[Federal Register Volume 86, Number 185 (Tuesday, September 28, 2021)]
[Rules and Regulations]
[Pages 53539-53542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21029]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 9957]
RIN 1545-BP75


User Fee for Estate Tax Closing Letter

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulation.

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SUMMARY: This document contains final regulations that establish a new 
user fee of $67 for persons requesting the issuance of IRS Letter 627, 
also referred to as an estate tax closing letter. The final regulations 
affect persons who may request an estate tax closing letter.

DATES: 
    Effective date: These regulations are effective October 28, 2021.
    Applicability date: For date of applicability, see Sec.  300.13(d).

FOR FURTHER INFORMATION CONTACT: Juli Ro Kim at (202) 317-6859 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document amends the User Fee Regulations (26 CFR part 300) to 
establish a user fee applicable to requests for estate tax closing 
letters issued by the IRS (currently, IRS Letter 627).

A. Authority To Charge User Fees

    The Independent Offices Appropriations Act of 1952 (IOAA) (31 
U.S.C. 9701) authorizes each agency to promulgate regulations 
establishing the charge for services provided by the agency (user 
fees). The IOAA provides that these user fee regulations are subject to 
policies prescribed by the President. The policies currently are set 
forth in the Office of Management and Budget (OMB) Circular A-25, 58 FR 
38142 (July 15, 1993; OMB Circular). The OMB Circular requires agencies 
providing services that confer special benefits on identifiable 
recipients beyond those accruing to the general public to identify 
those services, to determine whether user fees should be assessed for 
those services, and if so, to establish user fees that recover the full 
cost of providing those services, unless the agency requests, and the 
OMB grants, an exception to the full cost requirement.

B. Notice of Proposed Rulemaking

    On December 31, 2020, the Department of the Treasury (Treasury 
Department) and the IRS published in the Federal Register (85 FR 86871) 
a notice of proposed rulemaking (REG-114615-16) proposing amendments to 
the User Fee Regulations in part 300 of title 26 of the Code of Federal 
Regulations (proposed regulations). Specifically, the proposed 
regulations proposed the addition of new Sec.  300.13 to the User Fee 
Regulations to establish a $67 user fee for issuing an estate tax 
closing letter for an estate.
    The preamble to the proposed regulations identifies the issuance of 
an estate tax closing letter as the provision of a service that confers 
special benefits, beyond those accruing to the general public, to an 
estate or other person properly authorized under section 6103 of the 
Internal Revenue Code (Code) to receive an estate tax closing letter. 
Accordingly, the preamble to the proposed regulations concludes that 
the IRS is authorized, pursuant to the IOAA and the OMB Circular, to 
charge a user fee for the issuance of an estate tax closing letter that 
reflects the full cost of providing this service. Additionally, the 
preamble to the proposed regulations explains the special benefits 
conferred by the issuance of estate tax closing letters and analyzes 
how the IRS has computed that the full cost of issuing an estate tax 
closing letter is $67. Finally, the preamble to the proposed 
regulations states that the Treasury Department and the IRS expect to 
implement a web-based procedure that will improve convenience and 
reduce burden for persons requesting estate tax closing letters as 
compared to the current procedure in place for making such requests.\1\
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    \1\ For an overview of the procedure applicable to a request for 
an estate tax closing letter on or before October 28, 2021, see part 
D of the Background and Explanation of Provisions of the proposed 
regulations.
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Summary of Comments

A. Overview

    The IRS received a total of five written public comments in 
response to the proposed regulations, some addressing multiple aspects 
of the proposed regulations. These comments are available at https://www.regulations.gov or upon request. No public hearing on the proposed 
regulations was requested and accordingly no public hearing was held. 
After careful consideration of the comments received, the Treasury 
Department and the IRS adopt the proposed regulations without 
significant change. Accordingly, new Sec.  300.13 establishes a $67 
user fee for issuing an estate tax closing letter.

