This Notice of Proposed Rulemaking will implement the requirement of the Fixing America’s Service Transportation (FAST) Act that the Department of State deny a passport (or the renewal of a passport) in the case of an individual if notified by the IRS that the individual has been certified as having a seriously delinquent tax debt. The FAST Act also permits the Department of State to revoke a passport previously issued to such person. The FAST Act requires the IRS to notify the Department of State of certified seriously delinquent tax debts. The Department of State procures services from outside contractors in connection with carrying out its responsibilities under the FAST Act. These proposed regulations authorize the Department of State to disclose return information to its contractors for purposes of carrying out such responsibilities.

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for March 2018 used under § 417(e)(3)(D), the 24-month average segment rates applicable for March 2018, and the 30-year Treasury rates. These rates reflect the application of § 430(h)(2)(C)(iv), which was added by the Moving Ahead for Progress in the 21st Century Act, Public Law 112–141 (MAP-21) and amended by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).

This revenue procedure modifies Rev. Proc. 2018–4, 2018–1 I.R.B. 146. Specifically, this revenue procedure changes one user fee set forth in Appendix A of Rev. Proc. 2018–4, Schedule of User Fees, with respect to applications on Form 5310, Application for Determination for Terminating Plan. That user fee is reduced from $3,000 to $2,300, effective January 2, 2018. Applicants who paid the $3,000 user fee listed in Rev. Proc. 2018–4 will receive a refund of $700.

This revenue procedure modifies the procedures of the Internal Revenue Service for issuing opinion and advisory letters for pre-approved master and prototype and volume submitter plans as provided in Rev. Proc. 2015–36, 2015–27 I.R.B. 20. In particular, this revenue procedure modifies sections 6.03(7)(c) and 16.03(7)(c) of Rev. Proc. 2015–36 to allow pre-approved defined benefit plans containing a cash balance formula to provide for the actual rate of return on plan assets as the rate used to determine interest credits. This revenue procedure also modifies section 6.03(7)(c) of Rev. Proc. 2017–41 relating to the rates that are permitted to be used to determine interest credits in pre-approved defined benefit plans containing a cash balance formula. In addition, this revenue procedure changes references to “hypothetical interest” and “hypothetical interest credits” in Rev. Proc. 2015–36 to “interest credits”, consistent with terminology in Rev. Proc. 2017–41.

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 1274, 1288, and other sections of the Code, tables set forth the rates for April 2018.

This revenue ruling provides various prescribed rates for federal income tax purposes for April 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%. Finally, 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.

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

Section 430 specifies the minimum funding requirements that apply to single-employer plans (except for CSEC plans under § 414(y)) pursuant to § 412. Section 430(h)(2) specifies the interest rates that must be used to determine a plan’s target normal cost and funding target. Under this provision, present value is generally determined using three 24-month average interest rates (“segment rates”), each of which applies to cash flows during specified periods. To the extent provided under § 430(h)(2)(C)(iv), these segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins.^[1] However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates.

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 February 2018 data is in Table 2018–1 at the end of this notice. The spot first, second, and third segment rates for the month of February 2018 are, respectively, 2.72, 3.94, and 4.33.

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 2016, 2017, and 2018 were published in Notice 2015–61, 2015–39 I.R.B. 408; 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 March 2018 without adjustment for the 25-year average segment rate limits are as follows:

Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for March 2018, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates, are as follows:

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 February 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 November 2047 determined each day through February 7, 2018 and the yield on the 30-year Treasury bond maturing in February 2048 determined each day for the balance of the month. For plan years beginning in March 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:

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 February 2018 are as follows:

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan at 202-317-6700 or Tony Montanaro at 202-317-8698 (not toll-free numbers).

This revenue procedure modifies Rev. Proc. 2018–4, 2018–1 I.R.B. 146. Specifically, this revenue procedure changes one user fee set forth in Appendix A of Rev. Proc. 2018–4, Schedule of User Fees, with respect to applications on Form 5310, Application for Determination for Terminating Plan. That user fee is reduced from $3,000 to $2,300, effective January 2, 2018. Applicants who paid the $3,000 user fee listed in Rev. Proc. 2018–4 will receive a refund of $700.

.01 Rev. Proc. 2018–4 explains how the Internal Revenue Service (Service) provides advice to taxpayers on issues under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements Office (Employee Plans Rulings and Agreements), including procedures for requesting determination letters from the Service. It also includes the user fees that are required to be paid when requesting various types of advice.

