[Federal Register Volume 60, Number 30 (Tuesday, February 14, 1995)]
[Rules and Regulations]
[Pages 8298-8300]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3755]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 8589]
RIN 1545-AS84


User Fees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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

EFFECTIVE DATE: March 16, 1995.

FOR FURTHER INFORMATION CONTACT: 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. [[Page 8299]] 
    For these 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.
    On December 28, 1994, a notice of proposed rulemaking (PS-39-94) 
relating to user fees under 31 U.S.C. 9701 was published in the Federal 
Register (59 FR 66828). Written comments responding to the notice were 
received and a public hearing was held on January 20, 1995. Commenters 
expressed concern that some taxpayers cannot afford to pay a fee in 
addition to their installment payments. The IRS is concerned about the 
effect of the fee on such taxpayers. Accordingly, the IRS intends to 
use existing administrative procedures to take into account the 
taxpayer's ability to pay in structuring the payment schedule, 
including the payment of the fee. After consideration of the comments, 
the proposed regulations are adopted by this Treasury decision.

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 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 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 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 restructuring or 
reinstatement fee is $24.

Special Analyses

    Although it has been determined that this Treasury decision 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, the notice of proposed rulemaking 
preceding these regulations was submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

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

    Estate taxes, Excise taxes, Gift taxes, Income taxes, Reporting and 
recordkeeping requirements, User fees.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 300 is 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 March 16, 1995. 
[[Page 8300]] 


Sec. 300.1  Installment agreement fee.

    (a) Applicability. This section applies 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. This section applies 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.
    Approved: February 1, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-3755 Filed 2-10-95; 12:57 pm]
BILLING CODE 4830-01-P