Internal Revenue Bulletin: 2012-17
April 23, 2012
These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.
Notice 2012-26 Notice 2012-26
Modification of Notice 2008-40; deduction for energy efficient commercial buildings. This notice modifies Notice 2006-52, 2006-1 C.B. 1175, and Notice 2008-40, 2008-1 C.B. 725, by providing an additional set of energy savings percentages that taxpayers may use to qualify for a partial section 179D deduction under the permanent rule for property placed in service on or after the effective date of the notice. Specifically, the applicable energy savings percentages provided under this notice are 25 percent for the interior lighting system, 15 percent for the HVAC and hot water systems, and 10 percent for the building envelope. Notice 2006-52, as clarified and amplified by Notice 2008-40, modified.
Rev. Proc. 2012-22 Rev. Proc. 2012-22
General rules and specifications for substitute forms W-2c and W-3c. This procedure provides specifications for the private printing of red-ink and black-and-white paper substitutes for the 2011 revision of Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements. It will be reproduced as the next revision of Publication 1223. Rev. Proc. 2010-43 superseded.
Notice 2012-28 Notice 2012-28
Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in April 2012; the 24-month average segment rates; the funding transitional segment rates applicable for April 2012; and the minimum present value transitional rates for March 2012.
Rev. Proc. 2012-22 Rev. Proc. 2012-22
General rules and specifications for substitute forms W-2c and W-3c. This procedure provides specifications for the private printing of red-ink and black-and-white paper substitutes for the 2011 revision of Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements. It will be reproduced as the next revision of Publication 1223. Rev. Proc. 2010-43 superseded.
Notice 2012-27 Notice 2012-27
This notice provides guidance relating to the application of the tax imposed by section 4043 of the Code on fuel used in fractional program aircraft. Section 4043 was added to the Code by section 1103 of the FAA Modernization and Reform Act of 2012 (Act) (Pub. L. 112-95) and applies to fuel used after March 31, 2012.
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The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).
Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.
It is the policy of the Internal Revenue Service to announce at an early date whether it will follow the holdings in certain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unappealed issues decided adverse to the government. Generally, an Action on Decision is issued where its guidance would be helpful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent.
Actions on Decisions shall be relied upon within the Service only as conclusions applying the law to the facts in the particular case at the time the Action on Decision was issued. Caution should be exercised in extending the recommendation of the Action on Decision to similar cases where the facts are different. Moreover, the recommendation in the Action on Decision may be superseded by new legislation, regulations, rulings, cases, or Actions on Decisions.
Prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions. The Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal. Regardless of the court deciding the case, the recommendation of any Action on Decision will be published in the Internal Revenue Bulletin.
The recommendation in every Action on Decision will be summarized as acquiescence, acquiescence in result only, or nonacquiescence. Both “acquiescence” and “acquiescence in result only” mean that the Service accepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts. However, “acquiescence” indicates neither approval nor disapproval of the reasons assigned by the court for its conclusions; whereas, “acquiescence in result only” indicates disagreement or concern with some or all of those reasons. “Nonacquiescence” signifies that, although no further review was sought, the Service does not agree with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a circuit court of appeals, a “nonacquiescence” indicates that the Service will not follow the holding on a nationwide basis. However, the Service will recognize the precedential impact of the opinion on cases arising within the venue of the deciding circuit.
The Actions on Decisions published in the weekly Internal Revenue Bulletin are consolidated semiannually and appear in the first Bulletin for July and the Cumulative Bulletin for the first half of the year. A semiannual consolidation also appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year.
The Commissioner does ACQUIESCE IN RESULT ONLY in the following decision:
Alan Baer Revocable Trust v. United States,[1]
105 AFTR 2d 1544,
2010-1 USTC ¶ 60,590 (D. Neb. 2010)
[1] Acquiescence in result only relating to the court’s holding that stock includible in the Decedent’s gross estate qualifies for the martial deduction under section 2056(b)(7) of the Code when the stock is subject to contingent bequests.
This notice modifies Notice 2006-52, 2006-1 C.B. 1175, and Notice 2008-40, 2008-1 C.B. 725, which clarified and amplified Notice 2006-52. This notice sets forth additional guidance relating to the deduction for energy efficient commercial buildings under § 179D and is intended to be used with Notice 2006-52 and Notice 2008-40.
