.

(ii) Basis pool. Under section 3.06(2) of this

notice, the opening balance of the basis pool is zero.

Under sections 3.06(3) and 3.06(4) of this notice, the

basis pool is increased by Japan Branch’s section

987 taxable income of $90.91 and by amounts transferred from U.S. Corp to Japan Branch in year 1. The

total amount transferred to Japan Branch in year 1 is

$1,500: ¥100,000 cash with a basis of $1,000, and

land with a basis of $500. Therefore, Japan Branch’s

basis pool at the end of year 1 is equal to $1,590.91.

(iii) Net unrecognized section 987 gain or loss.

Under section 3.04 of this notice, U.S. Corp’s net

unrecognized section 987 gain or loss with respect

to Japan Branch for year 1 is equal to the equity pool

on the last day of year 1, translated into dollars at the

spot rate on the last day of year 1, minus the basis

pool on the last day of year 1. The equity pool on the

last day of year 1 is equal to ¥160,000. The translated value of the equity pool is $1,333.33 (¥160,000

translated at the spot rate on December 31, year 1,

of $1 = ¥120). The basis pool at the end of year 1

is $1,590.91. Therefore, U.S. Corp has $257.58

of net unrecognized section 987 loss ($1,333.33 $1,590.91) with respect to Japan Branch for year 1.

SECTION 4. OTHER PROPOSED

REGULATIONS TO BE ISSUED

UNDER SECTION 987

.01 In general.

Following the publication of the 2024

final regulations, the Treasury Department

and the IRS received feedback requesting

Bulletin No. 2026–12

modifications to the loss limitation rules

under § 1.987-11 in order to provide taxpayers with additional flexibility to recognize section 987 losses and to reduce the

compliance burden of tracking suspended

section 987 losses. In response to these

comments, the forthcoming proposed regulations are expected to provide the rules

described in this section 4, which generally would permit taxpayers to recognize

section 987 loss in connection with certain

ordinary course remittances and would

limit the number of recognition groupings

for purposes of the loss-to-the-extent-ofgain rule.

Additionally, in response to comments,

the definition of a section 987 hedging

transaction would be expanded to cover

certain hedges that do not meet the GAAP

hedging requirement of § 1.987-14(b)(2)

(iv). The Treasury Department and the

IRS are continuing to study other comments received with respect to section 987

hedging transactions and expect to address

these comments in future guidance.

Except as otherwise provided, terms

used in this section 4 have the meaning

provided in §§ 1.987-1 through 1.987-15.

.02 Proposed modification to loss suspension rules.

Sections 1.987-11(c)(1) (the CRE loss

suspension rule) and 1.987-7(d)(1)(ii) (the

partnership loss suspension rule) apply to

a section 987 QBU or a successor deferral QBU only in a taxable year in which

either—

(1) The remittance proportion (determined under § 1.987-5(b)(1), or, if an

election to use the equity and basis pool

method is in effect, under section 3.10(1)

of this notice) with respect to the section

987 QBU or successor deferral QBU

exceeds five percent; or

(2) The total amount of net unrecognized section 987 loss or deferred section 987 loss with respect to the section

987 QBU or successor deferral QBU that

would become suspended section 987 loss

under § 1.987-11(c)(1) or § 1.987-7(d)(1)

(ii) (in each case, applied without regard

to this section 4.02) exceeds $5 million.

.03 Proposed modification to the recognition grouping requirement.

(1) In general. Except as provided

in section 4.03(2) of this notice, all of

an owner’s section 987 gain or loss is

treated as being in a single recognition

703

grouping for purposes of the loss-tothe-extent-of-gain rule in § 1.987-11(e).

Thus, for example, a domestic corporation may recognize suspended section

987 loss due to the recognition of section

987 gain that is assigned to any section

904 category.

(2) Application to CFCs. If the owner

of a section 987 QBU is a CFC (or a partnership in which a partner is a CFC), a

recognition grouping for purposes of the

loss-to-the-extent-of-gain rule includes

section 987 gain or loss that is initially

assigned to one of the four groupings

described in this section 4.03(2). Thus, for

example, section 987 gain or loss assigned

to separate subpart F income groups is

part of a single recognition grouping,

but section 987 gain or loss assigned to a

subpart F income group is not part of the

same recognition grouping as section 987

gain or loss assigned to a tentative tested

income group. The groupings described in

this section 4.03(2) are—

(a) Tentative tested income (without

regard to section 904 category);

(b) A subpart F income group (as

defined in § 1.960-1(d)(2)(ii)(B));

(c) Income described in section 952(b)

(ECI that is excluded from subpart F

income); and

(d) Other income.

.04 Proposed modification to the definition of successor deferral QBU.

A section 987 QBU is treated as a successor deferral QBU only if the requirements of § 1.987-12(g)(2) are met and

a significant portion of the assets of the

terminated section 987 QBU described

in § 1.987-12(g)(1)(i) are reflected on the

books and records of the potential successor deferral QBU immediately after the

termination. For this purpose, the term

significant portion has the meaning provided in § 1.987-13(l)(5).

