bulletin Internal — Internal Revenue Bulletin 1997-30

HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

EMPLOYMENT TAX

T.D. 8723, page 4. Final and temporary regulations under section 6302 of the Code relate to the deposit of federal taxes by electronic funds transfer (EFT).

Notice 97–43, page 9. This notice provides guidance relating to the waiver of the failure-to-deposit penalty for certain taxpayers required to begin using electronic funds transfer on or after July 1, 1997.

ADMINISTRATIVE

Rev. Proc. 97–33, page 10. Tax forms and instructions . Information is provided to taxpayers about the Electronic Federal Tax Payment System (EFTPS). EFTPS is an electronic remittance system for making federal tax deposits and federal tax payments.

Bulletin No. 1997–30

July 28, 1997

Rev. Proc. 97–34, page 14. Electronic filing; magnetic media; 1997 form specifi- cations . Specifications are set forth for the magnetic or e l e c t ronic filing of 1997 Forms 1098, 1099, 5498, and W- 2 G . The forms may be filed with the IRS using 1/2 inch magnetic tape; IBM 3480/3490 or AS400 compatible tape cartridges; 8 mm tape cartridges; 4 mm cartridges; quarter inch cartridges; or 5 1/4-, 3 1/2-inch diskettes. Rev. Proc. 96–36 superseded.

Announcement 97–73, page 86. An updated edition of Publication 939, General Rule for Pensions and Annuities (revised June 1997), will be available in August.

Finding Lists begin on page 90. Announcement of Disbarments and Suspensions begins on page 87.

Department of the Tr e a s u r y Internal Revenue Service

Mission of the Service

The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serv e the public by continually improving the quality of our prod

Statement of Principles of Internal Revenue Tax Administration

The function of the Internal Revenue Service is to adm i n i ster the Internal Revenue Code. Tax policy for raising re v e n u e is determined by Congre s s .

With this in mind, it is the duty of the Service to carry out that policy by correctly applying the laws enacted by Congress; to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them; and to perform this work in a fair and impartial manner, with neither a government nor a taxpayer point of view.

At the heart of administration is interpretation of the Code. It is the responsibility of each person in the Service, charged with the duty of interpreting the law, to try to find the true meaning of the statutory provision and not to adopt a strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only when we ascertain and apply the true meaning of the statute.

ucts and services; and perf o rm in a manner warr a n t i n g the highest degree of public confidence in our integrity, eff iciency and fairn e s s .

The Service also has the responsibility of applying and administering the law in a reasonable, practical manner. Issues should only be raised by examining officers when they have merit, never arbitrarily or for trading purposes. At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that c a re be exercised not to raise an issue or to ask a court to adopt a position inconsistent with an established Serv i c e p o s i t i o n .

Administration should be both reasonable and vigorous. It should be conducted with as little delay as possible and with great courtesy and considerateness. It should never t ry to overreach, and should be reasonable within the bounds of law and sound administration. It should, howeve r, be vigorous in requiring compliance with law and it should be relentless in its attack on unreal tax devices and f r a u d .

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained f rom the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and pro c e d u res that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field off i c e s, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Tre a s u ry Department Regulations, but they may be used as precedents. Unpublished ru l i n g s will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and pro c e

dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions, and Subpart B, Legislation and Related Committee Reports.

P a rt III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross re f e rences to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest. With the exception of the Notice of Proposed Rulemaking and the disbarment and suspension list included in this part, none of these announcements are consolidated in the Cumulative Bulletins.

The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a quarterly and semiannual basis, and are published in the first Bulletin of the succeeding quarterly and semi-annual period, re s p e c t i v e l y.

The contents of this publication are not copyrighted and may be reprinted freely.Acitation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

P a rt I. Rulings and Decisions Under the Internal Revenue Code of 1986

posit by EFT for return periods beginning on and after January 1, 1997, need not begin to deposit by EFTuntil July 1, 1997. The final regulations provide that these taxpayers must use EFT to make deposits that are due on or after July 1, 1997, and relate to return periods beginning on or after January 1, 1997. For example, a corporation to which this rule applies, and which files its income tax returns on a calendar year basis, must use EFT to make corporate and estimated income tax deposits that are due on or after July 1, 1997. Thus, the corporation’s September 15, 1997, and subsequent estimated tax payments must be made by EFT.

