TEFRA partnership provisions; classification of items. This ruling provides that the tax treatment by an affiliated group on a consolidated return of the parent corporation’s payment to a partnership, in which the parent is not a partner, is not a “partnership item” within the meaning of section 6231(a)(3) of the Code or an “affected item” within the meaning of section 6231(a)(5), even if another member of the group is a partner in the partnership.

Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning April 1, 2006, will be 7 percent for overpayments (6 percent in the case of a corporation), 7 percent for underpayments, and 9 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 4.5 percent.

This notice informs Alabama, Louisiana, and Mississippi of their state population portion in the Gulf Opportunity Zone required to determine the (1) Gulf Opportunity housing amount under section 1400N(c)(1)(B) of the Code, and (2) maximum aggregate face amount of qualified Gulf Opportunity Zone Bonds under section 1400N(a)(3) of the Code.

This notice informs taxpayers of amendments that will be made to the final regulations (T.D. 9241, 2006-7 I.R.B. 427) under section 671 of the Code regarding certain reporting rules for non-mortgage widely held fixed investment trusts (NMWHFITs). Until such amendments reflecting these changes are issued, taxpayers may rely on this notice.

John A. Hyman Memorial Youth Foundation of Warrenton, NC, no longer qualifies as an organization to which contributions are deductible under section 170 of the Code.

A list is provided of organizations now classified as private foundations.

TEFRA partnership provisions; classification of items. This ruling provides that the tax treatment by an affiliated group on a consolidated return of the parent corporation’s payment to a partnership, in which the parent is not a partner, is not a “partnership item” within the meaning of section 6231(a)(3) of the Code or an “affected item” within the meaning of section 6231(a)(5), even if another member of the group is a partner in the partnership.

Temporary and proposed regulations under section 6103 of the Code are provided regarding administrative review procedures for certain government agencies and other authorized recipients of tax returns or return information (authorized recipients) whose receipt of returns and return information may be suspended or terminated because they do not maintain proper safeguards. The regulations provide guidance to responsible IRS personnel and authorized recipients as to these administrative procedures.

Temporary and proposed regulations under section 6103 of the Code are provided regarding administrative review procedures for certain government agencies and other authorized recipients of tax returns or return information (authorized recipients) whose receipt of returns and return information may be suspended or terminated because they do not maintain proper safeguards. The regulations provide guidance to responsible IRS personnel and authorized recipients as to these administrative procedures.

Automobile owners and lessees. This procedure provides owners and lessees of passenger automobiles (including trucks, vans, and electric automobiles) with tables detailing the limitations on depreciation deductions for passenger automobiles first placed in service during calendar year 2006 and the amounts to be included in income for passenger automobiles first leased during calendar year 2006.

This document withdraws a proposed regulation (REG-103829-99, 2002-2 C.B. 59) regarding the definition of highway vehicle.

Internal Revenue Service (IRS), Treasury.

Temporary regulations.

This document contains temporary regulations regarding administrative review procedures for certain government agencies and other authorized recipients of tax returns or return information (authorized recipients) whose receipt of returns and return information may be suspended or terminated because they do not maintain proper safeguards. The temporary regulations provide guidance to responsible IRS personnel and authorized recipients as to these administrative procedures. The text of these temporary regulations serves as the text of the proposed regulations (REG-157271-05) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.

Effective Date: These regulations are effective February 24, 2006.

Applicability Date: For dates of applicability, see §301.6103(p)(7)-1T(e).

Melinda Fisher, (202) 622-4580 (not a toll-free number).

Accordingly, 26 CFR Part 301 is amended as follows:

The principal author of these temporary regulations is Melinda K. Fisher, Office of the Associate Chief Counsel (Procedure & Administration), Disclosure and Privacy Law Division.

* * * * *

Under the circumstances described below, is the deduction by a member of an affiliated group that files a consolidated return of a payment to a partnership in which the member is not a partner a “partnership item” within the meaning of § 6231(a)(3) or an “affected item” within the meaning of § 6231(a)(5)?

P is the common parent of an affiliated group of corporations, including S, that files a consolidated return for the calendar year 2006. S is a partner in PRS, a partnership that also uses the calendar year as its taxable year. PRS is subject to the unified audit and litigation procedures set forth in §§ 6221 through 6234 of the Internal Revenue Code (TEFRA partnership procedures).