.05 Proposed modification to the definition of a section 987 hedging transaction.

(1) In general. A hedge described in

§ 1.987-14(b)(1) may qualify as a section

987 hedging transaction even if the GAAP

hedging requirement of § 1.987-14(b)(2)

(iv) is not met, provided that the other

requirements of § 1.987-14(b) are met and

the hedge is entered into primarily to manage exchange rate risk with respect to an

interest in the section 987 QBU that would

be treated as either debt or stock held by

March 16, 2026

the owner if the section 987 QBU were

treated as a separate corporation.

(2) Identification. If a hedge does not

meet the GAAP hedging requirement and

qualifies as a section 987 hedging transaction due to the application of section

4.05(1) of this notice, and the hedge was

entered into before April 26, 2026, the

hedge will be treated as timely identified

under § 1.987-14(c) if—

(a) The hedge is identified under

§ 1.987-14(c) before April 26, 2026; and

(b) The owner of the hedged QBU

identifies substantially all of the hedges

with respect to the hedged QBU for the

taxable year (including hedges that meet

the GAAP hedging requirement) as section 987 hedging transactions.

SECTION 5. PROPOSED

REGULATIONS TO BE ISSUED

RELATED TO THE APPLICATION OF

SECTION 987(3) TO CFCs

.01 In general.

As noted in section 2.05 of this notice,

the preamble to the 2024 proposed regulations stated that the Treasury Department and the IRS are considering special

rules relating to the application of section

987(3) to CFCs. The Treasury Department

and the IRS received two comments recommending that section 987(3) should not

apply to CFCs. In response to these comments, the Treasury Department and the

IRS intend to issue future guidance that

would provide an election under which

CFCs generally would not be required to

compute or recognize foreign currency

gain or loss under section 987(3) (the

CFC election) as described in this section

5. The Treasury Department and the IRS

intend to issue this guidance in the near

future to provide taxpayers with sufficient

time to determine whether to make the

CFC election for the 2025 taxable year on

an originally filed return (with extension).

Accordingly, comments are requested on

all aspects of the rules described in this

section 5.

Except as otherwise provided, terms

used in this section 5 have the meaning

provided in §§ 1.987-1 through 1.987-15.

.02 Effect of the proposed CFC election.

For taxable years in which the CFC

election is in effect with respect to a CFC,

March 16, 2026

the CFC generally would not be required

to recognize foreign currency gain or loss

under section 987(3) with respect to its

section 987 QBUs (except to the extent

provided in section 5.05 of this notice).

However, the rules of section 987(1) and

(2) would continue to apply, for example, for purposes of computing the taxable income and earnings and profits of

the CFC. In addition, the basis of assets

and the amount of liabilities transferred

between a section 987 QBU and its owner

would be translated as described in section 3.07(3) of this notice.

.03 Rules for making the CFC election.

Taxpayers would be permitted to make

the CFC election on an originally filed

return (including extensions) for any taxable year in which the rules described in

this section 5 are applicable. Once made,

the CFC election could be revoked only

with the consent of the Commissioner.

A taxpayer would be required to make

the CFC election consistently for all

CFCs controlled by the taxpayer and its

related parties. For instance, a consistency

requirement might apply to all CFCs in

which the taxpayer and the members of

its controlled group own a majority of the

stock (by vote or value), determined at the

end of the taxpayer’s taxable year in which

the CFC election is made. Special consistency rules would be provided to address

situations in which a CFC is acquired from

an unrelated person (for example, where

an electing taxpayer acquires a CFC that

is not subject to the CFC election immediately before the acquisition).

.04 Transition rules.

Transition rules would be provided to

account for unrecognized section 987 gain

or loss that arose before the taxable year

of the taxpayer in which the CFC election is made. Under the transition rules,

the unrecognized section 987 gain or

loss would be recognized pro rata over a

period of 120 months beginning with the

first month of the taxable year in which

the CFC election is made.

.05 Special rules for inbound transactions.

In the case of an inbound asset reorganization or liquidation described in

§ 1.367(b)-3(a) of a CFC (transferor CFC)

that is subject to the CFC election, rules

would be provided to account for foreign currency gain (but not loss) that, as

704

a result of the CFC election, has not been

recognized under section 987(3). This

gain would be accounted for by computing the amount of the transferor CFC’s

“section 987 basis increase.”

In principle, a transferor CFC’s section 987 basis increase would represent

the net amount by which the basis in the

transferor CFC’s assets increased due

to currency fluctuations that would have

been accounted for under section 987(3)

had the CFC election not been made. In

order to simplify the application of section 987 in this context, the amount of the

section 987 basis increase would be computed under one of several proxies using

information that is expected to be readily

available to taxpayers.

The Treasury Department and the IRS

are considering a framework in which a

taxpayer may choose to compute a transferor CFC’s section 987 basis increase

under one of two options: (1) the transferor CFC’s aggregate net unrecognized

section 987 gain computed for a period of

ten taxable years preceding the inbound

transaction, using the simplified method

provided in § 1.987-10(e)(3) (which could

potentially be applied based on financial statement balance sheets instead of

tax-basis balance sheets); or (2) excess

asset basis with respect to the transferor

CFC, as determined under § 1.367(b)-3(g)

(2)(i).

