This document contains proposed regulations that would provide guidance on how taxpayers will report liability for the excise tax imposed on manufacturers, producers, or importers of certain designated drugs. The proposed regulations affect manufacturers, producers, and importers of designated drugs that sell such drugs during certain statutory periods. The proposed regulations also would except such tax from semimonthly deposit requirements.

Notice 2023-69 provides guidance on certain charitable relief to aid victims of the Hawaii wildfires that began on August 8, 2023. Under employer sponsored leave-based donation programs, employees may elect to forgo vacation, sick, or personal leave in exchange for cash payments made by the employer to tax-exempt entities described in § 170(c) of the code that provide aid to victims of the Hawaii wildfires. This notice provides that an employee making the election to forgo such leave will not be treated as having constructively received gross income or wages and cannot claim a charitable contribution deduction under § 170. The employer may deduct the cash payments as business expenses or charitable contributions if the employer otherwise meets the respective requirements of either § 162 or § 170 of the Internal Revenue Code.

This notice provides guidance on the new energy efficient home credit under § 45L of the Internal Revenue Code, as amended by § 13304 of Public Law 117-169, 136 Stat. 1818, 1952 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). The amendments made by § 13304 of the IRA apply to qualified new energy efficient homes (qualified homes) acquired after December 31, 2022. The guidance provided in this notice addresses the person that is eligible for the credit, determining the applicable amount of the credit, energy saving requirements, certification requirements, and substantiation requirements. This notice also obsoletes Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650, for qualified homes acquired after December 31, 2022.

This notice explains the circumstances under which the four-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought. The Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending August 31, 2023. Taxpayers may use this list to determine if any extension is available.

This revenue procedure provides that a redemption of money market fund shares will not be treated as part of a wash sale under § 1091 of the Internal Revenue Code.

26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability.

(Also: Part I, §§ 1091; 1.446-7.)

This notice provides guidance on the new energy efficient home credit under § 45L of the Internal Revenue Code (Code), as amended by § 13304 of Public Law 117-169, 136 Stat. 1818, 1952 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA).¹ The amendments made by § 13304 of the IRA apply to qualified new energy efficient homes acquired after December 31, 2022. The guidance provided in this notice addresses: (i) the person that is eligible for the credit, (ii) determining the applicable amount of the credit, (iii) energy saving requirements, (iv) certification requirements, and (v) substantiation requirements. This notice also obsoletes Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650, which remain applicable for purposes of former § 45L.²

.01 Former § 45L

(1) For purposes of the general business credit under § 38, the new energy efficient home credit under § 45L (§ 45L credit) has been a current year business credit since former § 45L and § 38(b)(23) were enacted by § 1332(a) and (b) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1024 (August 8, 2005).

(2) Former § 45L(a)(1) provided that, for purposes of § 38, in the case of an “eligible contractor” (defined in former § 45L(b)(1)), the new energy efficient home credit under former § 45L for the taxable year is the “applicable amount” (determined under former § 45L(a)(2)) for each “qualified new energy efficient home” (defined in former § 45L(b)(2)) that is constructed by an eligible contractor and “acquired” (as defined in former § 45L(b)(4)) by a person from such eligible contractor for use as a residence during the taxable year. Former § 45L(c) provided the energy saving requirements that a dwelling unit must have met to be a qualified new energy efficient home, as certified using the method and in the form provided under former § 45L(d). If a credit was allowed under former § 45L in connection with any expenditure for any property, former § 45L(e) provided for certain adjustments to the basis of such property for purposes of subtitle A of the Code. In addition, former § 45L(f) provided that no expenditures taken into account under § 47 or § 48(a) could be taken into account under former § 45L.

(3) As originally enacted, former § 45L(g) provided that the new energy efficient home credit under former § 45L terminated with respect to any qualified new energy efficient home acquired after December 31, 2007. Prior to the IRA, former § 45L(g) was amended 10 times between 2006 and 2020 to extend the termination of the new energy efficient home credit, with the most recent extension terminating for any qualified new energy efficient home acquired after December 31, 2021.

.02 Section 45L as Amended by the IRA

(1) Section 13304 of the IRA amended former § 45L in two ways. First, § 13304(a) and (f) of the IRA retroactively extend the new energy efficient home credit under former § 45L for qualified new energy efficient homes acquired after December 31, 2021, and on or before December 31, 2022.

(2) Second, for qualified new energy efficient homes acquired after December 31, 2022, § 13304 of the IRA amends former § 45L in various respects. Specifically, § 13304 of the IRA:

(a) Changes the applicable amount of the § 45L credit determined under § 45L(a)(2),

(b) Sets new energy saving requirements under § 45L(c),

(c) Adds an exception to the required basis adjustment under § 45L(e),

(d) Redesignates § 45L(g) as § 45L(h) and adds a new § 45L(g) to provide certain prevailing wage requirements, and

(e) Amends newly redesignated § 45L(h) to allow the § 45L credit for qualified new energy efficient homes acquired on or before December 31, 2032.

(3) The IRA did not amend § 45L(a)(1), which continues to provide that, for purposes of § 38, in the case of an eligible contractor, the § 45L credit for the taxable year is the applicable amount for each qualified new energy efficient home that is constructed by an eligible contractor and acquired by a person from such eligible contractor for use as a residence during the taxable year.

(4) Section 45L(a)(2) provides that, for purposes of § 45L(a)(1), the “applicable amount” is:

(a) $2,500, in the case of a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program and meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)),

(b) $5,000, in the case of a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program and meets the requirements of § 45L(c)(1)(B),

(c) $500, in the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)), and

(d) $1,000, in the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and meets the requirements of § 45L(c)(1)(B).

(5) Section 45L(b) provides certain definitions for purposes of § 45L. Section 45L(b)(1) defines the term “eligible contractor” as:

(a) The person that constructed the qualified new energy efficient home, or

(b) In the case of a qualified new energy efficient home that is a manufactured home, the manufactured home producer of such home.

(6) Section 45L(b)(2) defines the term “qualified new energy efficient home” (qualified home) as a dwelling unit:

(a) Located in the United States,

(b) The construction of which is substantially completed after August 8, 2005, and

(c) That meets the energy saving requirements of § 45L(c).

(7) Section 45L(b)(3) provides that the term “construction” includes substantial reconstruction and rehabilitation and § 45L(b)(4) provides that the term “acquire” includes purchase.

