SECTION 3. DEPOSIT PENALTY

RELIEF

(a) Overview . With the end of the moratorium on the medical device excise tax, taxpayers are required to resume making semimonthly deposits of tax. The first deposit, covering the first 15 days of January, is due by January 29, 2018. In consideration of the short time frame between the end of the moratorium period and the due date of the first deposit and in the interest of sound tax administration, the IRS and the Treasury Department have decided to provide temporary relief from the § 6656 penalty for the first three calendar quarters of 2018, as de

scribed below. The normal rules under § 6656 and the corresponding regulations will apply with respect to deposits due during the fourth calendar quarter of 2018 and thereafter.

Beginning in the third calendar quarter of 2018, medical device manufacturers may use the safe harbor rules of § 40.6302(c)– 1(b)(2) for semimonthly deposits due during that quarter. For purposes of the safe harbor, the first calendar quarter of 2018 is the lookback quarter for deposits due during the third calendar quarter.

(b) Relief . (i) During the first three calendar quarters of 2018, the IRS will not impose the penalty provided in § 6656 on a taxpayer liable for the medical device excise tax that fails to make timely deposits of the medical device excise tax as required by §§ 40.6302(c)–1 and 40.6302(c)–2 (relating to special deposits required in September), provided that the taxpayer demonstrates a good faith attempt to comply with requirements of §§ 40.6302(c)–1 and 40.6302(c)–2 and that the failure was not due to willful neglect. Thereafter, a taxpayer may avoid penalties if it makes an affirmative showing that the failure to deposit is due to reasonable cause and not due to willful neglect.

(ii) During the third and fourth calendar quarters of 2018, the IRS will not exercise its authority under § 40.6302(c)– 1(b)(2)(v) to withdraw the taxpayer’s right to use the deposit safe harbor rules of § 40.6302(c)–1(b)(2) due to a failure to make deposits as required, provided the taxpayer satisfies the requirements of the first sentence of paragraph (b)(i) of this section for the look-back quarter at issue.