In 2006, P makes a payment to PRS in the ordinary course of P’s business. The payment by P is not made in P’s capacity as agent for the affiliated group under the consolidated return regulations; nor is the payment by P made on behalf of S. PRS treats the payment from P as income for services provided by PRS.

P deducts the payment on the group’s 2006 consolidated return as a business expense. The Service determines that P’s deduction should be disallowed because P’s payment is actually a loan from P to PRS.

Section 6221 provides that, except as otherwise provided in §§ 6221 through 6234, the tax treatment of any partnership item (and the applicability of any penalty, addition to tax, or additional amount that relates to an adjustment to a partnership item) shall be determined at the partnership level.

Section 301.6221-1 of the Procedure and Administration Regulations provides that a partner’s treatment of partnership items on the partner’s return may not be changed except as provided in §§ 6222 through 6231 and the regulations thereunder. Thus, for example, if a partner treats an item on the partner’s return consistently with the treatment of the item on the partnership’s return, the IRS generally cannot adjust the treatment of that item on the partner’s return except through a partnership-level proceeding. Similarly, the partner may not put partnership items in issue in a proceeding relating to nonpartnership items.

Section 6222(a) provides that a partner shall, on the partner’s return, treat a partnership item in a manner which is consistent with the treatment of such partnership item on the partnership return.

Section 6226(c)(1) provides that each person who was a partner at any time during the taxable year shall be treated as a party to an action under § 6226(a) or (b).

Section 6231(a)(2) provides that the term “partner” means (A) a partner in the partnership and (B) any other person whose tax liability under subtitle A is determined in whole or in part by taking into account directly or indirectly partnership items of the partnership. The corporate parent of a subsidiary C corporation is not a partner in a partnership merely because the subsidiary is a partner in that partnership. Section 301.6231(a)(2)-1(b). Each person who is jointly or severally liable for the income tax liability attributable to partnership items, however, is treated as a partner under § 6231(a)(2)(B) for purposes of determining the tax attributable to those partnership items. See, for example, section 1.1502-6, which generally provides that the common parent corporation and each subsidiary that was a member of the group during any part of the consolidated return year shall be severally liable for the tax for such year computed in accordance with the regulations under § 1502.

Section 6231(a)(3) provides that the term “partnership item” means, with respect to a partnership, any item required to be taken into account for the partnership’s taxable year under any provision of subtitle A to the extent regulations prescribed by the Secretary provide that, for purposes of this subtitle, such item is more appropriately determined at the partnership level than at the partner level. Section 301.6231(a)(3)-1 provides a list of items that are more appropriately determined at the partnership level than at the partner level.

Section 6231(a)(4) provides that the term “nonpartnership item” means an item that is (or is treated as) not a partnership item.

Section 6231(a)(5) defines an “affected item” as any item to the extent the item is affected by a partnership item. Affected items are adjusted and assessed after the determination of partnership items. See §§ 301.6231(a)(5)-1 and 301.6231(a)(6)-1; GAF v. Commissioner, 114 T.C. 519 (2000) (affected item notices of deficiency cannot be issued until after the determination of partnership items). Affected items must be determined consistently with the prior determination of partnership items. N.C.F. Energy Partners v. Commissioner, 89 T.C. 741, 746-747 (1987). Generally, affected items have a partnership item component that subchapter K of the Code requires a member of the partnership to take into account in computing that member’s tax liability. See section 702.

In the situation described above, each member of P’s affiliated group that filed a consolidated return (including P) is severally liable for the tax for the 2006 consolidated return year. Section 1.1502-6(a). Thus, P is severally liable for the income tax liability attributable to partnership items that are allocated by PRS to S, including PRS’s receipt of payments from P for services. Under § 6231(a)(2)(B), P is treated as a partner in PRS for purposes of the TEFRA partnership procedures.

The TEFRA partnership procedures only apply to the specific items that the partnership must determine under subtitle A of the Internal Revenue Code. Section 6231(a)(3). If the TEFRA partnership procedures apply, the definition of partner under § 6231(a)(2) may bring a person into a partnership proceeding, and bind that person to the outcome of the partnership proceeding with respect to those partnership items. Section 6226(c). It will also bind the partner to the direct flow-through effects of partnership item adjustments on other items on the partner’s return, i.e., “affected items.”

