Daily Tax Update - April 14, 2009

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS FROM ITS SPRING RECESS ON APRIL 20TH

Guidance for Corporations whose instruments are acquired by Treasury:  On April 13, the IRS and Treasury issued Notice 2009-38 to provide corporations with additional guidance regarding how to apply section 382 when Treasury acquires their instruments pursuant to one of the programs created under the Emergency Economic Stabilization Act of 2008 (EESA). Specifically, Notice 2009-38 describes how instruments acquired by Treasury will be characterized and treated when determining whether an ownership change has occurred under section 382. Notice 2009-38 amplifies and supersedes Notice 2009-14.

  • Notice 2009-38 provides guidance regarding the characterization and treatment of instruments such as stock, instruments of indebtedness, preferred stock, and warrants acquired by Treasury. The notice also provides guidance regarding the treatment of stock redeemed from Treasury and capital contributions made by Treasury.
  • The guidance in Notice 2009-38 also generally applies to certain “covered instruments” as though such instruments were issued directly to Tresury under one of the programs established by the EESA. A “covered instrument” includes any instrument acquired by Treasury in exchange for an instrument that was issued to Treasury under an EESA program.
  • Notice 2009-39 states that the guidance contained therein shall apply until additional guidance is issued. The notice states that Taxpayers may rely on the guidance issued in Notice 2009-38 for instruments (i) issued to or acquired by Treasury prior to publication of additional guidance or (ii) issued to or acquired by Treasury under a binding contract entered into prior to publication of additional guidance.
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com
  • The notice can be accessed here.
MISCELLANEOUS GUIDANCE ISSUED TODAY:
Announcement 2009-34 the Internal Revenue Service intends to establish a program for the pre-approval of prototype plans under § 403(b) of the Internal Revenue Code (Code). This announcement includes a draft revenue procedure that contains the Service’s proposed procedures for issuing opinion letters as to the acceptability under § 403(b) of the form of prototype plans. The Service is simultaneously posting draft sample plan language on the irs.gov website for use in drafting § 403(b) prototype plans. The Service seeks public input before finalizing these procedures and sample plan language, and invites interested persons to submit comments. 

Notice 2009-39 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. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional 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, and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007. 

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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