Tax shelter final regs.

Treasury and the IRS issued tax shelter final regulations on taxpayer disclosure and material advisor list maintenance for reportable transactions. This article focuses on certain differences between the final and temporary regulations and significant issues the former present.

On Feb. 28, 2003, Treasury and the IRS issued tax shelter final regulations (1) on the disclosure and list maintenance of reportable transactions. Although the final regulations addressed many of the shortcomings of the October 2002 temporary regulations (2) and received generally positive reviews, difficult interpretive and administrative issues remain for taxpayers and their advisors.

A two-part article in the February and March 2003 issues (3) summarized the history of Treasury's efforts to curb the proliferation of corporate tax shelters and analyzed the regime established by the temporary regulations. This follow-up article focuses on certain remaining issues taxpayers and their advisors may face when attempting to comply with the final regulations.

Revised Effective Date

The temporary regulations are effective for transactions entered into after 2002 and before Feb. 28, 2003; the final regulations are generally effective for transactions entered into after Feb. 27, 2003. However, under Regs. Sec. 1.6011-4(h), taxpayers may elect to apply the final regulations to all transactions entered into after 2002. Because the final regulations are generally narrower in scope of reporting than the temporary regulations, there is no benefit in applying the temporary regulations (rather than the final regulations) for transactions entered into after 2002 and before Feb. 28, 2003.

How does a taxpayer determine when a transaction is "entered into" for purposes of applying the correct set of regulations? Many situations could arise in which the initial steps of a transaction commence before 2003, but the final steps occur after 2002. Which regulations should the taxpayer apply in such situations? The answer is significant, because many transactions would not be reportable under the prior rules, but would be under the final regulations.

To rely solely on the step-transaction doctrine to determine which set of regulations to apply would be risky. Rather, taxpayers should evaluate the timing and significance of each transactional step and then ascertain the transactions reportability under the regulations in effect when the first "substantive" steps occur. In any event, both the prior and final regulations trigger disclosure in the first affected tax year.

Participation

The final regulations are helpful, because they provide that a taxpayer must disclose a transaction when the taxpayer has "participated" in a reportable transaction. Regs. Sec. 1.6011-4(c)(3) further establishes when a taxpayer has participated in each of the six categories of reportable transactions. (4) Like earlier regulations, there must be Federal tax benefits from the transaction. (5) Thus, if the initial steps do not affect the taxpayer's Federal tax liability, it is likely that the initial tax year is not the year of disclosure. The practical effect of this uncertainty, however, may be that conservative taxpayers will evaluate a transaction under the old regime when the first substantive steps occur prior to 2003 (and disclose if warranted), then evaluate the same transaction again under the new regime when substantive steps occur after 2002 (and possibly disclose a second time), to avoid the harsh proposed penalty regime. Exhibit 1 on p. 340 presents a quick reference guide highlighting the similarities and differences between the disclosure, list maintenance and registration requirements under the current regulations. Exhibit 2 on p. 342 is a decision tree for determining whether a transaction should be disclosed.

Exhibit 1: Final tax shelter regulations quick reference guide

                                     Disclosure

Governs                             Taxpayer (TP)

Code
Sec.                                  Sec. 6011

Required      TP files disclosure statement with return for each
action        year TP "participates" in a reportable transaction
              (copy to Office of Tax Shelter Analysis (OTSA) for
              first year). Retain related documents until
              expiration of statute on final tax-year disclosure was
              required.

Type          "Reportable transactions"

Definition    After 2002, a transaction described in any of the six
              categories listed below.

              Transitional election: For transactions entered into
              between Jan. 1, 2003 and Feb. 28, 2003, TPs can elect to
              apply the final regulations in place of the October 2002
              temporary regulations. As the final regulations are
              generally narrower in scope, TPs may benefit from the
              election.

              Participation: Participation is defined for each of the
              six categories. Generally, a TP has participated in a
              reportable transaction if the TP's return reflects tax
              consequences or a tax strategy from the transaction.
              Participation is expanded for listed transactions to
              include situations in which a TP knows or has reason to
              know that tax benefits are derived directly or indirectly
              from a listed transaction.

              Transaction: Includes all of the factual elements rele-
              vant to the expected tax treatment of any investment,
              entity, plan or arrangement, and includes any series of
              steps carried out as part of a plan.

