[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31819]


[Federal Register: December 28, 1994]


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DEPARTMENT OF THE TREASURY
26 CFR Part 300

[PS-39-94]
RIN 1545-AS84


User Fees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to user 
fees for certain services provided to specific persons and implements 
the Independent Offices Appropriations Act (IOAA).

DATES: Written comments must be received by January 27, 1995. Requests 
to speak at the public hearing scheduled for January 20, 1995, must be 
received by January 17, 1995.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (PS-39-94), room 5228, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. In the alternative, submissions may be hand delivered between 
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (PS-39-94), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC. The public hearing will be held in the Auditorium, 
Internal Revenue Building, 1111 Constitution Avenue NW., Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Concerning the hearing and submission 
of written comments, Carol Savage, (202) 622-8452; concerning costing 
methodology, Robert Miller (202) 535-9701(x3222); concerning 
installment agreements, Kevin Connelly (202) 622-3640 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Background

    The IOAA, codified at 31 U.S.C. 9701, authorizes agencies to 
prescribe regulations that establish charges for services provided by 
the agency (user fees). The charges must be fair and be based on the 
costs to the Government, the value of the service to the recipient, the 
public policy or interest served, and other relevant facts. The IOAA 
expressly provides that regulations implementing user fees ``are 
subject to policies prescribed by the President * * *''
    The FY 1995 Appropriations Bill for the Treasury Department (the 
1995 Appropriations Bill) includes a provision relating to the 
establishment of new fees for services provided by the IRS if the fees 
are authorized by another law, such as the IOAA.
    Since 1959, the Office of Management and Budget (OMB) has issued 
policy guidance on user fees through Circular A-25 (the OMB Circular). 
See FPC v. New England Power Co., 415 U.S. 345, 349-51. (1974) (citing 
the OMB Circular). On July 15, 1993, OMB issued a revised version of 
the OMB Circular in the Federal Register (58 FR 38142), which provides 
updated policy guidance on user fees. Under the OMB Circular, user fees 
for Government-provided services that confer benefits on identifiable 
recipients over and above those benefits received by the general public 
are encouraged. The amount of the user fee imposed should recover the 
cost for providing the special benefit or the value of the special 
benefit.
    For these proposed fees, the IRS followed the guidance provided by 
the OMB Circular and the relevant court cases in calculating the costs 
of the services provided. Under the OMB Circular, each agency is to 
include in its calculation of the cost of providing a benefit:
    (1) Direct and indirect personnel costs, including salaries and 
fringe benefits such as medical insurance and retirement.
    (2) Physical overhead, consulting, and other indirect costs, 
including material and supply costs, utilities, insurance, travel, and 
rents or imputed rents on land, buildings, and equipment.
    (3) Management and supervisory costs.
    (4) The costs of enforcement, collection, research, establishment 
of standards, and regulation, including any environmental impact 
statements.

Establishment of User Fees

    Pursuant to the IOAA, the OMB Circular, and the 1995 Appropriations 
Bill, the IRS is proposing user fees for the following services that 
confer a special benefit on identifiable recipients: (1) entering into 
an installment agreement, and (2) restructuring or reinstating an 
installment agreement.
    Section 300.1 of these regulations proposes to impose a $43 fee for 
entering into an installment agreement. The taxpayer entering into the 
installment agreement is the person that would be liable for the fee.
    Section 300.2 of these regulations proposes to impose a $24 fee for 
restructuring or reinstating an installment agreement. The taxpayer 
that has an installment agreement restructured or reinstated is the 
person that would be liable for the fee.
    These regulations do not propose procedures relating to paying any 
fee. Subsequent guidance will provide that information.

Effective Date

    These regulations are proposed to be effective thirty days after 
the date of publication in the Federal Register of the final 
regulations. Depending on the exact publication schedule, the effective 
date is estimated to be March 3, 1995.

Entering Into Installment Agreements

    Section 6159 of the Internal Revenue Code authorizes the IRS to 
enter into a written agreement with any taxpayer for the payment of 
that taxpayer's outstanding tax obligation in installments. Each 
taxpayer that enters into an installment agreement receives the special 
benefit of being allowed to pay an outstanding tax obligation over time 
rather than immediately.
    Before entering into an installment agreement, the IRS must first 
determine whether such an agreement is appropriate, then set up the 
agreement, process payments, and monitor for conformance with the 
agreement.
    The amount of the proposed installment agreement fee has been 
determined by using activity-based costing. In a 1993 study, the IRS 
analyzed the work activities related to establishing new installment 
agreements at both the Service Center (pre-assessment) and District 
Office levels (post assessment). The costs incurred in establishing new 
installment agreements at Service Centers and District Offices were 
averaged in computing a uniform fee. Projected costs for program start-
up and training and software maintenance were developed. Lockbox and 
remittance processing costs (based on an historic average of 8.5 
payments per agreement) were calculated. These figures were added to 
the initial activity-based costing totals. The activity-based 
methodology did not include some indirect cost elements (primarily 
executive support) which were then calculated at a 2.3% indirect cost 
rate. Based on this costing methodology, the proposed installment 
agreement fee is $43.

