Determination of Adjusted Applicable Federal Rates Under Section 1288 and the Adjusted Federal Long-Term Rate Under Section 382, 24482-24484 [2016-09614]
Download as PDF
<![CDATA[
24482
Federal Register / Vol. 81, No. 80 / Tuesday, April 26, 2016 / Rules and Regulations
pay benefits with respect to a claim for
which the operator has been adjudicated
liable, the Director may invoke and
execute the lien on the property of the
operator as described in § 725.603.
Enforcement of this lien must be
pursued in an appropriate U.S. district
court. If the Director determines that the
remedy provided by § 725.603 may not
be sufficient to guarantee the continued
compliance with the terms of an award
or awards against the operator, the
Director may in addition seek an
injunction in the U.S. district court to
prohibit future noncompliance by the
operator and such other relief as the
court considers appropriate (see
§ 725.604). If an operator unlawfully
suspends or terminates the payment of
benefits to a claimant, the district
director may declare the award in
default and proceed in accordance with
§ 725.605. In all cases payments of
additional compensation (see § 725.607)
and interest (see § 725.608) will be
sought by the Director or awarded by
the district director.
(c) In certain instances the remedies
provided by the Act are concurrent; that
is, more than one remedy might be
appropriate in any given case. In such
a case, the Director may select the
remedy or remedies appropriate for the
enforcement action. In making this
selection, the Director shall consider the
best interests of the claimant as well as
those of the fund.
■ 6. Revise § 725.607 to read as follows:
asabaliauskas on DSK3SPTVN1PROD with RULES
§ 725.607 Payments of additional
compensation.
(a) If any benefits payable under the
terms of an award by a district director
(§ 725.419(d)), a decision and order filed
and served by an administrative law
judge (§ 725.478), or a decision filed by
the Board or a U.S. court of appeals, are
not paid by an operator or other
employer ordered to make such
payments within 10 days after such
payments become due, there will be
added to such unpaid benefits an
amount equal to 20 percent thereof,
which must be paid to the claimant at
the same time as, but in addition to,
such benefits, unless review of the order
making such award is sought as
provided in section 21 of the LHWCA
and an order staying payments has been
issued.
(b) If, on account of an operator’s or
other employer’s failure to pay benefits
as provided in paragraph (a) of this
section, benefit payments are made by
the fund, the eligible claimant will
nevertheless be entitled to receive such
additional compensation to which he or
she may be eligible under paragraph (a),
with respect to all amounts paid by the
VerDate Sep<11>2014
17:40 Apr 25, 2016
Jkt 238001
fund on behalf of such operator or other
employer.
(c) The fund may not be held liable
for payments of additional
compensation under any circumstances.
Signed at Washington, DC, this 19th day of
April, 2016.
Leonard J. Howie, III,
Director, Office of Workers’ Compensation
Programs.
[FR Doc. 2016–09525 Filed 4–25–16; 8:45 am]
BILLING CODE 4510–CR–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9763]
RIN 1545–BM20
Determination of Adjusted Applicable
Federal Rates Under Section 1288 and
the Adjusted Federal Long-Term Rate
Under Section 382
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations that provide the method to
be used to adjust the applicable Federal
rates (AFRs) to determine the
corresponding rates under section 1288
of the Internal Revenue Code (Code) for
tax-exempt obligations (adjusted AFRs)
and the method to be used to determine
the long-term tax-exempt rate and the
adjusted Federal long-term rate under
section 382. For tax-exempt obligations,
the regulations affect the determination
of original issue discount under section
1273 and of total unstated interest under
section 483. In addition, the regulations
affect the determination of the
limitations under sections 382 and 383
on the use of certain operating loss
carryforwards, tax credits, and other
attributes of corporations following
ownership changes.
DATES: Effective Date: These regulations
are effective on April 26, 2016.