PENALTYRELIEF

Under Notice 97–43, (1997–30 I.R.B.), the IRS announced that no penalties for failure to deposit by EFT will be imposed through December 31, 1997, on any taxpayer first required to deposit by EFT on or after July 1, 1997. These taxpayers will remain liable for the failure-to-deposit penalty (absent reasonable cause) under section 6656 if they fail to make a required deposit (using either EFT - r paper coupons) in a timely manner.

THRESHOLD FOR JANUARY 1, 1999 MANDATE

Section 6302.—Mode or Time of Collection

26 CFR 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.

T.D. 8723

D E PA RTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 31, and 40

Federal Tax Deposits by Electro n i c Funds Transfer

A G E N C Y: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

S U M M A RY: This document contains final regulations relating to the deposit of Federal taxes by electronic funds transfer (EFT). The regulations provide rules regarding which taxpayers must make deposits by EFT, the types of Federal taxes that must be deposited by EFT, and when deposits by EFT must begin. The regulations affect taxpayers required to make deposits of Federal taxes by EFT. The final regulations reflect changes to the Internal Revenue Code of 1986 (Code) made by the North American Free Trade A g r e e m e n t Implementation Act and the Small Business Job Protection Act of 1996.

essary for the development and implementation of an EFT system to be used for the collection of depository taxes.

On July 11, 1994, the IRS published temporary regulations (T.D. 8553) in the Federal Register (59 FR 35414) relating to the deposit of Federal taxes by EFT. A notice of proposed rulemaking (IA–03–94) cross-referencing the temporary regulations was also published in the Federal Register for the same day (59 FR 35418). Subsequently, on March 21, 1996, additional temporary regulations ( T.D. 8661) were published in the F e d e r a l R e g i s t e r (61 FR 11548) as well as a notice of proposed rulemaking (IA–03–94, 61 FR 11595) that both cross–referenced the temporary regulations published that day and amended the notice of proposed rulemaking published July 11, 1994. Many written comments were received in response to these notices of proposed rulemaking. Apublic hearing on the 1994 notice was held on October 3, 1994. T h e r e were no requests for a public hearing on the 1996 notice and none was held.

Section 1809 of the Small Business Job Protection Act of 1996, Public Law 104–188, 110 Stat. 1755 (August 20, 1996), delayed the date by which certain taxpayers must begin EFT deposits.

After consideration of all comments, the regulations proposed by IA–03–94 are adopted as revised by this Treasury decision, and the corresponding temporary regulations are removed. The revisions are discussed below.

the North American Free Trade A g r e e m e n t The temporary regulations provide that

sion, and the corresponding temporary

Implementation Act and the Small Busi- if a taxpayer’s employment tax deposits

regulations are removed. The revisions

ness Job Protection Act of 1996. during 1997 exceed $20,000, or, if no em are discussed below.

ployment taxes are deposited, the other

DATES: The final regulations are effective July 14, 1997. For dates of applica- Explanation of Provisions taxes deposited in 1997 exceed $20,000,

the taxpayer must begin depositing by

bility of these regulations, see §31.6302–

Under the temporary regulations, the re- EFT for return periods beginning on and

1(h)(2).

quirement to deposit by EFT is based on after January 1, 1999. Based on informa FOR FURTHER INFORMATION CON- the taxpayer’s total deposits of certain tion available in 1994, the IRS and TreaTA C T: Vincent G. Surabian, 202-622- taxes during certain “determination peri- sury Department concluded that the 6232 (not a toll-free number). ods.” If the taxpayer’s deposits of the $20,000 threshold was necessary to as taxes during a determination period ex- sure that 94% of employment taxes and

SUPPLEMENTARYINFORMATION: ceed a prescribed dollar threshold, the tax- 94% of other depository taxes would be

payer must use EFT to make deposits on collected by EFT in fiscal year 1999 and

Background and after the date prescribed in the tempo- subsequent years as required by section

rary regulations. 6302(h). Based on information currently

Section 523 of the North American Free available, the IRS and Treasury DepartTrade Agreement Implementation A c t, DELAY IN JANUARY 1, 1997, ment have concluded that the statutory rePublic Law 103–182, 107 Stat. 2057 (De- START-UP DATE quirement for 1999 and subsequent years cember 8, 1993), amended section 6302 of will be satisfied without the need to rethe Code by enacting a new subsection (h) The Small Business Job Protection A c t duce the threshold below $50,000. A crequiring the Secretary of the Treasury to of 1996 provides that taxpayers first re- c o r d i n g l y, the final regulations raise the prescribe such regulations as may be nec- quired by the temporary regulations to de- threshold for the January 1, 1997 through

1997–30 I R B 4 July 28 1997

DATES: The final regulations are effective July 14, 1997. For dates of applicability of these regulations, see §31.6302– 1(h)(2).

