Final regulations under section 143 of the Code provide rules for calculating the effective rate of mortgage interest. Specifically, the regulations provide that amounts paid for pool mortgage insurance are to be excluded from the calculation of the effective rate of mortgage interest (which results in a lower effective rate of mortgage interest). Generally, interest on bonds issued by state and local governments is excluded from gross income. However, this exclusion does not apply to non-qualified private activity bonds. A qualified mortgage bond or a qualified veterans' mortgage bond (together, “qualified mortgage revenue bonds”) may be a qualified bond. A bond may only be a qualified mortgage revenue bond if the effective rate of mortgage interest on the mortgages provided with the bond proceeds does not exceed the yield on the bonds by more than 1.125 percentage points.

Temporary and proposed regulations under section 41 of the Code provide rules for the computation and allocation of the credit for increasing research activities in the case of a controlled group of corporations or a group of trades or businesses under common control. The regulations also provide rules for making and revoking an election to compute the research credit using the alternative incremental research credit rules. A public hearing on the proposed regulations is scheduled for October 19, 2005. REG-133791-02 withdrawn.

Temporary and proposed regulations under section 41 of the Code provide rules for the computation and allocation of the credit for increasing research activities in the case of a controlled group of corporations or a group of trades or businesses under common control. The regulations also provide rules for making and revoking an election to compute the research credit using the alternative incremental research credit rules. A public hearing on the proposed regulations is scheduled for October 19, 2005. REG-133791-02 withdrawn.

Temporary and proposed regulations under section 6050L provide guidance for the filing of information returns by donees relating to qualified intellectual property contributions. The regulations affect donees receiving net income from qualified intellectual property contributions after June 3, 2004.

Temporary and proposed regulations under section 6050L provide guidance for the filing of information returns by donees relating to qualified intellectual property contributions. The regulations affect donees receiving net income from qualified intellectual property contributions after June 3, 2004.

Proposed regulations under section 7702 of the Code define the attained age of the insured under contracts intending to qualify as life insurance contracts and explain how to use that age to test whether a contract qualifies as a life insurance contract for federal income tax purposes. A public hearing is scheduled for September 14, 2005.

Proposed regulations under section 1503(d) of the Code address various dual consolidated loss issues, including exceptions to the general prohibition against using a dual consolidated loss to reduce the taxable income of any other member of the affiliated group. Section 1503(d) generally provides that a dual consolidated loss of a dual resident corporation cannot reduce the taxable income of any other member of the affiliated group unless, to the extent provided in regulations, such loss does not offset the income of any foreign corporation. Similar rules apply to losses of separate units of domestic corporations. A public hearing is scheduled for September 7, 2005.

Charitable contributions of qualified vehicles. This notice provides interim guidance under section 170(f)(12) of the Code regarding the deductibility of vehicle contributions. The notice explains the new requirements applicable to the acknowledgments that donee organizations provide to vehicle donors. In addition, the notice provides guidance on the new penalties section 6720 imposes on donee organizations that provide a false or fraudulent acknowledgment of a vehicle contribution, or fail to properly furnish the acknowledgment. Sections 170(f)(12) and 6720 are effective for vehicle contributions made after December 31, 2004.

Final regulations under section 7701 of the Code provide that an eligible entity that makes a timely and valid election to be classified as an S corporation will be deemed to have elected to be classified as an association taxable as a corporation.

Temporary and proposed regulations under section 6050L provide guidance for the filing of information returns by donees relating to qualified intellectual property contributions. The regulations affect donees receiving net income from qualified intellectual property contributions after June 3, 2004.

Temporary and proposed regulations under section 6050L provide guidance for the filing of information returns by donees relating to qualified intellectual property contributions. The regulations affect donees receiving net income from qualified intellectual property contributions after June 3, 2004.