Applicability Dates: For the dates of
applicability, see §§ 1.382–12(d) and
1.1288–1(c).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations under
section 1288, Jason G. Kurth at (202)
317–6842; concerning the regulations
under section 382, William W. Burhop
at (202) 317–6847.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
On March 2, 2015, the IRS and the
Treasury Department published a notice
PO 00000
Frm 00028
Fmt 4700
Sfmt 4700
of proposed rulemaking (REG–136018–
13) in the Federal Register (80 FR
11141) proposing the method to be used
to determine the adjusted AFRs for taxexempt obligations under section 1288
and the method to be used to determine
the long-term tax-exempt rate and the
adjusted Federal long-term rate under
section 382. No comments were
received on the notice of proposed
rulemaking. No public hearing was
requested or held. Accordingly, this
Treasury decision adopts the proposed
regulations without substantive change.
Explanation of Provisions
The regulations in this Treasury
decision provide the new method by
which the Treasury Department and the
IRS will determine the adjusted AFRs
under section 1288 to take into account
the tax exemption for interest on taxexempt obligations (as defined in
section 1275(a)(3) and § 1.1275–1(e)).
The regulations also provide that the
Treasury Department and the IRS will
use the new method to determine the
long-term tax-exempt rate and the
adjusted Federal long-term rate under
section 382(f) to take into account
differences between rates on long-term
taxable and tax-exempt obligations.
Since November 1986, the adjusted
Federal long-term rate published under
section 382(f)(2) has been equal to the
long-term adjusted AFR with annual
compounding published under section
1288(b) in the same month. See Rev.
Rul. 86–133 (1986–2 CB 59). For
calendar months from November 1986
to February 2013, the Treasury
Department determined the adjusted
Federal long-term rate and each
adjusted AFR described in section
1288(b)(1) by multiplying the
corresponding AFR by a fraction (the
adjustment factor). The numerator of the
adjustment factor was a composite yield
of the highest-grade tax-exempt
obligations available, which are prime,
general obligation tax-exempt
obligations. The denominator was a
composite yield of U.S. Treasury
obligations with maturities similar to
those of the tax-exempt obligations.
Each of the composite yields was
measured over a one-month period.
The IRS published Notice 2013–4
(2013–9 IRB 527) on February 25, 2013,
requesting comments on possible
modifications to the method by which
adjusted AFRs and the adjusted Federal
long-term rate are determined. The IRS
requested comments on these possible
modifications because, since the
beginning of 2008, market yields of
prime, general obligation tax-exempt
obligations had sometimes exceeded
market yields of comparable U.S.
E:\FR\FM\26APR1.SGM
26APR1
asabaliauskas on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 81, No. 80 / Tuesday, April 26, 2016 / Rules and Regulations
Treasury obligations, causing the
adjusted Federal long-term rate and
each adjusted AFR to exceed the
corresponding AFRs. Adjusted rates that
are higher than the corresponding AFRs
indicate that the adjustment factor no
longer served the purposes of sections
1288(b)(1) and 382(f)(2), which were
intended to adjust only for the tax
exemption. These rates were also
inconsistent with the express intention
of Congress that the adjusted Federal
long-term rate and the long-term taxexempt rate be lower than the Federal
long-term rate. See 2 H.R. Rep. No. 99–
841 (Conf. Rep.), 99th Cong., 2d Sess. II–
188 (1986) (1986–3 CB (Vol. 4) 1, 188).
Notice 2013–4 also provided that,
until the Treasury Department and the
IRS issue further guidance, the adjusted
AFRs and the long-term tax-exempt rate
would continue to be calculated using
the adjustment factor, except that the
adjustment factor would equal one (1)
for any month in which the adjustment
factor would otherwise be greater than
one or in which the denominator of the
adjustment factor would otherwise be
less than or equal to zero.
After reviewing comments received in
response to Notice 2013–4, the Treasury
Department and the IRS issued a notice
of proposed rulemaking (REG–136018–
13) proposing the regulations that are
adopted in this Treasury decision. The
regulations use historical market data to
create an appropriate adjustment factor
based on individual tax rates. The
regulations provide that the adjusted
AFRs and the adjusted Federal longterm rate for each month will be
determined from the appropriate AFRs
for that month using the adjustment
factor that results from the following
calculation: 100 percent—[(a combined
tax rate) x (a fixed percentage)].
