Notice 2001-10

Part III. Administrative, Procedural, and Miscellaneous
Split-Dollar Life Insurance
Arrangements
Notice 2001–10
I. PURPOSE
The Treasury Department and Internal
Revenue Service (IRS) are reviewing the
Federal income tax treatment of so-called
“split-dollar” arrangements for the purchase of life insurance contracts. This
notice clarifies prior rulings issued by the
IRS regarding the taxation of split-dollar
arrangements, provides taxpayers with
interim guidance on the tax treatment of
split-dollar arrangements pending publication of further guidance, and requests
taxpayer comments on the interim guidance and a number of unresolved issues.
This notice primarily addresses splitdollar arrangements between employers
and employees. However, Treasury and
the IRS believe the same principles generally govern the Federal tax treatment of
split-dollar arrangements in other contexts, including arrangements that provide
compensation to non-employees and economic benefits to corporate shareholders
and arrangements involving gifts.
II. BACKGROUND
Rev. Rul. 64–328, 1964–2 C.B. 11, and
Rev. Rul. 66–110, 1966–1 C.B. 12,
addressed the Federal income tax treatment of split-dollar arrangements under
which an employer and employee join in
the purchase of a life insurance contract
on the life of the employee subject to a
contractual allocation of policy benefits
between the employer and employee. The
rulings described two contractual forms:
(1) the endorsement method, under which
the employer is formally designated as the
owner of the contract, and the employer
endorses the contract to specify the portion of the proceeds payable to the
employee’s beneficiary; and (2) the collateral assignment method, under which the
employee is formally designated as the
owner of the contract, the employer’s premium payments are characterized as loans
from the employer to the employee, and
the employer’s interest in the proceeds of
the contract is designated as collateral
security for its loans.

2001–5 I.R.B.

These rulings conclude that all economic benefits conferred on an employee
under such an arrangement, excluding
economic benefits attributable to the
employee’s own premium payments, constitute gross income to the employee. See
also Commissioner v. LoBue, 351 U.S.
243 (1956); Commissioner v. Smith, 324
U.S. 177 (1945). Under the rationale of
these rulings, the determination of an
employee’s gross income is unaffected by
whether the endorsement method or the
collateral assignment method is used.
Under the specific split-dollar arrangement addressed in Rev. Rul. 64–328, all
amounts credited to the cash surrender
value of the life insurance contract inured
to the benefit of the employer. Thus, the
only economic benefit inuring to the
employee was the value of the insurance
protection attributable to the portion of
the contract’s death benefit payable to the
employee’s beneficiary. Rev. Rul. 64–328
holds that, in such a case, the employee’s
gross income in any year includes the
value of the life insurance protection provided to the employee in that year, less
any amount actually paid by the employee.
Rev. Rul. 66–110 amplified Rev. Rul.
64–328 by holding that the value of any
economic benefits in addition to current
insurance protection that are provided to
an employee under a split-dollar arrangement are also includible in the employee’s
gross income. More specifically, Rev.
Rul. 66–110 held that an employee has
additional gross income equal to the
amount of any policyholder dividends distributed to the employee or applied to provide additional insurance for the exclusive
benefit of the employee. Thus, where the
employer has no interest in the dividend
applied to provide paid-up additional
insurance, the taxable economic benefit is
the dividend itself, not the value of the
insurance protection resulting from the
dividend.
Rev. Rul. 64–328 and Rev. Rul. 66–110
each addressed a situation in which the
employer possessed all beneficial interest
in the cash surrender value of the life
insurance contract (exclusive of any separate cash surrender value of paid-up additions attributable to dividends1), and the
employee was entitled only to certain

