IRB 2015-46 (Rev. November 16, 2015)

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

Notice 2015–73, page 660.The Treasury and IRS released Notice 2015–47, 2015–30I.R.B. 76, a Listing Notice that applies to a type of structuredfinancial transaction in which a taxpayer attempts to defer andtreat ordinary income and short-term capital gain (earned un-der a contract denominated as an option contract that refer-ences a basket of securities) as long-term capital gain. Notice2015–73 was initiated in response to commenters’ concernsthat difficulty in identifying transactions that are the same as orsubstantially similar to the transactions described in Notice2015–47 may cause taxpayers to file disclosures for transac-tions that are not intended to be treated as listed transactionsat this time. Notice 2015–73 revokes Notice 2015–47 andprovides additional details on the types of transactions that arelisted transactions. Notice 2015–73 also provides proceduresfor taxpayers to change their method of accounting for trans-actions within the scope of the notice. The transaction de-scribed in Notice 2015–73 is similar to a transaction of inter-est described in Notice 2015–74.

Notice 2015–74, page 663.The Treasury and IRS released Notice 2015–48, 2015–30I.R.B. 77, a Transaction of Interest Notice that applies to a typeof structured financial transaction in which a taxpayer attemptsto defer and treat ordinary income and short-term capital gain(earned under a contract denominated as a derivative contractthat references a basket of securities) as long-term capitalgain. Notice 2015–74 was initiated in response to comment-ers’ concerns that difficulty in identifying transactions that arethe same as or substantially similar to the transactions de-scribed in Notice 2015–48 may cause taxpayers to file disclo-sures for transactions that are not intended to be treated astransactions of interest at this time. Notice 2015–74 revokesNotice 2015–48 and provides additional details on the typesof transactions that are transactions of interest. Notice2015–74 also provides procedures for taxpayers to change

their method of accounting for transactions within the scope ofthe notice. The transaction described in Notice 2015–74 issimilar to a listed transaction described in Notice 2015–73.

EMPLOYEE PLANS

Notice 2015–75, page 668.Section 415 of the Internal Revenue Code (the Code) providesfor dollar limitations on benefits and contributions under qual-ified retirement plans. Section 415(d) requires that the Secre-tary of the Treasury annually adjust these limits for cost ofliving increases. Other limitations applicable to deferred com-pensation plans are also affected by these adjustments under§ 415. Under § 415(d), the adjustments are to be made underadjustment procedures similar to those used to adjust benefitamounts under § 215(i)(2)(A) of the Social Security Act.

EXEMPT ORGANIZATIONS

Announcement 2015–28, page 673.Revocation of IRC 501(c)(3) Organizations for failure to meetthe code section requirements. Contributions made to theorganizations by individual donors are no longer deductibleunder IRC 170(b)(1)(A).

Announcement 2015–29, page 673.Serves notice to potential donors of a stipulated decision bythe United States Tax Court in declaratory judgment proceed-ings under Section 7428.

Announcement 2015–30, page 673.Serves notice to potential donors of a stipulated decision bythe United States Tax Court in declaratory judgment proceed-ings under Section 7428.

(Continued on the next page)

Finding Lists begin on page ii.

Bulletin No. 2015–46November 16, 2015

EXCISE TAX

Notice 2015–76, page 669.This notice requests comments about issues that should beaddressed in guidance relating to the excise tax imposed onamounts paid for the right to award free or reduced rate airtransportation. Section 4261(e)(3) authorizes the IRS and Trea-sury Department to prescribe rules to exclude from the airtransportation excise tax imposed by § 4261 amounts attrib-utable to mileage awards (sometimes referred to as frequentflyer miles) that are redeemed other than for taxable transpor-tation.

ADMINISTRATIVE

REG–121496–15, page 674.This document contains proposed regulations that will reducethe user fee to obtain or renew a Preparer Tax IdentificationNumber (PTIN) from $50 to $33 for each original and renewalapplication.

Notice 2015–76, page 669.This notice requests comments about issues that should beaddressed in guidance relating to the excise tax imposed onamounts paid for the right to award free or reduced rate airtransportation. Section 4261(e)(3) authorizes the IRS and Trea-sury Department to prescribe rules to exclude from the airtransportation excise tax imposed by § 4261 amounts attrib-utable to mileage awards (sometimes referred to as frequentflyer miles) that are redeemed other than for taxable transpor-tation.

T.D. 9742, page 657.This document contains temporary regulations that will reducethe user fee to obtain or renew a Preparer Tax IdentificationNumber (PTIN) from $50 to $33 for each original and renewalapplication.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-force the law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly.

It is the policy of the Service to publish in the Bulletin allsubstantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of internalmanagement are not published; however, statements of inter-nal practices and procedures that affect the rights and dutiesof taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulings totaxpayers or technical advice to Service field offices, identify-ing details and information of a confidential nature are deletedto prevent unwarranted invasions of privacy and to comply withstatutory requirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, 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 unlessthe 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 ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A, TaxConventions and Other Related Items, and Subpart B, Legisla-tion and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index forthe matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished 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.

November 16, 2015 Bulletin No. 2015–46

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986T.D. 9742

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 300

Preparer Tax IdentificationNumber (PTIN) User FeeUpdate

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains tem-porary regulations relating to the impositionof certain user fees on tax return preparers.The temporary regulations reduce the userfee to apply for or renew a preparer taxidentification number (PTIN) and affect in-dividuals who apply for or renew a PTIN.The Independent Offices AppropriationsAct of 1952 authorizes the charging of userfees. The text of the temporary regulationsalso serves as the text of the proposed reg-ulations (REG–121496–15) set forth in thenotice of proposed rulemaking on this sub-ject in the Proposed Rules section of thisissue of the Bulletin.

DATES: Effective Date: These regula-tions are effective on October 30, 2015.

Applicability Date: For date of appli-cability, see paragraph (d) of these tem-porary regulations.

FOR FURTHER INFORMATIONCONTACT: Concerning the temporaryregulations, Hollie M. Marx at (202) 317-6844; concerning cost methodology, EvaJ. Williams at (202) 803-9728 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The Independent Offices Appropria-tions Act of 1952 (IOAA), which is cod-ified at 31 U.S.C. 9701, authorizes agen-cies to prescribe regulations that establishuser fees for services provided by theagency. The charges must be fair and must

be based on the costs to the government,the value of the service to the recipient,the public policy or interest served, andother relevant facts. The IOAA providesthat regulations implementing user feesare subject to policies prescribed by thePresident; these policies are set forth inthe Office of Management and BudgetCircular A–25, 58 FR 38142 (July 15,1993) (OMB Circular A–25).

Under OMB Circular A–25, federalagencies that provide services that conferbenefits on identifiable recipients are toestablish user fees that recover the fullcost of providing the special benefit. Anagency that seeks to impose a user fee forgovernment-provided services must cal-culate the full cost of providing those ser-vices. In general, a user fee should be setat an amount that allows the agency torecover the direct and indirect costs ofproviding the service, unless the Office ofManagement and Budget grants an excep-tion. OMB Circular A–25 provides thatagencies are to review user fees bienniallyand update them as necessary.

PTIN Requirement

Section 6109(a)(4) of the Internal Rev-enue Code authorizes the Secretary to pre-scribe regulations for the inclusion of atax return preparer’s identifying numberon a return, statement, or other documentrequired to be filed with the IRS. On Sep-tember 30, 2010, the Treasury Departmentand IRS published final regulations undersection 6109 (REG–134235–08) in theFederal Register (TD 9501) (75 FR60315) (PTIN regulations) to provide that,for returns or claims for refund filed afterDecember 31, 2010, the identifying num-ber of a tax return preparer is the individ-ual’s PTIN or such other number pre-scribed by the IRS in forms, instructions,or other appropriate guidance. The PTINregulations require a tax return preparerwho prepares or who assists in preparingall or substantially all of a tax return orclaim for refund after December 31, 2010to have a PTIN. The PTIN regulationsalso state that the IRS will set forth informs, instructions or other appropriate

guidance PTIN application and renewalprocedures, including the payment of auser fee. The PTIN regulations furtherstate that the IRS may conduct a Federaltax compliance check on an individualwho applies for or renews a PTIN.

In accordance with section 1.6109–2(d) of the PTIN regulations, the IRS hasset forth application and renewal proce-dures in Form W–12, IRS Paid PreparerTax Identification Number (PTIN) Appli-cation and Renewal, and the Form W–12Instructions. Individuals may also applyfor or renew a PTIN and pay the user feeonline at irs.gov/ptin. The annual PTINapplication and renewal period generallybegins in the fall (on October 15 in pre-vious years) of the year preceding thefiling season to which the PTIN relates. Athird-party vendor processes applicationsto obtain or renew a PTIN and charges areasonable fee that is separate from theuser fee charged by the government.

Requiring the use of PTINs improvestax administration and tax compliance andbenefits tax return preparers by allowingthem to provide an identifying number onthe return that is not an SSN. Requiringthe use of PTINs enables the IRS to bettercollect and track data on tax return pre-parers, including the number of personswho prepare returns, the qualifications ofthose who prepare returns, and the numberof returns each person prepares. PTIN useallows the IRS to more easily identify andcommunicate with tax return preparerswho make errors on returns, which bene-fits tax return preparers by improvingcompliance and therefore reducing thenumber of client returns that are exam-ined. The PTIN also enables the IRS tomore easily locate and review returns pre-pared by a tax return preparer when in-stances of misconduct or potential mis-conduct are detected, which aids taxadministration and compliance. Theseaids to tax administration and compliancein turn benefit taxpayers and tax returnpreparers by working to reduce preparererror and misconduct.

Section 1.6109–2(d) states that onlyindividuals authorized to practice beforethe IRS under 31 U.S.C. 330 are eligible

Bulletin No. 2015–46 November 16, 2015657

to obtain a PTIN. Under section 1.6109–2(h), the IRS may prescribe in forms, in-structions, or other appropriate guidanceexceptions to the requirements of thePTIN regulations, including the require-ment that an individual must be autho-rized to practice before the IRS to beeligible to receive a PTIN. On December30, 2010, the IRS released Notice 2011–6(2011–3 IRB 315 (Jan. 17, 2011)), whichstated that, until December 31, 2013, aprovisional PTIN could be renewed uponproper application and payment of the ap-plicable user fee, even if the individualholding the provisional PTIN was not au-thorized to practice before the IRS.

On June 3, 2011, the Treasury Depart-ment and the IRS published in the Fed-eral Register (76 FR 32286) amendmentsto Treasury Department Circular No. 230(31 CFR part 10), to regulate all tax returnpreparers under 31 U.S.C. 330. In Lovingv. IRS, 917 F.Supp.2d 67 (D.D.C. 2013),the district court concluded that the IRSand Treasury Department lacked statutoryauthority to regulate tax return preparationas practice before the IRS under 31 U.S.C.330 and enjoined the IRS and Treasuryfrom enforcing the regulation of regis-tered tax return preparers. The districtcourt subsequently modified its order toclarify that the IRS’s authority to requirethat tax return preparers obtain a PTIN isunaffected by the injunction. Loving v.IRS, 920 F.Supp.2d 108, 109 (D.D.C.2013) (stating “Congress has specificallyauthorized the PTIN scheme by statute . . .[and that] scheme, therefore, does not fallwithin the scope of the injunction and mayproceed as promulgated.”). The UnitedStates Court of Appeals for the District ofColumbia Circuit affirmed the districtcourt’s decision and order for injunction.Loving v. IRS, 742 F.3d 1013 (D.C. Cir.2014).

PTIN User Fee

Final regulations (REG–139343–08)published in the Federal Register (TD9503) (75 FR 60316) (PTIN user fee reg-ulations) on September 30, 2010, estab-lished a $50 user fee to apply for or renewa PTIN. The $50 user fee was based on anannual PTIN renewal period and an esti-mate that 1.2 million individuals would be

applying for or renewing a PTIN eachyear.

The IRS and Treasury Department de-termined that a $50 user fee to apply for orrenew a PTIN would recover the full di-rect and indirect costs that the governmentincurs to administer the PTIN applicationand renewal process. The initial determi-nation of a $50 annual fee took into ac-count certain costs that the IRS ascer-tained it would incur to provide thespecial benefit associated with the provi-sion of PTINs. As explained in the PTINuser fee regulations, the initial projectedcosts included the development and main-tenance of the IRS information technol-ogy system that would interface with athird-party vendor, the development andmaintenance of internal applications thatwould have the capacity to process andadminister the anticipated increase inPTIN applications, customer service sup-port activities, which included website de-velopment and maintenance and call cen-ter staffing to respond to questionsregarding PTIN usage and renewal. The$50 user fee was also determined to re-cover costs for personnel, administrative,and management support needed to eval-uate and address tax compliance issues ofindividuals applying for and renewing aPTIN, to investigate and address conductand suitability issues, and otherwise sup-port and enforce the programs that re-quired an individual to apply for and re-new a PTIN.