The tax rate in the adjustment factor
is the sum of the maximum individual
rate under section 1 and the maximum
individual rate under section 1411 for
the month to which the rate applies.
The fixed percentage is the amount by
which that combined tax rate must be
multiplied to reflect the historical
relationship between the maximum tax
rate and the spread between yields of
taxable and tax-exempt obligations. The
fixed percentage in the adjustment
factor is 59 percent, because the yield
on tax-exempt obligations from
February 1986 to July 2007 was lower
than that of comparable taxable
obligations by, on average, 59 percent of
the maximum individual rate in effect
under section 1.
Therefore, the adjustment factor
under current tax rates would be 74.39
percent, the result of subtracting 25.61
percent (the product of 43.4 percent (the
VerDate Sep<11>2014
17:40 Apr 25, 2016
Jkt 238001
sum of the current maximum individual
rate under section 1 (39.6 percent) and
the current maximum individual rate
under section 1411 (3.8 percent)) and 59
percent) from 100 percent. If an AFR for
a given month were 5 percent, under
current tax rates, the corresponding
adjusted AFR would be 3.72 percent:
The product of 74.39 percent and 5
percent. If that 5 percent AFR were the
Federal long-term rate for debt
instruments with annual compounding,
the adjusted Federal long-term rate
under section 382 would likewise be
3.72 percent.
As noted previously, because no
comments were received on the
proposed regulations, the final
regulations adopt the proposed
regulations without substantive change.
Effective/Applicability Date
These regulations apply to determine
the adjusted AFRs, adjusted Federal
long-term rate, and long-term taxexempt rate beginning with the rates
determined during August 2016 that
apply during September 2016.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed by
Executive Order 13563. Therefore, a
regulatory impact assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and
because the regulations do not impose a
collection of information on small
entities, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
the proposed regulations preceding
these final regulations were submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for
comment on their impact on small
businesses. No comments were
received.
Drafting Information
The principal authors of these
regulations are Jason G. Kurth, IRS
Office of the Associate Chief Counsel
(Financial Institutions and Products)
and William W. Burhop, IRS Office of
the Associate Chief Counsel (Corporate).
However, other personnel from the
Treasury Department and the IRS
participated in their development.
Availability of IRS Documents
The IRS revenue ruling and notice
cited in this Treasury decision are made
available by the Superintendent of
PO 00000
Frm 00029
Fmt 4700
Sfmt 4700
24483
Documents, U.S. Government Printing
Office, Washington, DC 20402.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Section 1.382–12 also issued under 26
U.S.C. 382(f) and 26 U.S.C. 382(m). * * *
Section 1.1288–1 also issued under 26
U.S.C. 1288(b). * * *
Par. 2. Section 1.382–1 is amended by
revising the introductory text and
adding an entry for § 1.382–12 to read
as follows:
■
§ 1.382–1
Table of contents.
This section lists the captions that
appear in the regulations for §§ 1.382–
2 through 1.382–12.
*
*
*
*
*
§ 1.382–12 Determination of adjusted
Federal long-term rate.
(a) In general.
(b) Adjusted Federal long-term rate.
(c) Adjustment factor.
(d) Effective/applicability date.
■ Par. 3. Section 1.382–12 is added to
read as follows:
§ 1.382–12 Determination of adjusted
Federal long-term rate.
(a) In general. The long-term taxexempt rate for an ownership change is
the highest of the adjusted Federal longterm rates in effect for any month in the
3-calendar-month period ending with
the calendar month in which the change
date occurs. For purposes of the
previous sentence, the adjusted Federal
long-term rate is the Federal long-term
rate determined under section 1274(d)
(without regard to paragraphs (2) and (3)
thereof), adjusted for differences
between rates on long-term taxable and
tax-exempt obligations. The Secretary
calculates the adjusted Federal longterm rate as provided in paragraph (b)
of this section. The Internal Revenue
Service publishes the long-term taxexempt rate and the adjusted Federal
long-term rate for each month in the
Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii) of this chapter).
(b) Adjusted Federal long-term rate.
