Part I. Rulings — Internal Revenue Bulletin 1997-48

Section 861.—Income From Sources Within the United States

26 CFR 1.861–2: Interest.

Guidance is provided to the payors of U.S. source substitute interest payments made after November 13, 1997, and before January 1, 1999, for complying with the statement requirement of § 871(h)(5) in order to qualify as portfolio interest. See Notice 97–66, page 8.

26 CFR 1.861–3: Dividends.

Guidance is provided on the determination of the amount of tax imposed under §§ 871 and 881 on U.S. source substitute dividend payments which are made by a foreign person to another foreign person (“foreign-to-foreign” payments).

Section 864.—Definitions and Special Rules

26 CFR 1.864–5: General provisions relating to withholding agent.

A general election to defer the effective date of final securities lending regulations (published October 14, 1997, TD 8735, 62 FR 53498) for substitute payments made after November 13, 1997, to January 1, 1999, does not apply for substitute interest and substitute dividend payments received that are foreign source effectively connected income under § 1.864–5(b)(2) of the final regulations. Notice 97–66, page 8.

Section 871.—Tax on Nonresident Alien Individuals

26 CFR 1.871–7: Taxation of nonresident alien in- dividuals not engaged in U.S. business.

Guidance is provided as to the amount of tax to be imposed under § 1.871–7(b)(2) with respect to substitute interest or substitute dividend payments made by one foreign person to another foreign person. See Notice 97–66, page 8.

26 CFR 1.871–14: Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt in- vestments.

Guidance is provided to payors of substitute interest payments made after November 13, 1997, and before January 1, 1999, i.e., prior to the effective date of §1.871–14, for complying with the statement requirement of § 871(h)(5) in order to qualify the payments as portfolio interest payments for purposes of the tax imposed under §§ 871 and 881. See Notice 97–66, page 8.

Section 881.—Tax on Income of Foreign Corporations Not

Connected With United States Business

26 CFR 1.881–2: Income of foreign corporations treated as effectively connected with U.S. business.

Guidance is provided as to the amount of tax to be imposed under § 1.881–2(b)(2) with respect to substitute interest or substitute dividend payments made by one foreign person to another foreign person. See Notice 97–66, page 8.

Section 995.—Taxation of DISC Income to Shareholders

1997 base period T-bill rate. The “base period T-bill rate” for the period ending September 30, 1997, is published, as required by section 995(f)(4) of the Code.

Rev. Rul. 97–49

Section 995(f)(l) of the Internal Revenue Code provides that a shareholder of a DISC shall pay interest each taxable year in an amount equal to the product of the shareholder’s DISC-related deferred tax liability for the year and the “base period T-bill rate.” Under section 995(f)(4), the base period T-bill rate is the annual rate of interest determined by the Secretary to be equivalent to the average investment yield of United States Treasury bills with maturities of 52 weeks which were auctioned during the one-year period ending on September 30 of the calendar year ending with (or of the most recent calendar year ending before) the close of the taxable year of the shareholder. The base period T-bill rate for the period ending September 30, 1997, is 5.68 percent. Pursuant to section 6622 of the Code, interest must be compounded daily. The table below provides factors for compounding the base period T-bill rate daily for any number of days in the shareholder’s taxable year (including a 52–53 week accounting period) for the 1997 base period T-bill rate. To compute the amount of the interest charge for the shareholder’s taxable year, multiply the amount of the shareholder’s DISC-related deferred tax liability (as defined in section 995(f)(2)) for that year by the base period T-bill rate factor corresponding to the number of days in the shareholder’s tax

able year for which the interest charge is being computed. Generally, one would use the factor for 365 days. One would use a different factor only if the shareholder’s taxable year for which the interest charge being determined is a short taxable year, if the shareholder uses the 52-53 week taxable year, or if the shareholder’s taxable year is a leap year.