The vendor’s fee, currently set at$14.25 for new applications and $13 forrenewal applications, is paid directly tothe vendor and covers the costs incurredby the vendor to process applications andrenewals. The agency user fee and thevendor fee pay for different aspects of thePTIN program, each of which is essentialto the program.

Explanation of Provisions

Pursuant to the guidelines in OMB Cir-cular A–25, the IRS has re-calculated itscost of providing services under the PTINapplication and renewal process. The IRShas determined that the full cost of admin-istering the PTIN program going forwardhas been reduced from $50 to $33 perapplication or renewal. Individuals whoprepare or assist in preparing all or sub-stantially all of a tax return or claim for

refund for compensation are required tohave a PTIN. The ability to prepare taxreturns and claims for refund for compen-sation is a special benefit, for which theIRS may charge a user fee to recover thefull costs of providing the special benefit.

The amount of the user fee is $33 forboth initial PTIN applications and renew-als because the activities the IRS is re-quired to perform to issue a new PTIN orrenew an existing PTIN are the same.Pursuant to the authority granted in sec-tion 6109(c), the IRS has determined thatit requires certain information to assign(or, in the case of a renewal, re-assign) aPTIN to an individual. The required infor-mation is set forth in the Form W–12 andForm W–12 Instructions.

The PTIN user fee is based on directcosts of the PTIN program, which includestaffing and contract-related costs for activ-ities, processes, and procedures related tothe electronic and paper registration and re-newal submissions; tax compliance andbackground checks; professional designa-tion checks; foreign preparer processing;compliance and IRS complaint activities;information technology and contract-relatedexpenses; and communications. The PTINuser fee also takes into account various in-direct program costs, including manage-ment and support costs.

The reduction in the fee amount is at-tributable to several factors, which includethe reduced number of PTIN holders (ap-proximately 700,000) from the numberoriginally projected (1.2 million) in 2010,which reduced associated costs; the ab-sorption of certain development costs inthe early years of the program; and thefact that certain activities that would havebeen required to regulate registered taxreturn preparers will not be performed. Inparticular, the determination of the userfee no longer includes expenses for per-sonnel who perform functions primarilyrelated to continuing education and testingfor registered tax return preparers. Addi-tionally, expenses related to personnelwho perform continuing education andtesting for enrolled agents and enrolledretirement plan agents were also removedfrom the user fee.

Individuals who apply for or renew aPTIN will continue to pay a fee directly toa third-party vendor, which is separatefrom the user fee described in this Trea-


sury decision. The vendor fee is increas-ing from $14.25 for original applicationsand $13 for renewal applications to $17for original applications and $17 for re-newal applications.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866, as supplemented by Executive Or-der 13563.

Historically, the annual PTIN applica-tion and renewal period has begun on Oc-tober 15. For 2015, the date has beenpostponed to November 1. There is insuf-ficient time before November 1 to providean opportunity for notice and public com-ment and issue a final regulation prior tothat date. To enable the reduced feeamount to be in effect for PTINs issued orrenewed by tax return preparers preparingreturns in 2016, the IRS and Treasury findthat there is good cause to dispense with(1) notice and public comment pursuant to5 U.S.C. 553(b) and (c) and (2) a delayedeffective date pursuant to 5 U.S.C. 553(d).It would be impracticable, unnecessary,and contrary to the public interest to con-tinue to charge the current fee when theIRS has determined pursuant to the bien-nial review conducted under OMB Circu-lar A–25 that the fee should be reducedgoing forward. The IRS and Treasury De-partment will consider public commentssubmitted in response to the cross-referenced notice of proposed rulemaking

published elsewhere in this issue of theBulletin and will promulgate a final ruleafter considering those comments.

For applicability of the RegulatoryFlexibility Act, please refer to the cross-referenced notice of proposed rulemakingpublished elsewhere in this issue of theBulletin. Pursuant to section 7805(f), thisTreasury decision has been submitted tothe Chief Counsel for Advocacy of theSmall Business Administration for com-ment on its impact on small business.

Drafting Information

The principal author of these regula-tions is Hollie M. Marx, Office of theAssociate Chief Counsel (Procedure andAdministration).

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 300 isamended as follows:

Paragraph 1. The authority citation forpart 300 continues to read as follows:

Authority: 31 U.S.C. 9701.Par. 2. Section 300.13 is amended by

removing and reserving paragraph (b) toread as follows:

§ 300.13 Fee for obtaining a preparertax identification number.

* * * * *(b) Fee. [Reserved]

* * * * *Par. 3. Section 300.13T is added to

read as follows:

§ 300.13T Fee for obtaining a preparertax identification number.

(a) [Reserved](b) Fee. The fee to apply for or renew

a preparer tax identification number is $33per year, which is the cost to the govern-ment for processing the application for apreparer tax identification number anddoes not include any fees charged by thevendor.

(c) [Reserved](d) Effective/applicability date. This

section will be applicable for all PTINapplications filed on or after November 1,2015.

Karen M. SchillerActing Deputy Commissioner

for Services and Enforcement.

Approved: October 16, 2015.

Mark J. MazurAssistant Secretary of

the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on October 29,2015, 8:45 a.m., and published in the issue of the FederalRegister for October 30, 2015, 80 F.R. 27789)


Part III. Administrative, Procedural, and MiscellaneousListing Notice–BasketOption Contracts

Notice 2015–73

The Treasury Department and the In-ternal Revenue Service (the “IRS”) areaware of a type of structured financialtransaction, described below, in which ataxpayer attempts to defer income recog-nition and convert short-term capital gainand ordinary income to long-term capitalgain using a contract denominated as anoption contract. The Treasury Departmentand the IRS believe this transaction (the“basket option contract”) is a tax avoidancetransaction. Notice 2015–47, 2015–30I.R.B. 76, identified the basket option con-tract and substantially similar transactionsas listed transactions for purposes of§ 1.6011–4(b)(2) of the Income Tax Reg-ulations and §§ 6111 and 6112 of theInternal Revenue Code (“the Code”). No-tice 2015–47 also alerted persons in-volved in these transactions about certainresponsibilities that may arise from theirinvolvement with these transactions.

Commenters expressed concern that dif-ficulty in identifying transactions that are thesame as, or substantially similar to, thetransaction described in Notice 2015–47may cause taxpayers to file disclosures fortransactions that are not intended to betreated as listed transactions at this time.This notice revokes Notice 2015–47. Sec-tion 2 of this notice provides additional de-tails on the types of transactions that are thesame as, or substantially similar to, thetransaction described in this notice, and thuslisted transactions for purposes of § 1.6011–4(b)(2) and §§ 6111 and 6112 of the Code.Section 3.06 of this notice provides proce-dures for taxpayers to change their methodof accounting for transactions within thescope of this notice.

Section 2.04 of this notice more spe-cifically describes the tax benefits thatidentify the transaction described in thisnotice as a listed transaction. No inferenceis intended regarding the appropriatetreatment of transactions not described in

this notice. The IRS may challenge, in-cluding by asserting judicial doctrines,claimed tax benefits under §§ 871, 881and 882 or other provisions of the Code,and assert failures to comply with report-ing obligations associated with invest-ments in passive foreign investment com-panies and withholding and reportingobligations under Chapters 3 and 4 of theCode.

SECTION 1. BACKGROUND

In a basket option contract, a taxpayer(“T”), typically a hedge fund or a highnet-worth individual, enters into a contractthat is denominated as an option with acounterparty (“C”), typically a bank, toreceive a return based on the performanceof a notional basket of referenced activelytraded personal property (the “referencebasket”). T, or a designee named by T,will either determine the assets that com-prise the reference basket or design orselect a trading algorithm that determinesthe assets. While the basket option con-tract remains open, T1 has the right tochange the assets in the reference basket,request that C change the assets in thereference basket, change the trading algo-rithm, or request that C change the tradingalgorithm (collectively, discretion).2 Theterms of the basket option contract maypermit C to reject certain changes re-quested by T to the assets in the referencebasket or the trading algorithm. C, how-ever, generally accepts all or nearly all ofthe changes requested by T.

When the basket option contract is en-tered into, T typically makes an upfrontcash payment to C of between 10 and 40percent of the value of the assets in thereference basket. To manage its risk underthe basket option contract, C typically ac-quires substantially all of the assets in thereference basket at the inception of thecontract and acquires and disposes of as-sets during the term of the contract eitherwhen T changes the assets in the referencebasket or the trading algorithm providesfor such changes. C generally supplies the

additional cash required to purchase theassets in the reference basket. The assetsin the reference basket would typicallygenerate ordinary income if held directlyby T, and short-term gains and losses ifpurchases and sales of the assets werecarried out directly by T.

The basket option contract has a statedterm of more than one year but containsprovisions that in effect allow either party toterminate the contract at any time during thestated contract term with proper notice. Theamount that T receives upon settlement ofthe basket option contract is based on theperformance of the assets in the referencebasket. A common payout formula on thebasket option contract entitles T to a returnequal to the upfront payment, plus net bas-ket gain or minus net basket loss. The netbasket gain or net basket loss includes netchanges in the values of the assets in thereference basket, together with interest, div-idend, and other periodic income on theassets, reduced by C’s fee for its role in thetransaction. The basket option contract typ-ically includes a provision automatically ter-minating the contract if the amount of thenet basket loss reaches the amount of theupfront payment, giving T a cash settlementamount of zero. The basket option contractalso may permit or require T to provideadditional collateral or otherwise reduce riskin the reference basket if a specified level ofrisk is reached.

The basket option contract typicallycontains other safeguards to minimize theeconomic risk to C. For example, C mayterminate the basket option contract if Tviolates investment guidelines that arepart of the contract. C typically holds therights associated with legal title to theassets and positions in the reference bas-ket, including voting rights and the rightto commingle, lend, pledge, transfer, orotherwise use the assets in the basketwithout notice to T.

T takes the position that T’s short-termtrading gains and interest, dividend, andother ordinary periodic income from theperformance of the reference basket aredeferred until the basket option contract

1When used in this sentence and subsequently with respect to changing or requesting changes to the assets in the reference basket or the trading algorithm, references to “T” include T’sdesignee as defined in section 2.02 of this notice.

2See also section 2.03 of this notice.


terminates and, if the basket option con-tract is held for more than one year, thatthe entire gain is treated as long-term cap-ital gain.

The Treasury Department and the IRSare concerned that taxpayers are using abasket option contract to inappropriatelydefer income recognition or convert ordi-nary income or short-term capital gaininto long-term capital gain. In some cases,taxpayers are also mischaracterizing atransaction as an option to avoid applica-tion of § 1260. Therefore, the TreasuryDepartment and the IRS are identifyingtransactions described in section 2 of thisnotice as listed transactions.

The IRS may assert one or more argu-ments to challenge the parties’ tax char-acterization of a basket option contract,including: (1) that C, in substance, holdsthe assets in the reference basket as anagent of T and that T is the beneficialowner of the assets for tax purposes; (2)that the basket option contract is not anoption for tax purposes; (3) that changesto the assets in the reference basket duringthe year materially modify the basket op-tion contract and result in taxable dispo-sitions of the contract under § 1001throughout the term of the contract; and(4) that T actually owns separate contrac-tual rights with respect to each asset in thereference basket such that each change tothe assets in the basket results in a taxabledisposition of a contractual right under§ 1001 with respect to the asset affectedby the change. The IRS may assert otherarguments supporting the conclusion thatT is the beneficial owner of the assets inthe reference basket for tax purposes.

SECTION 2. LISTEDTRANSACTIONS

.01 Transactions Identified as ListedTransactions

A transaction is the same as, or sub-stantially similar to, the transaction iden-tified in this notice only if: (1) T entersinto a transaction with C that is denomi-nated as an option contract; (2) T receivesa return based on the performance of thereference basket; (3) substantially all ofthe assets in the reference basket primarilyconsist of actively traded personal prop-

erty as defined under § 1.1092(d)–1(a); (4)the contract is not fully settled at intervalsof one year or less; (5) T or T’s designee(as defined in section 2.02 of this notice)has exercised discretion (as defined in sec-tion 2.03 of this notice) to change (eitherdirectly or through a request to C) theassets in the reference basket or the trad-ing algorithm; and (6) T’s tax return for ataxable year ending on or after January 1,2011,3 reflects a tax benefit described insection 2.04 of this notice. Notwithstand-ing any other provision in this notice, atransaction is not the same as, or substan-tially similar to, the listed transactionidentified in this notice if the transaction isdescribed in section 2.05 of this notice.

