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December 2004 Plain Language Regulations

Health Coverage Portability for Group Health Plans and Group Health Insurance Issuers
These regulations provide guidance on the HIPAA portability requirements for group health plans, including the restrictions on the extent to which plans can impose preexisting condition exclusions, the furnishing of certificates of creditable coverage, the provision of special enrollment rights, and miscellaneous exceptions and definitions. The regulations affect businesses, non-profit organizations, governments, and plan participants.  TD 9166.  Published December 30, 2004.
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Health Coverage Portability: Tolling Certain Time Periods and Interaction with the Family and Medical Leave Act
These proposed regulations would provide guidance on the HIPAA portability requirements for group health plans, including interaction with the Family and Medical Leave Act of 1993, special enrollment procedures, and other miscellaneous issues.  The regulations affect businesses, non-profit organizations, governments, and plan participants.  REG-130370-04.  Published December 30, 2004.
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Retirement Plans; Cash or Deferred Arrangements under Section 401(k)
Retirement Plans; Cash or Deferred Arrangements under Section 401(k) and Matching Contributions or Employee Contributions under Section 401(m) Regulations.  These final regulations provide guidance for certain retirement plans containing cash or deferred arrangements under section 401(k) and providing for matching contributions or employee contributions under section 401(m).  These regulations affect sponsors of plans that contain cash or deferred arrangements or provide for employee or matching contributions, and participants in these plans.
TD 9169.  Published December 29, 2004.
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New Markets Tax Credit
A taxpayer making a qualified equity investment in a qualified community development entity that has received a new markets tax credit allocation may claim a 5-percent tax credit with respect to the qualified equity investment on each of the first 3 credit allowance dates and a 6-percent tax credit with respect to the qualified equity investment on each of the remaining 4 credit allowance dates.
TD 9171.  Published December 28, 2004.
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Effective Dates of C - to - S Corporation Gain Recognition Rules
These regulations provide guidance to S corporations that have converted from C corporations or that, while S corporations, acquire carryover basis property from C corporations.  Specifically, the regulations provide that (1) an S corporation may recognize corporate-level gain after receiving carryover basis property on or after December 27, 1994 regardless of the date of the corporation's S election, and (2) a corporation's most recent S election, not an earlier election that has been revoked or terminated, determines whether or not it may be required to recognize corporate-level gain after it has converted from a C corporation. 
TD 9170.  Published December 22, 2004.
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Effective Dates of C - to - S Corporation Gain Recognition Rules
These regulations provide guidance to S corporations that have converted from C corporations or that, while S corporations, acquire carryover basis property from C corporations.  Specifically, the regulations provide that (1) an S corporation may recognize corporate-level gain after receiving carryover basis property on or after December 27, 1994 regardless of the date of the corporation's S election, and (2) a corporation's most recent S election, not an earlier election that has been revoked or terminated, determines whether or not it may be required to recognize corporate-level gain after it has converted from a C corporation. 
REG-139683-04.  Published December 22, 2004.
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Optional 10-Year Writeoff of Certain Tax Preferences
These final regulations provide rules governing the time and manner for making and revoking an election to treat certain qualified expenditures which are otherwise deductible under the Internal Revenue Code as amortized over the applicable period provided for in the statute. The regulations provide that the election may be made for any specific dollar amount of the qualified expenditures, but cannot be made by reference to a formula.  To revoke the election, a taxpayer must receive the permission of the Commissioner.  Permission will only be granted in rare and unusual circumstances.  If permission is granted, the revocation will be effective in the taxpayer's earliest open taxable year affected by the election.
TD 9168.  Published December 22, 2004.
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Student FICA and FUTA Exception
This final regulation provides guidance on the student services exception from Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) taxes.  The final regulations provide guidance on whether an employer is considered a "school, college, or university," and whether an employee is considered a "student" for purposes of the student exception from FICA and FUTA taxes.  Schools, colleged, and universities, and employers with employees who are medical residents are affected by this proposed regulation.  The final regulation is applicable for services performed on or after April 1, 2005.  The final regulation is issued in conjunction with Revenue Procedure 2005-11, I.R.B. 2005-2 (January 10, 2005), modifying and superseding Rev. Proc. 98-16, 1998-1 C.B. 403.