B. Comments Regarding the Imposition of a User Fee

1. Establishment and Amount of User Fee
    One commenter opposed the establishment of a user fee to request an 
estate tax closing letter and suggested that the IRS return to issuing 
estate tax closing letters for every estate tax return filed, without 
the need for making a request or paying a user fee, as was the practice 
prior to June 2015.\2\ Another commenter suggested that the user fee be 
reduced so that all estates desiring an estate tax closing letter can 
afford to pay the user fee and request the estate tax closing letter. A 
third commenter stated that the proposed $67 user fee is both 
reasonable and appropriate given the impact of returns filed solely to 
elect portability under section 2010 of the Code and the fact that 
estate tax returns are most often filed in the context of decedents 
with substantial gross estates.
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    \2\ See part B of the Background and Explanation of Provisions 
of the preamble of the proposed regulations for a full discussion of 
the June 2015 change to the prior IRS practice of issuing estate tax 
closing letters for every estate tax return filed.
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    As described in the preamble to the proposed regulations, the 
issuance of an estate tax closing letter, and the return information 
and procedural and substantive explanations such letters provide, 
constitutes the provision of a service that confers special benefits on 
identifiable recipients beyond those accruing to the general public. 
Because of these special benefits, the IOAA and the OMB Circular 
require the imposition of a user fee for the issuance of an estate tax 
closing letter to reflect the full cost of providing the service unless 
the IRS requests, and the OMB grants, an exception to the full cost 
requirement. The IRS has not requested an exception to the full cost 
requirement, for the

[[Page 53540]]

following reasons. First, the IRS views the $67 user fee as not onerous 
or excessive, but reasonable in relation to the service provided. 
Second, as also discussed in the preamble to the proposed regulations, 
an account transcript is a free alternative to the estate tax closing 
letter that provides certain return information comparable to that 
found in an estate tax closing letter. Account transcripts can be used 
to confirm that the examination of an estate tax return has been 
completed and the IRS file has been closed, which most often is 
identified as the primary purpose for requesting an estate tax closing 
letter. See Notice 2017-12, I.R.B. 2017-5 742 (describing the utility 
of the account transcript in lieu of the estate tax closing letter and 
its availability at no charge). Thus, if affording the user fee for the 
issuance of an estate tax closing letter presents a challenge, an 
estate instead can request an account transcript free of charge. The 
suggestions of the commenters to reduce or eliminate the user fee, 
therefore, are not adopted.
2. Comments Regarding a Single User Fee When Multiple Letters Are 
Issued
    The Treasury Department and the IRS note that the preamble to the 
proposed regulations incorrectly states that the estate tax closing 
letter is issued to each executor. Instead, regardless of who requests 
an estate tax closing letter, the letter generally is issued to only 
one of multiple executors. Generally, the executor to whom the estate 
tax closing letter is issued is the executor identified on line 6a of 
Part 1 of the Form 706, United States Estate (and Generation-Skipping 
Transfer) Tax Return; the address of such executor that is entered on 
line 6b becomes the estate's address of record (unless subsequently 
updated using Form 8822, Change of Address (For Individual, Gift, 
Estate, or Generation-Skipping Transfer Tax Returns). Currently, estate 
tax closing letters also are sent to the recognized representative 
identified in Part 4 of the Form 706 and up to two representatives 
listed on Form 2848, Power of Attorney and Declaration of 
Representative. Therefore, in almost all cases, each request and 
corresponding $67 user fee will generate the issuance of an estate tax 
closing letter to three or four persons.
    One commenter referred to the costing analysis in the preamble of 
the proposed regulations and sought an explanation of the decision to 
charge the same user fee per request, regardless of the number of 
estate tax closing letters to be issued in response to that single 
request. The commenter noted the incremental cost impact that occurs 
with the need to issue multiple letters in response to a single 
request, and contended that requests requiring the issuance of only one 
letter will subsidize the user fee cost of such requests requiring the 
issuance of multiple letters.
    The costing analysis described in part H of the Background and 
Explanation of Provisions of the proposed regulations is based in large 
part on the number of requests for estate tax closing letters, rather 
than the total number of letters issued. The fact that one request 
generates, on average, three issued letters has only a marginal impact 
on the calculated user fee. The number of letters factors into the 
costing analysis in two places: Request processing and quality 
assurance review.
    For request processing costs, the costing analysis in the proposed 
regulations provides for 0.65 staff hours to review the return, create 
the estate tax closing letters, and prepare the letters for mailing. 
Although a detailed description of what each of these tasks entails and 
a breakdown of the time required for each task is not provided in the 
proposed regulations, the bulk of the time in processing the request is 
attributable to the research and analysis of IRS records by qualified 
personnel and not to the issuance of additional letters to additional 
persons. Thus, the incremental request processing cost of issuing the 
same estate tax closing letter at the same time to multiple persons is 
minimal.
    For quality assurance review costs, the costing analysis in the 
proposed regulations provides that five out of every 100 estate tax 
closing letters are reviewed for quality assurance. While the issuance 
of multiple letters per request increases the number of letters 
reviewed for quality assurance and, therefore, increases the cost 
estimate for quality assurance review, the impact on the full costing 
is relatively small, only $3 per letter.
    Notwithstanding the marginal impact of issuing multiple letters per 
request on the calculation of the user fee, a variable user fee 
structure raises significant administrability concerns. Incorrect 
payments of the user fee are likely to occur in the event of a variable 
fee because persons that request the issuance of an estate tax closing 
letter may not have sufficient information regarding the estate's 
account to accurately identify the number of persons currently 
authorized under IRS procedures to receive an estate tax closing 
letter; the determination of the number of letters to be issued 
sometimes depends on more information than is shown on the estate tax 
return. Thus, varying the user fee based on the number of letters to be 
issued would require the IRS to modify the request processing 
procedures to add procedures for overpayments and underpayments of the 
user fee and likely would cause administrative delays as the personnel 
processing the requests take necessary steps and wait for correction of 
the payment before issuing letters. The changes to the request 
processing procedures necessary to accommodate a variable fee in place 
of a fixed fee would increase the request processing costs that factor 
into the overall cost estimate for the user fee; it is possible that 
the increase caused by the changes to the request processing procedures 
could exceed the marginal increase of issuing multiple letters per 
request under a fixed fee.
    Based on all of these considerations, and recognizing that most 
requests for estate tax closing letters will require the issuance of 
multiple letters, the Treasury Department and the IRS have determined 
that the most economical and least complex approach is to have a fixed 
user fee based on the average number of letters issued per request. 
Thus, no change to the costing analysis is required and the proposed 
user fee of $67 is adopted without change.