.02 Designee

For purposes of this notice, any refer-ence to T having the right to change orrequest changes to the assets in the refer-ence basket or the trading algorithm in-cludes T’s designee as defined in this sec-tion 2.02. T’s designee is any person whois: (1) T’s agent under principles ofagency law; (2) compensated by T forsuggesting, requesting, or determiningchanges in the assets in the reference bas-ket or the trading algorithm; or (3) se-lected by T to suggest, request, or deter-mine changes in the assets in the referencebasket or the trading algorithm. A personwill not, however, be treated as compen-sated or selected by T as a result of: (1)the person’s position as an investment ad-visor, officer, or employee of an entity,such as a mutual fund, when the entity’spublicly offered securities are included inthe reference basket; or (2) the person’suse of, the person’s payment of a licensingfee for the right to use, or the person’sauthority to suggest, request, or determinechanges in the assets included in (y) awidely used and publicly quoted indexthat is based on objective financial infor-mation or (z) an index that tracks a broadmarket or a market segment.

.03 Discretion

For purposes of this notice, T will notbe treated as having discretion to change(either directly or through a request to C)the assets in the reference basket or the

trading algorithm if changes in the assetsin the reference basket or the trading al-gorithm are made according to objectiveinstructions, operations, or calculationsthat are disclosed at the inception of thetransaction (the rules) and T does not havethe right to alter or amend the rules duringthe term of the transaction or to deviatefrom the assets in the reference basket orthe trading algorithm selected in accor-dance with the rules. For these purposes,T will not be treated as having authority toalter or amend the rules solely because Thas the authority to: (1) exercise routinejudgment in the administration of the rulesprovided, however, that such routine judg-ment does not include deviations or alter-ation to the rules that are designed toimprove the financial performance of thereference basket; (2) correct errors in theimplementation of the rules or calcula-tions made pursuant to the rules; or (3)make an adjustment to respond to an un-anticipated event outside of T’s control,such as a stock split, merger, listing ordelisting, nationalization, or insolvency ofa component of a basket, a disruption inthe financial markets for specific assets orin a particular jurisdiction, regulatorycompliance requirement, force majeure,or any other unanticipated event of similarmagnitude and significance.

.04 Tax Benefit

For purposes of this notice, a tax ben-efit is a deferral of income into a latertaxable year or a conversion of ordinaryincome or short-term capital gain or lossinto long-term capital gain or loss.

.05 Excluded Contracts

A transaction is not the same as, orsubstantially similar to, the transaction de-scribed in this notice if: (1) the contract istraded on (a) a national securities ex-change that is regulated by the Securitiesand Exchange Commission or a domesticboard of trade regulated by the Commod-ity Futures Trading Commission, or (b) aforeign exchange or board of trade that issubject to regulation by a comparable reg-ulator; or (2) the contract is treated as acontingent payment debt instrument under§ 1.1275–4 (including a short-term con-

3See section 3.01 for disclosure requirements.


tingent payment debt instrument) or avariable rate debt instrument under§ 1.1275–5. With respect to T, a transac-tion is not the same as, or substantiallysimilar to, the transaction described in thisnotice unless T’s tax return for a taxableyear ending on or after January 1, 2011,4

reflects a tax benefit of the transaction thatis described in section 2.04 of this notice.With respect to C, a transaction is not thesame as, or substantially similar to, thetransaction described in this notice if: (1)T represents to C in writing under penal-ties of perjury that T’s tax return has notand will not reflect a tax benefit describedin section 2.04 of this notice in any tax-able year ending on or after January 1,2011,5 or (2) C has established that T is anonresident alien that is not engaged in aU.S. trade or business or a foreign corpo-ration that is not engaged in a U.S. tradeor business by obtaining a valid withhold-ing certificate from the beneficial ownerof the payments made or to be made underthe basket option contract (W–8BEN,W–8BEN–E, or W–8EXP), or in the caseof payments made outside of the U.S.on offshore obligations, by obtainingdocumentary evidence as described in§ 1.1441–1(c)(17).

SECTION 3. RULES OFAPPLICATION

.01 Effective Date

Transactions in effect on or after January1, 2011, that are the same as, or substantiallysimilar to, the transaction described in thisnotice are identified as “listed transactions”for purposes of § 1.6011–4(b)(2) and§§ 6111 and 6112 as of October 21, 2015.Persons engaged in transactions in effect onor after January 1, 2011, must disclose thetransactions as described in § 1.6011–4 foreach taxable year in which the taxpayer par-ticipated in the transactions, provided thatthe period of limitations for assessment oftax had not ended on or before October 21,2015. Material advisors who make a taxstatement on or after January 1, 2011, withrespect to transactions in effect on or afterJanuary 1, 2011, have disclosure and listmaintenance obligations under §§ 6111 and6112. See §§ 301.6111–3, 301.6112–1.

Independent of their classification aslisted transactions, transactions that arethe same as, or substantially similar to, thetransaction described in this notice mayalready be subject to the requirements of§§ 6011, 6111, or 6112, or the regulationsthereunder. If a transaction is identified asa listed transaction under section 2.01 ofthis notice and as a transaction of interestin Notice 2015–74, the transaction is iden-tified as a listed transaction. Persons sat-isfying the disclosure requirements for alisted transaction under this notice aredeemed to have satisfied the disclosurerequirements under Notice 2015–74.

.02 Participation

Under § 1.6011–4(c)(3)(i)(A), for eachyear in which a transaction described inthis notice (basket option contract) isopen, only the following parties aretreated as participating in the listed trans-action identified in this notice: (1) thepurchaser of the basket option contract,(2) if the purchaser of the basket optioncontract is a partnership, any general part-ner of the purchaser, (3) if the purchaserof the basket option contract is a limitedliability company, any managing memberof the purchaser, and (4) the counterpartyto the basket option contract.

.03 Time for Disclosure

For rules regarding the time for provid-ing disclosure of a transaction describedin this notice, see § 1.6011–4(e) and§ 301.6111–3(e). However, if, under§ 1.6011–4(e), a taxpayer is required tofile a disclosure statement with respect tothe listed transaction described in this no-tice after October 21, 2015, and prior toJanuary 19, 2016, that disclosure state-ment will be considered to be timely filedif the taxpayer alternatively files the dis-closure with the Office of Tax ShelterAnalysis by January 19, 2016.

.04 Material Advisor Threshold Amount

For the threshold amounts necessary tobecome a material advisor to a listedtransaction, see § 301.6111–3(b)(3)(i)(B).

.05 Penalties and Period of Limitations

Persons required to disclose thesetransactions under § 1.6011–4 who fail todo so may be subject to the penalty under§ 6707A. Persons required to disclosethese transactions under § 6111 who failto do so may be subject to the penaltyunder § 6707(a). Persons required tomaintain lists of advisees under § 6112who fail to do so (or who fail to providesuch lists when requested by the IRS) maybe subject to the penalty under § 6708(a).In addition, the IRS may impose otherpenalties on parties involved in thesetransactions or substantially similar trans-actions, including the accuracy-relatedpenalty under §§ 6662 or 6662A. Personsrequired to disclose these transactions un-der § 1.6011–4 who fail to do so may besubject to an extended period of limita-tions on assessment under § 6501(c)(10).

The Treasury Department and the IRSrecognize that some taxpayers may havefiled tax returns taking the position thatthey were entitled to the purported taxbenefits of the type of transaction de-scribed in this notice. These taxpayersshould take appropriate corrective actionand ensure that their transactions are dis-closed properly.

.06 Requests for a Change in Methodof Accounting

(1) Background. Section 446(e) and§ 1.446–1(e) provide that, except as oth-erwise provided, a taxpayer must securethe consent of the Commissioner beforechanging a method of accounting for fed-eral income tax purposes. Section 1.446–1(e)(3)(i) provides that, to obtain theCommissioner’s consent to an accountingmethod change, a taxpayer must file aForm 3115, Application for Change inAccounting Method, during the taxableyear in which the taxpayer desires to makethe proposed change. Section 1.446–1(e)(3)(ii) authorizes the Commissioner toprescribe administrative procedures set-ting forth the limitations, terms, and con-ditions deemed necessary to permit a tax-payer to obtain consent to change a




method of accounting in accordance with§ 446(e).

Rev. Proc. 2015–13, 2015–5 I.R.B.419, as clarified and modified by Rev.Proc. 2015–33, 2015–24 I.R.B. 1067, pro-vides the procedures for obtaining theconsent of the Commissioner to change amethod of accounting for Federal incometax purposes. Under the non-automaticchange procedures of Rev. Proc. 2015–13,a taxpayer generally must file a Form3115 during the year of change. When ataxpayer computes its taxable income us-ing a method of accounting that differsfrom the method of accounting used dur-ing the preceding taxable year, a § 481(a)adjustment is required to prevent the du-plication or omission of taxable income.See § 1.446–1(e)(3)(ii).

Section 11.02 of Rev. Proc. 2015–13states that the national office will denyany Form 3115 requesting consent tomake a change in method of accounting inany situation in which the national officedetermines that permitting the requestedchange in method of accounting wouldnot clearly reflect income or would other-wise not be in the interest of sound taxadministration. As part of this determina-tion, the national office will considerwhether the change in method of account-ing would clearly and directly frustratecompliance efforts of the IRS in adminis-tering the income tax laws. The nationaloffice will consider all the facts and cir-cumstances and exercise discretion under§§ 446(e) and 481(c) in a manner thatgenerally minimizes distortions of incomeacross taxable years, as well as on anannual basis.

Rev. Rul. 90–38, 1990–1 C.B. 57, pro-vides that, if a taxpayer uses an erroneousmethod of accounting for two or moreconsecutive taxable years, the taxpayerhas adopted a method of accounting. Theruling further provides that a taxpayermay not, without the Commissioner’sconsent, retroactively change from an er-roneous to a permissible method of ac-counting by filing an amended return. Seealso Rev. Proc. 2015–13, section 2.03(1).

(2) In general. The IRS has deter-mined that it is not in the interest ofsound tax administration to permit aprospective change in method of ac-

counting6 for a transaction within thescope of this notice. Accordingly, theIRS will not process applications forany changes in method of accountingfiled under the non-automatic changeprocedures of Rev. Proc. 2015–13 for atransaction within the scope of this no-tice. A taxpayer may, however, changeits method of accounting for a transac-tion within the scope of this notice byfiling an amended return in accordancewith section 3.06(3) of this notice.

(3) Change in method of accounting byfiling amended returns.

(a) In general. In accordance with§ 1.446–1(e)(3)(ii) and Rev. Rul. 90–38,consent is hereby granted for any taxpayerthat has engaged in a transaction withinthe scope this notice to file amended re-turns to retroactively change from an im-permissible method of accounting to apermissible method of accounting for thetransaction. This consent is granted only ifthe taxpayer files such amended returnsusing a permissible method of accountingfor such transactions for the first taxableyear in which the taxpayer used the im-permissible method of accounting for anysuch transaction (or if the period of limi-tations has expired for such taxable year,for the first taxable year for which theperiod of limitations has not expired) andfor each subsequent taxable year in whichthe taxpayer’s use of the impermissiblemethod of accounting for these transac-tions affected the taxpayer’s taxable in-come. If the period of limitations has ex-pired for the first taxable year in which ataxpayer used the impermissible methodof accounting for these transactions andthe taxpayer files amended returns pursu-ant to this notice, the amended return forthe first taxable year for which the periodof limitations has not expired must in-clude the entire amount of the § 481(a)adjustment, whether positive or negative,attributable to the change in accountingmethod as ordinary in character. Theterms, conditions, and administrative pro-cedures of Rev. Proc. 2015–13, as clari-fied and modified by Rev. Proc. 2015–33,do not apply to a taxpayer changing itsmethod of accounting by amending itsFederal income tax returns under section3.06(3) of this notice.

(b) Manner of making change.A taxpayer filing amended returns under

this notice must comply with the require-ments of § 1.6011–4 including, but not lim-ited to, attaching to the amended return anydisclosure statements that may be requiredin accordance with § 1.6011–4(a) and (e).In addition, a taxpayer filing an amendedreturn under this section 3.06(3)(b) mustwrite “FILED UNDER NOTICE 2015–73”at the top of any amended paper return or,with respect to any amended return submit-ted electronically, must indicate “FILEDUNDER NOTICE 2015–73.”

SECTION 4. EFFECT ON OTHERDOCUMENTS

Notice 2015–47 is revoked.

SECTION 5. DRAFTINGINFORMATION

The principal authors of this notice areOrla J. O’Connor and Robert A. Martin ofthe Office of the Associate Chief Counsel(Financial Institutions and Products). Forfurther information regarding this notice,contact Ms. O’Connor at (202) 317-6367or Mr. Martin at (202) 317-4455 (not toll-free numbers).

