Notice 2006-50

ject to withholding and payment of employment taxes. See § 1.62–2(h)(2)(i)(B).
(1) Any periodic variable rate payment
that relates to miles in excess of the business miles substantiated by the employee
and that the employee fails to return within
a reasonable period, or any portion of a periodic fixed payment that relates to a period during which the employee is treated
as not covered by the FAVR allowance and
that the employee fails to return within a
reasonable period, is subject to withholding and payment of employment taxes no
later than the first payroll period following the end of the reasonable period. See
§ 1.62–2(h)(2)(i)(A).
(2) Any optional high mileage payment
is subject to withholding and payment of
employment taxes when paid.

SECTION 1. PURPOSE
This revenue procedure provides the
procedures under which the whaling expenses of an individual recognized by
the Alaska Eskimo Whaling Commission
(AEWC) as a whaling captain charged
with the responsibility of maintaining and
carrying out sanctioned whaling activities
are substantiated for purposes of Internal
Revenue Code § 170(n), as enacted by the
American Jobs Creation Act of 2004 and
effective for whaling expenses incurred
after December 31, 2004. Pub. L. No.
109–357, § 335.
SECTION 2. BACKGROUND

Rev. Proc. 2006–50

.01 The AEWC was formed in 1977
to represent the Alaskan whaling communities in efforts to preserve the Eskimo
subsistence hunting of bowhead whales
(Baleana mysticetus). The AEWC’s purpose is to protect the bowhead whale and
its habitat; preserve Eskimo subsistence
bowhead whaling and associated Eskimo
culture, traditions, and activities; and
conduct research and education activities
related to bowhead whales.
.02 The AEWC recognizes certain individuals as whaling captains and provides
rules for the conduct of sanctioned whaling activities. It requires these captains to
file reports detailing their whaling activities.
.03 Section 170(n) provides that an
individual recognized by the AEWC as a
whaling captain, who is responsible for
maintaining and carrying out sanctioned
whaling activities and engages in these
activities during the taxable year, may
claim a charitable contribution deduction
not exceeding $10,000 per taxable year
for the reasonable and necessary whaling
expenses paid in carrying out sanctioned
whaling activities.
Section 170(n) is
effective for contributions made after December 31, 2004.
.04 Under § 170(n)(2)(B), “whaling expenses” include amounts paid for (1) the
acquisition and maintenance of whaling
boats, weapons, and gear used in sanctioned whaling activities, (2) the supplying
of food for the crew and other provisions

November 20, 2006

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SECTION 11. EFFECTIVE DATE
This revenue procedure is effective
for (1) deductible transportation expenses
paid or incurred on or after January 1,
2007, and (2) mileage allowances or reimbursements paid to an employee or
to a charitable volunteer (a) on or after
January 1, 2007, and (b) with respect to
transportation expenses paid or incurred
by the employee or charitable volunteer
on or after January 1, 2007.
SECTION 12. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2005–78 is superseded.
DRAFTING INFORMATION
The principal author of this revenue
procedure is John Roman Faron of the Office of Associate Chief Counsel (Income
Tax and Accounting). For further information regarding this revenue procedure,
contact Mr. Faron at (202) 622–4930 (not
a toll-free call).

26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I, § 170.)

for carrying out sanctioned whaling activities, and (3) the storage and distribution of
the catch from sanctioned whaling activities.
.05 Section 170(n)(3) defines “sanctioned whaling activities” as subsistence
bowhead whale hunting activities conducted pursuant to the management plan
of the AEWC.
.06 Section 170(n)(4) directs the Secretary to issue guidance requiring taxpayers claiming a deduction under § 170(n)
to substantiate their whaling expenses by
maintaining appropriate written records of
the time, place, date, amount, and nature
of the expenses and of the taxpayer’s eligibility for the deduction.
.07 A whaling captain may deduct an
amount for whaling expenses only as an
itemized deduction. See § 63(d).
SECTION 3. SCOPE
This revenue procedure applies to taxpayers who are recognized by the AEWC
as whaling captains and who pay whaling
expenses during the taxable year in carrying out sanctioned whaling activities as
captain of a whaling crew.
SECTION 4. SUBSTANTIATION OF
EXPENSES
.01 In general. A taxpayer within the
scope of this revenue procedure is required
to substantiate a deduction for whaling expenses by maintaining adequate records of
the elements of time, place, date, amount,
and nature of the expenses as required under section 4.02, and of the taxpayer’s eligibility for the deduction as required under
section 4.03, of this revenue procedure.
.02 Requirements for adequate records
of whaling expenses. A taxpayer within the
scope of this revenue procedure must meet
each of the following adequate records requirements:
(1) A taxpayer satisfies the adequate
records requirement of this revenue procedure by maintaining written records that
include—
(A) An expense report (such as an account book, diary, log, statement of expense, trip sheets, or similar record that
lists each expense); and

2006–47 I.R.B.

