[Federal Register Volume 59, Number 42 (Thursday, March 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4780]


[[Page Unknown]]

[Federal Register: March 3, 1994]


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DEPARTMENT OF THE TREASURY
26 CFR Part 301

[TD 8524]
RIN 1545-A079

 

Clarification of Period During Which Interest Is Allowed With 
Respect to Certain Overpayments

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document amends Sec. 301.6611-1 on Procedure and 
Administration. The amendments clarify the period during which interest 
is allowed on overpayments credited against a taxpayer's liability for 
interest and certain additions to the tax. The amendments are necessary 
as a result of changes to the law made by the Tax Equity and Fiscal 
Responsibility Act of 1982 and the Deficit Reduction Act of 1984. The 
amendments affect all taxpayers that have overpayments credited against 
underpayments.

DATES: These regulations are effective March 3, 1994. These regulations 
are applicable for credits made on or after August 25, 1992.

FOR FURTHER INFORMATION CONTACT: Forest Boone of the Office of 
Assistant Chief Counsel (Income Tax & Accounting), Internal Revenue 
Service, 1111 Constitution Avenue NW., Washington, DC 20224 (Attention: 
CC:IT&A:Br06) or telephone 202-622-4960 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document amends the regulations on Procedure and 
Administration (26 CFR part 301) under section 6611 of the Internal 
Revenue Code (Code) to clarify the period during which interest is 
allowed on overpayments that are credited against a taxpayer's 
liability for interest and certain additions to the tax. These 
amendments conform the regulations to section 344 of the Tax Equity and 
Fiscal Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248, 96 Stat. 
635), and section 158 of the Deficit Reduction Act of 1984 (DEFRA) 
(Pub. L. 98-369, 98 Stat. 696).
    On August 25, 1992, the IRS published in the Federal Register a 
Notice of Proposed Rulemaking (57 FR 38457). The IRS did not receive 
any comment letters in response to that notice nor was a public hearing 
requested. The proposed regulations are adopted in this Treasury 
decision.

Explanation of Provisions

Interest on Overpayments That Are Credited Against Interest on 
Underpayments

    Section 6611(a) of the Code provides that interest shall be allowed 
and paid on any overpayment in respect of any internal revenue tax at 
the overpayment rate established under section 6621. Under section 
6402(a), the Secretary may credit any overpayment (including any 
interest allowed thereon) against any liability imposed under the Code 
on the taxpayer. Under section 6611(b)(1), interest is allowed on an 
overpayment that is so credited from the date of the overpayment to the 
due date of the taxpayer's liability against which the overpayment is 
credited. For purposes of this interest computation, specific due dates 
are provided in Sec. 301.6611-1(h).
    Generally, section 6601(f) provides that once an overpayment is 
credited to satisfy a taxpayer's liability, interest no longer accrues 
on that liability. Section 344 of TEFRA added section 6622 of the Code, 
which requires interest imposed by the Code to be compounded daily. The 
effect of section 6601(f) on the compounding requirement of section 
6622 is that once an overpayment is credited to satisfy the taxpayer's 
liability for interest, that credit cuts off any further compounding of 
that interest (i.e., interest no longer accrues on the taxpayer's 
interest liability against which the credit has been made).
    Similarly, it is appropriate that no interest liability to the 
taxpayer accrues on the overpayment once the overpayment is credited to 
satisfy the taxpayer's liability for interest. Thus, Sec. 301.6611-
1(h)(2)(v) is amended to clarify that interest does not continue to 
accrue on any portion of an overpayment that is credited against the 
taxpayer's liability for interest.

Interest on Overpayments That Are Credited Against Certain Additions to 
the Tax

    Prior to DEFRA, interest only accrued on additions to the tax from 
the date of notice and demand, and then only if not paid within 10 days 
from the date of notice and demand. In section 158 of DEFRA, Congress 
added section 6601(e)(2)(B) to the Code, which requires taxpayers to 
pay interest on certain additions to tax from the due date of the 
relevant return (including any extensions) until the addition to the 
tax is paid. The number of additions to the tax that bear interest from 
the due date of the return was increased by Congress in 1988 and again 
in 1989. Thus, Sec. 301.6611-1(h)(2)(vi) is amended to clarify that no 
interest is allowed on any portion of an overpayment that is credited 
against certain additions to the tax for any period after the due date 
of the return (including extensions) to which the addition to the tax 
relates.

Prior Regulations Obsolete

    These regulations are effective for credits made on or after August 
25, 1992. It should be noted that, since the enactment of section 6622 
of the Code in TEFRA, the IRS has treated Sec. 301.6611-1(h)(2)(v) of 
the prior regulations as obsolete. Likewise, the Service has treated 
Sec. 301.6611-1(h)(2)(vi) of the prior regulations as obsolete with 
respect to certain additions to the tax since the enactment of section 
6601(e)(2)(B) in DEFRA. Thus, the IRS has computed and is currently 
computing interest in a fashion consistent with these amendments.

Effect on Other Documents

    On October 9, 1984, the IRS published in the Federal Register (49 
FR 39566 [LR-280-82, 1984-2 C.B. 860]) proposed amendments to 
Sec. 301.6611-1 and Sec. 301.6601-1 on Procedure and Administration. 
The proposed amendments revised Sec. 301.6611-1 to reflect section 346 
of TEFRA and section 714(n) of DEFRA, eliminated certain deadwood 
provisions, and reorganized Sec. 301.6611-1. The proposed amendments 
did not, however, include revisions to take into account section 344 of 
TEFRA or section 158 of DEFRA because those sections were beyond the 
scope of that regulation project. The proposed amendments have not been 
adopted as final regulations. If the proposed amendments are adopted as 
final regulations, their rules (and, to the extent necessary, their 
effective dates) will be modified to be consistent with these 
regulations.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.

Drafting Information

    The principal author of these regulations is Forest Boone of the 
Office of Assistant Chief Counsel (Income Tax & Accounting). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.6611-1 is amended by:

    a. Revising paragraphs (h)(2)(v) and (h)(2)(vi) as set forth below.
    b. Adding paragraph (k) to read as set forth below.


Sec. 301.6611-1  Interest on overpayments.

* * * * *
    (h) * * *
    (2) * * *
    (v) Interest. In the case of a credit against interest that accrues 
for any period ending prior to January 1, 1983, the due date is the 
earlier of the date of assessment of such interest or December 31, 
1982. In the case of a credit against interest that accrues for any 
period beginning on or after December 31, 1982, such interest is due as 
it economically accrues on a daily basis, rather than when it is 
assessed.
    (vi) Additional amount, addition to the tax, or assessable penalty. 
In the case of a credit against an additional amount, addition to the 
tax, or assessable penalty, the due date is the earlier of the date of 
assessment or the date from which such amount would bear interest if 
not satisfied by payment or credit.
* * * * *
    (k) Effective date. Paragraphs (h)(2)(v) and (h)(2)(vi) of this 
section are effective for credits made on or after August 25, 1992.
Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: February 3, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-4780 Filed 3-2-94; 8:45 am]
BILLING CODE 4830-01-U