This announcement clarifies certain changes to the September 2003 revision of Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically or Magnetically.

Disallowance of convention expenses; North American geographical area. All geographical areas included in the North American area for purposes of section 274 of the Code are listed. Rev. Ruls. 87-95 and 94-56 superseded.

Final regulations under section 482 of the Code clarify that stock-based compensation is taken into account in determining the intangible development costs of a controlled participant in a qualified cost sharing arrangement. The regulations also provide rules for measuring the cost associated with stock-based compensation; clarify that stock-based compensation is appropriately taken into account as a comparability factor for purposes of the comparable profits method; and provide rules that coordinate the cost sharing rules with the arm's length standard.

Proposed regulations under section 1275 of the Code provide for the treatment of contingent payment debt instruments for which one or more payments are denominated in, or determined by reference to, a currency other than the taxpayer's functional currency. The regulations generally provide that taxpayers should apply the existing rules to nonfunctional currency contingent payment debt instruments in the currency in which the debt instrument is denominated, and should then translate those amounts into the taxpayers' functional currency using the rules provided. In addition, a rule is provided to determine the currency in which the calculations should be made in the case of a multi-currency debt instrument. A public hearing is scheduled for December 3, 2003.

Proposed regulations under section 1446 of the Code provide guidance with respect to the withholding tax liability of a partnership with income that is effectively connected with its United States trade or business, all or a portion of which is allocable under section 704 to foreign partners. Rev. Procs. 89-31 and 92-66 obsoleted.

Section 1(h) of the Code was amended by the Jobs and Growth Tax Relief Reconciliation Act of 2003 to provide that certain dividends paid to an individual shareholder from either a domestic corporation or a “qualified foreign corporation” are subject to tax at the reduced rates applicable to certain capital gains. The term “qualified foreign corporation” is defined to include certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the United States, which the Secretary determines is satisfactory for purposes of this provision and which includes an exchange of information program. This notice provides a current list of U.S. income tax treaties that meet the requirements of section 1(h)(11)(C)(i)(II).

Weighted average interest rate update. The weighted average interest rate for October 2003 and the resulting permissible range of interest rates used to calculate current liability for purposes of the full funding limitation of section 412(c)(7) of the Code are set forth.