Internal Revenue Bulletin 2018-27 (PDF rendition): IRS Revenue Rulings

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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 2018–56, page 3.
This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for June
2018 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for June 2018, and the 30-year Treasury
rates, as reflected by the application of § 430(h)(2)(C)(iv).
Income Tax
Rev. Rul. 2018–19, page 1.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, the long-term exempt rate, and the blended annual
rate. For purposes of sections 382, 1274, 1288, 7872 and
other sections of the Code, tables set forth the rates for July
2018.
REG–106977–18, page 6.
The proposed regulations would amend the definition of
investment-type property for purposes of tax-advantaged
bonds and the arbitrage investment yield restrictions under
§148 that apply to those bonds. Section 103 provides that an
arbitrage bond, as defined in §148, is not tax-exempt. A bond
is an arbitrage bond under §148 if the bond’s proceeds are
used to purchase certain investment property with a yield
higher than the yield on the issue. Investment property includes
not only securities but also, among other things, “investment-
type property.” Investment-type property is generally defined
as any property that is held principally as a passive vehicle for
the production of income. The proposed regulations would
amend this definition to clarify that real or tangible personal
property purchased with proceeds of tax-exempt bonds is not
investment-type property if that property is used in furtherance
of the public purposes for which the tax-exempt bonds are
issued.
Finding Lists begin on page ii.
Bulletin No. 2018–27
July 2, 2018

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.
July 2, 2018Bulletin No. 2018–27

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, 7872.)
Rev. Rul. 2018–19
This revenue ruling provides various
prescribed rates for federal income tax
purposes for July 2018 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Internal
Revenue Code. Table 2 contains the short-
term, mid-term, and long-term adjusted
applicable federal rates (adjusted AFR)
for the current month for purposes of sec-
tion 1288(b). Table 3 sets forth the ad-
justed federal long-term rate and the long-
term tax-exempt rate described in section
382(f). Table 4 contains the appropriate
percentages for determining the low-
income housing credit described in sec-
tion 42(b)(1) for buildings placed in ser-
vice during the current month. However,
under section 42(b)(2), the applicable per-
centage for non-federally subsidized new
buildings placed in service after July 30,
2008, shall not be less than 9%. 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 remain-
der or a reversionary interest for purposes
of section 7520. Finally, Table 6 contains
the blended annual rate for 2018 for pur-
poses of section 7872.
REV. RUL. 2018–19 TABLE 1
Applicable Federal Rates (AFR) for July 2018
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR2.38%2.37%2.36%2.36%
110% AFR2.63%2.61%2.60%2.60%
120% AFR2.86%2.84%2.83%2.82%
130% AFR3.10%3.08%3.07%3.06%
Mid-term
AFR2.87%2.85%2.84%2.83%
110% AFR3.16%3.14%3.13%3.12%
120% AFR3.45%3.42%3.41%3.40%
130% AFR3.74%3.71%3.69%3.68%
150% AFR4.33%4.28%4.26%4.24%
175% AFR5.05%4.99%4.96%4.94%
Long-term
AFR3.06%3.04%3.03%3.02%
110% AFR3.37%3.34%3.33%3.32%
120% AFR3.68%3.65%3.63%3.62%
130% AFR3.99%3.95%3.93%3.92%
REV. RUL. 2018–19 TABLE 2
Adjusted AFR for July 2018
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR1.81%1.80%1.80%1.79%
Mid-term adjusted AFR2.17%2.16%2.15%2.15%
Long-term adjusted AFR2.32%2.31%2.30%2.30%
Bulletin No. 2018–27July 2, 2018
1

