Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

voluntary distribution of an employee’s vested accrued benefit valued at $5,000 or less could be treated as made due to termination of the employee’s participation if the distribution could have been made at termination of participation but for the fact that the benefit was then valued at more than $3,500. Finally, the temporary regulations amended §1.411(a)–11(c)(3) to eliminate the “lookback rule” for distributions other than those made pursuant to an optional form of benefit under which at least one scheduled periodic distribution remained payable. Prior to this amendment, the lookback rule in §1.411(a)– 11(c)(3) provided that the present value of a vested accrued benefit was deemed to exceed the cash-out limit if it had exceeded the cash-out limit at the time of any previous distribution. The temporary regulations did not change the parallel lookback rule under §1.417(e)–1(b)(2)(i).

The proposed regulations generally included the provisions of the temporary regulations, but they also proposed the complete removal (on a prospective basis) of the lookback rule under both §§1.411(a)–11(c)(3) and 1.417(e)– 1(b)(2)(i). Thus, under the proposed regulations, the lookback rule would be eliminated both for plans subject to the spousal-consent provisions of sections 401(a)(11) and 417 and for plans not subject to those provisions. Under this removal of the lookback rule, a participant’s vested accrued benefit valued at $5,000 or less could be distributed without consent even if the benefit had been valued at more than $5,000 at the time of a previous distribution. However, in accordance with section 417(e)(1), the proposed regulations also provided that, in the case of plans subject to sections 401(a)(11) and 417, consent would be required after the annuity starting date for the immediate distribution of the present value of an accrued benefit being distributed in any form, including a qualified joint and survivor annuity or a qualified preretirement survivor annuity, regardless of the amount of that present value.

Very few comments were received on the proposed regulations. One commentator inquired whether a cash-out could be made of a benefit presently valued at $4,500 that had been valued at $4,000

Section 42.—Low-Income Housing Credit

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 280G.—Golden Parachute Payments

Federal short-term, mid-term, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 382.—Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change

The adjusted applicable federal long-term rate is set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 411.—Minimum Vesting Standards

26 CFR: 1.411(a)–7: Definitions and special rules.

T.D. 8891

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 31

Increase In Cash-Out Limit Under Sections 411(a)(7), 411(a)(11), and 417(e)(1) for Qualified Retirement Plans

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations relating to the increase from $3,500 to $5,000 of the limit on distributions from qualified retirement plans that can be made without participant or spousal consent. This increase is contained in the Taxpayer Relief Act of 1997. In addition, these regulations eliminate the “lookback rule” pursuant to which certain qualified plan benefits are deemed to exceed this limit on involuntary distrib

utions. The final regulations affect sponsors and administrators of qualified retirement plans, and participants in those plans.

DATES: Effective Date : These regulations are effective October 17, 2000.

Applicability Date : These regulations generally apply to distributions made on or after October 17, 2000.

FOR FURTHER INFORMATION CONTACT: Robert Walsh, (202) 622-6090 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 21, 1998, a notice of proposed rulemaking (REG–113694–98, 1999–7 I.R.B. 56) was published in the Federal Register (63 F.R. 70356) regarding the “cash-out limit” under sections 411(a)(7), 411(a)(11), and 417(e)(1) of the Internal Revenue Code. That same day, temporary and final regulations (T.D. 8794, 1999–7 I.R.B. 4) were published in the Federal Register (63 F.R. 70335) which amended the Income Tax Regulations and the Employment Tax Regulations (26 CFR parts 1 and 31) relating to the increase in the cash-out limit enacted by section 1071 of the Taxpayer Relief Act of 1997, Public Law 105-34, 111 Stat. 788 (1997) (TRA ’97). The text of the temporary regulations served as a portion of the text of the proposed regulations. Very few comments were submitted on the proposed regulations; no hearing was requested or held. After consideration of the comments, these final regulations adopt the provisions of the proposed regulations.

Explanation of Provisions

The temporary regulations made several changes to the cash-out rules under sections 411(a)(7), 411(a)(11), and 417(e)(1). In accordance with section 1071 of TRA ’97, the temporary regulations increased the cash-out limit from $3,500 to $5,000. Thus, a qualified plan can generally distribute vested accrued benefits valued at $5,000 or less without participant or spousal consent. The temporary regulations also provided that, for purposes of section 411(a)(7)(B)(i), an in

August 7, 2000 152 2000–32 I.R.B.

upon termination of the employee’s employment more than two years earlier. As indicated in the preamble to the final and temporary regulations published with the proposed regulations, that benefit could be cashed out.

