Introduction — Internal Revenue Bulletin 2016-51

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.

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 procedures 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 offices, 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 Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases.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 procedures 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 Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references 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. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.

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

December 19, 2016 Bulletin No. 2016–51

Section 6621.—Determin- ation of Rate of Interest

26 CFR 301.6621–1: Interest rate.

Rev. Rul. 2016–28

Section 6621 of the Internal Revenue Code establishes the interest rates on overpayments and underpayments of tax. Under section 6621(a)(1), the overpayment rate is the sum of the federal shortterm rate plus 3 percentage points (2 percentage points in the case of a corporation), except the rate for the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal short-term rate plus 0.5 of a percentage point. Under section 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

Section 6621(c) provides that for purposes of interest payable under section 6601 on any large corporate underpayment, the underpayment rate under section 6621(a)(2) is determined by substituting “5 percentage points” for “3 percentage points.” See section 6621(c) and section 301.6621–3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date. Section 6621(c) and section 301.6621–3 are generally effective for periods after December 31, 1990.

Section 6621(b)(1) provides that the Secretary will determine the federal shortterm rate for the first month in each calendar quarter. Section 6621(b)(2)(A) provides that the federal short-term rate determined under section 6621(b)(1) for any month applies during the first calendar quarter beginning after that month. Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during that month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate is increased to the next highest full percent).

Notice 88–59, 1988–1 C.B. 546, announced that in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.

The federal short-term rate determined in accordance with section 1274(d) during October 2016 is the rate published in Revenue Ruling 2016–26, 2016–45 IRB 538, to take effect beginning November 1, 2016. The federal short-term rate, rounded to the nearest full percent, based on daily compounding determined during the month of October 2016 is 1 percent. Accordingly, an overpayment rate of 4 percent (3 percent in the case of a corporation) and an underpayment rate of 4 percent are established for the calendar quarter beginning January 1, 2017. The overpayment rate for the portion of a corporate overpayment exceeding $10,000 for the calendar quarter beginning January 1, 2017 is 1.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter beginning January 1, 2017, is 6 percent. These rates apply to

365 Day Year

amounts bearing interest during that calendar quarter.

Sections 6654(a)(1) and 6655(a)(1) provide that the underpayment rate established under section 6621 applies in determining the addition to tax under sections 6654 and 6655 for failure to pay estimated tax for any taxable year. Thus, the 4 percent rate also applies to estimated tax underpayments for the first calendar quarter in 2017. Pursuant to section 6621(b)(2)(B), in determining the addition to tax under section 6654 for any taxable year for an individual, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the 4th month following the taxable year. In addition, pursuant to section 6603(d)(4), the rate of interest on section 6603 deposits is 1 percent for the first calendar quarter in 2017.

Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13 and 17 of Rev. Proc. 95–17, 1995–1 C.B. 562, 565, 567 and 571.

Annual interest rates to be compounded daily pursuant to section 6622 that apply for prior periods are set forth in the tables accompanying this revenue ruling.

DRAFTING INFORMATION

The principal author of this revenue ruling is Sarah McLemore of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue ruling, contact Ms. McLemore at (202) 317-6844 (not a tollfree number).

