Breadcrumb Region

Internal Revenue Bulletin: 2012-49

December 3, 2012


Highlights of This Issue

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.

INCOME TAX

Rev. Rul. 2012-31 Rev. Rul. 2012-31

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for December 2012.

Rev. Proc. 2012-44 Rev. Proc. 2012-44

Insurance companies; loss reserves; discounting unpaid losses. The loss payment patterns and discount factors are set forth for the 2012 accident year. These factors will be used for computing discounted unpaid losses under section 846 of the Code.

Rev. Proc. 2012-45 Rev. Proc. 2012-45

Insurance companies; discounting estimated salvage recoverable. The salvage discount factors are set forth for the 2012 accident year. These factors will be used for computing discounted estimated salvage recoverable under section 832 of the Code.

EMPLOYEE PLANS

Notice 2012-66 Notice 2012-66

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 November 2012; the 24-month average segment rates; the funding transitional segment rates applicable for November 2012; and the minimum present value transitional rates for October 2012. The rates in this notice reflect certain changes implemented by the Moving Ahead for Progress in the 21st Century Act, Public Law 112-141 (MAP-21).

Announcement 2012-44 Announcement 2012-44

This announcement provides relief under section 401 of the Code to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by Hurricane Sandy. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. The relief provided under this announcement is in addition to the relief already provided by the Service pursuant to News Release IR-2012-83 under section 7508A of the Code for victims of Hurricane Sandy.

ADMINISTRATIVE

Rev. Proc. 2012-43 Rev. Proc. 2012-43

This procedure informs the taxpayer how to request the Service to reduce the amount of a frivolous tax submission penalty assessed under section 6702(a) or (b) of the Code and the criteria that the Service will apply in determining whether a reduction would promote compliance with and administration of Federal tax laws.

Preface

The IRS Mission

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction

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.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Rev. Rul. 2012-31

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for December 2012.

This revenue ruling provides various prescribed rates for federal income tax purposes for December 2012 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Finally, Table 6 contains contains the 2013 interest rate for sections 846 and 807.

REV. RUL. 2012-31 TABLE 1
Applicable Federal Rates (AFR) for December 2012
Period for Compounding
Annual Semiannual Quarterly Monthly
Short-term
AFR .24% .24% .24% .24%
110% AFR .26% .26% .26% .26%
120% AFR .29% .29% .29% .29%
130% AFR .31% .31% .31% .31%
Mid-term
AFR .95% .95% .95% .95%
110% AFR 1.05% 1.05% 1.05% 1.05%
120% AFR 1.14% 1.14% 1.14% 1.14%
130% AFR 1.24% 1.24% 1.24% 1.24%
150% AFR 1.44% 1.43% 1.43% 1.43%
175% AFR 1.67% 1.66% 1.66% 1.65%
Long-term
AFR 2.40% 2.39% 2.38% 2.38%
110% AFR 2.65% 2.63% 2.62% 2.62%
120% AFR 2.89% 2.87% 2.86% 2.85%
130% AFR 3.13% 3.11% 3.10% 3.09%
REV. RUL. 2012-31 TABLE 2
Adjusted AFR for December 2012
Period for Compounding
Annual Semiannual Quarterly Monthly
Short-term adjusted AFR .27% .27% 27% .27%
Mid-term adjusted AFR .95% .95% .95% .95%
Long-term adjusted AFR 2.83% 2.81% 2.80% 2.79%
REV. RUL. 2012-31 TABLE 3
Rates Under Section 382 for December 2012
Adjusted federal long-term rate for the current month 2.83%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 2.87%
REV. RUL. 2012-31 TABLE 4
Appropriate Percentages Under Section 42(b)(2) for December 2012
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit 7.38%
Appropriate percentage for the 30% present value low-income housing credit 3.16%
REV. RUL. 2012-31 TABLE 5
Rate Under Section 7520 for December 2012
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 1.2%
REV. RUL. 2012-31 TABLE 6
Rates Under Sections 846 and 807
Applicable rate of interest for 2013 for purposes of sections 846 and 807 2.16%

Part III. Administrative, Procedural, and Miscellaneous

Notice 2012-66

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007. These rates reflect certain changes implemented by the Moving Ahead for Progress in the 21st Century Act, Public Law 112-141 (MAP-21). MAP-21 provides that for purposes of § 430(h)(2), the segment rates are limited by the applicable maximum percentage or the applicable minimum percentage based on the average of segment rates over a 25 year period.

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l)(7)(C)(i) provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 must be within a permissible range based on the weighted average of the rates of interest on amounts invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004-34, 2004-1 C.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004-34 continues to apply in determining that rate. See Notice 2006-75, 2006-2 C.B. 366.

The composite corporate bond rate for October 2012 is 3.93 percent. Pursuant to Notice 2004-34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

For Plan Years Beginning in Corporate Bond Weighted Average Permissible Range
Month Year 90% to 100%
November 2012 5.13 4.62 5.13

YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans under sections 104 and 105 of the Pension Protection Act of 2006, § 430 of the Code specifies the minimum funding requirements that apply to single employer plans pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

Notice 2007-81, 2007-44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007-81, the monthly corporate bond yield curve derived from October 2012 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of October 2012 are, respectively, 0.96, 3.57, and 4.58. The three 24-month average corporate bond segment rates applicable for November 2012, without adjustment by the applicable percentage of the 25-year average segment rates, are as follows:

24-Month Segment Rates Without Adjustment by 25-Year Average Segment Rates
First Segment Second Segment Third Segment
1.69 4.53 5.60

For plan years beginning in 2012, the 24-month average segment rates determined under § 430(h)(2)(C)(iv) must be not less than 90% nor greater than 110% of the 25-year average segment rates. Pursuant to Notice 2012-55, 2012-36 I.R.B. 332, the first, second, and third 25-year segment rates applicable for plan years beginning in 2012 are 6.15, 7.61, and 8.35, respectively. Therefore, for plan years beginning in 2012, the three adjusted 24-month average corporate bond segment rates applicable for November 2012, taking into account the applicable percentage of the 25-year average segment rates, are as follows:

Adjusted 24-Month Average Segment Rates, Using Applicable Percentage of 25-Year Average Segment Rates
Applicable Month For Plan Years Beginning in First Segment Second Segment Third Segment
November 2012 2012 5.54 6.85 7.52

The 25-year average segment rates for the period ending September 30, 2012 have not been determined yet. The Service will issue additional guidance on the November 2012 adjusted 24-month average segment rates applicable for plan years beginning in 2013 when those 25-year average segment rates are determined.

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual rate of interest on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury securities for October 2012 is 2.90 percent. The Service has determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in August 2042.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in section 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate. The following rates were determined for plan years beginning in the month shown below.

For Plan Years Beginning in 30-Year Treasury Weighted Average Permissible Range
Month Year 90% to 105%
November 2012 3.66 3.30 3.84

MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. For plan years beginning in 2008 through 2011, the applicable interest rates are the monthly spot segment rates blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007-81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for October 2012, taking into account the October 2012 30-year Treasury rate of 2.90 stated above, are as follows:

For Plan Years Beginning in First Segment Second Segment Third Segment
2011 1.35 3.44 4.24
2012 0.96 3.57 4.58
2013 0.96 3.57 4.58

DRAFTING INFORMATION

The principal author of this notice is Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov.

Table I
Monthly Yield Curve for October 2012 Derived from October 2012 Data
Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield
0.5 0.32 20.5 4.39 40.5 4.60 60.5 4.69 80.5 4.73
1.0 0.51 21.0 4.40 41.0 4.61 61.0 4.69 81.0 4.73
1.5 0.68 21.5 4.41 41.5 4.61 61.5 4.69 81.5 4.73
2.0 0.82 22.0 4.41 42.0 4.61 62.0 4.69 82.0 4.73
2.5 0.94 22.5 4.42 42.5 4.62 62.5 4.69 82.5 4.73
3.0 1.04 23.0 4.43 43.0 4.62 63.0 4.70 83.0 4.74
3.5 1.14 23.5 4.43 43.5 4.62 63.5 4.70 83.5 4.74
4.0 1.25 24.0 4.44 44.0 4.62 64.0 4.70 84.0 4.74
4.5 1.38 24.5 4.45 44.5 4.63 64.5 4.70 84.5 4.74
5.0 1.54 25.0 4.45 45.0 4.63 65.0 4.70 85.0 4.74
5.5 1.70 25.5 4.46 45.5 4.63 65.5 4.70 85.5 4.74
6.0 1.88 26.0 4.46 46.0 4.63 66.0 4.70 86.0 4.74
6.5 2.07 26.5 4.47 46.5 4.64 66.5 4.70 86.5 4.74
7.0 2.26 27.0 4.48 47.0 4.64 67.0 4.71 87.0 4.74
7.5 2.45 27.5 4.48 47.5 4.64 67.5 4.71 87.5 4.74
8.0 2.64 28.0 4.49 48.0 4.64 68.0 4.71 88.0 4.74
8.5 2.82 28.5 4.50 48.5 4.65 68.5 4.71 88.5 4.74
9.0 2.99 29.0 4.50 49.0 4.65 69.0 4.71 89.0 4.74
9.5 3.15 29.5 4.51 49.5 4.65 69.5 4.71 89.5 4.74
10.0 3.30 30.0 4.51 50.0 4.65 70.0 4.71 90.0 4.75
10.5 3.44 30.5 4.52 50.5 4.65 70.5 4.71 90.5 4.75
11.0 3.56 31.0 4.53 51.0 4.66 71.0 4.71 91.0 4.75
11.5 3.67 31.5 4.53 51.5 4.66 71.5 4.72 91.5 4.75
12.0 3.77 32.0 4.54 52.0 4.66 72.0 4.72 92.0 4.75
12.5 3.86 32.5 4.54 52.5 4.66 72.5 4.72 92.5 4.75
13.0 3.94 33.0 4.55 53.0 4.66 73.0 4.72 93.0 4.75
13.5 4.01 33.5 4.55 53.5 4.67 73.5 4.72 93.5 4.75
14.0 4.07 34.0 4.55 54.0 4.67 74.0 4.72 94.0 4.75
14.5 4.12 34.5 4.56 54.5 4.67 74.5 4.72 94.5 4.75
15.0 4.17 35.0 4.56 55.0 4.67 75.0 4.72 95.0 4.75
15.5 4.21 35.5 4.57 55.5 4.67 75.5 4.72 95.5 4.75
16.0 4.24 36.0 4.57 56.0 4.68 76.0 4.72 96.0 4.75
16.5 4.27 36.5 4.58 56.5 4.68 76.5 4.72 96.5 4.75
17.0 4.29 37.0 4.58 57.0 4.68 77.0 4.73 97.0 4.75
17.5 4.31 37.5 4.58 57.5 4.68 77.5 4.73 97.5 4.75
18.0 4.33 38.0 4.59 58.0 4.68 78.0 4.73 98.0 4.75
18.5 4.34 38.5 4.59 58.5 4.68 78.5 4.73 98.5 4.76
19.0 4.36 39.0 4.59 59.0 4.68 79.0 4.73 99.0 4.76
19.5 4.37 39.5 4.60 59.5 4.69 79.5 4.73 99.5 4.76
20.0 4.38 40.0 4.60 60.0 4.69 80.0 4.73 100.0 4.76

