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

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

(Also Sections 42, 280G, 382, 467, 468, 482, 483, 1288, 7520.)

Rev. Rul. 2018–12

This revenue ruling provides various prescribed rates for federal income tax purposes for May 2018 (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 shortterm, 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 long-term rate and the longterm 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)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. 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. 2018–12 TABLE 1

Applicable Federal Rates (AFR) for May 2018

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR 2.18% 2.17% 2.16% 2.16%

110% AFR 2.40% 2.39% 2.38% 2.38%

120% AFR 2.62% 2.60% 2.59% 2.59%

130% AFR 2.84% 2.82% 2.81% 2.80%

Mid-term

AFR 2.69% 2.67% 2.66% 2.66%

110% AFR 2.96% 2.94% 2.93% 2.92%

120% AFR 3.23% 3.20% 3.19% 3.18%

130% AFR 3.50% 3.47% 3.46% 3.45%

150% AFR 4.05% 4.01% 3.99% 3.98%

175% AFR 4.72% 4.67% 4.64% 4.63%

Long-term

AFR 2.94% 2.92% 2.91% 2.90%

110% AFR 3.24% 3.21% 3.20% 3.19%

120% AFR 3.53% 3.50% 3.48% 3.47%

130% AFR 3.84% 3.80% 3.78% 3.77%

REV. RUL. 2018-12 TABLE 2

Adjusted AFR for May 2018

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjusted AFR 1.66% 1.65% 1.65% 1.64%

Mid-term adjusted AFR 2.04% 2.03% 2.02% 2.02%

Long-term adjusted AFR 2.23% 2.22% 2.21% 2.21%

Bulletin No. 2018–20 575 May 14, 2018

REV. RUL. 2018-12 TABLE 3

Rates Under Section 382 for May 2018

Adjusted federal long-term rate for the current month 2.23%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the 2.30% adjusted federal long-term rates for the current month and the prior two months.)

REV. RUL. 2018-12 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for May 2018

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.65%

Appropriate percentage for the 30% present value low-income housing credit 3.28%

REV. RUL. 2018-12 TABLE 5

Rate Under Section 7520 for May 2018

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

3.2%

Section 42.—Low-Income Housing Credit

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

Section 280G.—Golden Parachute Payments

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

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 May 2018. See Rev. Rul. 2018–12, page 575.

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

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

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

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

Section 482.—Allocation of Income and Deductions Among Taxpayers

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

Section 483.—Interest on Certain Deferred Payments

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

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

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

Section 7520.—Valuation Tables

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of May 2018. See Rev. Rul. 2018–12, page 575.

Section 807.—Rules for Certain Reserves

Rev. Rul. 2018–13

For purposes of § 807(d)(4) of the Internal Revenue Code, for taxable years beginning after December 31, 2016, and on or before December 31, 2017, this ruling supplements the schedules of prevailing state assumed interest rates set forth in Rev. Rul. 92–19, 1992–1 C.B. 227. This information is to be used by insurance companies in computing their reserves for (1) life insurance and supplementary total and permanent disability benefits, (2) individual annuities and pure endowments, and (3) group annuities and pure endowments. For taxable years beginning on or before December 31, 2017, under § 807(d), the amount of the life insurance reserves for any contract is the greater of the net surrender value of such contract or the reserve determined by using (1) the tax reserve method applicable to such contract, (2) the greater of (i) the applicable federal interest rate, or (ii) the prevailing state assumed interest rate, and (3) the

May 14, 2018 576 Bulletin No. 2018–20

prevailing commissioners’ standard tables for mortality and morbidity adjusted as appropriate to reflect the risks (such as substandard risks) incurred under the contract which are not otherwise taken into account.

Section 13517 of “[a]n Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97 (the “Act”), amended § 807(d) for taxable years beginning after December 31, 2017. For each taxable year beginning after December 31, 2017, the amount of the life insurance reserves for any contract (other than variable contracts described in § 807(d)(1)(B), as amended by section 13517 of the Act) is the greater of the net surrender value of such contract, or 92.81 percent of the reserve determined by using the tax reserve method applicable to such contract. The amount of the life insurance reserves for any variable contract for each taxable year beginning after December 31, 2017, is the sum of (1) the greater of (i) the net surrender value of such contract or (ii) the portion of the reserve that is separately accounted for under § 817, plus (2) 92.81 percent of the excess (if any) of the reserve determined by using the tax reserve method applicable to such contract.

For taxable years beginning after December 31, 2017, § 807(d), as amended by

section 13517 of the Act, no longer requires life insurance reserves to be computed using the greater of (1) the applicable federal interest rate or (2) the prevailing state assumed interest rate. For this reason, this revenue ruling only provides the prevailing state assumed interest rates for certain insurance products issued in 2017 to be used by insurance companies in computing their reserves for taxable years beginning after December 31, 2016, and on or before December 31, 2017. Following are supplements to schedule A to Part III of Rev. Rul. 92–19, addressing the change in law; to schedules B, C, and D to Part III of Rev. Rul. 92–19, providing prevailing state assumed interest rates for insurance products with different features issued in 2017; and to the table in Part IV of Rev. Rul. 92–19, addressing the change in law. This ruling does not supplement Parts I and II of Rev. Rul. 92–19.

This is the twenty-sixth and final supplement to the interest rates provided in Rev. Rul. 92–19. Earlier supplements were published in Rev. Rul. 93–58, 1993–2 C.B. 241 (interest rates for insurance products issued in 1992 and 1993); Rev. Rul. 94–11, 1994–1 C.B. 196 (1993 and 1994); Rev. Rul. 95–4, 1995–1 C.B. 141 (1994 and 1995); Rev. Rul. 96–2,

1996–1 C.B. 141 (1995 and 1996); Rev. Rul. 97–2, 1997–1 C.B. 134 (1996 and 1997); Rev. Rul. 98–2, 1998–1 C.B. 259 (1997 and 1998); Rev. Rul. 99–10, 1999–1 C.B. 671 (1998 and 1999); Rev. Rul. 2000–17, 2000–1 C.B. 842 (1999 and 2000); Rev. Rul. 2001–11, 2001–1 C.B. 780 (2000 and 2001); Rev. Rul. 2002–12, 2002–1 C.B. 624 (2001 and 2002); Rev. Rul. 2003–24, 2003–1 C.B. 557 (2002 and 2003); Rev. Rul. 2004–14, 2004–1 C.B. 511 (2003 and 2004); Rev. Rul. 2005–29, 2005–1 C.B. 1080 (2004 and 2005); Rev. Rul. 2006–25, 2006–1 C.B. 882 (2005 and 2006); Rev. Rul. 2007–10, 2007–1 C.B. 660 (2006 and 2007); Rev. Rul. 2008–19, 2008–1 C.B. 669 (2007 and 2008); Rev. Rul. 2009–3, 2009–5 I.R.B. 382 (2008 and 2009); Rev. Rul. 2010–7, 2010–8 I.R.B. 417 (2009 and 2010); Rev. Rul. 2011–23, 2011–43 I.R.B. 585 (2010 and 2011); Rev. Rul. 2012–6, 2012–6 I.R.B. 349 (2011 and 2012); Rev. Rul. 2013–4, 2013–9 I.R.B. 520 (2012 and 2013); Rev. Rul. 2014–4, 2014–5 I.R.B. 449 (2013 and 2014); Rev. Rul. 2015–2, 2015–3 I.R.B. 321 (2014 and 2015); Rev. Rul. 2016–02, 2016–4 I.R.B. 284 (2015 and 2016); and Rev. Rul. 2017–03, 2017–4 I.R.B. 522 (2016 and 2017).