Category      1. Same or substantially similar to "listed
                 transactions"
              2. Confidential transactions
              3. Transactions with contractual protection
              4. Sec. 165 loss transactions *
              5. Transactions with significant (exceeding $10
                 million) book-tax differences **
              6. Transactions involving a brief asset holding
                 period ***

Exceptions    Category 1: No exceptions
              Category 2:
              * Securities law
              * Mergers and acquisitions
              Category 3:
              * Termination of transaction
              * Previously reported transactions
              Category 4:
              * Assets with a qualifying basis
              * 8 other exceptions listed
              Category 5:
              * 30 exceptions listed
              Category 6: No exceptions
              General: Published guidance or ruling exceptions.

Penalties     Sec. 6662: Accuracy penalty
              Sec. 6663: Fraud penalty
              Sec. 6664(c): Reasonable cause
              * Significant proposed penalties for nondisclosure

                                  List Maintenance

Governs                         Material Advisor (MA)

Code
Sec.                                  Sec. 6112

Required      MA maintains lists of investors acquiring interests
action        and retains lists and related documents for seven
              years following the earlier of the date MA last made
              a tax statement, or the date the transaction was
              entered into, if known.

Type          "Potentially abusive tax shelters"

Definition    After Feb. 27, 2003, a transaction that:
              * Is a Sec. 6111 tax shelter
              * Meets one of the six categories of reportable
              transactions
              * Is a reportable transaction transferred to a subsequent
              participant

              Caveats: Applies to transactions entered into after Feb.
              27, 2000, if the transaction becomes a "listed transac-
              tion" after that date, and affects Federal income tax.
              Also applies to transactions entered into after 2002 if
              the transaction becomes a "listed transaction" affecting
              other than Federal income tax. The October 2002 temporary
              regulations apply to "listed transactions" and Sec. 6111
              tax shelters entered into after 2002 and before Feb.
              28, 2003.

              Grace period: The IRS will not ask for lists of transac-
              tions entered into after 2002 until June 1, 2003, unless
              the transaction is a "listed transaction" or a Sec. 6111
              tax shelter.

              Material advisor: Any person required to register the
              transaction under Sec. 6111 or who makes a tax statement
              and receives or expects to receive at least a minimum fee
              with respect to the transaction.

              Minimum fee: Corporations (or partnerships or trusts
              entirely comprised of corporations): $250,000;
              all others: $50,000

Category      Same as "Category" under "Disclosure"

              * Specific thresholds apply for a single year or combina-
              tion of years for different taxpayers.
              ** On a gross basis in any tax year. Applicable to SEC
              registrants and entities with $250 million or more in
              gross assets for book purposes.
              *** Those resulting in the TP claiming a tax credit
              exceeding $250,000 (including a foreign tax credit) if
              the underlying asset is held for 45 days or less.

Exceptions    Same as "Exceptions" under "Disclosure"

Penalties     Sec. 6708: $50/investor, maximum $100,000/year
              Sec. 7203: Willful failure
              Sec. 7206: Fraudulent and false statements
              * Significant proposed penalties for noncompliance

                                    Registration

Governs                             Promoter (P)

Code
Sec.                                Sec. 6111(d)

Required      P files Form 8264, Application for Registration of a
action        Tax Shelter, by the day on which first offered for
              sale.
              * Amended filings required for material changes.
              * See Note below.

Type          "Confidential corporate tax shelters"

Definition    Affects interests first offered after Feb. 28, 2000, and
              A significant purpose of the structure of the transaction
                  is the avoidance or evasion of Federal income tax for
                a direct or indirect corporate participant; and
              * Offered under conditions of confidentiality; and
              * P may receive aggregate fees in excess of $100,000 (fee
              threshold is assumed met, unless promoter shows
              otherwise).

              Caveats: If interests were first offered for sale before
              Feb. 29, 2000, the first offer for sale occurring after
              Feb. 28, 2000 is treated as the first offer for sale.
              Additionally, transactions offered for sale within the
              last six years that become "listed transactions" after
              Feb. 27, 2003 must be registered within 60 days of such
              date.

              Conditions of confidentiality: An offeree's disclosure of
              the tax treatment or tax structure of the transaction is
              limited in any way by an express or implied understanding
              for the benefit of the promoter, whether or not legally
              binding. Includes transactions claimed to be proprietary
              or exclusive to the promoter. Includes the same excep-
              tions as "Confidential Transactions" under "Disclosure."