The Treasury Department and the IRS

are also evaluating whether the cumulative translation adjustment (as computed

for U.S. GAAP purposes with respect to

the activities of the transferor CFC’s section 987 QBUs for all taxable years in

which the CFC election is in effect) could

be used as a reasonable proxy for the section 987 basis increase. For this purpose,

the Treasury Department and the IRS are

studying several issues, including whether

the relevant portion of the cumulative

translation adjustment can be accurately

determined and can be adjusted to eliminate amounts that are not properly taken

into account under section 987(3) (for

example, foreign currency gain or loss on

net investment hedges).

These methodologies would be relevant only for purposes of computing the

section 987 basis increase and would not

affect the application of any other provisions that may also apply to the inbound

Bulletin No. 2026–12

transaction, such as section 367(b)

(including existing rules under section

367(b) and any rules that may be provided

under section 367(b) in future guidance or

by statute).

The rules described in this section

5.05 and section 5.06 of this notice would

apply only if a de minimis threshold were

met (for example, based on the aggregate gross basis in all of the transferor

CFC’s assets in the hands of the domestic

acquiring corporation immediately after

the inbound transaction). This de minimis rule is intended to reduce taxpayers’

compliance burden in cases in which the

section 987 basis increase is expected to

be minimal.

.06 Manner in which the section 987

basis increase is taken into account.

The forthcoming guidance would provide rules requiring the amount of any section 987 basis increase to be recognized

at the time of the inbound transaction or

to be preserved for future recognition.

The Treasury Department and the IRS are

considering the following three options:

(1) the transferor CFC would recognize

the amount of section 987 basis increase

as section 987 gain immediately before

the inbound transaction; (2) the domestic

acquiring corporation would reduce its

basis in assets acquired from the transferor CFC in the inbound transaction;

or (3) if the inbound transaction causes

the domestic acquiring corporation to

become the owner of a section 987 QBU,

the section 987 QBU’s unrecognized section 987 gain or loss following the transaction would be adjusted to include the

amount of the section 987 basis increase

attributable to the activities of the section

987 QBU (such that the gain would be

deferred and recognized by the domestic

acquiring corporation under the rules of

the 2024 final regulations, as modified by

this notice).

SECTION 6. PROPOSED

APPLICABILITY DATES AND

RELIANCE

The forthcoming proposed regulations, when finalized, are expected to

apply to taxable years ending on or after

the date final regulations adopting these

rules are published in the Federal Register. A taxpayer may rely on the rules

Bulletin No. 2026–12

described in sections 3 and 4 of this

notice (but not the rules described in section 5 of this notice) for a taxable year

ending before the proposed regulations

are published in the Federal Register and

to which the 2024 final regulations apply,

provided the taxpayer and all members of

its section 987 electing group apply the

rules described in sections 3 and 4 of this

notice in their entirety and in a consistent

manner for the taxable year and each subsequent taxable year ending before the

proposed regulations are published in the

Federal Register. The Treasury Department and the IRS expect that taxpayers

will similarly be permitted to rely on the

rules relating to the application of section

987(3) to CFCs that will be included in

the future guidance referenced in section

5.01 of this notice.

SECTION 7. REQUEST FOR

COMMENTS

The Treasury Department and the IRS

request comments on the rules described

in sections 3, 4, and 5 of this notice. The

Treasury Department and the IRS specifically request comments on the following

issues: (1) whether the cumulative translation adjustment is an appropriate proxy

for foreign currency gain that would

otherwise be recognized under section

987(3) for purposes of determining the

amount of the section 987 basis increase,

and what adjustments would be needed to

avoid material distortions (for example,

to avoid duplication or omission of foreign currency gain or loss when a section

987 QBU owns other foreign entities); (2)

how the section 987 basis increase rules

should interact with other provisions that

may apply to inbound reorganizations

and liquidations (such as sections 362(e)

(1) and 367(b)); (3) what de minimis

threshold should apply for purposes of

the section 987 basis increase rules; (4)

whether stock of a lower-tier CFC owned

by the transferor CFC should be taken into

account as an asset of the transferor CFC

for purposes of the de minimis rule (for

example, in cases in which the basis of

the lower-tier CFC stock may be affected

by the section 987 basis increase due to a

contribution of the assets of a section 987

QBU); (5) whether and how the hedging

rules of § 1.987-14 should apply if the

705

CFC election is in effect; and (6) how the

rules described in section 5 of this notice

should apply, if at all, in the case of a partnership in which one or more of the partners is a CFC.

Written comments should be submitted by April 26, 2026. The subject line

for comments should include a reference

to Notice 2026-17. Comments may be

submitted electronically via the Federal eRulemaking Portal at https://www.

regulations.gov (type IRS-2026-0199 in

the search field on the regulations.gov

homepage to find this notice and submit comments). Written comments may

be mailed to Internal Revenue Service,

CC:PA:01:PR (Notice 2026-17), Room

5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044. All commenters are strongly encouraged to submit

comments electronically.