If the TEFRA partnership procedures do not otherwise apply to the adjustment of an item, § 6231(a)(2)(B) does not operate to make that item subject to the TEFRA partnership procedures. Nor does § 6231(a)(2)(B) require that nonpartnership items that are not affected items be treated consistently with the partnership’s reporting of the items, or with the determination of partnership items. Thus, in the situation described above, P’s deduction on the consolidated return for P’s payment to PRS will not be subject to the TEFRA partnership procedures unless the deduction is a partnership item or an affected item.

P’s deduction of the payment to PRS is not a partnership item, as defined in § 301.6231(a)(3)-1. P’s status as a partner for purposes of section 6231(a)(2)(B) does not make P a partner in PRS for purposes of Subchapter K. Although the underlying facts and circumstances of the transaction between P and PRS should independently result in consistent treatment of the transaction by both PRS and P’s affiliated group, nothing in subtitle A requires PRS to account for how P characterizes the transfer of the payment to PRS. Nor is P’s deduction an affected item within the meaning of § 6231(a)(5). The manner in which PRS characterizes the receipt of the payment (whether as gross income for services or loan proceeds) is a separate item from, and does not affect, P’s characterization of the transfer of the payment to PRS (whether as a business expense or as a loan). Although section 702 requires that P’s affiliated group account for S’s distributive share of the receipt of the payment from P to PRS, S’s distributive share does not, in turn, “affect” the treatment of P’s payment to PRS. Accordingly, P’s deduction for its payment to PRS will not be subject to the TEFRA partnership procedures.

The tax treatment by a member of an affiliated group on a consolidated return of a payment to a partnership in which the member is not a partner is not a “partnership item” within the meaning of § 6231(a)(3) or an “affected item” within the meaning of § 6231(a)(5), even if another member of the group is a partner in the partnership.

The principal author of this revenue ruling is William Heard of the Office of the Associate Chief Counsel (Procedure & Administration), Administrative Provisions and Judicial Practice Division. For further information regarding this revenue ruling, contact Mr. Heard at (202) 622-7950 (not a toll-free call).

Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. Under section 6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points (2 percentage points in the case of a corporation), except the rate for the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal short-term rate plus 0.5 of a percentage point for interest computations made after December 31, 1994. Under section 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

Section 6621(c) provides that for purposes of interest payable under section 6601 on any large corporate underpayment, the underpayment rate under section 6621(a)(2) is determined by substituting “5 percentage points” for “3 percentage points.” See section 6621(c) and section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date. Section 6621(c) and section 301.6621-3 are generally effective for periods after December 31, 1990.

Section 6621(b)(1) provides that the Secretary will determine the federal short-term rate for the first month in each calendar quarter.

Section 6621(b)(2)(A) provides that the federal short-term rate determined under section 6621(b)(1) for any month applies during the first calendar quarter beginning after such month.

Section 6621(b)(2)(B) provides that in determining the addition to tax under section 6654 for failure to pay estimated tax for any taxable year, the federal short-term rate that applies during the third month following such taxable year also applies during the first 15 days of the fourth month following such taxable year.

Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during such month by the Secretary in accordance with § 1274(d), rounded to the nearest full percent (or, if a multiple of ¹/₂ of 1 percent, the rate is increased to the next highest full percent).

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

Rounded to the nearest full percent, the federal short-term rate based on daily compounding determined during the month of January 2006 is 4 percent. Accordingly, an overpayment rate of 7 percent (6 percent in the case of a corporation) and an underpayment rate of 7 percent are established for the calendar quarter beginning April 1, 2006. The overpayment rate for the portion of a corporate overpayment exceeding $10,000 for the calendar quarter beginning April 1, 2006, is 4.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter beginning April 1, 2006, is 9 percent. These rates apply to amounts bearing interest during that calendar quarter.

Under section 6621(b)(2)(B), the 7 percent rate that applies to estimated tax underpayments for the first calendar quarter in 2006, as provided in Rev. Rul. 2005-78, 2005-51 I.R.B. 1157, also applies to such underpayments for the first 15 days in April 2006.

Interest factors for daily compound interest for annual rates of 4.5 percent, 6 percent, 7 percent, and 9 percent are published in Tables 14, 17, 19, and 23 of Rev. Proc. 95-17, 1995-1 C.B. 556, 568, 571, 573, and 577.

Annual interest rates to be compounded daily pursuant to section 6622 that apply for prior periods are set forth in the tables accompanying this revenue ruling.

The principal author of this revenue ruling is Crystal Foster of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue ruling, contact Ms. Foster at (202) 622-7198 (not a toll-free call).