0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

1 0.000013699 63 0.000863380 125 0.001713784

2 0.000027397 64 0.000877091 126 0.001727506

3 0.000041096 65 0.000890801 127 0.001741228

4 0.000054796 66 0.000904512 128 0.001754951

5 0.000068495 67 0.000918223 129 0.001768673

6 0.000082195 68 0.000931934 130 0.001782396

Bulletin No. 2016–51 805 December 19, 2016

365 Day Year

0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

7 0.000095894 69 0.000945646 131 0.001796119

8 0.000109594 70 0.000959357 132 0.001809843

9 0.000123294 71 0.000973069 133 0.001823566

10 0.000136995 72 0.000986781 134 0.001837290

11 0.000150695 73 0.001000493 135 0.001851013

12 0.000164396 74 0.001014206 136 0.001864737

13 0.000178097 75 0.001027918 137 0.001878462

14 0.000191798 76 0.001041631 138 0.001892186

15 0.000205499 77 0.001055344 139 0.001905910

16 0.000219201 78 0.001069057 140 0.001919635

17 0.000232902 79 0.001082770 141 0.001933360

18 0.000246604 80 0.001096484 142 0.001947085

19 0.000260306 81 0.001110197 143 0.001960811

20 0.000274008 82 0.001123911 144 0.001974536

21 0.000287711 83 0.001137625 145 0.001988262

22 0.000301413 84 0.001151339 146 0.002001988

23 0.000315116 85 0.001165054 147 0.002015714

24 0.000328819 86 0.001178768 148 0.002029440

25 0.000342522 87 0.001192483 149 0.002043166

26 0.000356225 88 0.001206198 150 0.002056893

27 0.000369929 89 0.001219913 151 0.002070620

28 0.000383633 90 0.001233629 152 0.002084347

29 0.000397336 91 0.001247344 153 0.002098074

30 0.000411041 92 0.001261060 154 0.002111801

31 0.000424745 93 0.001274776 155 0.002125529

32 0.000438449 94 0.001288492 156 0.002139257

33 0.000452154 95 0.001302208 157 0.002152985

34 0.000465859 96 0.001315925 158 0.002166713

35 0.000479564 97 0.001329641 159 0.002180441

36 0.000493269 98 0.001343358 160 0.002194169

37 0.000506974 99 0.001357075 161 0.002207898

38 0.000520680 100 0.001370792 162 0.002221627

39 0.000534386 101 0.001384510 163 0.002235356

40 0.000548092 102 0.001398227 164 0.002249085

41 0.000561798 103 0.001411945 165 0.002262815

42 0.000575504 104 0.001425663 166 0.002276544

43 0.000589211 105 0.001439381 167 0.002290274

44 0.000602917 106 0.001453100 168 0.002304004

45 0.000616624 107 0.001466818 169 0.002317734

46 0.000630331 108 0.001480537 170 0.002331465

47 0.000644039 109 0.001494256 171 0.002345195

48 0.000657746 110 0.001507975 172 0.002358926

49 0.000671454 111 0.001521694 173 0.002372657

50 0.000685161 112 0.001535414 174 0.002386388

51 0.000698869 113 0.001549133 175 0.002400120

December 19, 2016 806 Bulletin No. 2016–51

365 Day Year

0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

52 0.000712578 114 0.001562853 176 0.002413851

53 0.000726286 115 0.001576573 177 0.002427583

54 0.000739995 116 0.001590293 178 0.002441315

55 0.000753703 117 0.001604014 179 0.002455047

56 0.000767412 118 0.001617734 180 0.002468779

57 0.000781121 119 0.001631455 181 0.002482511

58 0.000794831 120 0.001645176 182 0.002496244

59 0.000808540 121 0.001658897 183 0.002509977

60 0.000822250 122 0.001672619 184 0.002523710

61 0.000835960 123 0.001686340

62 0.000849670 124 0.001700062

365 Day Year

0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

1 0.000013661 63 0.000861020 125 0.001709097

2 0.000027323 64 0.000874693 126 0.001722782

3 0.000040984 65 0.000888366 127 0.001736467

4 0.000054646 66 0.000902040 128 0.001750152

5 0.000068308 67 0.000915713 129 0.001763837

6 0.000081970 68 0.000929387 130 0.001777522

7 0.000095632 69 0.000943061 131 0.001791208

8 0.000109295 70 0.000956735 132 0.001804893

9 0.000122958 71 0.000970409 133 0.001818579

10 0.000136620 72 0.000984084 134 0.001832265

11 0.000150283 73 0.000997758 135 0.001845951

12 0.000163947 74 0.001011433 136 0.001859638

13 0.000177610 75 0.001025108 137 0.001873324

14 0.000191274 76 0.001038783 138 0.001887011

15 0.000204938 77 0.001052459 139 0.001900698

16 0.000218602 78 0.001066134 140 0.001914385

17 0.000232266 79 0.001079810 141 0.001928073

18 0.000245930 80 0.001093486 142 0.001941760

19 0.000259595 81 0.001107162 143 0.001955448

20 0.000273260 82 0.001120839 144 0.001969136

21 0.000286924 83 0.001134515 145 0.001982824

22 0.000300590 84 0.001148192 146 0.001996512

23 0.000314255 85 0.001161869 147 0.002010201

24 0.000327920 86 0.001175546 148 0.002023889

25 0.000341586 87 0.001189223 149 0.002037578

26 0.000355252 88 0.001202900 150 0.002051267

27 0.000368918 89 0.001216578 151 0.002064957

28 0.000382584 90 0.001230256 152 0.002078646

Bulletin No. 2016–51 807 December 19, 2016

365 Day Year

0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

29 0.000396251 91 0.001243934 153 0.002092336

30 0.000409917 92 0.001257612 154 0.002106025

31 0.000423584 93 0.001271291 155 0.002119715

32 0.000437251 94 0.001284969 156 0.002133405

33 0.000450918 95 0.001298648 157 0.002147096

34 0.000464586 96 0.001312327 158 0.002160786

35 0.000478253 97 0.001326006 159 0.002174477

36 0.000491921 98 0.001339685 160 0.002188168

37 0.000505589 99 0.001353365 161 0.002201859

38 0.000519257 100 0.001367044 162 0.002215550

39 0.000532925 101 0.001380724 163 0.002229242

40 0.000546594 102 0.001394404 164 0.002242933

41 0.000560262 103 0.001408085 165 0.002256625

42 0.000573931 104 0.001421765 166 0.002270317

43 0.000587600 105 0.001435446 167 0.002284010

44 0.000601269 106 0.001449127 168 0.002297702

45 0.000614939 107 0.001462808 169 0.002311395

46 0.000628608 108 0.001476489 170 0.002325087

47 0.000642278 109 0.001490170 171 0.002338780

48 0.000655948 110 0.001503852 172 0.002352473

49 0.000669618 111 0.001517533 173 0.002366167

50 0.000683289 112 0.001531215 174 0.002379860

51 0.000696959 113 0.001544897 175 0.002393554

52 0.000710630 114 0.001558580 176 0.002407248

53 0.000724301 115 0.001572262 177 0.002420942

54 0.000737972 116 0.001585945 178 0.002434636

55 0.000751643 117 0.001599628 179 0.002448331

56 0.000765315 118 0.001613311 180 0.002462025

57 0.000778986 119 0.001626994 181 0.002475720

58 0.000792658 120 0.001640678 182 0.002489415

59 0.000806330 121 0.001654361 183 0.002503110

60 0.000820003 122 0.001668045 184 0.002516806

61 0.000833675 123 0.001681729

62 0.000847348 124 0.001695413

TABLE OF INTEREST RATES

PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986

OVERPAYMENTS AND UNDERPAYMENTS

PERIOD RATE In 1995–1 C.B. DAILY RATE TABLE

Before Jul. 1, 1975 6% Table 2, pg. 557

Jul. 1, 1975—Jan. 31, 1976 9% Table 4, pg. 559

December 19, 2016 808 Bulletin No. 2016–51

TABLE OF INTEREST RATES

PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986

OVERPAYMENTS AND UNDERPAYMENTS

In 1995–1 C.B.