On June 26, 2006, the Service published Notice 2006-52, which provides, among other things, the requirements for achieving a partial deduction under the permanent rule for (1) interior lighting systems, (2) heating, cooling, ventilation, and hot water systems, and (3) the building envelope. Specifically, Notice 2006-52 requires that for a partial deduction (other than a deduction under the interim lighting rule described below), the system must reduce the total annual energy and power costs with respect to the combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by at least a specified percentage as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001[2] (the energy savings percentages). The energy savings percentages prescribed in Notice 2006-52 were 162/3 percent for each of the three systems.
On April 7, 2008, the Service published Notice 2008-40, which provided alternative energy savings percentages that taxpayers could use to qualify for the partial deduction under the permanent rule. The energy savings percentages provided in Notice 2008-40 are 10 percent for the building envelope and 20 percent for interior lighting systems and heating, cooling, ventilation, and hot water systems.
This notice provides an additional set of energy savings percentages that taxpayers may use to qualify for a partial deduction under the permanent rule.
Section 1331, Title XIII of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (Aug. 8, 2005), enacted § 179D of the Code, which provides a deduction with respect to energy efficient commercial buildings. As originally enacted, § 179D applied to property placed in service after January 1, 2006 and before January 1, 2008. Section 204, Div. A, Title II of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20, 2006), extended the § 179D deduction to apply to property placed in service before January 1, 2009. Section 303, Div. B, Title III of the Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, 122 Stat. 3845 (October 8, 2008), further extended the § 179D deduction to apply to property placed in service before January 1, 2014.
Section 179D(a) allows a deduction to a taxpayer for part or all of the cost of energy efficient commercial building property that the taxpayer places in service. Section 179D(c)(1) defines “energy efficient commercial building property” as depreciable property that satisfies each of the following conditions: (1) the property is installed on or in any building that is located in the United States and is within the scope of Standard 90.1-2001; (2) the property is installed as part of the interior lighting systems; the heating, cooling, ventilation, and hot water systems; or the building envelope; and (3) it is certified that the interior lighting systems, heating, cooling, ventilation, and hot water systems, and the building envelope that have been incorporated into the building, or that the taxpayer plans to incorporate into the building subsequent to the installation of such property, will reduce the total annual energy and power costs with respect to the combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 50 percent or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001.
Section 179D(b) provides that the maximum amount of the § 179D deduction shall not exceed the excess (if any) of (i) the product of $1.80 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.
In the event that the installation of energy efficient commercial building property does not achieve the 50-percent reduction in total annual energy and power costs required by § 179D(c)(1)(D), § 179D(d)(1) provides for a partial deduction, in an amount not to exceed the product of $0.60 and the square footage of the building, for each system that satisfies the requirements § 179D(d)(1) (the permanent rule). While the taxpayer may claim a partial § 179D deduction for each system, the taxpayer may not claim partial deductions that in total exceed the overall limitation of (i) the product of $1.80 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.
Section 179D(f) provides an interim lighting rule, which is an alternate method of calculating a partial deduction for interior lighting systems. This rule provides a partial deduction for part or all of the cost of certain energy efficient commercial building property installed as part of a lighting system that reduces the lighting power density of the building by more than 25 percent (50 percent in the case of a warehouse).
Under the permanent rule, property that would be energy efficient commercial building property but for the failure to achieve the target 50-percent reduction in energy and power costs required under § 179D(c)(1)(D) is partially qualifying commercial building property if it is installed as part of a system that satisfies the applicable energy savings percentage.
.01 Energy Savings Percentages Provided in Notice 2006-52. Section 2.03(1)(a) of Notice 2006-52 provides that property installed as part of the interior lighting system is partially qualifying property under the permanent rule if the installation of such property will reduce the total annual energy and power costs with respect to the combined usage of the building’s heating, cooling, ventilation, hot water, and interior lighting systems by 162/3 percent or more as compared to a Reference Building that meets the minimum requirements of Standard 90.1-2001. Notice 2006-52 provides an identical rule for heating, cooling, ventilation and hot water systems in section 2.04(1), and for the building envelope in section 2.05(1). Thus, the applicable energy savings percentage under Notice 2006-52 is 162/3 percent for each of the three systems.
