May 5 -- The Internal Revenue Service (IRS), Treasury, proposes regulations relating to the use of actuarial tables in valuing annuities, interests for life or a term of years, and remainder or reversionary interests. These regulations will affect the valuation of inter vivos and testamentary transfers of interests dependent on one or more measuring lives. These regulations are necessary because applicable law requires the actuarial tables to be updated to reflect the most recent mortality experience available. Written or electronic comments and requests for a public hearing must be received by July 5, 2022.
This document contains amendments to the Income Tax Regulations (26 CFR part 1), the Estate Tax Regulations (26 CFR part 20), and the Gift Tax Regulations (26 CFR part 25) to reflect revisions to certain tables used for the valuation of interests in property under section 7520 of the Internal Revenue Code of 1986 (Code) to reflect the most recent mortality experience available.
Section 7520, effective for transfers for which the valuation date is on or after May 1, 1989, generally provides that the value of an annuity, an interest for life or a term of years, and a remainder or reversionary interest is to be determined under tables published by the Secretary of the Treasury or her delegate (Secretary) by using an interest rate (rounded to the nearest two-tenths of one percent) equal to 120 percent of the Federal midterm rate in effect under section 1274(d)(1) for the month in which the valuation date falls. If a charitable contribution is allowable for any part of the property transferred, the taxpayer may elect under section 7520(a) to use such Federal midterm rate for either of the two months preceding the month in which the valuation date falls. Section 7520(c)(2), as it existed on May 1, 1989, directed the Secretary to issue tables not later than December 31, 1989, utilizing the then most recent mortality experience. Thereafter, the Secretary is directed to revise these tables not less frequently than once each 10 years to take into account the most recent mortality experience available as of the time of the revision.
These proposed regulations contain Table 2010CM that is based on data compiled from the 2010 census. For transfers for which the valuation date is on or after the applicability date of the Treasury decision adopting these regulations as final regulations (published as the final rule in the Federal Register), the appropriate actuarial factors based on Table 2010CM may be computed by taxpayers. However, for the convenience of taxpayers, actuarial factors may be found on IRS websites and publications referenced in these proposed regulations. These proposed regulations also make conforming amendments to various sections of the existing regulations to provide the references to these revised actuarial factors. The updated actuarial tables will be available beginning May 5, 2022, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables
IRS Publications 1457 “Actuarial Valuations Version 4A” (forthcoming 2022), 1458 “Actuarial Valuations Version 4B” (forthcoming 2022), and 1459 “Actuarial Valuations Version 4C” (forthcoming 2022) will provide additional references and explanations to the actuarial tables that are published on the IRS website. These publications will be available after the applicability date of the Treasury decision adopting these regulations as final regulations. Table S (Single Life Remainder Factors) and Table U(1) (Unitrust Single Life Remainder Factors), which are referenced and explained in Publications 1457 and 1458, respectively, will no longer be published in these regulations. Furthermore, the current Table S and Table U(1), effective for transfers for which the valuation date is after April 30, 2009, and before the applicability date of the Treasury decision adopting these regulations as final regulations is published in the Federal Register , will be moved to sections containing actuarial material for historical reference. Table B, Table D, Tables F(0.2) through F(20.0), Table J, and Table K, which are not based on mortality experience, are not changed.