Tax lien. This ruling under section 6323(a) of the Code concludes that actual notice or knowledge of the existence of a section 6321 federal tax lien is irrelevant for purposes of section 6323(a) lien priority.

LIFO; price indexes; department stores. The August 2003 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, August 31, 2003.

REG-157164-02

Final, temporary, and proposed regulations under sections 168 and 1400L of the Code provide rules for the additional first-year depreciation allowance. The regulations provide the requirements that must be met for depreciable property to qualify for the additional first-year depreciation allowance and instruct taxpayers how to determine the additional first-year depreciation allowance and the amount of depreciation otherwise allowable for the property. The regulations apply to property acquired by a taxpayer after September 10, 2001 (for the additional 30-percent first-year depreciation allowance), and for property acquired by a taxpayer after May 5, 2003 (for the additional 50-percent first-year depreciation allowance). A public hearing on the proposed regulations is scheduled for December 18, 2003.

Proposed regulations under section 482 of the Code explain that when controlled taxpayers transfer goods, services, intangibles or other items of value, the amount charged must be consistent with the amount charged at arm's length in the same or comparable transactions. These regulations provide updated guidance on determining the arm's length charge where one controlled taxpayer performs services that benefit one or more other controlled taxpayers. These regulations also provide updated guidance on the allocation among controlled taxpayers of income from intangibles, in particular when one controlled taxpayer performs activities that increase (or are expected to increase) the value of an intangible owned by another controlled taxpayer. A public hearing is scheduled for January 14, 2004.

Penalties; substantial understatement. Guidance is provided concerning when information shown on a return in accordance with the applicable forms and instructions will be adequate disclosure for purposes of reducing an understatement of income tax under sections 6662(d) and 6694(a) of the Code.

Julie Renee Phelan Foundation, formerly Assured Nonprofit Services, Inc., of Sumner, WA, and Philanthropic Charities, Inc., of Castro Valley, CA, no longer qualify as organizations to which contributions are deductible under section 170 of the Code.

This notice announces that the Internal Revenue Service will follow the Tax Court's decision in Walton v. Commissioner, 115 T.C. 589 (2000), holding that section 25.2702-3(e), Example 5, of the Gift Tax Regulations is invalid.

Travel and entertainment expenses. This ruling specifies when an employer's use of electronic substantiation and expense reporting, as part of its travel and entertainment expense reimbursement procedures, satisfies the “accountable plan” requirements.