PERIOD RATE DAILY RATE TABLE

Feb. 1, 1976—Jan. 31, 1978 7% Table 3, pg. 558

Feb. 1, 1978—Jan. 31, 1980 6% Table 2, pg. 557

Feb. 1, 1980—Jan. 31, 1982 12% Table 5, pg. 560

Feb. 1, 1982—Dec. 31, 1982 20% Table 6, pg. 560

Jan. 1, 1983—Jun. 30, 1983 16% Table 37, pg. 591

Jul. 1, 1983—Dec. 31, 1983 11% Table 27, pg. 581

Jan. 1, 1984—Jun. 30, 1984 11% Table 75, pg. 629

Jul. 1, 1984—Dec. 31, 1984 11% Table 75, pg. 629

Jan. 1, 1985—Jun. 30, 1985 13% Table 31, pg. 585

Jul. 1, 1985—Dec. 31, 1985 11% Table 27, pg. 581

Jan. 1, 1986—Jun. 30, 1986 10% Table 25, pg. 579

Jul. 1, 1986—Dec. 31, 1986 9% Table 23, pg. 577

TABLE OF INTEREST RATES

FROM JAN. 1, 1987 - Dec. 31, 1998

OVERPAYMENTS UNDERPAYMENTS

1995–1 C.B. 1995–1 C.B. RATE TABLE PG RATE TABLE PG

Jan. 1, 1987—Mar. 31, 1987 8% 21 575 9% 23 577

Apr. 1, 1987—Jun. 30, 1987 8% 21 575 9% 23 577

Jul. 1, 1987—Sep. 30, 1987 8% 21 575 9% 23 577

Oct. 1, 1987—Dec. 31, 1987 9% 23 577 10% 25 579

Jan. 1, 1988—Mar. 31, 1988 10% 73 627 11% 75 629

Apr. 1, 1988—Jun. 30, 1988 9% 71 625 10% 73 627

Jul. 1, 1988—Sep. 30, 1988 9% 71 625 10% 73 627

Oct. 1, 1988—Dec. 31, 1988 10% 73 627 11% 75 629

Jan. 1, 1989—Mar. 31, 1989 10% 25 579 11% 27 581

Apr. 1, 1989—Jun. 30, 1989 11% 27 581 12% 29 583

Jul. 1, 1989—Sep. 30, 1989 11% 27 581 12% 29 583

Oct. 1, 1989—Dec. 31, 1989 10% 25 579 11% 27 581

Jan. 1, 1990—Mar. 31, 1990 10% 25 579 11% 27 581

Apr. 1, 1990—Jun. 30, 1990 10% 25 579 11% 27 581

Jul. 1, 1990—Sep. 30, 1990 10% 25 579 11% 27 581

Oct. 1, 1990—Dec. 31, 1990 10% 25 579 11% 27 581

Jan. 1, 1991—Mar. 31, 1991 10% 25 579 11% 27 581

Apr. 1, 1991—Jun. 30, 1991 9% 23 577 10% 25 579

Jul. 1, 1991—Sep. 30, 1991 9% 23 577 10% 25 579

Oct. 1, 1991—Dec. 31, 1991 9% 23 577 10% 25 579

Jan. 1, 1992—Mar. 31, 1992 8% 69 623 9% 71 625

Apr. 1, 1992—Jun. 30, 1992 7% 67 621 8% 69 623

Jul. 1, 1992—Sep. 30, 1992 7% 67 621 8% 69 623

Bulletin No. 2016–51 809 December 19, 2016

TABLE OF INTEREST RATES

FROM JAN. 1, 1987 - Dec. 31, 1998

OVERPAYMENTS UNDERPAYMENTS

1995–1 C.B. 1995–1 C.B. RATE TABLE PG RATE TABLE PG

Oct. 1, 1992—Dec. 31, 1992 6% 65 619 7% 67 621

Jan. 1, 1993—Mar. 31, 1993 6% 17 571 7% 19 573

Apr. 1, 1993—Jun. 30, 1993 6% 17 571 7% 19 573

Jul. 1, 1993—Sep. 30, 1993 6% 17 571 7% 19 573

Oct. 1, 1993—Dec. 31, 1993 6% 17 571 7% 19 573

Jan. 1, 1994—Mar. 31, 1994 6% 17 571 7% 19 573

Apr. 1, 1994—Jun. 30, 1994 6% 17 571 7% 19 573

Jul. 1, 1994—Sep. 30, 1994 7% 19 573 8% 21 575

Oct. 1, 1994—Dec. 31, 1994 8% 21 575 9% 23 577

Jan. 1, 1995—Mar. 31, 1995 8% 21 575 9% 23 577

Apr. 1, 1995—Jun. 30, 1995 9% 23 577 10% 25 579

Jul. 1, 1995—Sep. 30, 1995 8% 21 575 9% 23 577

Oct. 1, 1995—Dec. 31, 1995 8% 21 575 9% 23 577

Jan. 1, 1996—Mar. 31, 1996 8% 69 623 9% 71 625

Apr. 1, 1996—Jun. 30, 1996 7% 67 621 8% 69 623

Jul. 1, 1996—Sep. 30, 1996 8% 69 623 9% 71 625

Oct. 1, 1996—Dec. 31, 1996 8% 69 623 9% 71 625

Jan. 1, 1997—Mar. 31, 1997 8% 21 575 9% 23 577

Apr. 1, 1997—Jun. 30, 1997 8% 21 575 9% 23 577

Jul. 1, 1997—Sep. 30, 1997 8% 21 575 9% 23 577

Oct. 1, 1997—Dec. 31, 1997 8% 21 575 9% 23 577

Jan. 1, 1998—Mar. 31, 1998 8% 21 575 9% 23 577

Apr. 1, 1998—Jun. 30, 1998 7% 19 573 8% 21 575

Jul. 1, 1998—Sep. 30, 1998 7% 19 573 8% 21 575

Oct. 1, 1998—Dec. 31, 1998 7% 19 573 8% 21 575

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

1995–1 C.B. RATE TABLE PAGE

Jan. 1, 1999—Mar. 31, 1999 7% 19 573

Apr. 1, 1999—Jun. 30, 1999 8% 21 575

Jul. 1, 1999—Sep. 30, 1999 8% 21 575

Oct. 1, 1999—Dec. 31, 1999 8% 21 575

Jan. 1, 2000—Mar. 31, 2000 8% 69 623

Apr. 1, 2000—Jun. 30, 2000 9% 71 625

Jul. 1, 2000—Sep. 30, 2000 9% 71 625

Oct. 1, 2000—Dec. 31, 2000 9% 71 625

Jan. 1, 2001—Mar. 31, 2001 9% 23 577

Apr. 1, 2001—Jun. 30, 2001 8% 21 575

December 19, 2016 810 Bulletin No. 2016–51

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

1995–1 C.B. RATE TABLE PAGE

Jul. 1, 2001—Sep. 30, 2001 7% 19 573

Oct. 1, 2001—Dec. 31, 2001 7% 19 573

Jan. 1, 2002—Mar. 31, 2002 6% 17 571

Apr. 1, 2002—Jun. 30, 2002 6% 17 571

Jul. 1, 2002—Sep. 30, 2002 6% 17 571

Oct. 1, 2002—Dec. 31, 2002 6% 17 571

Jan. 1, 2003—Mar. 31, 2003 5% 15 569

Apr. 1, 2003—Jun. 30, 2003 5% 15 569

Jul. 1, 2003—Sep. 30, 2003 5% 15 569

Oct. 1, 2003—Dec. 31, 2003 4% 13 567

Jan. 1, 2004—Mar. 31, 2004 4% 61 615

Apr. 1, 2004—Jun. 30, 2004 5% 63 617

Jul. 1, 2004—Sep. 30, 2004 4% 61 615

Oct. 1, 2004—Dec. 31, 2004 5% 63 617

Jan. 1, 2005—Mar. 31, 2005 5% 15 569

Apr. 1, 2005—Jun. 30, 2005 6% 17 571

Jul. 1, 2005—Sep. 30, 2005 6% 17 571

Oct. 1, 2005—Dec. 31, 2005 7% 19 573

Jan. 1, 2006—Mar. 31, 2006 7% 19 573

Apr. 1, 2006—Jun. 30, 2006 7% 19 573

Jul. 1, 2006—Sep. 30, 2006 8% 21 575

Oct. 1, 2006—Dec. 31, 2006 8% 21 575

Jan. 1, 2007—Mar. 31, 2007 8% 21 575

Apr. 1, 2007—Jun. 30, 2007 8% 21 575

Jul. 1, 2007—Sep. 30, 2007 8% 21 575

Oct. 1, 2007—Dec. 31, 2007 8% 21 575

Jan. 1, 2008—Mar. 31, 2008 7% 67 621

Apr. 1, 2008—Jun. 30, 2008 6% 65 619

Jul. 1, 2008—Sep. 30, 2008 5% 63 617

Oct. 1, 2008—Dec. 31, 2008 6% 65 619

Jan. 1, 2009—Mar. 31, 2009 5% 15 569

Apr. 1, 2009—Jun. 30, 2009 4% 13 567

Jul. 1, 2009—Sep. 30, 2009 4% 13 567

Oct. 1, 2009—Dec. 31, 2009 4% 13 567

Jan. 1, 2010—Mar. 31, 2010 4% 13 567

Apr. 1, 2010—Jun. 30, 2010 4% 13 567

Jul. 1, 2010—Sep. 30, 2010 4% 13 567

Oct. 1, 2010—Dec. 31, 2010 4% 13 567

Jan. 1, 2011—Mar. 31, 2011 3% 11 565

Apr. 1, 2011—Jun. 30, 2011 4% 13 567

Jul. 1, 2011-—Sep. 30, 2011 4% 13 567

Oct. 1, 2011—Dec. 31, 2011 3% 11 565

Bulletin No. 2016–51 811 December 19, 2016

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

1995–1 C.B. RATE TABLE PAGE

Jan. 1, 2012—Mar. 31, 2012 3% 59 613

Apr. 1, 2012—Jun. 30, 2012 3% 59 613

Jul. 1, 2012—Sep. 30, 2012 3% 59 613

Oct. 1, 2012—Dec. 31, 2012 3% 59 613

Jan. 1, 2013—Mar. 31, 2013 3% 11 565

Apr. 1, 2013—Jun. 30, 2013 3% 11 565

Jul. 1, 2013—Sep. 30, 2013 3% 11 565

Oct. 1, 2013—Dec. 31, 2013 3% 11 565

Jan. 1, 2014—Mar. 31, 2014 3% 11 565

Apr. 1, 2014—Jun. 30, 2014 3% 11 565

Jul. 1, 2014—Sep. 30, 2014 3% 11 565

Oct. 1, 2014—Dec. 31, 2014 3% 11 565

Jan. 1, 2015—Mar. 31, 2015 3% 11 565

Apr. 1, 2015—Jun. 30, 2015 3% 11 565

Jul. 1, 2015—Sep. 30, 2015 3% 11 565

Oct. 1. 2015—Dec. 31, 2015 3% 11 565

Jan. 1, 2016—Mar. 31, 2016 3% 59 613

Apr. 1, 2016—Jun. 30, 2016 4% 61 615

Jul. 1, 2016—Sep. 30, 2016 4% 61 615

Oct. 1, 2016—Dec. 31, 2016 4% 61 615

Jan. 1, 2017—Mar. 31, 2017 4% 13 567

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS UNDERPAYMENTS

1995–1 C.B. 1995–1 C.B. RATE TABLE PG RATE TABLE PG

Jan. 1, 1999—Mar. 31, 1999 6% 17 571 7% 19 573

Apr. 1, 1999—Jun. 30, 1999 7% 19 573 8% 21 575

Jul. 1, 1999—Sep. 30, 1999 7% 19 573 8% 21 575

Oct. 1, 1999—Dec. 31, 1999 7% 19 573 8% 21 575

Jan. 1, 2000—Mar. 31, 2000 7% 67 621 8% 69 623

Apr. 1, 2000—Jun. 30, 2000 8% 69 623 9% 71 625

Jul. 1, 2000—Sep. 30, 2000 8% 69 623 9% 71 625

Oct. 1, 2000—Dec. 31, 2000 8% 69 623 9% 71 625

Jan. 1, 2001—Mar. 31, 2001 8% 21 575 9% 23 577

Apr. 1, 2001—Jun. 30, 2001 7% 19 573 8% 21 575

Jul. 1, 2001—Sep. 30, 2001 6% 17 571 7% 19 573

Oct. 1, 2001—Dec. 31, 2001 6% 17 571 7% 19 573

Jan. 1, 2002—Mar. 31, 2002 5% 15 569 6% 17 571

December 19, 2016 812 Bulletin No. 2016–51

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS UNDERPAYMENTS

1995–1 C.B. 1995–1 C.B. RATE TABLE PG RATE TABLE PG

Apr. 1, 2002—Jun. 30, 2002 5% 15 569 6% 17 571

Jul. 1, 2002—Sep. 30, 2002 5% 15 569 6% 17 571

Oct. 1, 2002—Dec. 31, 2002 5% 15 569 6% 17 571

Jan. 1, 2003—Mar. 31, 2003 4% 13 567 5% 15 569

Apr. 1, 2003—Jun. 30, 2003 4% 13 567 5% 15 569

Jul. 1, 2003—Sep. 30, 2003 4% 13 567 5% 15 569