459

other economic benefits generated by the
employer’s investment in the contract,
specifically, current insurance protection
or dividends. Consistent with that, Rev.
Rul. 64–328 revoked Rev. Rul. 55–713,
1955–2 C.B. 23, which had treated a splitdollar arrangement similar to that
addressed in Rev. Rul. 64–328 as a
secured loan from the employer to the
employee. In rejecting the loan characterization, Rev. Rul. 64–328 stated that
the substance of the split-dollar arrangement differed from that of a loan because
the employee was not expected to make
repayment except out of the cash surrender value or proceeds of the life insurance
contract. But see Commissioner v. Tufts,
461 U.S. 300, 307 (1983)(“we read
[Crane v. Commissioner, 331 U.S. 1
(1947)] to have approved the
Commissioner’s decision to treat a nonrecourse loan in this context as a true
loan.”).
Rev. Rul. 64–328 held that the table of
one-year premium rates set forth in Rev.
Rul. 55–747, 1955–2 C.B. 228, commonly referred to as the “P.S. 58” rates, may
be used to determine the value of the current life insurance protection provided to
an employee under a split-dollar arrangement. Rev. Rul. 66–110 amplified Rev.
Rul. 64–328 in this respect by holding that
the insurer’s published premium rates for
one-year term insurance may be used to
measure the value of the current insurance
protection if those rates are lower than the
P.S. 58 rates and available to all standard
risks. Rev. Rul. 67–154, 1967–1 C.B. 11,
modified Rev. Rul. 66–110 by holding
that an insurer’s published term rates must
be available for initial issue insurance (as
distinguished from rates for dividend
options) in order to be substituted for the
P.S. 58 rates set forth in Rev. Rul. 55–747.
Similarly, the IRS has ruled that the
economic benefit inuring to a third-party
donee under an employer-employee splitdollar arrangement or to a shareholder
under a corporation-shareholder split-dol-

1 Under the type of life insurance contract involved
in Rev. Rul. 66-110, the cash surrender value of
paid-up additions purchased with dividends was separate and distinct from the cash surrender value of
the life insurance contract under which the dividends
were paid.

January 29, 2001

lar arrangement is to be determined under
the principles and valuation methods set
forth in Rev. Rul. 64–328, as amplified by
Rev. Rul. 66–110. See Rev. Rul. 78–420,
1978–2 C.B. 67; Rev. Rul. 79–50, 1979–1
C.B. 138. Also, the same premium rate
alternatives may be relied upon to measure the value of current life insurance
protection provided to an employee under
a qualified retirement plan. See Rev. Rul.
55–747, supra.
III. NEED FOR UPDATED
GUIDANCE
A. Equity Split-Dollar
None of the published rulings relating
to split-dollar life insurance has directly
addressed the forms of equity split-dollar
arrangements that have been widely used
in recent years. In contrast with the splitdollar arrangements described in Rev.
Rul. 64–328 and Rev. Rul. 66–110, an
employee’s economic interest in a life
insurance contract purchased under an
equity split-dollar arrangement includes
an agreed upon portion of the cash surrender value. Under the most common form
of equity split-dollar arrangement, the
employer’s interest in the cash surrender
value of the contract is limited to the
aggregate amount of its premium payments, exclusive of any earnings component. In such cases, the employee derives
the entire economic benefit of any positive return on the employer’s investment
in the life insurance contract.
Under such an equity split-dollar
arrangement, the employee derives a valuable economic benefit from the employer’s
premium payments beyond the current life
insurance protection addressed in Rev.
Rul. 64–328. As held in Rev. Rul. 66–110,
an employee who receives economic benefits beyond the value of current life insurance protection is taxable on the value of
those additional benefits. Therefore,
under the general principles followed in
Rev. Rul. 64–328 and Rev. Rul. 66–110, it
is necessary to account for the employee’s
rights in the cash surrender value under an
equity split-dollar arrangement in a manner consistent with the substance of the
parties’ contractual positions.
Under section 83, which was enacted in
1969 and generally governs the income
tax treatment of property transferred in
connection with the performance of ser-

January 29, 2001

vices, a life insurance contract is considered to be property to the extent of its cash
surrender value. See § 1.83–3(e) of the
Income Tax Regulations. Therefore, if the
substance of an equity split-dollar
arrangement involves the transfer of a
beneficial interest in the cash surrender
value of a life insurance contract from an
employer to an employee, that economic
benefit is properly includible in the
employee’s gross income under section
83. For purposes of section 83, a splitdollar arrangement could, depending on
the facts, involve a series of property
transfers or a single transfer of property.2
However, whether an equity split-dollar
arrangement involves a transfer of property within the meaning of section 83
depends on the substance of the arrangement. See § 1.83–3(a) of the regulations.
If the employee is the beneficial owner of
the life insurance contract from the inception of the arrangement, there is no transfer of property under section 83. For
example, assuming there is a reasonable
and bona fide expectation that the
employer will receive repayment of its
share of the premiums at a fixed or determinable future date, then the arrangement
may in certain circumstances be properly
treated as an acquisition of a life insurance contract by the employee with the
proceeds of a loan or series of loans from
the employer to the employee secured by
the life insurance contract, rather than as
an arrangement whereby the employer
acquires ownership of the life insurance
contract and provides economic benefits
to the employee thereunder.
Section 7872 of the Code, which was
enacted in 1984, sets forth rules for determining the tax treatment of certain direct
and indirect below-market loans. In general, section 7872 recharacterizes a
below-market loan (a loan in which the
interest rate charged is less than the
applicable Federal rate, or “AFR”) as an
arm’s-length transaction in which the
lender makes a loan to the borrower at the
AFR, coupled with a payment or payments to the borrower sufficient to fund

