July 15, 2005

Page 1

Memo

TO: / All Attorneys and Paralegals
FROM: / XXX
DATE: / XXX
RE: / Firm Policy for Compliance with Reportable Transaction Returns and Advisee List Requirements

Attached is a Policy which the Firm has adopted in order to comply with recent changes to the Internal Revenue Code relating to persons who provide advice and assistance for certain transactions that may be viewed as abusive from a Federal tax standpoint. The revised Code provisions require that the Firm maintain a list relating to persons to whom we provide tax advice on certain types of transactions and to file a return with respect to each such transaction. These requirements may apply to the Firm if the Firm provides tax advice with respect to the transaction and receives or expects to receive a specified minimum fee in connection with the transaction. The amount of the minimum fee which will trigger the Firm’s obligation is $250,000 if all persons to which the Firm makes a tax statement are C corporations (or partnerships with only C corporations as partners or a trust with only C corporations as beneficiaries). Otherwise, the minimum fee is generally $50,000. However, with respect to a listed transaction (i.e., a transaction which is the same as or similar to a type of transaction that the IRS has determined to be a tax avoidance transaction and has identified as such by published guidance), these amounts are reduced to $25,000 and $10,000, respectively.

If the fee the Firm expects or receives with respect to a transaction meets the above-identified minimum fee threshold, and if the Firm provides an oral or written statement relating to a Federal tax aspect of the transaction, the Firm may be subject to the list maintenance and disclosure requirements. In that circumstance, you should contact XXX or XXX to discuss whether the Firm’s involvement with the transaction may subject the Firm to the list maintenance and disclosure requirements. Of course, the tax department should be consulted for substantive input regarding any tax advice we might give in connection with any transaction of a size sufficient to generate the minimum fee.

We appreciate your cooperation with this compliance effort.

[Date]

Page 1

Memo

TO: / All Attorneys and Paralegals
FROM: / XXX
DATE: / XXX
RE: / Firm Policies for Compliance with Reportable Transaction Returns and Advisee List Requirements

Congress recently revised the Internal Revenue Code (the "Code") with regard to persons who provide advice and assistance for certain transactions that may be abusiveand that are referred to as "Reportable Transactions". The revisions require the Firm and its clients, with respect to many routine business transactions, which may include settlement agreements in litigation matters, to file returns disclosing details of the transactions to the Internal Revenue Service (the “IRS”). The IRS had previously issued regulations that imposed certain reporting requirements(the “Tax Shelter Regulations”), which the IRS has stated it will continue to use in part to enforce the new Code provisions dealing with Reportable Transactions. This memorandum sets forth important Firm policies for complying with the Reportable Transaction requirements. Every attorney in the Firm should become familiar with these requirements and Firm policies. You should contact XXX or XXXregarding any questions or issues relating to the Reportable Transaction requirements or related Firm policies.

The Reportable Transaction requirements impose (1) list maintenance requirements upon tax advisors, and (2) disclosure requirements upon both tax advisors and taxpayers. Under the list maintenance requirements, the Firm is required to maintain a list with respect to each transaction that constitutes a “Reportable Transaction” if the Firm meets certain threshold requirements. The Firm must retain each list for a period of seven years, and provide it to the IRS upon request within 20 days. Under the disclosure requirements, both tax advisors and clients that participate in Reportable Transactions must disclose these transactions to the IRS. Tax advisors must use Form 8264 and clients must use Form 8886 to make the disclosures. The foregoing requirements generally apply with respect to transactions for which the tax advisor provides material aid, assistance or advice on or after October 22, 2004.

The term Reportable Transaction is quite broad and potentially encompasses a number of routine business transactions. For this reason, it is important that each attorney become familiar with each type of transaction that may constitute a Reportable Transaction (discussed below). Failure to comply with the Reportable Transaction requirements could subject the Firm to liability for substantial penalties.