This notice informs the states of Alabama, Louisiana, and Mississippi of their state population portion in the Gulf Opportunity Zone (GO Zone) to determine the (1) Gulf Opportunity housing amount under § 1400N(c)(1)(B) of the Internal Revenue Code, and (2) maximum aggregate face amount of qualified Gulf Opportunity Zone Bonds (GO Zone Bonds) under § 1400N(a)(3) of the Code.

The Gulf Opportunity Zone Act of 2005 (P. L. 109-135, 119 Stat. 25) (GOZA) added § 1400M and § 1400N to the Code to provide certain tax benefits to those areas affected by Hurricanes Katrina, Wilma, and Rita. Section 1400M(1) defines the GO Zone as that portion of the Hurricane Katrina disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act [Stafford Act] by reason of Hurricane Katrina. Section 1400M(2) defines the term “Hurricane Katrina disaster area” as an area with respect to which a major disaster has been declared by the President before September 14, 2005, under section 401 of the Stafford Act by reason of Hurricane Katrina. The Federal Emergency Management Agency (FEMA) has identified those counties and parishes in Alabama, Louisiana, and Mississippi that warrant individual or individual and public assistance resulting from Hurricane Katrina. These counties and parishes are:

Alabama— Baldwin, Chocktaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington.

Louisiana— Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge and West Feliciana.

Mississippi— Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston and Yazoo.

The most recent census estimate of the resident population released by the U.S. Census Bureau before August 28, 2005, that reflects the portion of state population that is in the GO Zone is the July 1, 2004, Annual Estimates of the Population for Counties released by the U.S. Census Bureau on April 14, 2005, in Press Release CB05-51. The portion of each state’s population that is in the GO Zone is determined by adding together the population estimate provided by CB05-51 for each county and parish located in the GO Zone for that state. The results are used to determine each state’s Gulf Opportunity housing amount under § 1400N(c)(1)(B) and the maximum aggregate face amount of bonds that may be designated as GO Zone Bonds under § 1400N(a)(3)(A). Each state’s total portion is provided below:

The principal authors of this notice are Christopher J. Wilson, Office of the Associate Chief Counsel (Passthroughs and Special Industries) and Timothy L. Jones, Office of the Division Counsel/Associate Chief Counsel (Tax-Exempt and Government Entities). For further information regarding this notice, contact Mr. Wilson at (202) 622-3040 (not a toll-free call).

This notice informs taxpayers of amendments that will be made to the final regulations under § 1.671-5 (Reporting Requirements for Widely Held Fixed Investment Trusts (WHFITs)), published in the Federal Register (T.D. 9241, 2006-7 I.R.B. 427 [71 FR 4002]) on January 24, 2006, regarding certain reporting rules for non-mortgage widely held fixed investment trusts (NMWHFITs). Until amendments reflecting these changes are issued, taxpayers may rely on this notice.

The final regulations under § 1.671-5 provide that if a NMWHFIT satisfies the qualified NMWHFIT exception in § 1.671-5(c)(2)(iv)(E), trustees and middlemen of those trusts are excepted from specific reporting requirements regarding market discount, bond premium, sales and dispositions, redemptions, and sales of trust interests. Section 1.671-5(c)(2)(iv)(E) provides that the qualified NMWHFIT exception is satisfied if a NMWHFIT has a start-up date that is before February 23, 2006, and the calendar year for which the trustee is reporting begins before January 1, 2011. Section 1.671-5(b)(19) defines a WHFIT’s start-up date as the date on which substantially all of the assets have been deposited with the trustee of the WHFIT.

Since the issuance of the § 1.671-5 final regulations, a number of comments have been received requesting that the definition of start-up date be clarified with respect to the qualified NMWHFIT exception and that the qualified NMWHFIT exception be extended to NMWHFITs created a certain period of time on or after February 23, 2006.

In response, the Treasury Department and the Internal Revenue Service intend to amend § 1.671-5(c)(2)(iv)(E) to provide that if, prior to February 23, 2006, both: (1) the registration statement of a NMWHFIT becomes effective under the Securities Act of 1933, as amended (15 U.S.C. 77a, et seq.); and (2) trust interests are offered for sale to the public, the NMWHFIT will be considered to have a start-up date that satisfies the qualified NMWHFIT exception. Section 1.671-5(c)(2)(iv)(E) will also be amended to provide that if, on or after February 23, 2006 and before June 1, 2006, both: (1) the registration statement of the NMWHFIT becomes effective under the Securities Act of 1933; and (2) trust interests are offered for sale to the public, the NMWHFIT will be considered to have a start-up date that satisfies the qualified NMWHFIT exception, provided that the NMWHFIT is fully funded before August 1, 2006.