.02 Energy Savings Percentages Provided in Notice 2008-40. Section 7.01 of Notice 2008-40 provides that when calculating a partial deduction for the building envelope, a taxpayer may apply section 2.05 of Notice 2006-52 by substituting “10” for “162/3” in section 2.05(1) of such notice. However, a taxpayer that makes this substitution must apply sections 2.03 (relating to the partial deduction for interior lighting systems) and 2.04 (relating to the partial deduction for heating, cooling, ventilation, and hot water systems) of Notice 2006-52 by substituting “20” for “162/3” in section 2.03(1)(a) and section 2.04(1) of such notice, respectively. Thus, the alternative energy savings percentages permitted under Notice 2008-40 are 20 percent for the interior lighting system and the heating, cooling, ventilation, and hot water systems, and 10 percent for the building envelope.
Section 7.01 of Notice 2008-40 also provides that if § 179D is extended beyond December 31, 2008, taxpayers should use these updated energy savings percentages to determine whether property placed in service after December 31, 2008, is partially qualifying property. Accordingly, the energy savings percentages provided in Notice 2006-52 (162/3 for each system) may not be used to determine whether property placed in service after December 31, 2008, is partially qualifying property.
.03 Energy Savings Percentages Provided in Current Notice. Under this notice, when calculating a partial deduction for heating, cooling, ventilation, and hot water systems, a taxpayer may apply section 2.04 of Notice 2006-52 by substituting “15” for “162/3” in section 2.04(1) of such notice. However, a taxpayer that makes this substitution must apply section 2.03 of Notice 2006-52 (relating to the partial deduction for interior lighting systems) by substituting “25” for “162/3” in section 2.03(1)(a) of such notice, and must apply section 2.05 of Notice 2006-52 (relating to the partial deduction for the building envelope) by substituting “10” for “162/3” in section 2.05(1) of such notice. Thus, the applicable energy savings percentages permitted under this notice are 25 percent for the interior lighting system, 15 percent for the heating, cooling, ventilation, and hot water systems, and 10 percent for the building envelope.
The energy savings percentages permitted under this notice are available for property placed in service on or after the effective date of this notice. If § 179D is extended beyond December 31, 2013, the Internal Revenue Service and the Treasury Department expect, in the absence of other changes to § 179D, that the substitute energy savings percentages set forth in this notice will be the only energy savings percentages used in determining whether property placed in service after December 31, 2013, is partially qualifying property. Until December 31, 2013, taxpayers may use either the energy savings percentages provided in section 7.01 of Notice 2008-40 or the substitute energy savings percentages provided under this notice.
Notwithstanding the foregoing provisions of this section 3.03 or any other provision of this notice, if a taxpayer claims or previously claimed a partial deduction with respect to a commercial building under Notice 2006-52 or Notice 2008-40 and the system for which the deduction is or was claimed does not satisfy the applicable energy savings percentage specified for such system in this section 3.03, the taxpayer may not claim a partial deduction for any other system in the same building using the energy savings percentages permitted under this section 3.03.
The following table summarizes the energy savings percentages permitted under Notice 2006-52, Notice 2008-40 and this notice.
Summary of Energy Savings Percentages Provided by IRS Guidance | |||
Energy Savings Percentages permitted under Notice 2006-52 | Energy Savings Percentages permitted under Notice 2008-40 | Energy Savings Percentages permitted under Notice 2012-26 | |
Interior Lighting Systems | 162/3 | 20 | 25 |
Heating, Cooling, Ventilation, and Hot Water Systems | 162/3 | 20 | 15 |
Building Envelope | 162/3 | 10 | 10 |
Effective for property placed in service | January 1, 2006 - December 31, 2008 | January 1, 2006 - December 31, 2013 | Effective date of Notice 2012-26 - December 31, 2013; if § 179D is extended beyond December 31, 2013, also effective (except as otherwise provided in an amendment of § 179D or the guidance thereunder) during the period of the extension |
.04 Limitation on Deduction for Partially Qualifying Property.
(1) In General. A taxpayer who owns, or is a lessee of, a commercial building and installs partially qualifying energy efficient commercial building property may claim a partial deduction for each system that meets the requirements provided in sections 2.03, 2.04 and 2.05 of Notice 2006-52 (as modified by Notice 2008-40 and this notice). However, because the deduction for each such system is limited to $0.60 per square foot, the sum of all partial § 179D deductions claimed cannot exceed the excess (if any) of (i) the product of $1.80 and the square footage of the building, over (ii) the aggregate amount of the § 179D deductions allowed with respect to the building for all prior taxable years.