(8) Section 45L(c) provides the energy saving requirements that a dwelling unit must meet to be a qualified home. Section 45L(c)(1)(A) generally provides that a dwelling unit meets the requirements of § 45L(c)(1)(A) if such dwelling unit meets the requirements of § 45L(c)(2) or (3) (whichever is applicable). A dwelling unit meets the requirements of § 45L(c)(1)(B) if such dwelling unit is certified as a “zero energy ready home” under the “zero energy ready home program” (ZERH program) of the U.S. Department of Energy (DOE) as in effect on January 1, 2023 (or any successor program determined by the Secretary of the Treasury or her delegate (Secretary)).

(9) A dwelling unit meets the requirements of § 45L(c)(2) if:

(a) In the case of a dwelling unit acquired before January 1, 2025, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.1, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit was acquired),

(b) In the case of a dwelling unit acquired after December 31, 2024, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.2, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit was acquired), or

(c) The dwelling unit meets the most recent Energy Star Manufactured Home National Program Requirements as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.

(10) A dwelling unit meets the requirements of § 45L(c)(3) if:

(a) The dwelling unit meets the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later), and

(b) The dwelling unit meets the most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later).

(11) Section 45L(d)(1) provides that the certification described in § 45L(c) must be made in accordance with guidance prescribed by the Secretary, after consultation with the Secretary of Energy, and that such guidance is to specify procedures and methods for calculating energy and cost savings. Section 45L(d)(2) provides that any certification described in § 45L(c) must be made in writing in a manner that specifies in readily verifiable fashion the energy efficient building envelope components and energy efficient heating or cooling equipment installed and their respective rated energy efficiency performance.

(12) Section 45L(e) provides that for purposes of subtitle A of the Code (except for purposes of determining the adjusted basis of any building under § 42, relating to the low-income housing credit), if a § 45L credit is allowed in connection with any expenditure for any property, the increase in the basis of such property that would (but for § 45L(e)) result from such expenditure must be reduced by the amount of the § 45L credit so determined. In addition, § 45L(f) provides that for purposes of § 45L, no expenditures taken into account under § 47 or § 48(a) can be taken into account under § 45L.

(13) Section 45L(g) adds a prevailing wage requirement that increases the amount of the § 45L credit allowed. Section 45L(g)(1) provides that in the case of a “qualifying residence” described in § 45L(a)(2)(B) meeting the prevailing wage requirements in § 45L(g)(2)(A), the § 45L credit amount allowed with respect to such residence is:

(a) $2,500, in the case of a residence that meets the requirements of § 45L(c)(1)(A) (and does not meet the requirements of § 45L(c)(1)(B)), and

(b) $5,000, in the case of a residence that meets the requirements of § 45L(c)(1)(B).

(14) The requirements set forth in § 45L(g)(2)(A) are that the taxpayer must ensure that any laborers and mechanics employed by the taxpayer, any contractor, or subcontractor in the construction of any qualified residence are paid wages at rates not less than the prevailing rates for construction, alteration, or repair of a similar character in the locality in which the qualified residence is located as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code, commonly known as the Davis-Bacon Act. Section 45L(g)(2)(B) provides that rules similar to the rules of § 45(b)(7)(B), which pertains to the correction and penalty related to the failure to satisfy prevailing wage requirements, apply for purposes of the prevailing wage requirements under § 45L(g). Section 45L(g)(3) authorizes the Secretary to issue such regulations or other guidance as the Secretary determines necessary to carry out the purposes of § 45L(g), including regulations or other guidance that provides for requirements for recordkeeping or information reporting for purposes of administering the requirements of § 45L(g).

(15) As amended and redesignated by § 13304 of the IRA, § 45L(h) provides that § 45L is not applicable to any qualified home acquired after December 31, 2032.

.03 Guidance under Former § 45L

(1) On March 13, 2006, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published Notice 2006-27, 2006-1 C.B. 626, and Notice 2006-28, 2006-1 C.B. 628. Notice 2006-27 and Notice 2006-28 were updated by Announcement 2006-88, 2006-2 C.B. 910, published on November 13, 2006. Notice 2006-27 and Notice 2006-28, as updated, provided guidance on the calculation of a dwelling unit’s heating and cooling energy consumption, and on the public list of software programs used to calculate energy consumption. Notice 2006-28 is specific to manufactured homes.

(2) On March 24, 2008, the Treasury Department and the IRS published Notice 2008-35, 2008-1 C.B. 647, and Notice 2008-36, 2008-1 C.B. 650. Notice 2008-35 and Notice 2008-36 superseded Notice 2006-27 and Notice 2006-28, respectively, by substantially republishing the guidance contained in those publications while clarifying the meaning of certain terms used in Notice 2006-27 and Notice 2006-28 and the process for removing software from the list of approved software. Notice 2008-36 is specific to manufactured homes. Because Notice 2008-35 and Notice 2008-36 provide guidance relating to former § 45L, this notice obsoletes Notice 2008-35 and Notice 2008-36 for qualified homes acquired after December 31, 2022. Notice 2008-35 and Notice 2008-36 remain applicable for qualified homes acquired on or before December 31, 2022.

.04 Post-IRA § 45L Guidance

(1) On October 24, 2022, the Treasury Department and the IRS published Notice 2022-48, 2022-43 I.R.B. 316, which included a request for comments on the amendments to § 45L by § 13304 of the IRA. Comments received in response to Notice 2022-48 were considered in the drafting of this notice.

(2) On November 30, 2022, the Treasury Department and the IRS published Notice 2022-61 in the Federal Register (87 F.R. 73580, corrected in 87 F.R. 75141 (Dec. 7, 2022); 2022-52 I.R.B. 560), which contains initial guidance with respect to the prevailing wage requirements under § 45L(g). On August 30, 2023, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-100908-23) in the Federal Register (88 F.R. 60018) providing proposed regulations that would add proposed rules to the Income Tax Regulations in 26 CFR part 1 related to the prevailing wage requirements, including under § 45L(g) as provided in proposed § 1.45L-3.

.01 In General. The § 45L credit for the taxable year is the applicable amount for each qualified home that is constructed by an eligible contractor and acquired by a person from such eligible contractor after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year for which the taxpayer is claiming the credit under § 45L. The eligible contractor is the taxpayer for purposes of the § 45L credit. See section 5.02 of this notice for the definition of an eligible contractor.