REV. RUL. 2018–19 TABLE 3
Rates Under Section 382 for July 2018
Adjusted federal long-term rate for the current month2.32%
Long-term tax-exempt rate for ownership changes during the current month (the highest of
the adjusted federal long-term rates for the current month and the prior two months.)
2.32%
REV. RUL. 2018–19 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for July 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 credit7.68%
Appropriate percentage for the 30% present value low-income housing credit3.29%
REV. RUL. 2018–19 TABLE 5
Rate Under Section 7520 for July 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
3.4%
REV. RUL. 2018–19 TABLE 6
Blended Annual Rate for 2018
Section 7872(e)(2) blended annual rate for 20182.03%
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of July
2018. See Rev. Rul. 2018 –19, page 1.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of July
2018. See Rev. Rul. 2018 –19, page 1.
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 July 2018. See Rev. Rul.
2018 –19, page 1.
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 July
2018. See Rev. Rul. 2018 –19, page 1.
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 July
2018. See Rev. Rul. 2018 –19, page 1.
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 July
2018. See Rev. Rul. 2018 –19, page 1.
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 July
2018. See Rev. Rul. 2018 –19, page 1.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of July 2018. See Rev. Rul. 2018 –19, page 1.
Section 7520.—Valuation
Tables
The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of July
2018. See Rev. Rul. 2018 –19, page 1.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of July
2018. See Rev. Rul. 2018 –19, page 1.
July 2, 2018Bulletin No. 2018–27
2

Part III. Administrative, Procedural, and Miscellaneous
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2018–56
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
Section 430 specifies the minimum
funding requirements that apply to single-
employer plans (except for CSEC plans
under § 414(y)) 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 de-
termined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.
1
However, an elec-
tion may be made under § 430(h)(2)
(D)(ii) to use the monthly yield curve in
place of the segment 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 May 2018
data is in Table 2018 –5 at the end of this
notice. The spot first, second, and third
segment rates for the month of May 2018
are, respectively, 3.08, 4.19, and 4.58.
The 24-month average segment rates de-
termined under § 430(h)(2)(C)(i) through
(iii) must be adjusted pursuant to § 430(h)
(2)(C)(iv) to be within the applicable mini-
mum and maximum percentages of the cor-
responding 25-year average segment rates.
For plan yearsbeginning before 2021, the
applicable minimum percentage is 90%
and the applicable maximum percentage
is 110%. The 25-year average segment
rates for plan years beginning in 2017
and 2018 were published in Notice
2016 –54, 2016 – 40 I.R.B. 429, and No-
tice 2017–50, 2017– 41 I.R.B. 280, re-
spectively.
24-MONTH AVERAGE
CORPORATE BOND SEGMENT
RATES
The three 24-month average corporate
bond segment rates applicable for June
2018 without adjustment for the 25-year
average segment rate limits are as follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable MonthFirst SegmentSecond SegmentThird Segment
June 20182.073.704.43
Based on § 430(h)(2)(C)(iv), the 24-
month averages applicable for June 2018,
adjusted to be within the applicable min-
imum and maximum percentages of the
corresponding 25-year average segment
rates, are as follows:
Adjusted 24-Month Average Segment Rates
For Plan
Years
Beginning In
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2017June 20184.165.726.48
2018June 20183.925.526.29
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 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’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 inter-
est 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 rate of interest
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)).
Bulletin No. 2018–27July 2, 2018
3

on 30-year Treasury securities for May
2018 is 3.13 percent. The Service deter-
mined this rate as the average of the daily
determinations of yield on the 30-year
Treasury bond maturing in February 2048
determined each day through May 9, 2018
and the yield on the 30-year Treasury
bond maturing in May 2048 determined
each day for the balance of the month. For
plan years beginning in June 2018, the
weighted average of the rates of interest
on 30-year Treasury securities and the
permissible range of rates used to calcu-
late current liability are as follows:
Treasury Weighted Average Rates
For Plan Years
Beginning In
30-Year Treasury
Weighted Average
Permissible Range
90% to105%
June 20182.852.57 to 3.00
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 May 2018 are
as follows:
Minimum Present Value Segment Rates
MonthFirst SegmentSecond SegmentThird Segment
May 20183.084.194.58
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Associ-
ate Chief Counsel (Tax Exempt and Gov-
ernment Entities). However, other person-
nel from the IRS participated in the
development of this guidance. For further
information regarding this notice, contact
Mr. Morgan at 202-317-6700 or Tony
Montanaro at 202-317-8698 (not toll-free
numbers).
Table 2018–5
Monthly Yield Curve for May 2018
Derived from May 2018 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.52.4420.54.4740.54.6060.54.6480.54.66
1.02.6321.04.4841.04.6061.04.6481.04.66
1.52.8121.54.4841.54.6061.54.6481.54.66
2.02.9622.04.4942.04.6062.04.6482.04.66
2.53.0922.54.4942.54.6062.54.6482.54.66
3.03.2023.04.5043.04.6063.04.6483.04.66
3.53.2923.54.5043.54.6063.54.6483.54.66
4.03.3724.04.5144.04.6164.04.6484.04.67
4.53.4524.54.5144.54.6164.54.6584.54.67
5.03.5225.04.5145.04.6165.04.6585.04.67
5.53.5925.54.5245.54.6165.54.6585.54.67
6.03.6626.04.5246.04.6166.04.6586.04.67
6.53.7326.54.5246.54.6166.54.6586.54.67
7.03.7927.04.5347.04.6167.04.6587.04.67
7.53.8527.54.5347.54.6267.54.6587.54.67
8.03.9128.04.5448.04.6268.04.6588.04.67
8.53.9628.54.5448.54.6268.54.6588.54.67
9.04.0129.04.5449.04.6269.04.6589.04.67
9.54.0629.54.5549.54.6269.54.6589.54.67
10.04.1030.04.5550.04.6270.04.6590.04.67
10.54.1430.54.5550.54.6270.54.6590.54.67
July 2, 2018Bulletin No. 2018–27
4

