[Federal Register Volume 81, Number 232 (Friday, December 2, 2016)]
[Rules and Regulations]
[Pages 86955-86960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28936]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[TD 9798]
RIN 1545-BN37
User Fees for Installment Agreements
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations that provide user
fees for installment agreements. The final regulations affect taxpayers
who wish to pay their liabilities through installment agreements.
DATES: Effective date: These regulations are effective on December 2,
2016.
Applicability date: These regulations apply to installment
agreements entered into, restructured, or reinstated on or after
January 1, 2017.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Maria Del
Pilar Austin at (202) 317-5437; concerning cost methodology, Eva
Williams, at (202) 803-9728 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document contains amendments to the User Fee Regulations under
26 CFR part 300. On August 22, 2016, the Treasury Department and the
IRS published in the Federal Register (81 FR 56550) a notice of
proposed rulemaking (REG-108792-16) relating to the user fees charged
for entering into and reinstating and restructuring installment
agreements. The Independent Offices Appropriations Act of 1952 (IOAA),
which is codified at 31 U.S.C. 9701, authorizes agencies to prescribe
regulations establishing user fees for services provided by the agency.
Regulations prescribing user fees are subject to the policies of the
President, which are currently set forth in the Office of Management
and Budget Circular A-25 (the OMB Circular), 58 FR 38142 (July 15,
1993). The OMB Circular allows agencies to impose user fees for
services that confer a special benefit to identifiable recipients
beyond those accruing to the general public. The agency must calculate
the full cost of providing those benefits, and, in general, the amount
of a user fee should recover the full cost of providing the service,
unless the Office of Management and Budget (OMB) grants an exception
under the OMB Circular.
The notice of proposed rulemaking proposed to increase the user
fees under Sec. 300.1 for entering into an installment agreement from
$120 to $225 and for entering into a direct debit installment agreement
from $52 to $107. The notice of proposed rulemaking proposed to
increase the user fee under Sec. 300.2 for restructuring or
reinstating an installment agreement from $50 to $89. The notice of
proposed rulemaking proposed the introduction of two new types of
online installment agreements under Sec. 300.1, each subject to a
separate user fee: (1) An online payment agreement with a fee of $149
and (2) a direct debit online payment agreement with a fee of $31.
Under the notice of proposed rulemaking, the user fee for low-income
taxpayers, as defined in Sec. 300.1(b)(3), would continue to be $43
for entering into a new installment agreement, except that the lower
fee of $31 for a direct debit online payment agreement would apply to
all taxpayers. Under Sec. 300.2(b), the fee for low-income taxpayers
restructuring or reinstating an installment agreement would be reduced
to $43 from $50. The new user fee rates were proposed to be effective
beginning on January 1, 2017. As explained in the notice of proposed
rulemaking, the proposed fees bring user fee rates for installment
agreements in line with the full cost to the IRS of providing these
taxpayer-specific services. In particular, the new user fee structure
offers taxpayers more tailored installment agreement options, including
a $31 user fee for direct debit online payment agreements, which
ensures that taxpayers are not charged more for their chosen
installment agreement option than the actual cost incurred by the IRS
in providing the type of installment agreement selected by taxpayers.
Because OMB has granted an exception to the full cost requirement for
low-income taxpayers, low-income taxpayers would continue to pay the
reduced fee of $43 for any new installment agreement, except where they
request a $31 direct debit online payment agreement, and would pay the
reduced $43 fee for restructuring or reinstating an installment
agreement.
No public hearing on the notice of proposed rulemaking was held
because one was not requested. Five comments were received. After
careful consideration of the comments, this Treasury Decision adopts
the proposed regulations without change.