The Firm will be subject to the list maintenance requirements and required to file a return with respect to a transaction if, in addition to the transaction constituting a Reportable Transaction, the Firm (i) receives or expects to receive a specified minimum fee in connection with the transaction, and (ii) provides tax advice with respect to the transaction (even if the advice is casual in nature or is provided by an attorney outside the Tax Department). The minimum fee requirement is discussed below. In general, the Firm will be treated as providing tax advice if it provides a statement, oral or written, that relates to a federal tax aspect of the transaction that causes it to be a Reportable Transaction. If the Firm provides no such tax advice with respect to the transaction or does not receive the minimum fee amount, the Firm will not be subject to the list maintenance and return requirements. However, a client may be subject to the disclosure requirements irrespective of the Firm’s fee and whether the Firm provides tax advice.

If the Firm is a material advisor with respect to a Reportable Transaction(i.e., it receives or expects to receive the minimum fee and makes a tax statement), then the Firm must file a return with the IRS on From 8264 within thirty days of becoming a material advisor. If the return is not filed within the thirty days then the Firm will be subject to substantial penalties.

Determining Whether the Reportable
Transaction Requirements Apply

A.Transactions that May Constitute Reportable Transactions

1.Confidential Transaction. A confidential transaction is a transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a minimum fee. A transaction is considered to be offered to a taxpayer under conditions of confidentiality if the advisor who is paid the minimum fee places a limitation on disclosure by the taxpayer of the tax treatment or tax structure of the transaction and the limitation protects the confidentiality of that advisor’s tax strategies. Under this test, a transaction is treated as confidential even if the conditions of confidentiality are not legally binding on the taxpayer. A claim that a transaction is proprietary or exclusive is not treated as a limitation on disclosure if the advisor confirms to the taxpayer that there is no limitation on disclosure of the tax treatment or tax structure of the transaction.

The regulations define the term “tax structure” very broadly to include “any fact that may be relevant to understanding the purported or claimed federal income tax treatment of the transaction.” The regulations define the “tax treatment” of a transaction as the purported or claimed federal tax treatment of the transaction.

A transaction is within the confidential transaction test category only if the taxpayer has paid an advisor a minimum fee. For purposes of the confidentiality rules, the minimum fee is $250,000 for a transaction if the taxpayer is a corporation or a partnership or trust, all of the partners or beneficiaries of which are corporations. Otherwise, the minimum fee is $50,000.

2.Loss Transaction. The loss transaction category may apply to many routine business transactions. A transaction may be a loss transaction if the taxpayer is a corporation and the taxpayer claims a loss under Section 165 (essentially all losses and deductions) with respect to the transaction of at least $10 million in any single year, or $20 million in the year of the transaction and the five succeeding years combined. For taxpayers that are not corporations, the amounts are generally reduced to $2 million and $4 million, respectively. The single year amount is reduced to $50,000 for individuals and trusts that claim a loss in connection with a Section 988 transaction (involving foreign currency). The IRS has issued a list of certain losses that are not taken into account for purposes of determining whether a transaction is a loss transaction. In appropriate situations you should contact XXX or XXXfor this information.

3.Transaction with a Significant Book-Tax Difference. A transaction with a significant book-tax difference is a transaction where the treatment for federal income tax purposes of any item or items from the transaction differs by more than $10 million on a gross basis from the treatment of the item or items for book purposes in any taxable year. This category applies only to (i) taxpayers that are reporting companies under the Securities Exchange Act of 1934 and related business entities, or (ii) business entities that have $250 million or more in gross assets for book purposes. The IRS has issued a list of book-tax differences that are not taken into account for purposes of determining whether a transaction falls within this category. In appropriate situations you should contact XXX or XXXfor this information.

4.Listed Transaction. A listed transaction is a transaction that is the same or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by published guidance as a listed transaction. The IRS continually adds transactions to this category. A list of listed transactions as of the date of this memorandum is attached hereto as Exhibit A. For a continually updated list, search for the term “listed transaction” at Most routine business transactions should not fall within this category.

5.Transaction with Contractual Protection. A transaction with contractual protection is a transaction for which the taxpayer or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained. This category also includes a transaction for which fees are contingent on the taxpayer’s realization of tax benefits from the transaction. For purposes of this category, the term “fees” refers to fees paid by or on behalf of the taxpayer or a related party to any person who makes or provides tax advice with respect to the transaction. The IRS has issued a list of contractual protections that are not taken into account for purposes of determining whether a transaction falls within this category. In appropriate situations you should contact XXX or XXXfor this information.

