Notice 2015-81

a domestic entity that are disregarded)
will apply to acquisitions completed on or
after November 19, 2015. In addition, except as provided in this section 5, the
regulations described in: (i) section
3.01(b) (which provides that inversion
gain includes certain income or gain recognized by an expatriated entity from an
indirect transfer or license of property and
provides aggregate treatment for certain
foreign partnerships for purposes of determining inversion gain) will apply to transfers or licenses of property occurring on
or after November 19, 2015, but only if
the inversion transaction is completed on
or after September 22, 2014; (ii) section
3.02(b) (which requires the recognition of
realized stock gain in certain specified exchanges) will apply to specified exchanges occurring on or after November
19, 2015, but only if the inversion transaction is completed on or after September
22, 2014; and (iii) section 4.03 (which
clarifies certain exceptions to the rules
announced in Notice 2014 –52 regarding
transactions to de-control or significantly
dilute CFCs) will apply to specified transactions and specified exchanges completed on or after November 19, 2015, but
only if the inversion transaction is completed on or after September 22, 2014.
Taxpayers may elect to apply the rules
in sections 4.01(b) of this notice (which
modifies the definition of foreign group
nonqualified property in Notice 2014 –52)
and 4.02(b) of this notice (which provides
a de minimis exception to the rules announced in Notice 2014 –52 regarding
certain distributions of a domestic entity
that are disregarded) to acquisitions completed before November 19, 2015.
No inference is intended regarding the
treatment under current law of the transactions described in this notice. The IRS may
challenge such transactions under applicable
Code provisions or judicial doctrines.
SECTION 6. REQUEST FOR
COMMENTS AND CONTACT
INFORMATION
The Treasury Department and the IRS
expect to issue additional guidance to fur-

ther limit (i) inversion transactions that
are contrary to the purposes of section
7874 and (ii) the benefits of post-inversion
tax avoidance transactions. In particular,
as described in section 5 of Notice 2014 –
52, the Treasury Department and the IRS
continue to consider guidance to address
strategies that avoid U.S. tax on U.S. operations by shifting or “stripping” U.S.source earnings to lower-tax jurisdictions,
including through intercompany debt. Accordingly, the Treasury Department and
the IRS reiterate the requests for comments made in Notice 2014 –52.
Written comments may be submitted to
the Office of Associate Chief Counsel (International), Attention: David A. Levine and
Shane M. McCarrick, Internal Revenue Service, 1111 Constitution Avenue, NW,
Washington, DC 20224. Alternatively, taxpayers may submit comments electronically
to notice.comments@irscounsel.treas.gov.
Comments will be available for public inspection and copying.
The principal authors of this notice are
Mr. Levine and Mr. McCarrick of the
Office of Associate Chief Counsel (International). However, other personnel from
the Treasury Department and the IRS participated in its development. For further
information regarding this notice, contact
Mr. Levine or Mr. McCarrick at (202)
317-6934 (not a toll-free number).

Section 529A INTERIM
GUIDANCE REGARDING
CERTAIN PROVISIONS OF
PROPOSED REGULATIONS
RELATING TO QUALIFIED
ABLE PROGRAMS
Notice 2015– 81
I. PURPOSE AND OVERVIEW
This notice advises how the Treasury
Department and the Internal Revenue Service (IRS) intend to respond to comments
by revising three provisions of the proposed regulations under § 529A of the

Internal Revenue Code when those regulations are finalized. Specifically, commenters noted that the following three requirements for qualified Achieving a
Better Life Experience (ABLE) programs
in the proposed regulations would create
significant barriers to the establishment of
such programs: (1) the requirement to establish safeguards to categorize distributions from ABLE accounts, (2) the requirement to request the taxpayer
identification number (TIN) of each contributor to an ABLE account, and (3) the
requirements for disability certifications,
and in particular the requirement to process disability certifications with signed
physicians’ diagnoses.
II. BACKGROUND
The Stephen Beck, Jr., Achieving a
Better Life Experience Act of 2014
(ABLE Act) was enacted on December
19, 2014, as part of The Tax Increase
Prevention Act of 2014 (P.L. 113–295).
The ABLE Act added § 529A to the Code.
Section 529A allows a State (or State
agency or instrumentality) to establish and
maintain a tax-advantaged savings program under which contributions may be
made to an account (an ABLE account)
for the purpose of providing for the qualified disability expenses of the designated
beneficiary of the account. The designated
beneficiary generally must be a resident of
that State who has a disability that commenced before the designated beneficiary’s 26th birthday and who meets the statutory eligibility requirements. In general,
neither the ABLE account nor distributions from the account are treated as income or resources of a designated beneficiary who is an eligible individual in
determining that designated beneficiary’s
qualification for federal benefits.1 The undistributed income earned in an ABLE
account is not taxable and distributions
made from an ABLE account for qualified
disability expenses of the designated beneficiary are not included in the designated
beneficiary’s gross income for federal income tax purposes. However, the earnings
portion of distributions from an ABLE

