Part III. — Internal Revenue Bulletin 2003-35

Weighted Average Interest Rate Update

Notice 2003–58

Sections 412(b)(5)(B) and 412(l)(7) (C)(i) of the Internal Revenue Code provide that the interest rates used to calculate current liability for purposes of determining the full funding limitation under § 412(c)(7) and the required contribution under § 412(l) must be within a permissible range around 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

Month Year

Weighted

Average

weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability for the purpose of the full funding limitation of § 412(c)(7) of the Code.

Section 417(e)(3)(A)(ii)(II) of the Code defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner

for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury Securities for July 2003 is 4.93 percent. Pursuant to Notice 2002–26, 2002–1 C.B. 743, the Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.

Section 405 of the Job Creation and Worker Assistance Act of 2002 amended § 412(l)(7)(C) of the Code to provide that for plan years beginning in 2002 and 2003 the permissible range is extended to 120 percent.

The following rates were determined for the plan years beginning in the month shown below.

90% to 120% Permissible

Range

90% to 110% Permissible

Range

August 2003 5.31 4.78 to 5.85 4.78 to 6.38

for a taxable year ending on or before May 8, 2003, also may request automatic consent to make such a change by complying with Rev. Proc. 2002–9 and this notice. However, such a taxpayer is not subject to the filing requirements in section 6.02(3)(a) of Rev. Proc. 2002–9, provided that the taxpayer complies with the following filing requirements. The taxpayer must complete and file a Form 3115 in duplicate. The original must be attached to the taxpayer's amended federal income tax return for its most recent taxable year ending on or before May 8, 2003. This amended return must be filed no later than February 13, 2004. A copy of the Form 3115 must be filed with the national office (see section 6.02(6)(a) of Rev. Proc. 2002–9 for the address) no later than when the taxpayer's amended return is filed.

For taxable years ending after May 8, 2003, Forms 3115 to make these changes must be filed with the national office under Rev. Proc. 97–27, 97–1 C.B. 680.

In the future, if the Service and Treasury Department provide that the automatic consent procedures no longer apply for one or more methods of accounting for which taxpayers had been permitted

Drafting Information

The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Stern may be reached at 1–202–283–9703. Mr. Montanaro may be reached at 1–202–283–9714. The telephone numbers in two preceding sentences are not toll-free.

Simplified Service Cost Method; Simplified Production Method

Notice 2003–59

Notice 2003–36, 2003–23 I.R.B. 992, provides that after May 8, 2003, the Internal Revenue Service will not accept Forms 3115, Application for Change in

Accounting Method, filed under the automatic consent procedures of Rev. Proc. 2002–9, 2002–1 C.B. 327, that request consent to change to either the simplified service cost method or the simplified production method for self-constructed assets under §§ 1.263A–1(h)(2)(i)(D) and 1.263A–2(b)(2)(i)(D) of the Income Tax Regulations. This notice informs taxpayers that the Service and Treasury Department have decided that a taxpayer will be permitted, after May 8, 2003, to timely file Forms 3115 to make these changes under Rev. Proc. 2002–9 for its most recent taxable year ending on or before May 8, 2003. To qualify under this notice, a taxpayer that wishes to file a Form 3115 on or after August 13, 2003, must do so under Rev. Proc. 2002–9 requesting to make a change for its most recent taxable year ending on or before May 8, 2003, and in addition to complying with the requirements of Rev. Proc. 2002–9, must include the following statement on top of the form: “Automatic Change Filed Under Notice 2003–59.”

A taxpayer that has timely filed its original federal income tax return after May 8, 2003, but on or before September 12, 2003,

September 2, 2003 429 2003-35 I.R.B.

DRAFTING INFORMATION

The principal author of this notice is Scott H. Rabinowitz of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Mr. Rabinowitz at (202) 622–4970 (not a toll-free call).

to use the automatic consent procedures, such change may be effective for Forms 3115 filed after such change is announced. In such case, a taxpayer that has not filed a copy of Form 3115 with the national office by the time the change is announced

would not be permitted to use the automatic consent procedures.

EFFECT ON OTHER DOCUMENTS

Notice 2003–36 is modified.

2003-35 I.R.B. 430 September 2, 2003