6.Transaction Involving a Brief Asset Holding Period. A transaction involving a brief asset holding period is a transaction resulting in the taxpayer claiming a tax credit exceeding $250,000 if the underlying asset giving rise to the tax credit is held by the taxpayer for less than 45 days. The IRS has issued a list of certain brief holding periods that are not taken into account for purposes of determining whether a transaction falls within this category. In appropriate situations you should contact XXX or XXXfor this information.

B.Minimum Fee

The Firm is subject to the list maintenance rules and disclosure requirements if, in addition to providing tax advice (a “tax statement”) with respect to a Reportable Transaction, it receives or merely expects to receive a fee in connection with the transaction that exceeds the applicable minimum amount. All fees are included for this purpose, not just those attributable to tax advice. In general, the minimum fee is $250,000 if all persons to which the Firm makes a tax statement (or for whose benefit the Firm makes a tax statement) are C corporations (or partnerships with only C corporations as partners or a trust with only C corporations as beneficiaries). Otherwise, the minimum fee is generally $50,000. However, with respect to a listed transaction, these amounts are reduced to $25,000 and $10,000, respectively.

Contents of the List

In general, the list must contain the following items:

1.The name, address, and taxpayer identification number (“TIN”) of each person to whom (or for whose benefit) the Firm provides a written or oral tax statement (i.e., tax advice);

2.The TIN, if any, of each transaction;

3.If applicable, the number of units (e.g., profits percentage or number of shares) acquired by each person required to be included on the list, if known by the Firm;

4.The date on which each person required to be included on the list entered into each transaction, if known by the Firm;

5.The amount invested in each transaction by each person required to be included on the list, if known by the Firm;

6.A detailed description of each transaction that describes both the tax structure and its expected tax treatment;

7.A summary or schedule of the tax treatment that each person is intended orexpected to derive from participation in each transaction, if known by the Firm;

8.Copies of any additional written materials, including tax analyses or opinions,relating to each transaction that are material to an understanding of the purportedtax treatment or tax structure of the transaction that have been shown or providedto any person who acquired an interest in the transaction; and

9.For each person required to be on the list, the name of the person from whom the interest was acquired.

Firm Policies and Procedures

This memorandum provides only a general discussion of the Reportable Transaction requirements, which are complex and replete with caveats and exceptions. Accordingly, if you have any questions, you should contact XXX or XXXfor advice concerning application of the Reportable Transaction requirements. In addition, the Firm has instituted the following procedures:

1.Contact Tax Department.

In any substantial transaction, the Firm may provide tax advice of some sort unless the Firm specifically disclaims that it is providing tax advice (in which case, we recommend that the disclaimer be acknowledged in writing by the client). Thus, if the fee expected or received meets the previously referenced minimum fee thresholds, the Firm will be subject to the list maintenance and disclosure requirements if the transaction is a Reportable Transaction. Therefore, you should contact XXX or XXX to discuss whether the transaction would subject the Firm to the list maintenance and disclosure requirements.

2.List Maintenance and File Retention.

If the Firm is subject to the list maintenance requirements with respect to a transaction, the responsible attorney should insure that a list is prepared and sent to the Firm’s Reportable Transaction Coordinator (who initially will be XXX) along with a completed Reportable Transaction List Maintenance Transmittal Form (attached hereto as Exhibit B). In addition, a copy of the list should be retained in the client file maintained by the attorney, which file should be retained for at least seven years after the Firm last provides tax advice with respect to the transaction.

3.IRS Requests.

If an attorney receives a request from the IRS to produce a list, the attorney should immediately notify the Reportable Transaction Coordinator, and should also send the Reportable Transaction Coordinator a completed Notification of Request to Produce a Reportable Transaction List form (attached hereto as Exhibit C). In addition, the client should be notified by the attorney in writing that the Firm has received a request for the list and intends to comply with such request.

4.ReturnRequirements.

If the Firm is subject to completing a return for a reportable transaction the responsible attorney should contact the Reportable Transaction Coordinator for assistance in completing Form 8264 as soon as possible in order for the Firm to avoid being subject to penalties for failure to timely file a return.