Another commentator indicated support for the content of the proposed regulations but expressed concern about the rule, derived from section 417(e)(1), prohibiting a cashout after the annuity starting date of a benefit being distributed in any form by a plan subject to sections 401(a)(11) and 417. The commentator observed that, under section 417(f)(2)(A), the annuity starting date for a benefit payable upon termination of employment in non-annuity form could be the date of termination. The commentator argued that the rule in the proposed regulations prohibiting a cashout after the annuity starting date could be read to preclude a cashout of a non-annuity benefit payable at termination, regardless of the present value of that benefit. To address this, the commentator urged the IRS and Treasury to redefine “annuity starting date” such that a cashout would be permitted as long as a benefit remains immediately distributable (that is, until the later of normal retirement age or age 62).

The provision in the proposed regulations prohibits a cashout after the annuity starting date of a benefit “being distributed in any form.” The rule does not apply to any benefit that is not yet “being distributed” — that is, to any benefit with respect to which no payment has been made. If the present value of a benefit payable on or after termination of employment does not exceed the cashout limit, the rule of section 417(e)(1), as set forth in the proposed regulations, would not prohibit a cashout prior to the date on which a payment is first made (disregarding, obviously, the cashout payment itself). Thus, no change has been made to the regulations on this point.

Another commentator objected to the complete elimination of the lookback rule under the proposed regulations. The commentator cited three reasons for its opposition: first, that an amount distributed in a hardship or other type of distribution remains part of a participant’s benefit; second, that a participant could manipulate a distribution in order to evade the spousalconsent requirements; and, third, that per

mitting cash-outs after a hardship or other distribution is contrary to the policy of discouraging non-retirement distributions.

In contrast, a comment received prior to the issuance of the proposed regulations noted problems faced by plan administrators due to the lookback rule. The commentator noted, for example, that if a plan provides for hardship distributions, the plan administrator must review its records to determine the value of the participant’s benefits at the time of any prior distribution. The commentator added that this can be particularly difficult and costly where plans sponsored by other employers have merged into the plan. The commentator further stated that the cash-out provisions are designed to allow plans to reduce their administrative costs by making lump sum payments to participants with small benefits and that the lookback rule is contrary to that design because the rule (1) makes it more costly for administrators to determine whether the provisions apply and (2) can prevent a plan from relying on the provisions in many cases where the value of the participant’s current benefit is well below $5,000.

After consideration of the comments, the IRS and Treasury have decided to adopt the regulation eliminating the lookback rule as proposed. The IRS and Treasury believe that the statutory cash-out provisions represent a balancing of the interests of participants in maintaining their benefits in qualified plans with the reasonable administrative needs of plan sponsors and administrators. The lookback rule prevents plans from cashing out a benefit currently valued below the cashout limit simply because it had been valued above the cash-out limit at the time of an earlier distribution. This creates disparity in the treatment of benefits of equivalent value and requires plans to incur additional recordkeeping and other administrative costs.

The IRS and Treasury note that removal of the lookback rule is unlikely to present significant opportunities for participants to evade the spousal-consent rules. In the case of any plan subject to the spousalconsent provisions of sections 401(a)(11) and 417, a distribution that draws a participant’s accrued benefit from a value above the cash-out limit to a value at or below the cash-out limit will itself require

spousal consent. Furthermore, these final regulations strengthen the spousal-consent rules by clarifying that a plan subject to sections 401(a)(11) and 417 may not distribute a benefit after the annuity starting date without consent. This prohibition on cash-outs after the annuity starting date, which is statutory in source, applies without regard to the value of the benefit at the annuity starting date and without regard to the distribution form.

Finally, the IRS and Treasury note that concerns about non-retirement distributions of benefits are mitigated by the availability of rollovers. In almost all cases, an amount distributed from a qualified plan in a cash-out distribution will be an eligible rollover distribution that can be paid directly (or indirectly, through a 60-day rollover) to another qualified retirement plan or individual retirement arrangement.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has 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 regulation does 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 Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Robert M. Walsh, Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). However, other personnel from the IRS and Treasury Department participated in their development.