Summary of Comments
The first comment suggested that filing a tax return and requesting
an installment agreement should not be a two-step process and that
taxpayers
[[Page 86956]]
requesting an installment agreement with the filing of their returns
should not be subject to a higher user fee. The comment expressed
concern with tying eligibility for the $31 user fee to submitting a
request for a direct debit online payment agreement. The comment also
noted the length of time it takes the IRS to initiate direct debit
installment agreement payments. The comment asserted that taxpayers
requesting installment agreements with the filing of their tax returns
and paying via direct debit should be entitled to the $31 user fee.
These regulations deal with only the user fees for installment
agreements and not the administration of the installment agreement
program generally, and so this comment is addressed only to the extent
it relates to user fees for installment agreements. As explained in the
notice of proposed rulemaking, agencies are required to set user fees
at an amount that recovers the full cost of providing the service
unless an agency requests, and the OMB grants, an exception to the full
cost requirement. The proposed installment agreement fees are
structured to reflect the full cost to the IRS to establish and monitor
the different types of installment agreements associated with each user
fee. The costs to the IRS for installment agreements are the same to
the IRS whether the taxpayer requests an installment agreement at the
same or a different time from filing its tax return. The regulations
now offer taxpayers additional types of installment agreements to
choose from, including a low-cost user fee of $31 for a direct debit
online payment agreement. A taxpayer may file a return and then request
a direct debit online payment agreement and would be charged a fee of
only $31. As discussed in the notice of proposed rulemaking, the IRS
incurs higher costs in establishing and monitoring all other forms of
installment agreements. If a taxpayer chooses to request an installment
agreement other than a direct debit online payment agreement, that
taxpayer must pay the full cost of that user fee unless the taxpayer
qualifies as a low-income taxpayer. The length of time required to
establish direct debit installment agreements that the comment
described is due to IRS budget cuts in recent years that have resulted
in lower staffing levels combined with increased workloads. During peak
times of the year, the IRS has more installment agreements to process
than available staff to process them and backlogs occur. In addition,
there are Federal e-pay requirements that also add time in processing
installment agreements paid by direct debit. However, taxpayers using
the online payment agreement service receive immediate confirmation of
direct debit online payment agreements. Taxpayers requesting
installment agreements via a Form 9465 when e-filing are not entitled
to the lower $31 user fee under the proposed regulations because the
costs associated with processing the Form 9465 are greater than those
incurred for taxpayers using the online payment agreement service. At
the time taxpayers submit Form 9465 with their e-filed returns, the IRS
has no way of determining whether the taxpayers qualify for an
installment agreement or whether the payment proposal meets streamlined
processing criteria. While the IRS continues to explore ways to make
this process completely automated, at this time the process to review a
regular installment agreement request requires IRS staff involvement
that direct debit online payment agreements do not.
The second comment expressed concern that the proposed increase in
user fees was too high and asked whether ``any consideration [has] been
given to increasing the time frame for an exten[s]ion [from] 120[]days
to 180[]days.'' It appears that the latter part of this comment is
referring to the full pay agreement that has no user fee but requires
the taxpayer to full pay within 120 days. The extension of the time
period for full pay agreements is unrelated to the proposed increase in
the user fees for installment agreements. With regard to the increase
in fee, the fee increase is consistent with the requirement under the
OMB Circular that agencies that confer special benefits on identifiable
recipients beyond those accruing to the general public are to establish
user fees that recover the full cost of providing those services. In
the notice of proposed rulemaking, the IRS provided a detailed analysis
of how it calculated the full cost of this service and the fee is
consistent with the full cost of the particular service.
The third comment provided examples of taxpayers with varying
circumstances and opined that increasing the user fee for installment
agreements would be unfair to taxpayers who are so situated. For
taxpayers whose income falls at or below 250 percent of the poverty
level as established by the U.S. Department of Health and Human
Services and updated annually, the proposed regulations continue to
offer a reduced fee for low-income taxpayers of $43, and extend the $43
fee to low-income taxpayers restructuring or reinstating installment
agreements. In addition, the proposed regulations establish a lower fee
of $31 for online direct debit installment agreements that is available
to all taxpayers. Thus, even if taxpayers do not qualify for the
reduced low-income taxpayer fee, the proposed regulations permit all
taxpayers the option to pay the lower $31 fee by establishing direct
debit online payment agreements.
