Federal Tax Deposits by Electronic Funds Transfer

SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS is issuing temporary regulations that provide

guidance relating to the deposit of taxes by electronic funds transfer

under section 6302(h) of the Internal Revenue Code. The text of the

temporary regulations also serves as the comment document for this

notice of proposed rulemaking. This document also provides notice of a

public hearing on these proposed regulations.

DATES: Written comments must be received by September 12, 1994.

Outlines of topics to be discussed at the public hearing scheduled for

October 3, 1994, beginning at 10:00 a.m. must be received by September

12, 1994.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (IA-03-94), room 5228,

Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be hand delivered between

the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (IA-03-94),

Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW,

Washington, DC. The public hearing will be held in the IRS Auditorium.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Vincent G.

Surabian, 202-622-6232 (not a toll-free number). Concerning submissions

and the public hearing, Michael Slaughter 202-622-7190 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations (TD 8553) published in the Rules and

Regulations section of this issue of the Federal Register contain

amendments to the Income Tax Regulations (26 CFR part 1), the

Regulations on Employment Taxes and Collection of Income Tax at the

Source (26 CFR part 31), and the Excise Tax Procedural Regulations (26

CFR part 40). These amendments relate to the deposits of taxes by

electronic funds transfer. The final regulations that will result from

the regulations proposed in this notice would be based on the text of

the temporary regulations and would provide rules for the gradual

phase-in of the requirement for taxpayers to deposit certain taxes by

electronic funds transfer.

The text of those temporary regulations also serves as the text of

these proposed regulations. The preamble to the temporary regulations

explains these proposed regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It also has been determined

that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do

not apply to these rules and, therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to section 7805(f) of the Internal

Revenue Code, a copy of this notice of proposed rulemaking will be

submitted to the Chief Counsel for Advocacy of the Small Business

Administration for comment on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments (preferably a

signed original and eight (8) copies) that are timely submitted to the

IRS. All comments will be available for public inspection and copying.

A public hearing has been scheduled for October 3, 1994, beginning

at 10:00 a.m. at the IRS Auditorium. Because of access restrictions,

visitors will not be admitted beyond the building lobby more than 15

minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons who wish to present oral comments at the hearing must

submit written comments by September 12, 1994, and submit an outline of

the topics to be discussed and the time to be devoted to each topic by

September 12, 1994.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving comments has passed. Copies of the

agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Vincent G. Surabian,

Office of the Assistant Chief Counsel (Income Tax & Accounting), IRS.

However, other personnel from the IRS and Treasury Department

participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 31

Employment taxes, Income taxes, Penalties, Pensions, Railroad

retirement, Reporting and recordkeeping requirements, Social Security,

Unemployment compensation.

26 CFR Part 40

Excise taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1, 31 and 40 are proposed to be amended

as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by

removing the entry ``Section 1.6302-1(a)'' and adding entries in

numerical order to read as follows:

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

Section 1.6302-1 also issued under 26 U.S.C. 6302 (c) and (h).

Sections 1.6302-2 and 1.6302-3 also issued under 26 U.S.C. 6302(h).

* * *

Par. 2. Section 1.6302-1 is amended as follows:

1. The heading for paragraph (b) is revised.

2. The text of paragraph (b) is redesignated paragraph (b)(1) and a

heading for (b)(1) is added.

3. Paragraph (b)(2) is added.

4. The revised and added provisions read as follows:

Sec. 1.6302-1 Use of Government depositaries in connection with

corporation income and estimated income taxes and certain taxes of tax-

exempt organizations.

* * * * *

(b) Manner of deposit--(1) Deposit by Federal tax deposit coupon. *

* *

(2) Deposit by electronic funds transfer. For the requirement to

deposit corporation income and estimated income taxes and certain taxes

of tax-exempt organizations by electronic funds transfer, see

Sec. 31.6302-1T(h) of this chapter. A taxpayer not required to deposit

by electronic funds transfer pursuant to Sec. 31.6302-1T(h) of this

chapter remains subject to the rules of Sec. 1.6302-(b)(1).

* * * * *

Par. 3. Section 1.6302-2 is amended as follows:

1. The heading for paragraph (b) is revised.

2. Paragraph (c) is redesignated paragraph (b)(6).

3. A new paragraph (c) is added.

4. The revised and added provisions read as follows:

Sec. 1.6302-2 Use of Government depositaries for payment of tax

withheld on nonresident aliens and foreign corporations.