.02 Appendix A of Rev. Proc. 2018–4 sets forth the specific fee applicable with respect to each category or subcategory of submission under the revenue procedure. Section .06 of Appendix A sets forth the fees applicable to determination letters. The user fee applicable to a determination letter request submitted on Form 5310 provided in section .06(1)(c) of Appendix A was increased from $2,300 for 2017 to $3,000 for 2018.

Section .06(1)(c) of Appendix A of Rev. Proc. 2018–4 is modified to read as follows:

(c) Form 5310 (Application for Determination for Terminating Plan) $2,300.

Taxpayers who paid a $3,000 user fee in connection with the submission of a determination letter request on Form 5310 will receive a refund of $700 (the difference between the $3,000 user fee listed in Rev. Proc. 2018–4 and the $2,300 user fee listed in this revenue procedure).

The collections of information contained in Revenue Procedure 2018–4 have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1520.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in Rev. Proc. 2018–4 are in sections 6.02, 6.03, 6.05, 6.06, 10.03, 10.04, 10.12, 10.15, 10.16, 10.18, 11.04, 16, 17, 18, 21.02, 22.03, 23.02, 23.08, 27.05, 27.06, 27.07, 27.08, 27.09, 27.10, 27.13, 28.01, 28.06, 28.07, and 29.10, and in Appendices C, E, and F. This information is required to evaluate and process the request for a letter ruling or determination letter, and, with respect to determination letters, information collected will be used to determine whether a plan is entitled to favorable tax treatment as a qualified plan. In addition, this information will be used to help the Service delete certain information from the text of the letter ruling or determination letter before it is made available for public inspection, as required by §§ 6110 and 6104. The collections of information are required to obtain a letter ruling or determination letter. The likely respondents are individuals, businesses or other for-profit institutions, tax exempt organizations, and government entities.

The estimated total annual reporting and/or recordkeeping burden with respect to letter ruling requests is 769 hours. The estimated total annual reporting and/or recordkeeping burden with respect to determination letters is 17,382 hours.

The estimated annual burden per respondent/recordkeeper varies from 15 minutes to 40 hours, depending on individual circumstances and the type of request involved, with an estimated average burden of 6.01 hours for letter ruling requests and 2.02 hours for determination letter requests. The estimated number of respondents and/or recordkeepers is 128 for letter rulings and 8,605 for determination letters.

For letter rulings, the estimated annual frequency of responses is one request per applicant, except that a taxpayer requesting a letter ruling may also request a presubmission conference.

For determination letters, the estimated annual frequency of responses (used for reporting requirements only) is once every three years.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by § 6103.

Rev. Proc. 2018–4 is modified.

This revenue procedure is effective as of January 2, 2018.

The principal author of this revenue procedure is Kathleen Herrmann of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this revenue procedure or submissions under Revenue Procedure 2018–4, contact Don Kieffer of Employee Plans Rulings and Agreements, at (908) 301-2655 (not a toll-free number).

This revenue procedure modifies the procedures of the Internal Revenue Service (IRS) for issuing opinion and advisory letters for pre-approved master and prototype and volume submitter plans as provided in Rev. Proc. 2015–36, 2015–27 I.R.B. 20. In particular, this revenue procedure modifies sections 6.03(7)(c) and 16.03(7)(c) of Rev. Proc. 2015–36 to allow pre-approved defined benefit plans containing a cash balance formula to provide for the actual rate of return on plan assets as the rate used to determine interest credits. This revenue procedure also modifies section 6.03(7)(c) of Rev. Proc. 2017–41, 2017–29 I.R.B. 92, relating to the rates that are permitted to be used to determine interest credits in pre-approved defined benefit plans containing a cash balance formula. In addition, this revenue procedure changes references to “hypothetical interest” and “hypothetical interest credits” in Rev. Proc. 2015–36 to “interest credits”, consistent with terminology in Rev. Proc. 2017–41.

.01 Rev. Proc. 2015–36 sets forth the procedures for obtaining opinion and advisory letters for qualified pre-approved plans submitted to the IRS with respect to remedial amendment cycles prior to the third six-year cycle.