The fourth comment had four main concerns and additional concerns
with respect to each of these main concerns.
The fourth comment's first main concern challenged the IRS's
application of the OMB Circular. The comment opined that an installment
agreement is not a special benefit as provided under the OMB Circular
for several reasons. Specifically, the comment noted that if a taxpayer
does not have assets to levy, then relief of levy is not a benefit to
that taxpayer. The comment suggested that the IRS receives a benefit
when a taxpayer enters into an installment agreement and as a result,
the installment agreement does not provide a special benefit for
purposes of the OMB Circular. The comment questioned how many
installment agreements resulted in payments that the IRS would not have
otherwise received. The comment also questioned whether installment
agreement income is a benefit to the fisc or whether the IRS could use
levies to secure the same amount of payment. The comment stated that
the IRS is required to enter into certain installment agreements
pursuant to section 6159(c) and questioned how a statutory requirement
could be considered a special benefit. The comment quoted Section
6(1)(4) of the OMB Circular, which provides that ``[n]o charge should
be made for a service when the identification of the specific
beneficiary is obscure, and the service can be considered primarily as
benefiting broadly the general public.'' The comment opined that
because the IRS may receive some benefit, the specific beneficiary of
an installment agreement is incompletely identified. Finally, the
comment noted that the OMB Circular allows for exceptions to charging
full cost and questioned whether it is good public policy to increase
the user fee considering that some installment agreements are
statutorily required and help bring noncompliant taxpayers into
compliance.
As described in the preamble to the proposed regulations, each
taxpayer entering into an installment agreement receives the special
benefit of paying an outstanding tax obligation over time rather than
immediately. This special
[[Page 86957]]
benefit does not accrue to the general public because taxpayers are
otherwise obligated to pay any outstanding taxes immediately when due.
The taxpayer receives this special benefit regardless of whether the
taxpayer has any assets on which the IRS could levy. In addition to
paying an outstanding tax obligation over time rather than immediately,
there are also the special benefits of avoiding enforcement action
generally and, for timely filed returns, a reduction of the section
6651 failure to pay penalty to 0.25 percent during any month during
which an installment agreement is in effect. The enforcement actions
that are put on hold during the pendency of an installment agreement
include wage garnishments, the filing of notices of federal tax liens,
and the making of levies. Even if it is argued that the government
derives some general benefit from collecting outstanding tax
liabilities to which it is inarguably entitled, it is still appropriate
under the OMB Circular to charge a user fee for entering into,
reinstating, or restructuring an installment agreement because
installment agreements provide ``specific services to specific
individuals.'' Seafarers Int'l Union of N. Am. v. U.S. Coast Guard, 81
F.3d 179, 183 (D.C. Cir. 1996). The benefit to the government generally
of collecting on outstanding tax liabilities is a benefit that accrues
to the public generally and does not diminish the special benefit
provided to an identifiable taxpayer who requests an installment
agreement. As noted in the notice of proposed rulemaking, the IOAA
permits the IRS to charge a user fee for providing a ``service or thing
of value.'' 31 U.S.C. 9701(b). A government activity constitutes a
``service or thing of value'' when it provides ``special benefits to an
identifiable recipient beyond those that accrue to the general
public.'' See the OMB Circular Section 6(a)(1). Among other things, a
``special benefit'' exists when a government service is performed at
the request of a taxpayer and is beyond the services regularly received
by other members of the same group or the general public. See OMB
Circular Section 6(a)(1)(c). Under the IOAA, agencies may impose
``specific charges for specific services to specific individuals or
companies.'' See Fed. Power Comm'n v. New England Power Co., 415 U.S.