• ---

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 31 are amended as follows:

2000–32 I.R.B. 153 August 7, 2000

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by removing the entry for §1.411(a)–7T and by adding a new entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * §1.411(a)–7 also issued under 26 U.S.C. 411(a)(7)(B)(i). * * * Par. 2. Section 1.411(a)–7 is amended as follows:

1. Paragraph (d)(4)(i) is revised;
2. Paragraphs (d)(4)(vi) and (d)(4)(vii) are added.

The revision and additions read as follows: §1.411(a)–7 Definitions and special rules.

• ---

(d) * * * (4) Certain cash-outs of accrued bene- fits —(i) Involuntary cash-outs . For purposes of determining an employee’s right to an accrued benefit derived from employer contributions under a plan, the plan may disregard service performed by the employee with respect to which—

(A) The employee receives a distribution of the present value of his entire nonforfeitable benefit at the time of the distribution;

(B) The requirements of section 411(a)(11) are satisfied at the time of the distribution;

(C) The distribution is made due to the termination of the employee’s participation in the plan; and

(D) The plan has a repayment provision which satisfies the requirements of paragraph (d)(4)(iv) of this section in effect at the time of the distribution.

• ---

(vi) For purposes of paragraph (d)(4)(i) of this section, a distribution shall be deemed to be made due to the termination of an employee’s participation in the plan if it is made no later than the close of the second plan year following the plan year in which such termination occurs, or if such distribution would have been made under the plan by the close of such second plan year but for the fact that the present value of the nonforfeitable accrued bene

fit then exceeded the cash-out limit in effect under §1.411(a)–11(c)(3)(ii). For purposes of determining the entire nonforfeitable benefit, the plan may disregard service after the distribution, as illustrated in paragraph (d)(2)(i) of this section.

(vii) Effective date . Paragraphs (d)(4)(i) and (vi) of this section apply to distributions made on or after March 22, 1999. However, an employer is permitted to apply paragraphs (d)(4)(i) and (vi) of this section to plan years beginning on or after August 6, 1997. Otherwise, for distributions prior to March 22, 1999, §§1.411(a)–7 and 1.411(a)–7T, in effect prior to October 17, 2000 (as contained in 26 CFR part 1, revised as of April 1, 2000) apply.

• ---

§1.411(a)–7T [Removed]

Par. 3. Section 1.411(a)–7T is removed.

Par. 4. Section 1.411(a)–11 is amended by revising paragraph (c)(3) to read as follows: §1.411(a)–11 Restriction and valuation of distributions.

• ---

(c) * * * (3) Cash-out limit . (i) Written consent of the participant is required before the commencement of the distribution of any portion of an accrued benefit if the present value of the nonforfeitable total accrued benefit is greater than the cash-out limit in effect under paragraph (c)(3)(ii) of this section on the date the distribution commences. The consent requirements are deemed satisfied if such value does not exceed the cash-out limit, and the plan may distribute such portion to the participant as a single sum. Present value for this purpose must be determined in the same manner as under section 417(e); see §1.417(e)–1(d).

(ii) The cash-out limit in effect for a date is the amount described in section 411(a)(11)(A) for the plan year that includes that date. The cash-out limit in effect for dates in plan years beginning on or after August 6, 1997, is $5,000. The

cash-out limit in effect for dates in plan years beginning before August 6, 1997, is $3,500.

(iii) Effective date . Paragraphs (c)(3)(i) and (ii) of this section apply to distributions made on or after October 17, 2000. However, an employer is permitted to apply the $5,000 cash-out limit described in paragraph (c)(3)(ii) of this section to plan years beginning on or after August 6, 1997. Otherwise, for distributions prior to October 17, 2000, §1.411(a)–11 and 1.411(a)–11T in effect prior to October 17, 2000 (as contained in 26 CFR Part 1 revised as of April 1, 2000) apply.

• ---

§1.411(a)–11T [Removed]

Par. 5. Section 1.411(a)–11T is removed.

Par. 6. Section 1.417(e)–1 is amended by revising the last sentence of paragraph (b)(2)(i) and by adding new paragraph (b)(2)(iii) to read as follows: §1.417(e)–1 Restrictions and valuations of distributions from plans subject to sec- tions 401(a)(11) and 417 .