1
While section 103 of the ABLE Act (not a tax provision) generally provides that a designated beneficiary’s ABLE account is disregarded in determining the designated beneficiary’s
eligibility under certain federal means-tested programs, there are two exceptions. In the case of the Supplemental Security Income program under title XVI of the Social Security Act,
distributions for certain housing expenses are not disregarded and the balance (including earnings) in an ABLE account is considered a resource of the designated beneficiary to the extent
that balance exceeds $100,000. Section 103 also addresses the impact of an excess balance on the designated beneficiary’s eligibility under the Supplemental Security Income program and
Medicaid.

December 7, 2015

784

Bulletin No. 2015– 49

account in excess of qualified disability
expenses generally is includible in the
gross income of the designated beneficiary.
The Treasury Department and the IRS
released proposed regulations concerning
qualified ABLE programs on June 19,
2015, which were published in the Federal
Register on June 22, 2015 (80 Fed. Reg.
35602). Although the comments received
to date generally have been positive regarding most aspects of the proposed regulations, commenters raised concerns that
the provisions in the proposed regulations
requiring a qualified ABLE program to
establish safeguards to categorize distributions, collect taxpayer identification
numbers (TINs) from contributors, and
process disability certifications with
signed physicians’ diagnoses, if unchanged in the final regulations, would
impose substantial administrative and cost
burdens on the States administering qualified ABLE programs. States indicated
that these burdens were sufficiently significant that they were encountering substantial hurdles in moving forward with creating their ABLE programs because they
did not know if the final regulations would
resolve their concerns regarding these requirements. Several commenters requested that the Treasury Department and
the IRS issue interim guidance on these
three requirements in order to facilitate
the establishment of qualified ABLE programs by the States.
III. DISTRIBUTIONS FOR
QUALIFIED DISABILITY EXPENSES
Consistent with § 529A(e)(5),
§ 1.529A–1(b)(16) of the proposed regulations defines the term “qualified disability expenses” as expenses incurred that
relate to the blindness or disability of the
designated beneficiary of an ABLE account and that are for the benefit of the
designated beneficiary in maintaining or
improving his or her health, independence, or quality of life. As stated in the
preamble to the proposed regulations, the
Treasury Department and the IRS recognize that this term should be broadly construed to permit the inclusion of basic
living expenses and should not be limited
to expenses for items for which there is a
medical necessity or which provide no
benefit to others in addition to the benefit

Bulletin No. 2015– 49

to the eligible individual. Section 1.529A–
2(h)(1) of the proposed regulations provides that a qualified ABLE program must
establish safeguards to allow the ABLE
program to distinguish between distributions used to pay for qualified disability
expenses and other distributions, and to
permit the identification of amounts distributed for housing expenses as defined
for purposes of the Supplemental Security
Income program of the Social Security
Administration.
Commenters noted that, because the
identification of housing expenses is relevant only for purposes of determining eligibility for certain Social Security benefits and has no relevance for federal
income tax purposes, any reference to
classifying distributions as housing expenses should be eliminated from the regulations. The Treasury Department and
the IRS agree, and the final regulations
will not require a qualified ABLE program to identify or record whether distributions were made for housing expenses.
Commenters also expressed concerns
regarding the requirement that a qualified
ABLE program establish safeguards to
distinguish between distributions for qualified disability expenses and other distributions. Commenters emphasized that requiring a qualified ABLE program to
determine how a distribution will be used
prior to making the distribution would be
unduly burdensome for both the program
and the designated beneficiary and explained that the particular use of a distribution might not be known when the distribution is made. The commenters
recommended that any requirement or
suggestion that qualified ABLE programs
will have to classify distributions should
be eliminated from the regulations.
Consistent with the reporting requirements in § 1.529A– 6 of the proposed regulations, which require that qualified
ABLE programs report only aggregate
distributions and distinguish such distributions as basis, earnings, or returned
contributions, the Treasury Department
and the IRS confirm that the final regulations will not require, for any federal income tax purpose, a qualified ABLE program to establish safeguards to distinguish
between distributions used for the payment of qualified disability expenses and
other distributions. The designated bene-

