IRB 2017-42 (Rev. October 16, 2017) - Internal Revenue … On Decision 2017–07, page 311. Nonacquiescence relating to the holdings that: 1) mere posses-sion of a stock certiﬁcate,

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

Action On Decision 2017–07, page 311.Nonacquiescence relating to the holdings that: 1) mere posses-sion of a stock certificate, disregarding other conditions, restric-tions or limitations on the possessor’s rights regarding the stock,constitutes ownership for purposes of § 469(c)(7)(D)(ii); and 2)work performed by the taxpayer in a rental real estate activity forpurposes of § 469(c)(7)(A) may also constitute work performed bythe taxpayer in non-rental business activities of the taxpayer forother purposes of § 469.

Notice 2017–53, page 318.This notice explains the circumstances under which the 4-yearreplacement period under section 1033(e)(2) is extended forlivestock sold on account of drought. The Appendix to thisnotice contains a list of counties that experienced exceptional,extreme, or severe drought conditions during the 12-monthperiod ending August 31, 2017. Taxpayers may use this list todetermine if any extension is available.

Notice 2017–54, page 321.Optional special per diem rates. This notice provides the2017–2018 special per diem rates for taxpayers to use insubstantiating the amount of ordinary and necessary businessexpenses incurred while traveling away from home. The noticeincludes (1) the special transportation industry rate, (2) the ratefor the incidental expenses only deduction, and (3) the ratesand list of high-cost localities for the high-low substantiationmethod.

Notice 2017–55, page 324.This notice excludes from the definition of United States prop-erty for purposes of section 956 certain property temporarilystored in the United States following Hurricane Irma or Hurri-cane Maria.

Notice 2017–57, page 324.This notice announces that Treasury and IRS intend to amendregulations under section 987 to delay the applicability date of thefinal section 987 regulations and certain temporary section 987regulations by 1 year. The Treasury Department and the IRSintend to amend §§1.861–9T, 1.985–5, 1.987–11, 1.987–1Tthrough 1.987–4T, 1.987–6T, 1.987–7T, 1.988–1, 1.988–1T,1.988–4, and 1.989(a)–1 to provide that the final regulations andthe related temporary regulations will apply to taxable yearsbeginning on or after two years after the first date of the firsttaxable year following December 7, 2016. Before the issuance ofthe amendments to the final section 987 regulations and therelated temporary regulations, taxpayers may rely on the provi-sions of this Notice regarding those proposed amendments.

Notice 2017–58, page 326.Notice 2017–58 extends the due date for participants to filedisclosures under § 1.6011–4(e)(2)(i) of the Income Tax Reg-ulations pursuant to IRS Notice 2017–10, from October 2,2017, until October 31, 2017.

REG–128841–07, page 327.Under §147(f) of the Code, a private activity bond is nottax-exempt if it is not approved by both the governmental unitissuing the bond and the governmental unit in which the fi-nanced property will be located. This project proposes rulesthat would update the existing regulations, located in §5f.103–2, to address changes in the Code and to provide issuers ofprivate activity bonds additional flexibility in satisfying the ap-proval requirement. This project also withdraws a notice ofproposed rulemaking on the same topic published in 2008.

Finding Lists begin on page ii.

Bulletin No. 2017–42October 16, 2017

ADMINISTRATIVE

Rev. Proc. 2017–54, page 336.This procedure publishes the amounts of unused housingcredit carryovers allocated to qualified states under section42(h)(3)(D) of the Code for calendar year 2017.

T.D. 9824, page 312.This document contains final regulations with respect to thewithholding from, and information reporting on, certain pay-ments of gambling winnings from horse races, dog races, andjai alai and on certain other payments of gambling winnings.The final regulations affect both payers and payees of thegambling winnings.

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.

October 16, 2017 Bulletin No. 2017–42

Decisions of the Tax Courtwith Court Decisions

It is the policy of the Internal RevenueService to announce at an early datewhether it will follow the holdings in cer-tain cases. An Action on Decision is thedocument making such an announcement.An Action on Decision will be issued atthe discretion of the Service only on un-appealed issues decided adverse to thegovernment. Generally, an Action on De-cision is issued where its guidance wouldbe helpful to Service personnel workingwith the same or similar issues. Unlike aTreasury Regulation or a Revenue Ruling,an Action on Decision is not an affirma-tive statement of Service position. It is notintended to serve as public guidance andmay not be cited as precedent.

Actions on Decisions shall be reliedupon within the Service only as conclu-sions applying the law to the facts in theparticular case at the time the Action onDecision was issued. Caution should beexercised in extending the recommenda-

tion of the Action on Decision to similarcases where the facts are different. More-over, the recommendation in the Actionon Decision may be superseded by newlegislation, regulations, rulings, cases, orActions on Decisions. Prior to 1991, theService published acquiescence or nonac-quiescence only in certain regular TaxCourt opinions. The Service has expandedits acquiescence program to include othercivil tax cases where guidance is deter-mined to be helpful. Accordingly, the Ser-vice now may acquiesce or nonacquiescein the holdings of memorandum TaxCourt opinions, as well as those of theUnited States District Courts, ClaimsCourt, and Circuit Courts of Appeal. Re-gardless of the court deciding the case, therecommendation of any Action on Deci-sion will be published in the InternalRevenue Bulletin.

The recommendation in every Action onDecision will be summarized as acquies-cence, acquiescence in result only, or non-acquiescence. Both “acquiescence” and “ac-quiescence in result only” mean that theService accepts the holding of the court in a

case and that the Service will follow it indisposing of cases with the same controllingfacts. However, “acquiescence” indicatesneither approval nor disapproval of thereasons assigned by the court for its con-clusions; whereas, “acquiescence in resultonly” indicates disagreement or concernwith some or all of those reasons. “Non-acquiescence” signifies that, although nofurther review was sought, the Servicedoes not agree with the holding of thecourt and, generally, will not follow thedecision in disposing of cases involvingother taxpayers. In reference to an opinionof a circuit court of appeals, a “nonacqui-escence” indicates that the Service willnot follow the holding on a nationwidebasis. However, the Service will recog-nize the precedential impact of the opin-ion on cases arising within the venue ofthe deciding circuit.

The Commissioner does NOT ACQUI-ESCE in the following decision:

Carol A. and Roy E. Stanley v. UnitedStates, W.D. Ark. No.5:14–cv–5236(2015).1

1Nonacquiescence relating to the holdings that: 1) mere possession of a stock certificate, disregarding other conditions, restrictions or limitations on the possessor’s rights regarding the stock,constitutes ownership for purposes of § 469(c)(7)(D)(ii); and 2) work performed by the taxpayer in a rental real estate activity for purposes of § 469(c)(7)(A) may also constitute workperformed by the taxpayer in non-rental business activities of the taxpayer for other purposes of § 469.

Bulletin No. 2017–42 October 16, 2017311

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986T.D. 9824

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Withholding on Payments ofCertain Gambling Winnings

AGENCY: Internal Revenue Service (IRS),Treasury.

ACTION: Final regulations.

SUMMARY: This document contains fi-nal regulations with respect to the with-holding from, and the information report-ing on, certain payments of gamblingwinnings from horse races, dog races, andjai alai and on certain other payments ofgambling winnings. The final regulationsaffect both payers and payees of the gam-bling winnings.

DATES: Effective date: These regulationsare effective on September 27, 2017.

Applicability Dates: For dates of ap-plicability, see §§ 31.3402(q)–1(g) and31.3406(g)–2(h).

FOR FURTHER INFORMATION CON-TACT: David Bergman, (202) 317-6845(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains final regula-tions in Title 26 of the Code of FederalRegulations under section 3402 of the In-ternal Revenue Code (Code). The finalregulations amend, update, and clarify theexisting withholding and information re-porting requirements for certain gamblingwinnings under § 31.3402(q)–1 of theEmployment Tax Regulations, and makeconforming changes to § 31.3406(g)–2.

On December 30, 2016, the TreasuryDepartment and the IRS published a no-tice of proposed rulemaking (REG–123841–16) in the Federal Register, 81FR 96406, containing proposed regula-tions that would provide a new rule regard-

ing how payers determine the amount of thewager in parimutuel wagering transactionswith respect to horse races, dog races, andjai alai, and that would update the existingrules to reflect current law regarding thewithholding thresholds and certain informa-tion reporting requirements.

Over 2,700 written public commentswere received in response to the notice ofproposed rulemaking. No public hearingwas requested. After careful considerationof the written comments, the proposedregulations are adopted as modified bythis Treasury Decision.

Explanation and Summary ofComments

All of the written comments on the no-tice of proposed rulemaking were consid-ered and are available at www.regulations.gov or upon request. Many of these com-ments addressed similar issues and ex-pressed similar points of view. These com-ments are summarized in this preamble.

Rule for Determining the Amount of theWager in the Case of Horse Races, DogRaces, and Jai Alai

The proposed regulations contained anew rule for determining the amount ofthe wager in the case of horse races, dograces, and jai alai to allow all wagersplaced in a single parimutuel pool andrepresented on a single ticket to be aggre-gated and treated as a single wager. Com-menters largely supported the proposedrules because they believe that the rulesaccurately and fairly reflect parimutuelwagering realities.

Some commenters raised concerns thatthe single ticket requirement in the proposedregulations did not address electronic wa-gering. Commenters stated that in horse rac-ing a paper ticket can only accommodate sixseparate lines of bets. In contrast, electronicwagering utilizes an “account wagering”system that can accommodate dozens (oreven hundreds) of lines of bets in a singleparimutuel pool, allowing bettors to placemore, customized wagers. As a result, somecommenters requested a special rule forelectronic wagering.

The proposed rule at § 31.3402(q)–1(c)(1)(ii) is specifically not limited to apaper ticket, but also includes an electronicrecord that is presented to collect proceedsfrom a wager or wagers placed in a singleparimutuel pool. Therefore, the rule in pro-posed § 31.3402(q)–1(c)(1)(ii) is not depen-dent on the applicable industry’s ticketingformat. Further, despite the commentersconcern regarding the limits on the numberof lines a paper ticket can accommodate, theproposed regulations do not limit the num-ber of bets on a single ticket nor do theproposed regulations contain a rule govern-ing the number of bets that can be containedon a single, electronic record of a wageringtransaction.

Another commenter stated that the singleticket requirement puts a person making anelectronic bet at a disadvantage because itremoves the opportunity to place bets in asingle parimutuel pool at multiple points intime throughout the allotted time period forwagering. The single ticket rule in the pro-posed regulations does not differentiate be-tween electronic betting and placing a betat a ticket window. Therefore, the pro-posed rule does not put an electronicbettor at a disadvantage. However, thecomment brings to light that there issome confusion regarding how the ruleapplies in the context of electronic bet-ting.

The single-ticket requirement in theproposed regulations allows aggregationof wagers that are placed in the sameparimutuel pool if they are represented ona single ticket. This is the case regardlessof whether the ticket is paper or elec-tronic. This requirement was included inthe proposed regulations to limit the po-tential for fraud, such as a winning bettorcollecting losing tickets from another bet-tor or bettors who placed bets in the sameparimutuel pool to artificially increase theamount of the wager. In addition, thesingle-ticket requirement improves ad-ministrability because it does not requirepayers to collect information reflected onmultiple tickets. As the preamble to theproposed regulations explains, the singleticket requirement was not intended tolimit the amount of the wager to bets


placed at a single point in time because aticket containing prior bets in a singlepool can be cancelled, and the original andadditional wagers in that pool can be placedon a new ticket. The fraud and administra-bility concerns that apply to paper tickets donot apply equally to electronic records be-cause each person’s bets are reflected on asingle electronic wagering account. Accord-ingly, electronic bettors may aggregate wa-gers placed at different points in time with-out having to cancel prior wagers and placethem on a new ticket as long as the wagersmeet the requirements in the proposedrule—that is, they are placed in a singleparimutuel pool and are represented on asingle, electronic record.

Because the comments received in re-sponse to the proposed rule do not justifyany change, the final regulations adopt theproposed rule without modification.

Effective/Applicability Dates

The proposed regulations providedthat final regulations would apply topayments made after the date they arepublished in the Federal Register.Some commenters requested a delayedeffective date to allow time for industrystakeholders to update their systems andseek any necessary state regulatory ap-proval. One commenter specficially sug-gested that 45 days following publica-tion of the final regulations would besufficient time to perform such updates.In addition, the commenters suggestedthat the final rules be effective for wa-gering transactions with respect to win-ning events that occur after the date thatthe final rules are published in the Fed-eral Register. The Treasury Departmentand IRS agree with these comments.Therefore, the final regulations are ap-plicable to reportable gambling win-nings paid with respect to a winningevent that occurs on or after 45 daysfrom the date the final regulations arepublished in the Federal Register. Ifthey so choose, payers may rely on theprovisions of the final regulations forpayments made after the date the finalregulations are published in the FederalRegister, regardless of when the relatedwinning event occurred.

Other Comments

Several commenters raised concernsregarding the thresholds for informationreporting and withholding for certaingambling winnings. Another commenterrequested that the regulations provide anexception to withholding under section3402(q). Neither the threshold for infor-mation reporting with respect to gam-bling winnings not subject to withhold-ing nor exceptions to section 3402(q)withholding were the focus of the pro-posed regulations. In addition, the with-holding thresholds are defined by stat-ute. These comments are outside thescope of the proposed regulations, andtherefore the comments have not beenadopted in the final regulations.

Special Analyses

Certain IRS regulations, including thisone, are exempt from the requirements ofExecutive Order 12866, as supplementedby Executive Order 13563. Therefore, aregulatory assessment is not required.

It is hereby certified that this rule will nothave a significant economic impact on asubstantial number of small entities. Al-though this rule may affect a substantialnumber of small entities, the economic im-pact is minimal because this rule merelyprovides guidance as to the statutory with-holding rules and filing of information re-turns for payers who make reportable pay-ments of certain gambling winnings andwho are required by sections 3402 and 6041to withhold and make returns reportingthose payments. This rule reduces the exist-ing burden on payers to comply with thestatutory requirement by simplifying theprocess for payers to verify payees’ identi-ties with a broader range of documents thatare more readily available.

This rule also will result in a reductionin the number of forms filed. Instead oftreating all components of a bet made by agambler in a single parimutuel pool as aseparate amount wagered, the rules treatall amounts wagered in a single parimu-tuel pool reflected on a single ticket as theamount wagered for purposes of deter-mining whether reporting or withholdingis needed. For the reasons stated, the finalrule will not have a significant economicimpact on a substantial number of smallentities. Accordingly, a regulatory flexi-

bility analysis under the Regulatory Flex-ibility Act (5 U.S.C. Chapter 6) is notrequired.

Pursuant to section 7805(f) of the In-ternal Revenue Code, the notice of pro-posed rulemaking preceding these regula-tions was submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comment on the regula-tions’ impact on small businesses, and nocomments were received.

Drafting Information

The principal author of these regula-tions is David Bergman of the Office ofthe Associate Chief Counsel (Procedureand Administration). However, other per-sonnel from the Treasury Department andthe IRS participated in their development.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 31 is amendedas follows:

PART 31—EMPLOYMENT TAXESAND COLLECTION OF INCOMETAX AT SOURCE

Par. 1. The authority citation for part31 continues to read in part as follows:

26 U.S.C. 7805 * * *Par. 2. Section 31.3402(q)–1 is amend-

ed:1. By revising paragraphs (a)(1), (b),

and (c)(1) and (4).2. By redesignating paragraphs (d), (e)

and (f) as paragraphs (f), (d), and (e),respectively.

3. By revising newly designated para-graphs (d) and (e).

4. By removing, in newly designatedparagraph (f), Example 3 and Example 11,redesignating Examples 4 through 10 asExamples 3 through 9, and adding exam-ples 10 through 16.

5. By removing, in newly designatedparagraph (f) the language “example 4” innewly designated Example 4 and addingin its place the language “example 3” andby removing the language “example 6” innewly designated Example 6 and addingin its place the language “example 5”wherever it appears.

6. By adding paragraph (g).


The revisions and additions read as fol-lows:

§ 31.3402(q)–1 Extension of withholdingto certain gambling winnings.