The adjusted Federal long-term rate for
E:\FR\FM\26APR1.SGM
26APR1
24484
Federal Register / Vol. 81, No. 80 / Tuesday, April 26, 2016 / Rules and Regulations
a calendar month is the product of the
Federal long-term rate determined
under section 1274(d) for that month,
based on annual compounding,
multiplied by the adjustment factor
described in paragraph (c) of this
section.
(c) Adjustment factor. The adjustment
factor is a percentage equal to—
(1) The excess of 100 percent, over
(2) The product of—
(i) 59 percent, and
(ii) The sum of the maximum rate in
effect under section 1 applicable to
individuals and the maximum rate in
effect under section 1411 applicable to
individuals for the month to which the
adjusted applicable Federal rate applies.
(d) Effective/applicability date. The
rules of this section apply to the
determination of the long-term taxexempt rate and the adjusted Federal
long-term rate beginning with the rates
determined during August 2016 that
apply during September 2016.
Par. 4. Section 1.1288–1 is added to
read as follows:
■
asabaliauskas on DSK3SPTVN1PROD with RULES
(a) In general. In applying section 483
or section 1274 to a tax-exempt
obligation, the applicable Federal rate is
adjusted to take into account the tax
exemption for interest on the obligation.
For each applicable Federal rate
determined under section 1274(d), the
Secretary computes a corresponding
adjusted applicable Federal rate by
multiplying the applicable Federal rate
by the adjustment factor described in
paragraph (b) of this section. The
Internal Revenue Service publishes the
applicable Federal rates and the
adjusted applicable Federal rates for
each month in the Internal Revenue
Bulletin (see § 601.601(d)(2)(ii) of this
chapter).
(b) Adjustment factor. The adjustment
factor is a percentage equal to—
(1) The excess of 100 percent, over
(2) The product of—
(i) 59 percent, and
(ii) The sum of the maximum rate in
effect under section 1 applicable to
individuals and the maximum rate in
effect under section 1411 applicable to
individuals for the month to which the
adjusted applicable Federal rate applies.
(c) Effective/applicability date. The
rules of this section apply to the
determination of adjusted applicable
Federal rates beginning with the rates
17:40 Apr 25, 2016
Jkt 238001
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: April 8, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2016–09614 Filed 4–25–16; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Par. 3. Section 1.1445–5 is amended
by revising the last sentence of
paragraph (b)(3)(ii)(A) to read as
follows:
■
§ 1.1445–5 Special rules concerning
distributions and other transactions by
corporations, partnerships, trusts, and
estates.
*
Internal Revenue Service
26 CFR Part 1
[TD 9751]
RIN 1545–BN22
PATH Act Changes to Section 1445;
Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Correcting amendment.
AGENCY:
*
*
*
*
(b) * * *
(3) * * *
(ii) * * *
(A) * * * In general, a foreign person
is a nonresident alien individual,
foreign corporation, foreign partnership,
foreign trust, or foreign estate, but not a
qualified foreign pension fund (as
defined in section 897(l)) or an entity all
of the interests of which are held by a
qualified foreign pension fund.
*
*
*
*
*
This document contains
corrections to final regulations (TD
9721) that were published in the
Federal Register on Friday, February 19,
2016 (81 FR 8398). The final regulations
are regarding the taxation of, and
withholding on, foreign persons upon
certain dispositions of, and distributions
with respect to, United States real
property interests (USRPIs).
DATES: This correction is effective April
26, 2016 and is applicable on or after
February 19, 2016.
FOR FURTHER INFORMATION CONTACT:
Milton M. Cahn or David A. Levine of
the Office of Associate Chief Counsel
(International) at (202) 317–6937 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Martin V. Franks,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel, (Procedure and Administration).
Background
The final regulations (TD 9751) that
are the subject of this correction are
under section 897 and1445 of the
Internal Revenue Code.
ACTION:
SUMMARY:
§ 1.1288–1 Adjustment of applicable
Federal rate for tax-exempt obligations.
VerDate Sep<11>2014
determined during August 2016 that
apply during September 2016.
Need for Correction
As published, the final regulations
(TD 9751) contain errors that may prove
to be misleading and are in need of
clarification.
List of Subjects in 26 CFR Part 1
Income taxes, reporting and
recordkeeping requirements.