FOR FURTHER INFORMATION CONTA C T: Vincent G. Surabian, 202-6226232 (not a toll-free number).

Explanation of Provisions

SUPPLEMENTARYINFORMATION:

Background

Section 523 of the North American Free Trade Agreement Implementation A c t, Public Law 103–182, 107 Stat. 2057 (December 8, 1993), amended section 6302 of the Code by enacting a new subsection (h) requiring the Secretary of the Treasury to prescribe such regulations as may be nec

Under the temporary regulations, the requirement to deposit by EFT is based on the taxpayer’s total deposits of certain taxes during certain “determination periods.” If the taxpayer’s deposits of the taxes during a determination period exceed a prescribed dollar threshold, the taxpayer must use EFT to make deposits on and after the date prescribed in the temporary regulations.

The Small Business Job Protection A c t of 1996 provides that taxpayers first required by the temporary regulations to de

DELAY IN JANUARY 1, 1997,

START-UP DATE

December 31, 1997 determination period from $20,000 to $50,000.

TECHNICALCORRECTION––FIRST

REQUIRED DEPOSIT

The final regulations revise the special rule requiring taxpayers with no employment tax deposits to use EFT if their deposits of other taxes exceed a specified threshold. As revised, the requirement to deposit by EFT “applies to all depository taxes due with respect to deposit obligations incurred for return periods beginning on and after the applicable effective date.” The words “for return periods beginning” were inadvertently omitted in the temporary regulations.

MISCELLANEOUS

The definition of time deemed de - posited has been revised solely for purposes of clarity.

Certain obsolete provisions in the temporary regulations relating to agreements entered into by the Commissioner with third party bulk data processors for the period prior to January 1, 1995, have been deleted.

Public Comment

Some commentators asked if the IRS intends to notify each affected taxpayer of the E F T requirement before the date on which the taxpayer must begin depositing by EFT. The IRS mailed several advance notices to each taxpayer that became subject to the E F Trequirement in 1997, and plans to provide similar notices to taxpayers required to begin depositing by EFT in 1998.

Other commentators stated that it would be easier for taxpayers to determine whether they are subject to the rules if the thresholds were based on deposit liabilities i n c u rre d during the calendar year rather than deposits made during the calendar y e a r. Although the specific suggestion was not adopted, the IRS is addressing the underlying concern in other ways. The IRS will make the threshold determination for a ffected taxpayers and, as indicated above, notify those taxpayers, in advance, of their obligation to begin depositing by EFT.

Some commentators suggested that the final regulations should clarify whether tax payments made with returns by check, money order, etc. are taken into account

in threshold determinations. Payments submitted with a return are not “deposits” and are, therefore, not taken into account in determining if a threshold has been exceeded for EFT purposes.

Other commentators stated that the determination period for EFT should be the same as the lookback period used in determining a taxpayer’s deposit status (semi-weekly or monthly) for employment tax deposit purposes. This suggestion was not adopted because the lookback periods for determining a taxpayer’s deposit status with respect to employment tax vary depending upon the type of employment tax being deposited (for example, Form 943 and 945 depositors have a calendar year lookback period whereas Form 941 depositors do not).

Several commentators suggested employers need a safe harbor more generous than the current 98 percent rule because deposits by EFT must be initiated earlier than current paper coupon deposits. The IRS and Treasury Department do not believe it is necessary to change the safe harbor. EFTdepositors may use the Same Day Payment option (Electronic Tax Application (ETA)) and, when using this option, are not required to initiate deposits any earlier than paper coupon depositors. Thus, EFT depositors will have as much time as they have always had to determine the amount they are required to deposit.

One commentator indicated that following the ACH Holiday Schedule will cause problems for $100,000 next-day depositors. The IRS and Treasury Department believe that the availability of ETA will alleviate any problems caused by the ACH Holiday Schedule.

