SECTION 3. BACKGROUND

.01 Section 1062 . (1) Generally . Section 70437 of Public Law 119-21, 139 Stat. 72 (2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), redesignated pre-OBBBA section 1062 as section 1063 and inserted a new section 1062. Section 1062(a) now allows a taxpayer who has gain from the sale or exchange of qualified farmland property to a qualified farmer (qualified sale or exchange) to elect (by making a section 1062 election) to pay the applicable net tax liability determined under section 1062(d)(1) (A) in four equal installments. Section

1062(b)(1) provides that, if a section 1062 election is made, the first installment must be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year in which the qualified sale or exchange occurs, and each succeeding installment must be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.

(2) Applicable net tax liability . Section 1062(d)(1)(A) defines “applicable net tax liability” with respect to a qualified sale or exchange as the excess (if any) of (i) such taxpayer’s net income tax for the taxable year, over (ii) such taxpayer’s net income tax for such taxable year determined without regard to any gain recognized from the qualified sale or exchange. Section 1062(d)(1)(A) defines “net income tax” for these purposes to mean the regular tax liability (as defined in section 26(b)) reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A of chapter 1 of the Code.

(3) Qualified farmland property . Section 1062(d)(2)(A) defines the term “qualified farmland property” as real property located in the United States that (i) during substantially all of the 10-year period ending on the date of the qualified sale or exchange has been used by the taxpayer either as a farm for farming purposes or leased by the taxpayer to a qualified farmer for farming purposes, and (ii) is subject to a covenant or other legally enforceable restriction which prohibits the use of such property other than as a farm for farming purposes for 10 years after the date of the qualified sale or exchange. Section 1062(d)(2)(A) further provides that property that is used or leased by a partnership or S corporation is treated as used or leased by each person who holds a direct or indirect interest in such entity. Section 1062(d)(2)(B) provides that the terms “farm” and “farming purposes” have the respective meanings given such terms under section 2032A(e). See section 2032A(e)(4) and (5).

1 Unless otherwise specified, all “section” references are to sections of the Code.

Bulletin No. 2026–2 307 January 5, 2026

on the previous year’s return exceeded $150,000), provided that the preceding taxable year was 12 months in duration and the individual filed a return for that year. An individual taxpayer whose income varies during the taxable year may be able to use the annualized income installment method described in section 6654(d)(2) to determine estimated income tax liability as their income accumulates, rather than dividing the required annual payment by four as if the income were earned equally throughout the year. Generally, section 6654(d)(2)(B) allows an individual taxpayer to reduce the amount of estimated income tax installments that are due earlier in the year and increase the amount of estimated income tax installments that are due later in the year.

(3) Due dates for installments of estimated income tax . Pursuant to section 6654(c)(2), estimated income tax installments for an individual calendar-year taxpayer generally are due on April 15, June 15, and September 15 of the taxable year, and on January 15 of the following year. Pursuant to section 6654(k) (1), for an individual fiscal-year taxpayer, the due dates of installments of estimated income tax are determined by substituting corresponding months. Section 6654(h), (i), and (j) provides special rules regarding installment amounts and due dates for taxpayers described therein.

(4) One annual payment of estimated income tax for qualifying farmers or fish- ermen . Special rules apply in the case of an individual taxpayer who is a farmer or fisherman and satisfies the requirements of section 6654(i) for a taxable year (qualifying farmer or fisherman). Under section 6654(i)(1), a qualifying farmer or fisherman has only one required installment payment (instead of four quarterly payments) due on January 15 of the year following the taxable year if at least twothirds of the taxpayer’s total gross income was from farming or fishing in either that taxable year or the preceding taxable year. For a qualifying farmer or fisherman who does not make the required estimated income tax installment payment by January 15 of the year following the taxable year, section 6654(i)(1)(D) provides that the taxpayer is not subject to an addition to tax for failing to pay estimated income tax if the taxpayer files the return for the

taxable year and pays the full amount of tax reported on the return by March 1 of the year following the taxable year. The definition of “qualified farmer” under section 1062(d)(3) differs from the definition of “farmer or fisherman” under section 6654(i)(2). For purposes of section 6654, section 6654(i)(2) provides that an individual is a farmer or fisherman for any taxable year if (A) the individual’s gross income from farming or fishing (including oyster farming) for the taxable year is at least 66 and 2/3 percent of the total gross income from all sources for the taxable year, or (B) the individual’s gross income from farming or fishing (including oyster farming) shown on the return of the individual for the preceding taxable year is at least 66 and 2/3 percent of the total gross income from all sources shown on such return.

(5) Exceptions to the addition to tax . An individual taxpayer will not be subject to the addition to tax under section 6654(a) if an exception applies. Under section 6654(e)(1), no addition to tax will be imposed on an individual taxpayer if the taxpayer owes less than $1,000 in tax, after subtracting tax withheld on wages. Under section 6654(e)(2), an individual will not be subject to an addition to tax if (i) the individual did not have any tax liability for the previous taxable year, (ii) the preceding taxable year was 12 months, and (iii) the individual was a citizen or resident of the United States throughout the preceding taxable year. Under section 6654(e)(3)(A), the addition to tax will not be imposed with respect to any underpayment to the extent the Secretary of the Treasury or the Secretary’s delegate (Secretary) “determines that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience.”

.03 Section 6655 . (1) Estimated income tax and liabil- ity for addition to tax . Section 6655(a) imposes an addition to tax for failure by a corporation to make a sufficient and timely payment of estimated income tax. Section 6655(c) and (d)(1)(A) generally provides that, in the case of a corporation, estimated income tax is required to be paid in four installments and the amount of any required installment is 25 percent

of the required annual payment. Generally, under section 6655(d)(1)(B), the required annual payment is the lesser of two amounts described in section 6655(d) (1)(B)(i) and (ii). The amount described in section 6655(d)(1)(B)(i) is 100 percent of the tax shown on the return for the taxable year. The amount described in section 6655(d)(1)(B)(ii) is 100 percent of the tax shown on the taxpayer’s return for the preceding taxable year, so long as the preceding taxable year was twelve months long and the return for such year showed a liability for tax. However, pursuant to section 6655(d)(2), in the case of a large corporation (as defined under section 6655(g)(2)), the amount described in section 6655(d)(1)(B)(ii) may not be used to reduce the amount of an installment payment other than the first installment payment for the taxable year. A taxpayer that is a corporation with income that varies during the taxable year may be able to use the annualized income installment method or the adjusted seasonal installment method described in section 6655(e) to lower the amount of one or more required estimated income tax installments.

(2) Due dates for installments of estimated income tax . Pursuant to section 6655(c)(2), estimated income tax installments of a corporation that uses the calendar-year for its taxable year generally are due on April 15, June 15, September 15, and December 15 of the taxable year. Pursuant to section 6655(i), for a corporation that uses a fiscal year for its taxable year, the due dates of installments of estimated income tax are determined by substituting corresponding months. In special circumstances, other rules specified in section 6655 or elsewhere may also apply.