• ---

(b) * * * (2) * * * (i) * * * After the annuity starting date, consent is required for the immediate distribution of the present value of the accrued benefit being distributed in any form, including a qualified joint and survivor annuity or a qualified preretirement survivor annuity, regardless of the amount of such present value.

• ---

(iii) Paragraph (b)(2)(i) of this section applies to distributions made on or after October 17, 2000. For distributions prior to October 17, 2000, §1.417(e)–1(b)(2)(i) in effect prior to October 17, 2000 (as contained in 26 CFR part 1 revised as of April 1, 2000) applies.

• ---

PARTS 1 AND 31—[AMENDED]

Par. 7. In the table below, for each section indicated in the left column, remove the language in the middle column and add the language in the right column:

August 7, 2000 154 2000–32 I.R.B.

Robert E. Wenzel, Deputy Commissioner

of Internal Revenue.

Approved July 10, 2000.

Jonathan Talisman, Deputy Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on July 18, 2000, 8:45 a.m., and published in the issue of the Federal Register for July 19, 2000, 65 F.R. 44679)

Section 412.—Minimum Funding Standards

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 467.—Certain Payments for the Use of Property or Services

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 468.—Special Rules for Mining and Solid Waste Reclamation and Closing Costs

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 482.—Allocation of Income and Deductions Among Taxpayers

Federal short-term, mid-term, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 483.—Interest on Certain Deferred Payments

The adjusted applicable federal short-term, mid

term, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 642.—Special Rules for Credits and Deductions

Federal short-term, mid-term, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 807.—Rules for Certain Reserves

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 809.—Reduction in Certain Deductions of Mutual Life Insurance Companies

26 CFR 1.809–9: Computation of the differential earnings rate and the recomputed differential earnings rate.

2000–32 I.R.B. 155 August 7, 2000

Federal income taxes, and ... properly adjusted for realized capital gains and losses....” See § 809(g)(1). The term “equity base” is defined as an amount determined in the manner prescribed by regulations equal to surplus and capital increased by the amount of nonadmitted financial assets, the excess of the amount of statutory reserves over the amount of tax reserves, the sum of certain other reserves, and 50 percent of any policyholder dividends (or other similar liability) payable in the following taxable year. See § 809(b)(2), (3), (4), (5) and (6). Section 1.809–10 of the Income Tax Regulations provides that the equity base includes both the asset valuation reserve and the interest maintenance reserve for taxable years ending after December 31, 1991. Section 1.809–9(a) of the regulations provides that neither the differential earnings rate under § 809(c) nor the recomputed differential earnings rate that is used in computing the recomputed differential earnings amount under § 809(f)(3) may be less than zero.

Rev. Rul. 99–3, 1999–3 I.R.B. 4, provides that a life insurance subsidiary of a mutual holding company is not a mutual life insurance company for which the deduction for policyholder dividends is reduced pursuant to §§ 808(c)(2) and 809.

For purposes of § 809, the differential earnings rate for 1999 and the rate used to calculate the recomputed differential earnings amount for 1998 (the recomputed differential earnings rate for 1998), and the figures on which these two rates are based are set forth in Table 1.

Mutual life insurance companies; differential earnings rate. The differential earnings rate for 1999 and the recomputed differential earnings rate for 1998 are set forth for use by mutual life insurance companies to compute their income tax liabilities for 1999.

Rev. Rul. 2000–37

This revenue ruling contains the differential earnings rate for 1999 and the recomputed differential earnings rate for 1998. Under § 809 of the Internal Revenue Code, mutual life insurance companies use these rates in computing their Federal income tax liability for taxable years beginning in 1999. This revenue ruling also contains the figures on which the determinations of these rates are based. Notice 2000–16, 2000–12 I.R.B. 826, contained tentative determinations of these rates.

Section 809(a) provides that, in the case of any mutual life insurance company, the amount of the deduction allowable under § 808 for policyholder dividends is reduced (but not below zero) by the “differential earnings amount.” Any excess of the differential earnings amount over the amount of the deduction allowable under § 808 is taken into account as a reduction in the closing balance of reserves under subsections (a) and (b) of § 807. The “differential earnings amount” for any taxable year is the amount equal to the product of (a) the life insurance company’s average equity base for the taxable year multiplied by (b) the “differential earnings rate” for that taxable year. The “differential earnings rate” for the taxable year is the excess of (a) the

“imputed earnings rate” for the taxable year over (b) the “average mutual earnings rate” for the second calendar year preceding the calendar year in which the taxable year begins. The “imputed earnings rate” for any taxable year is the amount that bears the same ratio to 16.5 percent as the “current stock earnings rate” for the taxable year bears to the “base period stock earnings rate.”