Rev. Proc. 2012-43

SECTION 1. PURPOSE

Section 6702(d) of the Internal Revenue Code authorizes the Internal Revenue Service (IRS) to reduce the amount of the frivolous tax submission penalty assessed under section 6702(a) or (b) if the IRS determines that a reduction would promote compliance with and administration of the Federal tax laws. This revenue procedure describes the limited circumstances in which a person may be eligible for a one-time reduction of any unpaid section 6702 penalty liabilities. This revenue procedure also prescribes how a person may request a reduction and the eligibility requirements for reduction. Generally, if a person satisfies all eligibility criteria of section 4 of this revenue procedure, including filing all tax returns and paying all outstanding taxes, penalties (other than under section 6702) and related interest, the IRS will reduce all unpaid section 6702 penalties assessed against that person to $500. After experience with the application of this revenue procedure, the IRS and the Treasury Department plan to assess whether the revenue procedure is successfully promoting compliance with and administration of the Federal tax laws and may revise this revenue procedure as necessary to further those goals.

SECTION 2. BACKGROUND

.01 Section 326(a) of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248 (96 Stat. 324, 617), added section 6702 to the Code to provide for a civil penalty for frivolous income tax returns. Specifically, section 6702(a) imposed a penalty in the amount of $500 against any individual who files what purports to be a return of income tax if (1) the purported return does not contain information on which the substantial correctness of the self-assessment may be judged or contains information that on its face indicates that the self-assessment is substantially incorrect, and (2) the filing of the purported return is due to either a position that is frivolous or a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws. Section 6702(b) provided that the penalty was in addition to any other penalty provided by law.

.02 Section 407(a) of Division A of the Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432 (120 Stat. 2922, 2960), amended section 6702(a) by increasing the amount of the penalty from $500 to $5,000, changing its application from “individual[s]” to “person[s],” expanding its scope from “purported income tax returns” to “purported returns of tax,” and substituting the term “a position which the Secretary has identified as frivolous” for “a position which is frivolous” as one of the bases for conduct subject to the penalty.

.03 The 2006 amendments also added the following provisions to section 6702:

(1) Revised section 6702(b) imposes a $5,000 penalty on any person who submits a “specified frivolous submission.” (The prior version of 6702(b) was re-designated as section 6702(e).) A “specified frivolous submission” is defined as a “specified submission” that is based on a position that the IRS has identified as frivolous or that reflects a desire to delay or impede the administration of the Federal tax laws. A “specified submission” means a request for a collection due process hearing under section 6320 or 6330 or an application for an installment agreement under section 6159, an offer-in-compromise under section 7122, or a taxpayer assistance order under section 7811.

(2) New section 6702(c) requires the IRS to prescribe and periodically revise a list of positions that the IRS has identified as frivolous for purposes of the penalty under section 6702(a) or (b).

(3) New section 6702(d) provides discretionary authority to the IRS to reduce the amount of a penalty imposed under section 6702(a) or (b) if the IRS determines a reduction would promote compliance with and administration of the Federal tax laws. As authorized by Congress, this revenue procedure describes the limited circumstances in which a person may be eligible for a one-time reduction of any unpaid section 6702 penalty liabilities. To be eligible for the one-time penalty reduction, a person must abandon any frivolous positions regarding the Federal tax laws and must meet the specific eligibility requirements detailed in section 4 of this revenue procedure, which include filing all tax returns and paying all outstanding taxes, penalties (other than those under section 6702) and related interest. Consistent with section 6702(d) and the IRS’ published policy statement on penalties (Policy Statement 20-1), these requirements will promote voluntary compliance with and administration of the Federal tax laws.

.04 The 2006 amendments apply to submissions made and issues raised after March 16, 2007, the date the IRS issued Notice 2007-30, 2007-1 C.B. 883, prescribing a list of frivolous positions under section 6702(c). The IRS subsequently revised the list in Notice 2008-14, 2008-1 C.B. 310, effective January 15, 2008, and Notice 2010-33, 2010-17 I.R.B. 609, effective April 8, 2010. The IRS may make additional updates to the list in the future.

SECTION 3. SCOPE

This revenue procedure applies to any person who has not fully paid a $5,000 penalty assessed by the IRS under section 6702 and who seeks a reduction of that penalty pursuant to section 6702(d). This revenue procedure does not apply to persons who seek to challenge the merits of a section 6702 penalty assessment. Other procedures may be available to challenge the merits, such as paying the penalty and filing a refund claim or raising the issue in a Collection Due Process hearing.

SECTION 4. ELIGIBILITY

.01 A request for reduction must comply with the requirements of this section. A person whose request does not comply with these requirements will not be eligible for a reduction of a section 6702 penalty.

(1) Form of request. A person must make a written request for reduction on IRS Form 14402, “IRC 6702(d) Frivolous Tax Submissions Penalty Reduction,” (or successor form) or as prescribed by the Form’s instructions. The person must also sign the form or written statement under penalties of perjury, and file it with the IRS in accordance with instructions to the form or other guidance. A person may file a single Form 14402 or written statement to request reduction of more than one section 6702 penalty.

(2) Partial payment. The IRS will reduce an eligible person’s total outstanding section 6702 liabilities to $500, regardless of the number of section 6702 penalties assessed. A person must pay this $500 balance in one of two ways:

(a) Payment submitted with request for reduction. Except as provided in section 4.01(2)(b), a person must submit a payment of at least $250 with the request for reduction even if that person has, prior to filing a request for reduction, paid either voluntarily or by an overpayment offset, a portion of the section 6702 penalty liabilities that are the subject of the request. This payment will be applied to the person’s assessed section 6702 penalty liabilities without regard to whether the IRS grants the reduction request. A person who chooses to pay $250 or more but less than $500 and who is granted the penalty reduction will remain liable for the remaining balance of the reduced penalties (i.e., the difference between the amount of the payment and $500) until the balance is satisfied, but this remaining liability will not preclude the requested reduction of the assessed and unpaid section 6702 penalties. If the person pays $250 or more but less than $500, interest will continue to accrue on the remaining balance of the reduced penalties from the date the IRS assessed the earliest unpaid section 6702 penalty falling under these procedures. The person granted the penalty reduction must pay the remaining balance of the reduced penalties (plus interest); if the person granted the penalty reduction fails to pay the remaining balance, the IRS may use any available remedy to collect the balance (plus interest). If a person chooses to submit the full $500 with the request for reduction and the IRS grants the request, any interest that has accrued on the outstanding section 6702 liabilities will be abated.

(b) Installment agreement. If a person has entered into and is in compliance with an approved full payment installment agreement with the IRS under section 6159 for all assessed Federal tax liabilities not fully paid and for which the period for collection under section 6502 remains open, then the person may pay the reduced section 6702 penalty of $500 as part of the installment agreement. If, at the time the IRS receives a request for reduction, the person has already paid more than $500 towards the section 6702 penalty under the installment agreement, that person will not be required to pay any additional amount towards the section 6702 penalty in order to become eligible. If the person pays the $500 penalty as part of an installment agreement, any interest that has accrued on the outstanding section 6702 liabilities will be abated.

.02 Time limits. A person must file a request for a reduction before the United States files suit against the person either for collection of the penalty or to reduce any assessment of the penalty to judgment.

The IRS will deny any request for reduction of a section 6702 penalty that does not meet these time limits. If a request seeks reduction of multiple penalties but the request falls within the time limits with respect to only some of the penalties, the IRS will treat the request as timely only for those penalties. Any person who has voluntarily paid a portion of any section 6702 penalty liabilities will be eligible for reduction of the remaining amount of those liabilities. Similarly, any person who has had an overpayment offset against any section 6702 penalty liabilities will be eligible for a reduction of the remaining amount of those liabilities, if any.

.03 Full compliance with all Federal tax filing and payment requirements.