Correction of Publication
Accordingly, 26 CFR part 1 is
corrected by making the following
correcting amendments:
PO 00000
Frm 00030
Fmt 4700
Sfmt 4700
[FR Doc. 2016–09666 Filed 4–25–16; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF JUSTICE
Bureau of Prisons
28 CFR Part 550
[BOP–1168–F]
RIN 1120–AB68
Drug Abuse Treatment Program
Bureau of Prisons, Justice.
Final rule.
AGENCY:
In this document, the Bureau
of Prisons (Bureau) revises the
Residential Drug Abuse Treatment
Program (RDAP) regulations to allow
greater inmate participation in the
program and positively impact
recidivism rates.
DATES: This rule is effective on May 26,
2016.
FOR FURTHER INFORMATION CONTACT:
Sarah Qureshi, Office of General
Counsel, Bureau of Prisons, phone (202)
353–8248.
SUPPLEMENTARY INFORMATION: In this
document, the Bureau revises the
Residential Drug Abuse Treatment
Program (RDAP) regulations to allow
greater inmate participation in the
SUMMARY:
E:\FR\FM\26APR1.SGM
26APR1
]]>Agencies
[Federal Register Volume 81, Number 80 (Tuesday, April 26, 2016)]
[Rules and Regulations]
[Pages 24482-24484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09614]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9763]
RIN 1545-BM20
Determination of Adjusted Applicable Federal Rates Under Section
1288 and the Adjusted Federal Long-Term Rate Under Section 382
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that provide the
method to be used to adjust the applicable Federal rates (AFRs) to
determine the corresponding rates under section 1288 of the Internal
Revenue Code (Code) for tax-exempt obligations (adjusted AFRs) and the
method to be used to determine the long-term tax-exempt rate and the
adjusted Federal long-term rate under section 382. For tax-exempt
obligations, the regulations affect the determination of original issue
discount under section 1273 and of total unstated interest under
section 483. In addition, the regulations affect the determination of
the limitations under sections 382 and 383 on the use of certain
operating loss carryforwards, tax credits, and other attributes of
corporations following ownership changes.
DATES: Effective Date: These regulations are effective on April 26,
2016.
Applicability Dates: For the dates of applicability, see Sec. Sec.
1.382-12(d) and 1.1288-1(c).
FOR FURTHER INFORMATION CONTACT: Concerning the regulations under
section 1288, Jason G. Kurth at (202) 317-6842; concerning the
regulations under section 382, William W. Burhop at (202) 317-6847.
SUPPLEMENTARY INFORMATION:
Background
On March 2, 2015, the IRS and the Treasury Department published a
notice of proposed rulemaking (REG-136018-13) in the Federal Register
(80 FR 11141) proposing the method to be used to determine the adjusted
AFRs for tax-exempt obligations under section 1288 and the method to be
used to determine the long-term tax-exempt rate and the adjusted
Federal long-term rate under section 382. No comments were received on
the notice of proposed rulemaking. No public hearing was requested or
held. Accordingly, this Treasury decision adopts the proposed
regulations without substantive change.
Explanation of Provisions
The regulations in this Treasury decision provide the new method by
which the Treasury Department and the IRS will determine the adjusted
AFRs under section 1288 to take into account the tax exemption for
interest on tax-exempt obligations (as defined in section 1275(a)(3)
and Sec. 1.1275-1(e)). The regulations also provide that the Treasury
Department and the IRS will use the new method to determine the long-
term tax-exempt rate and the adjusted Federal long-term rate under
section 382(f) to take into account differences between rates on long-
term taxable and tax-exempt obligations.
Since November 1986, the adjusted Federal long-term rate published
under section 382(f)(2) has been equal to the long-term adjusted AFR
with annual compounding published under section 1288(b) in the same
month. See Rev. Rul. 86-133 (1986-2 CB 59). For calendar months from
November 1986 to February 2013, the Treasury Department determined the
adjusted Federal long-term rate and each adjusted AFR described in
section 1288(b)(1) by multiplying the corresponding AFR by a fraction
(the adjustment factor). The numerator of the adjustment factor was a
composite yield of the highest-grade tax-exempt obligations available,
which are prime, general obligation tax-exempt obligations. The
denominator was a composite yield of U.S. Treasury obligations with
maturities similar to those of the tax-exempt obligations. Each of the
composite yields was measured over a one-month period.