Another commentator noted that many securities firms that have next-day deposits will be unable to comply with the E F T deposit requirement because of the nature of the securities business. T h e commentator recommends either exempting nonpayroll related income tax deposits from the EFT deposit requirement or allowing the use of Fedwire on a regular basis. Since ETA includes Fedwire value transfers, Fedwire non-value transfers, and Direct Access transactions, and is available for taxpayers to use on a regular basis, securities firms should be able to comply with the next-day deposit rule.

Another commentator suggested that a deposit by EFT should be considered

timely if initiated with the A u t o m a t e d Clearing House (ACH) in a timely and correct manner and that the taxpayer should not be responsible for possible ACH breakdowns. Rev. Rul. 94–46 (1994–2 C.B. 278), has been published to address this situation. The revenue ruling provides guidance on establishing reasonable cause for abatement of the failure-todeposit penalty in certain situations involving deposits by EFT.

A commentator suggested that the regulations should allow taxpayers to make deposits by EFT from any institution that has the ability to make ACH credit or debit transfers and should not require the taxpayers to open accounts with a Tr e asury Financial Agent. A taxpayer is not required to open an account with a Treasury Financial Agent. The ACH debit and ACH credit options allow a taxpayer to make a deposit from any of the many institutions that have the ability to make ACH credit or debit transfers.

One commentator suggested that a $500 minimum threshold should be provided for EFT deposits. This change would unduly complicate administration of the rules and has not been adopted.

Some of the issues raised in comments on the notice of proposed rulemaking published on July 11, 1994, were addressed in changes made to the temporary regulations by T.D. 8661. These issues were discussed in the preamble to T.D. 8661 and will not be addressed again here. In addition, several other comments that were outside the scope of this regulations project have not been addressed here.

Special Analyses

It has been determined that this Tr e asury decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and, because the notices of proposed rulemaking preceding the regulations were issued prior to March 29, 1996, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the two notices of proposed rulemaking preceding these regulations were submitted to the Chief Counsel for Advo

1997–30 I R B 5 July 28 1997

cacy of the Small Business A d m i n i s t r ation for comment on their impact on small business.

Drafting Information

The principal author of these regulations is Vincent G. Surabian, Office of the Assistant Chief Counsel (Income Tax & Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

- - - -

Amendments to the Regulations

Accordingly, 26 CFR parts 1, 31, and 40 are amended as follows:

PART1––INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by removing the citations for “Section 1.6302–1(a)”, and Sections 1.6302–1T, 1.6302–2T a n d 1.6302–3T”, and “Section 1.6302–4T” and adding entries in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.6302–1 also issued under 26 U.S.C. 6302(c) and (h).

Section 1.6302–2 also issued under 26 U.S.C. 6302(h).

Section 1.6302–3 also issued under 26 U.S.C. 6302(h).

Section 1.6302–4 also issued under 26 U.S.C. 6302(a) and (c). * * *

Par. 2. Section 1.6302–1 is amended as follows:

The heading for paragraph (b) is revised.
The text of paragraph (b) is redesignated as paragraph (b)(1) and a heading for (b)(1) is added.
Paragraph (b)(2) is added.
The OMB parenthetical at the end of the section is removed.

The revised and added provisions read as follows:

§1.6302–1 Use of Government deposi - taries in connection with corporation in - come and estimated income taxes and certain taxes of tax-exempt organizations.

- - - -

(b) Manner of deposit ––(1) Deposit by Federal tax deposit coupon. - * *

(b)(2) Deposits by electronic funds t r a n s f e r. For the requirement to deposit

corporation income and estimated income taxes and certain taxes of tax-exempt organizations by electronic funds transfer, see §31.6302–1(h) of this chapter. A taxpayer not required to deposit by electronic funds transfer pursuant to §31.6302–1(h) of this chapter remains subject to the rules of paragraph (b)(1) of this section.

§1.6302–1T [Removed]

Par. 3. Section 1.6302–1T is removed. Par. 4. Section 1.6302–2 is amended as follows:

The heading for paragraph (b) is revised.
Paragraph (c) is redesignated as paragraph (b)(6).
Anew paragraph (c) is added.
The OMB parenthetical at the end of the section is removed.

The revised and added provisions read as follows:

§1.6302–2 Use of Government deposi - taries for payment of tax withheld on non - resident aliens and foreign corporations.