(a) Withholding obligation—(1) Gen-eral rule. Every person, including theGovernment of the United States, a State,or a political subdivision thereof, or anyinstrumentality of any of the foregoingmaking any payment of “winnings subjectto withholding” (defined in paragraph (b)of the section) must deduct and withhold atax in an amount equal to the product ofthe third lowest rate of tax applicable un-der section 1(c) and the payment. The taxmust be deducted and withheld upon pay-ment of the winnings by the person mak-ing the payment (“payer”). See paragraph(c)(5)(ii) of this section for a special rulerelating to the time for making deposits ofwithheld amounts and filing the returnwith respect to those amounts. Any personreceiving a payment of winnings subjectto withholding must furnish the payer astatement as required in paragraph (d) ofthis section. Payers of winnings subject towithholding must file a return with theInternal Revenue Service and furnish astatement to the payee as required in para-graph (e) of this section. With respect toreporting requirements for certain pay-ments of gambling winnings not subject towithholding, see section 6041 and the reg-ulations thereunder.* * * * *

(b) Winnings subject to withholding—(1) In general. Winnings subject to with-holding means any payment from—

(i) A wager placed in a State-conductedlottery (defined in paragraph (c)(2) of thissection) but only if the proceeds from thewager exceed $5,000;

(ii) A wager placed in a sweepstakes,wagering pool, or lottery other than aState-conducted lottery but only if theproceeds from the wager exceed $5,000;or

(iii) Any other wagering transaction (asdefined in paragraph (c)(3) of this section)but only if the proceeds from the wager:

(A) Exceed $5,000; and(B) Are at least 300 times as large as

the amount of the wager.(2) Total proceeds subject to withhold-

ing. If proceeds from the wager qualify as

winnings subject to withholding, then thetotal proceeds from the wager, and notmerely amounts in excess of $5,000, aresubject to withholding.

(c) Definitions; special rules—(1)Rules for determining amount of proceedsfrom a wager—(i) In general. The amountof proceeds from a wager is the amountpaid with respect to the wager, less theamount of the wager.

(ii) Amount of the wager in the case ofhorse races, dog races, and jai alai. In thecase of a wagering transaction with re-spect to horse races, dog races, or jai alai,all wagers placed in a single parimutuelpool and represented on a single ticket areaggregated and treated as a single wagerfor purposes of determining the amount ofthe wager. A ticket in the case of horseraces, dog races, or jai alai is a written orelectronic record that the payee must pres-ent to collect proceeds from a wager orwagers.

(iii) Amount paid with respect to a wa-ger—(A) Identical wagers. Amounts paidwith respect to identical wagers aretreated as paid with respect to a singlewager for purposes of calculating theamount of proceeds from a wager. Two ormore wagers are identical wagers if win-ning depends on the occurrence (or non-occurrence) of the same event or events;the wagers are placed with the same pay-er; and, in the case of horse races, dograces, or jai alai, the wagers are placed inthe same parimutuel pool. Wagers may beidentical wagers even if the amounts wa-gered differ as long as the wagers areotherwise treated as identical wagers un-der this paragraph (c)(1)(iii)(A). Ticketspurchased in a lottery generally are notidentical wagers, because the designationof each ticket as a winner generally wouldnot be based on the occurrence of thesame event, for example, the drawing of aparticular number.

(B) Non-monetary proceeds. In deter-mining the amount paid with respect to awager, proceeds which are not money aretaken into account at the fair market value.

(C) Periodic payments. Periodic pay-ments, including installment payments orpayments which are to be made periodi-cally for the life of a person, are aggre-gated for purposes of determining theamount paid with respect to the wager.The aggregate amount of periodic pay-

ments to be made for a person’s life isbased on that person’s life expectancy.See §§ 1.72–5 and 1.72–9 of this chapterfor rules used in computing the expectedreturn on annuities. For purposes of deter-mining the amount subject to withholding,the first periodic payment must be reducedby the amount of the wager.* * * * *

(4) Certain payments to nonresidentaliens or foreign corporations. A paymentof winnings that is subject to withholdingtax under section 1441(a) (relating towithholding on nonresident aliens) or1442(a) (relating to withholding on for-eign corporations) is not subject to thetax imposed by section 3402(q) and thissection when the payee is a foreign per-son, as determined under the rules of sec-tion 1441(a) and the regulations thereun-der. A payment is treated as being subjectto withholding tax under section 1441(a)or 1442(a) notwithstanding that the rate ofsuch tax is reduced (even to zero) as maybe provided by an applicable treaty withanother country. However, a reduced orzero rate of withholding of tax must not beapplied by the payer in lieu of the rateimposed by sections 1441 and 1442 unlessthe person receiving the winnings has pro-vided to the payer the documentation re-quired by § 1.1441–6 of this chapter toestablish entitlement to treaty benefits.* * * * *

(d) Statement furnished by payee—(1)In general. Each person who is making apayment subject to withholding under thissection must obtain from the payee astatement described in paragraph (d)(2) ofthis section.

(2) Contents of statement. Each personwho is to receive a payment of winningssubject to withholding under this sectionmust furnish the payer a statement onForm W–2G or 5754 (whichever is appli-cable) made under the penalties of perjurycontaining—

(i) The name, address, and taxpayeridentification number of the winner ac-companied by a declaration that no otherperson is entitled to any portion of suchpayment, or

(ii) The name, address, and taxpayeridentification number of the payee and ofevery person entitled to any portion of thepayment.


(3) Multiple payments. If more thanone payment of winnings subject to with-holding is to be made with respect to asingle wager, for example in the case of anannuity, the payee is required to furnishthe payer a statement with respect to thefirst payment only, provided that the otherpayments are taken into account in a re-turn required by paragraph (e) of thissection.

(4) Reliance on statement for identicalwagers. If the payee furnishes the state-ment which may be required pursuant to§ 1.6011–3 of this chapter (regarding therequirement of a statement from payees ofcertain gambling winnings), indicatingthat the payee (and any other persons en-titled to a portion of the winnings) is en-titled to winnings from identical wagers,as defined in paragraph (c)(1)(iii)(A) ofthis section, and indicating the amountof the winnings, if any, then the payermay rely upon the statement in deter-mining the total amount of proceedsfrom the wager under paragraph (c)(1)of this section.

(e) Return of payer—(1) In general.Every person making payment of win-nings for which a statement is requiredunder paragraph (d) of this section mustfile a return on Form W–2G at the InternalRevenue Service location designated inthe instructions to the form on or beforeFebruary 28 (March 31 if filed electroni-cally) of the calendar year following thecalendar year in which the payment ofwinnings is made. The return required bythis paragraph (e) need not include thestatement by the payee required by para-graph (d) of this section and, therefore,need not be signed by the payee, providedthe statement is retained by the payer aslong as its contents may become mate-rial in the administration of any internalrevenue law. In addition, the return re-quired by this paragraph (e) need notcontain the information required byparagraph (e)(1)(v) of this section pro-vided the information is obtained withrespect to the payee and retained by thepayer as long as its contents may be-come material in the administration ofany internal revenue law. For paymentsto more than one winner, a separateForm W–2G, which in no event need besigned by the winner, must be filed with

respect to each such winner. Each FormW–2G must contain the following:

(i) The name, address, and taxpayeridentification number of the payer;

(ii) The name, address, and taxpayeridentification number of the winner;

(iii) The date, amount of the payment,and amount withheld;

(iv) The type of wagering transaction;(v) Except with respect to winnings

from a wager placed in a State-conductedlottery, a general description of the twotypes of identification (as described inparagraph (e)(2) of this section), one ofwhich must have the payee’s photographon it (except in the case of tribal memberidentification cards in certain circum-stances as described in paragraph (e)(3) ofthis section), that the payer relied on toverify the payee’s name, address, and tax-payer identification number;

(vi) The amount of winnings fromidentical wagers; and

(vii) Any other information required bythe form, instructions, or other applicableguidance published in the Internal Reve-nue Bulletin.

(2) Identification. The following itemsare treated as identification for purposesof paragraph (e)(1)(v) of this section—

(i) Government-issued identification(for example, a driver’s license, passport,social security card, military identificationcard, tribal member identification card is-sued by a federally-recognized Indiantribe, or voter registration card) in thename of the payee; and

(ii) A Form W–9, “Request for Tax-payer Identification Number and Certifi-cation,” signed by the payee that includesthe payee’s name, address, taxpayer iden-tification number, and other informationrequired by the form. A Form W–9 is notacceptable for this purpose if the payeehas modified the form (other than pursu-ant to instructions to the form) or if thepayee has deleted the jurat or other similarprovisions by which the payee certifies oraffirms the correctness of the statementscontained on the form.

(3) Special rule for tribal memberidentification cards. A tribal memberidentification card need not contain thepayee’s photograph to meet the identifica-tion requirement described in paragraph(e)(1)(v) of this section if—

(i) The payee is a member of afederally-recognized Indian tribe;

(ii) The payee presents the payer with atribal member identification card issuedby a federally-recognized Indian tribestating that the payee is a member of suchtribe; and

(iii) The payer is a gaming establishment(as described in § 1.6041–10(b)(2)(iv) ofthis chapter) owned or licensed (in accor-dance with 25 U.S.C. 2710) by the tribalgovernment that issued the tribal memberidentification card referred to in paragraph(e)(3)(ii) of this section.

(4) Transmittal form. Persons makingpayments of winnings subject to with-holding must use Form 1096 to transmitForms W–2G to the Internal Revenue Ser-vice.

(5) Furnishing a statement to thepayee. Every payer required to make areturn under paragraph (e)(1) of this sec-tion must also make and furnish to eachpayee, with respect to each payment ofwinnings subject to withholding, a writtenstatement that contains the informationthat is required to be included on the re-turn under paragraph (e)(1) of this section.The payer must furnish the statement tothe payee on or before January 31st of theyear following the calendar year in whichpayment of the winnings subject to with-holding is made. The statement will beconsidered furnished to the payee if it isprovided to the payee at the time of pay-ment or if it is mailed to the payee on orbefore January 31st of the year followingthe calendar year in which payment wasmade.

(f) * * *Example 10. (i) B places a $15 bet at the cashier

window at the racetrack for horse A to win the fifthrace at the racetrack that day. After placing the firstbet, B gains confidence in horse A’s prospects to winand places an additional $40 bet at the cashier win-dow at the racetrack for horse A to win the fifth race,receiving a second ticket for this second bet. HorseA wins the fifth race, and B wins a total of $5,500(100 to 1 odds) on those bets. The $15 bet and the$40 bet are identical wagers under paragraph(c)(1)(iii)(A) of this section because winning onboth bets depended on the occurrence of the sameevent and the bets are placed in the same parimu-tuel pool with the same payer. This is true regard-less of the fact that the amount of the wager differsin each case.

(ii) B cashes the tickets at different cashier win-dows. Pursuant to paragraph (d) of this section and§ 1.6011–3, B completes a Form W–2G indicatingthat the amount of winnings is from identical wagers


and provides the form to each cashier. The paymentsby each cashier of $1,500 and $4,000 are less thanthe $5,000 threshold for withholding, but under para-graph (c)(1)(iii)(A) of this section, identical wagersare treated as paid with respect to a single wagerfor purposes of determining the proceeds from awager. The payment is not subject to withholdingor reporting because although the proceeds fromthe wager are $5,445 ($1,500 � $4,000 – $55), theproceeds from the wager are not at least 300 timesas great as the amount wagered ($55 x 300 �$16,500).

Example 11. B makes two $1,000 bets in asingle “show” pool for the same jai alai game, onebet on Player X to show and one bet on Player Yto show. A show bet is a winning bet if the playercomes in first, second, or third in a single game.The bets are placed at the same time at the samecashier window, and B receives a single ticketshowing both bets. Player X places second in thegame, and Player Y does not place first, second, orthird in the game. B wins $8,000 from his bet onPlayer X. Because winning on both bets doesnot depend on the occurrence of the same event,the bets are not identical bets under paragraph(c)(1)(iii)(A) of this section. However, pursuant tothe rule in paragraph (c)(1)(ii) of this section, theamount of the wager is the aggregate amount ofboth wagers ($2,000) because the bets were placedin a single parimutuel pool and reflected on asingle ticket. The payment is not subject to with-holding or reporting because although the pro-ceeds from the wager are $6,000 ($8,000 –$2,000), the proceeds from the wager are not atleast 300 times as great as the amount wagered($2,000 x 300 � $600,000).

Example 12. B bets a total of $120 on a three-dog exacta box bet ($20 for each one of the sixcombinations played) at the dog racetrack andreceives a single ticket reflecting the bet from thecashier. B wins $5,040 from one of the selectedcombinations. Pursuant to the rule in paragraph(c)(1)(ii) of this section, the amount of the wageris $120, not $20 for the single winning combina-tion of the six combinations played. The paymentis not subject to withholding under section3402(q) because the proceeds from the wager are$4,920 ($5,040 –$120), which is below the section3402(q) withholding threshold.

Example 13. B makes two $12 Pick 6 bets at thehorse racetrack at two different cashier windowsand receives two different tickets each represent-ing a single $12 Pick 6 bet. In his two Pick 6 bets,B selects the same horses to win races 1–5 butselects different horses to win race 6. All Pick 6bets on those races at that racetrack are part of asingle parimutuel pool from which Pick 6 winningbets are paid. B wins $5,020 from one of his Pick6 bets. Pursuant to the rule in paragraph (c)(1)(ii)of this section, the bets are not aggregated forpurposes of determining the amount of the wagerbecause the bets are reflected on separate tickets.Assuming that the applicable rate is 25%, theracetrack must deduct and withhold $1,252(($5,020 –$12) x 25%) because the amount of theproceeds of $5,008 ($5,020 – $12) is greater than$5,000 and is at least 300 times as great as theamount wagered ($12 x 300 � $3,600). The race-

track also must report B’s winnings on FormW–2G pursuant to paragraph (e) of this sectionand furnish a copy of the Form W–2G to B.

Example 14. C makes two $50 bets in two dif-ferent parimutuel pools for the same jai alai game.One bet is an “exacta” in which C bets on player Mto win and player N to “place.” The other bet is a“trifecta” in which C bets on player M to win, playerN to “place,” and player O to “show.” C wins bothbets and is paid $2,000 with respect to the bet in the“exacta” pool and $3,100 with respect to the bet inthe “trifecta” pool. Under paragraph (c)(1)(iii)(A) ofthis section, the bets are not identical bets. Underparagraph (c)(1)(ii) of this section, the bets are notaggregated for purposes of determining the amountof the wager for either payment because they are notwagers in the same parimutuel pool. No section3402(q) withholding is required on either paymentbecause neither payment separately exceeds the$5,000 withholding threshold.

Example 15. C makes two $100 bets for the samedog to win a particular race. C places one bet at theracetrack and one bet at an off-track betting estab-lishment, but the two pools constitute a single pool.C receives separate tickets for each bet. C wins bothbets and is paid $4,000 from the racetrack and$4,000 from the off-track betting establishment. Un-der paragraph (c)(1)(ii) of this section, the bets arenot aggregated for purposes of determining theamount of the wager because the wager placed at theracetrack and the wager placed at the off-track bet-ting establishment are reflected on separate tickets,despite being placed in the same parimutuel pool. Nosection 3402(q) withholding is required because nei-ther payment separately exceeds the $5,000 with-holding threshold.

Example 16. C places a $200 Pick 6 bet for aseries of races at the racetrack on a particular dayand receives a single ticket for the bet. No wagercorrectly picks all six races that day, so that portionof the pool carries over to the following day. On thefollowing day, C places an additional $200 Pick 6bet for that day’s series of races and receives a newticket for that bet. C wins $100,000 on the secondday. Pursuant to the rule in paragraph (c)(1)(ii) ofthis section, the bets are on two separate tickets, soC’s two Pick 6 bets are not aggregated for purposesof determining the amount of the wager. Assumingthat the applicable rate is 25%, the racetrack mustdeduct and withhold $24,950 (($100,000 – $200) x25%) because the amount of the proceeds of $99,800($100,000 – $200) is greater than $5,000, and is atleast 300 times as great as the amount wagered ($200x 300 � $60,000). The racetrack also must reportC’s winnings on Form W–2G pursuant to paragraph(e) of this section and furnish a copy of the FormW–2G to C.

(g) Applicability date. The rules in thissection apply to payments made with re-spect to a winning event that occurs afterNovember 13, 2017. For rules that applyto payments made with respect to a win-ning event on or before that date, see§ 31.3402(q)–1 as contained in 26 CFRpart 31, revised April 1, 2017.

Par. 3. Section 31.3406–0 is amendedby adding an entry for paragraph (h) to§ 31.3406(g)–2 to read as follows:

§ 31.3406–0 Outline of the backupwithholding regulations.

* * * * *

§ 31.3406(g)–2 Exception for reportablepayments for which backup withholdingis otherwise required.

* * * * *(h) Applicability date.* * * * *Par. 4. Section 31.3406(g)–2 is amended

by revising paragraphs (d)(2) and (3) andadding paragraph (h) to read as follows:

§ 31.3406(g)–2 Exception for reportablepayment for which withholding isotherwise required.

