SECTION 6. CLARIFICATION OF

EXCISE TAX EXCEPTION UNDER SECTION 4701(B)

Section 4701 imposes an excise tax on a “registration-required obligation” that is not in registered form. The amount of the excise tax is equal to one percent of the principal amount multiplied by the number of calendar years until the obligation reaches maturity. Prior to the enactment of the HIRE Act, section 4701(b) provided that the term “registration-required obligation” generally had the same meaning as when used in section 163(f), which set forth the terms under which an issuer would be entitled to claim a deduction for interest paid on a registration-required obligation.

In connection with repealing section 163(f)(2)(B), section 502 of the HIRE Act amended section 4701(b) to provide that registration would not be required for obligations issued after March 18, 2012, that meet criteria similar to the foreign targeting rules under existing section 163(f)(2)(B). Comments requested clarification regarding how closely the procedures required under the new exception under section 4701(b) will mirror the procedures required under section 163(f)(2)(B). Treasury and the IRS intend to provide in regulations that rules identical to the rules that currently apply under section 163(f)(2)(B) and the regulations thereunder will apply for purposes of section 4701(b) to obligations issued after March 18, 2012.

EFFECT ON OTHER DOCUMENTS

Section 4 of Notice 2006–99, 2006–2 C.B. 907, is superseded.

EFFECTIVE DATE

The regulations incorporating the guidance described in this notice will be effective for obligations issued after March 18, 2012.

March 26, 2012 576 2012–13 I.R.B.

2011, in Press Releases CB11–CN.177, CB11–CN.179, CB11–CN.178, and CB11–CN.180, respectively.

For convenience, these figures are reprinted below.

For the 50 states, the District of Columbia, and Puerto Rico, the population figures for calculating the Credit Ceiling, the Volume Cap, and the Volume Limit for the 2012 calendar year are the resident population estimates released electronically by the U.S. Census Bureau

on December 21, 2011, in Press Release CB11–215. For American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands, the population figures for the 2012 calendar year are the 2010 population counts released electronically by the U.S. Census Bureau on August 24,

Resident Population Figures

Alabama 4,802,740 Alaska 722,718 American Samoa 55,519 Arizona 6,482,505 Arkansas 2,937,979 California 37,691,912 Colorado 5,116,796 Connecticut 3,580,709 Delaware 907,135 District of Columbia 617,996 Florida 19,057,542 Georgia 9,815,210 Guam 159,358 Hawaii 1,374,810 Idaho 1,584,985 Illinois 12,869,257 Indiana 6,516,922 Iowa 3,062,309 Kansas 2,871,238 Kentucky 4,369,356 Louisiana 4,574,836 Maine 1,328,188 Maryland 5,828,289 Massachusetts 6,587,536 Michigan 9,876,187 Minnesota 5,344,861 Mississippi 2,978,512 Missouri 6,010,688 Montana 998,199 Nebraska 1,842,641 Nevada 2,723,322 New Hampshire 1,318,194 New Jersey 8,821,155 New Mexico 2,082,224 New York 19,465,197 North Carolina 9,656,401 North Dakota 683,932 Northern Mariana Islands 53,883 Ohio 11,544,951 Oklahoma 3,791,508 Oregon 3,871,859 Pennsylvania 12,742,886 Puerto Rico 3,706,690 Rhode Island 1,051,302 South Carolina 4,679,230 South Dakota 824,082 Tennessee 6,403,353 Texas 25,674,681 Utah 2,817,222 Vermont 626,431 Virginia 8,096,604 Virgin Islands, U.S. 106,405

2012–13 I.R.B. 577 March 26, 2012

Resident Population Figures

Washington 6,830,038 West Virginia 1,855,364 Wisconsin 5,711,767 Wyoming 568,158

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 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 February 2012 is 4.49 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.

The principal authors of this notice are Julie Hanlon Bolton, Office of the Associate Chief Counsel (Passthroughs and Special Industries), and Timothy L. Jones, Office of the Associate Chief Counsel (Financial Institutions and Products). For further information regarding this notice, please contact Ms. Hanlon Bolton at (202) 622–3040 (not a toll-free call).

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

Notice 2012–24

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),

For Plan Years

and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest 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 calculate 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

Corporate Bond Weighted

Beginning in Permissible Range

Month Year

Average 90% to 100%

March 2012 5.61 5.05 5.61

monthly corporate bond yield curve, and the 24-month average corporate bond 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 February 2012 data is in Table I at the end of this notice. The spot first, second, and third segment rates for the month of February 2012 are, respectively, 1.56, 4.27, and 5.08. The three 24-month average corporate bond segment rates applicable for March 2012 are as follows:

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

(“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. Section 430(h)(2)G) set forth a transitional rule applicable to plan years beginning in 2008 and 2009 under which the segment rates were blended with the corporate bond weighted average described above, including an election under § 430(h)(2)(G)(iv) for an employer to use the segment rates without the transitional rule.

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

March 26, 2012 578 2012–13 I.R.B.

First Segment

Second Segment

Third Segment

1.93 4.95 6.07

multiemployer plans pursuant to § 412. 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.

The transitional rule of § 430(h)(2)(G) does not apply to plan years beginning after December 31, 2009. Therefore, for a plan year beginning after 2009 with a lookback month to March 2012, the funding segment rates are the three 24-month average corporate bond segment rates applicable for March 2012, listed above without blending for any 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

For Plan Years

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 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 February 2012 is 3.11 percent. The Service has determined this rate as the average of the yield on the 30-year Treasury bond maturing in November 2041 determined each day through February 8, 2012, and the yield on the 30-year Treasury bond maturing in February 2042 determined each day for the balance of the month.

Generally for plan years beginning after 2007, § 431 specifies the minimum funding requirements that apply to

30-Year Treasury Weighted

Beginning in Permissible Range

Month Year

Average 90% to 105%

March 2012 4.00 3.60 4.20

ing the minimum present value segment rates. Pursuant to that notice, the minimum present value transitional segment rates determined for February 2012, taking into account the February 2012 30-year Treasury rate of 3.11 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 to a

For Plan Years

Beginning in

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 determin

First Segment

Second Segment

2011 1.87 4.04 4.69 2012 1.56 4.27 5.08

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 .

2012–13 I.R.B. 579 March 26, 2012

Table I

Monthly Yield Curve for February 2012

Derived from February 2012 Data

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

March 26, 2012 580 2012–13 I.R.B.