Transaction of Interest–Basket Contracts

Notice 2015–74

The Treasury Department and the In-ternal Revenue Service (the “IRS”) areaware of a type of structured financialtransaction, described below, in which ataxpayer attempts to defer income recog-nition and may attempt to convert short-term capital gain and ordinary income tolong-term capital gain through a contractdenominated as an option, notional prin-cipal contract, forward contract, or otherderivative contract. The Treasury Depart-ment and the IRS believe this transaction(the “basket contract”) has a potential fortax avoidance or evasion but lack enoughinformation to determine whether thetransaction should be identified specificallyas a tax avoidance transaction. Notice 2015–48, 2015–30 I.R.B. 77, identified the basket

6Nothing in this notice may be construed as identifying whether the taxpayer’s treatment of any particular aspect of a transaction described in this notice is a method of accounting.


contract and substantially similar transac-tions as transactions of interest for purposesof § 1.6011–4(b)(6) of the Income Tax Reg-ulations and §§ 6111 and 6112 of the Inter-nal Revenue Code (“the Code”). Notice2015–48 also alerted persons involved inthese transactions about certain responsibil-ities that may arise from their involvementwith these transactions.

Commenters expressed concern thatdifficulty in identifying transactions thatare the same as, or substantially similar to,the transaction described in Notice2015–48 may cause taxpayers to file dis-closures for transactions that are not in-tended to be treated as transactions ofinterest at this time. This notice revokesNotice 2015–48. Section 2 of this noticeprovides additional details on the types oftransactions that are the same as or sub-stantially similar to the transaction de-scribed in this notice, and thus transac-tions of interest for purposes of § 1.6011–4(b)(6) and §§ 6111 and 6112 of the Code.Section 3.06 of this notice provides pro-cedures for taxpayers to change theirmethod of accounting for transactionswithin the scope of this notice.

Section 2.04 of this notice more spe-cifically describes the tax benefits thatidentify the transaction described in thisnotice as a transaction of interest. No in-ference is intended regarding the appro-priate treatment of transactions not de-scribed in this notice. The IRS maychallenge, including by asserting judicialdoctrines, claimed tax benefits under§§ 871, 881 and 882 or other provisions ofthe Code, and assert failures to complywith reporting obligations associated withinvestments in passive foreign investmentcompanies and withholding and reportingobligations under Chapters 3 and 4 of theCode.


In a basket contract, a taxpayer (“T”)enters into a contract with a counterparty(“C”) to receive a return based on theperformance of a notional basket of refer-enced assets (the “reference basket”). Theassets that comprise the reference basketmay include (1) interests in entities that

trade securities, commodities, foreign cur-rency, or similar property (“hedge fundinterests”), (2) securities, (3) commodi-ties, (4) foreign currency, or (5) similarproperty (or positions in such property).T, or a designee named by T, will eitherdetermine the assets that comprise the ref-erence basket or design or select a tradingalgorithm that determines the assets.While the basket contract remains open,T1 has the right to change the assets in thereference basket, request that C changethe assets in the reference basket, changethe trading algorithm, or request that Cchange the trading algorithm (collec-tively, discretion).2 The terms of the bas-ket contract may permit C to reject certainchanges requested by T to the assets in thereference basket or the trading algorithm.C, however, generally accepts all ornearly all of the changes requested by T.

When the basket contract is enteredinto, T typically makes an upfront cashpayment to C of between 10 and 40 per-cent of the value of the assets in the ref-erence basket. To manage its risk underthe basket contract, C typically acquiresall or substantially all of the assets in thereference basket at the inception of thecontract and acquires and disposes of as-sets during the term of the contract eitherwhen T changes the assets in the referencebasket or the trading algorithm providesfor such changes. C generally supplies theadditional cash required to purchase theassets in the reference basket. The assetsin the reference basket would typicallygenerate ordinary income if held directlyby T, and short-term gains and losses ifpurchases and sales of the assets werecarried out directly by T.

The basket contract has a stated term ofmore than one year or overlaps two of T’staxable years but contains provisions thatin effect allow either party to terminatethe contract at any time during the statedcontract term with proper notice. Theamount that T receives upon settlement ofthe basket contract is based on the perfor-mance of the assets in the reference bas-ket. A common payout formula on thebasket contract entitles T to a return equalto the upfront payment, plus net basket

gain or minus net basket loss. The netbasket gain or net basket loss includes netchanges in the values of the assets in thereference basket, together with interest,dividend, and other periodic income onthe assets, reduced by C’s fee for its rolein the transaction. The basket contract typ-ically includes a provision automaticallyterminating the contract if the amount ofthe net basket loss reaches the amount ofthe upfront payment, giving T a cash set-tlement amount of zero. The basket con-tract also may permit or require T to pro-vide additional collateral or otherwisereduce risk in the reference basket if aspecified level of risk is reached.

The basket contract typically containsother safeguards to minimize the eco-nomic risk to C. For example, C mayterminate the basket contract if T violatesinvestment guidelines that are part of thecontract. C typically holds the rights as-sociated with legal title to the assets andpositions in the reference basket, includ-ing voting rights and the right to commin-gle, lend, pledge, transfer, or otherwiseuse the assets in the basket without noticeto T.

T takes the position that T’s short-termtrading gains and interest, dividend, andother ordinary periodic income from theperformance of the reference basket aredeferred until the basket contract termi-nates and, if the basket contract is held formore than one year, that the entire gain istreated as long-term capital gain.

The Treasury Department and the IRSare concerned that taxpayers may be usinga basket contract to inappropriately deferincome recognition or convert ordinaryincome or short-term capital gain intolong-term capital gain. In some cases, tax-payers also may be mischaracterizing theform of the transaction to avoid applica-tion of § 1260. Therefore, the TreasuryDepartment and the IRS are identifyingtransactions described in section 2 of thisnotice as transactions of interest. TheTreasury Department and the IRS believethat the use of a basket contract to claimthe tax treatment specified herein may beimproper.

1When used in this sentence and subsequently with respect to changing or requesting changes to the assets in the reference basket or the trading algorithm, references to “T” include T’sdesignee as defined in section 2.02 of this notice.

2See also section 2.03 of this notice.


SECTION 2. TRANSACTIONSOF INTEREST

.01 Transactions Identified asTransactions of Interest

A transaction is the same as, or sub-stantially similar to, the transaction of in-terest identified in this notice only if: (1) Tenters into a contract with C to receive areturn based on the performance of thereference basket; (2) the basket contracthas a stated term of more than one year oroverlaps two of T’s taxable years; (3) T orT’s designee (as defined in section 2.02 ofthis notice) has exercised discretion (asdefined in section 2.03 of this notice) tochange (either directly or through a re-quest to C) the assets in the referencebasket or the trading algorithm; and (4)T’s tax return for a taxable year ending onor after January 1, 2011,3 reflects a taxbenefit described in section 2.04 of thisnotice. Notwithstanding any other provi-sion in this notice, a transaction is not thesame as, or substantially similar to, thetransaction of interest identified in thisnotice if the transaction is described insection 2.05 of this notice.

.02 Designee

For purposes of this notice, any refer-ence to T having the right to change orrequest changes to the assets in the refer-ence basket or the trading algorithm in-cludes T’s designee as defined in this sec-tion 2.02. T’s designee is any person whois: (1) T’s agent under principles ofagency law; (2) compensated by T forsuggesting, requesting, or determiningchanges in the assets in the reference bas-ket or the trading algorithm; or (3) se-lected by T to suggest, request, or deter-mine changes in the assets in the referencebasket or the trading algorithm. A personwill not, however, be treated as compen-sated or selected by T as a result of: (1)the person’s position as an investment ad-visor, officer, or employee of an entity,such as a mutual fund, when the entity’spublicly offered securities are included inthe reference basket; or (2) the person’suse of, the person’s payment of a licensing

fee for the right to use, or the person’sauthority to suggest, request, or determinechanges in the assets included in (y) awidely used and publicly quoted indexthat is based on objective financial infor-mation or (z) an index that tracks a broadmarket or a market segment.

.03 Discretion

For purposes of this notice, T will notbe treated as having discretion to change(either directly or through a request to C)the assets in the reference basket or thetrading algorithm if changes in the assetsin the reference basket or the trading al-gorithm are made according to objectiveinstructions, operations, or calculationsthat are disclosed at the inception of thetransaction (the rules) and T does not havethe right to alter or amend the rules duringthe term of the transaction or to deviatefrom the assets in the reference basket orthe trading algorithm selected in accor-dance with the rules. For these purposes,T will not be treated as having authority toalter or amend the rules solely because Thas the authority to: (1) exercise routinejudgment in the administration of the rulesprovided, however, that such routine judg-ment does not include deviations or alter-ation to the rules that are designed toimprove the financial performance of thereference basket; (2) correct errors in theimplementation of the rules or calcula-tions made pursuant to the rules; or (3)make an adjustment to respond to an un-anticipated event outside of T’s control,such as a stock split, merger, listing ordelisting, nationalization, or insolvency ofa component of a basket, a disruption inthe financial markets for specific assets orin a particular jurisdiction, regulatorycompliance requirement, force majeure,or any other unanticipated event of similarmagnitude and significance.

.04 Tax Benefit

For purposes of this notice, a tax ben-efit is a deferral of income into a latertaxable year or a conversion of ordinaryincome or short-term capital gain or lossinto long-term capital gain or loss.

.05 Excluded Contracts

A transaction is not the same as, orsubstantially similar to, the transaction de-scribed in this notice if: (1) the contract istraded on (a) a national securities ex-change that is regulated by the Securitiesand Exchange Commission or a domesticboard of trade regulated by the Commod-ity Futures Trading Commission, or (b) aforeign exchange or board of trade that issubject to regulation by a comparable reg-ulator; or (2) the contract is treated as acontingent payment debt instrument under§ 1.1275–4 (including a short-term con-tingent payment debt instrument) or avariable rate debt instrument under§ 1.1275–5. With respect to T, a transac-tion is not the same as, or substantiallysimilar to, the transaction described in thisnotice unless T’s tax return for a taxableyear ending on or after January 1, 2011,4

reflects a tax benefit of the transaction thatis described in section 2.04 of this notice.With respect to C, a transaction is notthe same as, or substantially similar to,the transaction described in this noticeif: (1) T represents to C in writing underpenalties of perjury that T’s tax returnhas not and will not reflect a tax benefitdescribed in section 2.04 of this noticein any taxable year ending on or afterJanuary 1, 2011,5 or (2) C has estab-lished that T is a nonresident alien thatis not engaged in a U.S. trade or busi-ness or a foreign corporation that is notengaged in a U.S. trade or business byobtaining a valid withholding certificatefrom the beneficial owner of the pay-ments made or to be made under thebasket contract (W–8BEN, W–8BEN–E, orW–8EXP), or in the case of paymentsmade outside of the U.S. on offshore ob-ligations, by obtaining documentary evi-dence as described in § 1.1441–1(c)(17).

SECTION 3. RULES OFAPPLICATION

.01 Effective Date

Transactions entered into on or afterNovember 2, 2006, that are the same as,or substantially similar to, the transac-





tions described in this notice, and ineffect on or after January 1, 2011, areidentified as transactions of interest forpurposes of § 1.6011– 4(b)(6) and§§ 6111 and 6112 as of October 21,2015. Persons engaged in transactionsentered into on or after November 2,2006, and in effect on or after January 1,2011, must disclose the transactions asdescribed in § 1.6011– 4 for each tax-able year in which the taxpayer partici-pated in the transactions, provided thatthe period of limitations for assessmentof tax had not ended on or before Octo-ber 21, 2015. Material advisors whomake a tax statement on or after January1, 2011, with respect to transactions ineffect on or after January 1, 2011, havedisclosure and list maintenance obliga-tions under §§ 6111 and 6112. See§§ 301.6111–3, 301.6112–1.

Independent of their classification astransactions of interest, transactions thatare the same as, or substantially similar to,the transaction described in this noticemay already be subject to the require-ments of §§ 6011, 6111, or 6112, or theregulations thereunder. If a transaction isidentified as a listed transaction under sec-tion 2.01 of Notice 2015–73, and as atransaction of interest under this notice,the transaction is identified as a listedtransaction. Persons satisfying the disclo-sure requirements for a listed transactionunder Notice 2015–73 are deemed to havesatisfied the disclosure requirements un-der this notice.

When the Treasury Department and theIRS have gathered enough information tomake an informed decision as to whetherthese transactions are a tax avoidance typeof transaction, the Treasury Departmentand the IRS may take one or more admin-istrative actions, including removing thetransactions from the transactions of inter-est category in published guidance, desig-nating the transactions as a listed transac-tion, or providing a new category ofreportable transactions. In the interim, inappropriate situations, the IRS may chal-lenge the taxpayer’s position taken as partof these transactions under §§ 1260, 1001,or other provisions of the Code or underjudicial doctrines, such as substance overform.

.02 Participation

Under § 1.6011–4(c)(3)(i)(E), for eachyear in which a transaction described inthis notice (basket contract) is open, onlythe following parties are treated as partic-ipating in the transaction of interest iden-tified in this notice: (1) the purchaser ofthe basket contract, (2) if the purchaser ofthe basket contract is a partnership, anygeneral partner of the purchaser, (3) if thepurchaser of the basket contract is a lim-ited liability company, any managingmember of the purchaser, and (4) thecounterparty to the basket contract.