* * * * * *(d) * * *(2) Definition of a reportable gambling

winning and determination of amount sub-ject to backup withholding. For purposes ofwithholding under section 3406, a report-able gambling winning is any gamblingwinning subject to information reporting un-der section 6041. A gambling winning(other than a winning from bingo, keno, orslot machines) is a reportable gambling win-ning only if the amount paid with respect tothe wager is $600 or more and if the pro-ceeds are at least 300 times as large as theamount wagered. See § 1.6041–10 of thischapter to determine whether a winningfrom bingo, keno, or slot machines is areportable gambling winning and thus sub-ject to withholding under section 3406. Theamount of a reportable gambling winning is—

(i) The amount paid with respect to theamount of the wager reduced, at the op-tion of the payer; by

(ii) The amount of the wager.(3) Special rules. For special rules for

determining the amount of the wager in awagering transaction with respect to horseracing, dog racing, and jai alai, or amountspaid with respect to identical wagers, see§ 31.3402(q)–1(c).* * * * *

(h) Applicability date. The rules applyto reportable gambling winnings paid withrespect to a winning event that occurs


after November 13, 2017. For rules thatapply to payments made with respect to awinning event on or before that date, see§ 31.3406(g)–2 as contained in 26 CFRpart 31, revised April 1, 2017.

Kirsten Wielobob,Deputy Commissioner for

Services and Enforcement.

Approved: August 21, 2017.

David J. Kautter,Assistant Secretary for Tax Policy.

(Filed by the Office of the Federal Register on September25, 2017, 4:15 a.m., and published in the issue of the FederalRegister for September 27, 2017, 82 F.R. 44925)


Part III. Administrative, Procedural, and MiscellaneousExtension of ReplacementPeriod for Livestock Soldon Account of Drought

Notice 2017–53

SECTION 1. PURPOSE

This notice provides guidance regard-ing an extension of the replacement periodunder § 1033(e) of the Internal RevenueCode for livestock sold on account ofdrought in specified counties.

SECTION 2. BACKGROUND

.01 Nonrecognition of Gain on Invol-untary Conversion of Livestock. Section1033(a) generally provides for nonrecog-nition of gain when property is involun-tarily converted and replaced with prop-erty that is similar or related in service oruse. Section 1033(e)(1) provides that asale or exchange of livestock (other thanpoultry) held by a taxpayer for draft, breed-ing, or dairy purposes in excess of the num-ber that would be sold following the taxpay-er’s usual business practices is treated as aninvoluntary conversion if the livestock issold or exchanged solely on account ofdrought, flood, or other weather-related con-ditions.

.02 Replacement Period. Section1033(a)(2)(A) generally provides thatgain from an involuntary conversion isrecognized only to the extent the amountrealized on the conversion exceeds thecost of replacement property purchasedduring the replacement period. If a sale orexchange of livestock is treated as an in-voluntary conversion under § 1033(e)(1)and is solely on account of drought, flood,or other weather-related conditions thatresult in the area being designated as eli-gible for assistance by the federal govern-ment, § 1033(e)(2)(A) provides that thereplacement period ends four years afterthe close of the first taxable year in whichany part of the gain from the conversion isrealized. Section 1033(e)(2)(B) providesthat the Secretary may extend this replace-ment period on a regional basis for suchadditional time as the Secretary deter-mines appropriate if the weather-relatedconditions that resulted in the area being

designated as eligible for assistance by thefederal government continue for morethan three years. Section 1033(e)(2) is ef-fective for any taxable year with respect towhich the due date (without regard to ex-tensions) for a taxpayer’s return is afterDecember 31, 2002.

SECTION 3. EXTENSION OFREPLACEMENT PERIOD UNDER§ 1033(e)(2)(B)

Notice 2006–82, 2006–2 C.B. 529,provides for extensions of the replacementperiod under § 1033(e)(2)(B). If a sale orexchange of livestock is treated as an invol-untary conversion on account of droughtand the taxpayer’s replacement period isdetermined under § 1033(e)(2)(A), the re-placement period will be extended under§ 1033(e)(2)(B) and Notice 2006–82 untilthe end of the taxpayer’s first taxable yearending after the first drought-free year forthe applicable region. For this purpose, thefirst drought-free year for the applicable re-gion is the first 12-month period that (1)ends August 31; (2) ends in or after the lastyear of the taxpayer’s 4-year replacementperiod determined under § 1033(e)(2)(A);and (3) does not include any weekly periodfor which exceptional, extreme, or severedrought is reported for any location in theapplicable region. The applicable region isthe county that experienced the drought con-ditions on account of which the livestockwas sold or exchanged and all counties thatare contiguous to that county.

A taxpayer may determine whether ex-ceptional, extreme, or severe drought isreported for any location in the applicableregion by reference to U.S. Drought Mon-itor maps that are produced on a weeklybasis by the National Drought MitigationCenter. U.S. Drought Monitor maps arearchived at http://droughtmonitor.unl.edu/Maps/MapArchive.aspx.

In addition, Notice 2006–82 providesthat the Internal Revenue Service willpublish in September of each year a listof counties, districts, cities, or parishes(hereinafter “counties”) for which excep-tional, extreme, or severe drought was re-ported during the preceding 12 months.Taxpayers may use this list instead ofU.S. Drought Monitor maps to determinewhether exceptional, extreme, or severe

drought has been reported for any locationin the applicable region.

The Appendix to this notice containsthe list of counties for which exceptional,extreme, or severe drought was reportedduring the 12-month period ending Au-gust 31, 2017. Under Notice 2006–82, the12-month period ending on August 31,2017, is not a drought-free year for anapplicable region that includes any countyon this list. Accordingly, for a taxpayerwho qualified for a four-year replacementperiod for livestock sold or exchanged onaccount of drought and whose replace-ment period is scheduled to expire at theend of 2017 (or, in the case of a fiscal yeartaxpayer, at the end of the taxable yearthat includes August 31, 2017), the re-placement period will be extended under§ 1033(e)(2) and Notice 2006–82 if theapplicable region includes any county onthis list. This extension will continue untilthe end of the taxpayer’s first taxable yearending after a drought-free year for theapplicable region.

SECTION 4. DRAFTINGINFORMATION

The principal author of this notice isInnessa Glazman of the Office of Asso-ciate Chief Counsel (Income Tax & Ac-counting). For further information re-garding this notice, please contact Ms.Glazman at (202) 317-7006 (not a toll-free number).

APPENDIX

Alabama

Counties of Autauga, Baldwin, Barbour,Bibb, Blount, Bullock, Butler, Calhoun,Chambers, Cherokee, Chilton, Choctaw,Clarke, Clay, Cleburne, Coffee, Colbert,Conecuh, Coosa, Covington, Crenshaw,Cullman, Dale, Dallas, DeKalb, Elmore, Es-cambia, Etowah, Fayette, Franklin, Geneva,Greene, Hale, Henry, Houston, Jackson, Jef-ferson, Lamar, Lauderdale, Lawrence, Lee,Limestone, Lowndes, Macon, Madison,Marengo, Marion, Marshall, Mobile, Mon-roe, Montgomery, Morgan, Perry, Pickens,Pike, Randolph, Russell, Saint Clair,Shelby, Sumter, Talladega, Tallapoosa,


http://droughtmonitor.unl.edu/Maps/MapArchive.aspx

http://droughtmonitor.unl.edu/Maps/MapArchive.aspx

Tuscaloosa, Walker, Washington, Wilcox,Winston.

Arizona

Counties of Cochise, La Paz, Pima,Santa Cruz, Yuma.

Arkansas

Counties of Arkansas, Ashley, Baxter,Benton, Boone, Bradley, Calhoun, Car-roll, Chicot, Clark, Cleburne, Cleveland,Conway, Craighead, Crawford, Crit-tenden, Cross, Dallas, Desha, Drew,Faulkner, Franklin, Fulton, Garland,Grant, Greene, Hempstead, Hot Spring,Howard, Independence, Izard, Jackson,Jefferson, Johnson, Lafayette, Lawrence,Lee, Lincoln, Little River, Logan,Lonoke, Madison, Marion, Miller, Missis-sippi, Monroe, Montgomery, Nevada,Newton, Ouachita, Perry, Phillips, Pike,Poinsett, Polk, Pope, Prairie, Pulaski,Saint Francis, Saline, Scott, Searcy, Se-bastian, Sevier, Sharp, Stone, Union, VanBuren, Washington, White, Woodruff,Yell.

California

Counties of Alameda, Alpine, Amador,Calaveras, Colusa, Contra Costa, El Do-rado, Fresno, Imperial, Inyo, Kern, Kings,Lake, Lassen, Los Angeles, Madera,Mariposa, Merced, Mono, Monterey, Ne-vada, Orange, Placer, Plumas, Riverside,Sacramento, San Benito, San Bernardino,San Diego, San Joaquin, San Luis Obispo,Santa Barbara, Santa Clara, Santa Cruz,Sierra, Solano, Stanislaus, Tulare, Tuol-umne, Ventura, Yolo.

Colorado

Counties of Adams, Arapahoe, Baca,Boulder, Broomfield, Cheyenne, Denver,Douglas, Elbert, Jefferson, Kiowa, La-rimer, Lincoln, Prowers, Weld.

Connecticut

Counties of Fairfield, Hartford, Litch-field, Middlesex, New Haven, New Lon-don, Tolland, Windham.

District of Columbia

District of Columbia.

Florida

Counties of Alachua, Baker, Bay, Bre-vard, Calhoun, Charlotte, Citrus, Collier,Columbia, DeSoto, Dixie, Duval, Escam-bia, Franklin, Gadsden, Glades, Gulf,Hamilton, Hardee, Hendry, Hernando,Highlands, Hillsborough, Holmes, IndianRiver, Jackson, Jefferson, Lake, Lee,Leon, Levy, Liberty, Madison, Manatee,Marion, Martin, Monroe, Nassau, Oka-loosa, Okeechobee, Orange, Osceola,Palm Beach, Pasco, Pinellas, Polk, SaintLucie, Santa Rosa, Sarasota, Seminole,Sumter, Volusia, Wakulla, Walton, Wash-ington.

Georgia

Counties of Appling, Atkinson, Bacon,Baker, Baldwin, Banks, Barrow, Bartow,Ben Hill, Berrien, Bibb, Bleckley, Brant-ley, Brooks, Burke, Butts, Calhoun, Cam-den, Carroll, Catoosa, Charlton, Chatta-hoochee, Chattooga, Cherokee, Clarke,Clay, Clayton, Clinch, Cobb, Coffee,Colquitt, Columbia, Cook, Coweta, Craw-ford, Crisp, Dade, Dawson, Decatur,DeKalb, Dodge, Dooly, Dougherty,Douglas, Early, Echols, Elbert, Emanuel,Fannin, Fayette, Floyd, Forsyth, Franklin,Fulton, Gilmer, Glascock, Glynn, Gordon,Grady, Greene, Gwinnett, Habersham,Hall, Hancock, Haralson, Harris, Hart,Heard, Henry, Houston, Irwin, Jackson,Jasper, Jeff Davis, Jefferson, Johnson,Jones, Lamar, Lanier, Laurens, Lee, Lin-coln, Lowndes, Lumpkin, Macon, Madison,Marion, McDuffie, McIntosh, Meriwether,Miller, Mitchell, Monroe, Montgomery,Morgan, Murray, Muscogee, Newton,Oconee, Oglethorpe, Paulding, Peach, Pick-ens, Pierce, Pike, Polk, Pulaski, Putnam,Quitman, Rabun, Randolph, Richmond,Rockdale, Schley, Seminole, Spalding, Ste-phens, Stewart, Sumter, Talbot, Taliaferro,Taylor, Telfair, Terrell, Thomas, Tift,Towns, Treutlen, Troup, Turner, Twiggs,Union, Upson, Walker, Walton, Ware,Warren, Washington, Wayne, Webster,Wheeler, White, Whitfield, Wilcox, Wilkes,Wilkinson, Worth.

Hawaii

Counties of Hawaii, Kauai, Maui.

Idaho

Counties of Bonner, Boundary, Clear-water, Idaho, Shoshone.

Illinois

Counties of Alexander, Hardin, Mas-sac, Pope, Pulaski.

Indiana

Counties of Clark, Floyd, Harrison,Jefferson, Scott, Switzerland, Washing-ton.

Iowa

Counties of Adair, Appanoose, BuenaVista, Calhoun, Cherokee, Clarke, Davis,Decatur, Jefferson, Keokuk, Lucas, Mad-ison, Mahaska, Marion, Monroe, O’Brien,Plymouth, Pocahontas, Ringgold, Sac,Union, Van Buren, Wapello, Warren,Wayne, Woodbury.

Kansas

Counties of Clark, Comanche, Finney,Ford, Grant, Gray, Hamilton, Haskell,Hodgeman, Kearny, Lane, Meade, Mor-ton, Ness, Scott, Seward, Stanton, Ste-vens, Wichita.

Kentucky

Counties of Adair, Allen, Anderson,Ballard, Barren, Bath, Bell, Boone, Bour-bon, Boyle, Bracken, Breathitt, Breckin-ridge, Bullitt, Butler, Caldwell, Calloway,Carlisle, Carroll, Carter, Casey, Christian,Clark, Clay, Clinton, Crittenden, Cumber-land, Daviess, Edmonson, Elliott, Estill,Fayette, Fleming, Floyd, Franklin, Fulton,Gallatin, Garrard, Grant, Graves, Gray-son, Green, Greenup, Hancock, Hardin,Harlan, Harrison, Hart, Henry, Hickman,Hopkins, Jackson, Jefferson, Jessamine,Johnson, Knott, Knox, Larue, Laurel,Lawrence, Lee, Leslie, Letcher, Lewis,Lincoln, Livingston, Logan, Lyon, Madi-son, Magoffin, Marion, Marshall, Martin,Mason, McCracken, McCreary, McLean,


Meade, Menifee, Mercer, Metcalfe, Mon-roe, Montgomery, Morgan, Muhlenberg,Nelson, Nicholas, Ohio, Oldham, Owen,Owsley, Pendleton, Perry, Pike, Powell,Pulaski, Robertson, Rockcastle, Rowan,Russell, Scott, Shelby, Simpson, Spencer,Taylor, Todd, Trigg, Trimble, Union,Warren, Washington, Wayne, Webster,Whitley, Wolfe, Woodford.

Louisiana

Parishes of Acadia, Allen, Ascension,Avoyelles, Beauregard, Bienville, Boss-ier, Caddo, Calcasieu, Caldwell, Cam-eron, Catahoula, Claiborne, Concordia,De Soto, East Baton Rouge, East Carroll,East Feliciana, Evangeline, Franklin,Grant, Iberia, Iberville, Jackson, JeffersonDavis, Jefferson, La Salle, Lafayette, Lin-coln, Livingston, Madison, Morehouse,Natchitoches, Orleans, Ouachita, Plaqu-emines, Pointe Coupee, Rapides, RedRiver, Richland, Sabine, Saint Bernard,Saint Charles, Saint Helena, Saint James,Saint John the Baptist, Saint Landry, SaintMartin, Saint Tammany, Tangipahoa,Tensas, Union, Vermilion, Vernon, Wash-ington, Webster, West Baton Rouge, WestCarroll, West Feliciana, Winn Parish.

Maine

Counties of Androscoggin, Aroostook,Cumberland, Franklin, Hancock, Kenne-bec, Knox, Lincoln, Oxford, Penobscot,Piscataquis, Sagadahoc, Somerset, Waldo,Washington, York.

Maryland

Counties of Anne Arundel, Howard,Montgomery, Prince George’s.

Massachusetts

Counties of Barnstable, Berkshire,Bristol, Dukes, Essex, Franklin, Hamp-den, Hampshire, Middlesex, Norfolk,Plymouth, Suffolk, Worcester.

Mississippi

Counties of Adams, Alcorn, Amite, At-tala, Benton, Bolivar, Calhoun, Carroll,Chickasaw, Choctaw, Claiborne, Clarke,Clay, Coahoma, Copiah, Covington, DeSoto,

Forrest, Franklin, George, Greene, Gre-nada, Hancock, Harrison, Hinds, Holmes,Humphreys, Issaquena, Itawamba, Jack-son, Jasper, Jefferson, Jefferson Davis,Jones, Kemper, Lafayette, Lamar, Lauder-dale, Lawrence, Leake, Lee, Leflore, Lin-coln, Lowndes, Madison, Marion, Mar-shall, Monroe, Montgomery, Neshoba,Newton, Noxubee, Oktibbeha, Panola,Pearl River, Perry, Pike, Pontotoc, Pren-tiss, Quitman, Rankin, Scott, Sharkey,Simpson, Smith, Stone, Sunflower, Tal-lahatchie, Tate, Tippah, Tishomingo,Tunica, Union, Walthall, Warren,Washington, Wayne, Webster, Wilkin-son, Winston, Yalobusha, Yazoo.

Missouri

Counties of Audrain, Benton, Boone,Butler, Callaway, Carroll, Chariton, Cole,Cooper, Dunklin, Howard, Johnson,Lafayette, Livingston, Macon, Missis-sippi, Moniteau, Monroe, Morgan, NewMadrid, Pemiscot, Pettis, Randolph, Ray,Saline, Scott, Stoddard, Wayne.