.02 Rev. Proc. 2015–36 was modified and superseded by Rev. Proc. 2017–41 with respect to applications for opinion letters for pre-approved plans submitted for the third (and subsequent) six-year remedial amendment cycles. Rev. Proc. 2017–41 modified the IRS pre-approved plan letter program by combining the master and prototype and volume submitter plan programs into a new Opinion Letter program. The provisions of Rev. Proc. 2015–36 continue to apply to applications for opinion and advisory letters submitted during the second six-year remedial amendment cycle. The second six-year remedial amendment cycle for pre-approved defined benefit plans began on February 1, 2013, and ends on April 30, 2020.^[2] Defined benefit plans submitted for opinion and advisory letters for the second six-year remedial amendment cycle continue to be reviewed by the IRS.

.03 Sections 4.12 and 13.08 of Rev. Proc. 2015–36 set forth definitions related to hybrid plans. Under these sections, a statutory hybrid plan is a defined benefit plan that contains a statutory hybrid benefit formula, as defined in § 1.411(a)(13)–1(d)(4). A cash balance plan is a defined benefit plan that includes a cash balance formula. A cash balance formula is a statutory hybrid benefit formula used to determine all or any part of a participant’s accumulated benefit, under which the accumulated benefit is expressed as the current balance of a hypothetical account maintained for the participant. Sections 4.12 and 13.08 of Rev. Proc. 2015–36 describe the hypothetical account balance as generally consisting of principal credits and hypothetical interest credits.

.04 Pursuant to sections 6.03(7)(a) and 16.03(7)(a) of Rev. Proc. 2015–36, opinion and advisory letters, respectively, will not be issued to statutory hybrid plans that contain a statutory hybrid benefit formula that is not a cash balance formula.

.05 Sections 6.03(7)(c) and 16.03(7)(c) of Rev. Proc. 2015–36 provide that opinion and advisory letters, respectively, will not be issued for statutory hybrid plans that include provisions that allow a rate used to determine hypothetical interest to be based on the actual return on plan assets or a subset of plan assets (as described in § 1.411(b)(5)–1(d)(5)(ii)) or the rate of return on certain regulated investment companies (RICs) (as described in § 1.411(b)(5)–1(d)(5)(iv)).

.06 Section 4.03(1) of Rev. Proc. 2017–41 clarifies that for purposes of the definition of “cash balance formula” the “hypothetical account balance generally consists of Principal Credits and Interest Credits.” Corresponding clarifications are made throughout that revenue procedure, where applicable.

.07 Section 6.03(7)(c) of Rev. Proc. 2017–41 also deletes the restriction on using a rate that is based on the actual return on plan assets in determining interest credits. This modification allows nonstandardized pre-approved defined benefit plans with a cash balance formula that are submitted for an opinion letter during the third (and subsequent) six-year remedial amendment cycles to provide for a rate that is based on the actual return on plan assets as the rate used to determine interest credits, including a rate that is equal to the actual rate of return on aggregate plan assets.

.08 Subsequent to the release of Rev. Proc. 2017–41, the IRS received comments requesting that plans submitted under Rev. Proc. 2015–36 be permitted to provide for a rate equal to the actual rate of return on aggregate plan assets as the rate used to determine interest credits. The IRS has determined that it is appropriate to allow master and prototype nonstandardized defined benefit plans and volume submitter defined benefit plans that contain a cash balance formula, submitted pursuant to Rev. Proc. 2015–36 with respect to the second six-year remedial amendment cycle, to provide for a rate equal to (but not merely based on) the actual rate of return on aggregate plan assets as the rate used to determine interest credits and to clarify that, although these plans generally may not provide that the rate used to determine interest credits is based on the rate of return on RICs, the rate used to determine interest credits may be equal to the actual rate of return on aggregate plan assets even if that return includes returns on RICs. The IRS has also determined that Rev. Proc. 2017–41 should be revised, consistent with these changes to Rev. Proc. 2015–36, to allow pre-approved defined benefit plans that contain a cash balance formula, submitted with respect to the third (and subsequent) six-year remedial amendment cycles, to provide for a rate equal to the actual rate of return on aggregate plan assets as the rate used to determine interest credits (rather than a rate that is merely based on the actual return on plan assets) and to clarify that the rate used to determine interest credits may be equal to the actual rate of return on aggregate plan assets even if that return includes returns on RICs. Further, the IRS has determined that Rev. Proc. 2015–36 should be modified to make clarifying changes to the definition of hypothetical account balance and related clarifications, throughout the revenue procedure, where applicable, consistent with Rev. Proc. 2017–41.

