Clarification of Periods of Interest With Respect to Certain Overpayments (T92-122)

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 70

[T.D. ATF-358]

RIN 1512-AB27

Clarification of Periods of Interest With Respect to Certain

Overpayments (T92-122)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Treasury.

ACTION: Treasury decision, final rule.

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SUMMARY: This Treasury decision amends 27 CFR 70.92, in Part 70,

Procedure and Administration. The amendments clarify the period during

which interest is allowed on taxpayer overpayments which are credited

against other liabilities of the same taxpayer for interest and certain

additions to the tax. The amendments are necessary as a result of

changes to the law made by the Tax Equity and Fiscal Responsibility Act

of 1982 and the Deficit Reduction Act of 1984. The regulations affect

all taxpayers who have overpayments credited against underpayments.

EFFECTIVE DATE: These regulations are effective on June 7, 1994.

FOR FURTHER INFORMATION CONTACT:

Jackie White of the Tax Compliance Branch, (202) 927-8220, Bureau of

Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 20091-

0221 ((202) 927-8220).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the regulations on Procedure

and Administration (27 CFR part 70) under Sec. 6611 of the Internal

Revenue Code of 1986 (IRC) to clarify the period during which interest

is allowed on overpayments that are credited against a taxpayer's

liability for interest and certain additions to the tax. The amendments

will conform the regulations to Sec. 344 of the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA) (Pub. L. 97-248, 96 Stat. 635), and

Sec. 158 of the Deficit Reduction Act of 1984 (DEFRA) (Pub. L. 98-369,

98 Stat. 696).

The Internal Revenue Service (IRS) applies Sec. 6611 to the taxes

it administers and enforces. The IRS published a notice of proposed

rulemaking in the Federal Register on August 25, 1992 (57 FR 38457),

and Treasury Decision 8524 (59 FR 10075) was published in the Federal

Register on March 3, 1994, adopting final rules implementing the TEFRA

and DEFRA amendments. ATF believes these regulations are equally

applicable to its tax collection activities and is adopting such

regulations.

Interest on Overpayments That Are Credited Against Interest on

Underpayments

Section 6611(a) of the IRC provides that interest shall be allowed

and paid on any overpayment in respect of any internal revenue tax at

the overpayment rate established under Sec. 6621.

Under Sec. 6402(a), the Secretary may credit any overpayment

(including any interest allowed thereon) against any liability imposed

on the taxpayer under the IRC. Under Sec. 6611(b)(1), interest is

allowed on an overpayment that is so credited from the date of the

overpayment to the due date of the taxpayer's liability against which

the overpayment is credited. For purposes of this interest computation,

a definition of the term ``due date'' is provided in Sec. 70.92(d) of

the regulations.

Generally, Sec. 6601(f) provides that once an overpayment is

credited to satisfy a taxpayer's liability, interest no longer accrues

on that liability. Section 344 of TEFRA added Sec. 6622 of the IRC,

which requires interest imposed by the IRC to be compounded daily. The

effect of Sec. 6601(f) on the compounding requirement of Sec. 6622 is

that once an overpayment is credited to satisfy the taxpayer's

liability for interest, that credit cuts off any further compounding of

the interest (i.e., interest no longer accrues on the taxpayer's

interest liability against which the credit has been made).

Similarly, it is appropriate that no interest liability to the

taxpayer accrues on the overpayment once the overpayment is credited to

satisfy the taxpayer's liability for interest. Thus, the regulations

amend Sec. 70.92(d)(2)(iii) to clarify that interest ceases to accrue

on any portion of an overpayment that is credited against the

taxpayer's liability for interest.

Interest on Overpayments That Are Credited Against Certain Additions to

the Tax

Prior to DEFRA, interest only accrued on additions to the tax from

the date of notice and demand, and then only if not paid within 10 days

from the date of notice and demand. In Sec. 158 of DEFRA, Congress

added Sec. 6601(e)(2)(B) to the IRC, requiring taxpayers to pay

interest on certain additions to tax from the due date of the relevant

return (including any extensions) until the addition to the tax is

paid. The number of additions to the tax that bear interest from the

due date of the return was increased by Congress in 1988 and again in

1989. This regulation amends Sec. 70.92(d)(2)(iv) to clarify that

interest ceases to accrue on any portion of an overpayment that is

credited against certain additions to the tax for any period after the

due date of the return (including extensions) to which the addition to

the tax relates.