Oct. 1, 2003—Dec. 31, 2003 3% 11 565 4% 13 567

Jan. 1, 2004—Mar. 31, 2004 3% 59 613 4% 61 615

Apr. 1, 2004—Jun. 30, 2004 4% 61 615 5% 63 617

Jul. 1, 2004—Sep. 30, 2004 3% 59 613 4% 61 615

Oct. 1, 2004—Dec. 31, 2004 4% 61 615 5% 63 617

Jan. 1, 2005—Mar. 31, 2005 4% 13 567 5% 15 569

Apr. 1, 2005—Jun. 30, 2005 5% 15 569 6% 17 571

Jul. 1, 2005—Sep. 30, 2005 5% 15 569 6% 17 571

Oct. 1, 2005—Dec. 31, 2005 6% 17 571 7% 19 573

Jan. 1, 2006—Mar. 31, 2006 6% 17 571 7% 19 573

Apr. 1, 2006—Jun. 30, 2006 6% 17 571 7% 19 573

Jul. 1, 2006—Sep. 30, 2006 7% 19 573 8% 21 575

Oct. 1, 2006—Dec. 31, 2006 7% 19 573 8% 21 575

Jan. 1, 2007—Mar. 31, 2007 7% 19 573 8% 21 575

Apr. 1, 2007—Jun. 30, 2007 7% 19 573 8% 21 575

Jul. 1, 2007—Sep. 30, 2007 7% 19 573 8% 21 575

Oct. 1, 2007—Dec. 31, 2007 7% 19 573 8% 21 575

Jan. 1, 2008—Mar. 31, 2008 6% 65 619 7% 67 621

Apr. 1, 2008—Jun. 30, 2008 5% 63 617 6% 65 619

Jul. 1, 2008—Sep. 30, 2008 4% 61 615 5% 63 617

Oct. 1, 2008—Dec. 31, 2008 5% 63 617 6% 65 619

Jan. 1, 2009—Mar. 31, 2009 4% 13 567 5% 15 569

Apr. 1, 2009—Jun. 30, 2009 3% 11 565 4% 13 567

Jul. 1, 2009—Sep. 30, 2009 3% 11 565 4% 13 567

Oct. 1, 2009—Dec. 31, 2009 3% 11 565 4% 13 567

Jan. 1, 2010—Mar. 31, 2010 3% 11 565 4% 13 567

Apr. 1, 2010—Jun. 30, 2010 3% 11 565 4% 13 567

Jul. 1, 2010—Sep. 30, 2010 3% 11 565 4% 13 567

Oct. 1, 2010—Dec. 31, 2010 3% 11 565 4% 13 567

Jan. 1, 2011—Mar. 31, 2011 2% 9 563 3% 11 565

Apr. 1, 2011—Jun. 30, 2011 3% 11 565 4% 13 567

Jul. 1, 2011—Sep. 30, 2011 3% 11 565 4% 13 567

Oct. 1, 2011—Dec. 31, 2011 2% 9 563 3% 11 565

Jan. 1, 2012—Mar. 31, 2012 2% 57 611 3% 59 613

Apr. 1, 2012—Jun. 30, 2012 2% 57 611 3% 59 613

Bulletin No. 2016–51 813 December 19, 2016

TABLE OF INTEREST RATES

FROM JANUARY 1, 1999 - PRESENT

CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS UNDERPAYMENTS

1995–1 C.B. 1995–1 C.B. RATE TABLE PG RATE TABLE PG

Jul. 1, 2012—Sep. 30, 2012 2% 57 611 3% 59 613

Oct. 1, 2012—Dec. 31, 2012 2% 57 611 3% 59 613

Jan. 1, 2013—Mar. 31, 2013 2% 9 563 3% 11 565

Apr. 1, 2013—Jun. 30, 2013 2% 9 563 3% 11 565

Jul. 1, 2013—Sep. 30, 2013 2% 9 563 3% 11 565

Oct. 1, 2013—Dec. 31, 2013 2% 9 563 3% 11 565

Jan. 1, 2014—Mar. 31, 2014 2% 9 563 3% 11 565

Apr. 1, 2014—Jun. 30, 2014 2% 9 563 3% 11 565

Jul. 1, 2014—Sep. 30, 2014 2% 9 563 3% 11 565

Oct. 1, 2014—Dec. 31, 2014 2% 9 563 3% 11 565

Jan. 1, 2015—Mar. 31, 2015 2% 9 563 3% 11 565

Apr. 1, 2015-—Jun.30, 2015 2% 9 563 3% 11 565

Jul. 1. 2015—Sep. 30, 2015 2% 9 563 3% 11 565

Oct. 1, 2015—Dec. 31, 2015 2% 9 563 3% 11 565

Jan. 1, 2016—Mar. 31, 2016 2% 57 611 3% 59 613

Apr. 1, 2016—Jun. 30, 2016 3% 59 613 4% 61 615

Jul. 1, 2016—Sep. 30, 2016 3% 59 613 4% 61 615

Oct. 1, 2016—Dec. 31, 2016 3% 59 613 4% 61 615

Jan. 1, 2017—Mar. 31, 2017 3% 11 565 4% 13 567

TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS

FROM JANUARY 1, 1991 - PRESENT

1995–1 C.B. RATE TABLE PG

Jan. 1, 1991—Mar. 31, 1991 13% 31 585

Apr. 1, 1991—Jun. 30, 1991 12% 29 583

Jul. 1, 1991—Sep. 30, 1991 12% 29 583

Oct. 1, 1991—Dec. 31, 1991 12% 29 583

Jan. 1, 1992—Mar. 31, 1992 11% 75 629

Apr. 1, 1992—Jun. 30, 1992 10% 73 627

Jul. 1, 1992—Sep. 30, 1992 10% 73 627

Oct. 1, 1992—Dec. 31, 1992 9% 71 625

Jan. 1, 1993—Mar. 31, 1993 9% 23 577

Apr. 1, 1993—Jun. 30, 1993 9% 23 577

Jul. 1, 1993—Sep. 30, 1993 9% 23 577

Oct. 1, 1993—Dec. 31, 1993 9% 23 577

Jan. 1, 1994—Mar. 31, 1994 9% 23 577

Apr. 1, 1994—Jun. 30, 1994 9% 23 577

Jul. 1, 1994—Sep. 30, 1994 10% 25 579

Oct. 1, 1994—Dec. 31, 1994 11% 27 581

December 19, 2016 814 Bulletin No. 2016–51

TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS

FROM JANUARY 1, 1991 - PRESENT

1995–1 C.B. RATE TABLE PG

Jan. 1, 1995—Mar. 31, 1995 11% 27 581

Apr. 1, 1995—Jun. 30, 1995 12% 29 583

Jul. 1, 1995—Sep. 30, 1995 11% 27 581

Oct. 1, 1995—Dec. 31, 1995 11% 27 581

Jan. 1, 1996—Mar. 31, 1996 11% 75 629

Apr. 1, 1996—Jun. 30, 1996 10% 73 627

Jul. 1, 1996—Sep. 30, 1996 11% 75 629

Oct. 1, 1996—Dec. 31, 1996 11% 75 629

Jan. 1, 1997—Mar. 31, 1997 11% 27 581

Apr. 1, 1997—Jun. 30, 1997 11% 27 581

Jul. 1, 1997—Sep. 30, 1997 11% 27 581

Oct. 1, 1997—Dec. 31, 1997 11% 27 581

Jan. 1, 1998—Mar. 31, 1998 11% 27 581

Apr. 1, 1998—Jun. 30, 1998 10% 25 579

Jul. 1, 1998—Sep. 30, 1998 10% 25 579

Oct. 1, 1998—Dec. 31, 1998 10% 25 579

Jan. 1, 1999—Mar. 31, 1999 9% 23 577

Apr. 1, 1999—Jun. 30, 1999 10% 25 579

Jul. 1, 1999—Sep. 30, 1999 10% 25 579

Oct. 1, 1999—Dec. 31, 1999 10% 25 579

Jan. 1, 2000—Mar. 31, 2000 10% 73 627

Apr. 1, 2000—Jun. 30, 2000 11% 75 629

Jul. 1, 2000—Sep. 30, 2000 11% 75 629

Oct. 1, 2000—Dec. 31, 2000 11% 75 629

Jan. 1, 2001—Mar. 31, 2001 11% 27 581

Apr. 1, 2001—Jun. 30, 2001 10% 25 579

Jul. 1, 2001—Sep. 30, 2001 9% 23 577

Oct. 1, 2001—Dec. 31, 2001 9% 23 577

Jan. 1, 2002—Mar. 31, 2002 8% 21 575

Apr. 1, 2002—Jun. 30, 2002 8% 21 575

Jul. 1, 2002—Sep. 30, 2002 8% 21 575

Oct. 1, 2002—Dec. 31, 2002 8% 21 575

Jan. 1, 2003—Mar. 31, 2003 7% 19 573

Apr. 1, 2003—Jun. 30, 2003 7% 19 573

Jul. 1, 2003—Sep. 30, 2003 7% 19 573

Oct. 1, 2003—Dec. 31, 2003 6% 17 571

Jan. 1, 2004—Mar. 31, 2004 6% 65 619

Apr. 1, 2004—Jun. 30, 2004 7% 67 621

Jul. 1, 2004—Sep. 30, 2004 6% 65 619

Oct. 1, 2004—Dec. 31, 2004 7% 67 621

Jan. 1, 2005—Mar. 31, 2005 7% 19 573

Apr. 1, 2005—Jun. 30, 2005 8% 21 575

Jul. 1, 2005—Sep. 30, 2005 8% 21 575

Oct. 1, 2005—Dec. 31, 2005 9% 23 577

Bulletin No. 2016–51 815 December 19, 2016

TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS

FROM JANUARY 1, 1991 - PRESENT

1995–1 C.B. RATE TABLE PG

Jan. 1, 2006—Mar. 31, 2006 9% 23 577

Apr. 1, 2006—Jun. 30, 2006 9% 23 577

Jul. 1, 2006—Sep. 30, 2006 10% 25 579

Oct. 1, 2006—Dec. 31, 2006 10% 25 579

Jan. 1, 2007—Mar. 31, 2007 10% 25 579

Apr. 1, 2007—Jun. 30, 2007 10% 25 579

Jul. 1, 2007—Sep. 30, 2007 10% 25 579

Oct. 1, 2007—Dec. 31, 2007 10% 25 579

Jan. 1, 2008—Mar. 31, 2008 9% 71 625

Apr. 1, 2008—Jun. 30, 2008 8% 69 623

Jul. 1, 2008—Sep. 30, 2008 7% 67 621

Oct. 1, 2008—Dec. 31, 2008 8% 69 623

Jan. 1, 2009—Mar. 31, 2009 7% 19 573

Apr. 1, 2009—Jun. 30, 2009 6% 17 571

Jul. 1, 2009—Sep. 30, 2009 6% 17 571

Oct. 1, 2009—Dec. 31, 2009 6% 17 571

Jan. 1, 2010—Mar. 31, 2010 6% 17 571

Apr. 1, 2010—Jun. 30, 2010 6% 17 571

Jul. 1, 2010—Sep. 30, 2010 6% 17 571

Oct. 1, 2010—Dec. 31, 2010 6% 17 571

Jan. 1, 2011—Mar. 31, 2011 5% 15 569

Apr. 1, 2011—Jun. 30, 2011 6% 17 571

Jul. 1, 2011—Sep. 30, 2011 6% 17 571

Oct. 1, 2011—Dec. 31, 2011 5% 15 569

Jan. 1, 2012—Mar. 31, 2012 5% 63 617

Apr. 1, 2012—Jun. 30, 2012 5% 63 617

Jul. 1, 2012—Sep. 30, 2012 5% 63 617

Oct. 1, 2012—Dec. 31, 2012 5% 63 617

Jan. 1, 2013—Mar. 31, 2013 5% 15 569

Apr. 1, 2013—Jun. 30, 2013 5% 15 569

Jul. 1, 2013—Sep. 30, 2013 5% 15 569

Oct. 1, 2013—Dec. 31, 2013 5% 15 569

Jan. 1, 2014—Mar. 31, 2014 5% 15 569

Apr. 1, 2014—Jun. 30, 2014 5% 15 569

Jul. 1, 2014—Sep. 30, 2014 5% 15 569

Oct. 1, 2014—Dec. 31, 2014 5% 15 569

Jan. 1, 2015—Mar. 31, 2015 5% 15 569

Apr. 1, 2015—Jun. 30, 2015 5% 15 569

Jul. 1, 2015—Sep. 30, 2015 5% 15 569

Oct. 1, 2015—Dec. 31, 2015 5% 15 569

Jan. 1, 2016—Mar. 31, 2016 5% 63 617

Apr. 1, 2016-—Jun.30, 2016 6% 65 619

Jul. 1, 2016-—Sep. 30, 2016 6% 65 619

December 19, 2016 816 Bulletin No. 2016–51

TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS

FROM JANUARY 1, 1991 - PRESENT

1995–1 C.B. RATE TABLE PG

Oct. 1, 2016-—Dec.31, 2016 6% 65 619

Jan. 1, 2017—Mar. 31, 2017 6% 17 571

TABLE OF INTEREST RATES FOR CORPORATE

OVERPAYMENTS EXCEEDING $10,000

FROM JANUARY 1, 1995 - PRESENT

1995–1 C.B. RATE TABLE PG

Jan. 1, 1995—Mar. 31, 1995 6.5% 18 572