Section 809(f) provides that, in the case of any mutual life insurance company, if the “recomputed differential earnings amount” for any taxable year exceeds the differential earnings amount for that taxable year, the excess is included in life insurance gross income for the succeeding taxable year. If the differential earnings amount for any taxable year exceeds the recomputed differential earnings amount for that taxable year, the excess is allowed as a life insurance deduction for the succeeding taxable year. The “recomputed differential earnings amount” for any taxable year is an amount calculated in the same manner as the differential earnings amount for that taxable year, except that the average mutual earnings rate for the calendar year in which the taxable year begins is substituted for the average mutual earnings rate for the second calendar year preceding the calendar year in which the taxable year begins.

The stock earnings rates and mutual earnings rates taken into account under § 809 generally are determined by dividing statement gain from operations by the average equity base. For this purpose, the term “statement gain from operations” means “the net gain or loss from operations required to be set forth in the annual statement, determined without regard to

Rev. Rul. 2000–37 Table 1

Determination of Rates To Be Used For Taxable Years

Beginning in 1999

Differential earnings rate for 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.249 Recomputed differential earnings rate for 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.182 Imputed earnings rate for 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.193 Imputed earnings rate for 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.815 Base period stock earnings rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.221 Current stock earnings rate for 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.465 Stock earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.238 Stock earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.321 Stock earnings rate for 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.836 Average mutual earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.566 Average mutual earnings rate for 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.011

August 7, 2000 156 2000–32 I.R.B.

DRAFTING INFORMATION

The principal author of this revenue ruling is Katherine A. Hossofsky of the Office of the Associate Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact Ms. Hossofsky on (202) 622-3477 (not a toll-free number).

Section 846.—Discounted Unpaid Losses Defined

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, on this page.

Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property

(Also sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term exempt rate. For purposes of sections 1274, 1288, 382, and other sections of the Code, tables set forth the rates for August 2000.

Rev. Rul. 2000–38

This revenue ruling provides various prescribed rates for federal income tax purposes for August 2000 (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 longterm 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)(2) for buildings placed in service during the current month. 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.

REV. RUL. 2000–38 TABLE 1 Applicable Federal Rates (AFR) for August 2000

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-Term

AFR 6.37% 6.27% 6.22% 6.19% 110% AFR 7.02% 6.90% 6.84% 6.80% 120% AFR 7.66% 7.52% 7.45% 7.40% 130% AFR 8.32% 8.15% 8.07% 8.01%

Mid-Term

AFR 6.33% 6.23% 6.18% 6.15% 110% AFR 6.97% 6.85% 6.79% 6.75% 120% AFR 7.62% 7.48% 7.41% 7.37% 130% AFR 8.26% 8.10% 8.02% 7.97% 150% AFR 9.57% 9.35% 9.24% 9.17% 175% AFR 11.20% 10.90% 10.76% 10.66%

Long-Term

AFR 6.22% 6.13% 6.08% 6.05% 110% AFR 6.85% 6.74% 6.68% 6.65% 120% AFR 7.50% 7.36% 7.29% 7.25% 130% AFR 8.13% 7.97% 7.89% 7.84%

2000–32 I.R.B. 157 August 7, 2000

REV. RUL. 2000–38 TABLE 2 Adjusted AFR for August 2000

Period for Compounding

Annual Semiannual Quarterly Monthly Short-term adjusted AFR 4.63% 4.58% 4.55% 4.54%

Mid-term adjusted AFR 4.84% 4.78% 4.75% 4.73%

Long-term adjusted AFR 5.53% 5.46% 5.42% 5.40%

REV. RUL. 2000–38 TABLE 3

Rates Under Section 382 for August 2000

Adjusted federal long-term rate for the current month 5.53%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 5.79%

REV. RUL. 2000–38 TABLE 4

Appropriate Percentages Under Section 42(b)(2)

for August 2000

Appropriate percentage for the 70% present value low-income housing credit 8.47%

Appropriate percentage for the 30% present value low-income housing credit 3.63%

REV. RUL. 2000–38 TABLE 5

Rate Under Section 7520 for August 2000

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 7.6%

EFFECTIVE DATE: These regulations are effective July 18, 2000.