2 For income or gift tax purposes outside of the
compensation context, transfers of beneficial interests in the cash surrender value of life insurance
contracts may similarly be treated as transfers of
property interests in accordance with general tax
principles.

460

all or part of the interest that the borrower
is treated as paying on that loan. The
amount, timing, and characterization of
the imputed payments to the borrower
under a below-market loan depend on the
relationship between the borrower and the
lender and whether the loan is characterized as a demand loan or a term loan. In
the case of a compensation-related belowmarket loan within the meaning of section
7872(c)(1)(B), the imputed payments to
the borrower are treated as compensation
income.
The legislative history of section 7872
states that the term “loan” is to be interpreted broadly for purposes of section
7872, potentially encompassing “any
transfer of money that provides the transferor with a right to repayment.” H.R.
Rep. 98–861, 98th Cong., 2d Sess. 1018
(1984). Treasury and the IRS believe that
Congress generally intended that section
7872 would govern the determination of
compensation income resulting from an
arrangement the substance of which is a
loan from an employer to an employee,
and that there was no congressional intent
to make section 7872 inapplicable to splitdollar arrangements if such arrangements
are, in substance, loans.
B. Value of Current Life Insurance
Protection
The P.S. 58 rates set forth in Rev. Rul.
55–747, which are based on mortality
tables originally published in 1946, no
longer bear an appropriate relationship to
the fair market value of current life insurance protection. Since the published splitdollar rulings merely state that the P.S. 58
rates “may” be used to value the economic benefit that an employee receives in the
form of current life insurance protection
and allow that economic benefit to instead
be valued using the insurer’s lower published one-year term rates, the P.S. 58
rates have come to function more as an
upper limit on the valuation of current life
insurance protection for Federal income
tax purposes than as the presumptive measure of the fair market value of that economic benefit. Nonetheless, because the
P.S. 58 rates represent the only valuation
standard sanctioned by existing published
guidance other than the insurer’s published term rates, some taxpayers (and
plan administrators in the case of life
insurance held for participants in qualified

2001–5 I.R.B.

plans) continue to use the P.S. 58 rates to
value current life insurance protection and
thereby report more gross income than is
warranted under current conditions.
Treasury and the IRS are also concerned that the P.S. 58 rates have been
used to understate the economic benefits
provided to employees and other taxpayers under certain split-dollar arrangements. In particular, some taxpayers have
used the P.S. 58 rates to determine the
employer’s share of the premiums under
so-called “reverse” split-dollar arrangements, where the employer’s interest in
the life insurance contract is limited to a
specified portion of the death benefit. The
use of P.S. 58 rates in this manner significantly overstates the value of the policy
benefits allocated to the employer, such
that the employee’s share of the premiums
is significantly lower than the employee’s
actual share of the policy benefits. No
published guidance has authorized
reliance on the P.S. 58 rates for this purpose.
In addition, Treasury and the IRS question whether insurers’ published term
rates provide an appropriate alternative
measure of the fair market value of current
life insurance protection. Treasury and
the IRS understand that, in some
instances, the published premium rates
used for this purpose may not be realistically available to all standard risks who
apply for term insurance, as required by
Rev. Rul. 66–110 and the other published
authorities that have sanctioned that alternative valuation standard. Moreover, taxpayers and the IRS ordinarily have no
practical means to confirm that the same
premium rates are available to all standard
risks who apply for one-year term insurance from the same life insurance company. It is also questionable whether the life
insurance protection provided to a particular insured should be valued differently
for Federal tax purposes from that provided to a similarly situated insured solely
because of differences in the published
premium rates of their respective insurers.
There are a number of variables other
than age that affect the cost and value of
current life insurance protection, including assumed mortality rates, the sex and
health of the insured, and the extent of
sales and other expense charges included
or assumed to be included in premiums.
However, valuation standards that allow