For the base period T-bill rates for the periods ending in prior years, see : Rev. Rul. 86–132, 1986–2 C.B. 137; Rev. Rul. 87–129, 1987–2 C.B. 196; Rev. Rul. 88–94, 1988–2 C.B. 301; Rev. Rul. 89–116, 1989–2 C.B. 197; Rev. Rul. 90–96, 1990–2 C.B. 188; Rev. Rul. 91–59, 1991–2 C.B. 347; Rev. Rul. 92–98, 1992–2 C.B. 201; Rev. Rul. 93–77, 1993–2 C.B. 253; Rev. Rul. 94–68, 1994–2 C.B. 177; Rev. Rul. 95–77, 1995–2 C.B. 122; and Rev. Rul. 96–55, 1996–2 C.B. 57.

DRAFTING INFORMATION

The principal author of this revenue ruling is David Bergkuist of the Office of the Associate Chief Counsel (International). For further information about this revenue ruling, contact Mr. Bergkuist on (202) 622-3850 (not a toll-free call).

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

1 .000155616 2 .000311257 3 .000466922 4 .000622611 5 .000778324

6 .000934062 7 .001089824 8 .001245610 9 .001401420 10 .001557255

11 .001713113 12 .001868996 13 .002024904 14 .002180835 15 .002336791

16 .002492771 17 .002648775 18 .002804804

December 1, 1997 4 1997–48 I.R.B.