Montana

Counties of Big Horn, Blaine, Broadwa-ter, Carbon, Carter, Cascade, Chouteau,Custer, Daniels, Dawson, Deer Lodge, Fal-lon, Fergus, Flathead, Gallatin, Garfield,Glacier, Golden Valley, Granite, Hill, Jef-ferson, Judith Basin, Lake, Lewis and Clark,Liberty, Lincoln, McCone, Meagher, Mineral,Missoula, Musselshell, Park, Petroleum,Phillips, Pondera, Powder River, Powell,Prairie, Ravalli, Richland, Roosevelt, Rose-bud, Sanders, Sheridan, Stillwater, SweetGrass, Teton, Toole, Treasure, Valley,Wheatland, Wibaux, Yellowstone.

Nebraska

Counties of Adams, Brown, Cedar,Cherry, Dakota, Dixon, Kearney, KeyaPaha, Knox, Pierce, Rock, Wayne.

Nevada

City of Carson City. Counties of Churchill,Douglas, Esmeralda, Humboldt, Lander,Lyon, Mineral, Nye, Pershing, Storey,Washoe.

New Hampshire

Counties of Belknap, Carroll, Cheshire,Grafton, Hillsborough, Merrimack, Rock-ingham, Strafford, Sullivan.

New Jersey

Counties of Bergen, Essex, Hudson,Hunterdon, Mercer, Middlesex, Morris,Passaic, Somerset, Sussex, Union, Warren.

New York

Counties of Allegany, Bronx, Cattarau-gus, Cayuga, Chautauqua, Chemung, Clin-ton, Columbia, Cortland, Dutchess, Erie,Essex, Franklin, Genesee, Greene, Hamil-ton, Jefferson, Lewis, Livingston, Monroe,Nassau, New York, Niagara, Onondaga,Ontario, Orange, Orleans, Oswego, Putnam,Queens, Richmond, Rockland, Saratoga,Schuyler, Seneca, Steuben, Suffolk, Sulli-van, Tioga, Tompkins, Ulster, Warren,Washington, Wayne, Westchester, Wyo-ming, Yates.

North Carolina

Counties of Alexander, Ashe, Avery,Buncombe, Burke, Caldwell, Catawba,Cherokee, Clay, Cleveland, Gaston, Gra-ham, Haywood, Henderson, Jackson, Lin-coln, Macon, Madison, McDowell, Mitch-ell, Polk, Rutherford, Swain, Transylvania,Watauga, Wilkes, Yancey.

North Dakota

Counties of Adams, Barnes, Benson,Billings, Bottineau, Bowman, Burke, Bur-leigh, Dickey, Divide, Dunn, Emmons,Golden Valley, Grant, Hettinger, Kidder,LaMoure, Logan, McHenry, McIntosh,McKenzie, McLean, Mercer, Morton,Mountrail, Oliver, Pierce, Ransom, Ren-ville, Sargent, Sheridan, Sioux, Slope,Stark, Stutsman, Ward, Wells, Williams.

Ohio

Counties of Adams, Brown, Scioto.

Oklahoma

Counties of Adair, Alfalfa, Atoka, Bea-ver, Beckham, Blaine, Bryan, Canadian,


Cherokee, Choctaw, Cimarron, Cleve-land, Coal, Craig, Creek, Delaware,Dewey, Ellis, Garfield, Garvin, Grady,Grant, Greer, Harmon, Harper, Haskell,Hughes, Johnston, Kay, Kingfisher, La-timer, Le Flore, Lincoln, Logan, Major,Mayes, McClain, McCurtain, McIntosh,Murray, Muskogee, Noble, Nowata, Okfus-kee, Oklahoma, Okmulgee, Osage, Pawnee,Payne, Pittsburg, Pontotoc, Pottawatomie,Pushmataha, Roger Mills, Rogers, Semi-nole, Sequoyah, Texas, Tulsa, Wagoner,Washington, Woods, Woodward.

Oregon

Counties of Baker, Grant, Harney, Mal-heur, Morrow, Umatilla, Union, Wallowa.

Pennsylvania

Counties of Berks, Bucks, Cameron,Carbon, Centre, Clearfield, Clinton, Elk,Erie, Lehigh, Lycoming, Monroe, Montgom-ery, Northampton, Pike, Potter, Tioga.

Rhode Island

Counties of Bristol, Kent, Newport,Providence, Washington.

South Carolina

Counties of Abbeville, Anderson,Cherokee, Chester, Edgefield, Fairfield,Greenville, Greenwood, Laurens, McCor-mick, Newberry, Oconee, Pickens, Sa-luda, Spartanburg, Union, York.

South Dakota

Counties of Aurora, Beadle, Bennett,Brown, Brule, Buffalo, Butte, Campbell,Charles Mix, Clay, Corson, Custer, Davi-son, Dewey, Douglas, Edmunds, Fall River,Faulk, Gregory, Haakon, Hand, Hanson,Harding, Hughes, Hyde, Jackson, Jerauld,Jones, Lawrence, Lyman, McPherson, Meade,Mellette, Pennington, Perkins, Potter, San-born, Shannon, Spink, Stanley, Sully, Todd,Tripp, Union, Walworth, Yankton, Ziebach.

Tennessee

Counties of Anderson, Bedford, Ben-ton, Bledsoe, Blount, Bradley, Campbell,Cannon, Carroll, Carter, Cheatham, Ches-

ter, Claiborne, Clay, Cocke, Coffee,Crockett, Cumberland, Davidson, Deca-tur, DeKalb, Dickson, Dyer, Fayette, Fen-tress, Franklin, Gibson, Giles, Grainger,Greene, Grundy, Hamblen, Hamilton,Hancock, Hardeman, Hardin, Hawkins,Haywood, Henderson, Henry, Hickman,Houston, Humphreys, Jackson, Jefferson,Johnson, Knox, Lake, Lauderdale, Law-rence, Lewis, Lincoln, Loudon, Macon,Madison, Marion, Marshall, Maury, Mc-Minn, McNairy, Meigs, Monroe, Mont-gomery, Moore, Morgan, Obion, Overton,Perry, Pickett, Polk, Putnam, Rhea, Roane,Robertson, Rutherford, Scott, Sequatchie,Sevier, Shelby, Smith, Stewart, Sullivan,Sumner, Tipton, Trousdale, Unicoi, Union,Van Buren, Warren, Washington, Wayne,Weakley, White, Williamson, Wilson.

Texas

Counties of Anderson, Angelina, Archer,Bastrop, Baylor, Bexar, Blanco, Bowie,Brooks, Caldwell, Cameron, Camp, Carson,Cass, Chambers, Cherokee, Childress, Col-lingsworth, Comal, Cottle, Delta, Dickens,Fannin, Foard, Franklin, Freestone, Gray-son, Gregg, Hansford, Hardeman, Hardin,Harris, Harrison, Haskell, Hays, Hemphill,Henderson, Hidalgo, Hill, Hopkins, Hunt,Hutchinson, Jasper, Kendall, Kenedy, King,Kleberg, Knox, Lamar, Liberty, Limestone,Lipscomb, Marion, McLennan, Morris,Motley, Nacogdoches, Navarro, Newton,Nueces, Ochiltree, Orange, Panola, Polk,Rains, Red River, Roberts, Rusk, Sabine,San Augustine, Shackelford, Shelby, Sher-man, Smith, Starr, Stephens, Throckmorton,Titus, Tyler, Upshur, Van Zandt, Wheeler,Wichita, Willacy, Wood, Young.

Utah

Counties of Carbon, Emery, Juab, San-pete, Utah, Wasatch.

Vermont

Counties of Addison, Chittenden,Franklin, Grand Isle, Orange, Rutland,Washington, Windsor.

Virginia

Cities of Alexandria, Fairfax, FallsChurch, Manassas, Manassas Park, Norton.

Counties of Arlington, Buchanan, Cul-peper, Dickenson, Fairfax, Fauquier, Lee,Loudoun, Louisa, Madison, Orange, PrinceWilliam, Russell, Scott, Spotsylvania, Staf-ford, Wise.

Wyoming

Counties of Big Horn, Campbell, Crook,Niobrara, Park, Sheridan, Teton, Weston.

2017–2018 Special PerDiem Rates

Notice 2017–54

SECTION 1. PURPOSE

This annual notice provides the 2017–2018 special per diem rates for taxpayersto use in substantiating the amount of or-dinary and necessary business expensesincurred while traveling away from home,specifically (1) the special transportationindustry meal and incidental expenses(M&IE) rates, (2) the rate for the incidentalexpenses only deduction, and (3) the ratesand list of high-cost localities for purposesof the high-low substantiation method.


Rev. Proc. 2011–47, 2011–42 I.R.B.520, provides rules for using a per diem rateto substantiate, under § 274(d) of the Inter-nal Revenue Code and § 1.274–5 of theIncome Tax Regulations, the amount of or-dinary and necessary business expensespaid or incurred while traveling away fromhome. Taxpayers using the rates and list ofhigh-cost localities provided in this noticemust comply with Rev. Proc. 2011–47. No-tice 2016–58, 2016–41 I.R.B. 438, pro-vides the rates and list of high-cost localitiesfor the period October 1, 2016, to Septem-ber 30, 2017.

Section 3.02(3) of Rev. Proc. 2011–47provides that the term “incidental ex-penses” has the same meaning as in theFederal Travel Regulations, 41 C.F.R.300–3.1, and that future changes to thedefinition of incidental expenses in theFederal Travel Regulations would be an-nounced in the annual per diem notice.Subsequent to the publication of Rev.Proc. 2011–47, the General Services Ad-ministration published final regulations re-


vising the definition of incidental expensesunder the Federal Travel Regulations to in-clude only fees and tips given to porters,baggage carriers, hotel staff, and staff onships. Transportation between places oflodging or business and places where mealsare taken, and the mailing cost of filingtravel vouchers and paying employer-sponsored charge card billings, are no lon-ger included in incidental expenses. Accord-ingly, taxpayers using the per diem ratesmay separately deduct or be reimbursed fortransportation and mailing expenses.

SECTION 3. SPECIAL M&IE RATESFOR TRANSPORTATION INDUSTRY

The special M&IE rates for taxpayersin the transportation industry are $63 forany locality of travel in the continental

United States (CONUS) and $68 for anylocality of travel outside the continentalUnited States (OCONUS). See section4.04 of Rev. Proc. 2011–47.

SECTION 4. RATE FOR INCIDENTALEXPENSES ONLY DEDUCTION

The rate for any CONUS or OCONUSlocality of travel for the incidental ex-penses only deduction is $5 per day. Seesection 4.05 of Rev. Proc. 2011–47.

SECTION 5. HIGH-LOWSUBSTANTIATION METHOD

1. Annual high-low rates. For purposesof the high-low substantiation method, theper diem rates in lieu of the rates de-scribed in Notice 2016–58 (the per diemsubstantiation method) are $284 for travel

to any high-cost locality and $191 fortravel to any other locality within CO-NUS. The amount of the $284 high rateand $191 low rate that is treated as paidfor meals for purposes of § 274(n) is $68for travel to any high-cost locality and$57 for travel to any other locality withinCONUS. See section 5.02 of Rev. Proc.2011–47. The per diem rates in lieu of therates described in Notice 2016–58 (themeal and incidental expenses only sub-stantiation method) are $68 for travel toany high-cost locality and $57 for travel toany other locality within CONUS.

2. High-cost localities. The followinglocalities have a federal per diem rate of$238 or more, and are high-cost localitiesfor all of the calendar year or the portionof the calendar year specified in parenthe-ses under the key city name.

Key city County or other defined location

California

Mill Valley/San Rafael/Novato(October 1–October 31 and June 1–September 30)

Marin

Monterey(July 1–August 31)

Monterey

Napa(October 1–October 31 and May 1–September 30)

Napa

Oakland(October 1–October 31 and January 1–September 30)

Alameda

San Francisco San Francisco

San Mateo/Foster City/Belmont San Mateo

Santa Barbara Santa Barbara

Santa Monica City limits of Santa Monica

Sunnyvale/Palo Alto/San Jose Santa Clara

Colorado

Aspen Pitkin

Denver/Aurora Denver, Adams, Arapahoe, and Jefferson

Grand Lake(December 1–March 31)

Grand

Silverthorne/Breckenridge(December 1–March 31)

Summit

Steamboat Springs(December 1–March 31)

Routt

Telluride San Miguel

Vail(December 1–March 31 and July 1–August 31)

Eagle

DelawareLewes

(July 1–August 31)Sussex

District of Columbia

Washington D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, inVirginia; and the counties of Montgomery and Prince George’s in Maryland) (See also Maryland and Virginia)



Florida

Boca Raton/Delray Beach/Jupiter(January 1–April 30)

Palm Beach and Hendry

Fort Lauderdale(January 1–April 30)

Broward

Fort Myers(February 1–March 31)

Lee

Fort Walton Beach/De Funiak Springs(June 1–July 31)

Okaloosa and Walton

Key West Monroe

Miami(December 1–March 31)

Miami-Dade

Naples(December 1–April 30)

Collier

Illinois

Chicago(October 1–November 30 and April 1–September 30)

Cook and Lake

Maine

Bar Harbor(October 1–October 31 and July 1–September 30)

Hancock

Maryland

Ocean City(July 1–August 31)

Worcester

Washington, DC Metro Area Montgomery and Prince George’s

Massachusetts

Boston/Cambridge Suffolk, city of Cambridge

Falmouth(July 1–August 31)

City limits of Falmouth

Hyannis(July 1–August 31)

Barnstable less the city of Falmouth

Martha’s Vineyard(June 1–September 30)

Dukes

Nantucket(June 1–September 30)

Nantucket

Michigan

Petoskey(July 1–August 31)

Emmet

Traverse City/Leland(July 1–August 31)

Grand Traverse and Leelanau

New York

Lake Placid(July 1–August 31)

Essex

New York City Bronx, Kings, New York, Queens, and Richmond

Saratoga Springs/Schenectady(July 1–August 31)

Saratoga and Schenectady

Oregon

Portland(October 1–October 31 and March 1–September 30)

Multnomah

Seaside(July 1–August 31)

Clatsop



Pennsylvania

Hershey(June 1–August 31)

Hershey

Philadelphia(October 1–November 30 and April 1–September 30)

Philadelphia

Rhode Island

Jamestown/Middletown/Newport(October 1–October 31 and June 1–September 30)

Newport

South Carolina

Charleston(October 1–November 30 and March 1–September 30)

Charleston, Berkeley and Dorchester

Utah

Park City(December 1–March 31)

Summit

Virginia

Virginia Beach(June 1–August 31)

City of Virginia Beach

Wallops Island(July 1–August 31)

Accomack

Washington, DC Metro Area Cities of Alexandria, Fairfax, and Falls Church;counties of Arlington and Fairfax

Washington

Seattle King

Vancouver(October 1–October 31 and March 1–September 30)

Clark, Cowlitz, and Skamania

Wyoming

Jackson/Pinedale(June 1–September 30)

Teton and Sublette

3. Changes in high-cost localities. Thelist of high-cost localities in this noticediffers from the list of high-cost localitiesin section 5 of Notice 2016–58.

a. The following localities have beenadded to the list of high-cost localities:Oakland, California; Lewes, Dela-ware; Fort Myers, Florida; Hyannis,Massachusetts; Petoskey, Michigan;Portland, Oregon; Vancouver, Wash-ington.

b. The following localities have changedthe portion of the year in which theyare high-cost localities: Aspen, Colo-rado; Denver/Aurora, Colorado; Tel-luride, Colorado; Vail, Colorado; BarHarbor, Maine; Ocean City, Mary-land; Nantucket, Massachusetts; Phil-adelphia, Pennsylvania; Jamestown/Middletown/Newport, Rhode Island;Jackson/Pinedale, Wyoming.

c. The following localities have been re-moved from the list of high-cost local-ities: Sedona, Arizona; Los Angeles,

California; Vero Beach, Florida; KillDevil, North Carolina.

SECTION 6. EFFECTIVE DATE

This notice is effective for per diemallowances for lodging, meal and inciden-tal expenses, or for meal and incidentalexpenses only, that are paid to any em-ployee on or after October 1, 2017, fortravel away from home on or after Octo-ber 1, 2017. For purposes of computingthe amount allowable as a deduction fortravel away from home, this notice is ef-fective for meal and incidental expensesor for incidental expenses only paid orincurred on or after October 1, 2017. Seesections 4.06 and 5.04 of Rev. Proc.2011–47 for transition rules for the last 3months of calendar year 2017.

SECTION 7. EFFECT ON OTHERDOCUMENTS

Notice 2016–58 is superseded.

DRAFTING INFORMATION

The principal author of this notice isElizabeth Binder of the Office of Asso-ciate Chief Counsel (Income Tax & Ac-counting). For further information re-garding this notice contact Ms. Binder at(202) 317-7005 (not a toll-free number).