Apr. 1, 1995—Jun. 30, 1995 7.5% 20 574

Jul. 1, 1995—Sep. 30, 1995 6.5% 18 572

Oct. 1, 1995—Dec. 31, 1995 6.5% 18 572

Jan. 1, 1996—Mar. 31, 1996 6.5% 66 620

Apr. 1, 1996—Jun. 30, 1996 5.5% 64 618

Jul. 1, 1996—Sep. 30, 1996 6.5% 66 620

Oct. 1, 1996—Dec. 31, 1996 6.5% 66 620

Jan. 1, 1997—Mar. 31, 1997 6.5% 18 572

Apr. 1, 1997—Jun. 30, 1997 6.5% 18 572

Jul. 1, 1997—Sep. 30, 1997 6.5% 18 572

Oct. 1, 1997—Dec. 31, 1997 6.5% 18 572

Jan. 1, 1998—Mar. 31, 1998 6.5% 18 572

Apr. 1, 1998—Jun. 30, 1998 5.5% 16 570

Jul. 1. 1998—Sep. 30, 1998 5.5% 16 570

Oct. 1, 1998—Dec. 31, 1998 5.5% 16 570

Jan. 1, 1999—Mar. 31, 1999 4.5% 14 568

Apr. 1, 1999—Jun. 30, 1999 5.5% 16 570

Jul. 1, 1999—Sep. 30, 1999 5.5% 16 570

Oct. 1, 1999—Dec. 31, 1999 5.5% 16 570

Jan. 1, 2000—Mar. 31, 2000 5.5% 64 618

Apr. 1, 2000—Jun. 30, 2000 6.5% 66 620

Jul. 1, 2000—Sep. 30, 2000 6.5% 66 620

Oct. 1, 2000—Dec. 31, 2000 6.5% 66 620

Jan. 1, 2001—Mar. 31, 2001 6.5% 18 572

Apr. 1, 2001—Jun. 30, 2001 5.5% 16 570

Jul. 1, 2001—Sep. 30, 2001 4.5% 14 568

Oct. 1, 2001—Dec. 31, 2001 4.5% 14 568

Jan. 1, 2002—Mar. 31, 2002 3.5% 12 566

Apr. 1, 2002—Jun. 30, 2002 3.5% 12 566

Jul. 1, 2002—Sep. 30, 2002 3.5% 12 566

Oct. 1, 2002—Dec. 31, 2002 3.5% 12 566

Jan. 1, 2003—Mar. 31, 2003 2.5% 10 564

Apr. 1, 2003—Jun. 30, 2003 2.5% 10 564

Jul. 1, 2003—Sep. 30, 2003 2.5% 10 564

Bulletin No. 2016–51 817 December 19, 2016

TABLE OF INTEREST RATES FOR CORPORATE

OVERPAYMENTS EXCEEDING $10,000

FROM JANUARY 1, 1995 - PRESENT

1995–1 C.B. RATE TABLE PG

Oct. 1, 2003—Dec. 31, 2003 1.5% 8 562

Jan. 1, 2004—Mar. 31, 2004 1.5% 56 610

Apr. 1, 2004—Jun. 30, 2004 2.5% 58 612

Jul. 1, 2004—Sep. 30, 2004 1.5% 56 610

Oct. 1, 2004—Dec. 31, 2004 2.5% 58 612

Jan. 1, 2005—Mar. 31, 2005 2.5% 10 564

Apr. 1, 2005—Jun. 30, 2005 3.5% 12 566

Jul. 1, 2005—Sep. 30, 2005 3.5% 12 566

Oct. 1, 2005—Dec. 31, 2005 4.5% 14 568

Jan. 1, 2006—Mar. 31, 2006 4.5% 14 568

Apr. 1, 2006—Jun. 30, 2006 4.5% 14 568

Jul. 1, 2006—Sep. 30, 2006 5.5% 16 570

Oct. 1, 2006—Dec. 31, 2006 5.5% 16 570

Jan. 1, 2007—Mar. 31, 2007 5.5% 16 570

Apr. 1, 2007—Jun. 30, 2007 5.5% 16 570

Jul. 1, 2007—Sep. 30, 2007 5.5% 16 570

Oct. 1, 2007—Dec. 31, 2007 5.5% 16 570

Jan. 1, 2008—Mar. 31, 2008 4.5% 62 616

Apr. 1, 2008—Jun. 30, 2008 3.5% 60 614

Jul. 1, 2008—Sep. 30, 2008 2.5% 58 612

Oct. 1, 2008—Dec. 31, 2008 3.5% 60 614

Jan. 1, 2009—Mar. 31, 2009 2.5% 10 564

Apr. 1, 2009—Jun. 30, 2009 1.5% 8 562

Jul. 1, 2009—Sep. 30, 2009 1.5% 8 562

Oct. 1, 2009—Dec. 31, 2009 1.5% 8 562

Jan. 1, 2010—Mar. 31, 2010 1.5% 8 562

Apr. 1, 2010—Jun. 30, 2010 1.5% 8 562

Jul. 1, 2010—Sep. 30, 2010 1.5% 8 562

Oct. 1, 2010—Dec. 31, 2010 1.5% 8 562

Jan. 1, 2011—Mar. 31, 2011 0.5%*

Apr. 1, 2011—Jun. 30, 2011 1.5% 8 562

Jul. 1, 2011-—Sep. 30, 2011 1.5% 8 562

Oct. 1, 2011—Dec. 31, 2011 0.5%*

Jan. 1, 2012—Mar. 31, 2012 0.5%*

Apr. 1, 2012—Jun. 30, 2012 0.5%*

Jul. 1, 2012—Sep. 30, 2012 0.5%*

Oct. 1, 2012—Dec. 31, 2012 0.5%*

Jan. 1, 2013—Mar. 31, 2013 0.5%*

Apr. 1, 2013—Jun. 30, 2013 0.5%*

Jul. 1, 2013—Sep. 30, 2013 0.5%*

Oct. 1, 2013—Dec. 31, 2013 0.5%*

Jan. 1, 2014—Mar. 31, 2014 0.5%*

Apr. 1, 2014—Jun. 30, 2014 0.5%*

December 19, 2016 818 Bulletin No. 2016–51

TABLE OF INTEREST RATES FOR CORPORATE

OVERPAYMENTS EXCEEDING $10,000

FROM JANUARY 1, 1995 - PRESENT

1995–1 C.B. RATE TABLE PG

Jul. 1, 2014—Sep. 30, 2014 0.5%*

Oct. 1, 2014—Dec. 31, 2014 0.5%*

Jan. 1, 2015—Mar. 31, 2015 0.5%*

Apr. 1, 2015—Jun. 30, 2015 0.5%*

Jul. 1, 2015—Sep. 30, 2015 0.5%*

Oct. 1, 2015—Dec. 31, 2015 0.5%*

Jan. 1, 2016—Mar. 31, 2016 0.5%*

Apr. 1, 2016—Jun. 30, 2016 1.5% 56 610

Jul. 1, 2016—Sep. 30, 2016 1.5% 56 610

Oct. 1, 2016—Dec. 31, 2016 1.5% 56 610

Jan. 1, 2017—Mar. 31, 2017 1.5% 8 562

The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent published in Appendix A of this Revenue Ruling.

26 CFR 1.6035–2

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

TD 9797

Consistent Basis Reporting Between Estate and Person Acquiring Property From Decedent

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

SUMMARY: This document contains final regulations that provide transition rules providing that executors and other persons required to file or furnish a statement under section 6035(a)(1) or (2) regarding the value of property included in a decedent’s gross estate for federal estate tax purposes before June 30, 2016, need not have done so until June 30, 2016. These final regulations are applicable to executors and other persons who file fed

eral estate tax returns required by section 6018(a) or (b) after July 31, 2015.

DATES: Effective Date . These regulations are effective on December 2, 2016.

Applicability Dates : For date of applicability, see § 1.6035–2(b).

FOR FURTHER INFORMATION CONTACT: Theresa Melchiorre (202) 317-6859 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 6018(a) requires executors to file federal estate tax returns with respect to (1) certain estates of citizens or residents of the United States and (2) certain estates of nonresidents that are not citizens of the United States. If an executor is unable to make a complete federal estate tax return as to any property that is a part of a decedent’s gross estate, section 6018(b) requires every person or beneficiary holding such property, upon notice from the Secretary, to make a federal estate tax return as to such part of the gross estate.

On July 31, 2015, the President of the United States signed into law H.R. 3236, The Surface Transportation and Veterans

Health Care Choice Improvement Act of 2015, Public Law 114–41, 129 Stat. 443 (Act). Section 2004 of the Act added new section 6035.

Section 6035 imposes reporting requirements with regard to the value of property included in a decedent’s gross estate for federal estate tax purposes. Section 6035(a)(1) provides that the executor of any estate required to file a return under section 6018(a) must file with the Secretary and furnish to the person acquiring any interest in property included in the decedent’s gross estate, a statement identifying the value of each interest in such property as reported on such return and such other information with respect to such interest as the Secretary may prescribe.

Section 6035(a)(2) provides that each other person required to file a return under section 6018(b) must file with the Secretary and furnish to each person who holds a legal or beneficial interest in the property to which such return relates, a statement identifying the same information described in section 6035(a)(1).

Section 6035(a)(3)(A) provides that each statement required to be filed or furnished under section 6035(a)(1) or (2) is to be filed or furnished at such time as the Secretary may prescribe, but in no case at

Bulletin No. 2016–51 819 December 19, 2016

a time later than the earlier of (i) the date that is 30 days after the date on which the return under section 6018 was required to be filed (including extensions actually granted, if any) or (ii) the date which is 30 days after the date such return is filed.

On August 21, 2015, the Treasury Department and the IRS issued Notice 2015– 57, 2015–36 IRB 294. That notice delayed until February 29, 2016, the due date for any statements required by section 6035.

On February 11, 2016, the Treasury Department and the IRS issued Notice 2016–19, 2016–09 IRB 362. That notice provided that executors or other persons required to file or furnish a statement under section 6035(a)(1) or (2) before March 31, 2016, need not have done so until March 31, 2016.