(1) In general. Prior to requesting a reduction, a person must have filed all tax returns due and paid (or arranged to pay, as described in paragraph (3) of this subsection) all taxes due, other than the section 6702 penalty or penalties for which reduction is requested. Unless these filing and payment requirements have been met, reduction of a section 6702 penalty would not promote compliance with and administration of the Federal tax laws and the request for reduction will be denied.

(2) Filing compliance. A person requesting reduction must file with the IRS valid tax returns required to be filed under the Code for any type of tax and for all taxable periods for six years before the date of the request. This requirement means a person must file all individual returns and all returns for any entity in which the person has a controlling interest. This includes, for example, any returns of a partnership or limited liability company for which the person is a general partner or managing member, any returns of a subchapter C or subchapter S corporation in which the person holds a greater than 50 percent interest, and any returns of a trust for which the person serves as trustee. A document other than a return that permits assessment of Federal income tax will not satisfy the requirements of this section.

(3) Payment compliance. A person requesting reduction must either:

(a) have fully paid all assessed tax liabilities, including interest, penalties (other than the section 6702 penalty or penalties that are the subject of the request), and additions to tax for all types of tax and for all taxable periods for which the period for collection under section 6502 remains open (for purposes of this subsection, the granting of relief under the provisions of section 6015 or section 66(c) will be considered payment of an assessed tax liability to the extent of the granted relief); or

(b) have entered into and be in compliance with an approved full payment installment agreement with the IRS under section 6159 for all assessed Federal tax liabilities not fully paid and for which the period for collection under section 6502 remains open.

.04 Deposit requirements. If the person requesting reduction is an employer, that person must, at the time of filing the request, have made all required deposits of Federal employment taxes under subtitle C of the Code for the current quarter and the prior two quarters.

.05 Disqualifying events.

(1) Prior reduction. Any person who previously received a reduction of a section 6702 penalty is ineligible for another reduction of a section 6702 penalty.

(2) Offer-in-compromise. Any person who has submitted an offer-in-compromise to the IRS under section 7122 that includes any section 6702 penalty is ineligible for a reduction of the penalty unless the person has withdrawn the offer in writing, the IRS has returned the offer to the taxpayer without accepting it, or the offer was rejected by the IRS and the taxpayer is not pursuing an administrative appeal of the rejection. All of a person’s outstanding Federal tax liabilities, including any outstanding section 6702 penalties, will be considered as part of the offer-in-compromise determination.

(3) Partial payment installment agreements. Any person who has entered into a partial payment installment agreement with the IRS under section 6159 is ineligible for a reduction of any section 6702 penalty included in the partial payment installment agreement because the person will be paying less than the full amount of Federal tax liabilities.

(4) Closing agreement. Any person who has entered into a closing agreement with the IRS under section 7121 is ineligible for a reduction of any section 6702 penalty included in the closing agreement.

(5) New frivolous filing. Any person who files a frivolous return or makes a frivolous submission after filing a request for reduction but before the IRS grants the reduction is ineligible for reduction of a section 6702 penalty whether or not the person withdraws the frivolous return or submission.

(6) Bankruptcy. A person is ineligible for a reduction of any section 6702 penalty under this revenue procedure if the penalty is dischargeable under an open bankruptcy case. Furthermore, a person is ineligible to apply for any penalty reduction while a bankruptcy case is open, regardless of whether the person is seeking discharge of the penalty for which reduction is sought.

SECTION 5. CONSIDERATION OF REDUCTION REQUEST

.01 Generally, if a person satisfies all eligibility criteria of section 4 of this revenue procedure, the IRS will reduce all section 6702 penalties assessed against that person to $500. If the person submitted $500 with the request for reduction, the IRS will abate any remaining unpaid amount of those penalty liabilities, including interest. If the person has submitted at least $250, but less than $500, with the request for reduction, the IRS will apply the amount submitted against the section 6702 penalty or penalties that the person seeks to reduce and will abate all but the difference between the payment submitted and $500 (i.e., the remaining unpaid amount of those penalty liabilities). If the person granted the reduction fails to pay the remaining balance of the $500 reduced penalty (plus interest as described above), the IRS may use any available remedy to collect the balance. The IRS will not refund any portion of the section 6702 penalty or penalties paid prior to the date the IRS received the request for reduction. In the case of a person who has entered into a full payment installment agreement, the section 6702 penalty or penalties will be reduced only upon completion of all payments required to satisfy all outstanding tax liabilities other than the section 6702 penalties that are the subject of the request for reduction. If the person defaults on the installment agreement, the section 6702 penalty or penalties will not be reduced.

.02 If a person fails to satisfy any of the eligibility criteria of section 4 of this revenue procedure, the IRS will deny the request for reduction. The IRS will apply any payment received with the request for reduction against unpaid section 6702 penalties before applying any remaining portion of the payment to any other outstanding tax liabilities of the person. A person may not designate the manner in which the IRS will apply the payment.

.03 The IRS will give a person written notice of whether the person’s request has been granted or denied. The IRS’s denial of a request for any reason will not be subject to an administrative appeal.

SECTION 6. EFFECTIVE DATE

This revenue procedure is effective November 5, 2012, the date this revenue procedure was released to the public.

SECTION 7. DRAFTING INFORMATION

The principal author of this revenue procedure is Skyler K. Bradbury of the Office of the Associate Chief Counsel, Procedure and Administration. For further information regarding this revenue procedure, contact Elizabeth Cowan at (202) 622-4940 (not a toll-free call).

Rev. Proc. 2012-44

SECTION 1. PURPOSE

This revenue procedure prescribes the loss payment patterns and discount factors for the 2012 determination year. These factors will be used to compute discounted unpaid losses under § 846 of the Internal Revenue Code.

SECTION 2. BACKGROUND

.01 Section 846 provides that discounted unpaid losses must be separately determined for each accident year of each line of business by applying an interest rate determined under § 846(c) and the appropriate loss payment pattern to the amount of unpaid losses as measured at the end of the tax year.

Section 846(d) directs the Secretary to use the most recent aggregate loss payment data of property and casualty insurance companies to determine and publish a loss payment pattern for each line of business every five years. This payment pattern is used to discount unpaid losses for the accident year ending with a determination year and for each of the four succeeding accident years.

Section 846(e) allows a taxpayer to make an election in each determination year to use its own historical payment pattern instead of the Secretary’s tables. This election does not apply to any international insurance or reinsurance line of business.

Section 846(f)(4) defines the term “line of business” as a category for the reporting of loss payment patterns on the annual statement for property and casualty companies approved by the National Association of Insurance Commissioners (NAIC), except that the multiple peril lines shall be treated as a single line of business. Section 846(f)(5) states that the term “multiple peril lines” means the lines of business relating to farmowners multiple peril, homeowners multiple peril, commercial multiple peril, ocean marine, aircraft (all perils), and boiler and machinery.

.02 Pursuant to § 846(d), the Secretary has determined a loss payment pattern for each property and casualty line of business for the 2012 determination year that, pursuant to § 846(d)(1), must be applied through the 2016 accident year.

.03 The loss payment patterns for the 2012 determination year are based on the aggregate loss payment information reported on the 2010 annual statements of property and casualty insurance companies and compiled by A.M. Best and Co. The tables are arranged in alphabetical order. Following is an additional explanation of some of the tables and changes to the tables.

(1) NAIC Changes in Lines of Business. The NAIC has changed the reporting of unpaid loss experience on the annual statement for warranty companies. These changes are reflected in the lines of business set forth below.

(2) Format of the Tables. To simplify the tables, the columns entitled Tax Year provide the actual tax years, rather than AY+0, AY+1, and so on.

(3) Accident Years Not Separately Reported on the NAIC Annual Statement. Section V of Notice 88-100, 1988-2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. The tables separately provide discount factors for taxpayers who elect to use the composite method of section V of Notice 88-100. See Rev. Proc. 2002-74, 2002-2 C.B. 980.

SECTION 3. SCOPE

This revenue procedure applies to any taxpayer that is required to discount unpaid losses under § 846 for a line of business using the discount factors published by the Secretary.

SECTION 4. TABLES OF DISCOUNT FACTORS

.01 The following tables present separately for each line of business the discount factors under § 846 for accident year 2012. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2012, 2.89 percent, and by assuming all loss payments occur in the middle of the calendar year.

.02 If the groupings of individual lines of business on the annual statement change, taxpayers must discount unpaid losses on the resulting line of business in accordance with the discounting patterns that would have applied to those unpaid losses based on their classification on the 2012 annual statement.

.03 Tables.