* * * * *

(b) Deposits by Federal tax deposit coupon. * * *

(c) Deposits by electronic funds transfer. For the requirement to

deposit taxes withheld on nonresident aliens and foreign corporations

by electronic funds transfer, see Sec. 31.6302-1T(h) of this chapter. A

taxpayer not required to deposit by electronic funds transfer pursuant

to Sec. 31.6302-1T(h) of this chapter remains subject to the rules of

Sec. 1.6302-2(b).

* * * * *

Par. 4. In Sec. 1.6302-3, paragraph (c) is revised to read as

follows:

Sec. 1.6302-3 Use of Government depositaries in connection with

estimated taxes of certain trusts.

* * * * *

(c) Cross-references. For further guidance and instructions for

certain banks and financial institutions acting as fiduciaries with

respect to taxable trusts, see Revenue Procedure 89-49, 1989-2 C.B. 615

(see Sec. 601.601(d)(2) of this chapter) or any successor revenue

procedure. For the requirement to deposit estimated tax payments of

taxable trusts by electronic funds transfer, see Sec. 31.6302-1T(h) of

this chapter.

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Par. 5. The authority citation for part 31 is amended by removing

the entry ``Sections 31.6302-1 through 31.6302-3'' and adding entries

in numerical order to read as follows:

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

Sections 31.6302-1 through 31.6302-3 also issued under 26 U.S.C.

6302(a), (c) and (h). * * *

Section 31.6302(c)-3 also issued under 26 U.S.C. 6302(h).

Par. 6. In Sec. 31.6302-1, paragraph (h) is redesignated paragraph

(i), and new paragraph (h) is added to read as follows:

Sec. 31.6302-1 Federal tax deposit rules for withheld income taxes and

taxes under the Federal Insurance Contributions Act (FICA) attributable

to payments made after December 31, 1992.

[The text of proposed paragraph (h) is the same as the text of

Sec. 31.6302-1T(h) published elsewhere in this issue of the Federal

Register].

Par. 7. Section 31.6302(c)-3 is amended as follows:

1. The heading for paragraph (b) is revised.

2. Paragraph (c) is revised.

3. Paragraph (d) is added.

4. The revised and added provisions read as follows:

Sec. 31.6302(c)-3 Use of Government depositaries in connection with

tax under the Federal Unemployment Tax Act.

* * * * *

(b) Manner of deposit--deposits required to be made by Federal tax

deposit (FTD) coupon. * * *

(c) Manner of deposit--deposits required to be made by electronic

funds transfer. For the requirement to deposit tax under the Federal

Unemployment Tax Act by electronic funds transfer, see Sec. 31.6302-

1T(h). A taxpayer not required to deposit by electronic funds transfer

pursuant to Sec. 31.6302-1T(h) remains subject to the rules of

Sec. 31.6302(c)-3(b).

(d) Effective date. The provisions of paragraphs (a) and (b) of

this section apply with respect to calendar quarters beginning after

December 31, 1969. The provisions of paragraph (c) of this section

apply with respect to calendar quarters beginning on or after January

1, 1995.

PART 40--EXCISE TAX PROCEDURAL REGULATIONS

Par. 8. The authority citation for part 40 is amended by removing

the entry ``Sections 40.6302(c)-1, 40.6302(c)-2, 40.6302(c)-3 and

40.6302(c)-4'' and adding entries in numerical order to read as

follows:

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

Section 40.6302(c)-1 also issued under 26 U.S.C. 6302 (a) and (h).

Sections 40.6302(c)-2, 40.6302(c)-3 and 40.6302(c)-4 also issued

under 26 U.S.C. 6302(a).

Par. 9. Section 40.6302(c)-1 is amended as follows:

1. The text of paragraph (d) is redesignated paragraph (d)(1) and a

paragraph heading is added for (d)(1).

2. Paragraph (d)(2) is added.

3. The added provisions read as follows:

Sec. 40.6302(c)-1 Use of Government depositaries.

* * * * *

(d) Remittance of deposits--(1) Deposits by Federal tax deposit

coupon. * * *

(2) Deposits by electronic funds transfer. For the requirement to

deposit excise taxes by electronic funds transfer, see Sec. 31.6302-

1T(h) of this chapter. A taxpayer not required to deposit by electronic

funds transfer pursuant to Sec. 31.6302-1T(h) of this chapter remains

subject to the rules of Sec. 40.6302(c)-1(d)(1).

* * * * *

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

[FR Doc. 94-16478 Filed 7-6-94; 1:01 pm]

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