Table 2018–5
Monthly Yield Curve for May 2018
Derived from May 2018 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
11.04.1831.04.5551.04.6271.04.6591.04.67
11.54.2131.54.5651.54.6271.54.6591.54.67
12.04.2432.04.5652.04.6372.04.6592.04.67
12.54.2732.54.5652.54.6372.54.6592.54.67
13.04.2933.04.5653.04.6373.04.6693.04.67
13.54.3133.54.5753.54.6373.54.6693.54.67
14.04.3334.04.5754.04.6374.04.6694.04.67
14.54.3534.54.5754.54.6374.54.6694.54.67
15.04.3735.04.5755.04.6375.04.6695.04.67
15.54.3835.54.5855.54.6375.54.6695.54.67
16.04.3936.04.5856.04.6376.04.6696.04.67
16.54.4136.54.5856.54.6376.54.6696.54.67
17.04.4237.04.5857.04.6377.04.6697.04.67
17.54.4337.54.5857.54.6477.54.6697.54.67
18.04.4438.04.5958.04.6478.04.6698.04.67
18.54.4438.54.5958.54.6478.54.6698.54.67
19.04.4539.04.5959.04.6479.04.6699.04.67
19.54.4639.54.5959.54.6479.54.6699.54.68
20.04.4640.04.5960.04.6480.04.66100.04.68
Bulletin No. 2018–27July 2, 2018
5