Accident and Health (Other Than Disability Income or Credit Disability Insurance)
Taxpayers that do not use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the 2012 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount all unpaid losses in this line of business that are outstanding at the end of the 2012 taxable year.
Auto Physical Damage
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 90.2657 90.2657 9.7343 9.5863 98.4790
2013 99.7478 9.4822 0.2522 0.2451 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 0.1261 0.1261 0.1243 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Commercial Auto/Truck Liability/Medical
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 25.7034 25.7034 74.2966 69.8790 94.0541
2013 48.2664 22.5629 51.7336 49.0119 94.7389
2014 67.8834 19.6171 32.1166 30.5298 95.0593
2015 82.0630 14.1795 17.9370 17.0291 94.9384
2016 90.4161 8.3532 9.5839 9.0483 94.4114
2017 94.6293 4.2132 5.3707 5.0362 93.7708
2018 97.0203 2.3910 2.9797 2.7564 92.5056
2019 98.2283 1.2081 1.7717 1.6107 90.9135
2020 98.6653 0.4370 1.3347 1.2140 90.9566
2021 98.8635 0.1982 1.1365 1.0480 92.2160
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.1982 0.9382 0.8772 93.4963
2023 0.1982 0.7400 0.7015 94.7956
2024 0.1982 0.5417 0.5207 96.1082
2025 0.1982 0.3435 0.3346 97.4146
2026 and later years 0.1982 0.1453 0.1432 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 94.9072 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Composite
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 39.5281 39.5281 60.4719 55.7933 92.2631
2013 62.0267 22.4986 37.9733 34.5843 91.0753
2014 73.7017 11.6750 26.2983 23.7413 90.2768
2015 80.0846 6.3830 19.9154 17.9529 90.1459
2016 85.7818 5.6971 14.2182 12.6929 89.2717
2017 90.2809 4.4992 9.7191 8.4960 87.4154
2018 91.9588 1.6778 8.0412 7.0396 87.5436
2019 92.9722 1.0134 7.0278 6.2151 88.4353
2020 94.0835 1.1113 5.9165 5.2674 89.0295
2021 94.7469 0.6634 5.2531 4.7468 90.3608
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.6634 4.5898 4.2111 91.7492
2023 0.6634 3.9264 3.6599 93.2124
2024 0.6634 3.2631 3.0928 94.7824
2025 0.6634 2.5997 2.5093 96.5231
2026 and later years 0.6634 1.9364 1.9090 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 93.7821 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Fidelity/Surety
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 22.8449 22.8449 77.1551 74.2475 96.2315
2013 55.8585 33.0137 44.1415 42.9060 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 22.0707 22.0707 21.7586 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Financial Guaranty/Mortgage Guaranty
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 6.2515 6.2515 93.7485 90.0777 96.0845
2013 43.0154 36.7639 56.9846 55.3896 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 28.4923 28.4923 28.0893 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
International (Composite)
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 39.5281 39.5281 60.4719 55.7933 92.2631
2013 62.0267 22.4986 37.9733 34.5843 91.0753
2014 73.7017 11.6750 26.2983 23.7413 90.2768
2015 80.0846 6.3830 19.9154 17.9529 90.1459
2016 85.7818 5.6971 14.2182 12.6929 89.2717
2017 90.2809 4.4992 9.7191 8.4960 87.4154
2018 91.9588 1.6778 8.0412 7.0396 87.5436
2019 92.9722 1.0134 7.0278 6.2151 88.4353
2020 94.0835 1.1113 5.9165 5.2674 89.0295
2021 94.7469 0.6634 5.2531 4.7468 90.3608
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.6634 4.5898 4.2111 91.7492
2023 0.6634 3.9264 3.6599 93.2124
2024 0.6634 3.2631 3.0928 94.7824
2025 0.6634 2.5997 2.5093 96.5231
2026 and later years 0.6634 1.9364 1.9090 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 93.7821 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Medical Professional Liability— Claims-Made
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 6.3462 6.3462 93.6538 85.6244 91.4266
2013 23.0958 16.7496 76.9042 71.1091 92.4645
2014 41.6827 18.5868 58.3173 54.3106 93.1295
2015 56.5267 14.8440 43.4733 40.8232 93.9041
2016 71.2882 14.7615 28.7118 27.0298 94.1415
2017 82.3023 11.0141 17.6977 16.6387 94.0165
2018 86.5143 4.2120 13.4857 12.8472 95.2653
2019 91.1422 4.6279 8.8578 8.5242 96.2335
2020 94.8664 3.7242 5.1336 4.9929 97.2591
2021 97.5408 2.6745 2.4592 2.4244 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 and later years 2.4592 - - 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Medical Professional Liability— Occurrence
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 1.2044 1.2044 98.7956 86.1709 87.2213
2013 4.3376 3.1332 95.6624 85.4830 89.3591
2014 11.8161 7.4785 88.1839 80.3677 91.1365
2015 24.7088 12.8928 75.2912 69.6126 92.4579
2016 42.3863 17.6774 57.6137 53.6934 93.1954
2017 57.1600 14.7738 42.8400 40.2594 93.9762
2018 68.9797 11.8196 31.0203 29.4337 94.8851
2019 82.4247 13.4450 17.5753 16.6464 94.7145
2020 86.7084 4.2837 13.2916 12.7823 96.1682
2021 91.6701 4.9617 8.3299 8.1188 97.4659
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 and later years 4.9617 3.3683 3.3206 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 93.6211 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Miscellaneous Casualty
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 69.0731 69.0731 30.9269 29.8935 96.6586
2013 85.5169 16.4438 14.4831 14.0777 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 7.2415 7.2415 7.1391 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 60.9719 60.9719 39.0281 37.0187 94.8513
2013 82.9059 21.9341 17.0941 15.8398 92.6624
2014 89.2783 6.3724 10.7217 9.8337 91.7181
2015 91.5605 2.2822 8.4395 7.8029 92.4579
2016 94.4255 2.8649 5.5745 5.1224 91.8898
2017 96.5899 2.1644 3.4101 3.0750 90.1726
2018 97.6023 1.0124 2.3977 2.1369 89.1235
2019 98.0034 0.4011 1.9966 1.7918 89.7436
2020 98.3410 0.3376 1.6590 1.5012 90.4859
2021 98.5727 0.2317 1.4273 1.3096 91.7483
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.2317 1.1957 1.1124 93.0370
2023 0.2317 0.9640 0.9096 94.3539
2024 0.2317 0.7324 0.7009 95.7035
2025 0.2317 0.5007 0.4862 97.0975
2026 and later years 0.2317 0.2691 0.2653 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 93.1358 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Other (Including Credit)
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 54.6589 54.6589 45.3411 44.0509 97.1546
2013 84.2314 29.5725 15.7686 15.3272 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 7.8843 7.8843 7.7728 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Other Liability — Claims-Made
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 7.4270 7.4270 92.5730 84.1387 90.8891
2013 25.2808 17.8538 74.7192 68.4604 91.6236
2014 44.2108 18.9301 55.7892 51.2373 91.8409
2015 56.4956 12.2848 43.5044 40.2571 92.5355
2016 69.2838 12.7883 30.7162 28.4487 92.6181
2017 77.6662 8.3823 22.3338 20.7683 92.9904
2018 83.1572 5.4910 16.8428 15.7987 93.8010
2019 88.1777 5.0205 11.8223 11.1628 94.4213
2020 93.1315 4.9539 6.8685 6.4605 94.0597
2021 92.9490 -0.1826 7.0510 6.8324 96.8986
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 3.2639 3.7871 3.7191 98.2030
2023 and later years 3.2639 0.5232 0.5158 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.2239 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Other Liability — Occurrence
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 10.0721 10.0721 89.9279 79.6509 88.5720
2013 24.3995 14.3274 75.6005 67.4199 89.1791
2014 37.3366 12.9372 62.6634 56.2456 89.7583
2015 52.4142 15.0776 47.5858 42.5771 89.4745
2016 64.3437 11.9295 35.6563 31.7069 88.9239
2017 73.7950 9.4512 26.2050 23.0365 87.9085
2018 79.7756 5.9807 20.2244 17.6357 87.2005
2019 84.0963 4.3206 15.9037 13.7628 86.5381
2020 85.6878 1.5915 14.3122 12.5462 87.6607
2021 86.9224 1.2346 13.0776 11.6565 89.1329
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 1.2346 11.8431 10.7411 90.6950
2023 1.2346 10.6085 9.7992 92.3713
2024 1.2346 9.3740 8.8302 94.1988
2025 1.2346 8.1394 7.8331 96.2365
2026 and later years 1.2346 6.9048 6.8072 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 92.6009 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Private Passenger Auto Liability/Medical
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 42.9881 42.9881 57.0119 54.6061 95.7801
2013 71.9931 29.0051 28.0069 26.7630 95.5587
2014 84.8250 12.8318 15.1750 14.5205 95.6868
2015 92.3500 7.5251 7.6500 7.3071 95.5183
2016 96.2665 3.9165 3.7335 3.5456 94.9681
2017 97.9880 1.7214 2.0120 1.9019 94.5282
2018 98.7958 0.8078 1.2042 1.1375 94.4596
2019 99.2445 0.4487 0.7555 0.7152 94.6679
2020 99.4543 0.2097 0.5457 0.5231 95.8548
2021 99.6370 0.1827 0.3630 0.3529 97.2105
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 and later years 0.1827 0.1803 0.1777 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5029 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Products Liability — Claims-Made
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 4.5270 4.5270 95.4730 83.8330 87.8080
2013 16.0134 11.4865 83.9866 74.6045 88.8291
2014 45.1313 29.1179 54.8687 47.2249 86.0690
2015 39.2459 -5.8854 60.7541 54.5596 89.8039
2016 44.8357 5.5898 55.1643 50.4663 91.4837
2017 72.1615 27.3258 27.8385 24.2070 86.9550
2018 80.4448 8.2834 19.5552 16.5044 84.3991
2019 73.2957 -7.1491 26.7043 24.2330 90.7459
2020 87.4824 14.1866 12.5176 10.5432 84.2267
2021 87.7500 0.2677 12.2500 10.5764 86.3381
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.2677 11.9823 10.6106 88.5517
2023 0.2677 11.7147 10.6457 90.8750
2024 0.2677 11.4470 10.6819 93.3158
2025 0.2677 11.1793 10.7191 95.8828
2026 and later years 0.2677 10.9117 10.7573 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 92.8642 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Products Liability — Occurrence
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 7.1936 7.1936 92.8064 80.9429 87.2170
2013 16.9555 9.7619 83.0445 73.3802 88.3625
2014 28.3624 11.4069 71.6376 63.9304 89.2413
2015 39.7945 11.4321 60.2055 54.1818 89.9948
2016 54.3906 14.5961 45.6094 40.9422 89.7670
2017 60.9060 6.5154 39.0940 35.5165 90.8490
2018 67.7760 6.8700 32.2240 29.5744 91.7775
2019 75.7119 7.9359 24.2881 22.3793 92.1411
2020 79.5966 3.8847 20.4034 19.0856 93.5415
2021 83.9430 4.3464 16.0570 15.2285 94.8401
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 4.3464 11.7107 11.2599 96.1507
2023 4.3464 7.3643 7.1766 97.4508
2024 and later years 4.3464 3.0179 2.9752 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 96.3135 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Reinsurance — Nonproportional Assumed Property
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 20.1003 20.1003 79.8997 75.4585 94.4415
2013 59.2833 39.1830 40.7167 37.8941 93.0676
2014 73.0867 13.8034 26.9133 24.9877 92.8453
2015 80.3675 7.2808 19.6325 18.3246 93.3382
2016 87.7278 7.3603 12.2722 11.3883 92.7976
2017 94.4454 6.7175 5.5546 4.9035 88.2774
2018 96.5143 2.0689 3.4857 2.9466 84.5335
2019 97.9468 1.4326 2.0532 1.5786 76.8884
2020 97.4560 -0.4909 2.5440 2.1222 83.4180
2021 97.0652 -0.3908 2.9348 2.5799 87.9068
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 0.1836 2.7512 2.4682 89.7139
2023 0.1836 2.5675 2.3533 91.6537
2024 0.1836 2.3839 2.2350 93.7531
2025 0.1836 2.2003 2.1133 96.0476
2026 and later years 0.1836 2.0166 1.9881 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 89.7139 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Reinsurance — Nonproportional Assumed Liability
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 3.4987 3.4987 96.5013 84.4091 87.4694
2013 23.2170 19.7183 76.7830 66.8474 87.0601
2014 43.7483 20.5313 56.2517 47.9534 85.2478
2015 38.9131 -4.8352 61.0869 54.2434 88.7977
2016 47.9298 9.0167 52.0702 46.6654 89.6201
2017 80.0315 32.1017 19.9685 15.4517 77.3805
2018 76.5053 -3.5292 23.4947 19.4751 82.8913
2019 78.1701 1.6649 21.8299 18.3492 84.0554
2020 80.0717 1.9015 19.9283 16.9507 85.0580
2021 79.8791 -0.1926 20.1209 17.6359 87.6494
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 1.1246 18.9963 17.0048 89.5164
2023 1.1246 17.8717 16.3555 91.5162
2024 1.1246 16.7471 15.6875 93.6726
2025 1.1246 15.6225 15.0001 96.0158
2026 and later years 1.1246 14.4979 14.2928 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 91.3700 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 1.5423 1.5423 98.4577 88.8020 90.1930
2013 20.9273 19.3850 79.0727 71.7053 90.6827
2014 30.4705 9.5433 69.5295 64.0974 92.1873
2015 46.3043 15.8337 53.6957 49.8889 92.9103
2016 51.8464 5.5421 48.1536 45.7090 94.9234
2017 72.7869 20.9405 27.2131 25.7890 94.7671
2018 82.0967 9.3097 17.9033 17.0911 95.4629
2019 89.2630 7.1664 10.7370 10.3158 96.0773
2020 95.3692 6.1062 4.6308 4.4201 95.4510
2021 96.7995 1.4303 3.2005 3.0970 96.7682
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 1.4303 1.7702 1.7357 98.0539
2023 and later years 1.4303 0.3399 0.3351 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.0539 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary and Theft)
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 55.6145 55.6145 44.3855 43.3187 97.5967
2013 89.3328 33.7182 10.6672 10.3687 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 5.3336 5.3336 5.2582 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Warranty
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 85.4101 85.4101 14.5899 14.3645 98.4555
2013 99.5388 14.1287 0.4612 0.4483 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2014 and later years 0.2306 0.2306 0.2273 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2014 taxable year.
Workers’ Compensation
Tax Year Estimated Cumulative Losses Paid (%) Estimated Losses Paid Each Year (%) Unpaid Losses at Year End (%) Discounted Unpaid Losses at Year End (%) Discount Factors (%)
2012 21.8973 21.8973 78.1027 68.3810 87.5527
2013 43.4962 21.5989 56.5038 48.4485 85.7437
2014 56.0061 12.5099 43.9939 37.1592 84.4646
2015 63.5544 7.5482 36.4456 30.5766 83.8965
2016 68.9880 5.4337 31.0120 25.9486 83.6730
2017 73.9567 4.9687 26.0433 21.6586 83.1638
2018 76.0580 2.1013 23.9420 20.1531 84.1746
2019 77.6365 1.5785 22.3635 19.1344 85.5607
2020 80.1194 2.4828 19.8806 17.1689 86.3597
2021 81.3456 1.2262 18.6544 16.4212 88.0286
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount unpaid losses incurred in this line of business in the 2012 accident year and that are outstanding at the end of the tax year shown.
2022 1.2262 17.4281 15.6519 89.8084
2023 1.2262 16.2019 14.8604 91.7203
2024 1.2262 14.9757 14.0461 93.7927
2025 1.2262 13.7494 13.2082 96.0635
2026 and later years 1.2262 12.5232 12.3460 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 92.3332 percent to discount unpaid losses incurred in this line of business in 2012 and prior years and that are outstanding at the end of the 2022 taxable year.