.02 Applicable Amount for a Dwelling Unit Meeting the Single-Family Home Requirements under § 45L(c)(2)

(1) In General. The applicable amount for a dwelling unit that is eligible to participate in the Energy Star Residential New Construction Program or the Energy Star Manufactured New Homes Program is:

(a) $2,500, for a dwelling unit that meets the requirements of § 45L(c)(2) and does not meet the requirements of § 45L(c)(1)(B), or

(b) $5,000, for a dwelling unit that meets the requirements of § 45L(c)(1)(B).

(2) Eligible to Participate

(a) A dwelling unit is eligible to participate in the Energy Star Residential New Construction Program if it meets the eligibility requirements provided for this program on the “About ENERGY STAR – Tax Credits for Home Builders” webpage (Energy Star Webpage)³ of the Environmental Protection Agency (EPA).

(b) A dwelling unit is eligible to participate in the Energy Star Manufactured New Homes Program if it meets the eligibility requirements provided for this program on the Energy Star Webpage.

.03 Applicable Amount for a Dwelling Unit Meeting the Multifamily Home Requirements under § 45L(c)(3)

(1) In General. Except as described in section 3.04 of this notice, the applicable amount for a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program is:

(a) $500, for a dwelling unit that meets the requirements of § 45L(c)(3) and does not meet the requirements of § 45L(c)(1)(B), or

(b) $1,000, for a dwelling unit that meets the requirements of § 45L(c)(1)(B).

(2) Eligible to Participate. A dwelling unit is part of a building eligible to participate in the Energy Star Multifamily New Construction Program if the building meets the eligibility requirements provided for this program on the Energy Star Webpage.

.04 Increase in Applicable Amount for Multifamily Homes Meeting Prevailing Wage Requirements. In the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and that meets the requirements of § 45L(c)(3) (and does not meet the requirements of § 45L(c)(1)(B)) and the prevailing wage requirements of § 45L(g)(2)(A) (Prevailing Wage Requirements), the applicable amount is $2,500. In the case of a dwelling unit that is part of a building eligible to participate in the Energy Star Multifamily New Construction Program and that meets the requirements of § 45L(c)(1)(B) and the Prevailing Wage Requirements, the applicable amount is $5,000. Guidance on the Prevailing Wage Requirements is provided in Notice 2022-61 and in the notice of proposed rulemaking (REG-100908-23) published in the Federal Register on August 30, 2023.

.01 In General. To meet the energy saving requirements of § 45L(c), a dwelling unit must meet the single-family home requirements of § 45L(c)(2) or the multifamily home requirements of § 45L(c)(3) (whichever is applicable), or meet the zero energy ready home requirements of § 45L(c)(1)(B).

.02 Single-Family Home Requirements under § 45L(c)(2)

(1) In General. A dwelling unit meets the energy saving requirements of § 45L(c)(2) if:

(a) In the case of a dwelling unit acquired before January 1, 2025, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.1, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired),

(b) In the case of a dwelling unit acquired after December 31, 2024, the dwelling unit meets the Energy Star Single-Family New Homes National Program Requirements 3.2, and the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit (as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired), or

(c) The dwelling unit meets the most recent Energy Star Manufactured Home National Program Requirements as in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date such dwelling unit is acquired.

(2) Certification

(a) In General. As provided on the Energy Star Webpage, the Energy Star Single-Family New Homes National Program Requirements 3.1 and 3.2, the Energy Star Single-Family New Homes Program Requirements applicable to the location of such dwelling unit, and the Energy Star Manufactured Home National Program Requirements (together, the Energy Star Single-Family Home Program Requirements) each require a dwelling unit to be certified as part of meeting such requirements. A dwelling unit will be considered to meet these respective program requirements for purposes of § 45L(c)(2) if it is certified under the rules of such respective program requirements. See section 6 of this notice for more information on certification requirements.

(b) Certification of Prior Versions through Later Versions. As provided on the Energy Star Webpage, a dwelling unit certified under a currently effective version of one of the Energy Star Single-Family Home Program Requirements by definition also is certified under any prior version of the same program requirements. For example, a dwelling unit certified under the Energy Star Single-Family New Homes National Program Requirements 3.2 also is considered certified under the Energy Star Single-Family New Homes National Program Requirements 3.1. All effective versions of Energy Star Single-Family Home Program Requirements are provided on the Energy Star Webpage.

(c) Deemed Certification of National and Regional Program Requirements. As provided on the Energy Star Webpage, the EPA will deem a dwelling unit certified under certain Energy Star Single-Family New Homes National Program Requirements also to be certified under certain Energy Star Single-Family New Homes Regional Program Requirements, and vice versa. To determine which deemed certifications correspond to which Energy Star Program Requirements, see the Energy Star Webpage.

(3) Energy Star Single-Family New Homes National Program Requirements. Energy Star Single-Family New Homes National Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(2)(A)(ii), if a dwelling unit is not located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, then the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of the dwelling unit will be the effective Energy Star Single-Family New Homes National Program Requirements.

(4) Energy Star Single-Family New Homes Regional Program Requirements. Energy Star Single-Family New Homes Regional Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(2)(A)(ii), if a dwelling unit is located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, then the most recent Energy Star Single-Family New Homes Program Requirements applicable to the location of a dwelling unit will be the Energy Star Single-Family New Homes Regional Program Requirements that apply to the dwelling unit. To determine which Energy Star Single-Family New Homes Regional Program Requirements are in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit was acquired, see the Energy Star Webpage.

(5) Energy Star Manufactured Home National Program Requirements. Energy Star Manufactured Home National Program Requirements are provided on the Energy Star Webpage. To determine which Energy Star Manufactured Home National Program Requirements are in effect on the later of January 1, 2023, or January 1 of two calendar years prior to the date the dwelling unit is acquired, see the Energy Star Webpage.

(6) Examples

(a) Example 1. A dwelling unit meets the eligibility requirements provided for the Energy Star Residential New Construction Program on the Energy Star Webpage. The dwelling unit is not located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, as provided on the Energy Star Webpage. The dwelling unit is certified in accordance with section 6 of this notice under the Energy Star Single-Family New Homes National Program Requirements 3.1. The eligible contractor sells the dwelling unit to a person for use as a residence on January 1, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2).