.03 Time for Disclosure

For rules regarding the time for provid-ing disclosure of a transaction describedin this notice, see § 1.6011–4(e) and§ 301.6111–3(e). However, if, under§ 1.6011–4(e), a taxpayer is required tofile a disclosure statement with respect tothe transaction of interest described in thisnotice after October 21, 2015, and prior toJanuary 19, 2016, that disclosure state-ment will be considered to be timely filedif the taxpayer alternatively files the dis-closure with the Office of Tax ShelterAnalysis by January 19, 2016.

.04 Material Advisor Threshold Amount

The threshold amounts are the sameas those for listed transactions. See§ 301.6111–3(b)(3)(i)(B).

.05 Penalties

Persons required to disclose thesetransactions under § 1.6011–4 who fail todo so may be subject to the penalty under§ 6707A. Persons required to disclosethese transactions under § 6111 who failto do so may be subject to the penaltyunder § 6707(a). Persons required tomaintain lists of advisees under § 6112who fail to do so (or who fail to providesuch lists when requested by the IRS) maybe subject to the penalty under § 6708(a).In addition, the IRS may impose otherpenalties on parties involved in thesetransactions or substantially similar trans-actions, including the accuracy-relatedpenalty under §§ 6662 or 6662A.

The Treasury Department and the IRSrecognize that some taxpayers may havefiled tax returns taking the position that

they were entitled to the purported taxbenefits of the type of transaction de-scribed in this notice. These taxpayersshould take appropriate corrective actionand ensure that their transactions are dis-closed properly.

.06 Requests for a Change in Methodof Accounting

(1) Background. Section 446(e) and§ 1.446–1(e) provide that, except as oth-erwise provided, a taxpayer must securethe consent of the Commissioner beforechanging a method of accounting for fed-eral income tax purposes. Section 1.446–1(e)(3)(i) provides that, to obtain theCommissioner’s consent to an accountingmethod change, a taxpayer must file aForm 3115, Application for Change inAccounting Method, during the taxableyear in which the taxpayer desires to makethe proposed change. Section 1.446–1(e)(3)(ii) authorizes the Commissioner toprescribe administrative procedures set-ting forth the limitations, terms, and con-ditions deemed necessary to permit a tax-payer to obtain consent to change amethod of accounting in accordance with§ 446(e).

Rev. Proc. 2015–13, 2015–5 I.R.B.419, as clarified and modified by Rev.Proc. 2015–33, 2015–24 I.R.B. 1067, pro-vides the procedures for obtaining theconsent of the Commissioner to change amethod of accounting for Federal incometax purposes. Under the non-automaticchange procedures of Rev. Proc. 2015–13,a taxpayer generally must file a Form3115 during the year of change.

When a taxpayer computes its taxableincome using a method of accounting thatdiffers from the method of accountingused during the preceding taxable year, a§ 481(a) adjustment is required to preventthe duplication or omission of taxable in-come. Except as otherwise provided inRev. Proc. 2015–13, a letter ruling to thetaxpayer, or in other guidance publishedin the Internal Revenue Bulletin, section7.03 of Rev. Proc. 2015–13 provides thata positive § 481(a) adjustment is takeninto account ratably over four taxableyears, and a negative § 481(a) adjustmentis taken into account in one taxable year.A taxpayer that timely files a Form 3115under Rev. Proc. 2015–13 generally re-ceives audit protection for taxable years


prior to the year of change, as provided insection 8 of Rev. Proc. 2015–13.

Section 11.02 of Rev. Proc. 2015–13states that the national office will denyany Form 3115 requesting consent tomake a change in method of accounting inany situation in which the national officedetermines that permitting the requestedchange in method of accounting wouldnot clearly reflect income or would other-wise not be in the interest of sound taxadministration. As part of this determina-tion, the national office will considerwhether the change in method of account-ing would clearly and directly frustratecompliance efforts of the IRS in adminis-tering the income tax laws. The nationaloffice will consider all the facts and cir-cumstances and exercise discretion under§§ 446(e) and 481(c) in a manner thatgenerally minimizes distortions of incomeacross taxable years, as well as on anannual basis.

Rev. Rul. 90–38, 1990–1 C.B. 57, pro-vides that, if a taxpayer uses an erroneousmethod of accounting for two or moreconsecutive taxable years, the taxpayerhas adopted a method of accounting. Theruling further provides that a taxpayermay not, without the Commissioner’sconsent, retroactively change from an er-roneous to a permissible method of ac-counting by filing an amended return. Seealso Rev. Proc. 2015–13, section 2.03(1).

(2) In general.6

(a) Deferral transaction. A taxpayerthat wants to change a method of account-ing for a transaction described in this no-tice, for a transaction from which the tax-payer’s only tax benefit is a deferral ofincome into a later taxable year (a “defer-ral transaction”), may change its methodof accounting for the deferral transactionby either: (1) filing amended returns inaccordance with section 3.06(3) of thisnotice, or (2) if eligible, requesting achange in method of accounting under thenon-automatic change procedures of Rev.Proc. 2015–13 subject to the rules pro-vided in section 3.06(4) of this notice.

(b) Conversion transaction. The IRShas determined that it is not in the interestof sound tax administration to permit aprospective change in method of account-

ing for a transaction within the scope ofthis notice that involves the conversion ofordinary income or short-term capital gainor loss into long-term capital gain or loss(a “conversion transaction”). Accord-ingly, the IRS will not process applica-tions for any changes in method of ac-counting filed under the non-automaticchange procedures of Rev. Proc. 2015–13for a conversion transaction within thescope of this notice. A taxpayer may,however, change its method of accountingfor a conversion transaction within thescope of this notice by filing an amendedreturn in accordance with section 3.06(3)of this notice.

(3) Change in method of accounting byfiling amended returns.

(a) In general. In accordance with§ 1.446–1(e)(3)(ii) and Rev. Rul. 90–38,consent is hereby granted for any taxpayerthat has engaged in a transaction withinthe scope of this notice, to file amendedreturns to retroactively change from animpermissible method of accounting to apermissible method of accounting for thetransaction. This consent is granted only ifthe taxpayer files such amended returnsusing a permissible method of accountingfor such transactions for the first taxableyear in which the taxpayer used the im-permissible method of accounting for anysuch transaction (or if the period of limi-tations has expired for such taxable year,for the first taxable year for which theperiod of limitations has not expired) andfor each subsequent taxable year in whichthe taxpayer’s use of the impermissiblemethod of accounting for these transac-tions affected the taxpayer’s taxable in-come. If the period of limitations has ex-pired for the first taxable year in which ataxpayer used the impermissible methodof accounting for these transactions andthe taxpayer files amended returns pursu-ant to this notice, the amended return forthe first taxable year for which the periodof limitations has not expired must in-clude the entire amount of the § 481(a)adjustment, whether positive or negative,attributable to the change in accountingmethod as ordinary in character. Theterms, conditions, and administrative pro-cedures of Rev. Proc. 2015–13, as clari-

fied and modified by Rev. Proc. 2015–33,do not apply to a taxpayer changing itsmethod of accounting by amending itsFederal income tax returns under section3.06(3) of this notice.

(b) Manner of making change.A taxpayer filing amended returns un-

der this notice must comply with the re-quirements of § 1.6011–4 including, butnot limited to, attaching to the amendedreturn any disclosure statements that maybe required in accordance with § 1.6011–4(a) and (e). In addition, a taxpayer filingan amended return under this section3.06(3)(b) must write “FILED UNDERNOTICE 2015–74” at the top of anyamended paper return or, with respect toany amended return submitted electroni-cally, must indicate “FILED UNDER NO-TICE 2015–74.”

(4) Filing Form 3115 under Rev. Proc.2015–13 for a deferral transaction. A tax-payer that wants to change its method ofaccounting under Rev. Proc. 2015–13 for adeferral transaction described in this notice,must use the non-automatic change proce-dures in Rev. Proc. 2015–13. Consistentwith the discretion granted to the NationalOffice under sections 7.01 and 7.03 of Rev.Proc. 2015–13, a taxpayer making a changein method of accounting under Rev. Proc.2015–13 to the method described in thisnotice must take into account the entireamount of a positive § 481(a) adjustment inthe taxable year of change.

SECTION 4. EFFECT ON OTHERDOCUMENTS

Notice 2015–48 is revoked.


The principal authors of this notice areOrla J. O’Connor and Robert A. Martin ofthe Office of the Associate Chief Counsel(Financial Institutions and Products). Forfurther information regarding this notice,contact Ms. O’Connor at (202) 317-6367or Mr. Martin at (202) 317-4455 (not toll-free numbers).

6Nothing in this notice may be construed as identifying whether the taxpayer’s treatment of any particular aspect of a transaction described in this notice is a method of accounting.


2016 Limitations AdjustedAs Provided in Section415(d), etc.

Notice 2015–75

Section 415 of the Internal RevenueCode (the Code) provides for dollar limi-tations on benefits and contributions underqualified retirement plans. Section 415(d)requires that the Secretary of the Treasuryannually adjust these limits for cost-of-living increases. Other limitations appli-cable to deferred compensation plans arealso affected by these adjustments under§ 415. Under § 415(d), the adjustmentsare to be made under adjustment proce-dures similar to those used to adjust ben-efit amounts under § 215(i)(2)(A) of theSocial Security Act.

Cost-of-Living Adjusted Limitsfor 2016

Effective January 1, 2016, the limita-tion on the annual benefit under a definedbenefit plan under § 415(b)(1)(A) remainsunchanged at $210,000.

For a participant who separated fromservice before January 1, 2016, the partic-ipant’s limitation under a defined benefitplan under § 415(b)(1)(B) is computed bymultiplying the participant’s compensa-tion limitation, as adjusted through 2015,by 1.0011.

The limitation for defined contributionplans under § 415(c)(1)(A) remains un-changed in 2016 at $53,000.

The Code provides that various otherdollar amounts are to be adjusted at thesame time and in the same manner as thedollar limitation of § 415(b)(1)(A). Aftertaking into account the applicable round-ing rules, the amounts for 2016 are asfollows:

The limitation under § 402(g)(1) on theexclusion for elective deferrals describedin § 402(g)(3) remains unchanged at$18,000.

The annual compensation limit under§§ 401(a)(17), 404(l), 408(k)(3)(C),and 408(k)(6)(D)(ii) remains un-changed at $265,000.

The dollar limitation under § 416(i)(1)(A)(i) concerning the definition of “key

employee” in a top-heavy plan remainsunchanged at $170,000.

The dollar amount under § 409(o)(1)(C)(ii)for determining the maximum accountbalance in an employee stock owner-ship plan subject to a 5-year distribu-tion period remains unchanged at$1,070,000, while the dollar amountused to determine the lengthening ofthe 5-year distribution period remainsunchanged at $210,000.

The limitation used in the definition of“highly compensated employee” under§ 414(q)(1)(B) remains unchanged at$120,000.

The dollar limitation under § 414(v)(2)(B)(i) for catch-up contributions to anapplicable employer plan other than aplan described in § 401(k)(11) or§ 408(p) for individuals aged 50 orover remains unchanged at $6,000.The dollar limitation under§ 414(v)(2)(B)(ii) for catch-up contri-butions to an applicable employer plandescribed in § 401(k)(11) or 408(p) forindividuals aged 50 or over remainsunchanged at $3,000.

The annual compensation limitationunder § 401(a)(17) for eligible partici-pants in certain governmental plansthat, under the plan as in effect on July1, 1993, allowed cost-of-living adjust-ments to the compensation limitationunder the plan under § 401(a)(17) to betaken into account, remains unchangedat $395,000.

The compensation amount under§ 408(k)(2)(C) regarding simplifiedemployee pensions (SEPs) remains un-changed at $600.

The limitation under § 408(p)(2)(E) re-garding SIMPLE retirement accountsremains unchanged at $12,500.

The limitation on deferrals under§ 457(e)(15) concerning deferred com-pensation plans of state and local gov-ernments and tax-exempt organizationsremains unchanged at $18,000.

The compensation amounts under§ 1.61–21(f)(5)(i) of the Income TaxRegulations concerning the definition of“control employee” for fringe benefitvaluation purposes remains unchanged at

$105,000. The compensation amount un-der § 1.61–21(f)(5)(iii) remains unchangedat $215,000.

The Code provides that the $1,000,000,000threshold used to determine whether amultiemployer plan is a systematically im-portant plan under § 432(e)(9)(H)(v)(III)(aa) isadjusted using the cost-of-living adjustmentprovided under § 432(e)(9)(H)(v)(III)(bb).After taking the applicable roundingrule into account, the threshold used todetermine whether a multiemployer planis a systematically important plan under§ 432(e)(9)(H)(v)(III)(aa) is increased in2016 from $1,000,000,000 to $1,012,000,000.