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is David Remus of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Mr. Remus on (202) 622-3970 (not a toll-free call).

Rev. Proc. 2012-45

SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for 2012. These factors must be used to compute discounted estimated salvage recoverable under § 832 of the Internal Revenue Code.

SECTION 2. BACKGROUND

Section 832(b)(5)(A) requires that all estimated salvage recoverable (including that which cannot be treated as an asset for state accounting purposes) be taken into account in computing the deduction for losses incurred. Under § 832(b)(5)(A), paid losses are reduced by salvage and reinsurance recovered during the taxable year. This amount is adjusted to reflect changes in discounted unpaid losses on nonlife insurance contracts and in unpaid losses on life insurance contracts. An adjustment is then made to reflect any changes in discounted estimated salvage recoverable and in reinsurance recoverable.

Pursuant to § 832(b), the amount of estimated salvage is determined on a discounted basis in accordance with procedures established by the Secretary.

SECTION 3. SCOPE

This revenue procedure applies to any taxpayer that is required to discount estimated salvage recoverable under § 832.

SECTION 4. TABLES OF DISCOUNT FACTORS

.01 The following tables present separately for each line of business the discount factors under § 832 for 2012. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2012, which is 2.89 percent, and by assuming all estimated salvage is recovered in the middle of the calendar year.

.02 Section V of Notice 88-100, 1988-2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Rev. Proc. 2002-74, section 3.03, 2002-2 C.B. 980, provides that an insurance company that elects to use the composite method of Notice 88-100 must use the same method to compute discounted estimated salvage recoverable. Accordingly, the tables separately provide discount factors for taxpayers who elect to use the composite method of section V of Notice 88-100.

.02 These tables must be used by taxpayers irrespective of whether they elected to discount unpaid losses using their own experience under § 846(e).

.03 Tables.

Accident and Health (Other Than Disability Income or Credit Disability Insurance)
Taxpayers that do not use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2012 accident year as of the end of the 2012 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount all salvage recoverable in this line of business as of the end of the 2012 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
2012 97.9926
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
2012 94.8601
2013 94.3170
2014 94.7640
2015 94.1089
2016 94.6321
2017 94.3280
2018 90.0593
2019 88.2417
2020 91.0508
2021 92.3107
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 93.5910
2023 94.8890
2024 96.1977
2025 97.4916
2026 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 93.5910 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Composite
Tax Year Discount Factors (%)
2012 94.5210
2013 94.2990
2014 94.5290
2015 92.9773
2016 93.4682
2017 93.0095
2018 92.8551
2019 93.5193
2020 93.5262
2021 94.8250
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 96.1362
2023 97.4384
2024 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 96.1362 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
2012 95.5378
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
2012 95.0291
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
International (Composite)
Tax Year Discount Factors (%)
2012 94.5210
2013 94.2990
2014 94.5290
2015 92.9773
2016 93.4682
2017 93.0095
2018 92.8551
2019 93.5193
2020 93.5262
2021 94.8250
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 96.1362
2023 97.4384
2024 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 96.1362 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
2012 93.7912
2013 94.6803
2014 92.2134
2015 95.0710
2016 95.3003
2017 95.7832
2018 96.7165
2019 97.3503
2020 97.3252
2021 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
2012 94.4161
2013 96.5442
2014 95.9802
2015 97.2713
2016 96.2322
2017 97.6681
2018 97.0089
2019 97.0932
2020 95.2155
2021 96.5222
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 97.7949
2023 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 97.7949 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
2012 96.1880
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))
Tax Year Discount Factors (%)
2012 95.2320
2013 95.1821
2014 95.7186
2015 93.7419
2016 95.3602
2017 95.8534
2018 96.0053
2019 95.8968
2020 95.5350
2021 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
2012 96.9381
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
2012 93.5677
2013 93.9483
2014 93.9860
2015 95.1734
2016 95.2144
2017 95.3785
2018 96.5322
2019 96.4985
2020 96.7811
2021 98.0683
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
2012 90.3389
2013 91.4894
2014 92.7055
2015 93.3713
2016 94.1617
2017 95.2667
2018 95.4478
2019 95.3361
2020 97.2714
2021 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
2012 96.1315
2013 95.9985
2014 95.9758
2015 95.3522
2016 95.3346
2017 95.4812
2018 95.2304
2019 95.5517
2020 96.8469
2021 98.1429
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
2012 89.8196
2013 91.4110
2014 89.5038
2015 95.0117
2016 92.8700
2017 98.1820
2018 96.3577
2019 85.3703
2020 98.2509
2021 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 97.2650 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
2012 90.7468
2013 90.8255
2014 91.6861
2015 93.0159
2016 93.6033
2017 94.5013
2018 94.4114
2019 96.6942
2020 96.0812
2021 97.3920
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
2012 92.8721
2013 95.2410
2014 93.0843
2015 91.7774
2016 94.0583
2017 92.9687
2018 96.9437
2019 90.0756
2020 95.9421
2021 97.2787
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 95.1349 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
2012 87.4545
2013 89.8069
2014 84.2710
2015 85.5707
2016 91.5781
2017 94.6877
2018 93.8198
2019 94.3842
2020 92.5740
2021 96.6295
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 97.9045
2023 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 97.9045 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
2012 88.2387
2013 89.9441
2014 93.6256
2015 93.7540
2016 95.1568
2017 93.2046
2018 95.1579
2019 95.0763
2020 98.3612
2021 98.5856
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Glass, Burglary and Theft)
Tax Year Discount Factors (%)
2012 96.3560
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Warranty
Tax Year Discount Factors (%)
2012 96.8733
2013 97.2010
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2014 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 98.5856 percent to discount salvage recoverable as of the end of the 2014 taxable year with respect to losses incurred in this line of business in 2012 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
2012 91.4448
2013 93.0206
2014 93.8697
2015 92.3671
2016 91.7503
2017 91.0454
2018 91.6474
2019 93.0907
2020 93.3550
2021 94.6576
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2012 accident year.
2022 95.9786
2023 97.3078
2024 and later years 98.5856
Taxpayers that use the composite method of Notice 88-100 should use 96.5709 percent to discount salvage recoverable as of the end of the 2022 taxable year with respect to losses incurred in this line of business in 2012 and prior years.