2001–5 I.R.B.

some or all of such variables to be taken
into account on an individual basis may
not be administrable or provide taxpayers
with sufficient certainty. Therefore, to
ease administrative burdens, minimize
disputes, and provide greater assurance
that similarly situated taxpayers are treated the same, Treasury and the IRS believe
it may be preferable, at least as a general
rule, for the value of current life insurance
protection provided under split-dollar
arrangements and qualified retirement
plans to be determined under one or more
premium rate tables prescribed for those
purposes.
IV. INTERIM GUIDANCE
A. Characterization of Split-Dollar
Arrangements
In light of the rationale set forth in Rev.
Rul. 64–328 and the fact that no published
guidance has addressed the potential
applicability of section 7872 to split-dollar arrangements, Treasury and the IRS
recognize that taxpayers have not generally treated employer payments under equity split-dollar arrangements as loans, and
that the below-market loan rules of section 7872 have not generally been applied
to impute compensation income to
employees from such arrangements. It is
also recognized that, without further guidance, it may be difficult for taxpayers to
determine whether an employer’s payments under a split-dollar arrangement are
properly characterized as loans for
Federal tax purposes or whether the
employer should instead be treated as having acquired a beneficial ownership interest in the life insurance contract through
its premium payments and having provided economic benefits to the employee
thereunder. Accordingly, pending consideration of public comments and the publication of further guidance, the characterization and income tax treatment of equity
and other split-dollar arrangements will
generally be determined under the following guidelines:
1. The IRS will generally accept the
parties’ characterization of the employer’s
payments under a split-dollar arrangement, provided that (i) such characterization is not clearly inconsistent with the
substance of the arrangement, (ii) such
characterization has been consistently followed by the parties from the inception of

461

the arrangement, and (iii) the parties fully
account for all economic benefits conferred on the employee in a manner consistent with that characterization.
2. The IRS will permit an employer’s
payments under a split-dollar arrangement
to be characterized as loans for tax purposes, provided that all of the conditions
set forth in paragraph 1 are satisfied. In
such cases, the tax consequences of the
payments treated as loans will be determined under section 7872, the employee
will not have additional compensation
income for the value of the insurance protection provided under the life insurance
contract, and the cash surrender value of
the contract will not represent property
that has been transferred to the employee
for purposes of section 83. However, the
employee ordinarily would have additional gross income if the employer’s
advances were not repaid in accordance
with the terms of the arrangement.
Moreover, the employee could have gross
income under section 72 for distributions
actually received under the life insurance
contract.
3. In any case in which an employer’s
payments under a split-dollar arrangement
have not been consistently treated as loans
in accordance with paragraph 1, the parties will be treated as having adopted a
non-loan characterization of the arrangement, and the parties must fully account
for all of the economic benefits that the
employee derives from the arrangement in
a manner consistent with that characterization and with Rev. Rul. 64–328, Rev.
Rul. 66–110, and the general tax principles upon which those rulings are based.
In general, this means that (i) the employer will be treated as having acquired beneficial ownership of the life insurance
contract through its share of the premium
payments, (ii) the employee will have
compensation income under section 61
equal to the value of the life insurance
protection provided to the employee each
year that the arrangement remains in
effect, reduced by any payments made by
the employee for such life insurance protection, (iii) the employee will have compensation income under section 61 equal
to any dividends or similar distributions
made to the employee under the life insurance contract (including any dividends
described in Rev. Rul. 66–110 applied to
provide additional policy benefits), and