On March 4, 2016, the Treasury Department and the IRS published temporary regulations (TD 9757) in the Federal Register (81 FR 11431–01) providing transition relief under § 1.6035–2T. The temporary regulations extended the due date for statements required by section 6035 to March 31, 2016, as provided in Notice 2016–19.

Also on March 4, 2016, the Treasury Department and the IRS published in the Federal Register (81 FR 11486–01) proposed regulations (REG–127923–15). The text of TD 9757 served as the text of the proposed regulations regarding the transition relief provided under § 1.6035– 2T. On March 23, 2016, the Treasury Department and the IRS issued Notice 2016– 27, 2016–15 IRB 576. That notice provided that executors or other persons required to file or furnish a statement under section 6035(a)(1) or (2) before June 30, 2016, need not have done so until June 30, 2016. On June 27, 2016, the Treasury Department and the IRS held a public hearing on the proposed regulations. In addition to the comments received at the hearing, the Treasury Department and the IRS received numerous written comments. Both at the hearing and in written comments, commenters commented favorably on the transition relief providing extensions of time to file and furnish the statements required by section 6035(a)(1) or (2) that the Treasury Department and the IRS had granted in TD 9757 and the

notices (including Notice 2016–27 issued after TD 9757 was published in the Federal Register).

Explanation of Provisions

These final regulations reiterate the statement in Notice 2016–27 and provide that executors or other persons required to file or furnish a statement under section 6035(a)(1) or (2) before June 30, 2016, need not have done so until June 30, 2016. These final regulations are issued within 18 months of the date of the enactment of the statutory provisions to which the final regulations relate and, as authorized by section 7805(b)(2), are applicable to executors and other persons who file a return required by section 6018(a) or (b) after July 31, 2015.

Statement of Availability of IRS Documents

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

Special Analyses

In addition, section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) did not apply to TD 9757 because TD 9757 was excepted from the notice and comment requirements of section 553(b) and (c) of the Administrative Procedure Act under the interpretative rule and good cause exceptions provided by section 553(b)(3)(A) and (B). The Act included an immediate effective date, thus making the first required statements due 30 days after enactment. It was necessary to provide more time to provide the statements required by section 6035(a), to allow the Treasury Department and the IRS sufficient time to issue both substantive and procedural guidance on how to com

ply with the section 6035(a) requirement, and to provide executors and other affected persons the opportunity to review this guidance before preparing the required statements. TD 9757 reiterated the relief in Notice 2016–19 and, because of the immediate need to provide relief, notice and public comment pursuant to 5 U.S.C. 553(b) and (c) was impracticable, unnecessary, and contrary to the public interest. Public comment, however, was received on TD 9757 and all the notices, including Notice 2016–27, at the public hearing held on June 27, 2016, and in written comments submitted on the proposed regulations that cross-referenced and included the text of TD 9757.

It has been certified that the collection of information in these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that this rule primarily affects individuals (or their estates) and trusts, which are not small entities as defined by the Regulatory Flexibility Act (5 U.S.C. 601). Although it is anticipated that there may be an incremental economic impact on executors that are small entities, including entities that provide tax and legal services that assist individuals in preparing tax returns, any impact would not be significant and would not affect a substantial number of small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.

Pursuant to section 7805(f) of the Code, TD 9757 and notice of the proposed rulemaking that cross-referenced and included the text of TD 9757 was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. No comments were received.

Drafting Information

The principal author of these final regulations is Theresa Melchiorre, Office of the Associate Chief Counsel (Passthroughs and Special Industries). Other personnel from the Treasury Department and the IRS participated in their development.

December 19, 2016 820 Bulletin No. 2016–51

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 § 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 § 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 § 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 § 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 § 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

Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding an entry in numerical order to read in part as follows:

Authority: 26 U. S. C. 7805 - -

- - - Section 1.6035–2 also issued under 26 U.S.C. 6035(b).

§ 1.6035–2T [Removed]

Par. 2. Section 1.6035–2T is removed. Par. 3. Section 1.6035–2 is revised to read as follows:

§ 1.6035–2 Transitional relief .

(a) Statements due before June 30, 2016 . Executors and other persons required to file or furnish a statement under section 6035(a)(1) or (2) after July 31, 2015 and before June 30, 2016, need not have done so until June 30, 2016.

(b) Applicability Date . This section is applicable to executors and other persons who file a return required by section 6018(a) or (b) after July 31, 2015.

John Dalrymple Deputy Commissioner for Services and

Enforcement. Approved: November 16, 2016.

Mark J. Mazur Assistant Secretary of the Treasury (Tax

Policy).

(Filed by the Office of the Federal Register on December 1, 2016, 8:45 a.m., and published in the issue of the Federal Register for December 2, 2016, 81 F.R. 86953)

26 CFR 300.1, amended; 26 CFR 300.2, amended

T.D. 9798

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

User Fees for Installment Agreements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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

Bulletin No. 2016–51 821 December 19, 2016

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 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 agree

ment 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 increas

ing 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

December 19, 2016 822 Bulletin No. 2016–51

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 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 garnish

ments, 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 provid

ing 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

Bulletin No. 2016–51 823 December 19, 2016

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 selfsustaining.” 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 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

December 19, 2016 824 Bulletin No. 2016–51

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 Cir

cular 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 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 lowincome 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 lowincome 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 lowincome 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 lowincome 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

Bulletin No. 2016–51 825 December 19, 2016

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 lowincome 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 lowincome 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 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.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 300 is amended as follows:

PART 300—USER FEES

Paragraph 1. The authority citation for part 300 continues to read as follows:

Authority: 31 U.S.C. 9701. Par. 2. In § 300.1, paragraphs (b) and (d) are revised to read as follows:

§ 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 lowincome taxpayer, that is, an individual

December 19, 2016 826 Bulletin No. 2016–51

who falls at or below 250 percent of the dollar criteria established by the poverty guidelines updated annually in the Fed- eral 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.

Par. 3. In § 300.2, paragraphs (b) and (d) are revised to read as follows:

§ 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 lowincome 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 Fed- eral 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).

(Filed by the Office of the Federal Register on November 29, 2016, 11:15 a.m., and published in the issue of the Federal Register for December 2, 2016, 81 F.R. 86955)

26 CFR 1.6695–2 and 26 CFR 1.6695–2T: Tax re- turn preparer due diligence requirements for certain credits

Tax Return Preparer Due Diligence Penalty under Section 6695(g)

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 602

[TD 9799]

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains temporary regulations that modify existing regulations related to the penalty under section 6695(g) of the Internal Revenue Code (Code) relating to tax return preparer due diligence. These temporary regulations implement recent law changes that expand the tax return preparer due diligence penalty under section 6695(g) so that it applies to the child tax credit (CTC), additional child tax credit (ACTC), and the American Opportunity Tax Credit (AOTC), in addition to the earned income credit (EIC). The temporary regulations affect tax return preparers. The substance of the temporary regulations is included in the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section in this issue of the Internal Revenue Bulletin.

DATES: Effective Date : These regulations are effective on December 5, 2016.

Applicability Date : For dates of applicability, see § 1.6695–2T(e).

FOR FURTHER INFORMATION CONTACT: Rachel L. Gregory, 202317-6845 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in these temporary and final regulations is in § § 1.6695–2(b) and 1.6695– 2T(b) and is reported on Form 8867, “Paid Preparer’s Due Diligence Checklist.” Responses to this collection of information are mandatory. The collection of information in current § 1.6695–2 was previously reviewed and approved under control number 1545-1570. Control number 1545-1570 was discontinued in 2014, as the burden for the collection of information contained in § 1.6695–2 is reflected in the burden on Form 8867 under control number 1545-1629.

Background

This document contains amendments to 26 CFR parts 1 and 602 under section 6695(g) of the Code, imposing a penalty on tax return preparers who fail to comply with the due diligence requirements imposed by the Secretary by regulations with respect to determining the eligibility for, or the amount of, the EIC. Section 6695(g) was added to the Code because Congress believed more thorough efforts by tax return preparers are important to improving EIC compliance. H.R. Rep. No. 105–148, 105 ^th Cong. 1 ^st Sess., p. 512 (June 24, 1997).

Enacted by section 1085(a)(2) of the Taxpayer Relief Act of 1997, Pub. L. 105–34 (11 Stat. 788, 955 (1997)), and effective for taxable years beginning after December 31, 1996, section 6695(g) originally imposed a $100 penalty on an income tax return preparer who failed to meet the EIC due diligence requirements set forth in regulations prescribed by the Secretary. Section 8246 of the Small Business and Work Opportunity Tax Act of 2007, Pub. L. 110–28 (121 Stat. 112, 200 (2007)) amended the penalty to apply to all tax return preparers. Section 501(a) of the United States-Korea Free Trade Agreement Implementation Act, Pub. L. 112–41 (125 Stat. 428, 459 (2011)), amended section 6695(g) to increase the amount of the penalty to $500, effective for returns required to be filed after December 31, 2011. Section 208(c), Div. B of the Tax Increase Prevention Act of

Bulletin No. 2016–51 827 December 19, 2016

2014, Pub. L. 113–295 (128 Stat. 4010, 4073 (2014)) (2014 Act), added section 6695(h), which indexes the penalty amount for inflation, effective for returns or claims for refund filed after December 31, 2014. Section 1.6695–2 implements section 6695(g) by imposing due diligence requirements on persons who are tax return preparers under section 7701(a)(36) with respect to determining eligibility for, or the amount of, the EIC. The due diligence requirements set forth in § 1.6695–2(b) are that the preparer must: (1) complete and submit Form 8867, “Paid Preparer’s Earned Income Credit Checklist;” (2) complete the Earned Income Credit Worksheet (Worksheet), as contained in the Form 1040 instructions or record the preparer’s computation of the credit, including the method and information used to make the computation; (3) not know or have reason to know that any information used by the preparer in determining eligibility for, and the amount of, the EIC is incorrect and make reasonable inquiries when required, documenting those inquiries and responses contemporaneously (knowledge requirement); and (4) retain, for three years from the applicable date, the Form 8867, the Worksheet (or alternative records), and the record of how and when the information used to determine eligibility for, and the amount of, the EIC was obtained by the preparer, including the identity of any person furnishing information and a copy of any document relied on by the preparer.