- - - -

( b ) Deposits by Federal tax deposit coupon. * * *

(c) Deposits by electronic funds trans - f e r. For the requirement to deposit taxes withheld on nonresident aliens and foreign corporations by electronic funds transfer, see §31.6302–1(h) of this chapter. A t a xpayer not required to deposit by electronic funds transfer pursuant to §31.6302–1(h) of this chapter remains subject to the rules of paragraph (b) of this section.

- - - -

§1.6302–2T [Removed]

Par. 5. Section 1.6302–2T is removed. P a r. 6. In §1.6302–3, paragraph (c) is revised to read as follows:

§1.6302–3 Use of Government deposi - taries in connection with estimated taxes of certain trusts.

- - - -

(c) C ro s s - re f e re n c e s . For further guidance and instructions for certain banks and financial institutions acting as fiduciaries with respect to taxable trusts, see Rev. Proc. 89–49 (1989–2 C.B. 615), (see §601.601(d)(2) of this chapter) or any suc

cessor revenue procedure. For the requirement to deposit estimated tax payments of taxable trusts by electronic funds t r a n s f e r, see §31.6302–1(h) of this chapter.

§1.6302–3T [Removed]

Par. 7. Section 1.6302–3T is removed. P a r. 8. Section 1.6302–4 is added to read as follows:

§1.6302–4 Use of financial institutions in connection with individual income taxes.

Voluntary payments by electronic funds t r a n s f e r. An individual may voluntarily remit by electronic funds transfer all payments of tax imposed by subtitle A of the Code, including any payments of estimated tax. Such payments must be made in accordance with procedures to be prescribed by the Commissioner.

§1.6302–4T [Removed]

Par. 9. Section 1.6302–4T is removed.

PART31––EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Par. 10. The authority citation for Part 31 is amended by removing the entries for “Section 31.6302–1T”, and “Section 31.6302(c)–3T” and revising the entry “Sections 31.6302–1 through 31.6302–3” and by adding an entry for “Section 31.6302(c)–3” to read as follows: Authority: 26 U.S.C. 7805 * * * Sections 31.6302–1 through 31.6302–3 also issued under 26 U.S.C. 6302(a), (c), and (h). * * * Section 31.6302(c)–3 also issued under 26 U.S.C. 6302(h). P a r. 11. In §31.0–1, paragraph (a) is amended by adding a sentence at the end of the paragraph to read as follows:

§31.0–1 Introduction.

(a) * * * The regulations in this part also provide rules relating to the deposit of other taxes by electronic funds transfer.

P a r. 12. In §31.0–3, paragraph (f) is amended by adding a sentence at the end of the paragraph to read as follows: §31.0–3 Scope of regulations.

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1997–30 I R B 6 July 28 1997

(f) * * * Subpart G of this part also provides rules relating to the deposit of other taxes by electronic funds transfer.

Par. 13. In §31.6302–1, paragraph (h) is redesignated as paragraph (i), and new paragraph (h) is added to read as follows:

§31.6302–1 Federal tax deposit rules for withheld income taxes and taxes under the Federal Insurance Contributions A c t (FICA) attributable to payments made after December 31, 1992.

- - - -

(h) Time and manner of deposit––de - posits re q u i red to be made by electro n i c funds transfer ––(1) In general . Section 6302(h) requires the Secretary to prescribe such regulations as may be necessary for the development and implementation of an electronic funds transfer system to be used for the collection of the depository taxes as described in paragraph (h)(3) of this section. Section 6302(h)(2) provides a phasein schedule that sets forth escalating minimum percentages of those depository taxes to be deposited by electronic funds transf e r. This paragraph (h) prescribes the rules necessary for implementing an electronic funds transfer system for collection of depository taxes and for effecting an orderly and expeditious phase-in of that system.