(b) Example 2. The facts are the same as in Example 1, except that the dwelling unit is certified in accordance with section 6 of this notice under the Energy Star Single-Family New Homes National Program Requirements 3.2. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2).

(c) Example 3. The facts are the same as in Example 1, except that: (i) the dwelling unit is located in one of the States specified by the effective Energy Star Single-Family New Homes Regional Program Requirements, and is certified in accordance with section 6 of this notice under the most recent of such program requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage, and (ii) the dwelling unit is deemed also to be certified under the Energy Star Single-Family New Homes National Program Requirements 3.1, as provided on the Energy Star Webpage. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(2).

.03 Multifamily Home Requirements under § 45L(c)(3)

(1) In General. A dwelling unit meets the energy saving requirements of § 45L(c)(3) if such dwelling unit meets:

(a) The most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later), and

(b) The most recent Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (as in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later).

(2) Certification

(a) In General. As provided on the Energy Star Webpage, the Energy Star Multifamily New Construction National Program Requirements and the Energy Star Multifamily New Construction Regional Program Requirements applicable to the location of such dwelling unit (together, the Energy Star Multifamily Home Program Requirements) each require a dwelling unit to be certified as part of meeting such requirements. A dwelling unit will be considered to meet these respective program requirements for purposes of § 45L(c)(3) if it is certified under the rules of such respective program requirements. See section 6 of this notice for more information on certification requirements.

(b) Certification of Prior Versions through Later Versions. As provided on the Energy Star Webpage, a dwelling unit certified under a currently effective version of one of the Energy Star Multifamily Home Program Requirements by definition also is certified under any prior version of the same program requirements. For example, a dwelling unit certified under the Energy Star Multifamily New Construction National Program Requirements Version 1.2 also is considered certified under the Energy Star Multifamily New Construction National Program Requirements Version 1.1.

(c) Deemed Certification of National and Regional Program Requirements. As provided on the Energy Star Webpage, the EPA will deem a dwelling unit certified under certain Energy Star Multifamily New Construction National Program Requirements also to be certified under certain Energy Star Multifamily New Construction Regional Program Requirements, and vice versa. To determine which deemed certifications correspond to which Energy Star Program Requirements, see the Energy Star Webpage.

(3) Energy Star Multifamily New Construction National Program Requirements. Energy Star Multifamily New Construction National Program Requirements are provided on the Energy Star Webpage. To determine which Energy Star Multifamily New Construction National Program Requirements are in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later, see the Energy Star Webpage.

(4) Energy Star Multifamily New Construction Regional Program Requirements. Effective Energy Star Multifamily New Construction Regional Program Requirements are provided on the Energy Star Webpage. As provided on the Energy Star Webpage, for purposes of § 45L(c)(3)(B), the Energy Star Multifamily New Construction Regional Program Requirements apply to a dwelling unit located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements. If a dwelling unit is not located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, § 45L(c)(3)(B) does not apply. To determine which Energy Star Multifamily New Construction Regional Program Requirements are in effect on either January 1, 2023, or January 1 of three calendar years prior to the date the dwelling unit was acquired, whichever is later, see the Energy Star Webpage.

(5) Examples

(a) Example 1. A dwelling unit is part of a building that meets the eligibility requirements provided for the Energy Star Multifamily New Construction Program on the Energy Star Webpage. The dwelling unit is not located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, as provided on the Energy Star Webpage. The dwelling unit is certified in accordance with section 6 of this notice under the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on January 1, 2023). The eligible contractor sells the dwelling unit to a person for use as a residence on January 1, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(3).

(b) Example 2. The facts are the same as in Example 1, except that: (i) the dwelling unit is located in one of the States specified by the effective Energy Star Multifamily New Construction Regional Program Requirements, and is certified in accordance with section 6 of this notice under the most recent of such program requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage, and (ii) the dwelling unit is deemed also to be certified under the most recent Energy Star Multifamily New Construction National Program Requirements (as in effect on January 1, 2023), as provided on the Energy Star Webpage. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(3).

.04 Zero Energy Ready Home Program Requirements under § 45L(c)(1)(B)

(1) In General. A dwelling unit meets the energy saving requirements under § 45L(c)(1)(B) if such dwelling unit is certified as a zero energy ready home under the ZERH program established by the DOE as in effect on January 1, 2023 (or any successor program determined by the Secretary). ZERH program requirements, including effective dates and certification requirements by building type, are provided on the DOE webpage, “DOE Zero Energy Ready Home (ZERH) Program Requirements” (ZERH Webpage).⁴ See section 6 of this notice for more information on certification requirements.

(2) ZERH Program in Effect; Determination of Successor Program. For purposes of establishing the ZERH program in effect under § 45L(c)(1)(B), the Secretary has determined:

(a) That the program identified on the ZERH Webpage (or any successor DOE webpage) is in effect and that successor ZERH programs will be in effect as of the date indicated on the ZERH Webpage (or any successor DOE webpage), and

(b) That should the DOE cease identifying ZERH programs on the DOE webpage and instead provide successor ZERH programs in an alternative, publicly available DOE source, that successor ZERH programs will be in effect as of the date indicated in the alternative, publicly available DOE source.

(3) Example. A dwelling unit is certified on December 23, 2023, in accordance with section 6 of this notice as a zero energy ready home under the ZERH program in effect on January 1, 2023 (as provided on the ZERH Webpage, and as determined by the effective dates provided under section 4.04 of this notice). The eligible contractor sells the dwelling unit to a person for use as a residence on July 30, 2024. Under these facts, the dwelling unit meets the energy saving requirements of § 45L(c)(1)(B).

.01 Acquired. The term “acquired” includes purchased. The IRS also will consider a qualified home that is leased by a person from an eligible contractor for use as a residence during the taxable year as “acquired” for purposes of § 45L(a)(1)(B). A qualified home is not acquired by a person from an eligible contractor if the eligible contractor retains the home for use as a residence. A qualified home that is a manufactured home may be acquired directly or indirectly from an eligible contractor. A qualified home that is a manufactured home is acquired indirectly from an eligible contractor for use as a residence if the person that produced the manufactured home sells it to an intermediary (for example, a dealer of manufactured homes) and the intermediary (or the last of multiple intermediaries) sells or leases the manufactured home to another person for use as a residence. See section 7.03 of this notice for a safe harbor permitting an eligible contractor to rely on a dealer’s statement concerning a sale by the dealer of manufactured homes.