Part IV. Items of General Interest
Notice of Proposed
Rulemaking
Arbitrage Investment
Restrictions on Tax-Exempt
Bonds
REG–106977–18
AGENCY:Internal Revenue Service
(IRS), Treasury.
ACTION:Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations regarding the arbi-
trage investment restrictions under section
148 of the Internal Revenue Code (Code)
applicable to tax-exempt bonds and other
tax-advantaged bonds issued by State and
local governments. The proposed regula-
tions would clarify existing regulations
regarding the definition of “investment-
type property” covered by arbitrage re-
strictions by expressly providing an ex-
ception for investments in capital projects
that are used in furtherance of the public
purposes of the bonds. The proposed reg-
ulations affect State and local governmen-
tal issuers of these bonds and potential
investors in capital projects financed with
these bonds.
DATES: Comments and requests for a
public hearing must be received by Sep-
tember 10, 2018.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–106977–18), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–106977–18),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue NW, Washing-
ton, DC 20224, or sent electronically via
the Federal eRulemaking Portal atwww.
regulations.gov(REG–106977–18).
FOR FURTHER INFORMATION CON-
TACT:Concerning the proposed regula-
tions, Spence Hanemann, (202) 317-6980;
concerning submissions of comments and
requesting a hearing, Regina L. Johnson,
(202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) on the arbitrage
investment restrictions under section
148 of the Code (Proposed Regulations).
1. In General
In general, under section 103, interest
received by holders of eligible bonds issued
by State and local governments is exempt
from Federal income tax. As a result, tax-
exempt State or local bonds generally have
lower borrowing costs. To qualify for the
tax exemption, State or local bonds must
satisfy various eligibility requirements un-
der sections 141 to 150, including the arbi-
trage investment restrictions under section
148. The arbitrage investment restrictions
under section 148 limit the investment of
proceeds of tax-exempt bonds in higher
yielding investments and require rebate to
the Federal government of certain excess
earnings on higher yielding investments.
On June 18, 1993, the Department of the
Treasury (Treasury Department) and the
IRS published comprehensive final regula-
tions in theFederal Register(TD 8476, 58
FR 33510) on the arbitrage investment re-
strictions and related provisions for tax-
exempt bonds under sections 103, 148, 149,
and 150 and, since that time, those final
regulations have been amended in certain
limited respects (these 1993 regulations and
the amendments thereto collectively are re-
ferred to as the Existing Regulations).
2. Investment Property Covered by
Arbitrage Restrictions
Section 148(a) defines a taxable “arbi-
trage bond” generally to mean any bond
issued as part of an issue any portion of the
proceeds of which are reasonably expected
to be used or are intentionally used to ac-
quire “higher yielding investments” or to
replace funds so used. Section 148(b)(1)
defines the term “higher yielding invest-
ments” to mean any “investment property”
that produces a yield over the term of the
issue that is materially higher than the yield
on the issue. Section 148(b)(2) defines the
term “investment property” to include any
security (within the meaning of section
165(g)(2)(A) or (B)), any obligation, any
annuity contract, certain residential real
property for family units located outside the
jurisdiction of the issuer that is financed
with bonds other than private activity bonds,
and any “investment-type property.”
Section 1.148 –1(e)(1) of the Existing
Regulations defines a catch-all category of
“investment-type property” to include any
property (other than securities, obliga-
tions, annuity contracts, and covered res-
idential real property for family units un-
der section 148(b)(2)(A), (B), (C), and
(E)) “that is held principally as a passive
vehicle for the production of income.” For
this purpose, § 1.148 –1(e)(1) of the Ex-
isting Regulations provides that the pro-
duction of income includes any benefit
based on the time value of money.
Explanation of Provisions
1. Proposed § 1.148 –1(e)(4): Exception
to Investment-Type Property Definition
for Certain Capital Projects
Institutional investors have suggested
clarification of the scope of the regulatory
definition of investment-type property un-
der § 1.148 –1(e)(1) to ensure that the
definition does not impede greater capital
investment in public infrastructure.
The legislative history to the Tax Re-
form Act of 1986, Public Law 99 –514,
100 Stat. 2085, indicates that Congress
intended to limit the scope of the arbitrage
restriction on investment-type property so
that it did not extend to investments in
capital projects in furtherance of the pub-
lic purposes of the bonds. In this regard,
the House Report to the Tax Reform Act
of 1986 included the following statement
about the intended scope of the definition
of investment-type property: “The restric-
tion would not apply, however, to real or
tangible personal property acquired with
bond proceeds for reasons other than in-
vestment (e.g., courthouse facilities fi-
nanced with bond proceeds).” H.R. Rep.
No. 99 – 426, at 552 (1985), 1986 –3 (vol.
2) C.B. 457;see alsoS. Rep. No. 99 –313,
at 844 (1986), 1986 –3 (vol. 3) C.B. 682
(containing a statement substantially iden-
tical to that in the House report); H.R.
July 2, 2018Bulletin No. 2018–27
6