January 29, 2001

(iv) the employee will have compensation
income under section 83(a) to the extent
that the employee acquires a substantially
vested interest in the cash surrender value
of the life insurance contract, reduced
under section 83(a)(2) by any consideration paid by the employee for such interest in the cash surrender value.
4. Pending the publication of further
guidance, the IRS will not treat an
employer as having made a transfer of a
portion of the cash surrender value of a
life insurance contract to an employee
for purposes of section 83 solely because
the interest or other earnings credited to
the cash surrender value of the contract
cause the cash surrender value to exceed
the portion thereof payable to the
employer on termination of the split-dollar arrangement. If future guidance provides that such earnings increments are
to be treated as transfers of property for
purposes of section 83, it will apply
prospectively.
5. In any case in which the employer’s
payments under a split-dollar arrangement
have not been consistently treated as
loans, then for so long as the arrangement
remains in effect, the IRS will treat the
employee as continuing to have gross
income under section 61 for any current
life insurance protection provided to the
employee under the arrangement, except
to the extent allocable to premium payments made by the employee (or included
in the employee’s gross income under
paragraph 6) or to any portion of the cash
surrender value of the contract that has
been treated as a substantially vested
transfer of property to the employee under
section 83. When such an allocation is
required, the IRS will accept a pro rata or
other reasonable method for determining
that portion of the death benefit allocable
to cash surrender value beneficially
owned by the employer and that portion
allocable to cash surrender value transferred to or purchased by the employee.
6. If an employer makes a premium or
other payment for the benefit of an
employee under a split-dollar arrangement, and the employer neither acquires a
beneficial ownership interest in the life
insurance contract through such payment
nor has a reasonable expectation of
receiving repayment of that amount
through policy proceeds or otherwise,
such payment will be treated as compensation income to the employee under sec-

January 29, 2001

tion 61. See Reg. § 1.61–2(d)(2)(ii)(a);
Frost v. Commissioner, 52 T.C. 89 (1969).
In sum, therefore, any payment made
by an employer under a split-dollar
arrangement must be accounted for as a
loan (see paragraph 2), as an investment in
the contract for the employer’s own
account (see paragraph 3), or as a payment of compensation (see paragraph 6).
B. Revised Standards for Valuing
Current Life Insurance Protection
Pending the consideration of comments
and publication of further guidance, the
following interim guidance is provided on
the valuation of current life insurance protection:
1. Rev. Rul. 55–747 is hereby revoked,
and the IRS will no longer treat or accept
the P.S. 58 rates set forth therein as a proper measure of the value of current life
insurance protection for Federal tax purposes. Nonetheless, for taxable years
ending on or before December 31, 2001,
taxpayers may continue to use the P.S. 58
rates set forth in Rev. Rul. 55–747 for purposes of determining the value of current
life insurance protection provided to an
employee under a split-dollar arrangement or a qualified retirement plan.
2. Taxpayers may use the premium rate
table set forth at the end of this notice,
captioned as Table 2001, to determine the
value of current life insurance protection
on a single life provided under a split-dollar arrangement or qualified retirement
plan for taxable years ending after the
date of issuance of this notice. Table 2001
is based on the mortality experience
reflected in the table of uniform premiums
promulgated under section 79(c) of the
Code (see § 1.79–3(d)(2) of the regulations), with extensions for ages below 25
and above 70, and the elimination of the
five-year age brackets.3 With the revocation of Rev. Rul. 55–747, the rates set
forth in Table 2001 are provided as an
interim substitute for the P.S. 58 rates that
taxpayers may rely upon pending further
consideration of how the value of current
life insurance protection should be determined for these Federal tax purposes in
the future. The premium rates set forth in
Table 2001 are materially lower than the
P.S. 58 rates at all ages.
3. Taxpayers may continue to determine the value of current life insurance

3 The table is limited to insureds below age 100.

462

protection by using the insurer’s lower
published premium rates that are available
to all standard risks for initial issue oneyear term insurance as set forth in Rev.
Rul. 66–110, subject to the following
additional limitations. First, for periods
after December 31, 2003, the IRS will not
consider an insurer’s published premium
rates to be available to all standard risks
who apply for term insurance unless (i)
the insurer generally makes the availability of such rates known to persons who
apply for term insurance coverage from
the insurer, (ii) the insurer regularly sells
term insurance at such rates to individuals
who apply for term insurance coverage
through the insurer’s normal distribution
channels, and (iii) the insurer does not
more commonly sell term insurance at
higher premium rates to individuals that
the insurer classifies as standard risks
under the definition of standard risk most
commonly used by that insurer for the
issuance of term insurance. Second, with
respect to a life insurance contract (or
individual certificate) issued after
February 28, 2001, no assurance is provided that such published premium rates
may be used to determine the value of life
insurance protection for periods after the
later of December 31, 2003, or December
31 of the year in which further guidance
relating to the valuation of current life
insurance protection is published.
V. EFFECT ON OTHER DOCUMENTS
Rev. Rul. 55–747 is revoked. Rev. Rul.
64–328 and Rev. Rul. 66–110 are modified to the extent that those rulings indicate that an employer’s premium payments under a split-dollar arrangement
should not be treated as loans where an
employee is not expected to make repayment except out of the cash surrender
value or proceeds of the life insurance
contract.
VI. REQUEST FOR COMMENTS
Comments are requested on the issues
discussed in this notice and on any other
issues for which further guidance relating
to the Federal tax treatment of split-dollar
arrangements is needed. In particular,
Treasury and the IRS request comments
on (i) the circumstances in which employer payments under a split-dollar arrangement should be treated as loans; (ii) in
cases where employer payments under a