C. Comments Regarding Procedural Aspects of Requesting Estate Tax 
Closing Letters and Paying the User Fee

1. Making the Request and Paying the User Fee With the Estate Tax 
Return
    Two commenters suggested amending the estate tax return or using a 
separate form to allow an estate to request the estate tax closing 
letter and pay the user fee with the filing of the estate tax return. 
The commenters sought to further reduce or eliminate the administrative 
burden on both the estate and the IRS by removing the need for a 
separate web-based process. Under this suggestion, an estate would not 
be required to make a separate request subsequent to filing the estate 
tax return. The commenters stated that this suggestion would allow for 
efficient administration of the estate and provide the IRS with 
immediate notice of the request.
    The Treasury Department and the IRS concur that the ability to pay 
the user fee and make the request for an estate tax closing letter at 
the time of filing the estate tax return would reduce or eliminate the 
burden on estates intending to make such requests. However, estate tax 
closing letters are not issued by the same IRS personnel who are 
involved in the examination of, and the decision to close the IRS file 
on,

[[Page 53541]]

the estate tax return. Personnel issuing estate tax closing letters are 
alerted to begin that process only after the examination of the estate 
tax return has been completed and the IRS file has been closed. Thus, 
implementing such a change to current IRS procedures and return 
processing systems would substantially increase the burden on the IRS 
and would require increases in budget, staffing, and resources not 
currently available. In addition, as discussed elsewhere in this 
preamble, the procedure to be put in place for paying the user fee and 
requesting the estate tax closing letter is a convenient and not unduly 
burdensome alternative that balances the administrability concerns of 
both the IRS and the estates making requests for estate tax closing 
letters. For these reasons, this suggestion is not adopted.
2. Additional User Fee for Requests Related to Supplemental Estate Tax 
Returns
    One commenter requested further clarification of whether an 
additional user fee is required for estate tax closing letters after 
the filing of a supplemental estate tax return. Specifically, the 
commenter references Rev. Proc. 81-27, 1981-2 C.B. 547, and identifies 
supplemental estate tax returns filed in relation to elections made 
under section 6166 of the Code as creating an undue burden on such 
estates if an additional user fee is required for a new estate tax 
closing letter after each subsequent filing of a supplemental estate 
tax return. The commenter suggests that only one user fee should be 
imposed per estate, regardless of how many estate tax returns are 
filed.
    As directed by the OMB Circular, the cost analysis described in the 
proposed regulations is based on the number of estate tax closing 
letters requested over a specified period of time, whether related to 
an initial estate tax return or to a supplemental estate tax return, 
and the labor and benefits costs of campus employees required to 
process the requests. Each request requires the same amount of IRS 
resources to issue the estate tax closing letter, whether the request 
is related to the initial estate tax return or a supplemental estate 
tax return. In particular, each such request necessitates research and 
analysis of IRS records, which makes up a significant part of the cost 
of the user fee. Therefore, accommodating the commenter's suggestion 
likely would increase the cost of a single request, and such increase 
would be borne equally by all estates requesting estate tax closing 
letters, including simpler estates filing only an initial estate tax 
return. Further, an estate filing a supplemental estate tax return is 
not required to request an estate tax closing letter in relation to 
both the initial estate tax return and the supplemental estate tax 
return, and presumably will request multiple estate tax closing letters 
only if the estate determines that the benefits of receiving a second 
estate tax closing letter merit the payment of the additional user fee. 
Accordingly, the suggestion is not adopted and each request for an 