345, 349 (1974); see also Seafarers, 81 F.3d at 182-83 (D.C. Cir. 1996)
(``[A] user fee will be justified under the IOAA if there is a
sufficient nexus between the agency service for which the fee is
charged and the individuals who are assessed.'').
Section 6(a)(3) of the OMB Circular explains that ``when the public
obtains benefits as a necessary consequence of an agency's provision of
special benefits to an identifiable recipient (i.e., the public
benefits are not independent of, but merely incidental to, the special
benefits), an agency need not allocate any costs to the public and
should seek to recover from the identifiable recipient either the full
cost to the Federal Government of providing the special benefit or the
market price, whichever applies.'' While it is true that installment
agreements benefit tax administration and collection, and by extension
the public fisc, the benefit is incidental to the special benefits of
allowing taxpayers to satisfy their Federal tax liabilities over time
rather than when due as required by the Code and avoiding enforcement
actions.
By the very nature of government action, the general public will
almost always experience some benefit from an activity that is subject
to a user fee. See, e.g., Seafarers, 81 F.3d at 184-85 (D.C. Cir.
1996). However, as long as the activity confers a specific benefit upon
an identifiable beneficiary, it is permissible for the agency to charge
the beneficiary a fee even though the public will also experience an
incidental benefit. See Engine Mfrs. Ass'n v. E.P.A., 20 F.3d 1177,
1180 (D.C. Cir. 1994) (``If the agency does confer a specific benefit
upon an identifiable beneficiary . . . then it is of no moment that the
service may incidentally confer a benefit upon the general public as
well.'') citing Nat'l Cable Television Ass'n v. FCC, 554 F.2d 1094, at
1103 (D.C. Cir. 1976). It is permissible for a service for which a user
fee is charged to generate an ``incidental public benefit,'' and there
is no requirement that the agency weigh this public benefit against the
specific benefit to the identifiable recipient. Seafarers, 81 F.3d at
183-84 (D.C. Cir. 1996). Furthermore, the benefit to the fisc of
collecting outstanding taxes is not an additional benefit to the
government because the IRS would collect those amounts through other
means absent the installment agreement. Even so, an agency is still
entitled to charge for services that assist a person in complying with
her statutory duties. See In Elec. Indus Ass'n v. FCC, 554 F.2d 1109,
1115 (D.C. Cir. 1976).
While the IRS is required to enter into certain installment
agreements pursuant to section 6159(c), the IRS may still charge a fee
for providing that service. In fact, under the OMB Circular, there are
several examples of special benefits (e.g., passport, visa, patent) for
which the issuing agency may charge a fee even though the agency is
required to issue such benefit if the individual meets certain
statutory or regulatory requirements. In addition, a taxpayer meeting
the criteria in section 6159(c) must still submit a request for an
installment agreement before one is established. Section 6159(c)
requires that the IRS enter into the installment agreement provided
that the taxpayer establishes its eligibility for such an agreement. In
that situation, the IRS incurs the costs of establishing and monitoring
these installment agreements as with any other installment agreement.
Therefore, it is proper under the OMB Circular to charge a user fee for
providing this service.
The IRS has taken public policy into consideration and is providing
multiple user fee options to tailor the user fees to the specific IRS
costs in establishing and monitoring the installment agreements. As a
result, the IRS has introduced a reduced fee of $31 for direct debit
online payment agreements. This $31 reduced fee is available to all
taxpayers choosing to obtain the special benefits of installment
agreements by using this service. The $31 reduced fee reflects the
substantially lower costs the IRS incurs for establishing and
monitoring direct debit online payment agreements. Thus, the
installment agreement user fee structure now more closely reflects the
full cost of processing each specific type of installment agreement.
The fourth comment's second main concern was that the IRS charges
user fees inconsistently because, for example, the IRS does not charge
user fees for toll-free telephone service, estimated income tax
payments, walk-in service, notice letters, annual filing season program
record of completion, and administrative appeals within the IRS.