2001–5 I.R.B.

split-dollar arrangement are not treated as
loans, the circumstances in which interests in the cash surrender value of a life
insurance contract should be treated as
transfers of property to the employee for
purposes of section 83, including whether
earnings credited to the cash surrender
value of a life insurance contract should
be treated as transfers of property for purposes of section 83 when such earnings
cause the cash surrender value to exceed
the portion thereof payable to the employer (or other transferor); and (iii) whether
additional guidance is needed on the treatment of split-dollar arrangements for
Federal gift tax purposes.
Comments are also invited on the
standards that should be used to value
life insurance protection. Comments are
specifically invited on (i) whether one or
more premium rate tables should be prescribed as the exclusive basis for valuing
current life insurance protection for
Federal tax purposes; (ii) if one or more
premium rate tables are prescribed for

these purposes, what assumptions
should be used in constructing such
table or tables; (iii) if one or more premium rate tables are prescribed for these
purposes, whether the value of life insurance protection for a given insured
should take account of variables other
than the age of the insured; (iv) whether
one or more premium rate tables should
be prescribed for purposes of determining the value of current life insurance
protection under a second-to-die policy
and, if so, what assumptions should be
used in constructing such table or tables;
(v) whether there are reasonable and
workable means to incorporate premium
rates actually charged by life insurance
companies into the valuation standards
used for Federal tax purposes; and (vi)
whether there are reasonable and workable means to allow the value of life
insurance protection for a given insured
to be determined by reference to the cost
structure of the life insurance contract
covering that insured.

Written comments are requested to be
submitted no later than April 30, 2001, to
CC:FIP (Notice 2001–10), room 4300,
Internal Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC 20044.
Comments may be hand delivered
between the hours of 8 a.m. and 5 p.m. to
CC:FIP (Notice 2001–10), Courier’s
Desk, Internal Revenue Service, 1111
Constitution Avenue NW., Washington,
DC. All comments will be available for
public inspection and copying.
DRAFTING INFORMATION
The principal authors of this notice are
David B. Silber of the Office of Associate
Chief Counsel (Financial Institutions and
Products) and Erin Madden of the Office
of Associate Chief Counsel (Tax Exempt
and Government Entities). For further
information regarding this notice, contact
Mr. Silber at (202) 622-3930 or
Ms. Madden at (202) 622-6060 (Not tollfree calls).

TABLE 2001
INTERIM TABLE OF ONE-YEAR TERM PREMIUMS
FOR $1,000 OF LIFE INSURANCE PROTECTION
Attained
Age
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

2001–5 I.R.B.

Section 79
Extended and
Interpolated
Annual Rates

Attained
Age

Section 79
Extended and
Interpolated
Annual Rates

Attained
Age

$0.70
$0.41
$0.27
$0.19
$0.13
$0.13
$0.14
$0.15
$0.16
$0.16
$0.16
$0.19
$0.24
$0.28
$0.33
$0.38
$0.52
$0.57
$0.59
$0.61
$0.62
$0.62
$0.64
$0.66

35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58

$0.99
$1.01
$1.04
$1.06
$1.07
$1.10
$1.13
$1.20
$1.29
$1.40
$1.53
$1.67
$1.83
$1.98
$2.13
$2.30
$2.52
$2.81
$3.20
$3.65
$4.15
$4.68
$5.20
$5.66

70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93

463

Section 79
Extended and
Interpolated
Annual Rates
$20.62
$22.72
$25.07
$27.57
$30.18
$33.05
$36.33
$40.17
$44.33
$49.23
$54.56
$60.51
$66.74
$73.07
$80.35
$88.76
$99.16
$110.40
$121.85
$133.40
$144.30
$155.80
$168.75
$186.44