              Promoter: Any person who participates in the organiza-
              tion, management or sale of a tax shelter, including
              related persons (per Sec. 267 or 707).

Category      1. Same or substantially similar to "listed
                 transactions" in Notice 2001-51, 2001-2 CB
                 190, and subsequent IRS guidance.
              2. Other transactions structured to produce Federal
                 income tax benefits that are an important part of
                 the intended results and P reasonably expects to
                 be presented (in the same or substantially similar
                 form) to more than one potential participant.

Exceptions    Category 1: No exceptions
              Category 2:
              * P reasonably determines that there is no "reasonable
              basis" to deny any significant portion of Federal income
              tax benefits.
              * Published guidance or ruling exceptions.
              * TP participates in the ordinary course of business in a
              form consistent with customary commercial practice and
              there is a generally accepted understanding that expected
              Federal income taxbenefits are allowable.

              Note: Discussing person (including TP) may be obligated
                    to register transaction within 90 days (or decline
                    to participate within 90 days of commencing
                    discussions) if only foreign promoters and they do
                    not register.

Penalties     Sec: 6707: Greater of 50% (75% if intentional) of
              fees paid to promoter or $10,000

Note: It is necessary to consider the potential registration and
listing of a transaction as a Sec. 6111(c) traditional tax shelter
unless and until pending legislation repeals the Sec. 6111 registration
provisions and replaces them with a material advisor disclosure
requirement. [c]2003 PricewaterhouseCoopers LLP. All Rights Reserved.

[ILLUSTRATION OMITTED]

Penalties

For tax returns filed after July 1, 2002, failure to disclose a listed transaction will now lead to the Service requesting tax-accrual workpapers. (6) Failure to disclose a reportable transaction or to provide requested workpapers may bar a taxpayer from participating in a limited-scope IRS audit program. (7)

The CARE Act of 2003 (8) (passed by the Senate):

* Includes severe new penalties for nondisclosure of reportable transactions ($50,000-$200,000).

* Requires SEC disclosure of such penalties.

* Modifies (increases) existing accuracy-related and substantial understatement penalties.

* Extends the statute of limitations (SOL) for the entire return for failure to disclose a listed transaction (not just for the undisclosed transaction).

* Denies deductions for interest paid to the IRS if the understatement is attributable to an undisclosed listed transaction or a transaction that lacks economic substance.

* Contains severe limits on the ability to have such penalties waived or rescinded.

In light of the recent Enron Report (9) and the general legislative atmosphere surrounding perceived abuses as to corporate tax shelters, certain of the legislative proposals will likely be enacted by Congress this session. Proposed effective dates apply to returns due after the enactment date, so that transactions entered into before that date could be subject to penalty.

What Is a Transaction?

Temp. Regs. Sec. 1.6011-4T(b)(1) defined a "transaction" as "all of the factual elements relevant to the expected tax treatment of any investment, entity, plan, or arrangement, and includes any series of steps carried out as part of a plan and any series of substantially similar transactions entered into in the same taxable year." Regs. Sec. 1.6011-4(b)(1)'changes this definition to limit the concept of "substantially similar" to listed transactions, so there is no aggregation when quantifying other reportable transactions for applicable thresholds. For example, under the temporary regulations, losses may be aggregated to meet the Sec. 165 loss threshold, whereas the final regulations quantify each individual transaction. However, the ability to aggregate similar transactions occurring in a single tax year on one Form 8886, Reportable Transaction Disclosure Statement, is retained for convenience.

Confidential Transactions

The reportable transaction category of confidential transactions seems to raise the most questions among advisors. The final regulations addressing confidential transactions further complicate the matter by adding an exception for certain transactions and modifying an existing provision.