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is David Remus of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Mr. Remus on (202) 622-3970 (not a toll-free call).

Part IV. Items of General Interest

Announcement 2012-44

Hurricane Sandy Relief

Purpose

This announcement provides relief to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by Hurricane Sandy. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. The relief provided under this announcement is in addition to the relief already provided by the Service pursuant to News Release IR-2012-83 under § 7508A of the Internal Revenue Code (“Code”) for victims of Hurricane Sandy. (See the regulations under § 7508A and Section 8 of Rev. Proc. 2007-56, 2007-2 C.B. 388, for a listing of employee benefit-related acts currently postponed until February 1, 2013, because of the disaster.)

Background

The laws relating to qualified employer plans impose various limitations on the permissibility of loans and distributions from those plans. For example, § 401(k)(2)(B)(i) of the Code provides that in the case of a § 401(k) plan that is part of a profit-sharing or stock bonus plan, elective deferrals may be distributed only in certain situations, one of which is on account of hardship. Section 403(b)(11) provides similar rules with respect to elective deferrals under a § 403(b) plan. Section 457(d)(1)(A) provides that a plan described in § 457(b) may not permit distributions before the occurrence of certain enumerated events, one being when the participant is faced with an unforeseeable emergency. Certain other types of plans or accounts are not permitted to make in-service distributions (distributions to a participant who is still an employee) even if there is a hardship. For example, in-service hardship distributions are generally not permitted from pension plans or from accounts holding qualified nonelective contributions (“QNECs”) described in § 401(m)(4)(C) or qualified matching contributions (“QMACs”) described in § 401(k)(3)(D)(ii)(I). However, Rev. Rul. 2004-12, 2004-2 C.B. 478, holds that if amounts attributable to rollover contributions are separately accounted for within a plan, those amounts may be distributed at any time, pursuant to the employee’s request. Section 72(p) imposes certain requirements relating to plan loans. Unless those requirements are satisfied, a loan is treated as a distribution under the plan.

In order to make a loan or distribution (including a hardship distribution), a plan must contain language authorizing the loan or distribution. Also, except to the extent a distribution consists of already-taxed amounts, the distribution will be includible in gross income and generally subject to the 10-percent additional tax under § 72(t). Similar rules relating to income inclusion and taxation apply to a distribution from an IRA.

Plan provisions and regulations under certain Code sections establish verification procedures that a plan must follow before loans or distributions can be made from the plan. For example, the regulations under § 401(k) set forth certain criteria an employee must meet in order to receive a hardship distribution. A plan may contain procedures designed to confirm that the criteria have been satisfied.

Relief

As described below, a qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Sandy, to an employee or former employee whose principal residence on October 26, 2012, was located in one of the counties or Tribal Nations that have been identified as covered disaster areas because of the devastation caused by Hurricane Sandy or whose place of employment was located in one of these counties or Tribal Nations on that date or whose lineal ascendant or descendant, dependent or spouse had a principal residence or place of employment in one of these counties or Tribal Nations on that date. Covered disaster areas are identified as federally declared disaster areas in the News Releases issued by the IRS for Victims of Hurricane Sandy, which are found on IRS.gov at: — http://www.irs.gov/uac/Newsroom/Help-for-Victims-of-Hurricane-Sandy. Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution, unless the plan administrator has actual knowledge to the contrary, and the distribution is treated as a hardship distribution for all purposes under the Code and regulations.

For purposes of this announcement, a “qualified employer plan” means a plan or contract meeting the requirements of § 401(a), 403(a) or 403(b), and, for purposes of the hardship relief, which could, if it contained enabling language, make hardship distributions. For purposes of this paragraph, a “qualified employer plan” also means a plan described in § 457(b) maintained by an eligible employer described in § 457(e)(1)(A), and any hardship arising from Hurricane Sandy is treated as an “unforeseeable emergency” for purposes of distributions from such plans. For example, a profit-sharing or stock bonus plan that currently does not provide for hardship or other in-service distributions may nevertheless make Sandy-related hardship distributions pursuant to this announcement, except from QNEC or QMAC accounts or from earnings on elective contributions (see below for plan amendment requirements). A defined benefit or money purchase plan, which generally cannot make in-service hardship distributions, may not make hardship distributions pursuant to this announcement, other than from a separate account, if any, within the plan containing either employee contributions or rollover amounts.

The amount available for hardship distribution is limited to the maximum amount that would be permitted to be available for a hardship distribution under the plan under the Code and regulations. However, the relief provided by this announcement applies to any hardship of the employee, not just the types enumerated in the regulations, and no post-distribution contribution restrictions are required. For example, regulations under § 401(k) provide safe harbor hardship distribution standards under which a hardship is deemed to exist only for certain enumerated events, and after receipt of the hardship amount, the employee is prohibited from making contributions for at least 6 months. Plans need not follow these rules with respect to hardship distributions for which relief is provided under this announcement.

To make a loan or hardship distribution, a qualified employer plan that does not provide for them must be amended to provide for loans or hardship distributions no later than the end of the first plan year beginning after December 31, 2012. To qualify for the relief under this announcement, a hardship distribution must be made on account of a hardship resulting from Hurricane Sandy and be made on or after October 26, 2012, and no later than February 1, 2013. Plan loans made pursuant to this announcement must satisfy the requirements of § 72(p).

In addition, a retirement plan will not be treated as failing to follow procedural requirements for plan loans (in the case of retirement plans other than IRAs) or distributions (in the case of all retirement plans, including IRAs) imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after October 26, 2012, and continuing through February 1, 2013, with respect to distributions to individuals described in the first paragraph under “Relief”, above, provided the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith diligent effort under the circumstances to comply with those requirements. However, as soon as practicable, the plan administrator (or financial institution in the case of IRAs) must make a reasonable attempt to assemble any forgone documentation. For example, if spousal consent is required for a plan loan or distribution and the plan terms require production of a death certificate if the employee claims his or her spouse is deceased, the plan will not be disqualified for failure to operate in accordance with its terms if it makes a loan or distribution to an individual described in the first paragraph under “Relief” in the absence of a death certificate if it is reasonable to believe, under the circumstances, that the spouse is deceased, the loan or distribution is made no later than February 1, 2013, and the plan administrator makes reasonable efforts to obtain the death certificate as soon as practicable. Taxpayers are reminded that in general the normal spousal consent rules continue to apply. For purposes of this announcement, “retirement plan” has the same meaning as “eligible retirement plan” under § 402(c)(8)(B).

The Department of Labor has advised Treasury and the Internal Revenue Service that it will not treat any person as having violated the provisions of Title I of the Employee Retirement Income Security Act solely because that person complied with the provisions of this announcement.

Drafting Information

The principal author of this announcement is Eric Slack of the Employee Plans, Tax Exempt and Government Entities Division. Questions regarding this announcement may be sent via e-mail to RetirementPlanQuestions@irs.gov.

Announcement 2012-47

Announcement of Disciplinary Sanctions From the Office of Professional Responsibility

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations.

The disciplinary sanctions to be imposed for violation of the regulations are:

Disbarred from practice before the IRS—An individual who is disbarred is not eligible to represent taxpayers before the IRS.

Suspended from practice before the IRS—An individual who is suspended is not eligible to represent taxpayers before the IRS during the term of the suspension.

Censured in practice before the IRS—Censure is a public reprimand. Unlike disbarment or suspension, censure does not affect an individual’s eligibility to represent taxpayers before the IRS, but OPR may subject the individual’s future representations to conditions designed to promote high standards of conduct.