Treatment Under Section956(c) of Certain PropertyTemporarily Stored in theUnited States FollowingHurricane Irma orHurricane MariaNotice 2017–55

SECTION 1. OVERVIEW

Section 956(c) of the Internal Reve-nue Code defines United States propertygenerally to include tangible property


located in the United States. In responseto the damage caused by Hurricane Irmaand Hurricane Maria, including in theCommonwealth of Puerto Rico and theU.S. Virgin Islands, certain controlledforeign corporations (within the mean-ing of section 957(a)) (“CFCs”) mayneed to transport property described insection 1221(a)(1) (“section 1221(a)(1)property”) located in affected areas tothe United States (as defined in section7701(a)(9)) for safekeeping. This noticeprovides relief for certain such section1221(a)(1) property that would other-wise constitute United States property.

SECTION 2. TREATMENT OFCERTAIN SECTION 1221(a)(1)PROPERTY UNDER SECTION956(c)

The damage caused by HurricaneIrma and Hurricane Maria has imperiledsection 1221(a)(1) property located inaffected areas. To facilitate necessarysafekeeping of such section 1221(a)(1)property, this notice announces that, forpurposes of section 956, a CFC will notbe treated as holding United Statesproperty as a result of holding section1221(a)(1) property located in theUnited States, if such section 1221(a)(1)property was located, on or before Sep-tember 5, 2017, in an area identified bythe Federal Emergency ManagementAgency (“FEMA”) as subject to a majordisaster or emergency declaration, andsuch section 1221(a)(1) property wastransported to the United States for tem-porary storage for safekeeping in antic-ipation of, or as a result of, HurricaneIrma. Furthermore, for purposes of sec-tion 956, a CFC will not be treated asholding United States property as a re-sult of holding section 1221(a)(1) prop-erty located in the United States, if suchsection 1221(a)(1) property was located,on or before September 17, 2017, in anarea identified by FEMA as subject to amajor disaster or emergency declara-tion, and such section 1221(a)(1) prop-erty was transported to the United Statesfor temporary storage for safekeeping inanticipation of, or as a result of, Hurri-cane Maria.

SECTION 3. RELIANCE ONNOTICE

This notice shall only apply to taxableyear quarters of a CFC ending on or afterSeptember 5, 2017, and on or before Jan-uary 31, 2018.

SECTION 4. DRAFTINGINFORMATION

The principal author of this notice isRose E. Jenkins of the Office of AssociateChief Counsel (International). For furtherinformation regarding this notice, contactMs. Jenkins at (202) 317-6934 (not a toll-free number).

Foreign Currency Guidanceunder Section 987

Notice 2017–57

I. PURPOSE

This Notice announces that the Depart-ment of the Treasury (Treasury Depart-ment) and the Internal Revenue Service(IRS) intend to amend the regulations un-der section 987 to defer the applicabilitydate of the final regulations under section987, as well as certain provisions of thetemporary regulations under section 987,by one year.

The final regulations under section 987were identified in Notice 2017–38, 2017–30I.R.B. 147 (July 24, 2017), as significant taxregulations requiring additional review pur-suant to Executive Order 13789. As part ofthat review, the Treasury Department andthe IRS are considering changes to the finalregulations that would allow taxpayers toelect to apply alternative rules for transition-ing to the final regulations and alternativerules for determining section 987 gain orloss.

II. BACKGROUND

A. FINAL AND TEMPORARYREGULATIONS

On January 9, 2017, the Treasury De-partment and the IRS published TreasuryDecision 9794, which contains final regu-lations relating to the determination of thetaxable income or loss of a taxpayer withrespect to a qualified business unit (QBU)

subject to section 987 (a section 987QBU); the timing, amount, character, andsource of any section 987 gain or loss; andother regulations (the final regulations).On that same date, the Treasury Depart-ment and the IRS also published TreasuryDecision 9795, which contains temporaryregulations under section 987, includingthe following: rules relating to the recog-nition and deferral of foreign currencygain or loss under section 987 in connec-tion with certain QBU terminations andcertain other transactions; an annualdeemed termination election for a section987 QBU; an elective method, available totaxpayers that make the annual deemedtermination election, for translating allitems of income or loss with respect to asection 987 QBU at the yearly averageexchange rate; rules regarding the treat-ment of section 988 transactions of a sec-tion 987 QBU; rules regarding QBUs withthe U.S. dollar as their functional cur-rency; rules regarding combinations andseparations of section 987 QBUs; rulesregarding the translation of income usedto pay creditable foreign income taxes;and rules regarding the allocation of assetsand liabilities of aggregate partnershipsfor purposes of section 987 (the temporarysection 987 regulations). Treasury Deci-sion 9795 also contains temporary regula-tions under section 988 requiring the de-ferral of certain section 988 loss thatarises with respect to related-party loans(the temporary section 988 regulations,and with the temporary section 987 regu-lations, the temporary regulations).

B. APPLICABILITY DATES

The final and temporary regulationswere effective on December 7, 2016.Dates of applicability for §§ 1.987–1through 1.987–10 are provided in§ 1.987–11. Specifically, § 1.987–11(a)states that, except as otherwise providedin § 1.987–11, §§ 1.987–1 through1.987–10 apply to taxable years begin-ning on or after one year after the firstday of the first taxable year followingDecember 7, 2016. Corresponding pro-visions under sections 861, 985, 988, and989 also apply to taxable years beginning onor after one year after the first day of the firsttaxable year following December 7, 2016.See §§ 1.861–9T(g)(2)(vi); 1.985–5(g);


1.988–1(i); 1.988–4(b)(2)(ii); 1.989(a)–1(b)(4); 1.989(a)–1(d)(4).

Similarly, §§ 1.987–1T (other than§§ 1.987–1T(g)(2)(i)(B) and (g)(3)(i)(H))through 1.987–4T, 1.987–6T, 1.987–7T,and 1.988–1T (the related temporary reg-ulations) apply to taxable years beginningon or after one year after the first day ofthe first taxable year following December7, 2016. See §§ 1.987–1T(h); 1.987–2T(e); 1.987–3T(f); 1.987–4T(h); 1.987–6T(d); 1.987–7T(d); 1.988–1T(j). Allother provisions in the temporary regula-tions, including the provisions relating tothe deferral of section 987 gain or loss andthe temporary section 988 regulations, aresubject to different applicability dates. See§§ 1.987–1T(h) (concerning §§ 1.987–1T(g)(2)(i)(B) and (g)(3)(i)(H)); 1.987–8T(g); 1.987–12T(j); 1.988–2T(j).

A taxpayer may apply the final regula-tions and the related temporary regula-tions to taxable years beginning after De-cember 7, 2016, provided the taxpayerconsistently applies those regulations tosuch taxable years with respect to all sec-tion 987 QBUs directly or indirectlyowned by the taxpayer on the transitiondate as well as all section 987 QBUs di-rectly or indirectly owned on the transi-tion date by members that file a consoli-dated return with the taxpayer or by anycontrolled foreign corporation, as definedin section 957, in which a member ownsmore than 50 percent of the voting poweror stock value, as determined under sec-tion 958(a). Sections 1.987–11(b); 1.987–1T(h); 1.987–2T(e); 1.987–3T(f); 1.987–4T(h); 1.987–6T(d); 1.987–7T(d). Thetransition date is the first day of the firsttaxable year to which §§ 1.987–1 through1.987–10 are applicable with respect to ataxpayer under § 1.987–11. Section1.987–11(c).

III. AMENDED APPLICABILITYDATE

The Treasury Department and the IRSintend to amend §§ 1.861–9T, 1.985–5,1.987–11, 1.987–1T through 1.987–4T,1.987–6T, 1.987–7T, 1.988–1, 1.988–1T,1.988–4, and 1.989(a)–1 to provide thatthe final regulations and the related tem-porary regulations will apply to taxable

years beginning on or after two years afterthe first date of the first taxable year fol-lowing December 7, 2016. Thus, for ataxpayer whose first taxable year after De-cember 7, 2016, begins on January 1,2017, the final regulations and the relatedtemporary regulations will apply for thetaxable year beginning on January 1,2019.

A taxpayer may, however, elect un-der § 1.987–11(b) to apply the final reg-ulations and the related temporary reg-ulations to taxable years beginning afterDecember 7, 2016 (subject to the con-ditions in § 1.987–11(b)), including tax-able years beginning on or after one yearafter the first day of the first taxable yearfollowing December 7, 2016 (the origi-nal applicability date in § 1.987–11(a)).

The intended amendments would notaffect the applicability date of the tempo-rary regulations other than the relatedtemporary regulations.

IV. TAXPAYER RELIANCE

Before the issuance of the amendmentsto the final regulations and the relatedtemporary regulations described in sectionIII of this Notice, taxpayers may rely onthe provisions of this Notice regardingthose proposed amendments.

V. DRAFTING INFORMATION

The principal author of this Notice isAnthony J. Marra of the Office of Asso-ciate Chief Counsel (International). Forfurther information regarding this Notice,contact Anthony J. Marra at (202) 317-6938 (not a toll-free number).

Extended Due Date underNotice 2017–10 forParticipants Affected byHurricanes Harvey, Irma,or Maria

Notice 2017–58

On December 23, 2016, the IRS re-leased Notice 2017–10, 2017–4 I.R.B.544, identifying syndicated conservationeasement transactions described in section

2 of that notice and substantially similartransactions as listed transactions for pur-poses of § 1.6011–4(b)(2) of the IncomeTax Regulations and §§ 6111 and 6112 ofthe Internal Revenue Code. Section 3 ofNotice 2017–10 provides that, in the caseof a participant with a disclosure obliga-tion with respect to these transactions un-der § 1.6011–4(e)(2)(i) (regarding subse-quently listed transactions), the disclosurewas due to the IRS Office of Tax ShelterAnalysis on June 21, 2017.

On April 27, 2017, the IRS released No-tice 2017–29, 2017–20 I.R.B. 1243, modi-fying Notice 2017–10. Notice 2017–29 ex-tended the due date for participants filingdisclosures under § 1.6011–4(e)(2)(i) fromJune 21, 2017, until October 2, 2017.

In response to Hurricane Harvey, Hur-ricane Irma, and Hurricane Maria, thisnotice further extends the due date foraffected participants to file disclosures un-der § 1.6011–4(e)(2)(i) from October 2,2017, until October 31, 2017.

An affected participant is any partici-pant whose principal residence or princi-pal place of business was located in aHurricane Harvey, Hurricane Irma, orHurricane Maria covered disaster area, asdefined in § 301.7508A–1(d)(2), or whoserecords necessary to meet the disclosureobligation were maintained in such a cov-ered disaster area.

Taxpayers who believe they are enti-tled to this extended due date should mark“Hurricane Harvey”, “Hurricane Irma”, or“Hurricane Maria” on the top of theirForm 8886, Reportable Transaction Dis-closure Statement.

EFFECT ON OTHER DOCUMENTS

Notice 2017–10 and Notice 2017–29are modified.


The principal authors of this notice areZachary King and Charles Gorham of theOffice of the Associate Chief Counsel (In-come Tax and Accounting). For furtherinformation regarding this notice contactMr. King or Mr. Gorham at (202) 317-7003 (not a toll-free number).


Part IV. Items of General InterestPublic Approval of Tax-Exempt Private ActivityBonds

REG–128841–07

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Withdrawal of notice of pro-posed rulemaking and notice of proposedrulemaking.

SUMMARY: This document contains pro-posed regulations to update and streamlinethe public approval requirement provided insection 147(f) of the Internal Revenue Codeapplicable to tax-exempt private activitybonds issued by State and local govern-ments. The proposed regulations would up-date the existing regulations on the publicapproval requirement to reflect statutorychanges, to streamline the public approvalprocess, and to reduce burden on State andlocal governments that issue tax-exempt pri-vate activity bonds. This document alsowithdraws two previous notices of proposedrulemaking on this topic. The proposed reg-ulations affect State and local governmentsthat issue tax-exempt private activity bonds.

DATES: Comments and requests for apublic hearing must be received by De-cember 27, 2017.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG–128841–07), Room5203, Internal Revenue Service, P.O.Box 7604, Ben Franklin Station, Wash-ington, DC 20044. Submissions may behand-delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to CC:PA:LPD:PR (REG–128841– 07),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue NW.,Washington, DC 20224, or sent elec-tronically via the Federal eRulemakingPortal at www.regulations.gov (IRSREG–128841– 07).

FOR FURTHER INFORMATION CON-TACT: Concerning the proposed regula-tions, Spence Hanemann at (202) 317-6980;concerning submissions of commentsand requesting a hearing, Regina John-

son at (202) 317-6901 (not toll-freenumbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information con-tained in this notice of proposed rulemak-ing has been submitted to the Office ofManagement and Budget for review underOMB Control Number 1545–2185 in ac-cordance with the Paperwork ReductionAct of 1995 (44 U.S.C. 3507(d)). Thecollection of information in this pro-posed regulation is the requirement in§ 1.147(f)–1 that certain information becontained in a public notice or public ap-proval and, consequently, disclosed to thepublic. This information is required to meetthe statutory public approval requirementprovided in section 147(f). The likely re-spondents are the governmental units re-quired to approve an issue of private activitybonds under section 147(f).

Estimated total annual burden: 2,600hours.Estimated average annual burden perrespondent: 1.3 Hours.Estimated number of respondents:2,000.Estimated frequency of responses: Annual.Comments on the collection of informa-

tion should be sent to the Office of Manage-ment and Budget, Attn: Desk Officer for theDepartment of the Treasury, Office of Infor-mation and Regulatory Affairs, Washing-ton, DC 20503, with copies to the InternalRevenue Service, Attn: IRS Reports Clear-ance Officer, SE:CAR:MP:T:T:SP, Wash-ington, DC 20224. Comments on the collec-tion of information should be received byNovember 27, 2017.

Comments are specifically requestedconcerning:

Whether the proposed collection of in-formation is necessary for the proper per-formance of the functions of the IRS, in-cluding whether the information will havepractical utility;

The accuracy of the estimated burdenassociated with the proposed collection ofinformation;

How the quality, utility, and clarity ofthe information to be collected may beenhanced;

How the burden of complying with theproposed collection of information maybe minimized, including through the ap-plication of automated collection tech-niques or other forms of information tech-nology; and

Estimates of capital or start-up costs andcosts of operation, maintenance, and pur-chase of services to provide information.

An agency may not conduct or spon-sor, and a person is not required to re-spond to, a collection of information un-less it displays a valid control numberassigned by the Office of Managementand Budget.

Books or records relating to a collec-tion of information must be retained aslong as their contents may become mate-rial in the administration of any internalrevenue law. Generally, tax returns andtax return information are confidential, asrequired by 26 U.S.C. 6103.

Background

This document contains proposedamendments to 26 CFR part 1 under sec-tion 147(f) of the Internal Revenue Codeof 1986 (the Code) and 26 CFR part 5funder section 103(k) of the Internal Rev-enue Code of 1954 (the 1954 Code). In theTax Equity and Fiscal Responsibility Actof 1982 (TEFRA), Public Law 97–248, 96Stat. 324, Congress added section 103(k)to the 1954 Code to impose a public ap-proval requirement on tax-exempt indus-trial development bonds. On May 11,1983, the Department of the Treasury (Trea-sury Department) and the IRS published inthe Federal Register (48 FR 21117) tem-porary regulations under section 103(k) ofthe 1954 Code (TD 7892) (the ExistingRegulations). See § 5f.103–2. A notice ofproposed rulemaking (LR–221–82) bycross-reference to the temporary regulationswas published in the Federal Register (48FR 21166) on the same day.

In the Tax Reform Act of 1986 (1986Tax Act), Public Law 99–514, 100 Stat.2085, Congress reorganized the tax-exempt bond provisions and carried for-ward the public approval requirement ofsection 103(k) of the 1954 Code in ex-panded form in section 147(f) of the Code.In section 147(f), Congress extended the


public approval requirement to apply to alltypes of tax-exempt private activity bonds,as provided in section 141(e). The legisla-tive history of the 1986 Tax Act indicatesthat “[t]he conferees intend that, to the ex-tent not amended, all principles of presentlaw continue to apply under the reorganizedprovisions.” H.R. Rep. No. 99–841, at II–686 (1986) (Conf. Rep.). Thus, the ExistingRegulations in § 5f.103–2 remain in effect.

On September 9, 2008, the TreasuryDepartment and the IRS published a no-tice of proposed rulemaking (REG–128841–07) in the Federal Register (73FR 52220) that proposed regulations toamend and supplement the Existing Reg-ulations (the 2008 Proposed Regulations).The Treasury Department and the IRS re-ceived public comments on the 2008 Pro-posed Regulations and held a public hearingon January 26, 2009. As discussed morefully in the Explanation of Provisions sec-tion of this preamble, the Treasury Depart-ment and the IRS have decided to withdrawthe 2008 Proposed Regulations in full and topropose new regulations. This documentcontains those new proposed regulations(the Proposed Regulations).