estate tax closing letter will require a separate user fee.
3. Procedures for the Request and Issuance of Estate Tax Closing 
Letters
    Several commenters requested clarification on some of the 
procedural aspects of requesting estate tax closing letters. For 
example, commenters sought information on who is permitted to make the 
request, when the request can be made, how many letters will be issued 
in response to a single request, and who will be the recipients of the 
estate tax closing letters.
    The procedure for requesting the estate tax closing letter and 
paying the user fee utilizes https://www.pay.gov. In this web-based 
procedure, a request for the estate tax closing letter and the payment 
of the user fee will be accomplished by a single request, thus 
eliminating the potential under the current procedure for multiple 
requests and necessary duplicative follow-up.
    As noted in the preamble to the proposed regulations, specific 
procedures for requesting an estate tax closing letter and paying the 
associated user fee for that request are not provided in these 
regulations. Such procedures change from time to time and therefore are 
best addressed and kept current in subregulatory guidance. It is clear 
that, while any person with sufficient information about the estate may 
request the issuance of a closing letter and pay the user fee, the 
closing letter will be provided only to certain authorized persons, a 
category that might not include the person making the request (for 
example, an employee of the attorney, certified public accountant, or 
enrolled agent for the estate). Information about who will receive an 
estate tax closing letter in response to a request, together with 
specific instructions for requesting the estate tax closing letter and 
paying the user fee, will be available on https://www.pay.gov (and on 
the IRS website at https://www.irs.gov) on or before October 28, 2021. 
To the extent possible, the procedures will reflect the comments and 
questions from these commenters, and the instructions and information 
are expected to address the issues these commenters raised.
    In identifying the person liable for the fee for the estate tax 
closing letter, Sec.  300.13(c) of the proposed regulations includes 
persons properly authorized under section 6103 of the Code to request 
and receive the estate tax closing letter with respect to the estate. 
Consistent with the decision to exclude the relevant procedural 
guidance for requesting estate tax closing letters from these 
regulations, Sec.  300.13 is revised in the final regulations by 
removing the reference to section 6103, which governs the disclosure of 
return information but does not necessarily govern who would be liable 
for payment of the user fee for requesting the estate tax closing 
letter.
4. Recommended Changes to Account Transcripts
    One commenter stated that, although the account transcript is a 
free alternative to the estate tax closing letter, the account 
transcript does not provide all of the information needed by an estate, 
including potentially the amount of net estate tax and the amount of 
generation-skipping transfer tax (information that an estate tax 
closing letter provides). The commenter suggested that the IRS should 
modify the account transcript to include additional detailed 
information.
    As discussed in Notice 2017-12, an account transcript may be an 
acceptable substitute for an estate tax closing letter, even though the 
information provided by each is not identical. As discussed earlier in 
this preamble, both documents can be relied upon for confirmation that 
the IRS examination of the estate tax return has been closed, which 
most often is identified as the primary purpose for requesting an 
estate tax closing letter. The commenter's suggestion to change the 
information provided in the account transcript to include additional 
information also included in the estate tax closing letter is 
consistent with the determination that the issuance of an estate tax 
closing letter confers special benefits on identifiable recipients. 
Making changes to the account transcript as the commenter suggests 
would require costly programming changes and, moreover, is beyond the 
scope of this rulemaking. Accordingly, the commenter's suggestion is 
not adopted.

