Investor control and general public; taxation of variable contracts; insurance and annuities. This ruling effectively excludes classes of beneficial ownership from the definition of “general public” as defined in Rev. Rul. 81-225, 1981-2 C.B. 12, for purposes of investor control analysis. Investor control analysis is used to determine who owns (and is taxed on) income generated inside of variable contracts (e.g., variable life insurance contracts or variable annuity contracts). Rev. Ruls. 81-225 and 2003-92 clarified and amplified.

Section 357(c). Section 357(c)(1) of the Code does not apply to transactions that qualify as reorganizations described in sections 368(a)(1)(A), (C), (D), or (G), and to which section 351 applies, provided certain requirements are satisfied. Rev. Ruls. 75-161 and 76-188 obsoleted. Rev. Rul. 78-330 modified.

Final regulations under section 863 of the Code contain rules governing the source of income from certain space and ocean activities. They also contain rules governing the source of income from certain communications activities. The regulations affect persons who derive income from activities conducted in space or on or under water not within the jurisdiction of a foreign country, possession of the United States, or the United States (in international water). The regulations also affect persons who derive income from transmission of communications.

Final regulations under sections 446(e) and 1016(a)(2) of the Code provide rules for determining which changes in depreciation or amortization are, and are not, changes in method of accounting.

Final regulations under section 6664 of the Code provide circumstances that end the period within which a taxpayer may file an amended return that constitutes a qualified amended return. Qualified amended returns are used to determine whether an underpayment exists that is potentially subject to the accuracy-related penalty on underpayments.

This procedure provides exceptions to the contractual protection filter, which is a reportable transaction under regulations section 1.6011-4(b)(4). Rev. Proc. 2004-65 modified and superseded.

Permitted benefits; defined benefit plan. This notice, which is a notice of intent to propose regulations, requests comments regarding the types of benefits permitted to be provided in a qualified defined benefit plan.

The IRS has revoked its determination that Hawaii Credit Counseling Service of Honolulu, HI; and Lighthouse Credit Foundation, Inc., of Largo, FL, qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Code.

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

Insurance companies; closing agreements. This notice requests comments on how the Service may improve the procedures for obtaining closing agreements to correct inadvertent failures of life insurance contracts or annuity contracts to satisfy the requirements of sections 817(h), 7702, or 7702A. The Service is also asking for comments on the four model closing agreements provided in this notice.

Insurance companies; modified endowment contracts. This procedure modifies Rev. Proc. 2001-42, 2001-2 C.B. 212, which provides procedures by which an issuer may remedy an in-advertent non-egregious failure to comply with the modified endowment contract (MEC) rules under section 7702A of the Code. The procedure updates information regarding the indices referenced in Rev. Proc. 2001-42 and also changes one of the indices. It allows the electronic submission of information and templates and changes the address to which payments required under the closing agreement are sent. Rev. Proc. 2001-42 modified and amplified.

This document contains corrections to proposed regulations (REG-208270-86, 2006-42 I.R.B. 698) regarding the determination of the items of income or loss of a taxpayer with respect to a section 987 of the Code qualified business unit as well as the timing, amount character, and source of any section 987 gain or loss.

This document cancels a public hearing on proposed regulations (REG-136806-06, 2006-47 I.R.B. 950) modifying the standards for treating payments in lieu of taxes (PILOTs) as generally applicable taxes for purposes of the private security or payment test under section 141 of the Code.