Source: https://www.irs.gov/irb/2018-27_IRB
Timestamp: 2018-09-18 19:31:26
Document Index: 488694666

Matched Legal Cases: ['§ 417', '§ 430', '§148', '§148', '§148', '§ 430', '§ 430', '§ 430', '§ 412', '§ 431', '§ 417', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1']

Internal Revenue Bulletin: 2018-27 | Internal Revenue Service
Internal Revenue Bulletin: 2018-27
Rev. Rul. 201819
Notice 201856
REG10697718
Notice 2018–56 Notice 2018–56
This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for June 2018 used under § 417(e)(3)(D), the 24-month average segment rates applicable for June 2018, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).
Rev. Rul. 2018–19 Rev. Rul. 2018–19
Federal rates; adjusted federal rates; adjusted federal long-term rate, the long-term exempt rate, and the blended annual rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for July 2018.
REG–106977–18 REG–106977–18
The proposed regulations would amend the definition of investment-type property for purposes of tax-advantaged bonds and the arbitrage investment yield restrictions under §148 that apply to those bonds. Section 103 provides that an arbitrage bond, as defined in §148, is not tax-exempt. A bond is an arbitrage bond under §148 if the bond’s proceeds are used to purchase certain investment property with a yield higher than the yield on the issue. Investment property includes not only securities but also, among other things, “investment-type property.” Investment-type property is generally defined as any property that is held principally as a passive vehicle for the production of income. The proposed regulations would amend this definition to clarify that real or tangible personal property purchased with proceeds of tax-exempt bonds is not investment-type property if that property is used in furtherance of the public purposes for which the tax-exempt bonds are issued.
Rev. Rul. 2018–19
This revenue ruling provides various prescribed rates for federal income tax purposes for July 2018 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Finally, Table 6 contains the blended annual rate for 2018 for purposes of section 7872.
REV. RUL. 2018–19 TABLE 1
Applicable Federal Rates (AFR) for July 2018
REV. RUL. 2018–19 TABLE 2
Adjusted AFR for July 2018
Long-term adjusted AFR 2.32% 2.31% 2.30% 2.30%
REV. RUL. 2018–19 TABLE 3
Rates Under Section 382 for July 2018
Adjusted federal long-term rate for the current month 2.32%
REV. RUL. 2018–19 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for July 2018
REV. RUL. 2018–19 TABLE 5
Rate Under Section 7520 for July 2018
REV. RUL. 2018–19 TABLE 6
Section 7872(e)(2) blended annual rate for 2018 2.03%
Notice 2018–56
Notice 2007–81, 2007–44 I.R.B. 899, provides guidelines for determining the monthly corporate bond yield curve, and the 24-month average corporate bond segment rates used to compute the target normal cost and the funding target. Consistent with the methodology specified in Notice 2007–81, the monthly corporate bond yield curve derived from May 2018 data is in Table 2018–5 at the end of this notice. The spot first, second, and third segment rates for the month of May 2018 are, respectively, 3.08, 4.19, and 4.58.
The 24-month average segment rates determined under § 430(h)(2)(C)(i) through (iii) must be adjusted pursuant to § 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. For plan years beginning before 2021, the applicable minimum percentage is 90% and the applicable maximum percentage is 110%. The 25-year average segment rates for plan years beginning in 2017 and 2018 were published in Notice 2016–54, 2016–40 I.R.B. 429, and Notice 2017–50, 2017–41 I.R.B. 280, respectively.
The three 24-month average corporate bond segment rates applicable for June 2018 without adjustment for the 25-year average segment rate limits are as follows:
Applicable Month First Segment Second Segment Third Segment
June 2018 2.07 3.70 4.43
Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for June 2018, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:
2017 June 2018 4.16 5.72 6.48
2018 June 2018 3.92 5.52 6.29
Section 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412. Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in § 431(c)(6)(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides that the interest rate used to calculate current liability for this purpose must be no more than 5 percent above and no more than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate. The rate of interest on 30-year Treasury securities for May 2018 is 3.13 percent. The Service determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in February 2048 determined each day through May 9, 2018 and the yield on the 30-year Treasury bond maturing in May 2048 determined each day for the balance of the month. For plan years beginning in June 2018, the weighted average of the rates of interest on 30-year Treasury securities and the permissible range of rates used to calculate current liability are as follows:
For Plan Years Beginning In 30-Year Treasury Weighted Average Permissible Range 90% to105%
June 2018 2.85 2.57 to 3.00
