SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for a taxpayer’s second taxable year ending on or after December 31, 2003.

March 28, 2005 798 2005–13 I.R.B.

nated remittance treated as a payment will be taken into account by the Service in determining the existence of a deficiency and whether a notice of deficiency is required to be issued.

.02 Treatment of deposits made dur- ing an examination upon the completion of such examination by the Service .

(1) Upon completion of an examination, if a taxpayer who has made a deposit executes a waiver of restrictions on assessment and collection of the deficiency or otherwise agrees to the full amount of the deficiency, an assessment will be made and any deposit will be applied against the assessed liability as a payment of tax as of the date the assessment was made. Interest on an underpayment for which a deposit is applied as a payment will be determined as provided under section 8. If the deposit satisfies the assessed liability, no notice of deficiency will be mailed and the taxpayer will not have the right to petition the Tax Court for a redetermination of the deficiency.

(2) Upon completion of an examination, if a taxpayer who has made a deposit does not execute a waiver of restrictions on assessment and collection or otherwise agree to the full amount of the deficiency, the Service will mail a notice of deficiency and the taxpayer will have the right to petition the Tax Court. The portion of the deposit that is not greater than the determined deficiency plus any interest that has accrued on that deficiency will be posted to the taxpayer’s account as a payment of tax upon the expiration of the 90 or 150-day period during which assessment is stayed, unless the taxpayer files a petition with the Tax Court and requests in writing before the expiration of that period that the deposit continue to be treated as a deposit during the applicable Tax Court proceeding. If a petition is filed, but no written request is submitted to continue the treatment as a deposit before the expiration of the 90 or 150-day period, the tax will be assessed subject to the restrictions imposed by section 6213 and the deposit will be applied as payment of the tax upon the expiration of the 90 or 150-day period. Interest on an underpayment for which a deposit is applied as a payment will be determined as provided under section 8.

(3) A taxpayer may elect to have a deposit that exceeds the amount of tax ultimately determined to be due applied

paid on the date the deposit is made for purposes of computing interest on underpayments under section 6601.

.03 Section 6603(c) provides that the Service will return to the taxpayer any amount of a deposit that the taxpayer requests in writing be returned unless the amount has previously been used to pay tax or the Service determines that collection of tax is in jeopardy. Section 6603(d) authorizes the payment of interest on a deposit that is returned to the taxpayer to the extent (and only to the extent) that the deposit is attributable to a disputable tax. Section 6603(d)(4) provides that the rate of interest is the Federal short-term rate determined under section 6621(b), compounded daily.

.04 Section 6603(d)(2) defines a “disputable tax” as the amount of tax specified at the time of deposit as the taxpayer’s reasonable estimate of the maximum amount of tax attributable to disputable items. Section 6603(d)(3)(A) defines a “disputable item” as any item of income, gain, loss, deduction or credit if the taxpayer has a reasonable basis for its treatment of such item and reasonably believes that the Service also has a reasonable basis for disallowing the taxpayer’s treatment of such item. If a taxpayer has been issued a 30-day letter, the amount of disputable tax is, at a minimum, the amount of the proposed deficiency specified in the letter.

.05 Interest allowable under section 6603(d) on a deposit returned to the taxpayer will not establish a period for which interest was allowable at the applicable Federal short-term rate for purposes of establishing a net zero interest rate for the same period under section 6621(d). See H.R. Conf. Rep. No. 755, 108 ^th Cong, 2d Sess. 649 (2004).

.06 Rev. Proc. 84–58 provides procedures for taxpayers to make remittances, or “deposits in the nature of a cash bond,” to suspend the running of interest on deficiencies. Under Rev. Proc. 84–58, a deposit in the nature of a cash bond is not a payment of tax, is not subject to a claim for credit or refund, and, if returned to the taxpayer, does not bear interest. Section 842(c)(2) of the Act provides that, in the case of an amount held by the Service as a deposit in the nature of a cash bond pursuant to Rev. Proc. 84–58 on the date of enactment (October 22, 2004), the date the taxpayer identifies the amount as a de

posit made pursuant to section 6603 shall be treated as the date the amount is deposited for purposes of section 6603(d).

.07 The legislative history for section 6603 provides that the Secretary may issue rules relating to the making, use, and return of the deposits. See H.R. Conf. Rep. No. 755, 108 ^th Cong, 2d Sess. 647 (2004). The following procedures implement the requirements of section 6603.