785

ficiary, however, will have to categorize
distributions in order to properly determine the designated beneficiary’s federal
income tax obligations.
IV. REPORTING REQUIREMENTS
REGARDING CONTRIBUTORS
Consistent with §§ 529A(b)(2)(B) and
(b)(6), §§ 1.529A–2(g)(2) and (3) of the
proposed regulations provide that a qualified ABLE program must provide that no
contribution to an ABLE account will be
accepted to the extent that such contribution exceeds certain stated limits. Specifically, the total contributions (whether
from the designated beneficiary or one or
more other persons) to the designated beneficiary’s ABLE account made during the
designated beneficiary’s taxable year must
not exceed the amount in effect under
§ 2503(b) (the annual gift tax exclusion
amount) for the calendar year in which the
designated beneficiary’s taxable year begins. In addition, the aggregate amount of
contributions to an ABLE account must
not exceed the limit established by the
State under § 529(b)(6) (the limit on contributions to a qualified tuition program).
If an excess contribution under § 1.529A–
2(g)(2) or an excess aggregate contribution under § 1.529A–2(g)(3) is allocated
to or deposited into the ABLE account of
a designated beneficiary, § 1.529A–
2(g)(4) of the proposed regulations requires the qualified ABLE program to return that excess contribution or excess
aggregate contribution (with any net income attributable to it, as determined under the applicable rules) to the person who
made that contribution. Because the income earned on that excess contribution
or excess aggregate contribution (if any)
will be taxable to that contributor,
§ 1.529A– 6(d) of the proposed regulations requires a qualified ABLE program
to request the TIN for each contributor to
the ABLE account at the time a contribution is made if the program does not already have a record of that person’s correct TIN.
One commenter suggested that excess
contributions instead could be required to
be paid to the designated beneficiary so
there would be no need for a qualified
ABLE program to procure a contributor’s
TIN. The Treasury Department and the
IRS do not agree with this suggestion be-

December 7, 2015

cause the designated beneficiary’s receipt
of such an excess amount could put the
designated beneficiary at risk of being disqualified for his or her federal benefits that
are income or resource based, a result that
would be inconsistent with the purposes
of the statute.
Commenters are concerned about the
substantial burdens imposed on qualified
ABLE programs if they must request the
TIN of every contributor (if the program
does not already have a record of that
person’s correct TIN) at the time a contribution is made. Commenters explained
that it is likely that contributions will
come from multiple sources and will be
made in a variety of ways (payroll deduction, check, debit, automated clearing
house (ACH) transfers, or others), making
it difficult as a practical matter to obtain
the TIN of the contributor. Commenters
also stated that some contributors, especially those making small gifts, may be
reluctant to make a contribution if a TIN
were required to be provided. Further,
several commenters indicated that systems would be used that would ensure that
qualified ABLE programs do not accept
contributions that would exceed applicable limits.
As an alternative, commenters suggested that a contributor’s TIN be required to be collected only by those qualified ABLE programs that do not have
systems in place to prevent the acceptance
and/or deposit to the ABLE account of a
particular designated beneficiary of an excess contribution or excess aggregate contribution. The commenters expect that
most qualified ABLE programs will adopt
the infrastructure currently utilized by
State § 529 qualified tuition programs either to reject such excess contributions or
to escrow and immediately refund the excess contributions. Other commenters recommend that the obligation to request a
contributor’s TIN should only arise in the
unlikely circumstance in which an excess
contribution or excess aggregate contribution has been deposited into an individual’s
ABLE account and has accrued earnings or
losses. One commenter suggested eliminating the TIN requirement altogether while
another suggested the collection of TINs
should be required only in the case of contributions over a specified dollar amount.

December 7, 2015

In consideration of these comments,
the Treasury Department and the IRS believe that a modification to § 1.529A– 6(d)
of the proposed regulations is appropriate.
Consequently, it is anticipated that the
final regulations will eliminate the requirement to request the TIN of each contributor at the time a contribution is made
(if the program does not already have a
record of that person’s correct TIN) if the
qualified ABLE program has a system in
place to identify and reject excess contributions and excess aggregate contributions before they are deposited into an
ABLE account. However, in the event an
excess contribution or excess aggregate
contribution is deposited into an ABLE
account, the qualified ABLE program will
be required to request the TIN of the contributor making the excess contribution or
excess aggregate contribution.
V. ELIGIBLE INDIVIDUAL, FILING
OF DISABILITY CERTIFICATION
AND PHYSICIAN DIAGNOSIS
Consistent with § 529A(e)(1),
§ 1.529A–2(d)(1) of the proposed regulations provides that a qualified ABLE program must specify the documentation that
an individual must furnish, both at the
time an ABLE account is established for
the designated beneficiary of that account
and thereafter, to ensure that the designated beneficiary of the ABLE account is,
and continues to be, an eligible individual.
One way to qualify as an eligible individual under § 529A(e)(1) is to have a disability certification filed with the Secretary of the Treasury. Under the proposed
regulations, a disability certification is
deemed to be filed with the Secretary once
the qualified ABLE program has received
the disability certification or a disability
certification is deemed to have been received under the rules of the qualified
ABLE program, which information the
qualified ABLE program must file with
the IRS in accordance with the filing requirements under § 1.529A–5(c)(2)(iv).
Section 529A(e)(2)(A) defines a disability
certification as “a certification to the satisfaction of the Secretary” by the individual or the parent or guardian of the individual that (i) certifies that the individual
meets the disability standard and (ii) includes a copy of the individual’s diagnosis
signed by a licensed physician. Section