The IRS published Notice 2013-4 (2013-9 IRB 527) on February 25,
2013, requesting comments on possible modifications to the method by
which adjusted AFRs and the adjusted Federal long-term rate are
determined. The IRS requested comments on these possible modifications
because, since the beginning of 2008, market yields of prime, general
obligation tax-exempt obligations had sometimes exceeded market yields
of comparable U.S.
[[Page 24483]]
Treasury obligations, causing the adjusted Federal long-term rate and
each adjusted AFR to exceed the corresponding AFRs. Adjusted rates that
are higher than the corresponding AFRs indicate that the adjustment
factor no longer served the purposes of sections 1288(b)(1) and
382(f)(2), which were intended to adjust only for the tax exemption.
These rates were also inconsistent with the express intention of
Congress that the adjusted Federal long-term rate and the long-term
tax-exempt rate be lower than the Federal long-term rate. See 2 H.R.
Rep. No. 99-841 (Conf. Rep.), 99th Cong., 2d Sess. II-188 (1986) (1986-
3 CB (Vol. 4) 1, 188).
Notice 2013-4 also provided that, until the Treasury Department and
the IRS issue further guidance, the adjusted AFRs and the long-term
tax-exempt rate would continue to be calculated using the adjustment
factor, except that the adjustment factor would equal one (1) for any
month in which the adjustment factor would otherwise be greater than
one or in which the denominator of the adjustment factor would
otherwise be less than or equal to zero.
After reviewing comments received in response to Notice 2013-4, the
Treasury Department and the IRS issued a notice of proposed rulemaking
(REG-136018-13) proposing the regulations that are adopted in this
Treasury decision. The regulations use historical market data to create
an appropriate adjustment factor based on individual tax rates. The
regulations provide that the adjusted AFRs and the adjusted Federal
long-term rate for each month will be determined from the appropriate
AFRs for that month using the adjustment factor that results from the
following calculation: 100 percent--[(a combined tax rate) x (a fixed
percentage)].
The tax rate in the adjustment factor is the sum of the maximum
individual rate under section 1 and the maximum individual rate under
section 1411 for the month to which the rate applies. The fixed
percentage is the amount by which that combined tax rate must be
multiplied to reflect the historical relationship between the maximum
tax rate and the spread between yields of taxable and tax-exempt
obligations. The fixed percentage in the adjustment factor is 59
percent, because the yield on tax-exempt obligations from February 1986
to July 2007 was lower than that of comparable taxable obligations by,
on average, 59 percent of the maximum individual rate in effect under
section 1.
Therefore, the adjustment factor under current tax rates would be
74.39 percent, the result of subtracting 25.61 percent (the product of
43.4 percent (the sum of the current maximum individual rate under
section 1 (39.6 percent) and the current maximum individual rate under
section 1411 (3.8 percent)) and 59 percent) from 100 percent. If an AFR
for a given month were 5 percent, under current tax rates, the
corresponding adjusted AFR would be 3.72 percent: The product of 74.39
percent and 5 percent. If that 5 percent AFR were the Federal long-term
rate for debt instruments with annual compounding, the adjusted Federal
long-term rate under section 382 would likewise be 3.72 percent.
As noted previously, because no comments were received on the
proposed regulations, the final regulations adopt the proposed
regulations without substantive change.
Effective/Applicability Date
These regulations apply to determine the adjusted AFRs, adjusted
Federal long-term rate, and long-term tax-exempt rate beginning with
the rates determined during August 2016 that apply during September
2016.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these regulations, and because the regulations do not impose a
collection of information on small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of
the Code, the proposed regulations preceding these final regulations
were submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small businesses. No
comments were received.
Drafting Information
The principal authors of these regulations are Jason G. Kurth, IRS
Office of the Associate Chief Counsel (Financial Institutions and
Products) and William W. Burhop, IRS Office of the Associate Chief
Counsel (Corporate). However, other personnel from the Treasury
Department and the IRS participated in their development.
