User Fees

DEPARTMENT OF THE TREASURY

26 CFR Part 300

[PS-39-94]

RIN 1545-AS84

User Fees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to user

fees for certain services provided to specific persons and implements

the Independent Offices Appropriations Act (IOAA).

DATES: Written comments must be received by January 27, 1995. Requests

to speak at the public hearing scheduled for January 20, 1995, must be

received by January 17, 1995.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (PS-39-94), 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 (PS-39-94),

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

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

Internal Revenue Building, 1111 Constitution Avenue NW., Washington,

DC.

FOR FURTHER INFORMATION CONTACT: Concerning the hearing and submission

of written comments, Carol Savage, (202) 622-8452; concerning costing

methodology, Robert Miller (202) 535-9701(x3222); concerning

installment agreements, Kevin Connelly (202) 622-3640 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Background

The IOAA, codified at 31 U.S.C. 9701, authorizes agencies to

prescribe regulations that establish charges for services provided by

the agency (user fees). The charges must be fair and be based on the

costs to the Government, the value of the service to the recipient, the

public policy or interest served, and other relevant facts. The IOAA

expressly provides that regulations implementing user fees ``are

subject to policies prescribed by the President * * *''

The FY 1995 Appropriations Bill for the Treasury Department (the

1995 Appropriations Bill) includes a provision relating to the

establishment of new fees for services provided by the IRS if the fees

are authorized by another law, such as the IOAA.

Since 1959, the Office of Management and Budget (OMB) has issued

policy guidance on user fees through Circular A-25 (the OMB Circular).

See FPC v. New England Power Co., 415 U.S. 345, 349-51. (1974) (citing

the OMB Circular). On July 15, 1993, OMB issued a revised version of

the OMB Circular in the Federal Register (58 FR 38142), which provides

updated policy guidance on user fees. Under the OMB Circular, user fees

for Government-provided services that confer benefits on identifiable

recipients over and above those benefits received by the general public

are encouraged. The amount of the user fee imposed should recover the

cost for providing the special benefit or the value of the special

benefit.

For these proposed fees, the IRS followed the guidance provided by

the OMB Circular and the relevant court cases in calculating the costs

of the services provided. Under the OMB Circular, each agency is to

include in its calculation of the cost of providing a benefit:

(1) Direct and indirect personnel costs, including salaries and

fringe benefits such as medical insurance and retirement.

(2) Physical overhead, consulting, and other indirect costs,

including material and supply costs, utilities, insurance, travel, and

rents or imputed rents on land, buildings, and equipment.

(3) Management and supervisory costs.

(4) The costs of enforcement, collection, research, establishment

of standards, and regulation, including any environmental impact

statements.

Establishment of User Fees

Pursuant to the IOAA, the OMB Circular, and the 1995 Appropriations

Bill, the IRS is proposing user fees for the following services that

confer a special benefit on identifiable recipients: (1) entering into

an installment agreement, and (2) restructuring or reinstating an

installment agreement.

Section 300.1 of these regulations proposes to impose a $43 fee for

entering into an installment agreement. The taxpayer entering into the

installment agreement is the person that would be liable for the fee.

Section 300.2 of these regulations proposes to impose a $24 fee for

restructuring or reinstating an installment agreement. The taxpayer

that has an installment agreement restructured or reinstated is the

person that would be liable for the fee.

These regulations do not propose procedures relating to paying any

fee. Subsequent guidance will provide that information.

Effective Date

These regulations are proposed to be effective thirty days after

the date of publication in the Federal Register of the final

regulations. Depending on the exact publication schedule, the effective

date is estimated to be March 3, 1995.

Entering Into Installment Agreements

Section 6159 of the Internal Revenue Code authorizes the IRS to

enter into a written agreement with any taxpayer for the payment of

that taxpayer's outstanding tax obligation in installments. Each

taxpayer that enters into an installment agreement receives the special

benefit of being allowed to pay an outstanding tax obligation over time

rather than immediately.

Before entering into an installment agreement, the IRS must first

determine whether such an agreement is appropriate, then set up the

agreement, process payments, and monitor for conformance with the

agreement.

The amount of the proposed installment agreement fee has been

determined by using activity-based costing. In a 1993 study, the IRS

analyzed the work activities related to establishing new installment

agreements at both the Service Center (pre-assessment) and District

Office levels (post assessment). The costs incurred in establishing new

installment agreements at Service Centers and District Offices were

averaged in computing a uniform fee. Projected costs for program start-

up and training and software maintenance were developed. Lockbox and

remittance processing costs (based on an historic average of 8.5

payments per agreement) were calculated. These figures were added to

the initial activity-based costing totals. The activity-based

methodology did not include some indirect cost elements (primarily

executive support) which were then calculated at a 2.3% indirect cost

rate. Based on this costing methodology, the proposed installment

agreement fee is $43.