Explanation of Provisions

1. Introduction

In general, pursuant to section 103 ofthe Code, interest received by investors oneligible State and local bonds is tax-exempt for Federal income tax purposes.Interest on private activity bonds qualifiesfor this tax-exempt treatment only if thebonds meet the requirements for “quali-fied bonds” as defined in section 141(e)and other applicable requirements pro-vided in section 103. Section 141(e) of theCode requires, among other things, thatqualified bonds meet the public approvalrequirement of section 147(f).

The Proposed Regulations would updatethe Existing Regulations to address subse-quent statutory changes and to streamlinethe public approval process. The ProposedRegulations provide greater flexibility toState and local governments with respect tothe public approval process to reduce ad-ministrative burdens associated with thepublic approval requirement. The ProposedRegulations recognize advances in technol-ogy and electronic communication that mayfacilitate more streamlined procedures for

providing reasonable public notice of a pub-lic hearing.

2. The 2008 Proposed Regulations

The 2008 Proposed Regulations pro-posed to update, clarify, and simplify dis-crete aspects of the Existing Regulationsregarding the public approval require-ment. The 2008 Proposed Regulations fo-cused on the scope, information content,methods, and timing for the public ap-proval process, and generally did not fo-cus on the governmental entities fromwhich public approval is required. Over-all, the public comments on the 2008 Pro-posed Regulations were favorable.

The Proposed Regulations generallyincorporate the amendments proposed inthe 2008 Proposed Regulations with mod-ifications in response to the public com-ments. One comment focused on thestructure of the 2008 Proposed Regula-tions. The 2008 Proposed Regulationswould have revised the Existing Regula-tions by amending existing rules and add-ing new rules. The 2008 Proposed Regu-lations further provided that the ExistingRegulations would remain in effect to theextent not inconsistent with the final ver-sion of the 2008 Proposed Regulations.Commenters expressed concern about po-tential confusion over two distinct andpartially inconsistent regulation sectionsgoverning the public approval require-ment. The Treasury Department and theIRS understand this concern. Accordingly,the Proposed Regulations consolidate theguidance in the Existing Regulations and the2008 Proposed Regulations, with modifica-tions in response to the public commentsand other recent developments, into newproposed guidance and provide a furtheropportunity for public comment.

The Treasury Department and the IRSalso received numerous comments regard-ing the level of specificity of informationrequired to be contained in reasonablepublic notice of a public hearing or apublic approval. Generally, the 2008 Pro-posed Regulations proposed to allow theissuer to provide streamlined informationabout projects to be financed, and the Ex-isting Regulations require a greater levelof specificity of information about suchprojects. The 2008 Proposed Regulationsalso proposed to afford issuers more

flexibility regarding the effect of post-issuance changes from the reasonably ex-pected facts provided in the reasonablepublic notice or public approval. Com-menters expressed differing views onwhether these proposed amendments inthe 2008 Proposed Regulations should beadopted. Commenters in favor of theseamendments generally applauded the re-duced burden that issuers would bear un-der the 2008 Proposed Regulations andsuggested ways in which that burdencould be reduced further. Commenters op-posed to these amendments generally ar-gued that reducing the amount of publicinformation would limit the public’s abil-ity to approve or oppose on an informedbasis new private activity bonds and pro-posed projects to be financed. The legis-lative history of the public approval re-quirement emphasizes the importance of“a reasonable opportunity for personswith differing views on both issuance ofthe bonds and the location and nature ofthe proposed facility to be heard.” S. Rep.No. 97–494, at 171 (1982). With respectto these proposed amendments, the Trea-sury Department and the IRS have deter-mined that the information that wouldhave been required by the 2008 ProposedRegulations is sufficient to permit thepublic to evaluate the merits of both theissuance of the bonds and the location andnature of the financed facility. Thus, theburden imposed by the Existing Regula-tions may be reduced as provided in the2008 Proposed Regulations without sig-nificantly impairing the public’s consid-eration of new private activity bonds.Accordingly, the Proposed Regulationsgenerally retain the streamlined infor-mation and post-issuance flexibility pro-posed in the 2008 Proposed Regulationsand provide for additional post-issuanceflexibility. (See section 6 of this Expla-nation of Provisions.)

Commenters also provided differingviews on the amendments in the 2008Proposed Regulations that proposedchanges to the procedures for providingreasonable public notice of a public hear-ing. The Existing Regulations generallypermit an issuer to publicize notice bynewspaper, radio, or television, and pre-sume notice to be reasonable if publishedat least 14 days prior to the date of thepublic hearing. The 2008 Proposed Regu-


lations proposed to expand the permittedmethods of providing public notice to in-clude notice by newspaper, radio, televi-sion, Web site, or other permitted methodsof giving public notice under State law,and would have shortened the presump-tively reasonable notice period to sevendays in advance of the hearing. Comment-ers in favor of these amendments gener-ally stated that the proposed amendmentswould ease the burden of providing thepublic notice. Commenters opposed tothese amendments generally expressedconcern that seven days’ notice of a publichearing would not provide the public suf-ficient time to make an informed decisionand to make arrangements to be present atthe hearing. The legislative history of TE-FRA indicates that Congress expected no-tice to be published no fewer than 14 daysbefore the scheduled date of the hearing.See S. Rep. No. 97–494, at 171 (1982). Inresponse to these comments, the ProposedRegulations adopt and expand the permit-ted methods for giving notice of a publichearing that were proposed in the 2008Proposed Regulations, but retain the 14-day notice period presumed reasonableunder the Existing Regulations consistentwith the expectations of Congress.

3. Host Approval and Issuer Approval

Section 147(f) generally requires thatboth the governmental unit that issues thebonds (or on behalf of which the bonds areissued) and a governmental unit with juris-diction over the location of the financedproject approve an issue of private activitybonds (and the approvals are referred to asthe issuer approval and the host approval,respectively). The Proposed Regulationsgenerally carry forward the rules on issuerapproval and host approval from the Exist-ing Regulations, with limited revisions toaddress statutory changes that affect the ap-plication of these rules to certain types ofprivate activity bonds. Thus, for example,the Proposed Regulations include guidanceto address subsequent statutory changes insection 147(f)(3) and (4) that added specialprovisions regarding the issuer approval andhost approval requirements for certain fi-nancings involving airports, high-speed railfacilities, qualified scholarship funding cor-porations, and volunteer fire departments.

The 1986 Tax Act extended the publicapproval requirement beyond the tradi-tional, facility-focused industrial develop-ment bonds subject to the requirement underthe 1954 Code to include certain specialtypes of financings that are not facility-specific, including “qualified mortgagebonds” as defined in section 143(a), “qual-ified veterans’ mortgage bonds” as definedin section 143(b), “qualified student loanbonds” as defined in section 144(b), and“qualified 501(c)(3) bonds” as defined insection 145. For these types of bonds, ob-taining a host approval may be impracticalor unworkable. For example, for qualifiedmortgage bonds, the locations of many ofthe homes to be financed with qualifiedmortgage loans generally are unknown atthe time of issuance of the bonds and thus itmay be difficult to identify appropriate gov-ernmental units to provide host approval.Moreover, for qualified student loan bondsand for qualified 501(c)(3) bonds used tofinance working capital expenditures, theapplication of the host approval requirementis unworkable because the assets and expen-ditures financed have no physical location.In recognition of the practical difficultiesfaced by issuers of these types of bondsunder the Existing Regulations, the Pro-posed Regulations provide that no host ap-proval is necessary for mortgage revenuebonds (defined as qualified mortgage bonds,qualified veterans’ mortgage bonds, and cer-tain refundings of bonds issued to financemortgages of owner-occupied residencesunder the law prior to enactment of section143), qualified student loan bonds, or qual-ified 501(c)(3) bonds used to finance work-ing capital expenditures.

4. Reasonable Public Notice and PublicHearing

The Existing Regulations generallyprovide that an applicable elected repre-sentative of the approving governmentalunit may approve an issue following apublic hearing for which there was rea-sonable public notice. The Existing Reg-ulations provide guidance on permittedmethods for giving reasonable public no-tice and holding public hearings. The Pro-posed Regulations would expand thesemethods to provide greater flexibility toState and local governments for providingreasonable public notice.

The Existing Regulations provide gen-erally that reasonable public notice mustbe published in a newspaper of generalcirculation available to residents of therelevant locality or announced by radio ortelevision broadcast to those residents.The Proposed Regulations would expandthe permitted methods of providing rea-sonable public notice to provide greaterflexibility and to recognize advances intechnology and electronic communica-tions. Thus, the Proposed Regulationswould allow reasonable public notice bynewspaper publication, radio or televisionbroadcast, postings on a governmentalunit’s public Web site, or alternativemethods permitted under a general Statelaw for public notices for public hearingsof a governmental unit. The Treasury De-partment and the IRS solicit comment onother possible methods of providing rea-sonable public notice to foster flexibilityand to reduce administrative burdens.

5. Content of Reasonable Public Noticeand Public Approval

A. General Rules for Content ofReasonable Public Notice and PublicApproval

The Existing Regulations generally re-quire that the reasonable public notice andthe public approval contain the followinginformation: A general, functional de-scription of the type and use of the facilityto be financed; the maximum aggregateface amount of the bonds to be issued forthe facility; the initial owner, operator, ormanager of the facility; and the location ofthe facility by street address or, if none, bya general description designed to informreaders of the specific location. The re-quired level of specificity of informationfor the public approval process under theExisting Regulations has proven to be un-duly limiting and burdensome in certainrespects. The Proposed Regulations gener-ally retain the requirements that information(public approval information) be providedfor the public approval process but refine therequired public approval information to re-duce burden and enhance flexibility.

Initially, the Existing Regulations fo-cus on an individual “facility” as the unitof financed property for which the issuermust provide the relevant information.


The definition of “facility” in the ExistingRegulations includes facilities on multipletracts of land only if the facilities are usedin an integrated operation. Whether facil-ities are part of an “integrated operation”has proven difficult to determine.

The Proposed Regulations use the term“project” in lieu of the term “facility” be-cause “project” more clearly indicates thatfinanced property may consist of multiplebuildings and multiple sites. The ProposedRegulations define the term “project” gen-erally to mean one or more capital projectsor facilities, including land, buildings,equipment, and other property, to be fi-nanced with an issue, that are located on thesame site, or adjacent or proximate sitesused for similar purposes. In addition, toaddress certain special types of loan financ-ings, the definition of a project under theProposed Regulations also includes mort-gage loans financed by mortgage revenuebonds, student loans financed by qualified stu-dent loan bonds, and working capital expen-ditures financed by qualified 501(c)(3) bonds.

The Proposed Regulations would con-tinue to require a general functional descrip-tion of the type and use of the financedproject. The Proposed Regulations, how-ever, would mitigate the required level ofspecificity of that information. Thus, theProposed Regulations would allow an issuerof exempt facility bonds to satisfy this re-quirement through a statement that identifiesthe category of exempt facility bond (forexample, bonds financing an airport or amass commuting facility). Similarly, an is-suer of other types of private activity bondsmay satisfy this requirement through a state-ment that identifies the type of bonds andthe type and use of the project (for example,qualified small issue bonds for a manufac-turing facility).

The Proposed Regulations would con-tinue to require that the public approvalinformation include the name of the ex-pected initial owner or the principal userof the project. The Proposed Regulations,however, would permit an issuer to namethe true beneficial party of interest as analternative to naming a legal owner oruser (for example, the name of a nonprofithospital organization instead of a limitedliability company that serves as the legalowner of a hospital).

The Proposed Regulations wouldcontinue to require that the public ap-

proval information include the locationof the project by street address. TheProposed Regulations, however, wouldclarify that a description by boundarystreets or other geographic boundariessuffices to meet this location require-ment. The Proposed Regulations wouldallow a consolidated description of thelocation of a project on the same site oron adjacent or proximate sites (for ex-ample, a college campus).

B. Special Rules for Mortgage RevenueBonds, Qualified Student Loan Bonds,and Certain Qualified 501(c)(3) Bonds

The 1986 Tax Act extended the pub-lic approval requirement to mortgagerevenue bonds, qualified student loanbonds, and qualified 501(c)(3) bonds.The Existing Regulations were promul-gated before the 1986 Tax Act and thusprovide no guidance tailored to the ap-plication of the public approval require-ment to these types of bonds. In theGeneral Explanation of the 1986 TaxAct, the Staff of the Joint Committee onTaxation stated that, “[i]n extendingthis requirement to all private activitybonds, Congress intended that the appli-cable Treasury regulations will beamended for student loan bonds (whereno facilities are financed), mortgage rev-enue bonds (where the exact residencesto be financed may not be identifiedbefore issuance of the bonds), and qual-ified 501(c)(3) bonds that qualify for thespecial exception to the maturity limita-tion for pooled financings (where thefacilities need not be identified beforeissuance of the bonds).” Joint Commit-tee on Taxation, General Explanation ofthe Tax Reform Act of 1986 (JCS–10 –87), at 1219 (May 4, 1987). Accord-ingly, the Proposed Regulations providespecial rules for public approval ofmortgage revenue bonds, qualified stu-dent loan bonds, and qualified 501(c)(3)bonds issued for pooled financings asdescribed in section 147(b)(4).

For mortgage revenue bonds, the Pro-posed Regulations would require the pub-lic approval information to state that thebonds will finance residential mortgages,provide the maximum stated principalamount of the bonds, and generally de-scribe the issuer’s geographic jurisdiction

in which the residences to be financedwith the mortgage loans are expected tobe located. Similarly, for qualified studentloan bonds, the Proposed Regulationswould require the public approval infor-mation to state that the bonds will financestudent loans and provide the maximumstated principal amount of the bonds. Forthese two types of bonds, the ProposedRegulations would not require the namesof borrowers to be included in the publicapproval information.

For qualified 501(c)(3) bonds that fi-nance loans described in the special provi-sion for pooled loan financings in section147(b)(4), the Proposed Regulations wouldpermit the issuer to choose to apply a two-stage public approval process if the issuerhas insufficient information at the time ofthe reasonable public notice or public ap-proval to meet the general public approvalinformation requirements. To apply thisspecial rule, the issuer must first obtain pub-lic approval within the time specified in theProposed Regulations for public approvalgenerally. For this first-stage public ap-proval, the public approval informationmust state that the bonds will be qualified501(c)(3) bonds used to finance loans de-scribed in section 147(b)(4)(B), provide themaximum stated principal amount of thebonds, generally describe the type of projectto be financed with such loans (for example,loans for hospital facilities or college facil-ities), and state that the issuer will obtain anadditional public approval with specificproject information before origination ofany such loans. In addition, before loanorigination, the issuer must obtain a supple-mental public approval of that loan contain-ing all of the project-specific informationthat the public approval information rulesgenerally require.

6. Deviations From the Information inthe Reasonable Public Notice and PublicApproval

Differences or “deviations” betweeninformation regarding a proposed projectto be financed with a proposed issuance ofprivate activity bonds that serves as thebasis for a public approval and the actualproject financed with the bonds may affectthe validity of the public approval. TheExisting Regulations and the ProposedRegulations provide that insubstantial de-


viations do not invalidate a public ap-proval. The Proposed Regulations provideadditional guidance concerning differ-ences that constitute insubstantial devia-tions and also allow remedial actions tocure certain substantial deviations.

The Proposed Regulations provide thatwhether a deviation is substantial gener-ally depends on all of the facts and cir-cumstances. The Proposed Regulations,however, would always treat a change inthe fundamental nature or type of a projectas a substantial deviation.

The Proposed Regulations would treatcertain specified deviations from the publicapproval information provided as insubstan-tial deviations. For example, a deviationfrom the size of a proposed bond issue for aproposed project specified in public ap-proval information is an insubstantial devi-ation if the stated principal amount of bondsactually issued and used for the project is nomore than ten percent (10%) greater than themaximum stated principal amount publiclyapproved for the project or is any amountless than that maximum stated principalamount. Furthermore, if an issuer appliesproceeds of an issue approved for use onone project to pay working capital expendi-tures directly associated with any projectapproved in the same public approval, thatdeviation is an insubstantial deviation. Fi-nally, a deviation between the initial owneror principal user of the project identified inthe public approval information and the ac-tual initial owner or principal user of theproject is an insubstantial deviation if theparties are related on the issue date.

The Proposed Regulations would allowsupplemental post-issuance public approv-als to cure certain substantial deviations thatresult from unexpected events or unforeseenchanges in circumstances that occur afterthe issuance of the bonds. This remedialaction is similar to a permitted post-issuancepublic approval under § 1.141–12(e)(2) and(f) used for remedial actions for purposes ofthe private business restrictions.