The Code also provides that severalretirement-related amounts are to be ad-justed using the cost-of-living adjustmentunder § 1(f)(3). After taking the applica-ble rounding rules into account, theamounts for 2016 are as follows:

The adjusted gross income limitation un-der § 25B(b)(1)(A) for determining theretirement savings contribution credit formarried taxpayers filing a joint return isincreased from $36,500 to $37,000; thelimitation under § 25B(b)(1)(B) is in-creased from $39,500 to $40,000; andthe limitation under §§ 25B(b)(1)(C) and25B(b)(1)(D) is increased from $61,000to $61,500.

The adjusted gross income limitation un-der § 25B(b)(1)(A) for determining theretirement savings contribution credit fortaxpayers filing as head of household isincreased from $27,375 to $27,750; thelimitation under § 25B(b)(1)(B) is in-creased from $29,625 to $30,000; andthe limitation under §§ 25B(b)(1)(C) and25B(b)(1)(D) is increased from $45,750to $46,125.

The adjusted gross income limitationunder § 25B(b)(1)(A) for determiningthe retirement savings contributioncredit for all other taxpayers is in-creased from $18,250 to $18,500; thelimitation under § 25B(b)(1)(B) is in-creased from $19,750 to $20,000; andthe limitation under §§ 25B(b)(1)(C)and 25B(b)(1)(D) is increased from$30,500 to $30,750.

The deductible amount under § 219(b)(5)(A) for an individual making quali-fied retirement contributions remainsunchanged at $5,500.


The applicable dollar amount under§ 219(g)(3)(B)(i) for determining thedeductible amount of an IRA contribu-tion for taxpayers who are active par-ticipants in a qualified plan (or anotherretirement plan specified in § 219(g)(5)) filing a joint return or as a quali-fying widow(er) remains unchanged at$98,000. The applicable dollar amountunder § 219(g)(3)(B)(ii) for all other tax-payers (other than married taxpayers fil-ing separate returns) remains unchangedat $61,000. The applicable dollar amountunder § 219(g)(3)(B)(iii) for a marriedindividual filing a separate return is notsubject to an annual cost-of-living adjust-ment and remains $0. The applicabledollar amount under § 219(g)(7)(A) for ataxpayer who is not an active participantbut whose spouse is an active participantis increased from $183,000 to $184,000.

Accordingly, under § 219(g)(2)(A), thededuction for taxpayers making contri-butions to a traditional IRA is phasedout for single individuals and heads ofhousehold who are active participantsin a qualified plan (or another retire-ment plan specified in § 219(g)(5)) andhave adjusted gross incomes (as de-fined in § 219(g)(3)(A)) between$61,000 and $71,000. This incomephase-out range remains unchanged.For married couples filing jointly, if thespouse who makes the IRA contribu-tion is an active participant, the incomephase-out range remains unchanged at$98,000 to $118,000. For an IRA con-tributor who is not an active participantand is married to someone who is anactive participant, the deduction isphased out if the couple’s income isbetween $184,000 and $194,000, in-creased from between $183,000 and$193,000. For a married individual fil-ing a separate return who is an activeparticipant, the phase-out range is notsubject to an annual cost-of-living ad-justment and remains $0 to $10,000.

The adjusted gross income limitationunder § 408A(c)(3)(B)(ii)(I) for deter-mining the maximum Roth IRA contri-bution for married taxpayers filing ajoint return or for taxpayers filing as aqualifying widow(er) is increased from$183,000 to $184,000. The adjustedgross income limitation under

§ 408A(c)(3)(B)(ii)(II) for all othertaxpayers (other than married taxpay-ers filing separate returns) is in-creased from $116,000 to $117,000.The applicable dollar amount under§ 408A(c)(3)(B)(ii)(III) for a marriedindividual filing a separate return isnot subject to an annual cost-of-living adjustment and remains $0.

Accordingly, under § 408A(c)(3)(A),the adjusted gross income phase-outrange for taxpayers making contribu-tions to a Roth IRA is $184,000 to$194,000 for married couples filingjointly, increased from $183,000 to$193,000. For singles and heads ofhousehold, the income phase-out rangeis $117,000 to $132,000, increasedfrom $116,000 to $131,000. For a mar-ried individual filing a separate return,the phase-out range is not subject to anannual cost-of-living adjustment andremains $0 to $10,000.

The dollar amount under § 430(c)(7)(D)(i)(II) used to determine excess employeecompensation with respect to a single-employer defined benefit pension planfor which the special election under§ 430(c)(2)(D) has been made is in-creased from $1,101,000 to $1,106,000.


The principal author of this notice isTom Morgan of the Office of the Associ-ate Chief Counsel (Tax Exempt and Gov-ernment Entities). However, other person-nel from the IRS participated in thedevelopment of this guidance. For furtherinformation regarding this notice, contactMr. Morgan at 202-317-6700 or John Heilat 443-853-5519 (not toll-free numbers).

REQUEST FOR COMMENTSREGARDING THE EXCISE TAXON AMOUNTS PAID FOR THERIGHT TO PROVIDE MILEAGEAWARDS

Notice 2015–76

SECTION 1. PURPOSE

The Treasury Department and the In-ternal Revenue Service (IRS) are consid-

ering exercising their authority under§ 4261(e)(3)(C) of the Internal RevenueCode (Code) to prescribe rules to excludefrom the tax imposed by § 4261(a) certainamounts attributable to mileage awards(sometimes referred to as “frequent flyermiles”) that are redeemed other than forthe taxable transportation of persons byair (referred to in this notice as “other thanfor taxable air transportation”), such as,but not limited to, redemptions for inter-national air transportation, restaurant giftcards, magazine and newspaper subscrip-tions, free hotel nights, and items from theairline’s shopping catalog. This notice in-vites public comments on issues thatshould be addressed in guidance relatingto § 4261(e)(3).


Section 4261(a) of the Code imposes atax on the amount paid for the taxabletransportation of any person.

Section 4262(a) defines “taxable trans-portation” to generally include transporta-tion by air that begins and ends in theUnited States.

Section 4261(d) provides that the tax ispaid by the person making the paymentsubject to tax, and § 4291 provides thatthe tax is collected by the person receivingthe payment.

Section 4261(e)(3)(A) provides that forpurposes of § 4261(a) any amount paid(and the value of any other benefit pro-vided) to an air carrier (or any relatedperson) for the right to provide mileageawards for (or other reductions in the costof) any transportation of persons by air istreated as an amount paid for taxabletransportation.

Section 4261(e)(3)(C) provides that theSecretary may prescribe rules that excludeamounts attributable to mileage awardsthat are used other than for the transpor-tation of persons by air from the tax im-posed by § 4261(a).

Congress enacted § 4261(e) as part ofthe Taxpayer Relief Act of 1997 (PublicLaw 105–34, 111 Stat. 788). The GeneralExplanation of Tax Legislation Enacted in1997 (General Explanation), prepared bythe Joint Committee on Taxation, JCS–23–97at 230–231, explains that § 4261(e)(3)(C)authorizes the Treasury Department to de-velop regulations excluding from the§ 4261(a) tax base a portion of otherwise


taxable payments, if any, with respect toawarded frequent flyer miles “if the Trea-sury determines that a portion properlycan be allocated (traced) to frequent flyermiles that are used by consumers for pur-poses other than air transportation.” Gen-eral Explanation at 231. The General Ex-planation further states that as part of anyrulemaking process it undertakes, theTreasury Department is authorized to re-view airline mileage awards programs andother information from all availablesources, including industry and third-party data, in determining whether fre-quent flyer miles can be adequately tracedto support allocations based on the ulti-mate use of the frequent flyer miles. TheGeneral Explanation also states that Con-gress intended that any adjustment to thetax base will be prescribed only if theTreasury Department finds a consistentpattern of non-air transportation usage offrequent flyer miles by consumers at lev-els indicating that significant mileageawarded pursuant to payments taxable un-der § 4261(e)(3) are being used for pur-poses other than for taxable air transpor-tation.

The Treasury Department and the IRShave not prescribed an allocation methodthat taxpayers (for example, credit cardcompanies) and collectors (typically air-lines’ mileage awards programs) can useto exclude from the taxes imposed by§ 4261(a) amounts attributable to mileageawards that are used other than for taxableair transportation. As a result, taxpayerscurrently must pay tax on all frequentflyer miles purchased from an airlinemileage awards program and then file aclaim for credit or refund for tax paid on

those frequent flyer miles that were ulti-mately redeemed other than for taxable airtransportation.

The Treasury Department and the IRSare considering a possible methodology,described in Section 3 of this Notice, thatwould allow a reduction in a taxpayer’s§ 4261(a) tax base for amounts paid formileage awards based on historical re-demption data.

SECTION 3. POSSIBLEMETHODOLOGY FORDETERMINING REDUCTION INSECTION 4261(a) TAX BASE

The Treasury Department and theIRS are considering an elective safe har-bor methodology that a collector coulduse to reduce a taxpayer’s § 4261(a) taxbase on purchased frequent flyer miles.Under the methodology, for each 12month period beginning on April 1 andending on March 31 (the “ElectionYear”), the tax base for frequent flyermiles purchased from a particular airlinemileage awards program would be re-duced based on redemption data fromthat airline mileage awards program forthe calendar year immediately precedingthe calendar year in which the ElectionYear begins (the “Base Period”).

The methodology would be based onthe following data from the Base Period:

• Total number of frequent flyer milesredeemed under that program.

• Number of frequent flyer miles underthat program redeemed for taxable airtransportation.

• Number of frequent flyer miles re-deemed under that program other thanfor taxable air transportation.

More specifically, for each specific air-line mileage awards program (that is, on aper airline mileage awards program basis),a collector may reduce the tax base uponwhich the tax imposed by § 4261(a) iscalculated by applying the following ratio:

i) The number of frequent flyer milesunder that program that the airline datashows were redeemed during the BasePeriod other than for taxable air trans-portation; over

ii) The total number of frequent flyermiles under that program that the air-line data shows were redeemed duringthe Base Period.

The collector will multiply the amountpaid for the right to provide frequent flyermiles under the program by the ratio de-termined above (the “Exclusion Ratio”)and will reduce the § 4261(a) tax base onthe purchased frequent flyer miles by thisamount. The Exclusion Ratio would applyfor the entire Election Year.

Example. The following example illus-trates this methodology:

On April 1, 2015, Company buys5,000,000 frequent flyer miles from Air-line X’s only mileage award program for$.01 per frequent flyer mile (for a totalcost of $50,000). Under current law, if the§ 4261(a) tax is calculated on the grosspurchase of the frequent flyer miles, thetax due on the purchase will be $3,750($50,000 x 7.5%).

For the applicable Base Period (that is,January 1, 2014, through December 31,2014), Airline X data indicates that fre-quent flyer miles were redeemed as notedin the table below:

Base PeriodTotal Frequent Flyer

Miles RedeemedFrequent Flyer Miles

Redeemed for Taxable Air TransportationFrequent Flyer Miles Redeemed

for Non-Taxable Purposes

1/1/2014 – 12/31/2014 100,000,000 70,000,000 30,000,000

Following the methodology describedabove, Airline X may reduce Company’stax base on the purchased frequent flyermiles as follows:

• Frequent flyer miles redeemed otherthan for taxable air transportation inthe Base Period divided by total frequent

flyer miles redeemed in that period:30,000,000 � 100,000,000 � 30%.

• Exclusion Ratio calculated in theprevious step applied to the frequentflyer miles purchased on April 1,2015: 30% x $50,000 amount paidfor frequent flyer miles � § 4261(a)tax base reduction of $15,000. This

results in a § 4261(a) tax base of$35,000 ($50,000 less $15,000).

Therefore, under this methodology, thetax due on the April 1, 2015, purchase is$2,625 ($35,000 § 4261(a) tax base x7.5%).


SECTION 4. POSSIBLEPROCEDURES FOR ACOLLECTOR ADOPTING ANEXCLUSION RATIO FOR APROGRAM FOR A YEAR

4.01 The collector would file a newform (to be designated by the IRS at afuture date) reporting the Exclusion Ratioto the IRS by February 1 following theclose of the Base Period. The collector’sfiling of the form by February 1 consti-tutes an election to use the safe harbormethodology. The election would be irre-vocable for all frequent flyer miles pur-chased from the collector during the Elec-tion Year beginning on April 1 followingthe close of the Base Period.

4.02 The collector would provide noti-fication of the adoption of the use of anExclusion Ratio and specify the ratio itselfin program literature available to taxpay-ers by February 1.

4.03 The collector would be required touse the Exclusion Ratio reported by thecollector in its February 1 filing for theentire Election Year.