Restructuring or Reinstating Installment Agreements

    When a taxpayer fails to meet any of the conditions of an 
installment agreement, that agreement is deemed to be in default. The 
IRS has the right to terminate an installment agreement in default. 
Each taxpayer that has an installment agreement restructured or 
reinstated receives not only the special benefit of being allowed to 
pay an outstanding tax obligation over time rather than immediately but 
also the special benefit of avoiding a potential enforcement action, 
including but not limited to the filing of liens and the making of 
levies.
    Before restructuring or reinstating an installment agreement, the 
IRS must monitor for nonconformance, analyze the cause(s) of default, 
correspond with the taxpayer, analyze the taxpayer's responses, and, if 
appropriate, restructure or reinstate the agreement.
    The amount of the proposed restructuring or reinstatement fee was 
calculated by determining direct labor costs and overhead labor costs 
derived from the IRS' Work Planning and Control tracking system, 
standard correspondence and postage costs incurred in preparing and 
mailing certified notices, and an indirect cost factor representing 
support cost. Examining program history through fiscal year 1993, the 
IRS estimated the total number of installment agreements likely to be 
restructured or reinstated in fiscal year 1995 as approximately 
150,000. Based on this costing methodology, the proposed restructuring 
or reinstatement fee is $24.

Special Analyses

    Although it has been determined that this notice of proposed 
rulemaking is a significant regulatory action as defined in EO 12866, 
the Office of Management and Budget has waived the preparation of a 
regulatory assessment. Because no substantive changes were made to 
these regulations subsequent to their submission to the Office of 
Management and Budget, the provisions of section 6(a)(3)(E) of EO 12866 
do not apply. It is hereby certified that these regulations will not 
have a significant economic impact on a substantial number of small 
entities. Accordingly, a regulatory flexibility analysis is not 
required. This certification is based on the information that follows. 
The economic impact of these regulations on any small entity would 
result from the entity being required to pay a fee prescribed by these 
regulations in order to obtain a particular service. However, due to 
the small dollar amount of each of these fees, the economic impact on 
any entity subject to one of the fees would not be significant. 
Pursuant to section 7805(f) of the Internal Revenue Code, this notice 
of proposed rulemaking will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for Friday, January 20, 1995, 
at 10 a.m. in the Auditorium, Internal Revenue Building, 1111 
Constitution Avenue NW, Washington, DC. Requests to speak at the 
hearing must be received by January 17, 1995.
    Because of access restrictions, visitors will not be admitted 
beyond the Internal Revenue Building lobby more than 15 minutes before 
the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. A period of 
10 minutes will be allotted to each person for making comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving requests to speak has passed. Copies 
of the agenda will be available free of charge at the hearing.

Drafting Information

    The principal authors of these regulations are Ruth Hoffman, Office 
of Assistant Chief Counsel (Passthroughs and Special Industries) and 
Tom Baker, Office of Assistant Chief Counsel (General Legal Services). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 300

    User fees, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 300 is proposed to be added to read as 
follows:

PART 300--USER FEES

Sec.
300.0  User fees; in general.
300.1  Installment agreement fee.
300.2  Restructuring or reinstatement of installment agreement fee.

    Authority: 31 U.S.C. 9701.


Sec. 300.0  User fees; in general.

    (a) In general. The regulations in this part 300 are designated the 
User Fee Regulations and provide rules relating to user fees under 31 
U.S.C. 9701.
    (b) Applicability. User fees are imposed on the following services:
    (1) Entering into an installment agreement.
    (2) Restructuring or reinstating an installment agreement.
    (c) Effective date. This part 300 is effective thirty days after 
the date of publication of the final regulations.


Sec. 300.1  Installment agreement fee.

    (a) Applicability. These regulations apply to installment 
agreements under section 6159 of the Internal Revenue Code.
    (b) Fee. The fee for entering into an installment agreement is $43.
    (c) Person liable for fee. The person liable for the installment 
agreement fee is the taxpayer entering into an installment agreement.


Sec. 300.2  Restructuring or reinstatement of installment agreement 
fee.

    (a) Applicability. These regulations apply to installment 
agreements under section 6159 of the Internal Revenue Code that are in 
default. An installment agreement is deemed to be in default when a 
taxpayer fails to meet any of the conditions of the installment 
agreement.
    (b) Fee. The fee for restructuring or reinstating an installment 
agreement is $24.
    (c) Person liable for fee. The person liable for the restructuring 
or reinstatement fee is the taxpayer that has an installment agreement 
restructured or reinstated.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-31819 Filed 12-27-94; 2:46 pm]
BILLING CODE 4830-01-P