To comply with the knowledge requirement under § 1.6695–2(b)(3), the tax return preparer may not ignore the implications of information furnished to, or known by, the tax return preparer, and must make reasonable inquiries if the information furnished to the tax return preparer appears to be incorrect, inconsistent, or incomplete. Examples in § 1.6695– 2(b)(3)(ii) illustrate this requirement. This knowledge requirement is consistent with the verification requirement imposed on all tax return preparers with respect to preparation of any tax return or claim for refund under the accuracy-related standards set forth in § 1.6694–1(e).

A tax return preparer is required to submit the Form 8867 to the IRS when the preparer electronically files the tax return.

If a tax return preparer required to complete the Form 8867 is not electronically filing the taxpayer’s return with the IRS, § 1.6695–2(b)(1) provides rules for submission of the form. If the tax return preparer required to complete the Form 8867 is not the signing tax return preparer, the preparer satisfies the submission requirement by providing a copy of the completed Form 8867 to the signing tax return preparer. If the tax return preparer required to complete the Form 8867 is the signing tax return preparer but the taxpayer is not electronically filing the return, the preparer must provide a copy of the completed Form 8867 to the taxpayer to be attached to the return being filed with the IRS.

Section 1.6695–2(c) provides that a firm that employs a tax return preparer subject to a penalty under section 6695(g) is also subject to a penalty if certain conditions apply. Under this rule, a firm will be subject to a penalty if and only if one or more members of principal management (or principal officers) of the firm or branch participated in, or prior to the time the return was filed, knew of the failure to comply with the due diligence requirements; the firm failed to establish reasonable and appropriate procedures to ensure compliance with the due diligence requirements; or, through willfulness, recklessness, or gross indifference (including ignoring facts that would lead a person of reasonable prudence and competence to investigate or ascertain) the firm disregarded its own reasonable and appropriate compliance procedures. A firm subject to a section 6695(g) penalty under this section is not eligible for the exception to the penalty in § 1.6695–2(d). Under this exception, the penalty will not be applied if the tax return preparer can demonstrate to the satisfaction of the IRS that, considering all of the facts and circumstances, the tax return preparer’s normal office procedures are reasonably designed and routinely followed to ensure compliance with the due diligence requirements, and the failure to meet the due diligence requirements with respect to the particular tax return or claim for refund was isolated and inadvertent.

Section 207, Div. Q of the Protecting Americans from Tax Hikes Act of 2015, Pub. L. 114–113 (129 Stat. 2242, 3082

(2015)) (PATH Act) amended section 6695(g) by expanding the scope of the due diligence requirements to also include claims of the CTC/ACTC under section 24 and the AOTC under section 25A(a)(1), effective for taxable years beginning after December 31, 2015.

These temporary regulations reflect the changes made to section 6695(g) by the PATH Act by expanding the due diligence requirements to the CTC/ACTC and the AOTC. These temporary regulations also conform the regulation to the 2014 Act, reflecting that the penalty is to be adjusted for inflation.

Explanation of Provisions

The temporary regulations amend § 1.6695–2 to implement the changes made by the PATH Act that extend the preparer due diligence requirements to returns or claims for refund including claims of the CTC/ACTC and/or AOTC in addition to the EIC. As a result of these changes, one return or claim for refund may contain claims for more than one credit subject to the due diligence requirements. Pursuant to the statute, each failure to comply with the due diligence requirements set forth in regulations prescribed by the Secretary results in a penalty. The section 6695(g) requirements apply to each credit claimed, meaning more than one penalty could apply to a single return or claim for refund. The temporary regulations provide examples to show how multiple penalties could apply when one return or claim for refund is filed.

The Form 8867 has been revised for the 2016 tax year and is a single checklist to be used for all applicable credits (EIC, CTC/ACTC, and/or AOTC) on the return or claim for refund subject to the section 6695(g) due diligence requirements. The Form 8867 was streamlined to eliminate unnecessary redundancy with other forms and schedules. These changes were intended to reduce burden while increasing the utility of the Form 8867 as a checklist for tax return preparers to more accurately determine taxpayer eligibility for credits, thereby reducing errors and increasing compliance by preparers and taxpayers. The temporary regulations clarify § 1.6695–2(b)(1)(ii) to illustrate that the completion of Form 8867 can be based on information pro

December 19, 2016 828 Bulletin No. 2016–51

vided by the taxpayer to the preparer or otherwise reasonably obtained or previously known by the preparer.

The examples provided in § 1.6695– 2(b)(3)(ii) have been updated to provide more insight into when a tax return preparer has satisfied the due diligence knowledge requirement, including for purposes of the CTC and AOTC. The updates to the examples in § 1.6695– 2T(b)(3)(ii) illustrate that the knowledge requirement for purposes of due diligence can be satisfied in conjunction with a tax return preparer’s information-gathering activities done for the purpose of accurately completing other aspects of a tax return or claim for refund. New examples, Example 2 and Example 4, have also been added to illustrate that in certain circumstances a tax return preparer may satisfy the knowledge requirement based on existing knowledge without having to make additional reasonable inquiries. Another new example, Example 7, provides an example of due diligence for purposes of the AOTC.

Section 1.6695–2(a) is amended by the temporary regulations to reflect the changes made by section 208(c) of the 2014 Act, requiring the IRS to index the penalty for inflation for returns or claims for refund filed after December 31, 2014. In addition, § 1.6695–2T(c)(3) clarifies the parenthetical therein by removing the words “or ascertained.”

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 assessment is not required. For applicability of the Regulatory Flexibility Act, please refer to the cross-reference notice of proposed rulemaking published elsewhere in this issue of the Federal Register. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact on small businesses.

Drafting Information

The principal author of this regulation is Rachel L. Gregory, Office of the Asso

ciate Chief Counsel (Procedure & Administration).

26 CFR Part 602 Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding a new entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 - - Section 1.6695–2T is also issued under 26 U.S.C. 6695(g).

- - - Par. 2. Section 1.6695–2 is amended by revising the section heading and paragraphs (a), (b)(1)(i) introductory text, (b)(1)(ii), (b)(2), (b)(3)(i) and (ii), (b)(4)(i)(B) and (C), and (c)(3) to read as follows:

§ 1.6695–2 Tax return preparer due diligence requirements for certain credits .

(a) [Reserved]. For further guidance regarding the penalty for failure to meet due diligence requirements with respect to certain credits, see § 1.6695–2T(a).

(b) - - (1) - - (i) [Reserved]. For further guidance regarding the completion of Form 8867, see § 1.6695–2T(b)(1)(i).

- - - (ii) [Reserved]. For further guidance regarding the information used to complete the Form 8867, see 1.6695– 2T(b)(1)(ii). (2) [Reserved]. For further guidance regarding computation, see § 1.6695– 2T(b)(2). (3) - - (i) [Reserved]. For further guidance regarding the knowledge requirement, see § 1.6695–2T(b)(3)(i).

(ii) [Reserved]. For current examples, see § 1.6695–2T(b)(3)(ii).

(4) - -

(i) - - (B) [Reserved]. For further guidance on the retention of records, see § 1.6695– 2T(b)(4)(i)(B). (C) [Reserved]. For further guidance on the retention of records, see § 1.6695– 2T(b)(4)(i)(C).

- - - (c) - - (3) [Reserved]. For further guidance on the special rule for firms, see § 1.6695– 2T(c)(3).
- - - Par. 3. Section 1.6695–2T is added to read as follows:

§ 1.6695–2T Tax return preparer due diligence requirements for certain credits (Temporary) .

(a) Penalty for failure to meet due dil- igence requirements –(1) In general . A person who is a tax return preparer (as defined in section 7701(a)(36)) of a tax return or claim for refund under the Internal Revenue Code with respect to determining the eligibility for, or the amount of, the child tax credit (CTC) and additional child tax credit (ACTC) under section 24, the American opportunity tax credit (AOTC) under section 25A(i), or the earned income credit (EIC) under section 32 and who fails to satisfy the due diligence requirements of paragraph (b) of this section will be subject to a penalty as prescribed in section 6695(g) (indexed for inflation under section 6695(h)) for each failure. A separate penalty applies with respect to each credit claimed on a return or claim for refund for which the due diligence requirements of this section are not satisfied and for which the exception to penalty provided by paragraph (d) of this section does not apply.

(2) Examples . The provisions of paragraph (a)(1) of this section are illustrated by the following examples:

Example 1 . Preparer A prepares a federal income tax return for a taxpayer claiming the CTC and the AOTC. Preparer A did not meet the due diligence requirements under this section with respect to the CTC or the AOTC claimed on the taxpayer’s return. Unless the exception to penalty provided by paragraph (d) of this section applies, Preparer A is subject to two penalties under section 6695(g): one for failure to meet the due diligence requirements for the CTC and a second penalty for failure to meet the due diligence requirements for the AOTC.