In general, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard to a 24-month average. Notice 2007–81 provides guidelines for determining the minimum present value segment rates. Pursuant to that notice, the minimum present value segment rates determined for May 2018 are as follows:
May 2018 3.08 4.19 4.58
Table 2018–5
Monthly Yield Curve for May 2018
Derived from May 2018 Data
0.5 2.44 20.5 4.47 40.5 4.60 60.5 4.64 80.5 4.66
1.0 2.63 21.0 4.48 41.0 4.60 61.0 4.64 81.0 4.66
1.5 2.81 21.5 4.48 41.5 4.60 61.5 4.64 81.5 4.66
2.0 2.96 22.0 4.49 42.0 4.60 62.0 4.64 82.0 4.66
2.5 3.09 22.5 4.49 42.5 4.60 62.5 4.64 82.5 4.66
3.0 3.20 23.0 4.50 43.0 4.60 63.0 4.64 83.0 4.66
3.5 3.29 23.5 4.50 43.5 4.60 63.5 4.64 83.5 4.66
4.0 3.37 24.0 4.51 44.0 4.61 64.0 4.64 84.0 4.67
4.5 3.45 24.5 4.51 44.5 4.61 64.5 4.65 84.5 4.67
5.0 3.52 25.0 4.51 45.0 4.61 65.0 4.65 85.0 4.67
5.5 3.59 25.5 4.52 45.5 4.61 65.5 4.65 85.5 4.67
6.0 3.66 26.0 4.52 46.0 4.61 66.0 4.65 86.0 4.67
6.5 3.73 26.5 4.52 46.5 4.61 66.5 4.65 86.5 4.67
7.0 3.79 27.0 4.53 47.0 4.61 67.0 4.65 87.0 4.67
7.5 3.85 27.5 4.53 47.5 4.62 67.5 4.65 87.5 4.67
8.0 3.91 28.0 4.54 48.0 4.62 68.0 4.65 88.0 4.67
8.5 3.96 28.5 4.54 48.5 4.62 68.5 4.65 88.5 4.67
9.0 4.01 29.0 4.54 49.0 4.62 69.0 4.65 89.0 4.67
9.5 4.06 29.5 4.55 49.5 4.62 69.5 4.65 89.5 4.67
10.0 4.10 30.0 4.55 50.0 4.62 70.0 4.65 90.0 4.67
10.5 4.14 30.5 4.55 50.5 4.62 70.5 4.65 90.5 4.67
11.0 4.18 31.0 4.55 51.0 4.62 71.0 4.65 91.0 4.67
11.5 4.21 31.5 4.56 51.5 4.62 71.5 4.65 91.5 4.67
12.0 4.24 32.0 4.56 52.0 4.63 72.0 4.65 92.0 4.67
12.5 4.27 32.5 4.56 52.5 4.63 72.5 4.65 92.5 4.67
13.0 4.29 33.0 4.56 53.0 4.63 73.0 4.66 93.0 4.67
13.5 4.31 33.5 4.57 53.5 4.63 73.5 4.66 93.5 4.67
14.0 4.33 34.0 4.57 54.0 4.63 74.0 4.66 94.0 4.67
14.5 4.35 34.5 4.57 54.5 4.63 74.5 4.66 94.5 4.67
15.0 4.37 35.0 4.57 55.0 4.63 75.0 4.66 95.0 4.67
15.5 4.38 35.5 4.58 55.5 4.63 75.5 4.66 95.5 4.67
16.0 4.39 36.0 4.58 56.0 4.63 76.0 4.66 96.0 4.67
16.5 4.41 36.5 4.58 56.5 4.63 76.5 4.66 96.5 4.67
17.0 4.42 37.0 4.58 57.0 4.63 77.0 4.66 97.0 4.67
17.5 4.43 37.5 4.58 57.5 4.64 77.5 4.66 97.5 4.67
18.0 4.44 38.0 4.59 58.0 4.64 78.0 4.66 98.0 4.67
18.5 4.44 38.5 4.59 58.5 4.64 78.5 4.66 98.5 4.67
19.0 4.45 39.0 4.59 59.0 4.64 79.0 4.66 99.0 4.67
19.5 4.46 39.5 4.59 59.5 4.64 79.5 4.66 99.5 4.68
20.0 4.46 40.0 4.59 60.0 4.64 80.0 4.66 100.0 4.68
REG–106977–18
Notice of Proposed Rulemaking Arbitrage Investment Restrictions on Tax-Exempt Bonds
Send submissions to: CC:PA:LPD:PR (REG–106977–18), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–106977–18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (REG–106977–18).
Section 1.148–1(e)(1) of the Existing Regulations defines a catch-all category of “investment-type property” to include any property (other than securities, obligations, annuity contracts, and covered residential real property for family units under section 148(b)(2)(A), (B), (C), and (E)) “that is held principally as a passive vehicle for the production of income.” For this purpose, § 1.148–1(e)(1) of the Existing Regulations provides that the production of income includes any benefit based on the time value of money.
1. Proposed § 1.148–1(e)(4): Exception to Investment-Type Property Definition for Certain Capital Projects
Institutional investors have suggested clarification of the scope of the regulatory definition of investment-type property under § 1.148–1(e)(1) to ensure that the definition does not impede greater capital investment in public infrastructure.
The legislative history to the Tax Reform Act of 1986, Public Law 99–514, 100 Stat. 2085, indicates that Congress intended to limit the scope of the arbitrage restriction on investment-type property so that it did not extend to investments in capital projects in furtherance of the public purposes of the bonds. In this regard, the House Report to the Tax Reform Act of 1986 included the following statement about the intended scope of the definition of investment-type property: “The restriction would not apply, however, to real or tangible personal property acquired with bond proceeds for reasons other than investment (e.g., courthouse facilities financed with bond proceeds).” H.R. Rep. No. 99–426, at 552 (1985), 1986–3 (vol. 2) C.B. 457; see also S. Rep. No. 99–313, at 844 (1986), 1986–3 (vol. 3) C.B. 682 (containing a statement substantially identical to that in the House report); H.R. Rep. No. 99–841, at II–747 (1986) (Conf. Rep.), 1986–3 (vol. 4) C.B. 608 (stating that the conference agreement follows the House bill and the Senate amendment on this restriction).
Par. 2. Section 1.148–0(c) is amended by adding entries for §§ 1.148–1(e)(4) and 1.148–11(n) to read as follows:
1. Adding an entry for § 1.148–1(e)(4).
2. Adding an entry for § 1.148–11(n).
Par. 3. Section 1.148–1 is amended by:
Par. 4. Section 1.148–11 is amended by adding paragraph (n) to read as follows:
(n) Investment-type property. Section 1.148–1(e)(1) and (4) apply to bonds sold on or after the date that is 90 days after the date of publication of a Treasury Decision adopting these rules as final regulations in the Federal Register.
(Filed by the Office of the Federal Register on June 11, 2018, 8:45 a.m., and published in the issue of the Federal Register for June 12, 2018, 80 F.R. 27302)
Bulletin 2018–27