.02 Eligible Contractor. An eligible contractor is the person that constructed the qualified home and owned and had a basis in the qualified home during its construction, or, in the case of a qualified home that is a manufactured home, the person that produced such home and owned and had a basis in such home during its production. For example, if a person that owns and has a basis in a qualified home during its construction hires a third-party contractor to construct the home, the person that hires the third-party contractor is the eligible contractor and the third-party contractor is not an eligible contractor.

.03 Qualified New Energy Efficient Home; Qualified Home. The terms “qualified new energy efficient home” and “qualified home” mean a dwelling unit located in the United States, the construction of which is substantially completed after August 8, 2005, that meets the energy saving requirements of § 45L(c) (see section 4 of this notice).

.04 Qualifying Residence; Qualified Residence. The terms “qualifying residence” and “qualified residence” used in § 45L(g)(1) and § 45L(g)(2)(A), respectively, each refer to a dwelling unit described in § 45L(a)(2)(B).

.05 United States. The term “United States” used in § 45L(b)(2)(A) means United States as defined in § 7701(a)(9), which includes only the States and the District of Columbia.

.01 In General. An eligible contractor must obtain any certification described in § 45L(c)(1) and sections 4.02(2), 4.03(2), and 4.04(1) of this notice with respect to a dwelling unit before claiming the § 45L credit. An eligible contractor is not required to file the certification with the return on which the credit is claimed, but should keep the certification as required under § 6001 (see section 7 of this notice for additional information on substantiation requirements). An eligible contractor must follow any procedures outlined in guidance and applicable forms and instructions provided by the IRS Commissioner with respect to § 45L. The guidance pertaining to certification in this notice was prepared after consultation with the Secretary of Energy in accordance with § 45L(d).

.02 Energy Star Certification Requirements. Certification requirements for the effective Energy Star program are provided on the Energy Star Webpage.

.03 ZERH Certification Requirements. Certification requirements for the effective ZERH program are provided on the ZERH Webpage.

.04 Eligible Certifier. For purposes of the credit requirements in place prior to the enactment of the IRA, Notice 2008-35 and Notice 2008-36 provide that a certification must be prepared by an “eligible certifier.” Those notices do not apply for purposes of any qualified homes acquired after December 31, 2022. For purposes of preparing the certification required under Energy Star and ZERH program requirements for qualified homes acquired after December 31, 2022, rules for the person eligible to issue a certification are under the respective Energy Star and ZERH program requirements.

.05 Software Programs. For purposes of the credit requirements in place prior to the enactment of the IRA, Notice 2008-35 and Notice 2008-36 include rules for approved software that may be used to calculate energy consumption for purposes of providing a certification. Those notices do not apply for purposes of any qualified homes acquired after December 31, 2022. For purposes of preparing the certification required under Energy Star and ZERH program requirements for qualified homes acquired after December 31, 2022, rules for the software to be used for purposes of providing a certification are under the respective Energy Star and ZERH program requirements.

.06 Safe Harbor for Certification of Energy Star and ZERH under § 45L(d). The IRS will deem a dwelling unit to meet any certification requirements under § 45L(d) if:

(1) In the case of a dwelling unit that meets the requirements of § 45L(c)(1)(A), it is certified under the rules of the Energy Star program requirements as provided in section 6.02 of this notice, or

(2) In the case of a dwelling unit that meets the requirements of § 45L(c)(1)(B), it is certified as a zero energy ready home under the ZERH program as provided in section 6.03 of this notice.

.01 In General. An eligible contractor claiming a credit under § 45L must meet the general recordkeeping requirements under § 6001 to substantiate that the requirements of § 45L have been met. Section 6001 provides that every person liable for any tax imposed by the Code, or for the collection thereof, must keep such records as the Secretary may from time to time prescribe. Section 1.6001-1(a) provides that any person subject to income tax under the Code, or any person required to file a return of information with respect to income, must keep such permanent books of account or records as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax or information. Section 1.6001-1(e) provides that the books and records required by § 1.6001-1 must be retained so long as the contents thereof may become material in the administration of any internal revenue law.

.02 Minimum Requirements. To meet the substantiation requirements described in section 7.01 of this notice, an eligible contractor must retain, at a minimum:

(1) Any Energy Star or ZERH certification described in § 45L(c)(1) and section 6 of this notice including the date of such certification,

(2) If applicable, a dealer’s statement described in section 7.03 of this notice, and

(3) Books or records sufficient to establish the following:

(a) The address of the qualified home, and that such home is located in the United States (see definition in section 5.05 of this notice),

(b) That the taxpayer is an eligible contractor as defined in section 5.02 of this notice,

(c) That the qualified home was acquired by a person from the eligible contractor for use as a residence during the taxable year for which the taxpayer is claiming the § 45L credit, and the name of the person that acquired it (except with respect to a manufactured home for which the eligible contractor retains a dealer’s statement described in section 7.03 of this notice), and

(d) If applicable, that the prevailing wage requirements as described in section 3.04 of this notice with respect to a qualified home are met.

.03 Safe Harbor for Sales to Dealers

(1) In General. In the case of a manufactured home sold by an eligible contractor to a dealer of manufactured homes, the eligible contractor may rely on a statement by the dealer to establish the date on which a manufactured home was acquired, that it is located in the United States, and that it was acquired for use as a residence, if the eligible contractor retains the statement in accordance with the recordkeeping requirements of § 6001 and section 7.01 of this notice.

(2) Content of Statement. The eligible contractor may not rely on the statement by the dealer unless the statement specifies the date of the retail sale of the manufactured home, that the dealer delivered the manufactured home to the purchaser at an address in the United States, and that the dealer has no knowledge of any information suggesting that the purchaser will use the manufactured home other than as a residence. The statement also must contain the following information:

(a) The name, address, and telephone number of the dealer.

(b) If the manufactured home was passed through any intermediaries between the initial purchase from the eligible contractor to the ultimate acquisition by the person that acquired the home for use as a residence, the name, address, and telephone number of each such intermediary.

