Part III. Administrative, Procedural, and Miscellaneous

Dyed Diesel Fuel and Kerosene: Nontaxable Use; Alaska

Notice 2010–68

This notice provides that undyed diesel fuel and undyed kerosene (undyed fuel) may continue to be removed, entered, and sold for nontaxable uses in the entire state of Alaska under the existing procedures in § 48.4082–5 of the Manufacturers and Retailers Excise Tax Regulations. These regulations generally allow tax-free removals of diesel fuel from approved terminals and tax-free sales of undyed fuel between registered dealers and between registered dealers and nontaxable users.

This notice clarifies that recent changes in Environmental Protection Agency (EPA) rules relating to Alaskan diesel fuel do not affect existing Internal Revenue Service (IRS) procedures relating to undyed fuel transactions in Alaska. Section 48.4082–5(b) provides that these existing IRS procedures apply only to areas of Alaska in which the sulfur content requirements for diesel fuel (see § 211(i) of the Clean Air Act, 42 U.S.C. 7545(i)) do not apply because the Administrator of the EPA has granted an exemption under § 211(i)(4) of that Act.

When § 48.4082–5 was issued in 1996, the entire state of Alaska was exempt from both EPA’s sulfur content requirement and its requirement for dyeing high sulfur diesel fuel and kerosene. The EPA is now phasing out Alaska’s exemption from the EPA sulfur content requirement but has retained its rule that exempts Alaska from the EPA fuel dyeing requirement.

Because § 4082(c) of the Internal Revenue Code provides an exemption from the dyeing requirements of § 4082(a)(2) of the Code for areas that are exempt from the EPA fuel dyeing requirement, diesel fuel and kerosene in Alaska will continue to be exempt from the dyeing requirements of the Internal Revenue Code. In addition, the current system of fuel distribution and nontaxable use in Alaska will remain in effect until the Administrator of the EPA eliminates part or all of Alaska’s exemption from the dyeing requirements of the Clean Air Act. The IRS expects to amend

§ 48.4082–5(b) to reflect the provisions of this notice.

Taxpayers are reminded that the $0.001 per gallon tax for the Leaking Underground Storage Tank Trust Fund financing rate generally applies to sales of undyed fuel for nontaxable uses including off-highway and heating oil uses.

The principal author of this notice is Charles J. Langley, Jr. of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, contact Charles J. Langley, Jr. at (202) 622–3130 (not a toll-free call).

Interim Relief with Respect to Form W-2 Reporting of the Cost of Coverage of Group Health Insurance Under § 6051(a)(14)

Notice 2010–69

This notice provides interim relief to employers with respect to reporting the cost of coverage under an employer-sponsored group health plan on Form W-2, Wage and Tax Statement, pursuant to § 6051(a)(14) of the Code. Specifically, this notice provides that reporting the cost of such coverage will not be mandatory for 2011 Forms W-2. The Treasury Department and the IRS have determined that this relief is appropriate to provide employers with additional time to make any necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement.

BACKGROUND

Section 6051(a)(14) was added to the Code by § 9002 of the Patient Protection and Affordable Care Act of 2010, Public Law 111–148, enacted March 23, 2010. Section 6051(a)(14) provides generally that the aggregate cost of applicable employer-sponsored coverage (as defined in § 4980I(d)(1)) must be reported on Form W-2. Section 6051(a)(14) further provides that, for this purpose, the aggregate cost is to be determined under rules similar to the rules of § 4980B(f)(4), referring to the

definition of the “applicable premium” under the rules providing for COBRA continuation coverage. Section 6051(a)(14) is effective for taxable years beginning on or after January 1, 2011.

INTERIM RELIEF

Pursuant to this notice, the reporting requirement set forth in § 6051(a)(14) is not mandatory for 2011 Forms W-2. Accordingly, an employer will not be treated as failing to meet the requirements of § 6051 for 2011, and will not be subject to any penalties for failure to meet such requirements, merely because it does not report the aggregate cost of employer-sponsored coverage (as defined in § 4980I(d)(1)) on 2011 Forms W-2. The Treasury Department and the IRS anticipate issuing guidance on the reporting requirement set forth in § 6051(a)(14) before the end of this year.

DRAFTING INFORMATION

The principal author of this notice is Leslie Paul of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) though other Treasury Department and IRS officials participated in its development. For further information on the provisions of this notice, contact Leslie Paul at (202) 622–6080 (not a toll-free number).