(B) Documentary evidence (such as a
receipt, bill, invoice, or credit card record
of charge) for each expense of $75 or more.
(2) Adequate records must document
each applicable element of a whaling expense, including the following information:
(A) Time and date of departure and return for each trip for sanctioned whaling
activities;
(B) Place or area of sanctioned whaling
activities;
(C) Amount of each separate expense,
such as the cost of weapons; and
(D) The nature of each expense including a description of the purpose of the expense and the relationship of the expense
to sanctioned whaling activities.
(3) The expense report, in combination
with the documentary evidence, must be
sufficient to establish each element of a
whaling expense. It is not necessary to
record information in an expense report
that duplicates information reflected on
documentary evidence (such as a receipt)
as long as the expense report and the
documentary evidence substantiate each
expense in an orderly manner.
(4) Adequate records must be made at
or near the time of the expenditure or activity. Records are made at or near the time
of the expenditure or activity if information relating to each element (time, place,
date, amount, and nature of the expense) is
recorded at a time when the taxpayer has
full present knowledge of the information.
.03 Substantiation of eligibility for the
deduction. A taxpayer must substantiate
eligibility to deduct whaling expenses under § 170(n) by maintaining documentation that the taxpayer is recognized as a
whaling captain by the AEWC and copies
of all reports the taxpayer submits to the
AEWC.
.04 Substantiation under revenue procedure required. An expense that is not
substantiated in accordance with this revenue procedure may not be deducted as
a whaling expense under § 170(n). Except as provided in section 5.02 of this revenue procedure, a taxpayer’s uncorroborated statement or estimates of expenses
unsupported by adequate records do not
constitute substantiation for purposes of
§ 170(n).

2006–47 I.R.B.

SECTION 5. MAINTENANCE OF
RECORDS
.01 A taxpayer must maintain with the
taxpayer’s books and records, and be able
to produce upon request of the Internal
Revenue Service, the documentation described in section 4 of this revenue procedure. A taxpayer is not required to attach
the documentation to the taxpayer’s tax return.
.02 Notwithstanding section 4.04 of
this revenue procedure, a taxpayer who
establishes that a failure to produce adequate records is due to the loss of the
records through circumstances beyond the
taxpayer’s control, such as destruction
by fire, flood, earthquake, or other casualty, may substantiate a deduction under
§ 170(n) by a reasonable reconstruction of
the previously-maintained documentation.
SECTION 6. SPECIAL RULES
.01 A taxpayer may not deduct expenses under both § 170(n) and another
provision of the Code.
.02 Expenses relating to a whaling boat
that is used for sanctioned whaling activities and other activities in a taxable year
must be allocated between the sanctioned
whaling activities and other activities by
comparing the total number of days the
whaling boat is used for sanctioned whaling activities to the total number of days in
the taxable year.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective for
whaling expenses paid after November 20,
2006.
SECTION 8. PAPERWORK
REDUCTION ACT
The collection of information contained in this revenue procedure has been
reviewed and approved by the Office
of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2041.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.

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The collection of information in this
revenue procedure is in sections 4 and 5.
This information is required to substantiate the amount of expenses paid in support of native Alaskan subsistence whaling and eligibility to deduct the expenses.
This information will be used to substantiate expenses paid during the taxable year
in carrying out sanctioned whaling activities upon audit. The collection of information is required to obtain a benefit. The
likely respondents are individuals recognized as whaling captains by the AEWC.
The estimated total annual recordkeeping burden is 48 hours.
The estimated annual burden per record
keeper varies from one to three hours, depending on individual circumstances, with
an estimated average of two hours. The estimated number of record keepers is 12 to
24.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and return information are confidential, as required by
§ 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Christian Wood of the Office
of the Associate Chief Counsel (Income
Tax & Accounting). For further information regarding this revenue procedure,
contact Jeffrey Rodrick at (202) 622–4930
(not a toll-free call).
26 CFR 601.602: Tax forms and instructions.
(Also Part I, § 911.)

Rev. Proc. 2006–51
SECTION 1. PURPOSE
This revenue procedure amplifies Rev.
Proc. 2005–70, 2005–47 I.R.B. 979,
which sets forth inflation adjusted items
for 2006.
SECTION 2. BACKGROUND
Subject to limitations, section 911
of the Internal Revenue Code allows a
qualified individual to elect to exclude
from gross income the foreign earned

November 20, 2006