(c) A declaration, applicable to the statement made by the dealer and any accompanying documents, signed by a person currently authorized to bind the dealer in such matters, in the following form:

“Under penalties of perjury, I declare that, to the best of my knowledge and belief, the facts presented with respect to this sale transaction are true, correct, and complete.”

The Paperwork Reduction Act of 1995 (44 U.S.C. §§ 3501-3520) (PRA) requires a Federal Agency to obtain the approval of the Office of Management and Budget (OMB) before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit.

This notice contains recordkeeping requirements and third-party disclosures that are required to claim the § 45L credit. These collections of information generally would be used by the IRS for tax compliance purposes and by taxpayers to facilitate proper reporting and compliance. A Federal agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The recordkeeping requirements provided in sections 6 and 7 of this notice are considered general tax records under § 1.6001-1. These records are required for the IRS to validate that eligible contractors have met the requirements of § 45L, including that a qualified home meets the energy saving requirements of § 45L(c). For PRA purposes, general tax records are already approved by OMB under control number 1545–0123 for business filers, control number 1545–0074 for individual filers, and control number 1545-1994 for trust/estate filers.

Sections 6 and 7 of this notice contain third-party disclosures to dealers of manufactured homes, and to the DOE and EPA for purposes of obtaining the certifications required to demonstrate that a dwelling unit meets the applicable Energy Star or ZERH program requirements. These certifications are included within the instructions for Form 8908, Energy Efficient Home Credit, which is approved by the OMB under control number 1545-1979.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by § 6103.

Notice 2008-35 and Notice 2008-36 are obsoleted for any qualified home acquired after December 31, 2022.

This notice applies to any qualified home acquired after December 31, 2022 and before January 1, 2033.

The principal author of this notice is the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact the Office of Associate Chief Counsel (Passthroughs & Special Industries) at (202) 317-6853 (not a toll-free number).

¹Unless otherwise specified, all “Section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

²All references to “former § 45L” in this notice refer to § 45L as applicable to qualified new energy efficient homes acquired on or before December 31, 2022.

³Available at https://www.energystar.gov/about/federal_tax_credits/federal_tax_credit_archives/tax_credits_home_builders. Should this link become inactive, visit the current https://www.energystar.gov webpage for the requirements at issue.

⁴Available at https://www.energy.gov/eere/buildings/doe-zero-energy-ready-home-zerh-program-requirements. Should this link become inactive, visit the current https://www.energy.gov webpage provided for the requirements at issue.

This notice provides guidance regarding an extension of the replacement period under § 1033(e) of the Internal Revenue Code for livestock sold on account of drought in specified counties.

.01 Nonrecognition of Gain on Involuntary Conversion of Livestock. Section 1033(a) generally provides for nonrecognition of gain when property is involuntarily converted and replaced with property that is similar or related in service or use. Section 1033(e)(1) provides that a sale or exchange of livestock (other than poultry) held by a taxpayer for draft, breeding, or dairy purposes in excess of the number that would be sold following the taxpayer’s usual business practices is treated as an involuntary conversion if the livestock is sold or exchanged solely on account of drought, flood, or other weather-related conditions.

.02 Replacement Period. Section 1033(a)(2)(A) generally provides that gain from an involuntary conversion is recognized only to the extent the amount realized on the conversion exceeds the cost of replacement property purchased during the replacement period. If a sale or exchange of livestock is treated as an involuntary conversion under § 1033(e)(1) and is solely on account of drought, flood, or other weather-related conditions that result in the area being designated as eligible for assistance by the federal government, § 1033(e)(2)(A) provides that the replacement period ends four years after the close of the first taxable year in which any part of the gain from the conversion is realized. Section 1033(e)(2)(B) provides that the Secretary may extend this replacement period on a regional basis for such additional time as the Secretary determines appropriate if the weather-related conditions that resulted in the area being designated as eligible for assistance by the federal government continue for more than three years. Section 1033(e)(2) is effective for any taxable year with respect to which the due date (without regard to extensions) for a taxpayer’s return is after December 31, 2002.

Notice 2006-82, 2006-2 C.B. 529, provides for extensions of the replacement period under § 1033(e)(2)(B). If a sale or exchange of livestock is treated as an involuntary conversion on account of drought and the taxpayer’s replacement period is determined under § 1033(e)(2)(A), the replacement period will be extended under § 1033(e)(2)(B) and Notice 2006-82 until the end of the taxpayer’s first taxable year ending after the first drought-free year for the applicable region. For this purpose, the first drought-free year for the applicable region is the first 12-month period that (1) ends August 31; (2) ends in or after the last year of the taxpayer’s four-year replacement period determined under § 1033(e)(2)(A); and (3) does not include any weekly period for which exceptional, extreme, or severe drought is reported for any location in the applicable region. The applicable region is the county that experienced the drought conditions on account of which the livestock was sold or exchanged and all counties that are contiguous to that county.

A taxpayer may determine whether exceptional, extreme, or severe drought is reported for any location in the applicable region by reference to U.S. Drought Monitor maps that are produced on a weekly basis by the National Drought Mitigation Center. U.S. Drought Monitor maps are archived at http://droughtmonitor.unl.edu/Maps/MapArchive.aspx.

In addition, Notice 2006-82 provides that the Internal Revenue Service will publish in September of each year a list of counties¹ for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Taxpayers may use this list instead of U.S. Drought Monitor maps to determine whether exceptional, extreme, or severe drought has been reported for any location in the applicable region.

The Appendix to this notice contains the list of counties for which exceptional, extreme, or severe drought was reported during the 12-month period ending August 31, 2023. Under Notice 2006-82, the 12-month period ended on August 31, 2023, is not a drought-free year for an applicable region that includes any county on this list. Accordingly, for a taxpayer who qualified for a four-year replacement period for livestock sold or exchanged on account of drought and whose replacement period is scheduled to expire at the end of 2023 (or, in the case of a fiscal year taxpayer, at the end of the taxable year that includes August 31, 2023), the replacement period will be extended under § 1033(e)(2) and Notice 2006-82 if the applicable region includes any county on this list. This extension will continue until the end of the taxpayer’s first taxable year ending after a drought-free year for the applicable region.

The principal author of this notice is Lewis Saideman of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, please contact Mr. Saideman at (202) 317-7009 (not a toll-free call).