The IRS's user fee policies are consistent with the OMB Circular.
The IOAA authorizes agencies to prescribe regulations that establish
charges for services provided by the agency, that is, user fees that
``are subject to policies prescribed by the President. . . .'' One of
the OMB Circular's stated objectives is to ``ensure that each service .
. . provided by an agency to specific recipients be self-sustaining.''
OMB Circular Section 5(a). The General Policy of the OMB Circular
states that ``a user charge . . . will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public.'' OMB Circular
Section 6. The presumption under the OMB Circular is that agencies are
encouraged, but not mandated, to charge user fees where
[[Page 86958]]
special benefits are provided to identifiable individuals. Installment
agreements are such special benefits. For purposes of these
regulations, the IRS need only take into consideration comments
relating to the installment agreement user fees and need not address
comments relating to other services for which no fee is charged. With
respect to installment agreement user fees, the IRS has charged fees
since 1995 in accordance with the OMB Circular that requires full cost
unless an exception is granted. The OMB Circular requires the IRS to
review the user fees it charges for special services biennially to
ensure that the fees are adjusted for cost. See OMB Circular Section
8(e). The new installment agreement user fee structure is consistent
with that requirement.
The fourth comment's third main concern questioned the ``optics''
of increasing installment agreement user fees because of IRS budget
constraints. As discussed in this Summary of Comments, the IRS has
determined that the proposed installment agreement user fees are
appropriate and consistent with the OMB Circular, and the question of
``optics'' raised in this comment is not relevant in this analysis.
Section 6(a)(2)(a) of the OMB Circular provides that user fees will be
sufficient to recover the full cost to the Government of providing the
service except as provided in Section 6(c) of the OMB Circular. The
exceptions in Section 6(c)(2) of the OMB Circular provide that agency
heads may recommend to the OMB that exceptions to the full cost
requirement be made when either (1) the cost of collecting the user fee
would represent an unduly large part of the fee or (2) any other
condition exists that, in the opinion of the agency head, justifies an
exception. The cost of collecting the proposed user fees for the
various types of installment agreements will not represent an unduly
large part of the fee for the activity because it occurs automatically
with the first installment payment. As noted above, Section 6(a)(2)(a)
of the OMB Circular requires that user fees recover the full cost to
the government of providing the service and nothing in the OMB Circular
mandates agency heads to seek an exception to the full cost
requirement. Nonetheless, the Commissioner of Internal Revenue has
determined that there is a compelling tax administration reason for
seeking an exception to the full cost requirement for low-income
taxpayers.
The fourth comment's fourth main concern focused on the overall
amount of the proposed user fees and included a number of related
comments on the size of the fees, the agency's methodology in
calculating the fees, and the efforts the IRS has taken to minimize the
costs of providing these services. The comment questioned why the IRS
decided not to change the $43 user fee for low-income taxpayers. The
comment asked why the increase in costs of these services exceeded the
rate of inflation during the past two years. The comment also
questioned the IRS's efficiency in providing this special benefit and
the IRS's concern in ensuring that its costs are driven down when
providing this service. The comment expressed concern that if
installment agreement volumes remained the same, the agency would
increase its user fee receipts by tens of millions of dollars. Finally,
the comment noted that the user fees do not depend on the balance due
under an installment agreement and questioned why the user fee is taken
from the first payments due under the installment agreement.
