[Federal Register Volume 66, Number 116 (Friday, June 15, 2001)]
[Rules and Regulations]
[Pages 32541-32543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14815]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 301, and 602

[TD 8947]
RIN 1545-AY79


Penalties for Underpayments of Deposits and Overstated Deposit 
Claims

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of final regulations.

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SUMMARY: This document makes conforming amendments to certain final 
regulations to reflect the removal of final regulations relating to the 
penalty for underpayment of deposits of taxes and the penalty for 
overstated deposit claims. These regulations are obsolete due to 
amendments to section 6656 of the Internal Revenue Code. The removal of 
these regulations will not affect taxpayers.

DATES: The amendments and removals are effective June 15, 2001.

FOR FURTHER INFORMATION CONTACT: Robin M. Tuczak, (202) 622-4940 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    This document removes two sections from the Procedure and 
Administration Regulations (26 CFR part 301) relating to penalties for 
underpayment of Federal tax deposits and overstated deposit claims 
under section 6656 of the Internal Revenue Code. The Omnibus Budget 
Reconciliation Act of 1989, Public Law 101-239 (103 Stat. 2106, 1989) 
amended section 6656, modifying the penalty rates relating to a failure 
to make a Federal tax deposit and removing the penalty relating to 
overstatement of Federal tax deposits. These changes have rendered 
Secs. 301.6656-1 and 301.6656-2 obsolete.
    Section 301.6656-1 was revised and Sec. 301.6656-2 was added by TD 
7925, published in the Federal Register for December 13, 1983 (LR-311-
81, 48 FR 5453). Section 301.6656-2 was added to implement changes made 
by the

[[Page 32542]]

Economic Recovery Tax Act of 1981, Public Law 97-34 (95 Stat. 172, 
1981). Section 301.6656-1 was revised to remove outdated provisions 
relating to deposits made before January 1, 1970, based on the law in 
effect for those deposits.
    Section 301.6656-1 reflects that, at the time it was revised, the 
penalty for underpayment of deposits was five percent of the amount of 
the underpayment without regard to the period during which the 
underpayment continued, absent reasonable cause. The Omnibus Budget 
Reconciliation Act of 1986, Public Law 99-509 (100 Stat. 1874, 1986) 
amended section 6656 to impose a ten percent penalty for underpayment. 
The Omnibus Budget Reconciliation Act of 1989 further amended this 
section to provide for a penalty that is equal to an applicable 
percentage of the amount of the underpayment based on the duration of 
the underpayment. This regulation does not reflect the most recent 
amendments to section 6656. Furthermore, all relevant information 
regarding underpayment penalties is put forth in the code section or in 
other published guidance. This regulation does not provide any 
additional guidance regarding the current underpayment penalties as set 
forth in section 6656 and therefore may be removed.
    Section 301.6656-2 explains and expands upon former section 
6656(b), Overstated Deposit Claims. The Omnibus Budget Reconciliation 
Act of 1989 removed former section 6656(b), making this regulation 
obsolete.
    In addition, Sec. 301.6656-3 is redesignated as Sec. 301.6656-1. 
Further, Secs. 1.6302-1(d) and 1.6302-2(d) of the Income Tax 
Regulations and Secs. 31.6302-1(m)(1) and 31.6302(c)-4(a) of the 
Employment Tax Regulations are revised to remove references to the 
removed regulations under section 6656.

Effect on other Documents

    The final regulations Secs. 301.6656-1 and 301.6656-2 published in 
the Federal Register for December 13, 1983 (LR-311-81, 48 FR 5453) are 
removed as of June 15, 2001.

Special Analyses

    It has been determined that the removal of these regulations is not 
a significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. Because this rule 
merely removes regulatory provisions made obsolete by statute, prior 
notice and comment and a delayed effective date are unnecessary and 
contrary to the public interest. 5 U.S.C. 553(b)(B) and (d). Because no 
notice of proposed rulemaking is required, the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) does not apply.

Drafting Information

    The principal author of the removal of the regulations is Robin M. 
Tuczak of the Office of Associate Chief Counsel, Procedure and 
Administration (Administrative Provisions and Judicial Practice 
Division).

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation.

26 CFR Part 301

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

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 31, 301, and 602 are amended as 
follows:

PART 1--INCOME TAXES

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

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

    Par. 2. In Sec. 1.6302-1, paragraph (d) is revised to read as 
follows:


Sec. 1.6302-1  Use of Government depositaries in connection with 
corporation income and estimated income taxes and certain taxes of tax-
exempt organizations.

* * * * *
    (d) Failure to deposit. For provisions relating to the penalty for 
failure to make a deposit within the prescribed time, see section 6656.

    Par. 3. In Sec. 1.6302-2, paragraph (d) is revised to read as 
follows:


Sec. 1.6302-2  Use of Government depositaries for payment of tax 
withheld on nonresident aliens and foreign corporations.

* * * * *
    (d) Penalties for failure to make deposits. For provisions relating 
to the penalty for failure to make a deposit within the prescribed 
time, see section 6656.
* * * * *

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

    Par. 4. The authority citation for part 31 continues to read in 
part as follows:

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

    Par. 5. In Sec. 31.6302-1, paragraph (m)(1) is revised to read as 
follows:


Sec. 31.6302-1  Federal tax deposit rules for withheld income taxes and 
taxes under the Federal Insurance Contributions Act (FICA) attributable 
to payments made after December 31, 1992.

* * * * *
    (m) * * * (1) Failure to deposit penalty. For provisions relating 
to the penalty for failure to make a deposit within the prescribed 
time, see section 6656.
* * * * *

    Par. 6. In Sec. 31.6302(c)-4, paragraph (a) is revised to read as 
follows:


Sec. 31.6302(c)-4  Cross references.

    (a) Failure to deposit. For provisions relating to the penalty for 
failure to make a deposit within the prescribed time, see section 6656.
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 7. The authority citation for part 301 continues to read in 
part as follows:

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


Secs. 301.6656-1 and 301.6656-2  [Removed]

    Par. 8. Sections 301.6656-1 and 301.6656-2 are removed.


Sec. 301.6656-3  [Redesignated as Sec. 301.6656-1]

    Par. 9.  Section 301.6656-3 is redesignated as new Sec. 301.6656-1.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 10. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 11. In Sec. 602.101, paragraph (b) is amended by removing the 
entries for 301.6656-1 and 301.6656-2 from the table.


[[Page 32543]]


    Approved: June 1, 2001.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.

Mark A. Weinberger,
Assistant Secretary of the Treasury.
[FR Doc. 01-14815 Filed 6-14-01; 8:45 am]
BILLING CODE 4830-01-P