4.04 A taxpayer that purchased fre-quent flyer miles offered by the collectorwould be deemed to have elected applica-tion of the safe harbor methodology. Thecollector would be required to referencethis deemed election in program literatureavailable to taxpayers.

4.05 A taxpayer would not subse-quently be able to obtain a credit or refundfor a portion of the tax paid if the percent-age of frequent flyer miles ultimately re-deemed other than for taxable air trans-portation ends up being higher than thepercentage calculated under the safe har-bor methodology, nor would the taxpayerbe assessed additional § 4261(a) tax if thepercentage ends up being lower.

SECTION 5. POSSIBLEPROCEDURES FOR FILING FORM720 APPLYING AN EXCLUSIONRATIO

A box would be added to Part I, Com-munications and Air TransportationTaxes, line IRS no. 26, of Form 720,Quarterly Federal Excise Tax Return, inwhich the collector would report the Ex-clusion Ratio.

SECTION 6. REQUEST FORCOMMENTS

The Treasury Department and the IRSrequest comments on issues that should beaddressed in guidance relating to § 4261(e)(3).Specifically, the Treasury Department andthe IRS request comments addressing thefollowing:

• Whether the methodology in Section 3of this notice, if adopted, is workablefor taxpayers, airlines, and other po-tential stakeholders.

• Whether the methodology in Section3 of this notice, if adopted, should beadopted as a rule of general applicabilityinstead of as a safe harbor provision.

• Whether the methodology in Section 3of this notice should be modified totake into account a longer or shorterperiod of historical data.

• Whether airlines (or airline mileageawards programs) are willing to sharehistorical data with taxpayers so thattaxpayers can verify the tax base uponwhich the § 4261(a) tax is appliedwhen a taxpayer purchases frequentflyer miles.

• Whether in lieu of the methodology inSection 3 of this notice, the TreasuryDepartment and the IRS should pro-vide an allocation percentage that canbe applied on an airline industry-widebasis, which the Treasury Departmentand the IRS would calculate usingindustry-provided data.

• How often an industry-wide alloca-tion percentage, if adopted, shouldbe updated to reflect current industrydata and what is the best method forthe Treasury Department and theIRS to collect the necessary data.

• Whether the Treasury Department andthe IRS should adopt a methodologythat is not described in this notice andrecommendations for alternativemethodologies.

• Whether the Treasury Department andthe IRS should provide a mechanismfor collectors to make adjustments tothe Exclusion Ratio to correct compu-tational and typographical errors afterthe collector reports the Exclusion Ra-tio to the IRS, and how such a mech-anism should work.

• Whether the procedures in Sections 4and 5 of this notice would be workablefrom the collector and the taxpayer’sperspectives.

• How to address overpayments andunderpayments of tax resultingfrom errors in the Exclusion Ratio,including whether the collectorshould be responsible for such un-derpayments.

DATE: Comments must be submittedby March 15, 2016.

ADDRESSES: Comments, identifiedby Notice 2015–76, may be sent by one ofthe following methods:

• Mail:

Internal Revenue ServiceCC:PA:LPD:PR (Notice 2015–76)Room 5203P.O. Box 7604Ben Franklin StationWashington, DC 20044

• Hand or courier delivery:Submissions may be hand deliveredMonday through Friday between thehours of 8 a.m. and 4 p.m. to:

Courier’s DeskInternal Revenue Service1111 Constitution Ave., N.W.Washington, DC 20224Attn: CC:PA:LPD:PR(Notice 2015–76)

• Electronic:Taxpayers may submit commentselectronically to [email protected]. Please include“Notice 2015–76” in the subject lineof any electronic communications.

All submissions will be available forpublic inspection and copying in room1621, 1111 Constitution Avenue, NW,Washington, DC, from 9 a.m. to 4 p.m.

SECTION 7. NO EFFECT ONOTHER DOCUMENTS

This notice does not affect any otherdocuments.

SECTION 8. NO RELIANCE BYCOLLECTORS OR TAXPAYERS

Unless and until the Treasury Depart-ment and the IRS issue regulatory or other


administrative guidance under § 4261(e)(3)(C)that adopts the methodology in Section 3of this notice, the methodology in Section3 of this notice does not apply for pur-poses of calculating the tax due under§ 4261(a), and neither excise tax collec-tors nor taxpayers may rely on thatmethod or this notice.


The principal author of this notice isMichael H. Beker of the Office of Asso-ciate Chief Counsel (Passthroughs & Spe-cial Industries). For further information

regarding this notice, please contact Mr.Beker at (202) 317-6855 (not a toll-freenumber).


Part IV. Items of General InterestDeletions From CumulativeList of Organizations,Contributions to Which areDeductible Under Section170 of the Code

Announcement 2015–28

Table of ContentsThe Internal Revenue Service has revoked

its determination that the organizations listedbelow qualify as organizations described insections 501(c)(3) and 170(c)(2) of the Inter-nal Revenue Code of 1986.

Generally, the IRS will not disallow deduc-tions for contributions made to a listed orga-

nization on or before the date of announce-ment in the Internal Revenue Bulletin that anorganization no longer qualifies. However, theIRS is not precluded from disallowing a de-duction for any contributions made after anorganization ceases to qualify under section170(c)(2) if the organization has not timelyfiled a suit for declaratory judgment undersection 7428 and if the contributor (1) hadknowledge of the revocation of the ruling ordetermination letter, (2) was aware that suchrevocation was imminent, or (3) was in partresponsible for or was aware of the activitiesor omissions of the organization that broughtabout this revocation.

If on the other hand a suit for declara-tory judgment has been timely filed, con-

tributions from individuals and organiza-tions described in section 170(c)(2) thatare otherwise allowable will continue tobe deductible. Protection under section7428(c) would begin on November 16,2015 and would end on the date the courtfirst determines the organization is notdescribed in section 170(c)(2) as moreparticularly set for in section 7428(c)(1).For individual contributors, the maximumdeduction protected is $1,000, with a hus-band and wife treated as one contributor.This benefit is not extended to any indi-vidual, in whole or in part, for the acts oromissions of the organization that werethe basis for revocation.

NAME OF ORGANIZATION Effective Date of Revocation LOCATION

Center for Academic Research and Enrichment January 1, 2013 San Luis Obispo, CA

Columbians of Nampa, Inc. January 1, 2010 Nampa, ID

Community Distribution Center January 1, 2011 Sherman Oaks, CA

Inspired Life Center, Inc. January 1, 2011 Las Vegas, NV

Johnny’s Kids, Inc. January 1, 2011 Westerville, OH

Legacy Charter Schools, Inc. July 1, 2011 Los Angeles, CA

Lewis Carroll Academy of the Arts a/k/a LewisCarroll Academy of the Arts, Inc.

November 1, 2012 Porter Ranch, CA

New Life Generation, Inc. January 1, 2013 Terre Haute, IN

Omega First Incorporated July 1, 2010 Charlotte, NC

Partners for a Safer America, Inc. January 1, 2012 Palm Desert, CA

People Against Drugs Affordable Housing Agency January 1, 2011 Dallas, TX

Return: The United Fund For The Education OfRussian Immigrant Children In Israel, Inc

January 1, 2000 Brooklyn, NY

The Ted Foundation, Inc. July 1, 2009 Aliquippa, PA

Works of Life International Ministries, Inc. January 1, 2011 Clovis, CA

Notice of Disposition ofDeclaratory JudgmentProceedings under Section7428Announcement 2015–29

This announcement serves notice todonors that on May 21, 2015, the UnitedStates Tax Court entered a stipulated de-cision that effective April 1, 2010, theorganization listed below is not qualifiedas an organization described in I.R.C.§ 501(c)(3), is not exempt from taxation

under I.R.C. § 501(a), and is not an orga-nization described in I.R.C. § 170(c)(2).

Bixun Wang and Lin Cheng FoundationFremont, CA

Notice of Disposition ofDeclaratory JudgmentProceedings under Section7428Announcement 2015–30

This announcement serves notice todonors that on June 22, 2015, the United

States Tax Court entered a stipulated de-cision that effective January 1, 2008, theorganization listed below is not qualifiedas an organization described in I.R.C.§ 501(c)(3), is not exempt from taxationunder section 501(a), and is not an orga-nization described in section 170(c)(2).

Golden State Debt ManagementLos Angeles, CA


Preparer Tax IdentificationNumber (PTIN) User FeeUpdate

REG–121496–15

AGENCY: Internal Revenue Service (IRS),Treasury.

ACTION: Notice of proposed rulemakingby cross-reference to temporary regulations.

SUMMARY: In the Rules and Regula-tions section of this issue of the Bulletin,the IRS is issuing temporary regulationsthat will amend regulations (TD 9503)relating to the imposition of certain userfees on tax return preparers. The tempo-rary regulations reduce the amount of theuser fee to apply for or renew a preparertax identification number (PTIN). The textof the temporary regulations also serves asthe text of these proposed regulations.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by January 28, 2016.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–121496–15), room5203, Internal Revenue Service, PO Box7604, Ben Franklin Station, Washington,D.C. 20044. Submissions may be hand-delivered Monday through Friday be-tween the hours of 8 a.m. and 4 p.m. toCC:PA:LPD:PR (REG–121496–15), Cou-rier’s Desk, Internal Revenue Service,1111 Constitution Avenue, NW, Wash-ington, D.C. 20224 or sent electronicallyvia the Federal eRulemaking Portal athttp://www.regulations.gov (IRS REG–121496–15). The public hearing will beheld in the Auditorium of the InternalRevenue Building, 1111 Constitution Av-enue, NW, Washington, D.C.

FOR FURTHER INFORMATIONCONTACT: Concerning the proposedregulations, Hollie M. Marx at (202) 317-6844; concerning cost methodology, EvaJ. Williams at (202) 803-9728; concerningsubmission of comments and/or requestsfor a public hearing, OluwafunmilayoTaylor, (202) 317-6901 (not toll-freenumbers).

SUPPLEMENTARY INFORMATION:

Background and Explanationof Provisions

Temporary regulations in the Rulesand Regulations section of this issue ofthe Bulletin amend regulations under 26CFR part 300 setting a user fee for indi-viduals who apply for or renew a PTIN.The text of the temporary regulations alsoserves as the text of these proposed regu-lations. The preamble to the temporaryregulations explains the temporary regu-lations and these proposed regulations.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a signifi-cant regulatory action as defined in Exec-utive Order 12866, as supplemented byExecutive Order 13563.

It has been determined that an initialregulatory flexibility analysis is requiredfor this notice of proposed rulemakingunder 5 U.S.C. 603. This analysis is setforth under the heading “Initial Regula-tory Flexibility Analysis.”

Pursuant to section 7805(f), this noticeof proposed rulemaking has been submit-ted to the Chief Counsel for Advocacy ofthe Small Business Administration forcomment on its impact on small business.

Initial Regulatory Flexibility Analysis

When an agency issues a rulemakingproposal, the Regulatory Flexibility Act(5 U.S.C. chapter 6) (RFA) requires theagency “to prepare and make available forpublic comment an initial regulatory flex-ibility analysis” that will “describe theimpact of the proposed rule on small en-tities.” See 5 U.S.C. 603(a). Section 605of the RFA provides an exception to thisrequirement if the agency certifies that theproposed rulemaking will not have a sig-nificant economic impact on a substantialnumber of small entities. A small entity isdefined as a small business, small non-profit organization, or small governmentaljurisdiction. See 5 U.S.C. 601(3) through(6). The IRS and the Treasury Departmentconclude that the proposed rule, if pro-mulgated, may have a significant eco-nomic impact on a substantial number ofsmall entities. As a result, an initial regu-latory flexibility analysis is required.

Description of the reasons why actionby the agency is being considered

The IRS and the Treasury Departmentimplemented regulatory changes in 2010that required any individual who preparesor who assists in preparing all or substan-tially all of a tax return or claim for refundfor compensation to obtain a PTIN. Pur-suant to the PTIN regulations, only thoseindividuals who apply for and maintain acurrent PTIN may prepare tax returns andclaims for refund for compensation. Be-cause the ability to prepare tax returns andclaims for refund for compensation is lim-ited to individuals who have a PTIN, theprovision of a PTIN confers a special ben-efit. The IRS incurs costs associated withprocessing a PTIN application and provid-ing the special benefit associated with thePTIN. The IRS and Treasury Departmentinitially determined that the full cost ofproviding the special benefit conferred bya PTIN was $50 for each original appli-cation and each annual renewal. In accor-dance with OMB Circular A–25, the IRSand Treasury conducted a biennial reviewof the PTIN user fee amount in 2015 anddetermined that the full cost of providingthe special benefit conferred by a PTINhad been reduced to $33 for each originalapplication and each annual renewal.