Availability of IRS Documents
The IRS revenue ruling and notice cited in this Treasury decision
are made available by the Superintendent of Documents, U.S. Government
Printing Office, Washington, DC 20402.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.382-12 also issued under 26 U.S.C. 382(f) and 26
U.S.C. 382(m). * * *
Section 1.1288-1 also issued under 26 U.S.C. 1288(b). * * *
0
Par. 2. Section 1.382-1 is amended by revising the introductory text
and adding an entry for Sec. 1.382-12 to read as follows:
Sec. 1.382-1 Table of contents.
This section lists the captions that appear in the regulations for
Sec. Sec. 1.382-2 through 1.382-12.
* * * * *
Sec. 1.382-12 Determination of adjusted Federal long-term rate.
(a) In general.
(b) Adjusted Federal long-term rate.
(c) Adjustment factor.
(d) Effective/applicability date.
0
Par. 3. Section 1.382-12 is added to read as follows:
Sec. 1.382-12 Determination of adjusted Federal long-term rate.
(a) In general. The long-term tax-exempt rate for an ownership
change is the highest of the adjusted Federal long-term rates in effect
for any month in the 3-calendar-month period ending with the calendar
month in which the change date occurs. For purposes of the previous
sentence, the adjusted Federal long-term rate is the Federal long-term
rate determined under section 1274(d) (without regard to paragraphs (2)
and (3) thereof), adjusted for differences between rates on long-term
taxable and tax-exempt obligations. The Secretary calculates the
adjusted Federal long-term rate as provided in paragraph (b) of this
section. The Internal Revenue Service publishes the long-term tax-
exempt rate and the adjusted Federal long-term rate for each month in
the Internal Revenue Bulletin (see Sec. 601.601(d)(2)(ii) of this
chapter).
(b) Adjusted Federal long-term rate. The adjusted Federal long-term
rate for
[[Page 24484]]
a calendar month is the product of the Federal long-term rate
determined under section 1274(d) for that month, based on annual
compounding, multiplied by the adjustment factor described in paragraph
(c) of this section.
(c) Adjustment factor. The adjustment factor is a percentage equal
to--
(1) The excess of 100 percent, over
(2) The product of--
(i) 59 percent, and
(ii) The sum of the maximum rate in effect under section 1
applicable to individuals and the maximum rate in effect under section
1411 applicable to individuals for the month to which the adjusted
applicable Federal rate applies.
(d) Effective/applicability date. The rules of this section apply
to the determination of the long-term tax-exempt rate and the adjusted
Federal long-term rate beginning with the rates determined during
August 2016 that apply during September 2016.
0
Par. 4. Section 1.1288-1 is added to read as follows:
Sec. 1.1288-1 Adjustment of applicable Federal rate for tax-exempt
obligations.
(a) In general. In applying section 483 or section 1274 to a tax-
exempt obligation, the applicable Federal rate is adjusted to take into
account the tax exemption for interest on the obligation. For each
applicable Federal rate determined under section 1274(d), the Secretary
computes a corresponding adjusted applicable Federal rate by
multiplying the applicable Federal rate by the adjustment factor
described in paragraph (b) of this section. The Internal Revenue
Service publishes the applicable Federal rates and the adjusted
applicable Federal rates for each month in the Internal Revenue
Bulletin (see Sec. 601.601(d)(2)(ii) of this chapter).
(b) Adjustment factor. The adjustment factor is a percentage equal
to--
(1) The excess of 100 percent, over
(2) The product of--
(i) 59 percent, and
(ii) The sum of the maximum rate in effect under section 1
applicable to individuals and the maximum rate in effect under section
1411 applicable to individuals for the month to which the adjusted
applicable Federal rate applies.
(c) Effective/applicability date. The rules of this section apply
to the determination of adjusted applicable Federal rates beginning
with the rates determined during August 2016 that apply during
September 2016.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: April 8, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-09614 Filed 4-25-16; 8:45 am]
BILLING CODE 4830-01-P