(2) T h reshold amounts, determination periods, and effective dates. (i)(A) Taxpayers whose aggregate deposits of the taxes imposed by Chapters 21 (Federal Insurance Contributions Act), 22 (Railroad Retirement Tax Act), and 24 (Collection of Income Tax at Source on Wages) of the Internal Revenue Code during a 12month determination period exceed the applicable threshold amount are required to deposit all depository taxes described in paragraph (h)(3) of this section by electronic funds transfer (as defined in paragraph (h)(4) of this section) unless exempted under paragraph (h)(5) of this section. If the applicable effective date is January 1, 1995, or January 1, 1996, the requirement to deposit by electronic funds transfer applies to all deposits required to be made on or after the applicable effective date. If the applicable effective date is July 1, 1997, the requirement to deposit by electronic funds transfer applies to all deposits required to be made on or after July 1, 1997 with respect to deposit obligations incurred for return periods beginning on or after January 1, 1997. If the

applicable effective date is January 1, 1998, or thereafter, the requirement to deposit by electronic funds transfer applies to all deposits required to be made with respect to deposit obligations incurred for return periods beginning on or after the applicable effective date. In general, each applicable effective date has one 12month determination period. However, for the applicable effective date January 1, 1996, there are two determination periods. If the applicable threshold amount is exceeded in either of those determination periods, the taxpayer becomes subject to the requirement to deposit by electronic funds transfer, effective January 1, 1996. The threshold amounts, determination periods and applicable effective dates for purposes of this paragraph (h)(2)(i)(A) are as follows:

(ii) Once a taxpayer is required to deposit by electronic funds transfer pursuant to this paragraph (h)(2), the taxpayer must continue to deposit by electronic funds transfer. Until such time as a taxpayer is required by this section to deposit by electronic funds transfer, the taxpayer may voluntarily make deposits by electronic funds transfer, but remains subject to the rules of paragraph (i) of this section, pertaining to deposits by Federal tax deposit (FTD) coupon, in making deposits other than by electronic funds transfer.

(3) Taxes required to be deposited by e l e c t ronic funds transfer. The requirement to deposit by electronic funds transfer under paragraph (h)(2) of this section applies to all the taxes required to be deposited under §§1.6302–1, 1.6302–2, and 1.6302–3 of this chapter; §§31.6302–1,

T h reshold A m o u n t Determination Period Applicable Effective Date $78 million 1–1–93 to 12–31–93 January 1, 1995 $47 million 1–1–93 to 12–31–93 January 1, 1996 $47 million 1–1–94 to 12–31–94 January 1, 1996 $50 thousand 1–1–95 to 12–31–95 July 1, 1997 $50 thousand 1–1–96 to 12–31–96 January 1, 1998 $50 thousand 1–1–97 to 12–31–97 January 1, 1999

(B) Unless exempted under paragraph (h)(5) of this section, a taxpayer that does not deposit any of the taxes imposed by chapters 21, 22, and 24 during the applicable determination periods set forth in paragraph (h)(2)(i)(A) of this section, but that does make deposits of other depository taxes (as described in paragraph (h)(3) of this section), is nevertheless subject to the requirement to deposit by electronic funds transfer if the taxpayer’s aggregate deposits of all depository taxes exceed the threshold amount set forth in this paragraph (h)(2)(i)(B) during an applicable 12-month determination period. This requirement to deposit by electronic funds transfer applies to all depository taxes due with respect to deposit obligations incurred for return periods beginning on or after the applicable eff e c t i v e date. The threshold amount, determination periods, and applicable eff e c t i v e dates for purposes of this paragraph (h)(2)(i)(B) are as follows:

31.6302–2, 31.6302–3, 31.6302–4, and 31.6302(c)–3; and §40.6302(c)–1 of this chapter.

(4) D e f i n i t i o n s ––(i) E l e c t ronic funds t r a n s f e r. An e l e c t ronic funds transfer i s any transfer of depository taxes made in accordance with Revenue Procedure 97–33, (1997–30 I.R.B.), (see §601.601(d)(2) of this chapter), or in accordance with procedures subsequently prescribed by the Commissioner.

(ii) Taxpayer. For purposes of this section, a taxpayer is any person required to deposit federal taxes, including not only individuals, but also any trust, estate, partnership, association, company or corporation.

(5) E x e m p t i o n s . If any categories of taxpayers are to be exempted from the requirement to deposit by electronic funds t r a n s f e r, the Commissioner will identify those taxpayers by guidance published in the Internal Revenue Bulletin. (See §601.601(d)(2)(ii)( b ) of this chapter.)

T h reshold A m o u n t Determination Period Applicable Effective Date $50 thousand 1–1–95 to 12–31–95 January 1, 1998 $50 thousand 1–1–96 to 12–31–96 January 1, 1998 $50 thousand 1–1–97 to 12–31–97 January 1, 1999

1997–30 I R B 7 July 28 1997

(6) Separation of deposits . A d e p o s i t for one return period must be made separately from a deposit for another return period.

