Section 9. DRAFTING INFORMATION

The principal author of this notice is Michael H. Beker of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, please contact Mr. Beker at (202) 622–3130 (not a toll-free number).

Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2012–78

This notice provides guidance as to the corporate bond weighted average interest

monthly period unless the safe harbor in § 40.6302(c)–1(b)(2)(ii) applies. Under the safe harbor, any person that filed a Form 720, Quarterly Federal Excise Tax Return, reporting a tax imposed by chapter 32 for the second preceding calendar quarter is considered to have met the semimonthly deposit requirement for the current quarter if: (i) the deposit for each semimonthly period in the current calendar quarter is not less than 1/6 of the net tax liability reported for the look back quarter: (ii) each deposit is made on time; (iii) the amount of any underpayment is paid by the due date of the return; and (iv) the person’s liability does not include any tax that was not imposed during the look back quarter. Section 40.6302(c)–1(b)(2)(v) provides that if a person fails to make deposits as required, the IRS may withdraw the person’s right to use the safe harbor rules of § 40.6302(c)–1(b)(2)(ii).

Section 6656 imposes a penalty in the case of any failure by any person to make timely deposits as required by § 6302. A taxpayer may avoid penalties under § 6656 for failure to make deposits of taxes if the taxpayer makes an affirmative showing that such failure is due to reasonable cause and not due to willful neglect. See § 6656 and the corresponding regulations.

The IRS and the Treasury Department recognize that many medical device manufacturers will still be preparing their systems to comply with the medical device excise tax when the tax goes into effect on January 1, 2013, including the requirement to make semimonthly deposits. The first deposit of the medical device excise tax, covering the first 15 days of January, is due by January 29, 2013. In consideration of the short time frame between the effective date of the tax and the due date of the first deposit, and in the interest of sound tax administration, the IRS and the Treasury Department have decided to provide temporary relief from the § 6656 penalty for the first three calendar quarters of 2013. The normal rules under § 6656 and the corresponding regulations will apply with respect to deposits due during the fourth calendar quarter of 2013 and thereafter.

In addition to the temporary penalty relief, the normal safe harbor rules of § 40.6302(c)–1(b)(2)(ii) apply. Beginning in the third quarter of 2013, medical device manufacturers may use the safe harbor rules of § 40.6302(c)–1(b)(2)(ii)

for semimonthly deposits due during that quarter. For purposes of the safe harbor, the first calendar quarter of 2013 is the look back quarter for deposits due during the third calendar quarter.

(b) Interim Rule . During the first three calendar quarters of 2013, the IRS will not impose the penalty provided in § 6656 on a taxpayer that is liable for the medical device excise tax that fails to make timely deposits of the medical device excise tax as required by §§ 40.6302(c)–1 and 40.6302(c)–2 (relating to special deposits required in September), provided that the taxpayer demonstrates a good faith attempt to comply with requirements of §§ 40.6302(c)–1 and 40.6302(c)–2 and that the failure was not due to willful neglect.

Thereafter, a taxpayer may avoid penalties if it makes an affirmative showing that the failure to deposit is due to reasonable cause and not due to willful neglect. In addition, during the third and fourth calendar quarters of 2013, the IRS will not exercise its authority under § 40.6302(c)–1(b)(2)(v) to withdraw the taxpayer’s right to use the deposit safe harbor rules of § 40.6302(c)–1(b)(2)(ii).