Many comments submitted on the temporary regulations asserted that this category would unduly mandate disclosure of many nonabusive transactions involving mergers and acquisitions (M&A), as the parties involved often impose confidentiality for nontax reasons. Responding to these, concerns, Regs. Sec. 1.6011-4(b)(3)(ii)(B) provides an exception for certain acquisitions of the historic assets of more than 50% of the stock of a corporation that constitutes an active trade or business the acquirer intends to continue, if there is no limit on the disclosure of the transaction's tax treatment and structure beyond the date (1) of public announcement of discussions, (2) of public announcement of the transaction or (3) the parties execute an agreement (with or without conditions) to enter into the transaction. This exception is not available, however, if the taxpayer's ability to consult any tax adviser as to the transaction's tax treatment or structure is limited in any way. Although this exception is certainly welcome, substantive questions remain, including (1) what constitutes an "active trade or business," (2) what are the procedures, if any, for amending agreements signed before the issuance of the final regulations to invoke the exception and (3) does the exception apply to the acquisition of entities other than corporations.

Presumption of nonconfidentiality: The temporary regulations provided a presumption of nonconfidentiality only if written authorization for the taxpayer to disclose was effective without limit from the commencement of discussions; as a result, many commentators wondered about the practical implications of communicating the presumption. Regs. Sec. 1.6011-4(b)(3)(iii) seeks to provide clarification by expressly restricting the presumption to transactions with written authorizations provided no later than 30 days from the first statement made to the taxpayer as to the transaction's tax consequences.

Because of this so-called "30-day rule," advisors should consider establishing a firm policy not to enter into conditions of confidentiality and to communicate the policy to all recurring clients at the earliest opportunity, using language provided in the final regulations. Advisors relying on their engagement letters to satisfy the presumption may find that these are often not issued within 30 days after discussions begin. Other possible solutions include advisors distributing the authorization at the first meeting with potential new clients or including such language in all presentations. Hopefully, Treasury and the IRS will recognize the difficulty of satisfying the presumption and provide more help.

So far, Treasury representatives have expressed surprise about the amount of interest in the written authorization to establish the presumption. They say that the fact remains that there must be no conditions of confidentiality; the presumption only serves as evidence of a lack of such conditions. The substance of the provision is whether the transaction is considered offered to the taxpayer under conditions of confidentiality, not whether the presumption is satisfied. Thus, Regs. Sec. 1.6011-4(b)(3)(iii) adds a provision that transactions held out as exclusive or proprietary will not be deemed confidential if the presumption requirements are satisfied and the transaction is not otherwise confidential. As was the case under the August 2000 modifications to the temporary rules, advisors can enter into exclusivity agreements (10) as long as the presumption is in place and the transaction is not otherwise confidential.

In the absence of a need for confidentiality (such as under the securities laws), some taxpayers have insisted on obtaining written confirmations at the beginning of discussions from all of their advisors that they do not contemplate conditions of confidentiality.

Transactions with Contractual Protection

Although Regs. Sec. 1.6011-4(b)(4)(i) narrows the scope of this category to focus on transactions in which fees are refundable or contingent on the intended tax consequences being sustained, this category must be considered in light of the July 26, 2002 (11) Circular 230 (12) restrictions on contingent and value-added fees. Circular 230 Section 10.27(b) permits Federally authorized tax practitioners to charge contingent fees only in connection with amended returns or refund claims that receive IRS substantive review. Regs. Sec. 1.6011-4(b)(4)(iii)(B) excepts transactions when an advisor makes or provides a statement as to the potential tax consequences only after the taxpayer has entered into, and reported, the transaction on a filed return, and the advisor has not previously received fees from the taxpayer. Consequently, there is only a limited possibility for this category to apply, because contingent fees may only be charged for controversy services involving a refund claim, not an original return. (13)

Loss Transaction

Regs. Sec. 1.6011-4(b)(5)(ii) clarifies what constitutes participation in a loss transaction over a combination of tax years. While the temporary disclosure regulations provided thresholds for "any combination of taxable years" the final regulations provide that in determining whether a threshold is met, only losses claimed in the tax year that the transaction is entered into, and the five succeeding tax years, are considered. However, under Regs. Sec. 301.6112-1(b)(2)(i)(B), advisors must still use the "reasonably expected" standard when determining whether a list-maintenance obligation exist, likely creating situations in which he or she is required to add a taxpayer to a list even though the taxpayer does not disclose the transaction.