The Treasury Department and the IRS

will publish for public availability any

comment submitted electronically and on

paper to its public docket on https://www.

regulations.gov.

SECTION 8. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of 1995

(44 U.S.C. 3501–3520) (PRA) requires

that a Federal agency obtain the approval

of the Office of Management and Budget (OMB) before collecting information

from the public, whether such collection

of information is mandatory, voluntary, or

required to obtain or retain a benefit. An

agency may not conduct or sponsor, and

a person is not required to respond to, a

collection of information unless it displays a valid control number assigned by

the OMB.

The collections of information in this

notice are in section 3.02(2) of this notice

(and the related election rules in § 1.9871(g) of the final regulations). The likely

respondents are individuals who file a

Form 1040 and businesses that file a Form

1065 or Form 1120.

The collection of information in section 3.02(2) of this notice is required only

when a taxpayer makes or revokes an

election to use the equity and basis pool

method. The Treasury Department and the

IRS intend that the information required

by § 1.987-1(g) with respect to an election

March 16, 2026

to use the equity and basis pool method

will be collected by attaching a statement

to a taxpayer’s return (such as the appropriate Form 1040, Form 1120, Form 1065,

or other appropriate forms). For purposes

of the PRA, the reporting burden associated with those collections of information

will be reflected in the PRA submissions

associated with those forms. The OMB

Control Numbers for the forms will be

approved under 1545–0074 for individuals and under 1545–0123 for business

entities.

To the extent that a taxpayer revokes an

election by obtaining a private letter ruling, the reporting burden associated with

those collections of information will be

March 16, 2026

reflected in the PRA submissions associated with revenue procedures governing

private letter rulings. The OMB Control

Number for those revenue procedures is

control number 1545-1522. The proposed

regulations would only require taxpayers

to follow the procedures under Revenue

Procedure 2026-1, IRB 2026-1 (or future

revenue procedures governing private

letter rulings) and would not change the

collection requirements of the Revenue

Procedure.

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

706

tax return information are confidential, as

required by 26 U.S.C. 6103.

SECTION 9. DRAFTING AND

CONTACT INFORMATION

The principal authors of this notice

are Mark Terrell, Adam G. Province, and

Raphael J. Cohen of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury

Department and the IRS participated in

its development. For further information

regarding the modification of the section

987 regulations, contact Mark Terrell at

646-259-8431 (not a toll-free number).

Bulletin No. 2026–12

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule

B (Form 941), Schedule D (Form 941), Schedule R (Form 941), and Form 8974.

Rev. Proc. 2026-11

TABLE OF CONTENTS

Part 1 –

Section 1.1 – Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .708

Section 1.2 – What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .709

Section 1.3 – Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .710

Section 1.4 – General Requirements for Reproducing IRS Official Form 941, Schedule B, Schedule D, Schedule R,

and Form 8974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .710

Section 1.5 – Reproducing Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 for Software-Generated

Paper Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .711

Section 1.6 – Specific Instructions for Schedule D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .713

Section 1.7 – Specific Instructions for Schedule R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .713

Section 1.8 – Specific Instructions for Form 8974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .714

Section 1.9 – Office of Management and Budget (OMB) Requirements for Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . .715

Section 1.10 – Order Forms and Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .715

Section 1.11 – Effect on Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .715

Section 1.12 – Helpful Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .716

Section 1.13 – Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .717

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March 16, 2026

Part 1

Section 1.1 – Purpose

.01 The purpose of this revenue procedure is to provide general rules and specifications from

the IRS for paper and computer-generated substitutes for Form 941, Employer’s QUARTERLY

Federal Tax Return; Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule

Depositors (referred to in this revenue procedure as “Schedule B”); Schedule D (Form 941),

Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations (referred

to in this revenue procedure as “Schedule D”); Schedule R (Form 941), Allocation Schedule for

Aggregate Form 941 Filers (referred to in this revenue procedure as “Schedule R”); and Form

8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities.

Caution: Before creating a substitute Form 941, see Pub. 1167, General Rules and Specifications

for Substitute Forms and Schedules, for additional rules and specifications for payment vouchers

(Vouchers), printing in margins (Marginal Printing), and additional instructions (Additional

Instructions for All Forms).

Note: Substitute Spanish-language forms (for example, Form 941 (sp) and Schedule B (Form

941) (sp)) should also generally conform to the specifications outlined in this revenue procedure.

However, some of the measurements provided in the exhibits, later, may need to be adjusted for

substitute Spanish-language forms.

.02 This revenue procedure provides information for substitute Form 941, Schedule B, Schedule

D, Schedule R, and Form 8974. If you need more in-depth information on who must complete

these forms and how to complete them, see the Instructions for Form 941, the Instructions for

Schedule B, the Instructions for Schedule D, the Instructions for Schedule R, the Instructions for

Form 8974, and Pub. 15, Employer’s Tax Guide, or go to IRS.gov.