Rep. No. 99 – 841, at II–747 (1986) (Conf.
Rep.), 1986 –3 (vol. 4) C.B. 608 (stating
that the conference agreement follows the
House bill and the Senate amendment on
this restriction).
To clarify the scope of the investment-type
property definition consistent with Congres-
sional intent reflected in the legislative history,
the Proposed Regulations would provide
an express exception to the definition of
investment-type property for capital projects
that further the public purposes for which the
tax-exempt bonds were issued. For example,
investment-type property does not include a
courthouse financed with governmental bonds
or an eligible exempt facility under section
142, such as a public road, financed with pri-
vate activity bonds.
2. Applicability Dates and Reliance
The proposed amendments to the defi-
nition of investment-type property in the
Proposed Regulations are proposed to ap-
ply to bonds sold on or after the date that
is 90 days after the date of publication of
a Treasury Decision adopting these rules
as final regulations in theFederal Regis-
ter. Issuers may apply the Proposed Reg-
ulations to bonds that are sold before the
applicability date provided in a Treasury
Decision adopting these rules as final reg-
ulations in theFederal Register.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Office
of Management and Budget regarding re-
view of tax regulations. Because these reg-
ulations do not impose a collection of infor-
mation on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not
apply.Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking will
be submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration for
comment on its impact on small entities.
Comments and Requests for Public
Hearing
Before the Proposed Regulations are ad-
opted as final regulations, consideration will
be given to any comments that are submit-
ted timely to the IRS as prescribed in this
preamble under theADDRESSESheading.
The Treasury Department and the IRS re-
quest comments on all aspects of the pro-
posed rules. All comments will be available
atwww.regulations.govor upon request. A
public hearing will be scheduled if re-
quested in writing by any person that timely
submits written comments. If a public hear-
ing is scheduled, notice of the date, time,
and place for the hearing will be published
in theFederal Register.
Drafting Information
The principal authors of these regula-
tions are Spence Hanemann of the Office
of Associate Chief Counsel (Financial In-
stitutions and Products) and Vicky Tsilas,
formerly of the Office of Associate Chief
Counsel (Financial Institutions and Prod-
ucts). However, other personnel from the
Treasury Department and the IRS partic-
ipated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805***
Par. 2. Section 1.148 – 0(c) is amended
by adding entries for §§ 1.148 –1(e)(4) and
1.148 –11(n) to read as follows:
§ 1.148 – 0 Scope and table of contents.
*****
(c)***
§ 1.148 –1 Definitions and elections.
*****
(e)***
(4) Exception for certain capital proj-
ects.
*****
§ 1.148 –11 Effective/applicability dates.
*****
(n) Investment-type property.
Par. 3. Section 1.148 –1 is amended by:
1. Revising the first sentence of para-
graph (e)(1).
2. Adding paragraph (e)(4).
The revision and addition read as fol-
lows:
§ 1.148 –1 Definitions and elections.
*****
(e)Investment-type property—(1)In
general. Except as otherwise provided in
this paragraph (e), investment-type prop-
erty includes any property, other than
property described in section 148(b)(2)
(A), (B), (C), or (E), that is held princi-
pally as a passive vehicle for the produc-
tion of income.***
*****
(4)Exception for certain capital proj-
ects. Investment-type property does not
include real property or tangible personal
property (for example, land, buildings,
and equipment) that is used in furtherance
of the public purposes for which the tax-
exempt bonds are issued. For example,
investment-type property does not include
a courthouse financed with governmental
bonds or an eligible exempt facility under
section 142, such as a public road, fi-
nanced with private activity bonds.
*****
Par. 4.Section 1.148 –11 is amended by
adding paragraph (n) to read as follows:
§ 1.148 –11 Effective/applicability dates.
*****
(n)Investment-type property. Section
1.148 –1(e)(1) and (4) apply to bonds sold
on or after the date that is 90 days after the
date of publication of a Treasury Decision
adopting these rules as final regulations in
theFederal Register.
Kirsten Wielobob,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register on June 11,
2018, 8:45 a.m., and published in the issue of the Federal
Register for June 12, 2018, 80 F.R. 27302)
Bulletin No. 2018–27July 2, 2018
7

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
withamplifiedandclarified, 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,modifiedand
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. 2018–27July 2, 2018
i

Numerical Finding List
1
Bulletin 2018 –27
Notices:
2018-56, 2018-27 I.R.B.3
Proposed Regulations:
REG-106977-18, 2018-27 I.R.B.6
Revenue Rulings:
2018-19, 2018-27 I.R.B.1
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018 – 01 through 2018 –26 is in Internal Revenue Bulletin
2018 –26, dated June 27, 2018.
July 2, 2018Bulletin No. 2018–27
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2018 –27
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018 – 01 through 2018 –26 is in Internal Revenue Bulletin
2018 –26, dated June 27, 2018.
Bulletin No. 2018–27July 2, 2018
iii

INTERNAL REVENUE BULLETIN
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