Restructuring or Reinstating Installment Agreements

When a taxpayer fails to meet any of the conditions of an

installment agreement, that agreement is deemed to be in default. The

IRS has the right to terminate an installment agreement in default.

Each taxpayer that has an installment agreement restructured or

reinstated receives not only the special benefit of being allowed to

pay an outstanding tax obligation over time rather than immediately but

also the special benefit of avoiding a potential enforcement action,

including but not limited to the filing of liens and the making of

levies.

Before restructuring or reinstating an installment agreement, the

IRS must monitor for nonconformance, analyze the cause(s) of default,

correspond with the taxpayer, analyze the taxpayer's responses, and, if

appropriate, restructure or reinstate the agreement.

The amount of the proposed restructuring or reinstatement fee was

calculated by determining direct labor costs and overhead labor costs

derived from the IRS' Work Planning and Control tracking system,

standard correspondence and postage costs incurred in preparing and

mailing certified notices, and an indirect cost factor representing

support cost. Examining program history through fiscal year 1993, the

IRS estimated the total number of installment agreements likely to be

restructured or reinstated in fiscal year 1995 as approximately

150,000. Based on this costing methodology, the proposed restructuring

or reinstatement fee is $24.

Special Analyses

Although it has been determined that this notice of proposed

rulemaking is a significant regulatory action as defined in EO 12866,

the Office of Management and Budget has waived the preparation of a

regulatory assessment. Because no substantive changes were made to

these regulations subsequent to their submission to the Office of

Management and Budget, the provisions of section 6(a)(3)(E) of EO 12866

do not apply. It is hereby certified that these regulations will not

have a significant economic impact on a substantial number of small

entities. Accordingly, a regulatory flexibility analysis is not

required. 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. However, due to

the small dollar amount of each of these fees, the economic impact on

any entity subject to one of the fees would not be significant.

Pursuant to section 7805(f) of the Internal Revenue Code, 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 (a signed original

and eight (8) copies) that are submitted timely to the IRS. All

comments will be available for public inspection and copying.

A public hearing has been scheduled for Friday, January 20, 1995,

at 10 a.m. in the Auditorium, Internal Revenue Building, 1111

Constitution Avenue NW, Washington, DC. Requests to speak at the

hearing must be received by January 17, 1995.

Because of access restrictions, visitors will not be admitted

beyond the Internal Revenue Building lobby more than 15 minutes before

the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. 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 requests to speak has passed. Copies

of the agenda will be available free of charge at the hearing.

Drafting Information

The principal authors of these regulations are Ruth Hoffman, Office

of Assistant Chief Counsel (Passthroughs and Special Industries) and

Tom Baker, Office of Assistant Chief Counsel (General Legal Services).

However, other personnel from the IRS and Treasury Department

participated in their development.

List of Subjects in 26 CFR Part 300

User fees, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 300 is proposed to be added to read as

follows:

PART 300--USER FEES

Sec.

300.0 User fees; in general.

300.1 Installment agreement fee.

300.2 Restructuring or reinstatement of installment agreement fee.

Authority: 31 U.S.C. 9701.

Sec. 300.0 User fees; in general.

(a) In general. The regulations in this part 300 are designated the

User Fee Regulations and provide rules relating to user fees under 31

U.S.C. 9701.

(b) Applicability. User fees are imposed on the following services:

(1) Entering into an installment agreement.

(2) Restructuring or reinstating an installment agreement.

(c) Effective date. This part 300 is effective thirty days after

the date of publication of the final regulations.

Sec. 300.1 Installment agreement fee.

(a) Applicability. These regulations apply to installment

agreements under section 6159 of the Internal Revenue Code.

(b) Fee. The fee for entering into an installment agreement is $43.

(c) Person liable for fee. The person liable for the installment

agreement fee is the taxpayer entering into an installment agreement.

Sec. 300.2 Restructuring or reinstatement of installment agreement

fee.

(a) Applicability. These regulations apply to installment

agreements under section 6159 of the Internal Revenue Code that are in

default. An installment agreement is deemed to be in default when a

taxpayer fails to meet any of the conditions of the installment

agreement.

(b) Fee. The fee for restructuring or reinstating an installment

agreement is $24.

(c) Person liable for fee. The person liable for the restructuring

or reinstatement fee is the taxpayer that has an installment agreement

restructured or reinstated.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 94-31819 Filed 12-27-94; 2:46 pm]

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