FOR FURTHER INFORMATION CONTACT: Beverly A. Baughman (202) 6224940 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 27, 1993, the IRS issued temporary regulations (T.D. 8510, 1994–1 C.B. 280) in the Federal Register (58 F.R. 68295) under sections 6012, 6061, and 6065 relating to the TeleFile Voice Signature test. Because the temporary regulations applied only to 1992 and 1993 calendar year returns, the IRS has decided to remove them. Therefore, temporary regulations §§1.6012–7T, 1.6061–2T, and 1.6065–2T are being removed.

Section 1288.—Treatment of Original Issue Discounts on Tax- Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 6061.—Signing of Returns and Other Documents

26 CFR1.6061–2T: Signing of returns by voice signature (temporary).

T.D. 8892

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602

TeleFile Voice Signature Test

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Removal of temporary regulations.

SUMMARY: This document removes temporary regulations that provide that an individual Federal income tax return completed as part of the Telefile Voice Signature test will be treated as a return that is signed, authenticated, verified and filed by the taxpayer as required by the Internal Revenue Code. The temporary regulations were published in the Federal Register on December 27, 1993. Because the temporary regulations applied only to 1992 and 1993 calendar year returns, the IRS is removing them.

August 7, 2000 158 2000–32 I.R.B.

On December 27, 1993, the IRS also issued a notice of proposed rulemaking (IA–38–93, 1994–1 C.B. 795 [58 F.R. 68335]) under sections 6012, 6061, and 6065. Although written comments and requests for a public hearing were solicited, no written or oral comments were received and no public hearing was requested or held. This notice of proposed rulemaking is being withdrawn in a separate document, Announcement 2000–68 on page 161.

Explanation of provisions

Under sections 6012, 6061, and 6065 of the Internal Revenue Code, each individual with gross income in excess of a specified amount must file an annual income tax return that (i) is signed in accordance with prescribed forms and instructions and, (ii) except as otherwise provided by the Service, contains (or is verified by) a written declaration that the return is made under penalties of perjury.

The temporary regulations provide rules to facilitate the implementation of the Telefile Voice Signature test. Generally, pursuant to the temporary regulations a taxpayer’s individual income tax return will be treated as having been properly filed if the taxpayer is eligible to participate in the Telefile Voice Signature test

and, pursuant to the instructions from the Telefile system interactive voice computer, provides the requested information and the voice signature during the telephonic filing season.

The Telefile Voice Signature test occurred during the 1993 and 1994 filing seasons. Since that time, the Service has published final regulations generally authorizing alternative signature methods. See §301.6061–1. Accordingly, the regulations relating to the Telefile Voice Signature test are being removed.

Drafting Information

The principal author of these regulations is Beverly A. Baughman of the Office of Assistant Chief Counsel (Income Tax and Accounting), IRS. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in their development.

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Removal of Temporary Regulations

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 * * *

§1.6012–7T [Removed]

Par. 2. Section 1.6012–7T is removed.

§1.6061–2T [Removed]

Par. 3. Section 1.6061–2T is removed.

§1.6065–2T [Removed]

Par. 4. Section 1.6065–2T is removed.

PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 5. The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805 * * * Par. 6. Section 602.101(c) is amended by removing the following entries in the table: §602.101 OMB Control numbers .

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(c)* * *

CFR part or section where Current OMB identified and described control number

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1.6012–7T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545-1348

1.6061–2T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545-1348

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Robert E. Wenzel, Deputy Commissioner of

Internal Revenue.

Approved June 30, 2000.

Jonathan Talisman, Assistant Secretary of

the Treasury .

(Filed by the Office of Federal Register on July 17, 2000, 8:45 a.m., and published in the issue of the Federal Register for July 18, 2000, 65 F.R. 44437)

Section 7520.—Valuation Tables

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

Section 7872.—Treatment of Loans with Below-Market Interest Rates

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of August 2000. See Rev. Rul. 2000–38, page 157.

2000–32 I.R.B. 159 August 7, 2000