Internal Revenue Bulletin 2016-5 (PDF rendition): IRS Notices

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
EMPLOYEE PLANS
Notice 2016–07, page 296.
This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for January
2016 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for January 2016, and the 30-year Trea-
sury rates. These rates reflect the application of
§ 430(h)(2)(C)(iv), which was added by the Moving Ahead for
Progress in the 21st Century Act, Public Law 112–141 (MAP–
21) and amended by section 2003 of the Highway and Trans-
portation Funding Act of 2014 (HATFA).
Finding Lists begin on page ii.
Bulletin No. 2016–5
February 1, 2016

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
February 1, 2016Bulletin No. 2016–5

Part III. Administrative, Procedural, and Miscellaneous
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2016–07
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used un-
der § 417(e)(3), and the 24-month average
segment rates under § 430(h)(2) of the
Internal Revenue Code. 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 and the 30-
year Treasury weighted average rate un-
der § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Generally, except for certain plans under
sections 104 and 105 of the Pension Protec-
tion Act of 2006 and CSEC plans under
§ 414(y), § 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 aver-
age interest rates (“segment rates”),
each of which applies to cash flows dur-
ing specified periods. To the extent pro-
vided under § 430(h)(2)(C)(iv), these
segment rates are adjusted by the appli-
cable percentage of the 25-year average
segment rates for the period ending Sep-
tember 30 of the year preceding the cal-
endar year in which the plan year be-
gins.
1
However, an election may be
made under § 430(h)(2)(D)(ii) to use the
monthly yield curve in place of the seg-
ment rates.
Notice 2007– 81, 2007– 44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond seg-
ment rates used to compute the target nor-
mal cost and the funding target. Consis-
tent with the methodology specified in
Notice 2007– 81, the monthly corporate
bond yield curve derived from December
2015 data is in Table I at the end of this
notice. The spot first, second, and third
segment rates for the month of December
2015 are, respectively, 1.82, 4.12, and
5.01.
The 24-month average segment rates
determinedunder§430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year average
segment rates. For plan years beginning
before 2018, the applicable minimum per-
centage is 90% and the applicable maxi-
mum percentage is 110%. The 25-year
average segment rates for plan years be-
ginning in 2014, 2015, and 2016 were
published in Notice 2013–58, 2013– 40
I.R.B. 294, Notice 2014 –50, 2014 – 40
I.R.B. 590, and Notice 2015– 61, 2015–39
I.R.B. 408, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for January
2016 without adjustment for the 25-year
average segment rate limits are as follows:
Applicable
Month
First
Segment
Second
Segment
Third
Segment
January 20161.413.964.97
Based on § 430(h)(2)(C)(iv), the 24-
month averages applicable for January
2016 adjusted to be within the applicable
minimum and maximum percentages of
the corresponding 25-year average seg-
ment rates, are as follows:
For Plan
Years
Beginning
In
Adjusted 24-Month Average
Segment Rates
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2014January20164.996.326.99
2015January20164.726.116.81
2016January20164.435.916.65
1
Pursuant to § 433(h)(3)(A), the 3
rd
segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
February 1, 2016Bulletin No. 2016–5
296

30-YEAR TREASURY SECURITIES
INTEREST RATES
Generally for plan years beginning af-
ter 2007, § 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-
scribed in § 431(c)(6)(A), based on the
plan’scurrentliability.Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 per-
cent below the weighted average of the
rates of interest on 30-year Treasury se-
curities 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
rate of interest on 30-year Treasury secu-
rities for December 2015 is 2.97 percent.
The Service determined this rate as the
average of the daily determinations of
yield on the 30-year Treasury bond ma-
turing in November 2045. For plan years
beginning in the month shown below, the
weighted average of the rates of interest
on 30-year Treasury securities and the
permissible range of rate used to calculate
current liability are as follows:
For Plan Years
Beginning in
30-Year
Treasury
Weighted
Average
Permissible Range
MonthYear90%to105%
January20163.122.813.28
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007– 81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for December 2015
are as follows:
First
Segment
Second
Segment
Third
Segment
1.824.125.01
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Asso
ciate Chief Counsel (Tax Exempt and
Government Entities). However, other
personnel from the IRS participated in
the development of this guidance. For
further information regarding this no-
tice, contact Mr. Morgan at 202-317-
6700 or Tony Montanaro at 202-317-
8698 (not toll-free numbers).
Bulletin No. 2016–5February 1, 2016
297

