LIFO; price indexes; department stores. The August 2006 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, August 31, 2006.

Generally, interest on a state or local bond is excluded from gross income. However, the exclusion does not apply to a private activity bond unless the bond is a qualified bond. Proposed regulations under sections 141 and 145 of the Code provide general rules on the allocation of and accounting for bond proceeds for purposes of the private activity bond restrictions which apply to tax-exempt governmental bonds. Special rules are also provided for certain projects that are used by both a private business and government (mixed-use project). Finally, the regulations provide that a partnership in which all the partners are governmental persons are disregarded and any use of the financed property by the partnership is treated as governmental use. A public hearing is scheduled for January 11, 2007.

This notice provides guidance on the new information reporting requirements in section 6049 of the Code for payments of interest on state or local bonds that are excludable from gross income under section 103 (tax-exempt interest).

This procedure formally establishes the Appeals arbitration program, which is designed to improve tax administration, provide customer service, and reduce taxpayer burden. Arbitration is available for cases within Appeals jurisdiction that meet the operation requirements of the program. Generally, this program is available for cases in which a limited number of factual issues remain unresolved following settlement discussions in Appeals.