7. Applicability Dates and Reliance

The Proposed Regulations are pro-posed to apply to bonds issued pursuant toa public approval that occurs on or afterthe date that is 90 days after publication ofa Treasury decision adopting these rulesas final regulations in the Federal Regis-

ter. Issuers may apply the Proposed Reg-ulations, in whole but not in part, to bondsthat are issued pursuant to a public ap-proval that occurs on or after September28, 2017 and before the applicability dateprovided in a Treasury decision adoptingthese rules as final regulations in the Fed-eral Register.

In addition, the Treasury Departmentand the IRS propose to remove the Exist-ing Regulations under § 5f.103–2 from 26CFR part 5f effective on the general ap-plicability date of the final regulations,which is proposed to be the date that is 90days after publication of a Treasury deci-sion adopting these rules as final regula-tions in the Federal Register.

Special Analyses

Certain IRS regulations, includingthese, are exempt from the requirementsof Executive Order 12866, as supple-mented and reaffirmed by Executive Or-der 13563. Therefore, a regulatory impactassessment is not required. It is herebycertified that these regulations will nothave a significant economic impact on asubstantial number of small entities. TheExisting Regulations provide guidance onthe minimum informational content, pro-cedures, and timing for the statutorily re-quired public notices, public hearings, andpublic approvals. Although the ProposedRegulations are expected to affect a sig-nificant number of small State or localgovernmental units that issue tax-exemptprivate activity bonds, the ProposedRegulations are not expected to have asignificant economic effect on thosegovernmental units because the ProposedRegulations generally would streamlineand simplify the Existing Regulations invarious respects to reduce the administra-tive burdens of meeting the statutory pub-lic approval requirement. For example,the Proposed Regulations would permitpublication of public notice by Web site toreduce costs associated with print publi-cation or radio or television broadcast,reduce the information required to be con-tained in public notice and public approvalfor certain types of bonds, liberalize theconsequences of insubstantial changes inproject information, and permit curative ac-tions to address certain circumstances inwhich finished projects differ from descrip-tions provided in the public notice or public

approval. Accordingly, a regulatory flexibil-ity analysis is not required. Pursuant to sec-tion 7805(f) of the Code, this notice of pro-posed rulemaking will be submitted to theChief Counsel for Advocacy of the SmallBusiness Administration for comment on itsimpact on small entities.

Comments and Requests for PublicHearing

Before the Proposed Regulations are ad-opted as final regulations, consideration willbe given to any comments that are submit-ted timely to the IRS as prescribed in thispreamble under the ADDRESSES heading.The Treasury Department and the IRS re-quest comments on all aspects of the pro-posed rules. All comments will be availableat www.regulations.gov or upon request. Apublic hearing will be scheduled if re-quested in writing by any person that timelysubmits written comments. If a public hear-ing is scheduled, notice of the date, time,and place for the hearing will be publishedin the Federal Register.

Drafting Information

The principal authors of these regula-tions are Spence Hanemann and VickyTsilas, Office of Associate Chief Counsel(Financial Institutions and Products).However, other personnel from the Trea-sury Department and the IRS participatedin their development.

* * * * *

Withdrawal of Notice of ProposedRulemaking

Accordingly, under the authority of 26U.S.C. 7805, the notice of proposed rule-making (REG–128841–07) that was pub-lished in the Federal Register (73 FR52220) on September 9, 2008, is with-drawn. Also, under the authority of 26U.S.C. 7805, § 1.103–17 of the notice ofproposed rulemaking (LR–221–82) pub-lished in the Federal Register (48 FR21166) on May 11, 1983, is withdrawn.

Proposed Amendments to theRegulations

Accordingly, 26 CFR parts 1 and 5f areproposed to be amended as follows:


PART 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.147(f)–1 is added to

read as follows:

§ 1.147(f)–1 Public approval of privateactivity bonds.

(a) In general. Interest on a privateactivity bond is excludable from gross in-come under section 103(a) only if thebond meets the requirements for a quali-fied bond as defined in section 141(e) andother applicable requirements provided insection 103. In order to be a qualifiedbond as defined in section 141(e), amongother requirements, a private activity bondmust meet the requirements of section147(f). A private activity bond meets therequirements of section 147(f) only if thebond is publicly approved pursuant toparagraph (b) of this section or the bondqualifies for the exception for refundingbonds in section 147(f)(2)(D).

(b) Public approval requirement—(1)In general. Except as otherwise providedin this section, a bond meets the require-ments of section 147(f) if, before the issuedate, the issue of which the bond is a partreceives issuer approval and host approval(each a public approval) as defined inparagraphs (b)(2) and (3) of this section inaccordance with the method and processset forth in paragraphs (c) through (f) ofthis section.

(2) Issuer approval. Except as other-wise provided in this section, issuer ap-proval means an approval that meets therequirements of this paragraph (b)(2). Ei-ther the governmental unit that issues theissue or the governmental unit on behalfof which the issue is issued must approvethe issue. For this purpose, § 1.103–1 ap-plies to the determination of whether anissuer issues bonds on behalf of anothergovernmental unit. If an issuer issuesbonds on behalf of more than one govern-mental unit (for example, in the case of anauthority that acts for two counties), anyone of those governmental units may pro-vide the issuer approval.

(3) Host approval. Except as otherwiseprovided in this section, host approvalmeans an approval that meets the require-

ments of this paragraph (b)(3). Each gov-ernmental unit the geographic jurisdictionof which contains the site of a project tobe financed by the issue must approve theissue. If, however, the entire site of aproject to be financed by the issue iswithin the geographic jurisdiction of morethan one governmental unit within a State(counting the State as a governmental unitwithin such State), then any one of thosegovernmental units may provide host ap-proval for the issue for that project. Forpurposes of the host approval, if a projectto be financed by the issue is locatedwithin the geographic jurisdiction of twoor more governmental units but not en-tirely within any one of those governmen-tal units, each portion of the project that islocated entirely within the geographic ju-risdiction of the respective governmentalunits may be treated as a separate project.The issuer approval provided pursuant toparagraph (b)(2) of this section may betreated as a host approval if the govern-mental unit providing the issuer approvalis also a governmental unit eligible toprovide the host approval pursuant to thisparagraph (b)(3).

(4) Special rule for host approval ofairports or high-speed intercity rail facil-ities. Pursuant to a special rule in section147(f)(3), if the proceeds of an issue are tobe used to finance a project that consists ofeither facilities located at an airport (withinthe meaning of section 142(a)(1)) or high-speed intercity rail facilities (within themeaning of section 142(a)(11)) and the is-suer of that issue is the owner or operator ofthe airport or high-speed intercity rail facil-ities, the issuer is the only governmental unitthat is required to provide the host approvalfor that project.

(5) Special rule for issuer approval ofscholarship funding bond issues and vol-unteer fire department bond issues. In thecase of a qualified scholarship fundingbond as defined in section 150(d)(2), thegovernmental unit that made a request de-scribed in section 150(d)(2)(B) with re-spect to the issuer of the bond is the gov-ernmental unit on behalf of which thebond was issued for purposes of the issuerapproval. If more than one governmentalunit within a State made a request de-scribed in section 150(d)(2)(B), the Stateor any such requesting governmental unitmay be treated as the governmental unit

on behalf of which the bond was issuedfor purposes of the issuer approval. In thecase of a bond of a volunteer fire depart-ment treated as a bond of a political sub-division of a State under section 150(e),the political subdivision described in sec-tion 150(e)(2)(B) with respect to that vol-unteer fire department is the governmentalunit on behalf of which the bond is issuedfor purposes of the issuer approval.

(6) Host approval not required for issuesof mortgage revenue bonds, student loanbonds, and certain qualified 501(c)(3)bonds. In the case of a mortgage revenuebond (as defined in paragraph (g)(5) of thissection), a qualified student loan bond asdefined in section 144(b), and the portion ofan issue of qualified 501(c)(3) bonds as de-fined in section 145 that finances workingcapital expenditures, the issue or portion ofthe issue must receive an issuer approval butno host approval is necessary.

(c) Method of public approval. Themethod of public approval of an issuemust satisfy either paragraph (c)(1) or (2)of this section. An approval may satisfythe requirements of this paragraph (c)without regard to the authority under Stateor local law for the acts constituting thatapproval.

(1) Applicable elected representative.An applicable elected representative ofthe approving governmental unit approvesthe issue following a public hearing forwhich there was reasonable public notice.

(2) Voter referendum. A voter referen-dum of the approving governmental unitapproves the issue.

(d) Public hearing and reasonablepublic notice—(1) Public hearing. Publichearing means a forum providing a rea-sonable opportunity for interested individ-uals to express their views, orally or inwriting, on the proposed issue of bondsand the location and nature of the pro-posed project to be financed.

(2) Location of the public hearing. Thepublic hearing must be held in a locationthat, based on the facts and circumstances,is convenient for residents of the approv-ing governmental unit. The location of thepublic hearing is presumed convenient forresidents of the unit if the public hearingis located in the approving governmentalunit’s capital or seat of government. Ifmore than one governmental unit is re-quired to hold a public hearing, the hear-


ings may be combined as long as thecombined hearing affords the residents ofall of the participating governmental unitsa reasonable opportunity to be heard. Thelocation of any combined hearing is pre-sumed convenient for residents of eachparticipating governmental unit if it is nofarther than 100 miles from the seat ofgovernment of each participating govern-mental unit beyond whose geographic ju-risdiction the hearing is conducted.

(3) Procedures for conducting the pub-lic hearing. In general, a governmentalunit may select its own procedure for apublic hearing, provided that interestedindividuals have a reasonable opportunityto express their views. Thus, a govern-mental unit may impose reasonable re-quirements on persons who wish toparticipate in the hearing, such as a re-quirement that persons desiring to speakat the hearing make a written request tospeak at least 24 hours before the hear-ing or that they limit their oral remarksto a prescribed time. For this purpose, itis unnecessary, for example, that theapplicable elected representative of theapproving governmental unit be presentat the hearing, that a report on the hear-ing be submitted to that applicableelected representative, or that State ad-ministrative procedural requirements forpublic hearings be observed. Except tothe extent State procedural requirementsfor public hearings are in conflict with aspecific requirement of this section, apublic hearing performed in compliancewith State procedural requirements sat-isfies the requirements for a public hear-ing in this paragraph (d). A public hear-ing may be conducted by an individualappointed or employed to perform suchfunction by the governmental unit or itsagencies, or by the issuer. Thus, forexample, for bonds to be issued by anauthority that acts on behalf of a county,the hearing may be conducted by theauthority, the county, or an appointee ofeither.

(4) Reasonable public notice. Reason-able public notice means notice that isreasonably designed to inform residents ofan approving governmental unit, includ-ing the issuing governmental unit and thegovernmental unit in whose geographicjurisdiction a project is to be located, ofthe proposed issue. The notice must state

the time and place for the public hearingand contain the information required byparagraph (f)(2) of this section. Notice ispresumed to be reasonably designed toinform residents of an approving govern-mental unit if it satisfies the requirementsof this paragraph (d)(4) and is given nofewer than fourteen (14) calendar daysbefore the public hearing in one or moreof the ways set forth in paragraphs(d)(4)(i) through (iv) of this section.

(i) Newspaper publication. Public no-tice may be given by publication in one ormore newspapers of general circulationavailable to the residents of the govern-mental unit.

(ii) Radio or television broadcast. Pub-lic notice may be given by radio or tele-vision broadcast to the residents of thegovernmental unit.

(iii) Governmental unit Web site post-ing. Public notice may be given by elec-tronic posting on the approving govern-mental unit’s public Web site used toinform its residents about events affectingthe residents (for example, notice of pub-lic meetings of the governmental unit). Inthe case of public notice provided as de-scribed in the first sentence of this para-graph (d)(4)(iii), the governmental unitmust offer a reasonable, publicly knownalternative method for obtaining the infor-mation contained in the public notice forresidents without access to the Internet(such as telephone recordings).

(iv) Alternative State law public noticeprocedures. Public notice may be given ina way that is permitted under a generalState law for public notices for publichearings for the approving governmentalunit.

(e) Applicable elected representative—(1) In general—(i) Definition of applica-ble elected representative. The applicableelected representative of a governmentalunit means—

(A) The governmental unit’s electedlegislative body;

(B) The governmental unit’s chiefelected executive officer;

(C) In the case of a State, the chiefelected legal officer of the State’s execu-tive branch of government; or

(D) Any official elected by the votersof the governmental unit and designatedfor purposes of this section by the govern-mental unit’s chief elected executive offi-

cer or by State or local law to approveissues for the governmental unit.

(ii) Elected officials. For purposes ofparagraphs (e)(1)(i)(B), (C), and (D) ofthis section, an official is consideredelected only if that official is popularlyelected at-large by the voters of thegovernmental unit. If an official popularlyelected at-large by the voters of a govern-mental unit is appointed or selected pur-suant to State or local law to be the chiefexecutive officer of the unit, that official isdeemed to be an elected chief executiveofficer for purposes of this section but forno longer than the official’s tenure as anofficial popularly elected at-large.

(iii) Legislative bodies. In the case ofa bicameral legislature that is popularlyelected, both chambers together constitutean applicable elected representative. Absentdesignation under paragraph (e)(1)(i)(D) ofthis section, however, neither such chamberindependently constitutes an applicableelected representative. If multiple electedlegislative bodies of a governmental unithave independent legislative authority, thebody with the more specific authority relat-ing to the issue is the only legislative bodythat is treated as an elected legislative bodyunder paragraph (e)(1)(i)(A) of this section.

(2) Governmental unit with no applica-ble elected representative—(i) In general.The applicable elected representatives of agovernmental unit with no applicableelected representative (but for this para-graph (e)(2) and section 147(f)(2)(E)(ii))are the applicable elected representativesof the next higher governmental unit (withan applicable elected representative) fromwhich the governmental unit derives itsauthority. Except as otherwise provided inthis section, any governmental unit fromwhich the governmental unit with no ap-plicable elected representative derives itsauthority may be treated as the next highergovernmental unit without regard to therelative status of such higher governmen-tal unit under State law. A governmentalunit derives its authority from anothergovernmental unit that—

(A) Enacts a specific law (for example,a provision in a State constitution, charter,or statute) by or under which the govern-mental unit is created;

(B) Otherwise empowers or approvesthe creation of the governmental unit; or


(C) Appoints members to the govern-ing body of the governmental unit.

(ii) Host approval. For purposes of ahost approval, a governmental unit may betreated as the next higher governmentalunit only if the project is located within itsgeographic jurisdiction and eligible resi-dents of the unit are entitled to vote for itsapplicable elected representatives.

(3) On behalf of issuers. In the case ofan issuer that issues bonds on behalf of agovernmental unit, the applicable electedrepresentative is any applicable electedrepresentative of the governmental unit onbehalf of which the bonds are issued.

(f) Public approval process—(1) Ingeneral. The public approval process foran issue, including scope, content, andtiming of the public approval, must meetthe requirements of this paragraph (f). Agovernmental unit must timely approveeither each project to be financed withproceeds of the issue or a plan of financ-ing for each project to be financed withproceeds of the issue.

(2) General rule on information re-quired for a reasonable public notice andpublic approval. Except as otherwise pro-vided in this section, a project to be fi-nanced with proceeds of an issue is withinthe scope of a public approval under sec-tion 147(f) if the reasonable public noticeof the public hearing, if applicable, andthe public approval (together the noticeand approval) include the information setforth in paragraphs (f)(2)(i) through (iv)of this section.

(i) The project. The notice and ap-proval must include a general functionaldescription of the type and use of theproject to be financed with the issue. Forthis purpose, a project description is suf-ficient if it identifies the project by refer-ence to a particular category of exemptfacility bond to be issued (for example, anexempt facility bond for an airport pursu-ant to section 142(a)(1)) or by reference toanother general category of private activ-ity bond together with information on thetype and use of the project to be financedwith the issue (for example, a qualifiedsmall issue bond as defined in section144(a) for a manufacturing facility or aqualified 501(c)(3) bond as defined in sec-tion 145 for a hospital facility and work-ing capital expenditures).

(ii) The maximum stated principalamount of bonds. The notice and approvalmust include the maximum stated princi-pal amount of the issue of private activitybonds to be issued to finance the project.If an issue finances multiple projects (forexample, facilities at different locationson non-proximate sites that are not treatedas part of the same project), the notice andapproval must specify separately the max-imum stated principal amount of bonds tobe issued to finance each separate project.

(iii) The name of the initial owner orprincipal user of the project. The noticeand approval must include the name of theexpected initial owner or principal user(within the meaning of section 144(a)) ofthe project. The name provided may beeither the name of the legal owner orprincipal user of the project or, alterna-tively, the name of the true beneficialparty of interest for such legal owner oruser (for example, the name of a 501(c)(3)organization that is the sole member of alimited liability company that is the legalowner).