Prior Regulations Obsolete

When ATF assumed responsibility for the collection and enforcement

of taxes imposed under Subtitle E of the IRC, it patterned many of its

procedural regulations upon those already promulgated by the IRS. See,

e.g., T.D. ATF-301, 55 Fed. Reg. 47608 (November 14, 1990); T.D. ATF-

251, 52 Fed. Reg. 19314 (May 22, 1987). However, since enactment of

Sec. 6622 of the IRC in TEFRA and Sec. 6601(e)(2)(B) in DEFRA, the

prior regulations regarding interest and certain additions to tax have

been obsolete. Accordingly, ATF has been computing interest consistent

with the statutory changes and these regulatory amendments acknowledge

existing agency practice.

Regulatory Flexibility Act

The provisions of the Regulatory Flexibility Act relating to a

final regulatory flexibility analysis (5 U.S.C. 604) are not applicable

to this final rule because the agency was not required to publish a

general notice of proposed rulemaking under 5 U.S.C. 553 or any other

law. A copy of this final rule has been submitted to the Administrator

of the Small Business Administration for comment on the impact of such

regulation on small business, pursuant to 26 U.S.C. 7805(f).

Executive Order 12866

It has been determined that this rule is not a significant

regulatory action because (1) it will not have an annual effect on the

economy of $100 million or more or adversely affect in a material way

the economy, a sector of the economy productivity, competition, jobs,

the environment, public health or safety, or State, local or tribal

governments or communities; (2) create a serious inconsistency or

otherwise interfere with an action taken or planned by another agency;

(3) materially alter the budgetary impact of entitlements, grants, user

fees, or loan programs or the rights and obligations of recipients

thereof; or (4) raise novel legal or policy issues arising out of legal

mandates, the Presidents priorities, or the principles set forth in

Executive Order 12866.

Administrative Procedures Act

Because this final rule merely adopts existing IRS procedural

regulations regarding overpayment interest, it is found to be

unnecessary to issue this Treasury decision for notice and public

procedure pursuant to 5 U.S.C. 553(b) or subject to the effective date

limitation in 5 U.S.C. 553(d).

Paperwork Reduction Act

The provisions of the Paperwork Reduction Act of 1980, Pub. L. No.

96-511, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR

Part 1320, do not apply to this final rule because it does not impose

any new recordkeeping or reporting requirements.

Drafting Information

The principal author of this document is Jackie White of the Tax

Compliance Branch, Bureau of Alcohol, Tobacco and Firearms.

List of Subjects in 27 CFR Part 70

Administrative practice and procedure, Alcohol and alcoholic

beverages, Authority delegations, Bankruptcy, Claims, Excise taxes,

Firearms and ammunition, Government employees, Law enforcement, Law

enforcement officers, Penalties, Reporting and recordkeeping

requirements, Seizures and forfeitures, Surety bonds, Tobacco.

Authority and Issuance

Title 27 CFR is amended as follows:

PART 70--[AMENDED]

Paragraph 1. The authority citation for part 70 continues to read

as follows:

Authority: 5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5146,

5203, 5207, 5275, 5367, 5415, 5504, 5555, 5684(a), 5741, 5761(b),

6020, 6021, 6064, 6102, 6155, 6159, 6201, 6203, 6204, 6301, 6303,

6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-6404,

6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6532, 6601, 6602,

6611, 6621, 6622, 6651, 6653, 6656, 6657, 6658, 6665, 6671, 6672,

6701, 6723, 6801, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122,

7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426,

7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601-7606, 7608-

7610, 7622, 7623, 7653, 7805.

Para. 2. Section 70.92 is amended by revising paragraphs

(d)(2)(iii) and (d)(2)(iv) to read as follows:

Sec. 70.92 Interest on overpayments.

* * * * *

(d) * * *

(2) * * *

(iii) Interest. In the case of a credit against interest that

accrues for any period ending prior to January 1, 1983, the due date is

the earlier of the date of assessment of such interest or December 31,

1982. In the case of a credit against interest that accrues from any

period beginning on or after December 31, 1982, such interest is due as

it economically accrues on a daily basis, rather than when it is

assessed.

(iv) Additional amount, addition to the tax, or assessable penalty.

In the case of a credit against an additional amount, addition to the

tax, or assessable penalty, the due date is the earlier of the date of

assessment or the date from which such amount would bear interest if

not satisfied by payment or credit.

* * * * *

Signed: May 11, 1994.

Daniel R. Black,

Acting Director.

Approved: May 19, 1994.

John P. Simpson,

Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).

[FR Doc. 94-13742 Filed 6-6-94; 8:45 am]

BILLING CODE 4810-31-M