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2010–70

This notice provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest

2010–44 I.R.B. 576 November 1, 2010

monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004–34 continues to apply in determining that rate. See Notice 2006–75, 2006–2 C.B. 366. The composite corporate bond rate for September 2010 is 5.17 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.

rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

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 and by the Pension Protection Act of 2006 (PPA), provide that the interest rates used to cal

For Plan Years

culate current liability and to determine the required contribution under § 412(l) for plan years beginning in 2004 through 2007 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, 2004–1 C.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

Corporate Bond Weighted

Beginning in Permissible Range

Month Year

Average 90% to 100%

October 2010 6.21 5.59 6.21

monthly corporate bond yield curve, the 24-month average corporate bond segment rates, and the funding transitional segment rates used to compute the target normal cost and the funding target. Pursuant to Notice 2007–81, the monthly corporate bond yield curve derived from September 2010 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of September 2010 are, respectively, 1.74, 4.75, and 6.03. The three 24-month average corporate bond segment rates applicable for October 2010 under the election of § 430(h)(2)(G)(iv) are as follows:

Third Segment

YIELD CURVE AND SEGMENT RATES

Generally for plan years beginning after 2007 (except for delayed effective dates for certain plans under sections 104, 105, and 106 of PPA), § 430 of the Code specifies the minimum funding requirements that apply to single employer plans 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

First Segment

(“segment rates”), each of which applies to cash flows during specified periods. However, an election may be made under § 430(h)(2)(D)(ii) to use the monthly yield curve in place of the segment rates. For plan years beginning in 2008 and 2009, a transitional rule under § 430(h)(2)(G) provides that the segment rates are blended with the corporate bond weighted average as specified above. An election may be made under § 430(h)(2)(G)(iv) to use the segment rates without applying the transitional rule.

Notice 2007–81, 2007–2 C.B. 899, provides guidelines for determining the

Second Segment

3.61 6.20 6.53

The transitional segment rates under § 430(h)(2)(G) applicable for October 2010, taking into account the corporate bond

For Plan Years

Beginning in

First Segment

weighted average of 6.21 stated above, are as follows:

Second Segment

Third Segment

2009 4.48 6.20 6.42

The transitional rule of § 430(h)(2)(G) does not apply to plan years starting in

2010. Therefore, for a plan year starting in 2010 with a lookback month to Octo

ber 2010, the funding segment rates are the three 24-month average corporate bond

November 1, 2010 577 2010–44 I.R.B.

Section 431(c)(6)(B) specifies a minimum amount for the full-funding limitation described in section 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 following rates were determined for plan years beginning in the month shown below.

segment rates applicable for October 2010, listed above without blending for the transitional period.

30-YEAR TREASURY SECURITIES INTEREST RATES

Section 417(e)(3)(A)(ii)(II) (prior to amendment by PPA) 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

For Plan Years

Tax Regulations provides that the applicable interest rate for a month is the annual rate of interest 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 September 2010 is 3.77 percent. The Service has determined this rate as the average of the daily determinations of yield on the 30-year Treasury bond maturing in August 2040.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to multiemployer plans pursuant to § 412.

30-Year Treasury Weighted

Beginning in Permissible Range

Month Year

Average 90% to 105%

October 2010 4.28 3.85 4.49

determining the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for September 2010, taking into account the September 2010 30-year Treasury rate of 3.77 stated above, are as follows:

Third Segment

MINIMUM PRESENT VALUE SEGMENT RATES

Generally for plan years beginning after December 31, 2007, the applicable interest rates under § 417(e)(3)(D) are segment rates computed without regard

For Plan Years

Beginning in

to a 24-month average. For plan years beginning in 2008 through 2011, the applicable interest rates are the monthly spot segment rates blended with the applicable rate under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning in 2007. Notice 2007–81 provides guidelines for

First Segment

Second Segment

2009 2.96 4.16 4.67 2010 2.55 4.36 5.13 2011 2.15 4.55 5.58

DRAFTING INFORMATION

The principal author of this notice is Tony Montanaro of the Employee Plans,

Tax Exempt and Government Entities Division. Mr. Montanaro may be e-mailed at RetirementPlanQuestions@irs.gov .

2010–44 I.R.B. 578 November 1, 2010

Table I

Monthly Yield Curve for September 2010

Derived from September 2010 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

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