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

19 .002960857 20 .003116934

21 .003273036 22 .003429161 23 .003585312 24 .003741486 25 .003897685

26 .004053908 27 .004210155 28 .004366426 29 .004522722 30 .004679043

31 .004835387 32 .004991756 33 .005148149 34 .005304567 35 .005461009

36 .005617475 37 .005773966 38 .005930481 39 .006087020 40 .006243584

41 .006400172 42 .006556784 43 .006713421 44 .006870082 45 .007026768

46 .007183478 47 .007340212 48 .007496971 49 .007653754 50 .007810561

51 .007967393 52 .008124249 53 .008281130 54 .008438035 55 .008594965

56 .008751919 57 .008908897 58 .009065900 59 .009222927 60 .009379979

61 .009537055 62 .009694155 63 .009851280

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

64 .010008430 65 .010165604

66 .010322802 67 .010480025 68 .010637272 69 .010794544 70 .010951840

71 .011109161 72 .011266506 73 .011423876 74 .011581270 75 .011738689

76 .011896132 77 .012053600 78 .012211092 79 .012368608 80 .012526150

81 .012683715 82 .012841306 83 .012998920 84 .013156560 85 .013314223

86 .013471912 87 .013629625 88 .013787362 89 .013945124 90 .014102911

91 .014260722 92 .014418557 93 .014576418 94 .014734302 95 .014892212

96 .015050146 97 .015208104 98 .015366087 99 .015524095 100 .015682127

101 .015840184 102 .015998265 103 .016156371 104 .016314502 105 .016472657

106 .016630837 107 .016789042 108 .016947271

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

109 .017105524 110 .017263803

111 .017422106 112 .017580433 113 .017738786 114 .017897162 115 .018055564

116 .018213990 117 .018372441 118 .018530916 119 .018689417 120 .018847941

121 .019006491 122 .019165065 123 .019323664 124 .019482287 125 .019640936

126 .019799609 127 .019958306 128 .020117028 129 .020275775 130 .020434547

131 .020593343 132 .020752165 133 .020911010 134 .021069881 135 .021228776

136 .021387696 137 .021546641 138 .021705610 139 .021864604 140 .022023623

141 .022182667 142 .022341736 143 .022500829 144 .022659947 145 .022819089

146 .022978257 147 .023137449 148 .023296666 149 .023455908 150 .023615174

151 .023774466 152 .023933782 153 .024093123

1997–48 I.R.B. 5 December 1, 1997

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

154 .024252489 155 .024411879

156 .024571294 157 .024730734 158 .024890199 159 .025049689 160 .025209204

161 .025368743 162 .025528307 163 .025687896 164 .025847510 165 .026007149

166 .026166813 167 .026326501 168 .026486214 169 .026645953 170 .026805716

171 .026965503 172 .027125316 173 .027285154 174 .027445016 175 .027604903

176 .027764816 177 .027924753 178 .028084715 179 .028244702 180 .028404713

181 .028564750 182 .028724812 183 .028884898 184 .029045010 185 .029205146

186 .029365307 187 .029525493 188 .029685704 189 .029845940 190 .030006201

191 .030166487 192 .030326798 193 .030487134 194 .030647495 195 .030807880

196 .030968291 197 .031128727 198 .031289187

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

199 .031449673 200 .031610183

201 .031770719 202 .031931279 203 .032091865 204 .032252475 205 .032413111

206 .032573771 207 .032734457 208 .032895167 209 .033055902 210 .033216663

211 .033377448 212 .033538259 213 .033699094 214 .033859955 215 .034020841

216 .034181751 217 .034342687 218 .034503648 219 .034664633 220 .034825644

221 .034986680 222 .035147741 223 .035308827 224 .035469938 225 .035631074

226 .035792236 227 .035953422 228 .036114633 229 .036275870 230 .036437131

231 .036598418 232 .036759730 233 .036921067 234 .037082428 235 .037243816

236 .037405228 237 .037566665 238 .037728127 239 .037889615 240 .038051128

241 .038212666 242 .038374229 243 .038535817

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

244 .038697430 245 .038859068

246 .039020732 247 .039182420 248 .039344134 249 .039505873 250 .039667638

251 .039829427 252 .039991242 253 .040153081 254 .040314946 255 .040476836

256 .040638752 257 .040800692 258 .040962658 259 .041124649 260 .041286665

261 .041448706 262 .041610773 263 .041772864 264 .041934981 265 .042097124

266 .042259291 267 .042421484 268 .042583702 269 .042745945 270 .042908213

271 .043070507 272 .043232826 273 .043395170 274 .043557539 275 .043719934

276 .043882354 277 .044044799 278 .044207270 279 .044369766 280 .044532287

281 .044694833 282 .044857405 283 .045020002 284 .045182624 285 .045345272

286 .045507945 287 .045670643 288 .045833366

December 1, 1997 6 1997–48 I.R.B.

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

289 .045996115 290 .046158889

291 .046321689 292 .046484514 293 .046647364 294 .046810240 295 .046973140

296 .047136067 297 .047299018 298 .047461995 299 .047624998 300 .047788025

301 .047951078 302 .048114157 303 .048277260 304 .048440390 305 .048603544

306 .048766724 307 .048929929 308 .049093160 309 .049256416 310 .049419698

311 .049583005 312 .049746337 313 .049909695 314 .050073078 315 .050236487

316 .050399921

Section 1441.—Withholding of Tax on Nonresident Aliens

26 CFR 1.1441–7: Requirement for the deduction and withholding of tax on payments to foreign persons.

Guidance is provided to payors of substitute interest and dividend concerning their obligations as withholding agents on payments made to foreign beneficial owners that are individuals. See Notice 97–66, page 8.

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

317 .050563380 318 .050726865 319 .050890376 320 .051053912

321 .051217473 322 .051381060 323 .051544672 324 .051708309 325 .051871972

326 .052035661 327 .052199375 328 .052363115 329 .052526880 330 .052690670

331 .052854486 332 .053018327 333 .053182194 334 .053346087 335 .053510005

336 .053673948 337 .053837917 338 .054001912 339 .054165932 340 .054329977

341 .054494048 342 .054658145 343 .054822267 344 .054986415 345 .055150588

Section 1442.—Withholding of Tax on Nonresident Corporations

26 CFR 1.1441–7: Requirement for the deduction and withholding of tax on payments to foreign per- sons.

Guidance is provided to payors of substitute interest and dividend concerning their obligations as withholding agents on payments made to foreign

1997 ANNUAL RATE, COMPOUNDED DAILY

5.68 PERCENT DAYS FACTOR

346 .055314787 347 .055479011 348 .055643261 349 .055807537 350 .055971838

351 .056136164 352 .056300516 353 .056464894 354 .056629297 355 .056793726

356 .056958181 357 .057122661 358 .057287166 359 .057451698 360 .057616255

361 .057780837 362 .057945445 363 .058110079 364 .058274738 365 .058439423

366 .058604134 367 .058768870 368 .058933632 369 .059098419 370 .059263232

371 .059428071

beneficial owners that are corporations. See Notice 97–66, page 8.

1997–48 I.R.B. 7 December 1, 1997