Contrary to what the comment asserted, the per-unit cost of the
installment agreement program has not generally increased, rather it
has generally decreased. In the 2013 biennial review, the IRS
determined that the full cost of an installment agreement was $282, the
full cost of an installment agreement paid by way of direct debit was
$122, and the full cost of restructuring and reinstating an installment
agreement was $85. See 78 FR 53702 (2013 Regulations). In connection
with the 2013 biennial review and the 2013 Regulations, the IRS had
requested and received an exception to the full cost requirement under
the OMB Circular for the installment agreement user fees. As a result,
the 2013 Regulations did not charge full cost for any of the
installment agreement options. Requesting an exception to the full cost
requirement of the OMB Circular is within the discretion of the agency
head and must be approved by the Office of Management and Budget. In
the 2015 biennial review, the IRS determined that the full cost of an
installment agreement is $225, the full cost of an installment
agreement paid by way of direct debit is $107, and the full cost of
restructuring and reinstating an installment agreement is $89. Thus,
contrary to the comment's assertion, the cost of the installment
agreement program has generally decreased rather than generally
increased during the span of two years. Furthermore, the IRS always
strives to make its services cost-effective. The decrease in the
installment agreement costs since 2013 demonstrates one of the ways the
IRS seeks to make its services most cost effective for the public. The
IRS also seeks new ways to makes its services more accessible to
taxpayers. The IRS has worked to improve the usability of the online
payment agreement application that provides for significantly lower
costs. The user fee for the online payment agreement is $149, and if
the installment agreement is paid by way of direct debit, is only $31.
Practitioners can submit an online payment agreement application on
behalf of their clients to secure lower fees. For smaller tax
liabilities, the IRS has established procedures for setting up
installment agreements utilizing guaranteed, streamlined, or in-
business express criteria that are quicker to process and do not
require securing a collection of information statement. See I.R.M.
5.14.5. The IRS has never based its user fee on the amount of liability
due under the agreement, which would be inconsistent with the full cost
requirement under the OMB Circular. The IRS, however, has provided
taxpayers the option to pay their liability in full over 120 days
without being charged any user fee. Furthermore, under the new fee
structure, taxpayers choose a specific installment agreement service
and pay the cost of the service. For example, a taxpayer may choose a
direct debit online payment agreement and pay only $31 or a taxpayer
may choose a regular installment agreement and pay $225. With regard to
the user fee being taken from the first payments due under the
installment agreement, this is not relevant for purposes of the
regulations as this is not addressed in the regulations. Regardless,
the OMB Circular requires user fees to be ``collected in advance of, or
simultaneously with, the rendering of services unless appropriations
and authority are provided in advance to allow reimbursable services.''
Section 6(a)(2)(C) of the OMB Circular. Instead of requiring the
taxpayer to pay the entire fee in advance of the IRS entering into the
installment agreement, the IRS allows the taxpayer to pay the fee with
the first installment agreement payments, thereby lessening the burden
on the taxpayer and making installment agreements more accessible to
taxpayers.
The fifth comment had three suggestions: (1) Eliminate installment
agreement user fees for low-income taxpayers, (2) revise internal
guidelines to place less emphasis on speedy collection practices and
more emphasis on viable collection practices, and (3) increase the
transparency of the
[[Page 86959]]
installment agreement user fees in publications.
The fifth comment's first suggestion was that the IRS should waive
the entire user fee for low-income taxpayers and thereby incentivize
them to enter into installment agreements instead of being placed in
currently not collectible status or entering into an offer in
compromise. According to the comment, this would increase the amount of
revenue that the IRS collects and encourage taxpayers to enter into
compliance. The comment pointed out that there is no user fee for a
low-income taxpayer entering an offer in compromise. The IRS's response
to a similar comment made to the installment agreement fee increase
proposed in the 2013 notice of proposed rulemaking pointed out that the
offer in compromise fee is charged for mere consideration of the offer
and is not refunded if it is not accepted. The comment claimed that the
IRS contradicted itself by further responding that the purpose of a
user fee is to recover the cost to the government for a particular
service to the recipient.