January 29, 2001

TABLE 2001—Continued
INTERIM TABLE OF ONE-YEAR TERM PREMIUMS
FOR $1,000 OF LIFE INSURANCE PROTECTION
Attained
Age
24
25
26
27
28
29
30
31
32
33
34

Section 79
Extended and
Interpolated
Annual Rates

Attained
Age

Section 79
Extended and
Interpolated
Annual Rates

$0.68
$0.71
$0.73
$0.76
$0.80
$0.83
$0.87
$0.90
$0.93
$0.96
$0.98

59
60
61
62
63
64
65
66
67
68
69

$6.06
$6.51
$7.11
$7.96
$9.08
$10.41
$11.90
$13.51
$15.20
$16.92
$18.70

Withholding and Information
Reporting on Payments to
Financial Institutions in U.S.
Possessions
Notice 2001-11
Corporations and partnerships that are
organized under the laws of a possession
of the United States are generally treated
as foreign persons for purposes of section
1441 and the regulations thereunder
(relating to the withholding of tax on payments to foreign persons). See section
881(b)(1) for exceptions to this general
rule. Financial institutions organized
under the laws of a U.S. possession (“possessions financial institutions”) have
noted that, to the extent they act as intermediaries (that is, as agents for others),
the regulations under section 1441, as in
effect on January 1, 2001 (the “new withholding regulations”), will require them to
function as nonqualified intermediaries.
Payments of U.S. source income made to
nonqualified intermediaries are generally
subject to 30-percent withholding (or 31percent withholding in the case of deposit
interest and certain payments on shortterm obligations) unless the nonqualified
intermediary provides documentation
from, and other information relating to,
customers on whose behalf the nonqualified intermediary acts that supports a

January 29, 2001

reduced rate of withholding. See section
1.1441-1(b)(1) and 1.1441-1(e)(3)(iii) and
(iv). Possessions financial institutions
have commented that the requirement to
provide a withholding agent with information relating to the possessions financial institution’s customers should not
apply to them because they are subject to
all of the withholding and information
reporting requirements that apply to U.S.
withholding agents under Chapters 3 and
61 and section 3406 of the Internal
Revenue Code and because they are subject to direct audit supervision by the
Internal Revenue Service.
Treasury and IRS agree that, for the
reasons described above, possessions
financial institutions should not be
required to act as nonqualified intermediaries under the new withholding regulations. Accordingly, until further notice,
any possessions financial institution will
be treated as a U.S. branch under section
1.1441-1(b)(2)(iv) of the new withholding
regulations. As such, it may agree with a
withholding agent from which it is receiving payments to be treated as a U.S. person. See section 1.1441-1(b)(2)(iv)(A)
and (E). Under the general rule of section
1.1441-1(b)(1), payments of U.S. source
income to a possessions financial institution that agrees to be treated as a U.S. person will be treated as made to a U.S.
payee and therefore not subject to with-

464

Attained
Age

Section 79
Extended and
Interpolated
Annual Rates

94
95
96
97
98
99

$206.70
$228.35
$250.01
$265.09
$270.11
$281.05

holding under section 1441. The possessions financial institution shall be subject
to all of the withholding and reporting
obligations of a U.S. withholding agent
under chapters 3 and 61 of the Code and
section 3406. For purposes of this notice,
the term financial institution has the same
meaning as in section 1.1441-1(c)(5).
A possessions financial institution that
agrees to be treated as a U.S. person must
provide a withholding agent with a properly completed Form W-8IMY on which it
evidences its agreement to be treated as a
U.S. person. The possessions financial
institution should not provide a Form
W-9. See section 1.1441-1(b)(2)(iv). In
addition, a withholding agent making a
payment to a possessions financial institution that agrees to be treated as a U.S. person must report payments made to the
institution on Form 1042-S. See section
1.1441-1(b)(2)(iv) and 1.1461-1(c)(4)(i)
(C)(1).
Contact Information
The principal author of this Notice is
Carl Cooper of the Office of the Associate
Chief Counsel (International), Internal
Revenue Service, 1111 Constitution
Avenue, N.W., Washington, D.C. 20224.
For further information regarding this
Notice contact Mr. Cooper at 202-6223840 (not a toll-free call).

2001–5 I.R.B.