(iv) The location of the project. Thenotice and approval must include a gen-eral description of the prospective loca-tion of the project by street address, ref-erence to boundary streets or othergeographic boundaries, or other descrip-tion of the specific geographic locationthat is reasonably designed to informreaders of the location. For a project in-volving multiple capital projects or facil-ities located on the same site, or on adja-cent or reasonably proximate sites withsimilar uses, a consolidated description ofthe location of those capital projects orfacilities provides a sufficient descriptionof the location of the project. For exam-ple, a project for a section 501(c)(3) edu-cational entity involving multiple build-ings on the entity’s main urban collegecampus may describe the location of theproject by reference to the outside streetboundaries of that campus with a refer-ence to any noncontiguous features of thatcampus.

(3) Special rule for mortgage revenuebonds. Mortgage loans financed by mort-gage revenue bonds are within the scopeof a public approval if the notice andapproval state that the bonds are to beissued to finance residential mortgages,provide the maximum stated principal

amount of mortgage revenue bonds ex-pected to be issued, and provide a generaldescription of the geographic jurisdictionin which the residences to be financedwith the proceeds of the mortgage revenuebonds are expected to be located (for ex-ample, residences located throughout aState for an issuer with a statewide juris-diction or residences within a particularlocal geographic jurisdiction, such aswithin a city or county, for a local issuer).For this purpose, in the case of mortgagerevenue bonds, no information is requiredon specific names of mortgage loan bor-rowers or specific locations of individualresidences to be financed.

(4) Special rule for qualified studentloan bonds. Qualified student loans fi-nanced by qualified student loan bonds asdefined in section 144(b) are within thescope of a public approval if the notice andapproval state that the bonds will be is-sued to finance student loans and state themaximum stated principal amount ofqualified student loan bonds expected tobe issued for qualified student loans. Forthis purpose, in the case of qualified stu-dent loan bonds, no information is re-quired with respect to names of specificstudent loan borrowers.

(5) Special rule for certain qualified501(c)(3) bonds. Loans financed by qual-ified 501(c)(3) bonds issued pursuant tosection 145 and described in section147(b)(4)(B) (without regard to anyelection under section 147(b)(4)(A)) arewithin the scope of a public approval ifthe requirements of paragraphs (f)(5)(i)and (ii) of this section are met.

(i) Pre-issuance general public ap-proval. Within the time period required byparagraph (f)(7) of this section, public ap-proval is obtained after reasonable publicnotice of a public hearing is provided anda public hearing is held. For this purpose,a project is treated as described in thenotice and approval if the notice and ap-proval provide that the bonds will bequalified 501(c)(3) bonds to be usedto finance loans described in section147(b)(4)(B), state the maximum statedprincipal amount of bonds expected tobe issued to finance loans to 501(c)(3)organizations or governmental units asdescribed in section 147(b)(4)(B), pro-vide a general description of the type ofproject to be financed with such loans


(for example, loans for hospital facili-ties or college facilities), and state thatan additional public approval that in-cludes specific project information willbe obtained before any such loans areoriginated.

(ii) Post-issuance public approval forspecific loans. Except as provided in para-graph (f)(5)(iii) of this section, before aloan described in section 147(b)(4)(B) isoriginated, a supplemental public ap-proval for the bonds to be used to financethat loan is obtained that meets all therequirements of section 147(f) and therequirements for a public approval inparagraph (b) of this section. This post-issuance supplemental public approval re-quirement applies by treating the bonds tobe used to finance such loan as if theywere reissued for purposes of section147(f) (without regard to paragraph (f)(5)of this section). For this purpose, proceedsto be used to finance such loan do notinclude the portion of the issue used tofinance a common reserve fund or com-mon costs of issuance.

(iii) Exception to post-issuance publicapproval requirement. A post-issuancesupplemental public approval pursuant toparagraph (f)(5)(ii) of this section is un-necessary for the initial use of proceeds tofinance one or more loans if the pre-issuance notice and approval pursuant toparagraph (f)(5)(i) of this section includethe information required by paragraphs(f)(2)(i) through (iv) of this section for theprojects to be financed by those loans.

(6) Deviations in public approval in-formation—(i) In general. Except as oth-erwise provided in this section, a substan-tial deviation between the stated use ofproceeds of an issue included in the infor-mation required to be provided in the no-tice and approval (public approval infor-mation) and the actual use of proceeds ofthe issue causes that issue to fail to meetthe public approval requirement. Con-versely, insubstantial deviations betweenthe stated use of proceeds of an issueincluded in the public approval informa-tion and the actual use of proceeds of theissue do not cause such a failure. In gen-eral, the determination of whether a devi-ation is substantial is based on all the factsand circumstances. In all events, however,a change in the fundamental nature or typeof a project is a substantial deviation.

(ii) Certain insubstantial deviations inpublic approval information. The follow-ing deviations from the public approvalinformation in the notice and approval aretreated as insubstantial deviations:

(A) Size of bond issue and use of pro-ceeds. A deviation between the maximumstated principal amount of a proposed is-suance of bonds to finance a project that isspecified in public approval informationand the actual stated principal amount ofbonds issued and used to finance that proj-ect is an insubstantial deviation if thatactual stated principal amount is no morethan ten percent (10%) greater than thatmaximum stated principal amount or isany amount less than that maximum statedprincipal amount. In addition, the use ofproceeds to pay working capital expendi-tures directly associated with any projectspecified in the public approval informa-tion is an insubstantial deviation.

(B) Initial owner or principal user. Adeviation between the initial owner orprincipal user of the project named in thenotice and approval and the actual initialowner or principal user of the project is aninsubstantial deviation if such parties arerelated parties on the issue date of theissue.

(iii) Supplemental public approval tocure certain substantial deviations in pub-lic approval information. A substantialdeviation between the stated use of pro-ceeds of an issue included in the publicapproval information and the actual use ofthe proceeds of the issue does not causethat issue to fail to meet the public ap-proval requirement if all of the followingrequirements are met:

(A) Original public approval and rea-sonable expectations. The issue met therequirements for a public approval inparagraph (b) of this section. In addition,on the issue date of the issue, the issuerreasonably expected there would be nosubstantial deviations between the stateduse of proceeds of an issue included in thepublic approval information and the actualuse of the proceeds of the issue.

(B) Unexpected events or unforeseenchanges in circumstances. As a resultof unexpected events or unforeseenchanges in circumstances that occur af-ter the issue date of the issue, the issuerdetermines to use proceeds of the issue

in a manner or amount not provided in apublic approval.

(C) Supplemental public approval. Be-fore using proceeds of the bonds in amanner or amount not provided in a pub-lic approval, the issuer obtains a supple-mental public approval for those bondsthat meets the public approval require-ment in paragraph (b) of this section. Thissupplemental public approval requirementapplies by treating those bonds as if theywere reissued for purposes of section147(f).

(7) Certain timing requirements. Pub-lic approval of an issue is timely only ifthe issuer obtains the public approvalwithin one year before the issue date ofthe issue. Public approval of a plan offinancing is timely only if the issuer ob-tains public approval for the plan of fi-nancing within one year before the issuedate of the first issue issued under the planof financing and the issuer issues all issuesunder the plan of financing within threeyears after the issue date of such firstissue.

(g) Definitions. The definitions in thisparagraph (g) apply for purposes of thissection. In addition, the general defini-tions in § 1.150–1 apply for purposes ofthis section.

(1) Geographic jurisdiction means thearea encompassed by the boundaries pre-scribed by State or local law for a govern-mental unit or, if there are no such bound-aries, the area in which a unit mayexercise such sovereign powers that makethat unit a governmental unit for purposesof § 1.103–1 and this section.

(2) Governmental unit has the meaningof “State or local governmental unit” asdefined in § 1.103–1. Thus, a govern-mental unit is a State, territory, a pos-session of the United States, the Districtof Columbia, or any political subdivi-sion thereof.

(3) Host approval is defined in para-graph (b)(3) of this section.

(4) Issuer approval is defined in para-graph (b)(2) of this section.

(5) Mortgage revenue bonds meanqualified mortgage bonds as defined insection 143(a), qualified veterans’ mort-gage bonds as defined in section 143(b), orrefunding bonds issued to finance mort-gages of owner-occupied residences pursu-


ant to applicable law in effect prior to en-actment of section 143(a) or section 143(b).

(6) Proceeds means “proceeds” as de-fined in § 1.141–1(b), except that it doesnot include disposition proceeds.

(7) Project generally means one or morecapital projects or facilities, including land,buildings, equipment, and other property, tobe financed with an issue, that are located onthe same site, or adjacent or proximate sitesused for similar purposes, and that are sub-ject to the public approval requirement ofsection 147(f). For an issue of mortgagerevenue bonds or an issue of qualified stu-dent loan bonds as defined in section 144(b),the term project means the mortgage loansor qualified student loans to be financedwith the proceeds of the issue. For an issueof qualified 501(c)(3) bonds as defined insection 145, the term project means a proj-ect as defined in the first sentence of thisdefinition, and also is deemed to includeworking capital expenditures to be financedwith proceeds of the issue.

(8) Public approval information is de-fined in paragraph (f)(6)(i) of this section.

(9) Public hearing is defined in para-graph (d)(1) of this section.

(10) Reasonable public notice is de-fined in paragraph (d)(4) of this section.

(11) Voter referendum means a vote bythe voters of the affected governmentalunit conducted in the same manner andtime as voter referenda on matters relatingto governmental spending or bond issu-ances by the governmental unit under ap-plicable State and local law.

(h) Applicability date. This section ap-plies to bonds issued pursuant to a publicapproval occurring on or after the datethat is 90 days after publication of theTreasury decision adopting these rules asfinal regulations in the Federal Register.For bonds issued pursuant to a public ap-proval occurring before that date, see§ 5f.103–2 as contained in 26 CFR part 5f,revised as of the date of the most recentannual revision.

PART 5f—TEMPORARY INCOMETAX REGULATIONS UNDER THETAX EQUITY AND FISCALRESPONSIBILITY ACT OF 1982

Par. 3. The authority citation for part 5fcontinues to read in part as follows:

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

§5f.103–2 [Removed]

Par. 4. Section 5f.103–2 is removed.Kirsten Wielobob,

Deputy Commissioner for Servicesand Enforcement.

(Filed by the Office of the Federal Register on September27, 2017, 8:45 a.m., and published in the issue of the FederalRegister for September 28, 2017, 82 F.R. 45233)

Rev. Proc. 2017–54

SECTION 1. PURPOSE

This revenue procedure publishes theamounts of unused housing credit carry-overs allocated to qualified states under§ 42(h)(3)(D) of the Internal RevenueCode for calendar year 2017.


Rev. Proc. 92–31, 1992–1 C.B. 775,provides guidance to state housing creditagencies of qualified states on the proce-dure for requesting an allocation of un-used housing credit carryovers under§ 42(h)(3)(D). Section 4.06 of Rev. Proc.92–31 provides that the Internal RevenueService will publish in the Internal Reve-nue Bulletin the amount of unused hous-ing credit carryovers allocated to qualifiedstates for a calendar year from a nationalpool of unused credit authority (the Na-tional Pool). This revenue procedure pub-lishes these amounts for calendar year2017.

SECTION 3. PROCEDURE

The unused housing credit carryoveramount allocated from the National Poolby the Secretary to each qualified state forcalendar year 2017 is as follows:

Qualified State Amount Allocated

Alabama 52,860

California 426,613

Connecticut 38,873

Delaware 10,348

Florida 224,039

Idaho 18,294

Illinois 139,141

Kansas 31,600

Kentucky 48,226

Qualified State Amount Allocated

Maryland 65,393

Massachusetts 74,038

Michigan 107,912

Minnesota 59,997

Montana 11,331

Nebraska 20,729

New Hampshire 14,508

New Jersey 97,218

New Mexico 22,619

New York 214,614

North Carolina 110,287

Ohio 126,238

Oklahoma 42,646

Oregon 44,492

Pennsylvania 138,953

South Dakota 9,407

Texas 302,842

Utah 33,164

Vermont 6,789

Virginia 91,429

Washington 79,214

West Virginia 19,902

Wisconsin 62,809

EFFECTIVE DATE

This revenue procedure is effective forallocations of housing credit dollar amountsattributable to the National Pool componentof a qualified state’s housing credit ceilingfor calendar year 2017.


The principal author of this revenueprocedure is James A. Holmes of the Of-fice of Associate Chief Counsel (Pass-throughs and Special Industries). For fur-ther information regarding this revenueprocedure, contact Mr. Holmes at (202)317-4137 (not a toll-free number).

Section 42.—Low-IncomeHousing Credit

26 CFR 1.42-14. Allocation rules for post-1989State housing credit ceiling amounts. Guidance isprovided to state housing credit agencies of qualifiedstates that request an allocation of unused housingcredit carryover under section 42(h)(3)(D) of theInternal Revenue Code. See Rev. Proc. 2017–54,page 336.


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. 2017–42 October 16, 2017i

Numerical Finding List1

Bulletin 2017–27 through 2017–42

Action on Decision:

2017-5, 2017-27 I.R.B. 12017-6, 2017-33 I.R.B. 1942017-7, 2017-42 I.R.B. 311

Announcements:

2017-05, 2017-27 I.R.B. 52017-08, 2017-28 I.R.B. 92017-09, 2017-35 I.R.B. 2192017-10, 2017-33 I.R.B. 2102017-11, 2017-39 I.R.B. 2552017-12, 2017-38 I.R.B. 2382017-13, 2017-40 I.R.B. 271

Notices:

2017-36, 2017-33 I.R.B. 2082017-37, 2017-29 I.R.B. 892017-38, 2017-30 I.R.B. 1472017-39, 2017-31 I.R.B. 1502017-40, 2017-32 I.R.B. 1902017-41, 2017-34 I.R.B. 2112017-42, 2017-34 I.R.B. 2122017-43, 2017-36 I.R.B. 2242017-44, 2017-36 I.R.B. 2262017-45, 2017-38 I.R.B. 2322017-46, 2017-41 I.R.B. 2752017-47, 2017-38 I.R.B. 2322017-48, 2017-39 I.R.B. 2542017-49, 2017-40 I.R.B. 2582017-50, 2017-41 I.R.B. 2802017-51, 2017-40 I.R.B. 2602017-52, 2017-40 I.R.B. 2622017-53, 2017-42 I.R.B. 3182017-54, 2017-42 I.R.B. 3212017-55, 2017-42 I.R.B. 3242017-57, 2017-42 I.R.B. 3252017-58, 2017-42 I.R.B. 326

Proposed Regulations:

REG-128841-07, 2017-42 I.R.B. 327REG-139633-08, 2017-31 I.R.B. 175REG-128483-15, 2017-32 I.R.B. 191REG-136118-15, 2017-28 I.R.B. 9REG-105004-16, 2017-41 I.R.B. 295REG-125374-16, 2017-41 I.R.B. 300

Revenue Procedures:

2017-41, 2017-29 I.R.B. 922017-42, 2017-29 I.R.B. 1242017-43, 2017-31 I.R.B. 1532017-44, 2017-35 I.R.B. 2162017-45, 2017-35 I.R.B. 2162017-47, 2017-38 I.R.B. 233

Revenue Procedures:—Continued

2017-48, 2017-36 I.R.B. 2292017-50, 2017-37 I.R.B. 2302017-52, 2017-41 I.R.B. 2832017-53, 2017-40 I.R.B. 2632017-54, 2017-42 I.R.B. 336

Revenue Rulings:

2017-14, 2017-27 I.R.B. 22017-15, 2017-32 I.R.B. 1762017-16, 2017-35 I.R.B. 2152017-17, 2017-36 I.R.B. 2222017-18, 2017-39 I.R.B. 2392017-19, 2017-40 I.R.B. 2572017-20, 2017-41 I.R.B. 273

Treasury Decisions:

9819, 2017-29 I.R.B. 859820, 2017-32 I.R.B. 1789821, 2017-32 I.R.B. 1819822, 2017-33 I.R.B. 1959823, 2017-33 I.R.B. 2069824, 2017-42 I.R.B. 312

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–01 through 2017–26 is in Internal Revenue Bulletin2017–26, dated June 27, 2017.

October 16, 2017 Bulletin No. 2017–42ii

Finding List of Current Actions onPreviously Published Items1

Bulletin 2017–27 through 2017–42

Notices:

2015-77Amplified byNotice 2017-40, 2017-32 I.R.B. 190

2017-10Modified byNotice 2017-58, 2017-42 I.R.B. 326

2017-29Modified byNotice 2017-58, 2017-42 I.R.B. 326

Revenue Procedures:

2016-27Modified byRev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-27Superseded byRev. Proc. 2017-43, 2017-31 I.R.B. 153

2016-48Superseded byRev. Proc. 2017-48, 2017-36 I.R.B. 232

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–01 through 2017–26 is in Internal Revenue Bulletin2017–26, dated June 27, 2017.

Bulletin No. 2017–42 October 16, 2017iii

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.

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IRB 2017-42 (Rev. October 16, 2017) - Internal Revenue … On Decision 2017–07, page 311. Nonacquiescence relating to the holdings that: 1) mere posses-sion of a stock certiﬁcate,