(7) Payment of balance due . If the aggregate amount of taxes reportable on the applicable tax return for the return period exceeds the total amount deposited by the taxpayer with regard to the return period, then the balance due must be remitted in accordance with the applicable form and instructions.

(8) Time deemed deposited . A deposit of taxes by electronic funds transfer will be deemed made when the amount is withdrawn from the taxpayer’s account, provided the U.S. Government is the payee and the amount is not returned or reversed.

(9) Time deemed paid . In general, an amount deposited under this paragraph (h) will be considered to be a payment of tax on the last day prescribed for filing the applicable return for the return period (determined without regard to any extension of time for filing the return) or, if later, at the time deemed deposited under paragraph (h)(8) of this section. In the case of the taxes imposed by chapters 21 and 24 of the Internal Revenue Code, solely for purposes of section 6511 and the regulations thereunder (relating to the period of limitation on credit or refund), if an amount is deposited prior to April 15th of the calendar year immediately succeeding the calendar year that includes the period for which the amount was deposited, the amount will be considered paid on April 15th.

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§31.6302–1T [Removed]

P a r. 18. Section 40.6302(c)–1 is amended as follows:

The text of paragraph (d) is redesignated paragraph (d)(1) and a paragraph heading is added for (d)(1).
Paragraph (d)(2) is added. The added provisions read as follows:

§40.6302(c)–1 Use of Government de - positaries.

- - - -

(d) Remittance of deposits —(1) D e p o s i t s by Federal tax deposit coupon. - * *

(2) Deposits by electronic funds trans - fer. For the requirement to deposit excise taxes by electronic funds transfer, see §31.6302–1(h) of this chapter. Ataxpayer not required to deposit by electronic funds transfer pursuant to §31.6302–1(h) of this chapter remains subject to the rules of this paragraph (d). * * * * *

§40.6302(c)–1T [Removed]

P a r. 19. Section 40.6302(c)–1T is removed.

Michael P. Dolan, Acting Commissioner

of Internal Revenue.

Approved June 27, 1997.

Donald C. Lubick, Acting Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on July 11, 1997, 8:45 a.m., and published in the issue of the Federal Register for July 14, 1997, 62 F.R. 37490)

26 CFR 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.

Information is provided to taxpayers about the Electronic Federal Tax Payment System (EFTPS). EFTPS is an electronic remittance system for making federal tax deposits and federal tax payments.

P a r. 14. Section 31.6302–1T is removed.

P a r. 15. Section 31.6302(c)–3 is amended as follows:

The heading for paragraph (b) is revised.
Paragraph (c) is revised.
Paragraph (d) is added. The revised and added provisions read as follows:

§31.6302(c)–3 Use of Government de - positaries in connection with tax under the Federal Unemployment Tax Act.

- - - -

(b) Manner of deposit––deposits re - quired to be made by Federal tax deposit (FTD) coupon. - * *

(c) Manner of deposit––deposits re - q u i red to be made by electronic funds t r a n s f e r. For the requirement to deposit tax under the Federal Unemployment Tax Act by electronic funds transfer, see §31.6302–1(h). A taxpayer not required to deposit by electronic funds transfer pursuant to §31.6302–1(h) remains subject to the rules of paragraph (b) of this section.

(d) Effective date . The provisions of paragraphs (a) and (b) of this section apply with respect to calendar quarters beginning after December 31, 1969. T h e provisions of paragraph (c) of this section apply with respect to calendar quarters beginning on or after January 1, 1 9 9 5 .

§31.6302(c)–3T [Removed]

P a r. 16. Section 31.6302(c)–3T is removed.

PART 40––EXCISE TAX PROCEDURAL REGULATIONS

Par. 17. The authority citation for part 40 is amended by revising the entry for “Sections 40.6302(c)–1, 40.6302(c)–2, 40.6302(c)–3, and 40.6302(c)–4” and removing the entry for “Section 40.6302(c)–1T” to read as follows: Authority: 26 U.S.C. 7805 * * * Section 40.6302(c)–1 also issued under 26 U.S.C. 6302(a) and (h). Sections 40.6302(c)–2, 40.6302(c)–3, and 40.6302(c)–4 also issued under 26 U.S.C. 6302(a).

1997–30 I R B 8 July 28 1997