The temporary regulations' limited exceptions have been significantly expanded and moved into Rev. Proc. 2003-24, (14) providing the IRS with the flexibility to update them without having to go through the regulation process. Sections 4.01,4.02(3) and 4.03 provide a general exception for losses from the sale or exchange of an asset with a "qualifying basis" (including those financed with certain debt instruments), as well as specific exceptions for an expanded list of "other" losses. However, taxpayers and their tax advisers may find it difficult to interpret the qualifying basis and debt instrument provisions, as they are quite complex. Nevertheless, in addition to the exception provided for assets with a qualifying basis, the list of other exceptions has been expanded from the two provided in the temporary regulations to the eight specified in the procedure.

Transactions with a Significant Book-Tax Difference

Regs. Sec. 1.6011-4(b)(6)(i) was modified in response to many comments on the temporary regulations. It provides that taxpayers who keep their books on a basis other than U.S. generally accepted accounting principles (GAAP) for financial reporting purposes, and do not maintain GAAP books for any purpose, will not be required to convert book values to GAAP in determining the amount of an item for book purposes, provided the books are kept on the same basis from year to year. In addition, Regs. Sec. 1.6011-4(b)(6)(ii)(A)(2) increases the applicability threshold for companies other than SEC registrants from $100 million to $250 million of gross assets, as measured at the end of any financial accounting period that ends with, or within, the entity's tax year in which the transaction occurs.

As with loss transactions, the list of excepted transactions was expanded and captured in Rev. Proc. 2003-25. (15) Instead of the 13 exceptions included in the temporary regulations, the procedure expands the list to 30 transactions. Of particular interest is the addition of transactions generating significant book-tax differences resulting from the application of Sec. 354, 355, 361, 367, 368 or 1031. While they seem to provide cover for many types of reorganizations, significant book-tax differences resulting from the application of Sec. 351 are not included in the exception, thereby providing no relief for many popular planning techniques. This exception is available only if the taxpayer fully complies with the filing and reporting requirements for the affected sections, including any requirements contained in the corresponding regulations or forms.

Document Retention

Under Regs. Sec. 1.6011-4(g), a taxpayer is not required to retain earlier drafts of documents if the taxpayer retains the final document and it contains information included in the prior draft material to an understanding of the transactions' tax treatment or structure. However, taxpayers may still be burdened with excessive document-retention requirements, because a transaction may subsequently be designated as a listed transaction by the IRS. As a result, when evaluating whether a transaction must be disclosed, astute taxpayers will retain material documentation regardless of the current disclosure decision.

Material advisors received a two-pronged document retention requirement that is both awkward and confusing. Regs. Sec. 301.6112-1(f) requires that they "maintain the list ... for seven years following the earlier of the date on which the material advisor last made a tax statement relating to the transaction, or the date the transaction was entered into, if known. This provision is unadministerable in firms with several tax advisers, because keeping track of statements made by all the practitioners is not feasible. Perhaps Treasury and the IRS will reconsider and substitute a six-year retention period from the date a transaction is entered into.

As to newly designated listed transactions, it is clear under Regs. Sec. 301.6112-1(e)(2)(i) that practitioners need look back no further than six years to list such transactions. Although not expressed in Regs. Sec. 1.6011-4(g), it appears that taxpayers need not worry about newly designated listed transactions entered into more than six years before, due to document-retention requirements tied to an SOL.

Minimum Fee

The final regulations provide some clarification as to the types of fees taken into account when determining whether the minimum-fee threshold is satisfied. Fees for services to analyze, implement and document a transaction are included under Regs. Sec. 301.6112-1(c)(3)(iii), as are fees for return preparation services (to the extent such fees are attributable to the transaction or reflect a misallocation). However, the final regulations remain unclear as to whether accounting advice and tax provision services are included.

Registration

It appears from Section 707 of the proposed CARE Act that registration of confidential corporate tax shelters and certain Sec. 6111(c) transactions with tax-benefit ratios in excess of two-to-one would be repealed. A material advisor disclosure requirement would replace it, so that advisors would be subject to both list maintenance and disclosure under the same definitions as those applicable to taxpayer disclosure. The Congressional Tax Writing Committees would leave the time for filing of such advisor disclosures to Treasury and the Service. Hopefully, such disclosures would not be due until transactions are entered into, rather than the day a transaction is first offered to a potential participant, as provided under the registration statute.

Lack of Economic Substance

Tax Writing Committees are apparently weighing the addition of a seventh category of reportable transaction (with its own penalties) for transactions lacking economic substance. However, Treasury continues to oppose the need to codify the judicial doctrine of economic substance.