Caution: Failure to produce acceptable substitutes of the forms and schedules listed in this revenue

procedure may result in delays in processing. This may result in penalties.

.03 Forms that completely follow the guidelines in this revenue procedure and are exact replicas

of the official IRS forms do not need to be submitted to the IRS for specific approval. Substitute

forms and schedules need to be scanned using IRS scanning equipment.

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

March 16, 2026

1.

Submit a letter citing the specification.

2.

State your understanding of the specification.

3.

Enclose an example (if appropriate) of how the form would appear if produced using your

understanding.

4.

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

with your correspondence. Send your request to SCRIPS@IRS.gov or SubstituteForms@

IRS.gov, or use the following address.

708

Bulletin No. 2026–12

Internal Revenue Service

Attn: Substitute Forms Program

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

ATSC

4800 Buford Highway, Mail Stop 061-N

Chamblee, GA 30341

Note: Allow at least 30 days for the IRS to respond.

.04 However, software developers and form producers should send a blank copy of their substitute

Form 941, Schedule B, Schedule R, and Form 8974 in Portable Document Format (PDF) to

SCRIPS@IRS.gov. The purpose is not specifically for approval but to assist the IRS in preparing

to scan these forms. Submitters will only receive comments if a significant problem is discovered

through this process. Submitters are not expected to delay marketing their forms in order to receive

feedback. Submitters must not include any “live” taxpayer data on any substitute form submitted

for review.

.05 Form 941, Schedule B, Schedule R, and Form 8974 have a six-digit form ID code in the upper

right-hand corner. The first two digits of the form ID code represent whether the form is an official

paper form or a substitute 6x10 grid. The third and fourth digits of the form ID code are a unique

identifier that is subject to change each quarter when changes are made to a page of the form. The

fifth and six digits of the form ID code generally represent the year in which the IRS made major

formatting changes to the layout of a page of the form. The following six-digit form ID codes,

some of which have been updated for the first quarter of 2026, are currently used on Form 941,

Schedule B, Schedule R, and Form 8974.

•

Official paper forms: 950126 (Form 941, page 1); 950224 (Form 941, page 2); 960311

(Schedule B); 950424 (Schedule R, page 1); 950524 (Schedule R, page 2); and 951823 (Form

8974).

•

Substitute 6x10 grids: 970126 (Form 941, page 1); 970224 (Form 941, page 2); 970311

(Schedule B); 970424 (Schedule R, page 1); 970524 (Schedule R, page 2); and 971823 (Form

8974).

Caution: You must always use the form ID code provided on the current form for the applicable

quarter for which you are creating a substitute form, even if this revenue procedure is not

superseded to reflect a change to a form ID code.

.06 This revenue procedure will be updated only if there are major formatting changes to the

layout of the forms (that is, changes to the measurements provided in the exhibits at the end of this

revenue procedure) or there are other changes that impact the processing of substitute forms. This

revenue procedure won’t be updated solely because a line is changed to “Reserved for future use”

or solely because a form ID code changes without major formatting changes.

Section 1.2 – What’s New

.01 Form 941, page 1, was revised to add the Aggregate Return Filers Only box with three new

checkboxes to identify the type of aggregate return filer, and to add direct deposit fields for an

overpayment.

Bulletin No. 2026–12

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March 16, 2026

Section 1.3 – Reminders

.01 Draft forms. Draft forms can be found at IRS.gov/DraftForms.

Section 1.4 – General Requirements for Reproducing IRS Official Form 941, Schedule B, Schedule D,

Schedule R, and Form 8974

.01 Submit substitute Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 to the IRS

for specifications review. Substitute Form 941, Schedule B, Schedule D, Schedule R, and Form

8974 that completely conform to the specifications contained in this revenue procedure do not

require prior approval from the IRS, but should be submitted to SCRIPS@IRS.gov to ensure that

they conform to IRS format and scanning specifications.

.02 Print the form on standard 8.5-inch wide by 11-inch paper.

.03 Use white paper that meets generally accepted weight, color, and quality standards (minimum

20 lb. white bond paper). Reclaimed fiber in any percentage is permitted provided that the

requirements of this standard are met.

.04 The IRS prefers printing Form 941 on both sides of a single sheet of paper, but it is acceptable

to print on one side of each of two separate sheets of paper.

.05 Make the substitute paper form as identical to the official form as possible.

.06 Print the substitute form using nonreflective black (not blue or other-colored) ink. Printing in

an ink color other than black may reduce readability in the scanning process. This may result in

figures being too faint to be recognizable.

.07 Use typefaces that are substantially identical in size and shape to the official form and use rules

and shading (if used) that are substantially identical to those on the official form. Use font size as

large as possible within the fields.

.08 In the same location as shown on the official IRS forms, print the six-digit form ID code (if one

exists on the official form) on each form using nonreflective black, carbon-based, 12-point font.

The use of non-OCR-A font may reduce readability for scanning. Use the official form to develop

your substitute form.

Note: Maintain as much white space as possible around the form ID code. Do not allow character

strings to print adjacent to the code.