Monetary penalty—A monetary penalty may be imposed on an individual who engages in conduct subject to sanction or on an employer, firm, or entity if the individual was acting on its behalf and if it knew, or reasonably should have known, of the individual’s conduct.

Disqualification of appraiser—An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS.

Under the regulations, attorneys, certified public accountants, enrolled agents, enrolled actuaries, and enrolled retirement plan agents may not assist, or accept assistance from, individuals who are suspended or disbarred with respect to matters constituting practice (i.e., representation) before the IRS, and they may not aid or abet suspended or disbarred individuals to practice before the IRS.

Disciplinary sanctions are described in these terms:

Disbarred by decision after hearing, Suspended by decision after hearing, Censured by decision after hearing, Monetary penalty imposed after hearing, and Disqualified after hearing—An administrative law judge (ALJ) conducted an evidentiary hearing upon OPR’s complaint alleging violation of the regulations and issued a decision imposing one of these sanctions. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision became the final agency decision.

Disbarred by default decision, Suspended by default decision, Censured by default decision, Monetary penalty imposed by default decision, and Disqualified by default decision—An ALJ, after finding that no answer to OPR’s complaint had been filed, granted OPR’s motion for a default judgment and issued a decision imposing one of these sanctions.

Disbarment by decision on appeal, Suspended by decision on appeal, Censured by decision on appeal, Monetary penalty imposed by decision on appeal, and Disqualified by decision on appeal—The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions.

Disbarred by consent, Suspended by consent, Censured by consent, Monetary penalty imposed by consent, and Disqualified by consent—In lieu of a disciplinary proceeding being instituted or continued, an individual offered a consent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension for an indefinite term; conditions that the individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement affirming compliance with the terms of the consent and affirming current eligibility to practice (i.e., an active professional license or active enrollment status). An enrolled agent or an enrolled retirement plan agent may also offer to resign in order to avoid a disciplinary proceeding.

Suspended by decision in expedited proceeding, Suspended by default decision in expedited proceeding, Suspended by consent in expedited proceeding—OPR instituted an expedited proceeding for suspension (based on certain limited grounds, including loss of a professional license and criminal convictions).

OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a decision on or after September 26, 2007, which was the effective date of amendments to the regulations that permit making such decisions publicly available; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” form, which requires consenting individuals to admit to one or more violations of the regulations and to consent to the disclosure of the individual’s own return information related to the admitted violations (for example, failure to file Federal income tax returns); or (3) OPR has issued a decision in an expedited proceeding for suspension.

Announcements of disciplinary sanctions appear in the Internal Revenue Bulletin at the earliest practicable date. The sanctions announced below are alphabetized first by the names of states and second by the last names of individuals. Unless otherwise indicated, section numbers (e.g., §10.51) refer to the regulations.

City and State Name Professional Designation Disciplinary Sanction Effective Date(s)
Arizona
Phoenix Everett, James J. Attorney Disbarred by ALJ for violation of §10.51 (conviction under 18 U.S.C. §157 (bankruptcy fraud); §152 (3) (false declaration); §1956 (money laundering/concealment)) August 21, 2010
Arkansas
Proctor Donaldson, Bryan D. Attorney 48 month suspension by ALJ for violation of §10.51 (failed to file Federal individual income tax returns for tax years 2003 and 2004; failed to timely file Federal individual income tax returns for tax years 2001 and 2002; failed to timely pay tax liabilities for tax years 2001 and 2002) From August 23, 2009 until reinstated by Director, OPR
California
Carlsbad Anson, Ronald I. CPA Suspended by default decision in expedited proceeding under §10.82 (conviction under 18 U.S.C. §371, conspiracy) From November 19, 2010 until reinstated by Director, OPR
La Mesa Finch, Mark D. CPA Disbarred by ALJ for violation of §10.51 (giving false or misleading information to the Department of the Treasury; failure to timely file Federal individual income tax returns for tax years 2006 and 2007) May 2, 2010
Poway Reed, Michael J. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license) From November 19, 2010 until reinstated by Director, OPR
Colorado
Denver Levine, Alan L. CPA Public censure for admitted violation of §10.51 (failed to file Federal individual income tax returns for tax years 2001, 2002, 2003, 2004 and 2005) August 11, 2009
Florida
Panama City Weeks, George K. Attorney Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7206(1), filing false Federal income tax returns) From June 18, 2012, until reinstated by Director, OPR
Georgia
Dawson Craft, C. Wesley CPA Suspended, on appeal, by Appellate Authority for violation of §10.51 (failed to timely file Federal income tax returns, and timely pay Federal tax liabilities for tax years 2001, 2002, 2003, 2004, 2005, 2006, and 2007) From October 12, 2011 until reinstated by Director, OPR
Georgia (Continued)
Tifton Walker-Lanier, Betty Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license) From March 25, 2011 until reinstated by Director, OPR
Illinois
Chicago Horwich, Arnold S. CPA Public censure for admitted violation of §10.22 (diligence as to accuracy) June 17, 2011
Kansas
Prairie Village Barr, James E. CPA 40 month suspension imposed by Appellate Authority (failure to timely file a Federal income tax return for tax years 2001, 2002, 2003, and 2004; and failure to file a Federal income tax return for tax years 2005 and 2006) From July 16, 2011 until reinstated by Director, OPR
Maryland
Bethesda Fox, David E. Attorney Suspended by default decision in expedited proceeding under §10.82 (attorney disbarment) June 7, 2011
Massachusetts
Scituate Sullivan, Brian B. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license) From March 25, 2011 until reinstated by Director, OPR
Michigan
Ann Arbor Lee, Lily Y. Enrolled Agent 36 month suspension by Appellate Authority (failure to timely file a Federal income tax return for tax years 2004 and 2005; and failure to file a Federal income tax return for tax years 2006 and 2007) From June 13, 2011 until reinstated by Director, OPR
Minnesota
Plymouth Volstad, Paul S. CPA Enrolled Agent Suspended for breach of Offer of Consent to Public Censure, which required timely filing of all required tax returns From August 10, 2011 until reinstated by Director, OPR
Missouri
Cassville Divers, Robert D. Enrolled Agent Public censure for admitted violation of §10.22 (diligence as to accuracy) August 3, 2009
Nevada
Las Vegas Moore, Michael J. CPA Suspended by default decision in expedited proceeding under §10.82 (revocation of CPA license) June 9, 2011
North Carolina
Charlotte Ross, Walter H. CPA Suspended by ALJ for violation of §10.51 (suspension of CPA license) From July 7, 2011 until reinstated by Director, OPR
Ohio
Columbiana Kaufman, Gregory B. CPA Suspended by default decision in expedited proceeding under §10.82 (revocation of CPA license) From November 14, 2011 until reinstated by Director, OPR
Columbus Smith, Patrick E. CPA Suspended by default decision in expedited proceeding under §10.82 (revocation of CPA license) From July 6, 2011 until reinstated by Director, OPR
Oregon
Grants Pass Cronin, Valerie Enrolled Agent Disbarred by ALJ for violation of §10.51 (failure to timely file Federal individual income tax returns for tax years 2001 and 2002, and failure to file individual income tax returns for years 2004, 2005, 2006 and 2007) From September 16, 2010 until reinstated by Director, OPR
Pennsylvania
Philadelphia Maslo, William R. CPA Consent suspension for admitted violation of §10.51 (failure to timely file and pay Federal income and employment taxes) From April 16, 2009 until reinstated by Director, OPR
Tennessee
Knoxville Gee Jr., Edgar H. CPA Disbarment by ALJ upheld on appeal for violation of §10.51 (failure to pay Federal income taxes for tax years 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004 and 2005) Indefinite from August 8, 2011, but not less than 5 years
Memphis Siegfried, Russell A. CPA 48 month consent suspension for admitted violation of §10.51 (failure to file a Federal income tax return for tax years 2001, 2002, 2003, 2004, 2005 and 2006, and failure to file Form 941, Employer’s Quarterly Federal Tax Return, beginning December 2002 to December 2006) From April 23, 2009 until reinstated by Director, OPR
Texas
Denton Graves, John P. CPA Consent suspension for admitted violation of §10.51 (failure to timely file and pay taxes) From April 28, 2009 until reinstated by Director, OPR
Virginia
Norfolk Coston, Dwayne H. CPA Disbarment by ALJ upheld on appeal for violation of §10.51 (failure to timely file a Federal income tax return for tax year 2005; and failure to file a Federal income tax return for tax years 2007, 2008 and 2009) Indefinite from October 14, 2011, but not less than 5 years
West Virginia
Beaver Reusing Jr., Matthew J. Attorney Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7206(2), assisting in false tax returns and conviction under 26 U.S.C. §7203, failure to file tax returns) From June 9, 2011 until reinstated by Director, OPR
Wisconsin
Milwaukee Purnell, Jeffrey W. Attorney Disbarred by ALJ for violation of §10.51 (failure to timely file individual Federal income tax returns for tax years 2002, 2003, 2004, 2005, 2006, 2007 and 2008) Indefinite from October 4, 2010, but not less than 5 years

Definition of Terms and Abbreviations

Definition of Terms

Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.

Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.

Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.

Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.

Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.

Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect:

Abbreviations

The following abbreviations in current use and formerly used will appear in material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D. —Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

Numerical Finding List

Numerical Finding List

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2012-1 through 2012-26 is in Internal Revenue Bulletin 2012-26, dated June 25, 2012.