TD 9167. Published December 21, 2004.
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Governing Practice Before the Internal Revenue Service
These proposed regulations amend provisions of Circular 230 relating to State or local bond opinions.  Section 10.39 prescribes specific requirements for "State or local bond opinions."  Section 10.36 provides that the practitioner who has the principal authority and responsibility for overseeing a firm's practice of providing advice to clients regarding Federal tax issues or advice that is included in offering materials for the issuance of a State or local bond must take reasonable steps to ensure that the firm has adequate procedures in place for purposes of complying with sections 10.35 and 10.39, as applicable.  The proposed regulations also contain conforming amendments to sections 10.38 and 10.52.  REG-159824-04.  Published December 20, 2004.
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Governing Practice Before the Internal Revenue Service
These final regulations set forth best practices for tax advisors providing advice to taxpayers relating to Federal tax issues or submissions to the Internal Revenue Service and modify the standards for certain tax shelter opinions.  Section 10.33 encourages all tax advisors to provide their clients with the highest quality representation.  Section 10.35 prescribes specific requirements for covered opinions.  Section 10.36 provides that the practitioner who has the principal authority and responsibility for overseeing a firm's practice of providing advice to clients regarding Federal tax issues must take reasonable steps to ensure that the firm has adequate procedures in place for purposes of complying with section 10.35.  Section 10.37 sets forth requirements for other written advice.  Section 10.38 authorizes the Director of the Office of Professional Responsibility to establish one or more advisory committees to review and make recommendations regarding professional standards or best practices for tax advisors, including whether a practitioner may have violated sections 10.35 or 10.36.
TD 9165.  Published December 20, 2004.

Prohibited Allocations of Securities in an S Corporation
These proposed regulations contain rules concerning requirements for employee stock ownership plans (ESOPs) holding stock of Subchapter S corporations.  The proposed regulations provide guidance on the definition and effects of a prohibited allocation under section 409(p), identification of disqualified persons and determination of a nonallocation year, calculation of synthetic equity under section 409(p)(5), and standards for determining whether a transaction is an avoidance or evasion of section 409(p).  These proposed regulations generally affect plan sponsors of , and participants in, ESOPs holding stock in Subchapter S corporations.
REG-129709-03.  Published December 17, 2004.
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Prohibited Allocations of Securities in an S Corporation
These temporary regulations contain rules concerning requirements for employee stock ownership plans (ESOPs) holding stock of Subchapter S corporations.  The temporary regulations provide guidance on the definition and effects of a prohibited allocation under section 409(p), identification of disqualified persons and determination of a nonallocation year, calculation of synthetic equity under section 409(p)(5), and standards for determining whether a transaction is an avoidance or evasion of section 409(p).  These temporary regulations generally affect plan sponsors of,and participants in, ESOPs holding stock of Subchapter S corporations.
TD 9164.  Published December 17, 2004.
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Automatic Extensions of Time to File Certain Information Returns and Exempt Organizations Returns
The final regulations will provide guidance to taxpayers who file certain information returns, exempt organization returns, or corporation income tax returns on how to obtain an automatic extension of time to file the return under section 6081 of the Internal Revenue Code.  Filers of certain information returns may now obtain an automatic 30-day extension and exempt organizations may now obtain a three-month extension (six-month extension for corporate filers of Form 990-T).  In addition, corporations may now request a six-month automatic extension of time to file without having to sign the Form 7004. TD 9163.  Published December 7, 2004.
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Federal Unemployment Tax Act Deposits--De Minimis Threshold
The final regulations will change the accumulated amount of tax liability above which taxpayers must begin depositing Federal Unemployment Tax Act (FUTA) taxes.  They increase the FUTA tax liability threshold from $100 to $500.  Thus, an employer will not be required to make a deposit of FUTA taxes until FUTA tax liability exceeds $500.  This change is a simple and straightforward step to reduce the burden on small businesses.  TD 9162.  Published December 1, 2004.
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