The following six-digit form ID codes are used on Form 941, Schedule B, Schedule R, and Form

8974 for the first quarter of 2026. Print “950126” on Form 941, page 1; “950224” on Form 941,

page 2; “960311” on Schedule B; “950424” on Schedule R, page 1; “950524” on Schedule R, page

2; and “951823” on Form 8974.

March 16, 2026

710

Bulletin No. 2026–12

Caution: You must always use the form ID code provided on the current form for the applicable

quarter for which you are creating a substitute form, even if this revenue procedure is not

superseded to reflect a change to a form ID code. See Section 1.5 for information on form ID

codes for software-generated forms.

.09 Print the OMB number in the same location as on the official form. Be sure to include the

OMB number on Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

.10 Print all entry boxes and checkboxes exactly as shown (location and size) on the official

forms.

Note: Instead of a four-sided checkbox for the entry, just the bottom line of the box can be used as

long as the location and size remain the same.

.11 Print “For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.” at the

bottom of page 1 of Form 941.

.12 Print “For Paperwork Reduction Act Notice, see separate instructions.” at the bottom of

Schedule B and Schedule D.

.13 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of

Schedule R.

.14 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of

Form 8974.

.15 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions.

Instead, print your IRS-issued three-letter substitute form source code in place of the catalog

number on the left at the bottom of page 1 of Form 941, Schedule B, Schedule D, Schedule R, and

Form 8974.

Note: You can obtain a three-letter substitute form source code by requesting it by email at

SubstituteForms@IRS.gov. Enter “Substitute Forms” on the subject line.

.16 Do not print the Government Publishing Office (GPO) symbol at the bottom of the forms or

instructions.

Section 1.5 – Reproducing Form 941, Schedule B, Schedule D, Schedule R, and Form 8974 for Software-Generated

Paper Forms

.01 You may use the PDF files to develop the layout for your forms. Draft forms found at IRS.

gov/DraftForms can be used to develop interim formats until the forms are finalized. When forms

become finalized, they are posted and can be found at IRS.gov/Forms. You may use 6x10 grid

formats to develop software versions of Form 941, Schedule B, Schedule D, Schedule R, and

Form 8974. Please follow the specifications exactly to develop the fields.

Bulletin No. 2026–12

711

March 16, 2026

.02 If you are developing software using the 6x10 grid, the following six-digit form ID codes are

used on Form 941, Schedule B, Schedule R, and Form 8974 for the first quarter of 2026.

•

“970126” for Form 941, page 1; “970224” for Form 941, page 2; “970311” for Schedule B;

“970424” for Schedule R, page 1; “970524” for Schedule R, page 2; and “971823” for Form

8974.

Caution: You must always use the form ID code provided on the current form, with the first

two digits changed to “97” when using a 6x10 grid, for the applicable quarter for which you

are creating a substitute form, even if this revenue procedure is not superseded to reflect a

change to a form ID code.

Note: Maintain as much white space as possible around the form ID code. Do not allow

character strings to print adjacent to the code.

•

Place all 6x10 grid boxes and entry spaces in the same field locations as indicated on the

official forms.

•

Use single lines for “Employer Identification Number (EIN)” and other entry areas in the

entity section of Form 941, pages 1 and 2; Schedule B; Schedule R, pages 1 and 2; and Form

8974.

•

Reverse type is not needed as shown on the official form.

•

Do not pre-print decimal points in the data boxes. However, where the amounts are required,

the amounts should be printed with decimal points and place holders for cents.

•

Delete the pre-printed formatting in any “date” boxes.

•

Use a single box for “Personal Identification Number (PIN)” on Form 941.

•

You may delete all shading when using the 6x10 grid format.

.03 If producing both the form and the data or the form only, print your three-letter source code

at the bottom of Form 941, page 1; Schedule B; Schedule D; Schedule R, page 1; or Form 8974.

See Section 1.4.15.

.04 If producing only the data on the form, print your four-digit software industry vendor code

on Form 941. The four-digit vendor code preceded by four zeros and a slash (0000/9876) must

be pre-printed. If you have a valid vendor code issued to you through the National Association

of Computerized Tax Processors (NACTP), you should use that code. If you do not have a valid

vendor code, contact the NACTP via email at president@nactp.org for information on these codes.

.05 Print “For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.” at the

bottom of Form 941, page 1.

.06 Print “For Paperwork Reduction Act Notice, see separate instructions.” at the bottom of

Schedule B and Schedule D.

.07 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of

Schedule R, page 1.

.08 Print “For Paperwork Reduction Act Notice, see the separate instructions.” at the bottom of

Form 8974.

March 16, 2026

712

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.09 Be sure to print the OMB number in the same location as on the official forms on substitute

Form 941, Schedule B, Schedule D, Schedule R, and Form 8974.

.10 Do not print the form catalog number (“Cat. No.”) at the bottom of the forms or instructions.

.11 Do not print the Government Publishing Office (GPO) symbol at the bottom of the forms or

instructions.