Section 1.671-5(f)(1)(i) provides that if substantially all of a NMWHFIT’s income is from dividends (as defined in § 6042(b) and the regulations thereunder) or interest (as defined in § 6049(b) and the regulations thereunder) and all trust interests have identical value and rights, a NMWHFIT may report under the safe harbor in § 1.671-5(f). Section 1.671-5(c)(2)(v)(C) provides that a NMWHFIT is eligible for simplified reporting on the sale of a trust interest by a trust interest holder if substantially all of the income of the NMWHFIT consists of dividends and: (1) the trustee is required by the governing document of the NMWHFIT to make distributions of all cash (less reasonably required reserve funds) held by the NMWHFIT no less frequently than monthly; or (2) the qualified NMWHFIT exception is satisfied.

Commentators have requested clarification regarding whether trust sales proceeds received by a NMWHFIT will make the NMWHFIT ineligible for the safe harbor reporting rules in § 1.671-5(f) and the simplified reporting rules for sales of trust interests for equity trusts in § 1.671-5(c)(2)(v)(C). Commentators also noted the reference to § 6049(b) in § 1.671-5(f)(1)(i)(1) and that the definition of interest in § 6049(b) does not include interest that is exempt from tax under § 103 of the Internal Revenue Code. These commentators were concerned that if a NMWHFIT’s income is from tax-exempt interest, the NMWHFIT would not be eligible to report under the NMWHFIT safe harbor reporting rules.

In response, the Service and the Treasury Department intend to amend § 1.671-5(f)(1)(i) to provide that trust sales proceeds received by the NMWHFIT, in addition to dividends and interest, will not cause the NMWHFIT to become ineligible for the NMWHFIT safe harbor in § 1.671-5(f). In addition, to address commentators’ concerns regarding NMWHFITs whose income is from tax-exempt interest, § 1.671-5(f)(1)(i)(1) will be corrected to remove the references to § 6042(b) and § 6049(b) and the regulations thereunder. Section 1.671-5(c)(2)(v)(C) will be amended to provide that trust sales proceeds received by the NMWHFIT in addition to dividend income will not cause an equity trust to be ineligible for the simplified reporting regarding sales of trust interests in § 1.671-5(c)(2)(v)(C).

The effective date for amended § 1.671-5(c)(2)(iv)(E), § 1.671-5(c)(2)(v)(C) and § 1.671-5(f)(1)(i) will be the date of publication of those amendments in the Federal Register. Taxpayers, however, may apply those amendments as of January 24, 2006.

The principal author of this notice is Faith P. Colson of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Faith P. Colson at (202) 622-3060 (not a toll-free call).

01. This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2006, including special tables of limitations on depreciation deductions for trucks and vans, and for passenger automobiles designed to be propelled primarily by electricity and built by an original equipment manufacturer (electric automobiles); and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2006, including a separate table of inclusion amounts for lessees of trucks and vans, and a separate table for lessees of electric automobiles.

02. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).

01. For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2007, § 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. For purposes of this revenue procedure, the term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.

02. For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles, a table for lessees of trucks and vans, and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the passenger automobile is first leased.

01. The limitations on depreciation deductions in section 4.02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2006, and continue to apply for each tax year that the passenger automobile remains in service.

02. The tables in section 4.03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2006. Lessees of such passenger automobiles must use these tables to determine the inclusion amount for each tax year during which the passenger automobile is leased. See Rev. Proc. 2002-14, 2002-1 C.B. 450, for passenger automobiles first leased before January 1, 2003, Rev. Proc. 2003-75, 2003-2 C.B. 1018, for passenger automobiles first leased during calendar year 2003, Rev. Proc. 2004-20, 2004-1 C.B. 642, for passenger automobiles first leased during calendar year 2004, and Rev. Proc. 2005-13, 2005-1 C.B. 759, for passenger automobiles first leased during calendar year 2005.

01. In General.

(1) Limitations on Depreciation Deductions for Certain Automobiles. The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2006 are found in Tables 1 through 3 in section 4.02(2) of this revenue procedure. Table 1 of this revenue procedure provides limitations on depreciation deductions for a passenger automobile. Table 2 of this revenue procedure provides limitations on depreciation deductions for a truck or van. Table 3 of this revenue procedure provides limitations on depreciation deductions for an electric automobile.