In response to the extreme need for charitable relief for victims of wildfires beginning on August 8, 2023, in the State of Hawaii (2023 Hawaii Wildfires), employers may have adopted or may be considering adopting leave-based donation programs. This notice provides guidance under the Internal Revenue Code (Code)¹ on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs for the relief of victims of the 2023 Hawaii Wildfires. This guidance is similar to the guidance provided in Notice 2001-69, 2001-46 IRB 491, as modified and superseded by Notice 2003-1, 2003-2 IRB 257, regarding charitable relief following the September 11, 2001, terrorist attacks.

Under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations described in section 170(c) (section 170(c) organizations). Cash payments made by an employer to section 170(c) organizations under an employer leave-based donation program are referred to as “employer leave-based donation payments.”

Employer leave-based donation payments made by an employer before January 1, 2025, to section 170(c) organizations to aid victims of the 2023 Hawaii Wildfires (qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer. Similarly, employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable). Employers should not include the amount of qualified employer leave-based donation payments in Box 1, 3 (if applicable), or 5 of the electing employees’ Forms W-2. Electing employees are not eligible to claim charitable contribution deductions under section 170 for the value of the forgone leave that funds qualified employer leave-based donation payments.

An employer may deduct qualified employer leave-based donation payments under the rules of section 170 or the rules of section 162 if the employer otherwise meets the respective requirements of either section of the Code.

For further information, please contact Clara L. Raymond of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 317-4718 (not a toll-free number).

¹Unless otherwise specified, all “section” or “§” references are to sections of the Code.

This revenue procedure amplifies and supersedes Rev. Proc. 2014-45, 2014-34 I.R.B. 388, which describes circumstances in which the Internal Revenue Service (IRS) will not treat a redemption of shares in a money market fund (MMF) as part of a wash sale for purposes of section 1091 of the Internal Revenue Code (Code).¹ This revenue procedure expands the scope of Rev. Proc. 2014-45 in response to final rules adopted by the Securities and Exchange Commission (SEC) on July 12, 2023, which amend Rule 2a-7 under the Investment Company Act of 1940 (1940 Act), 17 CFR § 270.2a-7 (2023 Amendments). See Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, Investment Company Act Release No. 34959 (July 12, 2023), 88 F.R. 51404 (Aug. 3, 2023) (2023 SEC Release).

.01 Money Market Funds

(1) An investment company that is registered under the 1940 Act and that meets the requirements of Rule 2a-7 under the 1940 Act is permitted to hold itself out as an MMF. MMFs have historically sought to keep stable (typically at $1.00) the prices at which their shares are distributed, redeemed, and repurchased. The securities that Rule 2a-7 permits an MMF to hold generally result in no more than minimal fluctuations in the value of an MMF’s portfolio as determined on a per-share basis.

(2) Prior to amendments in 2014, Rule 2a-7 generally permitted an MMF to compute its price per share by using either or both of (a) the amortized cost method of valuation, and (b) the penny-rounding method of pricing. Under the amortized cost method of valuation, an MMF’s net asset value per share (NAV) was determined by valuing the fund’s portfolio securities at their acquisition cost, adjusted for amortization of premium or accretion of discount. Under the penny-rounding method of pricing, an MMF’s NAV was rounded to the nearest one percent in computing the MMF’s share price. These methods were intended to enable MMFs to maintain stable share prices under most circumstances.

(3) Final rules adopted by the SEC in 2014 generally bar the use of the amortized cost method of valuation and the use of the penny-rounding method of pricing, except by government MMFs and retail MMFs² (2014 Amendments). See Money Market Fund Reform; Amendments to Form PF, Investment Company Act Release No. 31166 (July 23, 2014), 79 F.R. 47735 (Aug. 14, 2014). An MMF that is neither a government MMF nor a retail MMF must value its portfolio securities using market-based factors and compute its price per share by rounding the fund’s NAV to a minimum of the fourth decimal place (or, for an MMF with a share price other than $1.0000, an equivalent or greater level of precision). 17 CFR § 270.2a–7(c)(1)(ii). An MMF that uses market factors to value its securities and uses basis point rounding to price its shares for purposes of distribution, redemption, and repurchase (floating-NAV MMF) has a share price that is likely to change frequently, but usually within a narrow range because of the limited types of investments that an MMF may hold. A government MMF or retail MMF that continues to use the amortized cost method and penny rounding (stable-NAV MMF) can maintain a constant share price under most market conditions.

(4) The fact that stable-NAV MMFs maintain a constant share price simplifies the taxation of their shareholders. Because shareholders acquire shares from the fund for $1.00/share, have bases of $1.00/share, and redeem those shares for the same amount, they realize no gain or loss on those redemptions. On the other hand, shareholders in floating-NAV MMFs typically redeem shares for amounts slightly different from the amounts for which those shares were issued to them. Section 2.02(4) and (5) of this revenue procedure describe prior guidance intended to reduce tax compliance burdens associated with gains and losses on shares in floating-NAV MMFs.

(5) The 2014 Amendments also permitted an MMF to institute a liquidity fee if certain liquid assets of the MMF fall below a specified percentage of the MMF’s total assets. If those liquid assets fall below another (lower) specified percentage, the 2014 Amendments generally required the MMF to institute a liquidity fee, unless the MMF’s board of directors (including a majority of the directors who are not interested persons of the fund) determines that imposing such a fee is not in the best interests of the MMF. When an MMF has a liquidity fee in effect, the fee reduces the proceeds received by all redeeming shareholders. Government MMFs were generally exempt from the requirements of the liquidity fee provisions but were permitted to institute liquidity fees on the same terms.

.02 Wash Sale Rules

(1) Section 1091(a) disallows a loss realized by a taxpayer on a sale or other disposition of shares of stock or securities if, within a period beginning 30 days before and ending 30 days after the date of such sale or disposition, the taxpayer acquires (by purchase or by an exchange on which the entire amount of gain or loss is recognized by law), or enters into a contract or option to so acquire, substantially identical stock or securities (unless the taxpayer is a dealer in stock or securities and the loss is sustained in a transaction made in the ordinary course of such business).

(2) If a taxpayer acquired property and that acquisition resulted in the disallowance of a loss under section 1091(a), then under section 1091(d), the taxpayer’s basis in the property so acquired equals the basis of the stock or securities disposed of at a loss, increased or decreased to take into account any difference between the price at which the replacement property was acquired and the price at which the original stock or securities were disposed of.