.01 Sections 6.03(7)(c) and 16.03(7)(c) of Rev. Proc. 2015–36, describing areas not covered by opinion letters and advisory letters, respectively, with respect to statutory hybrid plans, and section 6.03(7)(c) of Rev. Proc. 2017–41, describing areas not covered by opinion letters with respect to statutory hybrid plans, are revised to read as follows:

(c) Provisions under which a rate used to determine Interest Credits is based on the actual rate of return on aggregate assets of the plan described in § 1.411(b)(5)–1(d)(5)(ii)(A) or the rate of return on certain regulated investment companies (RICs) described in § 1.411(b)(5)–1(d)(5)(iv) (unless the plan provides that the rate used to determine Interest Credits is equal to the actual rate of return on the aggregate assets of the plan), or is based on or equal to the actual rate of return on a subset of plan assets (as described in § 1.411(b)(5)–1(d)(5)(ii)(B)).

.02 In addition to the changes in sections 6.03(7)(c) and 16.03(7)(c) of Rev. Proc. 2015–36, clarifications to terminology relating to statutory hybrid plans are made to remove references to hypothetical interest or hypothetical interest credits and replace them with references to interest credit(s) throughout Rev. Proc. 2015–36, consistent with the changes made in Rev. Proc. 2017–41. These changes to Rev. Proc. 2015–36 are as follows:

(1) Sections 4.12(1) and 13.08(1), defining “Cash Balance Formula” are revised in part so that the last sentence of each of those sections reads as follows: “The hypothetical account balance generally consists of Principal Credits and Interest Credits.”

(2) Sections 4.12(4) and (6) and 13.08(4) and (6) relating to the definition of “Hypothetical Interest” and “Principal Credit” for master and prototype and volume submitter plans, respectively, are each revised to refer to “Interest Credit” or “interest credit” rather than “Hypothetical Interest” or “hypothetical interest,” as applicable.

(3) Sections 6.03(7)(b) and 16.03(7)(b) listing an area not covered by opinion or advisory letters, respectively, with respect to statutory hybrid plans are each revised to replace, “Provisions that allow for hypothetical interest crediting” with, “Provisions under which Interest Credits are.”

The collection of information contained in Rev. Proc. 2015–36 has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545-1674.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information in Rev. Proc. 2015–36 is in sections 5.11, 8.02, 11.02, 12, 14.05, 15.02, 18, and 24. This information is required to enable the Commissioner, Tax Exempt and Government Entities Division of the Internal Revenue Service to make determinations in connection with plan qualification. This information will be used to determine whether a plan is entitled to favorable tax treatment. The likely respondents are banks, insurance companies, other financial institutions, law, actuarial, and consulting firms, employee benefit practitioners and employers.

The estimated total annual reporting and/or recordkeeping burden is 988,290 hours.

The estimated annual burden per respondent/recordkeeper varies from 1/2 to 2,000 hours, depending on individual circumstances, with an estimated average of 3.18 hours. The estimated number of respondents and/or recordkeepers is 310,315.

The estimated frequency of responses is occasional.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. § 6103.

Rev. Proc. 2015–36 and Rev. Proc. 2017–41 are modified.

The modifications in this revenue procedure are effective as of March 16, 2018.

The principal author of this revenue procedure is Kathleen Herrmann of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this revenue procedure, contact Employee Plans (513) 975-6319 (not a toll-free number).

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

This document contains proposed regulations under section 6103(n) of the Internal Revenue Code (Code) to authorize the Department of State to disclose returns and return information to its contractors who assist the Department of State in carrying out its responsibilities under section 32101 of the Fixing America’s Surface Transportation (FAST) Act. The FAST Act requires the IRS to notify the Department of State of certified seriously delinquent tax debts, and the Department of State procures services from outside contractors in connection with carrying out its responsibilities under the FAST Act.

Written and electronic comments and requests for a public hearing must be received by April 12, 2018.

Send submissions to: CC:PA:LPD:PR (REG–129260–16), Room 5207, 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 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (REG–129260–16), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20224. Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–129260–16).

Concerning the proposed regulations, Brittany Harrison of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6833; concerning the submission of comments and requests for a public hearing, Regina Johnson, (202) 317-6901 (not toll-free numbers).

The principal author of these proposed regulations is Brittany Harrison of the Office of the Associate Chief Counsel (Procedure and Administration).

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