The comment opined that by waiving the low-income taxpayer user fee
entirely, the number of low-income taxpayers making payments on their
tax liabilities could increase. By way of example, the comment posited
the possibility of a low-income taxpayer submitting an offer in
compromise, paying no fee, and the IRS ultimately collecting less than
it would have if it had allowed the low-income taxpayer to enter into
an installment agreement with a complete fee waiver. According to the
comment, if a low-income taxpayer enters into currently not collectible
status and makes voluntary payments, those payments will be sporadic
and less than would be collected from an installment agreement since
the taxpayer would not receive monthly reminders. The comment
referenced the IRS's response to a similar comment made to the
installment agreement fee increase proposed in the 2013 notice of
proposed rulemaking, to which the IRS responded that generally
taxpayers who have the ability to pay their tax liability over time
(and thus are eligible for installment agreements) will not qualify for
currently not collectible status. In response, the comment suggested
that many taxpayers that qualify for currently not collectible status
may be mistakenly placed into installment agreements because the
taxpayers may feel pressured to make payments, the taxpayers misstate
their expenses and income, or the taxpayers are willing to cut back on
their monthly living expenses. The comment provided examples to show
how the $43 fee created disincentives for low-income taxpayers to enter
into installment agreements in cases where the liability was relatively
small. The comment requested that the IRS clarify that the user fee
does not have to be paid up front but may be paid in installments if
the taxpayer's monthly installment payment is less than the user fee.
The IRS considered the effect of the user fee on low-income
taxpayers in 2006 and 2013 when the installment agreement user fees
were updated. Both times, the IRS determined that the user fee should
remain $43 for low-income taxpayers. The IRS again has determined that
the user fee for installment agreements (other than for a direct debit
online payment agreement) should remain at $43 for low-income
taxpayers, both because requiring the full rate would be financially
burdensome to low-income taxpayers and because waiving the fee entirely
is not fiscally sustainable for the IRS given the constraints on its
resources for tax administration. Typically, a taxpayer that is able to
pay in full the liability under an installment agreement is not
eligible to enter into an offer in compromise. As discussed in the
preamble to T.D. 9647, 78 FR 72016-01, a taxpayer that is in currently
not collectible status is typically not eligible to enter into an
installment agreement. The low-income taxpayers that enter into
installment agreements described in the examples the comment presented
do so as a result of the taxpayers' choices or erroneous submissions of
information to the IRS. Thus, the comment's hypothetical low-income
taxpayer is the exception not the general rule. To ensure that low-
income taxpayers are more aware of the fee options for the various
types of installment agreements, the IRS will be revising its
publications to make them consistent with the final regulations.
The fifth comment's second main concern was that low-income
taxpayers are not always aware of the availability of the reduced fee
and as a consequence some low-income taxpayers pay the regular fee. The
comment suggested that IRS employees could do more to make low-income
taxpayers aware of their options. The comment also asserted that
installment agreements are set up not to allow low-income taxpayers to
modify payments based on unforeseen changes in economic circumstances.
The comment stated this can result in low-income taxpayers defaulting
and either become subject to collection action or subject to the
installment agreement reinstatement fee of $89 under the proposed
regulations.
The comment requested that the IRS revise its procedures in the
Internal Revenue Manual to place less emphasis on timely collection
practices and more emphasis on viable collection practices.
The fifth comment's concerns about tax administration are generally
beyond the scope of these regulations. However, for purposes of
clarification, under the proposed regulations the user fee for
reinstating an installment agreement for a low-income taxpayer would be
$43, not $89. Furthermore, while these concerns do not affect the
content of these final regulations, the IRS will consider these
comments when updating the procedures in the Internal Revenue Manual
for entering into installment agreements.
The fifth comment's third suggestion was for the IRS to clearly
communicate to the public both through the internet and in hard copy
publications the revised fee schedule so that taxpayers may make
informed decisions when deciding the manner of setting up an
installment agreement. The comment suggested that taxpayers who lack
access to the internet, lack computer efficiency, lack a bank account,
or have other disabilities or barriers should not be subjected to the
higher user fees.