Table I
Monthly Yield Curve for December 2015
Derived from December 2015 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.50.7120.54.8040.55.0360.55.1280.55.16
1.01.0921.04.8141.05.0461.05.1281.05.16
1.51.4321.54.8241.55.0461.55.1281.55.16
2.01.7022.04.8342.05.0462.05.1282.05.16
2.51.9022.54.8442.55.0462.55.1282.55.17
3.02.0423.04.8543.05.0563.05.1383.05.17
3.52.1623.54.8543.55.0563.55.1383.55.17
4.02.2824.04.8644.05.0564.05.1384.05.17
4.52.3924.54.8744.55.0664.55.1384.55.17
5.02.5225.04.8845.05.0665.05.1385.05.17
5.52.6525.54.8845.55.0665.55.1385.55.17
6.02.7926.04.8946.05.0666.05.1386.05.17
6.52.9426.54.9046.55.0766.55.1386.55.17
7.03.0927.04.9047.05.0767.05.1487.05.17
7.53.2427.54.9147.55.0767.55.1487.55.17
8.03.3828.04.9248.05.0768.05.1488.05.17
8.53.5228.54.9248.55.0868.55.1488.55.17
9.03.6529.04.9349.05.0869.05.1489.05.17
9.53.7829.54.9349.55.0869.55.1489.55.18
10.03.8930.04.9450.05.0870.05.1490.05.18
10.54.0030.54.9550.55.0870.55.1490.55.18
11.04.1031.04.9551.05.0971.05.1491.05.18
11.54.1931.54.9651.55.0971.55.1591.55.18
12.04.2732.04.9652.05.0972.05.1592.05.18
12.54.3432.54.9752.55.0972.55.1592.55.18
13.04.4033.04.9753.05.0973.05.1593.05.18
13.54.4633.54.9853.55.1073.55.1593.55.18
14.04.5134.04.9854.05.1074.05.1594.05.18
14.54.5534.54.9954.55.1074.55.1594.55.18
15.04.5935.04.9955.05.1075.05.1595.05.18
15.54.6235.55.0055.55.1075.55.1595.55.18
16.04.6536.05.0056.05.1076.05.1596.05.18
16.54.6836.55.0056.55.1176.55.1696.55.18
17.04.7037.05.0157.05.1177.05.1697.05.18
17.54.7237.55.0157.55.1177.55.1697.55.19
18.04.7438.05.0258.05.1178.05.1698.05.19
18.54.7538.55.0258.55.1178.55.1698.55.19
19.04.7739.05.0259.05.1179.05.1699.05.19
19.54.7839.55.0359.55.1279.55.1699.55.19
20.04.7940.05.0360.05.1280.05.16100.05.19
February 1, 2016Bulletin No. 2016–5
298

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE
—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2016–5February 1, 2016
i

Numerical Finding List
1
Bulletins 2016 –1 through 2016 –5
Announcements:
2016-1, 2016-3 I.R.B.283
2016-2, 2016-3 I.R.B.283
2016-3, 2016-4 I.R.B.294
Notices:
2016-1, 2016-2 I.R.B.265
2016-2, 2016-2 I.R.B.265
2016-3, 2016-3 I.R.B.278
2016-4, 2016-3 I.R.B.279
2016-6, 2016-4 I.R.B.287
2016-7, 2016-5 I.R.B.296
Proposed Regulations:
REG-138344-13, 2016-4 I.R.B.294
Revenue Procedures:
2016-1, 2016-1 I.R.B.1
2016-2, 2016-1 I.R.B.102
2016-3, 2016-1 I.R.B.126
2016-4, 2016-1 I.R.B.142
2016-5, 2016-1 I.R.B.188
2016-6, 2016-1 I.R.B.200
2016-7, 2016-1 I.R.B.239
2016-8, 2016-1 I.R.B.243
2016-10, 2016-2 I.R.B.270
2016-11, 2016-2 I.R.B.274
2016-13, 2016-4 I.R.B.290
Revenue Rulings:
2016-1, 2016-2 I.R.B.262
2016-2, 2016-4 I.R.B.284
2016-3, 2016-3 I.R.B.282
Treasury Decisions:
9745, 2016-2 I.R.B.256
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–27 through 2015–52 is in Internal Revenue Bulletin
2015–52, dated December 28, 2015.
February 1, 2016Bulletin No. 2016–5
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2016 –1 through 2016 –5
Announcements:
2007-21
Modified by
Ann. 2016-1, 2016-3 I.R.B.283
Notices:
2005-50
Modified by
Notice 2016-2, 2016-2 I.R.B.265
2014-79
Superseded by
Notice 2016-1, 2016-2 I.R.B.265
Revenue Procedures:
2015-1
Superseded by
Rev. Proc. 2016-2, 2016-1 I.R.B.1
2015-2
Superseded by
Rev. Proc. 2016-2, 2016-1 I.R.B.102
2015-3
Superseded by
Rev. Proc. 2016-3, 2016-1 I.R.B.126
2015-5
Superseded by
Rev. Proc. 2016-5, 2016-1 I.R.B.142
2015-7
Superseded by
Rev. Proc. 2016-7, 2016-1 I.R.B.188
2015-8
Superseded by
Rev. Proc. 2016-8, 2016-1 I.R.B.200
2015-9
Superseded by
Rev. Proc. 2016-5, 2016-1 I.R.B.239
2015-10
Superseded by
Rev. Proc. 2016-10, 2016-2 I.R.B.270
2015-22
Superseded by
Rev. Proc. 2016-8, 2016-1 I.R.B.243
2015-53
Modified by
Rev. Proc. 2016-11, 2016-2 I.R.B.274
Revenue Rulings:
2008-15
Revoked by
Rev. Rul. 2016-3, 2016-3 I.R.B.282
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–27 through 2015–52 is in Internal Revenue Bulletin
2015–52, dated December 28, 2015.
Bulletin No. 2016–5February 1, 2016
iii

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