786

1.529A–2(e) defines the disability certification to include the required certifications and a copy of the signed diagnosis,
but also provides for certain conditions to
be deemed to meet the requirements of
filing a disability certification.
States and potential qualified ABLE
program administrators expressed concerns about their responsibilities and potential liabilities for receiving and safeguarding medical information contained
in a signed diagnosis, particularly when
they do not anticipate having any expertise or ability to evaluate that medical
information. The commenters emphasized
that qualified ABLE programs would incur unmanageable costs and burdens in
trying to comply with applicable laws imposing system and other requirements on
those in possession of medical records, as
well as in implementing systems to receive and store paper documentation. The
commenters also expressed the concern
that, if these costs and burdens cannot be
minimized, some States may not proceed
with the implementation of qualified
ABLE programs for their residents. The
commenters recommended that a qualified
ABLE program be permitted to open an
ABLE account on the basis of a certification by the person opening the ABLE account, signed under penalties of perjury,
that the individual has a condition that
meets all of the required elements to qualify as an eligible individual and that a
diagnosis signed by a physician regarding
the relevant impairment or impairments
has been obtained.
After consideration of these comments,
the Treasury Department and the IRS
have concluded that a certification under
penalties of perjury that the individual (or
the individual’s agent under a power of
attorney or a parent or legal guardian of
the individual) has the signed physician’s
diagnosis, and that the signed diagnosis
will be retained and provided to the ABLE
program or the IRS upon request, is adequate to satisfy the Secretary with regard
to the requirements of §§ 529A(e)(1)(B)
and 529A(e)(2)(A) pertaining to the filing
of a disability certification. Accordingly,
the Treasury Department and the IRS intend, in the final regulations, to permit
such a certification of eligibility for purposes of satisfying the requirement for
filing a disability certification. The Trea-

Bulletin No. 2015– 49

sury Department and the IRS anticipate
that the final regulations will contain further details with regard to the information
required to be included in the certification,
annual recertifications, and annual reporting. Based on the comments received, the
required information is likely to include
the statutory basis for the individual’s eligibility (blindness or disability under title
II or XVI of the Social Security Act, or a
disability certification); confirmation that
the blindness or disability occurred before
age 26; the existence of an impairment
that satisfies the required level of marked
and severe functional limitations, if necessary for eligibility; and, if necessary for
eligibility, confirmation of receipt of a
written diagnosis relating to the disability,
the name and address of the diagnosing
physician, the date of the diagnosis, and
identification of the applicable diagnostic

Bulletin No. 2015– 49

code from those listed on Form 5498 –
QA. The final regulations may also provide that the certification may include information provided by the physician as to
the categorization of the disability that
could determine, under the particular
State’s program, the appropriate frequency of required recertifications.
VI. RELIANCE
The Treasury Department and the IRS
intend that the final regulations, when issued, will address the three identified issues in the manner indicated in this notice.
Pending the issuance of final regulations,
taxpayers may rely on the guidance contained in this notice. In particular, if a
certification used to open a qualified
ABLE account before the issuance of final
regulations is consistent with the discussion in section V of this notice but does

787

not contain other information required by
the final regulations, the account will not
lose its qualification as an ABLE account
solely for that reason. To the extent that
additional information is required by the
final regulations, the final regulations will
provide a transition period to facilitate
compliance with the additional requirements.
VII. DRAFTING INFORMATION
The principal authors of this notice are
Terri Harris and Sean Barnett, Office of
Associate Chief Counsel (Tax Exempt
and Government Entities). For further
information regarding this notice, contact Ms. Harris at (202) 317-4541, or
Mr. Barnett at (202) 317-5800 (not tollfree numbers).

December 7, 2015