Conclusion

The final regulations relieve some of the unwarranted complexity and excessive disclosure contained in the temporary regulations. With the use of the two revenue procedures containing exceptions for book-tax differences and loss transactions, Treasury and the IRS should be able to more timely maintain lists of exceptions. No doubt the Service will tire from seeing disclosures of many types of nonconsequential transactions and will add them to the procedures. Many practitioners, however, continue to have difficulty with the practical implications of certain provisions, such as the communication and timing of the confidentiality presumption and the tension created by certain transactional documents that taxpayers would like to keep private for competitive reasons.

Document retention by taxpayers and their advisors as an evidentiary matter is the overriding consideration and obligation under these regulations. Congress will surely enact strict penalties to dramatically shift the balance from nondisclosure to disclosure. Taxpayers and their advisors must have processes in place to be able to identify transactions that are potentially reportable, and all client-facing tax professionals must consider a thorough understanding of the final reportable transaction regulations to be a core competency, to avoid pending taxpayer and advisor penalties.

The regulations may be final, but more changes are just around the corner to deal with the imminent repeal of the registration rules and the imposition of material advisor disclosures, as well as other changes and refinements based on the Enron Report.

EXECUTIVE SUMMARY

* Taxpayers may elect to apply either the temporary or final regulations for transactions entered into after 2002 and before Feb. 28, 2003.

* The CARE Act of 2003 (passed by the Senate) would repeal the current tax shelter registration provision and regulations in favor of a material advisor disclosure requirement.

* The final regulations modify the definition of "transaction" and expand the exceptions for loss transactions and transactions with a significant book-tax difference.

Editor's note: Mr. Mendelson chairs the AICPA Tax Division's Tax Practice Responsibilities Committee.

(1) TD 9046 (2/28/03).

(2) TD 9017, 9018 (10/22/02).

(3) See Mendelson, Bhikha and Emilian, "Tax Shelter Temp. Regs. (Parts I and II)," 34 The Tax Adviser 86 (February 2003) and 34 The Tax Adviser 142 (March 2003).

(4) Although virtually unaffected by the prior tax shelter rules, exempt organizations fall under the disclosure and list-maintenance rules in the final regulations. As a result, exempt organizations should take immediate steps to understand the final regulations' implications and devise a compliance plan.

(5) As to listed transactions, the IRS has reserved the right to identify other persons that will be treated as participants.

(6) Ann. 2002-63, IRB 2002-27, 72; see also CC-2003-012. For returns filed after July 1, 2002, the IRS will routinely request all tax-accrual workpapers if the taxpayer (1) failed to disclose a listed transaction; (2) entered into more than one listed transaction, regardless of whether such transactions were disclosed; or (3) reported financial accounting irregularities (e.g., those resulting in earnings restatement) when the return under examination includes tax benefits from a listed transaction. For original returns filed prior to July 1, 2002 and containing tax benefits from an undisclosed listed transaction, the IRS may request tax-accrual workpapers strictly related to such transaction.

(7) The IRS's Large and Mid-Size Business Division recently announced the limited issue focused examination (LIFE) program, containing certain benefits for qualifying taxpayers, including limited scope (i.e., possible waiver of certain administrative requirements, fewer examined issues), shorter time frame (i.e., limited IRS ability to expand the audit) and increased involvement in planning and focus of the examination.

(8) See the CARE Act of 2003, S. 476, 108th Cong., 1st Sess. (2003).

(9) Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations (JCS-3-03, February 2003).

(10) An "exclusivity agreement" is a legally binding contract under which a taxpayer agrees to compensate an advisor for a transaction presented to the taxpayer by such advisor if the taxpayer uses a different advisor to implement the transaction.

(11) TD 9011 (7/25/02).

(12) Treasury Circular 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents and Appraisers Before the IRS.

(13) The IRS recently issued an advance notice of proposed rulemaking, REG-125638 (12/19/02), to seek comments on the propriety of contingent fees in other matters before the IRS, such as ruling requests.

(14) Rev. Proc. 2003-24, IRB 2003-11,599.

(15) Rev. Proc. 2003-25, IRB 2003-11,601.

Dan L. Mendelson

Partner

PricewaterhouseCoopers LLP

Washington, DC

Jim Emilian

Manager

PricewaterhouseCoopers LLP

Washington, DC