∫0

0

coefficients, and taking into account the bond’s coupon rate, number of years until maturity, and rating.

(B) Adjustment factor for share of bonds that are AA-rated . The first adjustment variable is based on the proportion of bonds that are rated AA within the universe of bonds in the data set that are rated AA or AAA, weighted by par value. In the case of an AAA-rated bond the adjustment variable described in this paragraph (d)(2)(iii)(B) is equal to the product of the proportion described in the preceding sentence and the number of years until maturity for the bond. In the case of an AA-rated bond the adjustment variable described in this paragraph (d) (2)(iii)(B) is equal to the product of (1that proportion) and the number of years until maturity for the bond. In the case of an A‑rated bond, the adjustment variable described in this paragraph (d)(2)(iii)(B) is 0.

(C) Adjustment factor for share of bonds that are A‑rated . The second adjustment variable is based on the proportion of bonds rated A within the universe of bonds in the data set, weighted by par value. In the case of an AAA-rated bond or an AA-rated bond, the adjustment variable described in this paragraph (d)(2)(iii)(C) is equal to the product of the proportion described in the preceding sentence and the number of years until maturity for the bond. In the case of an A-rated bond, the adjustment variable described in this paragraph (d)(2)(iii)(C) is equal to the product of (1- that proportion) and the number of years until maturity for the bond.

(D) Hump adjustment variable . The hump adjustment variable is a mathematical function that is a cubic spline in the interval from 10 years maturity through 30 years maturity made up of two polynomials with a smooth junction (as described in paragraph (d)(2)(ii)(A) of this section) at 20 years maturity. The spline rises from 0 at 10 years maturity to 1.0 at 20 years maturity, then falls back down to 0 at 30 years maturity. The hump adjustment variable is 0 for maturities less than 10 years and maturities greater than 30 years.

(iv) Weighting of bond data . The bond data are weighted in three steps. In the first step, equal weights are assigned to the

January 29, 2024 614 Bulletin No. 2024–5

commercial paper rates at the short end of the curve, and the par amounts outstanding of all the bonds are rescaled so that their sum equals the sum of the weights for commercial paper. In the second step, the squared price difference for each commercial paper rate is multiplied by the commercial paper weight, and the squared price difference for each bond is multiplied by the bond’s rescaled par amount outstanding. In the third step, applicable for bonds with duration greater than 1, the weighted squared price difference for each bond from the second step is divided by the bond’s duration.

(3) Data used —(i) In general . Except as otherwise provided in this paragraph (d)(3), the bonds that are used to construct the daily corporate bond yield curve for a business day are bonds with maturities longer than ½ year, with at least two payment dates, and that:

(A) Are designated as corporate; (B) Have high quality ratings (AAA, AA, or A) as of that business day from the nationally recognized statistical rating organizations;

(C) Have at least $250 million in par amount outstanding on at least one day during the month;

(D) Pay fixed nominal semiannual coupons and the principal amount at maturity; and

(E) Mature not later than 30 years after that business day.

(ii) Excluded bonds . The following types of bonds are not used to construct the daily corporate bond yield curve for a date:

(A) Bonds not denominated in U.S. dollars;

(B) Bonds not issued by U.S. corporations;

(C) Bonds that are capital securities (sometimes referred to as hybrid preferred stock);

(D) Bonds with variable coupon rates; (E) Convertible bonds; (F) Bonds issued by a government-sponsored enterprise (such as the Federal National Mortgage Association);

(G) Asset-backed bonds; (H) Callable bonds, unless the call feature is make-whole or the call feature is exercisable only during the last year before maturity;

(I) Putable bonds; (J) Bonds with sinking funds; and

(K) Bonds with an outstanding par amount below $250 million for the day for which the daily yield curve is constructed.

(iii) Durations equal to or below ½ year . The data for durations equal to or below ½ year that is used to construct the daily corporate bond yield curve consists of AA financial and AA nonfinancial commercial paper rates, as reported by the Federal Reserve Board.

• ---

(h) Applicability date . This section applies for months that begin on or after February 1, 2024. For rules that apply for earlier periods, see 26 CFR 1.430(h)(2)-1 revised as of April 1, 2023.

Approved: December 27, 2023.

Lily Batchelder, Assistant Secretary of the Treasury

(Tax Policy).

(Filed by the Office of the Federal Register on January 11, 2024, 8:45 a.m., and published in the issue of the Federal Register for January 12, 2024, 89 F.R. 2127)

Douglas W. O’Donnell, Deputy Commissioner for Services and

Enforcement.

Bulletin No. 2024–5 615 January 29, 2024