(2) Inclusions in Income of Lessees of Passenger Automobiles. A taxpayer first leasing a passenger automobile during calendar year 2006 must determine the inclusion amount that is added to gross income using the tables in section 4.03 of this revenue procedure. The inclusion amount is determined using Table 4 in the case of a passenger automobile (other than a truck, van, or electric automobile), Table 5 in the case of a truck or van, and Table 6 in the case of an electric automobile. In addition, the procedures of § 1.280F-7(a) must be followed.

02. Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the Inflation Adjustment. Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 135.1 for October 2005. The October 2005 index exceeded the October 1987 index by 19.9. The Service has, therefore, determined that the automobile price inflation adjustment for 2006 for passenger automobiles (other than trucks and vans) is 17.27 percent (19.9/115.2 x 100%). This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2006. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.1727, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks, vans, and electric automobiles) for calendar year 2006. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 2006, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.1727; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for calendar year 2006. To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2006, the new truck component of the CPI is used instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 143.6 for October 2005. The October 2005 index exceeded the October 1987 index by 31.2. The Service has, therefore, determined that the automobile price inflation adjustment for 2006 for trucks and vans is 27.76 percent (31.2/112.4 x 100%). This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2006. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.2776, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans.

(2) Amount of the Limitation. For passenger automobiles placed in service by the taxpayer in calendar year 2006, Tables 1 through 3 contain the dollar amount of the depreciation limitation for each tax year. Use Table 1 for passenger automobiles placed in service by the taxpayer in calendar year 2006. Use Table 2 for trucks and vans placed in service by the taxpayer in calendar year 2006. Use Table 3 for electric automobiles placed in service by the taxpayer in calendar year 2006.

03. Inclusions in Income of Lessees of Passenger Automobiles.

The inclusion amounts for passenger automobiles first leased in calendar year 2006 are calculated under the procedures described in § 1.280F-7(a). Lessees of passenger automobiles other than trucks, vans, and electric automobiles should use Table 4 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 5 of this revenue procedure and lessees of electric automobiles should use Table 6 of this revenue procedure.

This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by the taxpayer during calendar year 2006, and to leased passenger automobiles that are first leased by the taxpayer during calendar year 2006.

The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding the depreciation limitations and lessee inclusion amounts in this revenue procedure, contact Bernard P. Harvey at (202) 622-3110 (not a toll-free call).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking by cross-reference to temporary regulations.

In this issue of the Bulletin, the IRS is issuing temporary regulations (T.D. 9252) regarding administrative review procedures for certain government agencies and other authorized recipients of tax returns or return information (authorized recipients) whose receipt of returns and return information may be suspended or terminated because they do not maintain proper safeguards. The temporary regulations provide guidance to responsible IRS personnel and authorized recipients as to these administrative procedures. The text of the temporary regulations published in this issue of the Bulletin serves as the text of the proposed regulations.

Written and electronic comments and requests for a public hearing must be received by May 25, 2006.

Send submissions to: CC:PA:LPD:PR (REG-157271-05), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-157271-05), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the IRS Internet site at www.irs.gov/regs, or via the Federal eRulemaking Portal at www.regulations.gov (IRS and REG-157271-05).

Concerning submission of comments, Treena Garrett, (202) 622-7180; concerning the temporary regulations, Melinda K. Fisher, (202) 622-4580 (not toll-free numbers).

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

The principal author of these regulations is Melinda K. Fisher, Office of the Associate Chief Counsel (Procedure & Administration), Disclosure and Privacy Law Division.

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Internal Revenue Service (IRS), Treasury.

Withdrawal of notice of proposed rulemaking.

This document withdraws a proposed regulation relating to the definition of a highway vehicle for purposes of various excise taxes. The withdrawal affects vehicle manufacturers, dealers, and lessors; tire manufacturers; sellers and buyers of certain motor fuels; and operators of heavy highway vehicles.

Barbara Franklin, (202) 662-3130 (not a toll-free number).

Accordingly, under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-103829-99) that was published in the Federal Register on June 6, 2002 (67 FR 38913), is withdrawn.

The name of an organization that no longer qualifies as an organization described in section 170(c)(2) of the Internal Revenue Code of 1986 is listed below.

Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on March 20, 2006, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.