Part III. — Internal Revenue Bulletin 2004-30

2004 Marginal Production Rates

Notice 2004–48

Section 613A(c)(6)(C) of the Internal Revenue Code defines the term “applicable percentage” for purposes of determining percentage depletion for oil and gas

produced from marginal properties. The applicable percentage is the percentage (not greater than 25 percent) equal to the sum of 15 percent, plus one percentage point for each whole dollar by which $20 exceeds the reference price (determined under § 29(d)(2)(C)) for crude oil for the calendar year preceding the calendar year in which the taxable year begins.

Notice 2004–48 Table 1

The reference price determined under § 29(d)(2)(C) for the 2003 calendar year is $27.56.

Table 1 contains the applicable percentages for marginal production for taxable years beginning in calendar years 1991 through 2004.

APPLICABLE PERCENTAGE FOR MARGINAL PRODUCTION

Calendar Year Applicable Percentage

1991 15 percent 1992 18 percent 1993 19 percent 1994 20 percent 1995 21 percent 1996 20 percent 1997 16 percent 1998 17 percent 1999 24 percent 2000 19 percent 2001 15 percent 2002 15 percent 2003 15 percent 2004 15 percent

factor for the 2004 calendar year, the enhanced oil recovery credit for qualified costs paid or incurred in 2004 is determined without regard to the phase-out for crude oil price increases.

Table 1 contains the GNP implicit price deflator used for the 2004 calendar year, as well as the previously published GNP implicit price deflators used for the 1991 through 2003 calendar years.

The principal author of this notice is Eric B. Lee of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Mr. Lee at (202) 622–3120 (not a toll-free call).

2004 Section 43 Inflation Adjustment

Notice 2004–49

Section 43(b)(3)(B) of the Internal Revenue Code requires the Secretary to publish an inflation adjustment factor. The enhanced oil recovery credit under

§ 43 for any taxable year is reduced if the “reference price,” determined under § 29(d)(2)(C), for the calendar year preceding the calendar year in which the taxable year begins, is greater than $28 multiplied by the inflation adjustment factor for that year.

The term “inflation adjustment factor” means, with respect to any calendar year, a fraction the numerator of which is the GNP implicit price deflator for the preceding calendar year and the denominator of which is the GNP implicit price deflator for 1990.

Because the reference price for the 2003 calendar year ($27.56) does not exceed $28 multiplied by the inflation adjustment

July 26, 2004 88 2004–30 I.R.B.

Notice 2004–49 TABLE 1

GNP IMPLICIT PRICE DEFLATORS

Calendar Year GNP Implicit Price Deflator

1990 112.9 (used for 1991) 1991 117.0 (used for 1992) 1992 120.9 (used for 1993) 1993 124.1 (used for 1994) 1994 126.0 (used for 1995) 1995 107.5 (used for 1996) 1996 109.7 (used for 1997) 1997 112.35 (used for 1998) 1998 112.64 (used for 1999) 1999 104.59 (used for 2000) 2000 106.89 (used for 2001) 2001 109.31 (used for 2002) 2002 110.63 (used for 2003) 2003 105.67 (used for 2004)

Table 2 contains the inflation adjustment factor and the phase-out amount for taxable years beginning in the 2004 calendar year as well as the previously published inflation adjustment factors and phase-out amounts for taxable years beginning in 1991 through 2003 calendar years.

Beginning in 1995, the GNP implicit price deflator was rebased relative to 1992. The 1990 GNP implicit price deflator used to compute the 1996 § 43 inflation adjustment factor is 93.6.

** Beginning in 1997, two digits follow the decimal point in the GNP implicit price deflator. The 1990 GNP price deflator

used to compute the 1998 § 43 inflation adjustment factor is 93.63.

*** Beginning in 1999, the GNP implicit price deflator was rebased relative to 1996. The 1990 GNP implicit price deflator used to compute the 2000 § 43 inflation adjustment factor is 86.53.

Notice 2004–49 TABLE 2

Phase-out

Amount

Calendar

Year

INFLATION ADJUSTMENT FACTORS AND

PHASE-OUT AMOUNTS

Inflation Adjustment

Factor

1991 1.0000 0 1992 1.0363 0 1993 1.0708 0 1994 1.0992 0 1995 1.1160 0 1996 1.1485 0 1997 1.1720 0 1998 1.1999 0 1999 1.2030 0 2000 1.2087 0 2001 1.2353 0 2002 1.2633 0 2003 1.2785 0 2004 1.2952 0

rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. In addition, it provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II), and the weighted average interest rate and permissible ranges of interest rates based on the 30-year Treasury securities rate.

DRAFTING INFORMATION

Weighted Average Interest Rates Update

Notice 2004–51

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest

2004–30 I.R.B. 89 July 26, 2004

rate derived from designated corporate bond indices.

The composite corporate bond rate for June 2004 is 6.18 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.

CORPORATE BOND WEIGHTED AVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and 412(l) (7)(C)(i), as amended by the Pension Funding Equity Act of 2004, provide that the interest rates used to calculate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 or 2005 must be within a permissible range based on the weighted average of the rates of interest on amounts

invested conservatively in long term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year.

Notice 2004–34, 2004–18 I.R.B. 848, provides guidelines for determining the corporate bond weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond

Corporate

For Plan Years Bond 90% to 110%

Beginning in: Weighted Permissible Month Year Average Range

July 2004 6.32 5.69 to 6.32

imum amount of the deduction allowed under § 404(a)(1).

The rate of interest on 30-year Treasury securities for June 2004 is 5.41 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.

The following 30-year Treasury rates were determined for the plan years beginning in the month shown below.

30-YEAR TREASURY SECURITIES WEIGHTED AVERAGE INTEREST RATE

Section 417(e)(3)(A)(ii)(II) 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.

Section 404(a)(1) of the Code, as amended by the Pension Funding Equity Act of 2004, permits an employer to elect to disregard subclause (II) of § 412(b)(5)(B)(ii) to determine the max

30-Year

For Plan Years Treasury 90% to 105% 90% to 110%

Beginning in: Weighted Permissible Permissible Month Year Average Range Range

July 2004 5.17 4.65 to 5.43 4.65 to 5.69

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 tele

phone numbers in the preceding sentences are not toll-free.

26 CFR 601.204: Changes in accounting periods and in methods of accounting. (Also: Part I, §§ 404, 832, 846; 1.404(b)–1T, 1.404(d)–1T, 1.832–4.)

Rev. Proc. 2004–41