(2) Application to Multiple Taxpayers. If two or more taxpayers install property on or in the same building and the deduction for the cost of the property is subject to the limitation in section 3.04(1) of this notice, the aggregate amount of the § 179D deductions allowed to all such taxpayers with respect to the building shall not exceed the amount determined under section 3.04(1) of this notice.
This notice modifies Notice 2008-40, 2008-1 C.B. 725, which clarified and amplified Notice 2006-52, 2006-1 C.B. 1175.
The principal author of this notice is Jennifer C. Bernardini of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Ms. Bernardini at (202) 622-3110 (not a toll-free call).
[2] Any reference in this notice to Standard 90.1-2001 should be treated as a reference to ANSI/ASHRAE/IESNA Standard 90.1-2001, Energy Standard for Buildings Except Low-Rise Residential Buildings, developed for the American National Standards Institute by the American Society of Heating, Refrigerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America (as in effect on April 2, 2003, including addenda 90.1a-2003, 90.1b-2002, 90.1c-2002, 90.1d-2002, and 90.1k-2002 as in effect on that date).
This notice provides guidance relating to the application of the tax imposed by § 4043 of the Internal Revenue Code (Code) on fuel used in fractional program aircraft. Section 4043 was added to the Code by section 1103 of the FAA Modernization and Reform Act of 2012 (Act) (Pub. L. 112-95) and applies to fuel used after March 31, 2012.
Section 4043 imposes a $0.141-per-gallon tax on any liquid used in a fractional program aircraft as fuel (1) for the transportation of a qualified fractional owner with respect to the fractional ownership aircraft program of which such aircraft is a part, or (2) with respect to the use of such aircraft on account of such a qualified fractional owner, including use in deadhead service.
In general, a fractional ownership aircraft program is a system of aircraft ownership and exchange that involves a single program manager that manages a fleet of aircraft on behalf of fractional owners. Participation in a fractional ownership aircraft program entitles the owner to fly on any of the aircraft in the program’s fleet on an on-available basis, regardless of whether the owner has an ownership interest in the aircraft in which the owner travels. The terms “fractional program aircraft,” “fractional ownership aircraft program,” and “qualified fractional owner” are defined in § 4043(c).
The following rules apply with respect to § 4043:
Section 4043 imposes a tax at the rate of $0.141-per-gallon on the use of any liquid fuel in the propulsion system of a fractional program aircraft engaged in the activities described in § 4043(a).
The fractional ownership program manager, rather than fractional owners, is liable for the tax imposed by § 4043.
If tax is imposed by § 4043 on the fuel used in a flight, the taxes imposed by §§ 4261 and 4271 (related to amounts paid for taxable transportation) do not apply to that flight.
Section 4043 applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. If tax is imposed by § 4043 on fuel used in a flight, the flight is not commercial aviation for purposes of the fuel tax imposed by § 4081.
Fractional program aircraft are not considered used for the transportation of a qualified fractional owner, or on account of such qualified fractional owner, when they are used for flight demonstration, maintenance, or crew training. In such situations, the flight is not commercial aviation for purposes of the fuel tax imposed by § 4081. As a result, the § 4081 tax on the fuel used in the flight is imposed in the case of kerosene at the noncommercial aviation rate of $0.219 per gallon.
Fractional ownership program managers must report the tax imposed by § 4043 on Form 720, Quarterly Federal Excise Tax Return, in accordance with instructions to that form. For example, for fuel used in April, May, and June of 2012, the manager must report the tax on Form 720 for the second quarter of calendar year 2012, and must file the Form 720 by July 31, 2012.
Persons liable for the § 4043 tax are generally required to make semimonthly deposits of tax in accordance with § 40.6302(c)-1 of the Excise Tax Procedural Regulations. Thus, for example, the deposit covering the first fifteen days in April 2012 is due by April 27, 2012. For further information regarding excise tax deposit requirements, see the instructions to Form 720.
The principal author of this notice is Michael H. Beker of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Mr. Beker at (202) 622-3130 (not a toll-free call).