.12 To ensure accurate scanning and processing, enter data on Form 941, Schedule B, Schedule D,

Schedule R, and Form 8974 as follows.

•

Display/print the name and EIN on all pages and attachments in the proper associated fields.

•

Use 12-point (minimum 10-point) Courier font (where possible).

•

Omit dollar signs. Commas are optional.

•

Except for Form 941, lines 1, 2, and 12, leave blank any data field with a value of zero.

However, employers in American Samoa, Guam, the Commonwealth of the Northern Mariana

Islands, the U.S. Virgin Islands, and Puerto Rico must leave line 2 blank, unless they have

employees who are subject to U.S. income tax withholding.

•

Enter negative amounts with a minus sign. For example, report “-10.59” instead of “(10.59).”

Note: The IRS prefers that you use a minus sign for negative amounts instead of parentheses or

some other means. However, if your software only allows for parentheses in reporting negative

amounts, you may use them.

Section 1.6 – Specific Instructions for Schedule D

.01 To properly file and to reduce delays and contact from the IRS, Schedule D must be produced

as close as possible to the official form.

.02 Use Schedule D to explain why you have certain discrepancies. See the Instructions for

Schedule D for more information. In many cases, the information on Schedule D helps the IRS

resolve discrepancies without contacting you.

.03 If a substitute Schedule D is not submitted in similar format to the official IRS schedule, the

substitutes may be returned, you may be contacted by the IRS, delays in processing may occur,

and you may be subject to penalties.

Section 1.7 – Specific Instructions for Schedule R

.01 To properly file and to reduce delays and contact from the IRS, Schedule R and Continuation

Sheets for Schedule R must be produced as close as possible to the official form.

Caution: Do not present the information in spreadsheet or similar format. We may not be able

to properly process nonconforming documents with an excessive number of entries. Complete

Bulletin No. 2026–12

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March 16, 2026

as many Continuation Sheets for Schedule R (Schedule R, page 2) as necessary. If Continuation

Sheets are not used or they vary in form from the official form, processing may be delayed and you

may be subject to penalties.

.02 Use Schedule R to allocate the aggregate information reported on Form 941 to each client. If

you have more than 5 clients, complete as many Continuation Sheets for Schedule R as necessary.

Attach Schedule R, including any Continuation Sheets, to your aggregate Form 941 and file it with

your return. Enter your business information carefully.

Make sure all information exactly matches the information shown on the aggregate Form 941.

Compare the total of each column on Schedule R, line 9 (including your information on line 8),

to the amounts reported on the aggregate Form 941. For each column total of Schedule R, the

relevant line from Form 941 is noted in the column heading. The March 2024 revision of Schedule

R has some columns that are used only when Schedule R is attached to Form 941-X. If the totals

on Schedule R, line 9, do not match the totals on Form 941, there is an error that must be corrected

before submitting Form 941 and Schedule R.

.03 Do:

•

Develop and submit only conforming Schedules R;

•

Follow the format and fields exactly as on the official Schedule R, even if this revenue

procedure is not superseded to reflect a change in a column heading on Schedule R; and

•

Maintain the same number of entry lines on the substitute Schedule R as on the official form.

.04 Do not:

•

Add or delete entry lines;

•

Submit spreadsheets, database printouts, or similar formatted documents instead of using the

Schedule R format to report data; and

•

Reduce or expand font size to add or delete extra data or lines.

.05 If substitute Schedules R and Continuation Sheets for Schedule R are not submitted in similar

format to the official schedule, the substitutes may be returned, you may be contacted by the IRS,

delays in processing may occur, and you may be subject to penalties.

Section 1.8 – Specific Instructions for Form 8974

.01 To properly file and to reduce delays and contact from the IRS, Form 8974 must be produced

as close as possible to the official form.

.02 Use Form 8974 only if you are claiming the qualified small business payroll tax credit for

increasing research activities.

.03 If a substitute Form 8974 is not submitted in similar format to the official IRS form, the

substitutes may be returned, you may be contacted by the IRS, delays in processing may occur,

and you may be subject to penalties.

March 16, 2026

714

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Section 1.9 – Office of Management and Budget (OMB) Requirements for Substitute Forms

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

•

OMB approves all IRS tax forms that are subject to the Act.

•

Each IRS form contains the OMB approval number, if assigned. The official OMB numbers

may be found on the official IRS-printed forms.

•

Each IRS form (or its instructions) states:

1.

Why the IRS needs the information,

2.

How it will be used, and

3.

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

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

.03 The OMB requirements for substitute IRS forms are the following.

•

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

appears on the official form.

•

For Form 941, Schedule B, Schedule D, Schedule R, and Form 8974, the OMB number

(1545-0029) must appear exactly as shown on the official form.

•

For Form 941, Schedule B, Schedule D, Schedule R, and Form 8974, the OMB number must

use one of the following formats.

1.

OMB No. 1545-0029 (preferred).

2.

OMB # 1545-0029 (acceptable).

.04 If no instructions are provided to users of your forms, you must furnish to them the exact text

of the Privacy Act and Paperwork Reduction Act Notice.