Bulletins 2012-27 through 2012-49

Announcements

Article Issue Link Page
2012-26 2012-27 I.R.B. 2012-27 8
2012-27 2012-27 I.R.B. 2012-27 10
2012-28 2012-27 I.R.B. 2012-27 10
2012-29 2012-42 I.R.B. 2012-42 500
2012-30 2012-34 I.R.B. 2012-34 314
2012-31 2012-34 I.R.B. 2012-34 315
2012-32 2012-35 I.R.B. 2012-35 325
2012-33 2012-35 I.R.B. 2012-35 325
2012-34 2012-36 I.R.B. 2012-36 334
2012-35 2012-38 I.R.B. 2012-38 356
2012-36 2012-46 I.R.B. 2012-46 547
2012-37 2012-45 I.R.B. 2012-45 543
2012-38 2012-43 I.R.B. 2012-43 527
2012-39 2012-48 I.R.B. 2012-48 635
2012-40 2012-47 I.R.B. 2012-47 556
2012-41 2012-44 I.R.B. 2012-44 532
2012-42 2012-47 I.R.B. 2012-47 561
2012-44 2012-49 I.R.B. 2012-49
2012-47 2012-49 I.R.B. 2012-49


Notices

Article Issue Link Page
2012-2 2012-45 I.R.B. 2012-45 538
2012-39 2012-31 I.R.B. 2012-31 95
2012-44 2012-28 I.R.B. 2012-28 45
2012-45 2012-29 I.R.B. 2012-29 59
2012-46 2012-30 I.R.B. 2012-30 86
2012-47 2012-31 I.R.B. 2012-31 98
2012-48 2012-31 I.R.B. 2012-31 102
2012-49 2012-31 I.R.B. 2012-31 119
2012-50 2012-31 I.R.B. 2012-31 121
2012-51 2012-33 I.R.B. 2012-33 150
2012-52 2012-35 I.R.B. 2012-35 317
2012-53 2012-35 I.R.B. 2012-35 317
2012-55 2012-36 I.R.B. 2012-36 332
2012-56 2012-39 I.R.B. 2012-39 370
2012-57 2012-40 I.R.B. 2012-40 424
2012-58 2012-41 I.R.B. 2012-41 436
2012-59 2012-41 I.R.B. 2012-41 443
2012-60 2012-41 I.R.B. 2012-41 445
2012-61 2012-42 I.R.B. 2012-42 479
2012-62 2012-42 I.R.B. 2012-42 489
2012-63 2012-42 I.R.B. 2012-42 496
2012-64 2012-44 I.R.B. 2012-44 528
2012-66 2012-49 I.R.B. 2012-49
2012-68 2012-48 I.R.B. 2012-48 574


Proposed Regulations

Article Issue Link Page
126770-06 2012-38 I.R.B. 2012-38 347
138367-06 2012-40 I.R.B. 2012-40 426
101812-07 2012-34 I.R.B. 2012-34 311
134042-07 2012-27 I.R.B. 2012-27 5
140668-07 2012-43 I.R.B. 2012-43 501
153627-08 2012-29 I.R.B. 2012-29 60
136491-09 2012-35 I.R.B. 2012-35 321
138489-09 2012-38 I.R.B. 2012-38 355
125570-11 2012-30 I.R.B. 2012-30 93
130266-11 2012-32 I.R.B. 2012-32 126
134935-11 2012-29 I.R.B. 2012-29 64
141832-11 2012-28 I.R.B. 2012-28 54
107889-12 2012-28 I.R.B. 2012-28 53
113738-12 2012-29 I.R.B. 2012-29 66
134974-12 2012-47 I.R.B. 2012-47 553


Revenue Procedures

Article Issue Link Page
2012-28 2012-27 I.R.B. 2012-27 4
2012-29 2012-28 I.R.B. 2012-28 49
2012-30 2012-33 I.R.B. 2012-33 165
2012-31 2012-33 I.R.B. 2012-33 256
2012-32 2012-34 I.R.B. 2012-34 267
2012-33 2012-34 I.R.B. 2012-34 272
2012-34 2012-34 I.R.B. 2012-34 280
2012-35 2012-37 I.R.B. 2012-37 341
2012-36 2012-39 I.R.B. 2012-39 374
2012-37 2012-41 I.R.B. 2012-41 449
2012-38 2012-48 I.R.B. 2012-48 575
2012-39 2012-41 I.R.B. 2012-41 470
2012-40 2012-40 I.R.B. 2012-40 424
2012-41 2012-45 I.R.B. 2012-45 539
2012-42 2012-46 I.R.B. 2012-46 545
2012-43 2012-49 I.R.B. 2012-49
2012-44 2012-49 I.R.B. 2012-49
2012-45 2012-49 I.R.B. 2012-49


Revenue Rulings

Article Issue Link Page
2012-19 2012-28 I.R.B. 2012-28 16
2012-20 2012-27 I.R.B. 2012-27 1
2012-21 2012-32 I.R.B. 2012-32 123
2012-22 2012-48 I.R.B. 2012-48 565
2012-23 2012-39 I.R.B. 2012-39 359
2012-24 2012-36 I.R.B. 2012-36 329
2012-25 2012-37 I.R.B. 2012-37 337
2012-26 2012-39 I.R.B. 2012-39 358
2012-27 2012-41 I.R.B. 2012-41 435
2012-28 2012-42 I.R.B. 2012-42 476
2012-29 2012-42 I.R.B. 2012-42 475
2012-30 2012-45 I.R.B. 2012-45 534
2012-31 2012-49 I.R.B. 2012-49


Treasury Decisions

Article Issue Link Page
9591 2012-28 I.R.B. 2012-28 32
9592 2012-28 I.R.B. 2012-28 41
9593 2012-28 I.R.B. 2012-28 17
9594 2012-29 I.R.B. 2012-29 57
9595 2012-30 I.R.B. 2012-30 71
9596 2012-30 I.R.B. 2012-30 84
9597 2012-34 I.R.B. 2012-34 258
9598 2012-38 I.R.B. 2012-38 343
9599 2012-40 I.R.B. 2012-40 417
9600 2012-47 I.R.B. 2012-47 548


Effect of Current Actions on Previously Published Items

Finding List of Current Actions on Previously Published Items

A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012-1 through 2012-26 is in Internal Revenue Bulletin 2012-26, dated June 25, 2012.

Bulletins 2012-27 through 2012-49

Announcements

Old Article Action New Article Issue Link Page
83-196 Superseded by Rev. Proc. 2012-31 2012-33 I.R.B. 2012-33 256
85-141 Superseded by Rev. Proc. 2012-31 2012-33 I.R.B. 2012-33 256
2008-105 Modified and superseded by Ann. 2012-34 2012-36 I.R.B. 2012-36 334
2012-29 Corrected by Ann. 2012-41 2012-44 I.R.B. 2012-44 532
2012-38 Corrected by Ann. 2012-41 2012-44 I.R.B. 2012-44 532


Notices

Old Article Action New Article Issue Link Page
2009-24 Amplified by Notice 2012-51 2012-33 I.R.B. 2012-33 150
2011-81 Superseded by Notice 2012-63 2012-42 I.R.B. 2012-42 496
2012-51 Amplified by Notice 2012-51 2012-33 I.R.B. 2012-33 150


Proposed Regulations

Old Article Action New Article Issue Link Page
100276-97 Withdrawn by Ann. 2012-27 2012-27 I.R.B. 2012-27 10
136491-09 Hearing cancelled by Ann. 2012-39 2012-48 I.R.B. 2012-48 635
130266-11 Hearing scheduled by Ann. 2012-29 2012-42 I.R.B. 2012-42 500
130266-11 Hearing scheduled by Ann. 2012-38 2012-43 I.R.B. 2012-43 527
130266-11 Hearing rescheduled by Ann. 2012-41 2012-44 I.R.B. 2012-44 532


Revenue Procedures

Old Article Action New Article Issue Link Page
94-22 Modified and superseded by Rev. Proc. 2012-35 2012-37 I.R.B. 2012-37 341
95-15 Superseded by Rev. Proc. 2012-31 2012-33 I.R.B. 2012-33 256
97-27 Modified by Rev. Proc. 2012-39 2012-41 I.R.B. 2012-41 470
98-32 Modified and superseded by Rev. Proc. 2012-33 2012-34 I.R.B. 2012-34 272
2007-38 Modified and superseded by Rev. Proc. 2012-32 2012-34 I.R.B. 2012-34 267
2011-14 Clarified and modified by Rev. Proc. 2012-39 2012-41 I.R.B. 2012-41 470
2011-40 Superseded by Rev. Proc. 2012-30 2012-33 I.R.B. 2012-33 165
2011-50 Superseded by Rev. Proc. 2012-36 2012-39 I.R.B. 2012-39 374
2011-60 Superseded by Rev. Proc. 2012-38 2012-48 I.R.B. 2012-48 575
2012-30 Corrected and clarified by Ann. 2012-36 2012-46 I.R.B. 2012-46 547


Treasury Decisions

Old Article Action New Article Issue Link Page
9752 Corrected by Ann. 2012-35 2012-38 I.R.B. 2012-38 356


How to get the Internal Revenue Bulletin

INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Documents when their subscriptions must be renewed.

CUMULATIVE BULLETINS

The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. For the foreseeable future, the IRS will not create Cumulative Bulletins after the 2008-2 edition. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents.

ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET

You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select More Topics. Then select Internal Revenue Bulletins.

INTERNAL REVENUE BULLETINS ON CD-ROM

Internal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders) or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.

How to Order

Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the

P.O. Box 979050, St. Louis, MO 63197-9000

Please allow two to six weeks, plus mailing time, for delivery.

We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the

IRS Bulletin Unit, SE:W:CAR:MP:T:M:S, Washington, DC 20224.