Exhibit A

LISTED TRANSACTIONS

(Current as of January, 2005)

  • Notice 2004-31: Intercompany Financing Through Partnerships
  • Notice 2004-30: S Corporation Tax Shelter Involving Shifting Income to Tax Exempt Organization
  • Notice 2004-20: Abusive Foreign Tax Credit Transactions
  • Notice 2004-19: Withdraws Notice 98-5 and describes strategy to address abusive FTC transactions.
  • Revenue Ruling 2004-20: Abusive Transactions Involving Insurance Policies in IRC 412(i) Retirement Plans
  • Revenue Ruling 2004-04: Prohibited Allocations of Securities in an S Corporation
  • Notice 2004-8: Abusive Roth IRA Transactions
  • Notice 2003-81: Offsetting Foreign Currency Option Contracts
  • Notice 2003-77: Improper use of contested liability trusts to attempt to accelerate deductions for contested liabilities under IRC 461(f)
  • Notice 2003-55: Accounting for Lease Strips and Other Stripping Transactions
  • Revenue Ruling 2003-96: Reallocation of income and deductions among unrelated parties to a lease strip.
  • Notice 95-53: Lease Strips — Modified and superseded by Notice200355 above
  • Notice 2003-54: Common Trust Fund Straddle Tax Shelter
  • Notice 2003-47: Transfers of Compensatory Stock Options to Related Persons
  • Notice 2003-24: Qualified Asset Accounts of Funded Welfare Benefit Plans
  • Notice 2003-22: Certain Offshore Deferred Compensation Arrangements
  • Revenue Ruling 2003-6: Abuses Associated with S Corp ESOPs
  • Notice 2002-70: Certain Reinsurance Arrangements
  • Revenue Ruling 2002-69: Lease In / Lease Out or LILO Transactions
  • Revenue Ruling 99-14: Lease In / Lease Out or LILO Transactions
  • Coordinated Issue Paper: Losses Claimed and Income to be Reported from Lease In / Lease Out transactions
  • Notice 2002-65: Pass-through Entity Straddle Tax Shelter
  • Notice 2002-50: Partnership Straddle Tax Shelter
  • Revenue Ruling 2002-46: § 401k Accelerators
  • Revenue Ruling 2002-73: Modifies Rev. Rul. 2002-46 for taxpayers electing to change method of accounting.
  • Notice 2002-48: § 401(k) Accelerator not reportable
  • Notice 2002-35: Notional Principal Contracts
  • Revenue Ruling 2002-30: Notional Principal Contracts
  • Notice 2002-21: Inflated Basis “CARDS” Transactions
  • Notice 2001-45: § 302 Basis-Shifting Transactions
  • Notice 2001-17: § 351 Contingent Liability
  • Notice 2001-16: Intermediary Transactions
  • Coordinated Issue Paper: Intermediary Transactions
  • Notice 2000-61: Guam Trust
  • Notice 2000-60: Stock Compensation Transactions
  • Notice 2000-44: Inflated Partnership Basis Transactions
  • Revenue Ruling 2000-12: Debt Straddles
  • Treasury Regulation § 1.7701(1)-3: Fast Pay or Step-Down Preferred Transactions
  • Notice 99-59: BOSS Transactions
  • Revenue Ruling 99-14: Lease-In / Lease-Out or LILO Transactions
  • Treasury Regulation § 1.643(a)-8: Certain Distributions from Charitable Remainder Trusts
  • ASA Investing Partnership v. Commissioner: Transactions similar to that described in the ASA Investing litigation and in ACM Partnership v. Commissioner, 157 F.3d 231 (3rd Cir. 1998)
  • Notice 98-5: Part II -- Foreign Tax Credit Transactions
  • Notice 95-53: Lease Strips
  • Notice 95-34: Certain Trusts Purported to be Multiple Employer Welfare Funds Exempted from the Lists of §§ 419 and 419A
  • Revenue Ruling 90-105: Certain Accelerated Deductions for Contributions to a Qualified Cash or Deferred Arrangement or Matching Contributions to a Defined Contribution Plan

Exhibit B