A succinct statement of the objectives of,and legal basis for, the proposed rule

The objective of the proposed regula-tions is to recover the costs to the govern-ment associated with providing the specialbenefit that an individual receives uponapplying for or renewing a PTIN. Thesecosts include activities, processes, andprocedures related to the electronic andpaper registration and renewal submis-sions; tax compliance and backgroundchecks; professional designation checks;foreign preparer processing; complianceand complaint activities; informationtechnology and contract-related expenses;and communications. The PTIN user feealso takes into account various indirectprogram costs, including management andsupport costs. OMB Circular A–25 en-courages user fees when special benefitsare conferred on identifiable recipients.Individuals who obtain a PTIN receive theability to prepare or assist in preparing allor substantially all of a tax return or claim


for refund for compensation. The ability toprepare or assist in preparing all or substan-tially all of a tax return or claim for refundfor compensation is a special benefit.

The legal basis for the PTIN user fee iscontained in section 9701 of title 31.

A description of and, where feasible, anestimate of the number of small entitiesto which the proposed rule will apply

The proposed regulations affect all in-dividuals who prepare or assist in prepar-ing all or substantially all of a tax return orclaim for refund for compensation. Onlyindividuals, not businesses, can apply foror renew a PTIN. Thus, the economicimpact of these regulations on any smallentity generally will be a result of anindividual tax return preparer who is re-quired to apply for or renew a PTIN own-ing a small business or a small businessotherwise employing an individual tax re-turn preparer who is required to apply foror renew a PTIN.

The appropriate NAICS codes for PTINsare those that relate to tax preparation ser-vices (NAICS code 541213), offices of cer-tified public accountants (NAICS code541211), other accounting services (NAICScode 541219), and offices of lawyers (NA-ICS code 541110). Entities identified as taxpreparation services, offices of certified pub-lic accountants, and other accounting ser-vices are considered small under the SmallBusiness Administration size standards (13CFR 121.201) if their annual revenue is lessthan $20.5 million. Entities identified as of-fices of lawyers are considered small underthe Small Business Administration sizestandards if their annual revenue is less than$11 million. The IRS estimates that approx-imately 70 to 80 percent of the individualssubject to these proposed regulations are taxreturn preparers operating as or employedby small entities.

A description of the projected reporting,recordkeeping and other compliancerequirements of the proposed rule,including an estimate of the classes ofsmall entities which will be subject tothe requirement and the type ofprofessional skills necessary forpreparation of the report or record

No reporting or recordkeeping require-ments are projected to be associated withthis proposed regulation.

An identification, to the extentpracticable, of all relevant Federal ruleswhich may duplicate, overlap, or conflictwith the proposed rule

The IRS is not aware of any Federalrules that duplicate, overlap, or conflictwith the proposed rule.

A description of any significantalternatives to the proposed rule whichaccomplish the stated objectives ofapplicable statutes and which minimizeany significant economic impact of theproposed rule on small entities

The IOAA authorizes the charging ofuser fees for agency services, subject topolicies designated by the President.OMB Circular A–25 implements presi-dential policies regarding user fees andencourages user fees when a governmentagency provides a special benefit to amember of the public. In the IOAA, Con-gress has stated a preference that specialbenefits be self-sustaining.

A PTIN is required for an individual toprepare or assist in preparing all or sub-stantially all of a tax return or claim forrefund for compensation. PTINs are usedby the IRS to collect and track data on taxreturn preparers. This data allows the IRSto track the number of persons who pre-pare or assist in preparing returns andclaims for refund, the qualifications ofthose persons who prepare or assist inpreparing returns and claims for refund,the number of returns each person pre-pares, and, when instances of misconductor potential misconduct are detected, lo-cate and review returns and claims forrefund prepared by a specific tax returnpreparer. PTINs must be renewed annu-ally to ensure that the identifying informa-tion associated with a PTIN is current.

Due to the costs to the government toprocess the application for a PTIN, therequirement to include a PTIN on tax re-turns and claims for refund, and the ex-pressed preference in the IOAA that spe-cial benefits be self-sustaining, there is noviable alternative to imposing a user fee.

Comments and Public Hearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written (a signedoriginal and eight (8) copies) or electronic

comments that are submitted timely to theIRS. The IRS and Treasury Departmentrequest comments on all aspects of theseproposed regulations. All comments thatare submitted by the public will be madeavailable for public inspection and copy-ing. A public hearing will be scheduled ifrequested in writing by any person whotimely submits written comments. If apublic hearing is scheduled, notice of thedate, time, and place for the public hearingwill be published in the Federal Register.


The principal author of these regula-tions is Hollie M. Marx, Office of theAssociate Chief Counsel (Procedure andAdministration).

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 300 is pro-posed to be amended as follows:

Paragraph 1. The authority citation forpart 300 continues to read as follows:

Authority: 31 U.S.C. 9701.Par. 2. Section 300.13 is amended by

revising paragraphs (b) and (d) to read asfollows:

§ 300.13 Fee for obtaining a preparertax identification number.

* * * * *(b) [The text of proposed § 300.13(b) is

the same as the text of § 300.13T(b) publishedelsewhere in this issue of the Bulletin].

* * * * *(d) [The text of proposed § 300.13(d) is

the same as the text of § 300.13T(d) publishedelsewhere in this issue of the Bulletin].

Karen M. Schiller,Acting Deputy Commissioner

for Services and Enforcement.

(Filed by the Office of the Federal Register on October 29,2015, 8:45 a.m., and published in the issue of the FederalRegister for October 30, 2015, 80 F.R. 27791)


Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe theeffect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds thatthe same principle also applies to B, theearlier ruling is amplified. (Compare withmodified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the newruling does more than restate the sub-

stance of a prior ruling, a combination ofterms is used. For example, modified andsuperseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that isself contained. In this case, the previouslypublished ruling is first modified and then,as modified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further namesin subsequent rulings. After the originalruling has been supplemented severaltimes, a new ruling may be published thatincludes the list in the original ruling andthe additions, and supersedes all prior rul-ings in the series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in currentuse and formerly used will appear in ma-terial 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.

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.

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.

Bulletin No. 2015–46 November 16, 2015i

Numerical Finding List1

Bulletins 2015–27 through 2015–46

Announcements:

2015-17, 2015-28 I.R.B. 672015-18, 2015-33 I.R.B. 1982015-19, 2015-32 I.R.B. 1572015-20, 2015-38 I.R.B. 3552015-21, 2015-34 I.R.B. 2202015-22, 2015-35 I.R.B. 2882015-23, 2015-36 I.R.B. 3112015-24, 2015-36 I.R.B. 3132015-25, 2015-39 I.R.B. 4222015-28, 2015-46 I.R.B. 6732015-29, 2015-46 I.R.B. 6732015-30, 2015-46 I.R.B. 673

Notices:

2015-43, 2015-29 I.R.B. 732015-46, 2015-28 I.R.B. 642015-47, 2015-30 I.R.B. 762015-48, 2015-30 I.R.B. 772015-49, 2015-30 I.R.B. 792015-50, 2015-30 I.R.B. 812015-51, 2015-31 I.R.B. 1332015-52, 2015-35 I.R.B. 2272015-53, 2015-33 I.R.B. 1902015-54, 2015-34 I.R.B. 2102015-55, 2015-34 I.R.B. 2172015-56, 2015-35 I.R.B. 2352015-57, 2015-36 I.R.B. 2942015-58, 2015-37 I.R.B. 3222015-59, 2015-40 I.R.B. 4592015-60, 2015-43 I.R.B. 6042015-61, 2015-39 I.R.B. 4082015-62, 2015-39 I.R.B. 4112015-63, 2015-40 I.R.B. 4612015-64, 2015-40 I.R.B. 4642015-65, 2015-40 I.R.B. 4662015-66, 2015-41 I.R.B. 5412015-67, 2015-41 I.R.B. 5462015-68, 2015-41 I.R.B. 5472015-69, 2015-41 I.R.B. 5502015-70, 2015-43 I.R.B. 6042015-71, 2015-43 I.R.B. 6062015-72, 2015-44 I.R.B. 6132015-73, 2015-46 I.R.B. 6602015-74, 2015-46 I.R.B. 6632015-75, 2015-46 I.R.B. 6682015-76, 2015-46 I.R.B. 669

Proposed Regulations:

REG-140379-02, 2015-45 I.R.B. 653REG-136459-09, 2015-37 I.R.B. 332REG-155164-09, 2015-41 I.R.B. 560REG-109370-10, 2015-33 I.R.B. 198REG-112997-10, 2015-39 I.R.B. 422

Proposed Regulations:—Continued

REG-103033-11, 2015-37 I.R.B. 325REG-109813-11, 2015-37 I.R.B. 330REG-138344-13, 2015-41 I.R.B. 557REG-139483-13, 2015-40 I.R.B. 475REG-148998-13, 2015-45 I.R.B. 653REG-115452-14, 2015-32 I.R.B. 158REG-127895-14, 2015-41 I.R.B. 556REG-132075-14, 2015-35 I.R.B. 288REG-138526-14, 2015-28 I.R.B. 67REG-143800-14, 2015-37 I.R.B. 347REG-102648-15, 2015-31 I.R.B. 134REG-102837-15, 2015-27 I.R.B. 43REG-121496-15, 2015-46 I.R.B. 674REG-123640-15, 2015-37 I.R.B. 350

Revenue Procedures:

2015-34, 2015-27 I.R.B. 42015-36, 2015-27 I.R.B. 202015-38, 2015-36 I.R.B. 2952015-39, 2015-33 I.R.B. 1952015-40, 2015-35 I.R.B. 2362015-41, 2015-35 I.R.B. 2632015-42, 2015-36 I.R.B. 3102015-43, 2015-40 I.R.B. 4672015-44, 2015-38 I.R.B. 3542015-45, 2015-39 I.R.B. 4122015-46, 2015-39 I.R.B. 4142015-47, 2015-39 I.R.B. 4192015-48, 2015-40 I.R.B. 4692015-49, 2015-41 I.R.B. 5552015-50, 2015-42 I.R.B. 5832015-51, 2015-42 I.R.B. 5832015-52, 2015-45 I.R.B. 6382015-53, 2015-44 I.R.B. 6152015-54, 2015-45 I.R.B. 648

Revenue Rulings:

2015-15, 2015-27 I.R.B. 12015-16, 2015-31 I.R.B. 1302015-17, 2015-39 I.R.B. 3582015-18, 2015-34 I.R.B. 2092015-19, 2015-36 I.R.B. 2912015-20, 2015-38 I.R.B. 3532015-21, 2015-40 I.R.B. 4472015-22, 2015-44 I.R.B. 610

Treasury Decisions:

9723, 2015-31 I.R.B. 849726, 2015-31 I.R.B. 989727, 2015-32 I.R.B. 1549728, 2015-33 I.R.B. 1699729, 2015-35 I.R.B. 2219730, 2015-35 I.R.B. 2239731, 2015-37 I.R.B. 3149732, 2015-39 I.R.B. 3719733, 2015-41 I.R.B. 494

Treasury Decisions:—Continued

9734, 2015-41 I.R.B. 5009735, 2015-37 I.R.B. 3169736, 2015-39 I.R.B. 4029737, 2015-40 I.R.B. 4499738, 2015-40 I.R.B. 4539739, 2015-41 I.R.B. 5289740, 2015-42 I.R.B. 5739741, 2015-45 I.R.B. 6289742, 2015-46 I.R.B. 657

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–01 through 2015–26 is in Internal Revenue Bulletin2015–26, dated June 29, 2015.

November 16, 2015 Bulletin No. 2015–46ii

Finding List of Current Actions onPreviously Published Items1

Bulletins 2015–27 through 2015–46

Notices:

2014-4Modified byNotice 2015-51, 2015-31 I.R.B. 133

2014-17Superseded byNotice 2015-67, 2015-41 I.R.B. 546

Proposed Regulations:

2009-57Obsoleted byREG-112997-10 2015-39 I.R.B. 422

2013-17Obsoleted byREG-148998-13 2015-45 I.R.B. 653

Revenue Procedures:

1992-75Clarified byRev. Proc. 2015-40, 2015-35 I.R.B. 236

2003-40Modified byRev. Proc. 2015-40, 2015-35 I.R.B. 236



2006-9Superseded byRev. Proc. 2015-41, 2015-35 I.R.B. 263





Revenue Procedures:—Continued




2015-40Amplified byRev. Proc. 2015-41, 2015-35 I.R.B. 263

2015-41Amplified byRev. Proc. 2015-40, 2015-35 I.R.B. 236

Treasury Decisions:

58-422Obsoleted byT.D. 9739 2015-41 I.R.B. 528





1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–01 through 2015–26 is in Internal Revenue Bulletin2015–26, dated June 29, 2015.

Bulletin No. 2015–46 November 16, 2015iii

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue BulletinIf you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.NW, IR-6230 Washington, DC 20224.

Internal Revenue ServiceWashington, DC 20224Official BusinessPenalty for Private Use, $300

Documents

IRB 2015-46 (Rev. November 16, 2015)