The IRS will be updating its electronic and hard copy publications
to reflect the user fees in the final regulations. As explained in the
proposed notice of rulemaking and in this Summary of Comments, the
purpose of the user fees for installment agreements is to recover the
full cost to the IRS of providing this special benefit to specific
beneficiaries and the user fees in these final regulations are in
accordance with the OMB Circular.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It is hereby certified that these regulations will not
have a significant economic impact on a substantial number of small
entities. 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. The dollar amount
of the fee is not, however, substantial enough to have a significant
economic impact on any entity subject to the fee. Low-income taxpayers
and taxpayers entering into direct debit online payment agreements will
be charged a
[[Page 86960]]
lower fee, which lessens the economic impact of these regulations.
Accordingly, a regulatory flexibility analysis is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of
proposed rulemaking was submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business and no comments were received.
Drafting Information
The principal author of these regulations is Maria Del Pilar Austin
of the Office of the Associate Chief Counsel (Procedure and
Administration). Other personnel from the Treasury Department and the
IRS participated in their development.
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping requirements, User fees.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 300 is amended as follows:
PART 300--USER FEES
0
Paragraph 1. The authority citation for part 300 continues to read as
follows:
Authority: 31 U.S.C. 9701.
0
Par. 2. In Sec. 300.1, paragraphs (b) and (d) are revised to read as
follows:
Sec. 300.1 Installment agreement fee.
* * * * *
(b) Fee. The fee for entering into an installment agreement before
January 1, 2017, is $120. The fee for entering into an installment
agreement on or after January 1, 2017, is $225. A reduced fee applies
in the following situations:
(1) For installment agreements entered into before January 1, 2017,
the fee is $52 when the taxpayer pays by way of a direct debit from the
taxpayer's bank account. The fee is $107 when the taxpayer pays by way
of a direct debit from the taxpayer's bank account for installment
agreements entered into on or after January 1, 2017;
(2) For online payment agreements entered into before January 1,
2017, the fee is $120, except that the fee is $52 when the taxpayer
pays by way of a direct debit from the taxpayer's bank account. The fee
is $149 for entering into online payment agreements on or after January
1, 2017, except that the fee is $31 when the taxpayer pays by way of a
direct debit from the taxpayer's bank account; and
(3) Notwithstanding the type of installment agreement and method of
payment, the fee is $43 if the taxpayer is a low-income taxpayer, that
is, an individual who falls at or below 250 percent of the dollar
criteria established by the poverty guidelines updated annually in the
Federal Register by the U.S. Department of Health and Human Services
under authority of section 673(2) of the Omnibus Budget Reconciliation
Act of 1981 (95 Stat. 357, 511), or such other measure that is adopted
by the Secretary, except that the fee is $31 when the taxpayer pays by
way of a direct debit from the taxpayer's bank account with respect to
online payment agreements entered into on or after January 1, 2017;
* * * * *
(d) Applicability date. This section is applicable beginning
January 1, 2017.
0
Par. 3. In Sec. 300.2, paragraphs (b) and (d) are revised to read as
follows:
Sec. 300.2 Restructuring or reinstatement of installment agreement
fee.
* * * * *
(b) Fee. The fee for restructuring or reinstating an installment
agreement before January 1, 2017, is $50. The fee for restructuring or
reinstating an installment agreement on or after January 1, 2017, is
$89. If the taxpayer is a low-income taxpayer, that is, an individual
who falls at or below 250 percent of the dollar criteria established by
the poverty guidelines updated annually in the Federal Register by the
U.S. Department of Health and Human Services under authority of section
673(2) of the Omnibus Budget Reconciliation Act of 1981 (95 Stat. 357,
511), or such other measure that is adopted by the Secretary, then the
fee for restructuring or reinstating an installment agreement on or
after January 1, 2017 is $43.
* * * * *
(d) Applicability date. This section is applicable beginning
January 1, 2017.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: November 16, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-28936 Filed 11-29-16; 11:15 am]
BILLING CODE 4830-01-P