Section 1.10 – Order Forms and Instructions

.01 You can order forms and instructions at https://www.irs.gov/orderforms.

Section 1.11 – Effect on Other Documents

.01 Revenue Procedure 2024-11, 2024-13 I.R.B. 721, dated March 25, 2024, is superseded.

Bulletin No. 2026–12

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March 16, 2026

Section 1.12 – Helpful Information

.01 Please follow the specifications and guidelines to produce substitute Form 941, Schedule B,

Schedule D, Schedule R, and Form 8974.

.02 These forms are subject to review and possible changes, as required. Therefore, employers are

cautioned against overstocking supplies of privately printed substitutes.

.03 Here is a review of references that were listed throughout this document.

•

Form 941, Employer’s QUARTERLY Federal Tax Return.

•

Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors

(referred to in this revenue procedure as “Schedule B”).

•

Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers,

or Consolidations (referred to in this revenue procedure as “Schedule D”).

•

Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers (referred to in

this revenue procedure as “Schedule R”).

•

Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities.

•

Instructions for Form 941.

•

Instructions for Schedule B (Form 941).

•

Instructions for Schedule D (Form 941).

•

Instructions for Schedule R (Form 941).

•

Instructions for Form 8974.

•

Pub. 15, Employer’s Tax Guide.

•

SCRIPS@IRS.gov for submissions.

•

SubstituteForms@IRS.gov for questions.

•

For questions:

Internal Revenue Service

Attn: Substitute Forms Program

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

ATSC

4800 Buford Highway, Mail Stop 061-N

Chamblee, GA 30341

March 16, 2026

•

IRS.gov/DraftForms for draft forms.

•

IRS.gov/Forms for final forms.

716

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720

14

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15

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723

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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 laws 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 a 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

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.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2026–12

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

i

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

March 16, 2026

Numerical Finding List1

Bulletin 2026–12

Announcements:

2026-1, 2026-04 I.R.B. 402

2026-2, 2026-05 I.R.B. 447

2026-3, 2026-06 I.R.B. 518

2026-4, 2026-06 I.R.B. 533

2026-5, 2026-07 I.R.B. 540

2026-6, 2026-10 I.R.B. 634

2026-7, 2026-11 I.R.B. 697

Notices:

Revenue Rulings:

2026-1, 2026-02 I.R.B. 299

2026-2, 2026-03 I.R.B. 342

2026-3, 2026-06 I.R.B. 485

2026-4, 2026-06 I.R.B. 487

2026-5, 2026-08 I.R.B. 542

2026-6, 2026-11 I.R.B. 635

Treasury Decisions:

10042, 2026-03 I.R.B. 320

10041, 2026-04 I.R.B. 360

10039, 2026-05 I.R.B. 403

10040, 2026-05 I.R.B. 416

2026-2, 2026-02 I.R.B. 304

2026-3, 2026-02 I.R.B. 307

2026-5, 2026-02 I.R.B. 309

2026-6, 2026-02 I.R.B. 313

2026-1, 2026-04 I.R.B. 365

2026-8, 2026-04 I.R.B. 368

2026-10, 2026-04 I.R.B. 378

2026-11, 2026-06 I.R.B. 491

2026-12, 2026-06 I.R.B. 496

2026-13, 2026-06 I.R.B. 499

2026-9, 2026-07 I.R.B. 534

2026-7, 2026-11 I.R.B. 637

2026-14, 2026-11 I.R.B. 654

2026-15, 2026-11 I.R.B. 658

2026-16, 2026-11 I.R.B. 685

2026-17, 2026-12 I.R.B. 698

Proposed Regulations:

REG-101952-24, 2026-03 I.R.B. 345

REG-110519-25, 2026-03 I.R.B. 353

REG-132251-11; REG-134219-08,

2026-03 I.R.B. 358

REG-103430-24, 2026-05 I.R.B. 447

REG-112829-25, 2026-05 I.R.B. 452

REG-113515-25, 2026-05 I.R.B. 455

REG-121244-23, 2026-09 I.R.B. 579

Revenue Procedures:

2026-1, 2026-01 I.R.B. 1

2026-2, 2026-01 I.R.B. 119

2026-3, 2026-01 I.R.B. 143

2026-4, 2026-01 I.R.B. 160

2026-5, 2026-01 I.R.B. 258

2026-6, 2026-02 I.R.B. 314

2026-7, 2026-02 I.R.B. 316

2026-8, 2026-04 I.R.B. 380

2026-9, 2026-04 I.R.B. 393

2026-10, 2026-04 I.R.B. 394

2026-12, 2026-07 I.R.B. 535

2026-13, 2026-09 I.R.B. 563

2026-11, 2026-12 I.R.B. 707

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2024–52, dated December 22, 2024.

1

March 16, 2026

ii

Bulletin No. 2026–12

Finding List of Current Actions on

Previously Published Items1

Bulletin 2026–12

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2024–52, dated December 22, 2024.

1

Bulletin No. 2026–12

iii

March 16, 2026

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

INTERNAL REVENUE BULLETIN

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