Special Analyses

    These regulations are not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Treasury Department

[[Page 53542]]

and the Office of Management and Budget regarding review of tax 
regulations. Pursuant to the Regulatory Flexibility Act (5 U.S.C. 
chapter 6), it is hereby certified that these regulations will not have 
a significant economic impact on a substantial number of small 
entities. The regulations, which prescribe a fee to obtain a particular 
service, affect decedents' estates, which generally are not ``small 
entities'' as defined under 5 U.S.C. 601(6). In addition, the dollar 
amount of the fee ($67 as currently determined) is not substantial 
enough to have a significant economic impact on any entities (including 
small entities) that could be affected by establishing such a fee. 
Accordingly, the Secretary of the Treasury's delegate certifies that 
the rule will not have a significant economic impact on a substantial 
number of small entities.
    Pursuant to section 7805(f) of the Code, the proposed regulations 
(85 FR 86871) preceding these regulations were submitted to the Chief 
Counsel for the Office of Advocacy of the Small Business Administration 
for comment on their impact on small business. No comments on the 
proposed regulations were received from the Chief Counsel for the 
Office of Advocacy of the Small Business Administration.

Statement of Availability of IRS Documents

    IRS Revenue Procedures, Revenue Rulings, Notices, and other 
guidance cited in this document are published in the Internal Revenue 
Bulletin (or Cumulative Bulletin) and are available from the 
Superintendent of Documents, U.S. Government Publishing Office, 
Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.

Drafting Information

    The principal author of these regulations is Juli Ro Kim of the 
Office of Associate Chief Counsel (Passthroughs and Special 
Industries). Other personnel from the Treasury Department and the IRS 
participated in the development of the regulations.

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 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. Section 300.0 is amended by adding paragraph (b)(13) to read as 
follows:


Sec.  300.0  User fees; in general.

* * * * *
    (b) * * *
    (13) Requesting an estate tax closing letter.

0
Par. 3. Section 300.13 is added to read as follows:


Sec.  300.13  Fee for estate tax closing letter.

    (a) Applicability. This section applies to the request by a person 
described in paragraph (c) of this section for an estate tax closing 
letter from the IRS.
    (b) Fee. The fee for issuing an estate tax closing letter is $67.
    (c) Person liable for the fee. The person liable for the fee is the 
estate of the decedent or other person requesting, in accordance with 
applicable procedures and policies, an estate tax closing letter to be 
issued with respect to the estate.
    (d) Applicability date. This section applies to requests for estate 
tax closing letters received by the IRS on or after October 28, 2021.

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
    Approved: September 22, 2021.
Mark J. Mazur,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2021-21029 Filed 9-27-21; 8:45 am]
BILLING CODE 4830-01-P