Bulletin No. 2016–51 829 December 19, 2016

Example 2 . Preparer B prepares a federal income tax return for a taxpayer claiming the CTC and the AOTC. Preparer B did not meet the due diligence requirements under this section with respect to the CTC claimed on the taxpayer’s return, but Preparer B did meet the due diligence requirements under this section with respect to the AOTC claimed on the taxpayer’s return. Unless the exception to penalty provided by paragraph (d) of this section applies, Preparer B is subject to one penalty under section 6695(g) for the failure to meet the due diligence requirements for the CTC. Preparer B is not subject to a penalty under section 6695(g) for failure to meet the due diligence requirements for the AOTC.

(b) [Reserved]. For further guidance, see § 1.6695–2(b).

(1) Completion and submission of Form 8867 . (i) The tax return preparer must complete Form 8867, “Paid Preparer’s Due Diligence Checklist,” or such other form and such other information as may be prescribed by the Internal Revenue Service (IRS), and—

(A) through (C) [Reserved]. For further guidance, see § 1.6695–2(b)(1)(i)(A) through (C).

(ii) The tax return preparer’s completion of Form 8867 must be based on information provided by the taxpayer to the tax return preparer or otherwise reasonably obtained or known by the tax return preparer.

(2) Computation of credit or credits . (i) When computing the amount of a credit described in paragraph (a) of this section to be claimed on a return or claim for refund, the tax return preparer must either—

(A) Complete the worksheet in the Form 1040, 1040A, 1040EZ, and/or Form 8863 instructions or such other form including such other information as may be prescribed by the IRS applicable to each credit described in paragraph (a) of this section claimed on the return or claim for refund; or

(B) Otherwise record in one or more documents in the tax return preparer’s paper or electronic files the tax return preparer’s computation of the credit or credits claimed on the return or claim for refund, including the method and information used to make the computations.

(ii) The tax return preparer’s completion of an applicable worksheet described in paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer’s computation of the credit or credits permitted under paragraph

(b)(2)(i)(B) of this section) must be based on information provided by the taxpayer to the tax return preparer or otherwise reasonably obtained or known by the tax return preparer.

(3) Knowledge —(i) In general . The tax return preparer must not know, or have reason to know, that any information used by the tax return preparer in determining the taxpayer’s eligibility for, or the amount of, any credit described in paragraph (a) of this section and claimed on the return or claim for refund is incorrect. The tax return preparer may not ignore the implications of information furnished to, or known by, the tax return preparer, and must make reasonable inquiries if a reasonable and well-informed tax return preparer knowledgeable in the law would conclude that the information furnished to the tax return preparer appears to be incorrect, inconsistent, or incomplete. The tax return preparer must also contemporaneously document in the files any inquiries made and the responses to those inquiries.

(ii) Examples . The provisions of paragraph (b)(3)(i) of this section are illustrated by the following examples:

Example 1 . In 2018, Q, a 22 year-old taxpayer, engages Preparer C to prepare Q’s 2017 federal income tax return. Q completes Preparer C’s standard intake questionnaire and states that she has never been married and has two sons, ages 10 and 11. Based on the intake sheet and other information that Q provides, including information that shows that the boys lived with Q throughout 2017, Preparer C believes that Q may be eligible to claim each boy as a qualifying child for purposes of the EIC and the CTC. However, Q provides no information to Preparer C, and Preparer C does not have any information from other sources, to verify the relationship between Q and the boys. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer C must make reasonable inquiries to determine whether each boy is a qualifying child of Q for purposes of the EIC and the CTC, including reasonable inquiries to verify Q’s relationship to the boys, and Preparer C must contemporaneously document these inquiries and the responses.

Example 2 . Assume the same facts as in Exam- ple 1 of this paragraph (b)(3)(ii). In addition, as part of preparing Q’s 2017 federal income tax return, Preparer C made sufficient reasonable inquiries to verify that the boys were Q’s legally adopted children. In 2019, Q engages Preparer C to prepare her 2018 federal income tax return. When preparing Q’s 2018 federal income tax return, Preparer C is not required to make additional inquiries to determine the boys relationship to Q for purposes of the knowledge requirement in paragraph (b)(3) of this section.

Example 3 . In 2018, R, an 18 year-old taxpayer, engages Preparer D to prepare R’s 2017 federal income tax return. R completes Preparer D’s standard intake questionnaire and states that she has never been married, has one child, an infant, and that she and her infant lived with R’s parents during part of the 2017 tax year. R also provides Preparer D with a Form W–2 showing that she earned $10,000 during 2017. R provides no other documents or information showing that R earned any other income during the tax year. Based on the intake sheet and other information that R provides, Preparer D believes that R may be eligible to claim the infant as a qualifying child for the EIC and the CTC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer D must make reasonable inquiries to determine whether R is eligible to claim these credits, including reasonable inquiries to verify that R is not a qualifying child of her parents (which would make R ineligible to claim the EIC) or a dependent of her parents (which would make R ineligible to claim the CTC), and Preparer D must contemporaneously document these inquiries and the responses.

Example 4 . The facts are the same as the facts in Example 3 of this paragraph (b)(3)(ii). In addition, Preparer D previously prepared the 2017 joint federal income tax return for R’s parents. Based on information provided by R’s parents, Preparer D has determined that R is not eligible to be claimed as a dependent or as a qualifying child for purposes of the EIC or CTC on R’s parents’ return. Therefore, for purposes of the knowledge requirement in paragraph (b)(3) of this section, Preparer D is not required to make additional inquiries to determine that R is not her parents’ qualifying child or dependent.

Example 5 . In 2018, S engages Preparer E to prepare his 2017 federal income tax return. During Preparer E’s standard intake interview, S states that he has never been married and his niece and nephew lived with him for part of the 2017 tax year. Preparer E believes S may be eligible to claim each of these children as a qualifying child for purposes of the EIC and the CTC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer E must make reasonable inquiries to determine whether each child is a qualifying child for purposes of the EIC and the CTC, including reasonable inquiries about the children’s parents and the children’s residency, and Preparer E must contemporaneously document these inquiries and the responses.

Example 6 . W engages Preparer F to prepare her federal income tax return. During Preparer F’s standard intake interview, W states that she is 50 years old, has never been married, and has no children. W further states to Preparer F that during the tax year she was self-employed, earned $10,000 from her business, and had no business expenses or other income. Preparer F believes W may be eligible for the EIC. To meet the knowledge requirement in paragraph (b)(3) of this section, Preparer F must make reasonable inquiries to determine whether W is eligible for the EIC, including reasonable inquiries to determine whether W’s business income and expenses are correct, and Preparer F must contemporaneously document these inquiries and the responses.

December 19, 2016 830 Bulletin No. 2016–51

Example 7 . Y, who is 32 years old, engages Preparer G to prepare his federal income tax return. Y completes Preparer G’s standard intake questionnaire and states that he has never been married. As part of Preparer G’s client intake process, Y provides Preparer G with a copy of the Form 1098–T Y received showing that University M billed $4,000 of qualified tuition and related expenses for Y’s enrollment or attendance at the university and that Y was at least a half-time undergraduate student. Preparer G believes that Y may be eligible for the AOTC. To meet the knowledge requirements in paragraph (b)(3) of this section, Preparer G must make reasonable inquiries to determine whether Y is eligible for the AOTC, as Form 1098–T does not contain all the information needed to determine eligibility for the AOTC or to calculate the amount of the credit if Y is eligible, and contemporaneously document these inquiries and the responses.

(4) Retention of records . (i) [Reserved]. For further guidance, see § 1.6695– 2(b)(4)(i). (A) [Reserved]. For further guidance, see § 1.6695–2(b)(4)(i)(A).

(B) A copy of each completed worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer’s computation permitted under paragraph (b)(2)(i)(B) of this section); and

(C) A record of how and when the information used to complete Form 8867 and the applicable worksheets required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer’s computation permitted under paragraph (b)(2)(i)(B) of this section) was obtained by the tax return preparer, including the identity of any person furnish

ing the information, as well as a copy of any document that was provided by the taxpayer and on which the tax return preparer relied to complete Form 8867 and/or an applicable worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer’s computation permitted under paragraph (b)(2)(i)(B) of this section).

(ii) through (iii) [Reserved]. For further guidance, see § 1.6695–2(b)(4)(ii) through (iii).

(1) through (2) [Reserved]. For further guidance, see § 1.6695–2(c)(1) through (2).

(3) The firm disregarded its reasonable and appropriate compliance procedures through willfulness, recklessness, or gross indifference (including ignoring facts that would lead a person of reasonable prudence and competence to investigate) in the preparation of the tax return or claim for refund with respect to which the penalty is imposed.

(d) [Reserved]. For further guidance, see § 1.6695–2(d).

(e) Applicability date . This section applies to tax returns and claims for refund prepared on or after December 5, 2016 with respect to tax years beginning after December 31, 2015. For returns and claims for refund prepared before December 5, 2016 with respect to tax years be

ginning before January 1, 2016, the rules that apply are contained in § 1.6695–2 in effect prior to December 5, 2016. (See 26 CFR part 1 revised as of April 2016).

(f) Expiration date . This section will expire on December 5, 2019.

PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 4. The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805.

§ 602.101 [Amended]

Par. 5. In § 602.101, paragraph (b) is amended by removing the entry for § 1.6695–2 from the table.

John M Dalrymple, Deputy Commissioner for Services and

Enforcement. Approved: November 21, 2016.

Mark J Mazur, Assistant Secretary of the Treasury (Tax

Policy).

(Filed by the Office of the Federal Register on December 2, 2016, 8:45 a.m., and published in the issue of the Federal Register for December 5, 2016, 81 F.R. 87444)

Bulletin No. 2016–51 831 December 19, 2016