(3) As mentioned above, a shareholder may realize a loss upon a redemption of shares in an MMF in certain circumstances. For example, the share price of a floating-NAV fund may have declined below the price at which the shareholder acquired shares, or an MMF may impose a liquidity fee on redemptions. Because many MMF shareholders engage in frequent redemptions and purchases of MMF shares (for example, because of sweep arrangements and automatic reinvestments of distributions), a shareholder that realizes a loss on a redemption of MMF shares will often acquire shares in that MMF within 30 days before or after the redemption.

(4) When the 2014 Amendments required certain MMFs to become floating-NAV MMFs, the Department of the Treasury (Treasury Department) and the IRS published guidance to mitigate in two ways the administrative burdens associated with gains and losses on those MMF shares, including those associated with wash sales.

(a) First, § 1.446-7 provides a simplified method of accounting for gain or loss on MMF shares (NAV method). Under the NAV method, a taxpayer’s gain or loss on shares in an MMF is based on the change in the aggregate value of the taxpayer’s shares during a computation period and on the net amount of purchases and redemptions during the computation period. Because no gain or loss is determined for particular redemptions under the NAV method, no redemption implicates the wash sale rules. The NAV method applies to floating-NAV MMFs and stable-NAV MMFs. See § 1.446-7(a).

(b) Second, Rev. Proc. 2014-45 provided that the IRS will not treat a redemption of a share of a floating-NAV MMF as a part of a wash sale. Thus, Rev. Proc. 2014-45 provided relief from the wash sale rules for shareholders in floating-NAV MMFs not using the NAV method, but it did not extend the relief to stable-NAV MMFs.

.03 2023 Amendments

(1) The 2023 Amendments eliminate from Rule 2a-7 any link between an MMF’s liquid assets and the MMF’s ability (or obligation) to institute liquidity fees. Under Rule 2a-7(c)(2)(i), as amended, any MMF other than a government MMF must institute a liquidity fee (not to exceed two percent of the value of the shares redeemed) if the MMF’s board of directors, including a majority of the directors who are not interested persons of the MMF, determines that a liquidity fee is in the best interests of the MMF.³ A government MMF is permitted to impose liquidity fees on the same terms. The SEC intends to increase the resilience of MMFs by providing a mechanism to allocate liquidity costs to redeeming investors in times of stress while avoiding incentives for preemptive redemptions associated with liquidity fee triggers based on liquidity levels or other criteria investors might predict. See 2023 SEC Release, 88 F.R. at 51411.

(2) The provisions of the 2023 Amendments relating to liquidity fees are effective on October 2, 2023. These amendments provide a six-month compliance date for the discretionary liquidity fee provisions described in section 2.03(1) of this revenue procedure. Affected MMFs, however, including government MMFs, may begin to rely on those provisions after the October 2, 2023, effective date. See 2023 SEC Release, 88 F.R. at 51452.

(3) Thus, after October 2, 2023, any MMF may impose a liquidity fee based solely on a determination of its board of directors. Thus, in some situations, the board of a stable-NAV MMF may determine that such a fee is in the best interests of the MMF and so impose it on redemptions of the MMF’s shares. For a redeeming shareholder that has not adopted the NAV method (which is the case for almost all shareholders in stable-NAV MMFs), the fee will result in a loss on the redemption. Moreover, because stable-NAV MMFs are outside the scope of Rev. Proc. 2014-45, there is no current impediment to the application of the section 1091 wash sale rules to that loss.

(4) The Treasury Department and the IRS intend this revenue procedure to reduce undue tax compliance burdens resulting from the 2023 Amendments. Because of the constant value of shares in stable-NAV MMFs, the frequency with which many taxpayers continuously acquire and redeem shares in these MMFs, and the administrative and compliance burdens that would flow from applying section 1091 to these transactions, it is in the interest of sound tax administration to extend to these shares the relief that Rev. Proc. 2014-45 already provides to shares in floating-NAV MMFs. Accordingly, the IRS will not treat as part of a wash sale a redemption of a share in any MMF.

This revenue procedure applies to a redemption of one or more shares in an MMF.

If a redemption is within the scope of section 3 of this revenue procedure and results in a loss, the IRS will not treat the redemption as part of a wash sale. Therefore, section 1091(a) will not disallow the deduction for the resulting loss in the year realized and section 1091(d) will not cause the basis of any property to be determined by reference to the basis of the redeemed shares.

Rev. Proc. 2014-45 is amplified and superseded for redemptions of shares in MMFs after October 2, 2023.

This revenue procedure is effective for redemptions of shares in MMFs after October 2, 2023.

The principal author of this revenue procedure is Vanessa Mekpong of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Vanessa Mekpong on (202) 317-6842 (not a toll-free number).

¹Unless otherwise specified, all “Section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

²A government MMF is an MMF that “invests 99.5 percent or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully.” 17 CFR § 270.2a–7(a)(14). A retail MMF is an MMF that “has policies and procedures reasonably designed to limit all beneficial owners of the fund to natural persons.” 17 CFR § 270.2a–7(a)(21).

³The 2023 Amendments also require certain MMFs to impose liquidity fees based on levels of net redemptions. The MMFs subject to that rule, institutional prime MMFs and institutional tax-exempt MMFs, are floating-NAV MMFs. Accordingly, Rev. Proc. 2014-45 currently provides wash sale relief for transactions in their shares.

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations that would provide guidance on how taxpayers will report liability for the excise tax imposed on manufacturers, producers, or importers of certain designated drugs. The proposed regulations affect manufacturers, producers, and importers of designated drugs that sell such drugs during certain statutory periods. The proposed regulations also would except such tax from semimonthly deposit requirements.

DATES: Written or electronic comments and requests for a public hearing must be received by December 1, 2023. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section.

ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-115559-23) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS’s public docket. Send paper submissions to: CC:PA:LPD:PR (REG-115559-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, contact Jacob W. Peeples, James S. Williford, or Michael H. Beker at (202) 317-6855 (not a toll-free number); concerning the submission of comments and/or requests for a public hearing, contact Vivian Hayes by phone at (202) 317-5306 (not a toll-free number) or by email at publichearings@irs.gov (preferred).

SUPPLEMENTARY INFORMATION: