User Fees for Installment Agreements, 56543-56550 [2016-19836]
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Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Proposed Rules
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DEPARTMENT OF THE TREASURY
Background
Explanation of Provisions
Internal Revenue Service
This document contains proposed
regulations that would amend §§ 300.1
and 300.2 of the User Fee Regulations
(26 CFR part 300), which provide for a
user fee applicable to installment
agreements under section 6159 of the
Internal Revenue Code (Code).
Section 6159 authorizes the IRS to
enter into an agreement with any
taxpayer for the payment of tax in
installments to the extent the IRS
determines that entering into the
installment agreement will facilitate the
full or partial collection of the tax.
Section 301.6159–1(a). Installment
agreements are voluntary, and taxpayers
may request an installment agreement in
person, by completing the appropriate
forms and mailing them to the IRS,
online, or over the telephone. Before
entering into an installment agreement,
the IRS may examine the taxpayer’s
financial position to determine whether
such an agreement is appropriate. See
Internal Revenue Manual (IRM) 5.14. If
the IRS accepts the installment
agreement, the IRS must process the
payments made by the taxpayer and
monitor the taxpayer’s compliance with
the terms of the agreement. The terms of
an agreement generally require the
taxpayer to pay the minimum monthly
payment on time, file all required tax
returns on time, and pay all taxes in-full
and on time. See Form 433–D,
Installment Agreement. In addition,
section 6159(d) requires that the IRS
review partial payment installment
agreements at least once every two
years.
Under § 300.1, the IRS currently
charges three rates for installment
agreements. The user fee, in general, is
$120 for an installment agreement. The
user fee is reduced to $52 for a direct
debit installment agreement, which is
an agreement whereby the taxpayer
authorizes the IRS to request the
monthly electronic transfer of funds
from the taxpayer’s bank account to the
IRS. The user fee is $43 notwithstanding
the method of payment if the taxpayer
is a low-income taxpayer, as defined
below.
Under § 300.2, the IRS currently
charges $50 for restructuring or
reinstating an installment agreement
that is 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.
See IRM 5.14. Currently, there is no
exception to this fee for low-income
taxpayers.
A. Overview
To bring user fee rates for installment
agreements in line with the full cost to
the IRS of providing these taxpayer
specific services, the proposed
regulations under §§ 300.1 and 300.2
would increase the user fee for the
existing installment agreement types
and introduce two new types of online
installment agreements, each subject to
a separate user fee. Five of these
proposed user fee rates are based on the
full cost of establishing and monitoring
installment agreements. The sixth rate is
for low-income taxpayers.
• Regular Installment Agreements—A
taxpayer contacts the IRS in person, by
phone, or by mail and sets up an
agreement to make manual payments
over a period of time either by mailing
a check or electronically through the
Electronic Federal Tax Payment System
(EFTPS). The proposed fee for entering
into a regular installment agreement is
$225.
• Direct Debit Installment
Agreements—A taxpayer contacts the
IRS by phone or mail and sets up an
agreement to make automatic payments
over a period of time through a direct
debit from a bank account. The
proposed fee for entering into a direct
debit installment agreement is $107.
• Online Payment Agreements—A
taxpayer sets up an installment
agreement through https://www.irs.gov
and agrees to make manual payments
over a period of time either by mailing
a check or electronically through the
EFTPS. The proposed fee for entering
into an online payment agreement is
$149.
• Direct Debit Online Payment
Agreements—A taxpayer sets up an
installment agreement through https://
www.irs.gov and agrees to make
automatic payments over a period of
time through a direct debit from a bank
account. The proposed fee for entering
into a direct debit online payment
agreement is $31.
• Restructured/Reinstated Installment
Agreements—A taxpayer modifies a
previously established installment
agreement or reinstates an installment
agreement on which the taxpayer has
defaulted. The proposed fee for
restructuring or reinstating an
installment agreement is $89.
• Low-Income Rate—A rate that
applies when a low-income taxpayer
enters into any type of installment
agreement, other than a direct debit
online payment agreement, and when a
low-income taxpayer restructures or
reinstates any installment agreement. A
low-income taxpayer is a taxpayer that
26 CFR Part 300
[REG–108792–16]
RIN 1545–BN37
User Fees for Installment Agreements
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:
This document contains
proposed amendments to the
regulations that provide user fees for
installment agreements. The proposed
amendments affect taxpayers who wish
to pay their liabilities through
installment agreements. The proposed
effective date for these proposed
amendments to the regulations is
January 1, 2017. This document also
provides a notice of public hearing on
these proposed amendments to the
regulations.
SUMMARY:
Written or electronic comments
must be received by October 6, 2016.
Outlines of topics to be discussed at the
public hearing scheduled for October
19, 2016, at 2:00 p.m. must be received
by October 6, 2016.
ADDRESSES: Send submissions to:
Internal Revenue Service,
CC:PA:LPD:PR (REG–108792–16), Room
5203, Post Office Box 7604, Ben
Franklin Station, Washington, DC
20044. Submissions may be handdelivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–108792–16),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW.,
Washington, DC 20224 or sent
electronically via the Federal
eRulemaking Portal at https://
www.regulations.gov (indicate IRS and
REG–108792–16). The public hearing
will be held in the Main IR Auditorium
beginning at 2:00 p.m. in the Internal
Revenue Service Building, 1111
Constitution Avenue NW., Washington,
DC 20224.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed amendments
to the regulations, M. Pilar Puerto at
(202) 317–5437; concerning submissions
of comments, the hearing, or to be
placed on the building access list to
attend the hearing, Regina Johnson, at
(202) 317–6901; concerning cost
methodology, Eva Williams, at (202)
803–9728 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
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has income at or below 250 percent of
the dollar criteria established by the
poverty guidelines updated annually in
the Federal Register by the U.S.
Department of Health and Human
Services. Section 300.1(b)(2). The
proposed low-income rate is $43.
B. User Fee Authority
The Independent Offices
Appropriations Act (IOAA) (31 U.S.C.
9701) authorizes each agency to
promulgate regulations establishing the
charge for services provided by the
agency (user fees). The IOAA provides
that these user fee regulations are
subject to policies prescribed by the
President and shall be as uniform as
practicable. Those policies are currently
set forth in the Office of Management
and Budget (OMB) Circular A–25, 58 FR
38142 (July 15, 1993; OMB Circular).
The IOAA states that the services
provided by an agency should be selfsustaining to the extent possible. 31
U.S.C. 9701(a). The OMB Circular states
that agencies that provide services that
confer special benefits on identifiable
recipients beyond those accruing to the
general public are to establish user fees
that recover the full cost of providing
those services. The OMB Circular
requires that agencies identify all
services that confer special benefits and
determine whether user fees should be
assessed for those services.
Agencies are to review user fees
biennially and update them as necessary
to reflect changes in the cost of
providing the underlying services.
During this biennial review, an agency
must calculate the full cost of providing
each service, taking into account all
direct and indirect costs to any part of
the U.S. government. The full cost of
providing a service includes, but is not
limited to, salaries, retirement benefits,
rents, utilities, travel, and management
costs, as well as an appropriate
allocation of overhead and other
support costs associated with providing
the service.
An agency should set the user fee at
an amount that recovers the full cost of
providing the service unless the agency
requests, and the OMB grants, an
exception to the full cost requirement.
The OMB may grant exceptions only
where the cost of collecting the fees
would represent an unduly large part of
the fee for the activity or any other
condition exists that, in the opinion of
the agency head, justifies an exception.
When the OMB grants an exception, the
agency does not collect the full cost of
providing the service and therefore must
fund the remaining cost of providing the
service from other available funding
sources. By doing so, the agency
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subsidizes the cost of the service to the
recipients of reduced-fee services even
though the service confers a special
benefit on those recipients who should
otherwise be required to pay the full
costs of receiving that benefit as
provided for by the IOAA and the OMB
Circular.
C. Installment Agreement User Fee
The installment agreement program
confers a special benefit on identifiable
recipients beyond those accruing to the
general public. Specifically, a taxpayer
that is granted an installment agreement
is allowed to pay an outstanding tax
obligation over time without being
subjected to IRS levy related to these
taxes during this term of repayment. See
section 6331(k)(2) of the Code and
§ 301.6159–1(f). Section 6331(k)(2)
generally prohibits the IRS from levying
to collect taxes while a request to enter
into an installment agreement is
pending with the IRS, for 30 days after
the rejection of a proposed installment
agreement, and for 30 days immediately
following the termination of an
installment agreement. If, prior to the
expiration of the 30-day period
following the rejection or termination of
an installment agreement, the taxpayer
appeals the rejection or termination
decision, no levy may be made while
the rejection or termination is being
considered by Appeals. Because of these
special benefits the IOAA and the OMB
Circular authorize the IRS to charge a
user fee for an installment agreement
that reflects the full cost of providing
the service of the installment agreement
program to the taxpayer.
The installment agreement user fees
were last changed in 2014. As required
by the IOAA and the OMB Circular, the
IRS completed its 2015 biennial review
of the installment agreement program
and determined that the full cost of a
regular installment agreement is $225,
and the full cost of a direct debit
installment agreement is $107. The IRS
determined that the full cost of a regular
online payment agreement is $149, and
the full cost for a direct debit online
payment agreement is $31. The IRS
determined that the full cost of
restructuring or reinstating an
installment agreement is $89.
The proposed regulations adopt the
full cost amounts as the new user fees
for the various types of installment
agreements. Historically, the IRS
charged a user fee that recovered less
than the full cost of an installment
agreement to make the service more
accessible to a broader range of
taxpayers. However, in light of
constraints on IRS resources for tax
administration, the Treasury
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Department and the IRS have
determined that it is necessary to recoup
the full costs of the installment
agreement program. The IRS will
continue its practice of providing
services subject to user fees at less than
full cost where there is a compelling tax
administration reason to do so.
Therefore, these proposed regulations
do not increase the reduced user fee for
offers submitted by low-income
taxpayers and introduce a reduced fee
for requests by low-income taxpayers to
restructure or reinstate defaulted
installment agreements.
The proposed fees reflect the IRS’s
determination to continue to provide a
wide variety of installment agreement
options to taxpayers and, as required by
the OMB Circular, to determine the full
cost for each option. Since the
enactment of the installment agreement
program, the IRS has periodically
developed new ways for taxpayers to
enter into and pay for installment
agreements, such as through online
payment agreements and direct debit
online payment agreements. These new
installment agreement types have not
had their own separate user fee, but
instead have been included in the
existing user fee structure. In recent
years, taxpayers’ use of the online
installment agreement options have
increased, justifying a separate fee
structure for the online installment
agreement options.
Consistent with introducing these
new fees, the most recent full cost
analysis of the installment agreement
program has been refined to more
precisely account for the costs
associated with administering the
various types of installment agreements
available to taxpayers. Requesting
installment agreements in person or
over the phone and receiving payment
through means other than direct debit is
more costly for the IRS to administer,
and the proposed user fees reflect these
costs. Similarly, this recent analysis has
resulted in the availability of reduced
user fees to taxpayers for those options
that cost less for the IRS to administer.
By offering a range of installment
agreement options at a range of fees, the
IRS is assisting taxpayers in coming into
compliance with their tax payment
obligations, which benefits tax
administration and provides an
enhanced service to taxpayers.
D. Calculation of User Fees Generally
User fee calculations begin by first
determining the full cost for the service.
The IRS follows the guidance provided
by the OMB Circular to compute the full
cost of the service, which includes all
indirect and direct costs to any part of
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the U.S. government including but not
limited to direct and indirect personnel
costs, physical overhead, rents, utilities,
travel, and management costs. The IRS’s
cost methodology is described below.
Once the total amount of direct and
indirect costs associated with a service
is determined, the IRS follows the
guidance in the OMB Circular to
determine the costs associated with
providing the service to each recipient,
which represents the average per unit
cost of that service. This average per
unit cost is the amount of the user fee
that will recover the full cost of the
service.
The IRS follows generally accepted
accounting principles (GAAP), as
established by the Federal Accounting
Standards Advisory Board (FASAB) in
calculating the full cost of providing
services. The FASAB Handbook of
Accounting Standards and Other
Pronouncements, as amended, which is
available at https://files.fasab.gov/
pdffiles/2015_fasab_handbook.pdf,
includes the Statement of Federal
Financial Accounting Standards No. 4:
Managerial Cost Accounting Concepts
and Standards for the Federal
Government (SFFAS No.4). SFFAS No.
4 establishes internal costing standards
under GAAP to accurately measure and
manage the full cost of federal programs.
The methodology described below is in
accordance with SFFAS No. 4.
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1. Cost Center Allocation
The IRS determines the cost of its
services and the activities involved in
producing them through a cost
accounting system that tracks costs to
organizational units. The lowest
organizational unit in the IRS’s cost
accounting system is called a cost
center. Cost centers are usually separate
offices that are distinguished by subjectmatter area of responsibility or
geographic region. All costs of operating
a cost center are recorded in the IRS’s
cost accounting system and allocated to
that cost center. The costs allocated to
a cost center are the direct costs for the
cost center’s activities as well as all
indirect costs, including overhead,
associated with that cost center. Each
cost is recorded in only one cost center.
2. Determining the Per Unit Cost
To establish the per unit cost, the total
cost of providing the service is divided
by the volume of services provided. The
volume of services provided includes
both services for which a fee is charged
as well as subsidized services. The
subsidized services are those where
OMB has approved an exception to the
full cost requirement, for example, to
charge a reduced fee to low-income
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taxpayers. The volume of subsidized
services is included in the total volume
of services provided to ensure that the
IRS, and not those who are paying full
cost, subsidizes the cost of the reducedfull cost services.
3. Cost Estimation of Direct Labor and
Benefits
Not all cost centers are fully devoted
to only one service for which the IRS
charges a user fee. Some cost centers
work on a number of different services.
In these cases, the IRS estimates the cost
incurred in those cost centers
attributable to the service for which a
user fee is being calculated by
measuring the time required to
accomplish activities related to the
service, and estimating the average time
required to accomplish these activities.
The average time required to
accomplish these activities is multiplied
by the relevant organizational unit’s
average labor and benefits cost per unit
of time to determine the labor and
benefits cost incurred to provide the
service. To determine the full cost, the
IRS then adds an appropriate overhead
charge as discussed below.
4. Calculating Overhead
Overhead is an indirect cost of
operating an organization that cannot be
immediately associated with an activity
that the organization performs.
Overhead includes costs of resources
that are jointly or commonly consumed
by one or more organizational unit’s
activities but are not specifically
identifiable to a single activity.
These costs can include:
• General management and
administrative services of sustaining
and support organizations.
• Facilities management and ground
maintenance services (security, rent,
utilities, and building maintenance).
• Procurement and contracting
services.
• Financial management and
accounting services.
• Information technology services.
• Services to acquire and operate
property, plants and equipment.
• Publication, reproduction, and
graphics and video services.
• Research, analytical, and statistical
services.
• Human resources/personnel
services.
• Library and legal services.
To calculate the overhead allocable to
a service, the IRS first calculates the
Corporate Overhead rate and then
multiplies the Corporate Overhead rate
by the direct labor and benefits costs
determined as discussed above. The IRS
calculates the Corporate Overhead rate
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annually based on cost elements
underlying the Statement of Net Cost
included in the IRS Annual Financial
Statements, which are audited by the
Government Accountability Office. The
Corporate Overhead rate is the ratio of
the sum of the IRS’s indirect labor and
benefits costs from the supporting and
sustaining organizational units—those
that do not interact directly with
taxpayers—and all non-labor costs to
the IRS’s labor and benefits costs of its
organizational units that interact
directly with taxpayers.
The Corporate Overhead rate of 65.85
percent for costs reviewed during FY
2015 was calculated based on FY 2014
costs as follows:
Indirect Labor and Benefits Costs .................
Non-Labor Costs ..........
$1,693,339,843
+ $2,832,262,970
Total Indirect Costs
Direct Labor and Benefits Costs ...................
$4,525,602,813
+ $6,872,934,473
Corporate Overhead
Rate ...........................
65.85%
E. Calculation of Installment Agreement
User Fee
The full cost analysis considers the
common components of each of the five
installment agreement types as well as
each type’s unique cost drivers. The
costs for each type of installment
agreement are broadly categorized into
two groups: (1) Costs incurred by the
IRS to establish the installment
agreements and (2) costs incurred by the
IRS to maintain and monitor the
installment agreements.
The upfront costs for establishing
installment agreements requested in
person, in writing, or over the phone are
significantly higher than those for
online payment agreements. For that
reason, the upfront costs for establishing
installment agreements requested in
person, in writing, or over the phone are
determined separately and allocated
only to installment agreements
requested in person, in writing, or over
the phone. In contrast, the only upfront
costs to establish online payment
agreements through https://www.irs.gov
are the costs of the online payment
agreement system such as annual
maintenance and system enhancements,
which are only allocated to online
payment agreements.
After installment agreements are
established, costs to maintain and
monitor them, including routine notices
to the taxpayers, vary significantly
based on the type of installment
agreement. Direct debit installment
agreements and direct debit online
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payment agreements have lower
maintenance and monitoring costs
because they do not require as much
support on an ongoing basis as
installment agreements not paid via
direct debit. Payments under direct
debit installment agreements and direct
debit online payment agreements are
automatically debited from the
taxpayer’s bank account. Because
payments for direct debit installment
agreements and direct debit online
payment agreements are automatically
debited from taxpayers’ accounts
without requiring taxpayers to initiate
each payment, the IRS does not send
monthly payment notices and in general
sends fewer notices related to these
agreements compared to installment
agreements not paid via direct debit.
Correspondingly, direct debit
installment agreements and direct debit
online payment agreements require less
IRS time responding to taxpayer
inquiries resulting from these notices
than do installment agreements not paid
via direct debit.
Because the non-labor costs for
notices and telecommunication, which
includes the costs of paper, postage and
phone service, related to installment
agreements can be identified, the IRS
considered them to be direct costs for
the installment agreement program.
Accordingly, the IRS modified the
calculation of the Corporate Overhead
rate to exclude these notices and
telecommunication costs from the total
indirect costs in the calculation of the
Corporate Overhead rate used for
purposes of allocating Corporate
Overhead to the installment agreement
program (adjusted Corporate Overhead).
The adjusted Corporate Overhead rate
used for the entire installment
agreement program is 60.89 percent,
calculated as follows:
1. Establishing Installment Agreements
Adjusted Total Indirect
Costs .........................
The IRS allocates costs attributed to
establishing installment agreements
based on whether the installment
agreement is a non-online installment
agreement or an online payment
agreement.
Direct Labor and Benefits Costs ...................
Non-Labor Costs for
Notices and Telecommunication ..........
a. Non-Online Installment Agreements
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For non-online installment
agreements, the IRS identified the
activities conducted across various
organizations to establish agreements,
obtained the time spent on the activities
through various time tracking systems,
obtained the labor and benefits rates for
employees from the financial system for
FY 2013 and 2014 who spent time
establishing agreements, and averaged
those costs to create an annualized
average cost. The average labor and
benefits costs to establish non-online
installment agreements is $110,143,952,
calculated as follows:
Collection Field Function ......
Compliance Services Collection Operations ..................
Automated Collection System ....................................
Customer Service Toll-Free
Appeals Staff Labor and
Benefits .............................
Field Assistance ...................
Examination ..........................
Average Labor and Benefits
Costs to Establish NonOnline Installment Agreements ................................
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$53,268,552
19,989,943
19,377,987
6,183,764
8,624,615
1,894,976
804,115
110,143,952
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Indirect Labor and Benefits Costs .................
Non-Labor Costs ..........
Non-Labor Costs for
Notices and Telecommunication ..........
Adjusted Direct Labor
and Benefits Costs ....
Adjusted Total Indirect
Costs .........................
Adjusted Direct Labor
and Benefits Costs ....
Adjusted Corporate
Overhead Rate ..........
$1,693,339,843
+ 2,832,262,970
costs are non-labor, the IRS does not
allocate any overhead to determine the
total costs. The total non-labor costs for
establishing non-online installment
agreements are $636,046, calculated as
follows:
Telecommunications .............
Automated Collection System ....................................
Customer Service Toll-Free
Total Non-Labor Costs to
Establish Non-Online Installment Agreements ....
$145,169
274,664
216,213
636,046
The total costs for establishing nononline installment agreements are
$177,846,650, calculated as follows:
Total Labor and Benefits and
Adjusted Overhead Costs
to Establish Non-Online Installment Agreements .......
Total Non-Labor Costs to Establish Non-Online Installment Agreements ..............
$177,210,605
636,046
(211,959,052)
4,313,643,761
Total Costs to Establish
Non-Online Installment
Agreements ...................
177,846,650
To determine the unit cost to establish
non-online installment agreements, the
IRS divided the total cost by the average
volume of non-online installment
+ 211,959,052 agreements. The IRS determined the
volume of non-online installment
agreements by averaging the volumes of
7,084,893,526 new agreements entered into in FY 2013
and FY 2014. The unit cost was
4,313,643,761
calculated as follows:
$6,872,934,473
+ 7,084,893,526
60.89%
The IRS applied the adjusted
Corporate Overhead rate to the labor
and benefits costs to calculate the total
labor and benefits cost for establishing
non-online installment agreements as
follows:
Total Costs to Establish NonOnline Installment Agreements ................................
Average Annual Volume .......
Unit Cost to Establish NonOnline Installment Agreements ................................
$177,846,650
2,175,142
$81.76
b. Online Installment Agreements
For online payment agreements, the
only cost to establish those agreements
Labor and Benefits
is the cost for the online payment
Costs to Establish
agreement system that allows taxpayers
Non-Online Installment Agreements ......
$110,143,952 to set up the agreements. In FY 2014,
Adjusted Corporate
the IRS performed a substantial
Overhead Rate
enhancement to this system at a cost of
(60.89%) ....................
67,066,653 $4,200,000. The IRS amortizes system
enhancements over a six year period;
Total Labor and Benetherefore, for FY 2014 through FY 2020
fits and Adjusted
the annual amortized system cost for
Overhead Costs to
online payment agreements is $700,000.
Establish Non-Online
In addition to the annual amortized
Installment Agreements ........................
177,210,605 cost, the IRS incurs $200,000 in annual
system maintenance costs for this
There are also non-labor costs
system. The total annual cost for the
attributed to establishing non-online
online payment agreement system is
installment agreements. Because these
$900,000. The use of online payment
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agreements is trending upward and the
IRS expects this upward trend to
continue as more taxpayers utilize the
IRS’s online systems. To reflect the
IRS’s expectation of increased use of
online systems, the IRS adjusted
upward the average volume of online
payment agreements received in FY
2013 and FY 2014 consistent with that
expectation. The total cost to establish
online payment agreements is $6,
calculated as follows:
Amortized System Upgrade
Annual System Maintenance
Cost ...................................
Average Yearly System Cost
Average Annual Volume .......
Unit Cost to Establish Online
Payment Agreement .........
$700,000
$200,000
$900,000
150,000
$6
2. Maintaining and Monitoring
Installment Agreements
The costs for maintaining and
monitoring installment agreements
consist of the costs of monitoring and
telecommunications labor and benefits,
an allocation of overhead to these labor
costs, and notice and
telecommunication non-labor costs.
The IRS identified the activities
conducted across various business units
to monitor installment agreements,
obtained the time spent on the activities
through various time tracking systems,
obtained the labor and benefits rates for
these personnel from the financial
system for FY 2013 and 2014, and
determined the average annual cost for
monitoring installment agreements.
The IRS allocated the costs attributed
to maintaining and monitoring
installment agreements based on
whether the agreement is a direct debit
agreement (Direct Debit Installment
Agreement or Direct Debit Online
Payment Agreement), a non-direct debit
agreement (Regular Agreement or
Online Payment Agreement), or a
Restructured/Reinstated Installment
Agreement. The following sections
describe the costs allocated to various
types of installment agreements for
maintaining and monitoring.
The IRS continuously monitors all
installment agreements for accounts not
meeting the terms of the agreement, for
returned payments, and various other
circumstances that result in a need to
contact the taxpayer. When these
circumstances arise, the IRS reviews the
account and sends a notice to the
taxpayer, as needed, to resolve the
condition. The IRS maintains a system
that measures the hours of
correspondence labor by type of notice
sent to taxpayers.
Generally, the IRS uses the costs for
two years and averages those costs to
determine the cost of an activity.
However, for this component of cost, the
IRS used existing data for the hours
spent in FY 2014 on correspondence
labor related to monitoring installment
agreements and calculated total labor
and benefits for those hours. The IRS
does not believe including an additional
year of data would result in a significant
difference in the result. In the future,
the IRS intends to use the average cost
of two years to calculate this cost
component. The total annual cost of
correspondence for monitoring
agreements labor and benefits is
$5,807,847.
The IRS divided the total annual labor
and benefits cost of correspondence for
monitoring agreements by the total
agreements in inventory at the end of
FY 2014. The total inventory was
3,973,208, resulting in annual labor and
benefits cost per agreement of $1.46.
The IRS converted the annual cost of
correspondence for monitoring
agreements labor and benefits to a peragreement cost by dividing the annual
cost per installment agreement by 12
months to calculate the monthly cost
per installment agreement. The IRS then
multiplied the monthly cost per
installment agreement by 40.31 months,
the average term of installment
agreements (in months), to calculate the
unit cost over the life of the installment
agreement.
Total Annual Cost of Correspondence for Monitoring Agreements Labor
and Benefits ......................
Total Agreements in Inventory at End of FY 2014 .....
Annual Labor and Benefits
Cost per Agreement ..........
Monthly Cost Per Agreement
(Annual Labor and Benefits Cost per Agreement divided by 12 months) .........
Average Term of Installment
Agreement (in months) .....
Unit Cost of Correspondence
for Monitoring Agreements
Labor and Benefits Over
the Life of Installment
Agreement .........................
$5,807,847
3,973,208
$1.46
$0.12
40.31
$4.91
There is not a significant difference in
the cost of monitoring regular and direct
debit installment agreements; therefore,
each type of agreement is allocated the
same ratio of monitoring costs.
Restructured/reinstated installment
agreements are not allocated any
monitoring costs because monitoring
costs for restructured/reinstated
agreements are recovered in the original
user fee. The unit cost of
correspondence for monitoring
agreements labor and benefits per
installment agreement is shown below:
Regular agreement
Lhorne on DSK30JT082PROD with PROPOSALS
Unit Cost of Correspondence for Monitoring Agreements Labor and Benefits Over
the Life of Installment Agreement ..........................................................................
The IRS maintains a system that
calculates the number of seconds spent
on the phone by type of call. To
determine the telecommunications labor
and benefits costs to maintain and
monitor installment agreements, IRS
first analyzed the time spent on phone
calls related to monitoring and
maintaining installment agreements,
rather than establishing one. The total
seconds are converted into hours and
VerDate Sep<11>2014
15:13 Aug 19, 2016
Jkt 238001
Direct debit
installment agreement
Restructured/
reinstated installment agreement
$4.91
$4.91
$0
hourly salary and benefits rates are
applied.
The average labor and benefits costs
for responding to installment agreement
questions are $58,917,275 for FY 2013
and FY 2014. These costs are
accumulated by type of installment
agreement. To determine the annual
unit cost per type of agreement, the IRS
used the total volume of the
corresponding installment agreements
in inventory at the end of FY 2014 as
PO 00000
Frm 00010
Fmt 4702
Sfmt 4702
the baseline for the number of
installment agreements that generate
telecommunications costs of responding
to questions. The IRS divided the
average labor and benefits costs
separated by type of agreement by the
total agreements in inventory at the end
of FY 2014 for each type of agreement.
The IRS converted the annual cost of
correspondence for telecommunications
labor and benefits to a per-agreement
cost as follows:
E:\FR\FM\22AUP1.SGM
22AUP1
56548
Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Proposed Rules
Non-direct debit
installment
agreement
Average Telecommunications Labor and Benefits Costs .........................................
Volume of Installment Agreements in Inventory at end of FY 2014 by Type ...........
Annual Unit Cost Per Installment Agreement ...........................................................
Monthly Cost Per Installment Agreement 4 (Annual Unit Cost Per Installment
Agreement divided by 12 months) .........................................................................
Average Term of Installment Agreement (in months) ...............................................
Unit Cost for Telecommunications Labor and Benefits Over the Life of the Installment Agreement .....................................................................................................
Next, the IRS determined the
appropriate allocation of overhead for
installment agreements. As noted above,
the IRS adjusted the Corporate
Overhead Rate for the installment
Direct debit
installment
agreement
Restructured/
reinstated
agreement
$55,872,940
3,084,844
$18.11
$2,014,736
888,364
$2.27
$1,029,598
1,082,303
$0.95
$1.51
40.31
$0.19
40.31
$0.08
40.31
$60.84
$7.62
$3.20
agreement program down to 60.89
percent. The IRS applied this adjusted
Corporate Overhead rate to the total
labor and benefits costs for monitoring
and telecommunications calculated
above. The total labor unit cost
including the adjusted Corporate
Overhead allocated to each type
installment agreement is as follows:
Non-direct debit
installment
agreement
Direct debit
installment
agreement
Restructured/
reinstated
installment
agreement
Unit Cost of Correspondence for Monitoring Agreements Labor and Benefits Over
the Life of Installment Agreement ..........................................................................
Unit Cost for Telecommunications Labor and Benefits Over the Life of the Installment Agreement .....................................................................................................
$4.91
$4.91
$0
60.84
7.62
3.20
Subtotal ...............................................................................................................
Adjusted Corporate Overhead (60.89%) ...................................................................
Maintain and Monitor Labor and Benefits Unit Cost .................................................
65.75
40.03
105.78
12.53
7.63
20.16
3.20
1.95
5.15
The final element of the cost analysis
for maintaining and monitoring
installment agreements is the cost of
non-labor notice and
telecommunications. The IRS maintains
a system for tracking notices and
telecommunication costs. Each type of
notice has a known number of pages,
postage, and telecommunication costs
responding to taxpayer inquiries related
to the notices. The average annual nonlabor cost for all notices and
telecommunication related to
installment agreements is $36,219,659.
The IRS divided the total average notice
and telecommunication non-labor cost
by the total volume of agreements in
inventory at the end of FY 2014 to
determine the annual notice and
telecommunication non-labor cost per
installment agreement. The IRS
converted the annual cost of notice and
telecommunications to a per-agreement
cost as follows:
Regular
installment
agreement
Lhorne on DSK30JT082PROD with PROPOSALS
Average Annual Non-Labor Cost of All Notices ........................................................
Average Annual Non-Labor Cost of Telecommunication ..........................................
Total Average Notice and Telecommunication Non-Labor Costs .............................
Total Volume of Agreements in Inventory at end of FY 2014 ..................................
Annual Notice and Telecommunication Non-Labor Cost Per Installment Agreement .......................................................................................................................
Monthly Notice and Telecommunication Non-Labor Cost Per Installment Agreement (Annual Notice and Telecommunication Non-Labor Cost divided by 12
months) ..................................................................................................................
Average Term of Installment Agreement (in months) ...............................................
Unit Cost for Notice and Telecommunication Non-Labor Over the Life of the Installment Agreement ..............................................................................................
The unit costs for maintaining and
monitoring an installment agreement
based on the total cost of maintaining
$1,190,147
$48,421
$1,238,568
888,364
$608,206
$24,745
$632,950
1,082,303
$11.13
$1.39
$0.58
$0.93
40.31
$0.12
40.31
$0.05
40.31
$37.40
$4.68
$1.96
and monitoring all installment
agreements are as follows:
Maintain and Monitor Labor Unit Costs .....................................................................
15:13 Aug 19, 2016
Jkt 238001
Restructured/
reinstated
agreement
$33,005,331
$1,342,810
$34,348,141
3,084,844
Non-direct debit
installment
agreement
VerDate Sep<11>2014
Direct debit
installment
agreement
PO 00000
Frm 00011
Fmt 4702
Sfmt 4702
Direct debit
installment
agreement
$105.78
E:\FR\FM\22AUP1.SGM
$20.16
22AUP1
Restructured/
reinstated
installment
agreement
$5.15
Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Proposed Rules
Non-direct debit
installment
agreement
56549
Restructured/
reinstated
installment
agreement
Direct debit
installment
agreement
Maintain and Monitor Non-Labor Unit Cost ...............................................................
37.40
4.68
1.96
Total Maintain and Monitor Unit Cost ................................................................
143.18
24.84
7.11
3. Per Unit Full Cost of Each Type of
Installment Agreement
The per unit full cost and rates per
each type of installment agreement are
as follows:
Direct debit
installment
agreement
Regular
agreement
Unit Cost to Establish ..........................................................
Unit Cost to Maintain and Monitor .......................................
Per Unit Full Cost ................................................................
Rate ......................................................................................
Lhorne on DSK30JT082PROD with PROPOSALS
4. Low Income Installment Agreement
User Fee
The proposed regulations maintain
the low-income taxpayer user fee of $43
for regular installment agreements and
direct debit installment agreements and
extend the low-income taxpayer user fee
of $43 to restructured/reinstated
installment agreements and online
payment agreements. When the IRS first
instituted the $43 user fee for lowincome taxpayers, it determined that
this amount would not unduly burden
or disproportionately dissuade lowincome taxpayers from seeking
installment agreements. Historically,
approximately one-third of all
installment agreement requests have
come from low-income taxpayers, a
percentage that has remained relatively
consistent since the introduction of the
$43 low-income taxpayer rate. In light of
this, the IRS has determined to maintain
the existing $43 user fee for low-income
taxpayers and to extend this reduced
user fee to restructured/reinstated
installment agreements and online
payment agreements requested by lowincome taxpayers. Because the full cost
of direct debit online payment
agreements of $31 is less than the lowincome taxpayer user fee, all taxpayers
will be charged the same $31 user fee
for direct debit online payment
agreements.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed by
Executive Order 13563. Therefore, a
VerDate Sep<11>2014
15:13 Aug 19, 2016
Jkt 238001
$81.76
143.18
224.94
225
$81.76
24.84
106.60
107
regulatory impact assessment is not
required. It is hereby certified that these
regulations will not have a significant
economic impact on a substantial
number of small entities. 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. The dollar amount of
the fee is not, however, substantial
enough to have a significant economic
impact on any entity subject to the fee.
Low-income taxpayers and taxpayers
entering into direct debit online
payment agreements will be charged a
lower fee, which lessens the economic
impact of these regulations.
Accordingly, a regulatory flexibility
analysis is not required. 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 amendments to
the regulations are adopted as final
regulations, consideration will be given
to any comments that are submitted
timely to the IRS as prescribed in this
preamble under the ADDRESSES heading.
The Treasury Department and the IRS
request comments on all aspects of the
proposed regulations. All comments
will be available at www.regulations.gov
or upon request.
A public hearing has been scheduled
for October 19, 2016, beginning at 2:00
PO 00000
Frm 00012
Fmt 4702
Sfmt 4702
Restructured/
reinstated
installment
agreement
$81.76
7.11
88.87
89
Direct debit
online
payment
agreements
$6.00
24.84
30.84
31
Online
payment
agreements
$6.00
143.18
149.18
149
p.m. in the Main IR Auditorium of the
Internal Revenue Service Building, 1111
Constitution Avenue NW., Washington,
DC 20224. Due to building security
procedures, visitors must enter at the
Constitution Avenue entrance. In
addition, all visitors must present photo
identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For
information about having your name
placed on the building access list to
attend the hearing, see the FOR FURTHER
INFORMATION CONTACT section of this
preamble.
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 or
electronic comments by October 6, 2016
and submit an outline of the topics to
be discussed and the amount of time to
be devoted to each topic (a signed
original and 8 copies) by October 6,
2016. 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
outlines has passed. Copies of the
agenda will be available free of charge
at the hearing.
Drafting Information
The principal author of these
regulations is Maria Del Pilar Puerto of
the Office of Associate Chief Counsel
(Procedure and Administration). Other
personnel from the Treasury
Department and the IRS participated in
their development.
E:\FR\FM\22AUP1.SGM
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56550
Federal Register / Vol. 81, No. 162 / Monday, August 22, 2016 / Proposed Rules
(d) Effective/applicability date. This
section is applicable beginning January
1, 2017.
■ Par. 3. In § 300.2, paragraphs (b) and
(d) are revised to read as follows:
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping
requirements, User fees.
Proposed Amendments to the
Regulations
§ 300.2 Restructuring or reinstatement of
installment agreement fee.
Accordingly, 26 CFR part 300 is
proposed to be amended as follows:
*
PART 300—USER FEES
Paragraph 1. The authority citation
for part 300 continues to read as
follows:
■
Authority: 31 U.S.C. 9701.
Par. 2. In § 300.1, paragraphs (b) and
(d) are revised to read as follows:
■
§ 300.1
Installment agreement fee.
Lhorne on DSK30JT082PROD with PROPOSALS
*
*
*
*
*
(b) Fee. The fee for entering into an
installment agreement before January 1,
2017, is $120. The fee for entering into
an installment agreement on or after
January 1, 2017, is $225. A reduced fee
applies in the following situations:
(1) For installment agreements
entered into before January 1, 2017, the
fee is $52 when the taxpayer pays by
way of a direct debit from the taxpayer’s
bank account. The fee is $107 when the
taxpayer pays by way of a direct debit
from the taxpayer’s bank account for
installment agreements entered into on
or after January 1, 2017;
(2) For online payment agreements
entered into before January 1, 2017, the
fee is $120, except that the fee is $52
when the taxpayer pays by way of a
direct debit from the taxpayer’s bank
account. The fee is $149 for entering
into online payment agreements on or
after January 1, 2017, except that the fee
is $31 when the taxpayer pays by way
of a direct debit from the taxpayer’s
bank account; and
(3) Notwithstanding the type of
installment agreement and method of
payment, the fee is $43 if the taxpayer
is a low-income taxpayer, that is, an
individual who falls at or below 250
percent of the dollar criteria established
by the poverty guidelines updated
annually in the Federal Register by the
U.S. Department of Health and Human
Services under authority of section
673(2) of the Omnibus Budget
Reconciliation Act of 1981 (95 Stat. 357,
511), or such other measure that is
adopted by the Secretary, except that
the fee is $31 when the taxpayer pays
by way of a direct debit from the
taxpayer’s bank account with respect to
online payment agreements entered into
on or after January 1, 2017;
*
*
*
*
*
VerDate Sep<11>2014
15:13 Aug 19, 2016
Jkt 238001
*
*
*
*
(b) Fee. The fee for restructuring or
reinstating an installment agreement
before January 1, 2017, is $50. The fee
for restructuring or reinstating an
installment agreement on or after
January 1, 2017, is $89. If the taxpayer
is a low-income taxpayer, that is, an
individual who falls at or below 250
percent of the dollar criteria established
by the poverty guidelines updated
annually in the Federal Register by the
U.S. Department of Health and Human
Services under authority of section
673(2) of the Omnibus Budget
Reconciliation Act of 1981 (95 Stat. 357,
511), or such other measure that is
adopted by the Secretary, then the fee
for restructuring or reinstating an
installment agreement on or after
January 1, 2017 is $43.
*
*
*
*
*
(d) Effective/applicability date. This
section is applicable beginning January
1, 2017.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2016–19836 Filed 8–19–16; 8:45 am]
Background
BILLING CODE 4830–01–P
DEPARTMENT OF THE INTERIOR
National Park Service
36 CFR Part 7
[NPS–SER–CAHA–21373; PPSECAHAS0,
PPMPSPD1Z.YM0000]
RIN 1024–AE33
Special Regulations; Areas of the
National Park System, Cape Hatteras
National Seashore—Off-Road Vehicle
Management
National Park Service, Interior.
Proposed rule.
AGENCY:
ACTION:
The National Park Service
(NPS) proposes to amend its special
regulation for off-road vehicle (ORV) use
at Cape Hatteras National Seashore,
North Carolina, to revise the times that
certain beaches open to ORV use in the
morning, extend the dates that certain
seasonal ORV routes are open in the fall
and spring, and modify the size and
location of vehicle-free areas.
SUMMARY:
PO 00000
Frm 00013
Fmt 4702
Consideration of changes to this
special regulation was required by
section 3057 of the National Defense
Authorization Act for Fiscal Year 2015.
The NPS also proposes to amend this
special regulation to allow the Cape
Hatteras National Seashore to issue ORV
permits that would be valid for different
lengths of time than currently exist, and
to replace an ORV route designation on
Ocracoke Island with a park road to
allow vehicle access and pedestrian use
of a soundside area without the
requirement for an ORV permit.
DATES: Comments must be received by
October 21, 2016.
ADDRESSES: You may submit comments,
identified by the Regulation Identifier
Number (RIN) 1024–AE33, by any of the
following methods:
• Electronically: Federal eRulemaking
Portal: https://www.regulations.gov.
Follow the instructions for submitting
comments.
• Hardcopy: Mail or hand-deliver to:
Superintendent, Cape Hatteras National
Seashore, 1401 National Park Drive,
Manteo, North Carolina 27954.
For additional information see Public
Participation under SUPPLEMENTARY
INFORMATION below.
FOR FURTHER INFORMATION CONTACT:
Superintendent, Cape Hatteras National
Seashore, 1401 National Park Drive,
Manteo, North Carolina 27954. Phone
252–475–9032.
SUPPLEMENTARY INFORMATION:
Sfmt 4702
Description of Cape Hatteras National
Seashore
Situated along the Outer Banks of
North Carolina, Cape Hatteras National
Seashore (Seashore or park) was
authorized by Congress in 1937 and
established in 1953 as the nation’s first
national seashore. Consisting of more
than thirty thousand acres distributed
along approximately 67 miles of
shoreline, the Seashore is part of a
dynamic barrier island system.
The Seashore contains important
wildlife habitat created by dynamic
environmental processes. Several
species listed under the Endangered
Species Act, including the piping
plover, rufa subspecies of the red knot,
and five species of sea turtles, are found
within the park. The Seashore also
serves as a popular recreation
destination where users participate in a
variety of activities.
Authority and Jurisdiction To
Promulgate Regulations
In the NPS Organic Act (54 U.S.C.
100101), Congress granted the NPS
broad authority to regulate the use of
E:\FR\FM\22AUP1.SGM
22AUP1
]]>Agencies
[Federal Register Volume 81, Number 162 (Monday, August 22, 2016)]
[Proposed Rules]
[Pages 56543-56550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19836]
[[Page 56543]]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[REG-108792-16]
RIN 1545-BN37
User Fees for Installment Agreements
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed amendments to the regulations
that provide user fees for installment agreements. The proposed
amendments affect taxpayers who wish to pay their liabilities through
installment agreements. The proposed effective date for these proposed
amendments to the regulations is January 1, 2017. This document also
provides a notice of public hearing on these proposed amendments to the
regulations.
DATES: Written or electronic comments must be received by October 6,
2016. Outlines of topics to be discussed at the public hearing
scheduled for October 19, 2016, at 2:00 p.m. must be received by
October 6, 2016.
ADDRESSES: Send submissions to: Internal Revenue Service, CC:PA:LPD:PR
(REG-108792-16), Room 5203, Post Office Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
108792-16), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC 20224 or sent electronically via the Federal
eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-
108792-16). The public hearing will be held in the Main IR Auditorium
beginning at 2:00 p.m. in the Internal Revenue Service Building, 1111
Constitution Avenue NW., Washington, DC 20224.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed amendments to
the regulations, M. Pilar Puerto at (202) 317-5437; concerning
submissions of comments, the hearing, or to be placed on the building
access list to attend the hearing, Regina Johnson, at (202) 317-6901;
concerning cost methodology, Eva Williams, at (202) 803-9728 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed regulations that would amend
Sec. Sec. 300.1 and 300.2 of the User Fee Regulations (26 CFR part
300), which provide for a user fee applicable to installment agreements
under section 6159 of the Internal Revenue Code (Code).
Section 6159 authorizes the IRS to enter into an agreement with any
taxpayer for the payment of tax in installments to the extent the IRS
determines that entering into the installment agreement will facilitate
the full or partial collection of the tax. Section 301.6159-1(a).
Installment agreements are voluntary, and taxpayers may request an
installment agreement in person, by completing the appropriate forms
and mailing them to the IRS, online, or over the telephone. Before
entering into an installment agreement, the IRS may examine the
taxpayer's financial position to determine whether such an agreement is
appropriate. See Internal Revenue Manual (IRM) 5.14. If the IRS accepts
the installment agreement, the IRS must process the payments made by
the taxpayer and monitor the taxpayer's compliance with the terms of
the agreement. The terms of an agreement generally require the taxpayer
to pay the minimum monthly payment on time, file all required tax
returns on time, and pay all taxes in-full and on time. See Form 433-D,
Installment Agreement. In addition, section 6159(d) requires that the
IRS review partial payment installment agreements at least once every
two years.
Under Sec. 300.1, the IRS currently charges three rates for
installment agreements. The user fee, in general, is $120 for an
installment agreement. The user fee is reduced to $52 for a direct
debit installment agreement, which is an agreement whereby the taxpayer
authorizes the IRS to request the monthly electronic transfer of funds
from the taxpayer's bank account to the IRS. The user fee is $43
notwithstanding the method of payment if the taxpayer is a low-income
taxpayer, as defined below.
Under Sec. 300.2, the IRS currently charges $50 for restructuring
or reinstating an installment agreement that is 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. See IRM
5.14. Currently, there is no exception to this fee for low-income
taxpayers.
Explanation of Provisions
A. Overview
To bring user fee rates for installment agreements in line with the
full cost to the IRS of providing these taxpayer specific services, the
proposed regulations under Sec. Sec. 300.1 and 300.2 would increase
the user fee for the existing installment agreement types and introduce
two new types of online installment agreements, each subject to a
separate user fee. Five of these proposed user fee rates are based on
the full cost of establishing and monitoring installment agreements.
The sixth rate is for low-income taxpayers.
Regular Installment Agreements--A taxpayer contacts the
IRS in person, by phone, or by mail and sets up an agreement to make
manual payments over a period of time either by mailing a check or
electronically through the Electronic Federal Tax Payment System
(EFTPS). The proposed fee for entering into a regular installment
agreement is $225.
Direct Debit Installment Agreements--A taxpayer contacts
the IRS by phone or mail and sets up an agreement to make automatic
payments over a period of time through a direct debit from a bank
account. The proposed fee for entering into a direct debit installment
agreement is $107.
Online Payment Agreements--A taxpayer sets up an
installment agreement through https://www.irs.gov and agrees to make
manual payments over a period of time either by mailing a check or
electronically through the EFTPS. The proposed fee for entering into an
online payment agreement is $149.
Direct Debit Online Payment Agreements--A taxpayer sets up
an installment agreement through https://www.irs.gov and agrees to make
automatic payments over a period of time through a direct debit from a
bank account. The proposed fee for entering into a direct debit online
payment agreement is $31.
Restructured/Reinstated Installment Agreements--A taxpayer
modifies a previously established installment agreement or reinstates
an installment agreement on which the taxpayer has defaulted. The
proposed fee for restructuring or reinstating an installment agreement
is $89.
Low-Income Rate--A rate that applies when a low-income
taxpayer enters into any type of installment agreement, other than a
direct debit online payment agreement, and when a low-income taxpayer
restructures or reinstates any installment agreement. A low-income
taxpayer is a taxpayer that
[[Page 56544]]
has income at or below 250 percent of the dollar criteria established
by the poverty guidelines updated annually in the Federal Register by
the U.S. Department of Health and Human Services. Section 300.1(b)(2).
The proposed low-income rate is $43.
B. User Fee Authority
The Independent Offices Appropriations Act (IOAA) (31 U.S.C. 9701)
authorizes each agency to promulgate regulations establishing the
charge for services provided by the agency (user fees). The IOAA
provides that these user fee regulations are subject to policies
prescribed by the President and shall be as uniform as practicable.
Those policies are currently set forth in the Office of Management and
Budget (OMB) Circular A-25, 58 FR 38142 (July 15, 1993; OMB Circular).
The IOAA states that the services provided by an agency should be
self-sustaining to the extent possible. 31 U.S.C. 9701(a). The OMB
Circular states that agencies that provide services that confer special
benefits on identifiable recipients beyond those accruing to the
general public are to establish user fees that recover the full cost of
providing those services. The OMB Circular requires that agencies
identify all services that confer special benefits and determine
whether user fees should be assessed for those services.
Agencies are to review user fees biennially and update them as
necessary to reflect changes in the cost of providing the underlying
services. During this biennial review, an agency must calculate the
full cost of providing each service, taking into account all direct and
indirect costs to any part of the U.S. government. The full cost of
providing a service includes, but is not limited to, salaries,
retirement benefits, rents, utilities, travel, and management costs, as
well as an appropriate allocation of overhead and other support costs
associated with providing the service.
An agency should set the user fee at an amount that recovers the
full cost of providing the service unless the agency requests, and the
OMB grants, an exception to the full cost requirement. The OMB may
grant exceptions only where the cost of collecting the fees would
represent an unduly large part of the fee for the activity or any other
condition exists that, in the opinion of the agency head, justifies an
exception. When the OMB grants an exception, the agency does not
collect the full cost of providing the service and therefore must fund
the remaining cost of providing the service from other available
funding sources. By doing so, the agency subsidizes the cost of the
service to the recipients of reduced-fee services even though the
service confers a special benefit on those recipients who should
otherwise be required to pay the full costs of receiving that benefit
as provided for by the IOAA and the OMB Circular.
C. Installment Agreement User Fee
The installment agreement program confers a special benefit on
identifiable recipients beyond those accruing to the general public.
Specifically, a taxpayer that is granted an installment agreement is
allowed to pay an outstanding tax obligation over time without being
subjected to IRS levy related to these taxes during this term of
repayment. See section 6331(k)(2) of the Code and Sec. 301.6159-1(f).
Section 6331(k)(2) generally prohibits the IRS from levying to collect
taxes while a request to enter into an installment agreement is pending
with the IRS, for 30 days after the rejection of a proposed installment
agreement, and for 30 days immediately following the termination of an
installment agreement. If, prior to the expiration of the 30-day period
following the rejection or termination of an installment agreement, the
taxpayer appeals the rejection or termination decision, no levy may be
made while the rejection or termination is being considered by Appeals.
Because of these special benefits the IOAA and the OMB Circular
authorize the IRS to charge a user fee for an installment agreement
that reflects the full cost of providing the service of the installment
agreement program to the taxpayer.
The installment agreement user fees were last changed in 2014. As
required by the IOAA and the OMB Circular, the IRS completed its 2015
biennial review of the installment agreement program and determined
that the full cost of a regular installment agreement is $225, and the
full cost of a direct debit installment agreement is $107. The IRS
determined that the full cost of a regular online payment agreement is
$149, and the full cost for a direct debit online payment agreement is
$31. The IRS determined that the full cost of restructuring or
reinstating an installment agreement is $89.
The proposed regulations adopt the full cost amounts as the new
user fees for the various types of installment agreements.
Historically, the IRS charged a user fee that recovered less than the
full cost of an installment agreement to make the service more
accessible to a broader range of taxpayers. However, in light of
constraints on IRS resources for tax administration, the Treasury
Department and the IRS have determined that it is necessary to recoup
the full costs of the installment agreement program. The IRS will
continue its practice of providing services subject to user fees at
less than full cost where there is a compelling tax administration
reason to do so. Therefore, these proposed regulations do not increase
the reduced user fee for offers submitted by low-income taxpayers and
introduce a reduced fee for requests by low-income taxpayers to
restructure or reinstate defaulted installment agreements.
The proposed fees reflect the IRS's determination to continue to
provide a wide variety of installment agreement options to taxpayers
and, as required by the OMB Circular, to determine the full cost for
each option. Since the enactment of the installment agreement program,
the IRS has periodically developed new ways for taxpayers to enter into
and pay for installment agreements, such as through online payment
agreements and direct debit online payment agreements. These new
installment agreement types have not had their own separate user fee,
but instead have been included in the existing user fee structure. In
recent years, taxpayers' use of the online installment agreement
options have increased, justifying a separate fee structure for the
online installment agreement options.
Consistent with introducing these new fees, the most recent full
cost analysis of the installment agreement program has been refined to
more precisely account for the costs associated with administering the
various types of installment agreements available to taxpayers.
Requesting installment agreements in person or over the phone and
receiving payment through means other than direct debit is more costly
for the IRS to administer, and the proposed user fees reflect these
costs. Similarly, this recent analysis has resulted in the availability
of reduced user fees to taxpayers for those options that cost less for
the IRS to administer. By offering a range of installment agreement
options at a range of fees, the IRS is assisting taxpayers in coming
into compliance with their tax payment obligations, which benefits tax
administration and provides an enhanced service to taxpayers.
D. Calculation of User Fees Generally
User fee calculations begin by first determining the full cost for
the service. The IRS follows the guidance provided by the OMB Circular
to compute the full cost of the service, which includes all indirect
and direct costs to any part of
[[Page 56545]]
the U.S. government including but not limited to direct and indirect
personnel costs, physical overhead, rents, utilities, travel, and
management costs. The IRS's cost methodology is described below.
Once the total amount of direct and indirect costs associated with
a service is determined, the IRS follows the guidance in the OMB
Circular to determine the costs associated with providing the service
to each recipient, which represents the average per unit cost of that
service. This average per unit cost is the amount of the user fee that
will recover the full cost of the service.
The IRS follows generally accepted accounting principles (GAAP), as
established by the Federal Accounting Standards Advisory Board (FASAB)
in calculating the full cost of providing services. The FASAB Handbook
of Accounting Standards and Other Pronouncements, as amended, which is
available at https://files.fasab.gov/pdffiles/2015_fasab_handbook.pdf,
includes the Statement of Federal Financial Accounting Standards No. 4:
Managerial Cost Accounting Concepts and Standards for the Federal
Government (SFFAS No.4). SFFAS No. 4 establishes internal costing
standards under GAAP to accurately measure and manage the full cost of
federal programs. The methodology described below is in accordance with
SFFAS No. 4.
1. Cost Center Allocation
The IRS determines the cost of its services and the activities
involved in producing them through a cost accounting system that tracks
costs to organizational units. The lowest organizational unit in the
IRS's cost accounting system is called a cost center. Cost centers are
usually separate offices that are distinguished by subject-matter area
of responsibility or geographic region. All costs of operating a cost
center are recorded in the IRS's cost accounting system and allocated
to that cost center. The costs allocated to a cost center are the
direct costs for the cost center's activities as well as all indirect
costs, including overhead, associated with that cost center. Each cost
is recorded in only one cost center.
2. Determining the Per Unit Cost
To establish the per unit cost, the total cost of providing the
service is divided by the volume of services provided. The volume of
services provided includes both services for which a fee is charged as
well as subsidized services. The subsidized services are those where
OMB has approved an exception to the full cost requirement, for
example, to charge a reduced fee to low-income taxpayers. The volume of
subsidized services is included in the total volume of services
provided to ensure that the IRS, and not those who are paying full
cost, subsidizes the cost of the reduced-full cost services.
3. Cost Estimation of Direct Labor and Benefits
Not all cost centers are fully devoted to only one service for
which the IRS charges a user fee. Some cost centers work on a number of
different services. In these cases, the IRS estimates the cost incurred
in those cost centers attributable to the service for which a user fee
is being calculated by measuring the time required to accomplish
activities related to the service, and estimating the average time
required to accomplish these activities. The average time required to
accomplish these activities is multiplied by the relevant
organizational unit's average labor and benefits cost per unit of time
to determine the labor and benefits cost incurred to provide the
service. To determine the full cost, the IRS then adds an appropriate
overhead charge as discussed below.
4. Calculating Overhead
Overhead is an indirect cost of operating an organization that
cannot be immediately associated with an activity that the organization
performs. Overhead includes costs of resources that are jointly or
commonly consumed by one or more organizational unit's activities but
are not specifically identifiable to a single activity.
These costs can include:
General management and administrative services of
sustaining and support organizations.
Facilities management and ground maintenance services
(security, rent, utilities, and building maintenance).
Procurement and contracting services.
Financial management and accounting services.
Information technology services.
Services to acquire and operate property, plants and
equipment.
Publication, reproduction, and graphics and video
services.
Research, analytical, and statistical services.
Human resources/personnel services.
Library and legal services.
To calculate the overhead allocable to a service, the IRS first
calculates the Corporate Overhead rate and then multiplies the
Corporate Overhead rate by the direct labor and benefits costs
determined as discussed above. The IRS calculates the Corporate
Overhead rate annually based on cost elements underlying the Statement
of Net Cost included in the IRS Annual Financial Statements, which are
audited by the Government Accountability Office. The Corporate Overhead
rate is the ratio of the sum of the IRS's indirect labor and benefits
costs from the supporting and sustaining organizational units--those
that do not interact directly with taxpayers--and all non-labor costs
to the IRS's labor and benefits costs of its organizational units that
interact directly with taxpayers.
The Corporate Overhead rate of 65.85 percent for costs reviewed
during FY 2015 was calculated based on FY 2014 costs as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Indirect Labor and Benefits Costs................... $1,693,339,843
Non-Labor Costs..................................... + $2,832,262,970
-------------------
Total Indirect Costs............................ $4,525,602,813
Direct Labor and Benefits Costs..................... + $6,872,934,473
-------------------
Corporate Overhead Rate............................. 65.85%
------------------------------------------------------------------------
E. Calculation of Installment Agreement User Fee
The full cost analysis considers the common components of each of
the five installment agreement types as well as each type's unique cost
drivers. The costs for each type of installment agreement are broadly
categorized into two groups: (1) Costs incurred by the IRS to establish
the installment agreements and (2) costs incurred by the IRS to
maintain and monitor the installment agreements.
The upfront costs for establishing installment agreements requested
in person, in writing, or over the phone are significantly higher than
those for online payment agreements. For that reason, the upfront costs
for establishing installment agreements requested in person, in
writing, or over the phone are determined separately and allocated only
to installment agreements requested in person, in writing, or over the
phone. In contrast, the only upfront costs to establish online payment
agreements through https://www.irs.gov are the costs of the online
payment agreement system such as annual maintenance and system
enhancements, which are only allocated to online payment agreements.
After installment agreements are established, costs to maintain and
monitor them, including routine notices to the taxpayers, vary
significantly based on the type of installment agreement. Direct debit
installment agreements and direct debit online
[[Page 56546]]
payment agreements have lower maintenance and monitoring costs because
they do not require as much support on an ongoing basis as installment
agreements not paid via direct debit. Payments under direct debit
installment agreements and direct debit online payment agreements are
automatically debited from the taxpayer's bank account. Because
payments for direct debit installment agreements and direct debit
online payment agreements are automatically debited from taxpayers'
accounts without requiring taxpayers to initiate each payment, the IRS
does not send monthly payment notices and in general sends fewer
notices related to these agreements compared to installment agreements
not paid via direct debit. Correspondingly, direct debit installment
agreements and direct debit online payment agreements require less IRS
time responding to taxpayer inquiries resulting from these notices than
do installment agreements not paid via direct debit.
1. Establishing Installment Agreements
The IRS allocates costs attributed to establishing installment
agreements based on whether the installment agreement is a non-online
installment agreement or an online payment agreement.
a. Non-Online Installment Agreements
For non-online installment agreements, the IRS identified the
activities conducted across various organizations to establish
agreements, obtained the time spent on the activities through various
time tracking systems, obtained the labor and benefits rates for
employees from the financial system for FY 2013 and 2014 who spent time
establishing agreements, and averaged those costs to create an
annualized average cost. The average labor and benefits costs to
establish non-online installment agreements is $110,143,952, calculated
as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Collection Field Function............................... $53,268,552
Compliance Services Collection Operations............... 19,989,943
Automated Collection System............................. 19,377,987
Customer Service Toll-Free.............................. 6,183,764
Appeals Staff Labor and Benefits........................ 8,624,615
Field Assistance........................................ 1,894,976
Examination............................................. 804,115
---------------
Average Labor and Benefits Costs to Establish Non-Online 110,143,952
Installment Agreements.................................
------------------------------------------------------------------------
Because the non-labor costs for notices and telecommunication,
which includes the costs of paper, postage and phone service, related
to installment agreements can be identified, the IRS considered them to
be direct costs for the installment agreement program. Accordingly, the
IRS modified the calculation of the Corporate Overhead rate to exclude
these notices and telecommunication costs from the total indirect costs
in the calculation of the Corporate Overhead rate used for purposes of
allocating Corporate Overhead to the installment agreement program
(adjusted Corporate Overhead). The adjusted Corporate Overhead rate
used for the entire installment agreement program is 60.89 percent,
calculated as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Indirect Labor and Benefits Costs................... $1,693,339,843
Non-Labor Costs..................................... + 2,832,262,970
Non-Labor Costs for Notices and Telecommunication... (211,959,052)
-------------------
Adjusted Total Indirect Costs....................... 4,313,643,761
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Direct Labor and Benefits Costs..................... $6,872,934,473
Non-Labor Costs for Notices and Telecommunication... + 211,959,052
-------------------
Adjusted Direct Labor and Benefits Costs............ 7,084,893,526
Adjusted Total Indirect Costs....................... 4,313,643,761
Adjusted Direct Labor and Benefits Costs............ + 7,084,893,526
Adjusted Corporate Overhead Rate.................... 60.89%
------------------------------------------------------------------------
The IRS applied the adjusted Corporate Overhead rate to the labor
and benefits costs to calculate the total labor and benefits cost for
establishing non-online installment agreements as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Labor and Benefits Costs to Establish Non-Online $110,143,952
Installment Agreements.............................
Adjusted Corporate Overhead Rate (60.89%)........... 67,066,653
-------------------
Total Labor and Benefits and Adjusted Overhead Costs 177,210,605
to Establish Non-Online Installment Agreements.....
------------------------------------------------------------------------
There are also non-labor costs attributed to establishing non-
online installment agreements. Because these costs are non-labor, the
IRS does not allocate any overhead to determine the total costs. The
total non-labor costs for establishing non-online installment
agreements are $636,046, calculated as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Telecommunications...................................... $145,169
Automated Collection System............................. 274,664
Customer Service Toll-Free.............................. 216,213
---------------
Total Non-Labor Costs to Establish Non-Online 636,046
Installment Agreements...............................
------------------------------------------------------------------------
The total costs for establishing non-online installment agreements
are $177,846,650, calculated as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Labor and Benefits and Adjusted Overhead Costs to $177,210,605
Establish Non-Online Installment Agreements............
Total Non-Labor Costs to Establish Non-Online 636,046
Installment Agreements.................................
---------------
Total Costs to Establish Non-Online Installment 177,846,650
Agreements...........................................
------------------------------------------------------------------------
To determine the unit cost to establish non-online installment
agreements, the IRS divided the total cost by the average volume of
non-online installment agreements. The IRS determined the volume of
non-online installment agreements by averaging the volumes of new
agreements entered into in FY 2013 and FY 2014. The unit cost was
calculated as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Costs to Establish Non-Online Installment $177,846,650
Agreements.............................................
Average Annual Volume................................... 2,175,142
Unit Cost to Establish Non-Online Installment Agreements $81.76
------------------------------------------------------------------------
b. Online Installment Agreements
For online payment agreements, the only cost to establish those
agreements is the cost for the online payment agreement system that
allows taxpayers to set up the agreements. In FY 2014, the IRS
performed a substantial enhancement to this system at a cost of
$4,200,000. The IRS amortizes system enhancements over a six year
period; therefore, for FY 2014 through FY 2020 the annual amortized
system cost for online payment agreements is $700,000. In addition to
the annual amortized cost, the IRS incurs $200,000 in annual system
maintenance costs for this system. The total annual cost for the online
payment agreement system is $900,000. The use of online payment
[[Page 56547]]
agreements is trending upward and the IRS expects this upward trend to
continue as more taxpayers utilize the IRS's online systems. To reflect
the IRS's expectation of increased use of online systems, the IRS
adjusted upward the average volume of online payment agreements
received in FY 2013 and FY 2014 consistent with that expectation. The
total cost to establish online payment agreements is $6, calculated as
follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Amortized System Upgrade................................ $700,000
Annual System Maintenance Cost.......................... $200,000
Average Yearly System Cost.............................. $900,000
Average Annual Volume................................... 150,000
Unit Cost to Establish Online Payment Agreement......... $6
------------------------------------------------------------------------
2. Maintaining and Monitoring Installment Agreements
The costs for maintaining and monitoring installment agreements
consist of the costs of monitoring and telecommunications labor and
benefits, an allocation of overhead to these labor costs, and notice
and telecommunication non-labor costs.
The IRS identified the activities conducted across various business
units to monitor installment agreements, obtained the time spent on the
activities through various time tracking systems, obtained the labor
and benefits rates for these personnel from the financial system for FY
2013 and 2014, and determined the average annual cost for monitoring
installment agreements.
The IRS allocated the costs attributed to maintaining and
monitoring installment agreements based on whether the agreement is a
direct debit agreement (Direct Debit Installment Agreement or Direct
Debit Online Payment Agreement), a non-direct debit agreement (Regular
Agreement or Online Payment Agreement), or a Restructured/Reinstated
Installment Agreement. The following sections describe the costs
allocated to various types of installment agreements for maintaining
and monitoring.
The IRS continuously monitors all installment agreements for
accounts not meeting the terms of the agreement, for returned payments,
and various other circumstances that result in a need to contact the
taxpayer. When these circumstances arise, the IRS reviews the account
and sends a notice to the taxpayer, as needed, to resolve the
condition. The IRS maintains a system that measures the hours of
correspondence labor by type of notice sent to taxpayers.
Generally, the IRS uses the costs for two years and averages those
costs to determine the cost of an activity. However, for this component
of cost, the IRS used existing data for the hours spent in FY 2014 on
correspondence labor related to monitoring installment agreements and
calculated total labor and benefits for those hours. The IRS does not
believe including an additional year of data would result in a
significant difference in the result. In the future, the IRS intends to
use the average cost of two years to calculate this cost component. The
total annual cost of correspondence for monitoring agreements labor and
benefits is $5,807,847.
The IRS divided the total annual labor and benefits cost of
correspondence for monitoring agreements by the total agreements in
inventory at the end of FY 2014. The total inventory was 3,973,208,
resulting in annual labor and benefits cost per agreement of $1.46. The
IRS converted the annual cost of correspondence for monitoring
agreements labor and benefits to a per-agreement cost by dividing the
annual cost per installment agreement by 12 months to calculate the
monthly cost per installment agreement. The IRS then multiplied the
monthly cost per installment agreement by 40.31 months, the average
term of installment agreements (in months), to calculate the unit cost
over the life of the installment agreement.
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Annual Cost of Correspondence for Monitoring $5,807,847
Agreements Labor and Benefits..........................
Total Agreements in Inventory at End of FY 2014......... 3,973,208
Annual Labor and Benefits Cost per Agreement............ $1.46
Monthly Cost Per Agreement (Annual Labor and Benefits $0.12
Cost per Agreement divided by 12 months)...............
Average Term of Installment Agreement (in months)....... 40.31
Unit Cost of Correspondence for Monitoring Agreements $4.91
Labor and Benefits Over the Life of Installment
Agreement..............................................
------------------------------------------------------------------------
There is not a significant difference in the cost of monitoring
regular and direct debit installment agreements; therefore, each type
of agreement is allocated the same ratio of monitoring costs.
Restructured/reinstated installment agreements are not allocated any
monitoring costs because monitoring costs for restructured/reinstated
agreements are recovered in the original user fee. The unit cost of
correspondence for monitoring agreements labor and benefits per
installment agreement is shown below:
----------------------------------------------------------------------------------------------------------------
Restructured/
Direct debit reinstated
Regular agreement installment installment
agreement agreement
----------------------------------------------------------------------------------------------------------------
Unit Cost of Correspondence for Monitoring $4.91 $4.91 $0
Agreements Labor and Benefits Over the Life of
Installment Agreement..............................
----------------------------------------------------------------------------------------------------------------
The IRS maintains a system that calculates the number of seconds
spent on the phone by type of call. To determine the telecommunications
labor and benefits costs to maintain and monitor installment
agreements, IRS first analyzed the time spent on phone calls related to
monitoring and maintaining installment agreements, rather than
establishing one. The total seconds are converted into hours and hourly
salary and benefits rates are applied.
The average labor and benefits costs for responding to installment
agreement questions are $58,917,275 for FY 2013 and FY 2014. These
costs are accumulated by type of installment agreement. To determine
the annual unit cost per type of agreement, the IRS used the total
volume of the corresponding installment agreements in inventory at the
end of FY 2014 as the baseline for the number of installment agreements
that generate telecommunications costs of responding to questions. The
IRS divided the average labor and benefits costs separated by type of
agreement by the total agreements in inventory at the end of FY 2014
for each type of agreement. The IRS converted the annual cost of
correspondence for telecommunications labor and benefits to a per-
agreement cost as follows:
[[Page 56548]]
----------------------------------------------------------------------------------------------------------------
Non-direct debit Direct debit Restructured/
installment installment reinstated
agreement agreement agreement
----------------------------------------------------------------------------------------------------------------
Average Telecommunications Labor and Benefits Costs.... $55,872,940 $2,014,736 $1,029,598
Volume of Installment Agreements in Inventory at end of 3,084,844 888,364 1,082,303
FY 2014 by Type.......................................
Annual Unit Cost Per Installment Agreement............. $18.11 $2.27 $0.95
Monthly Cost Per Installment Agreement 4 (Annual Unit $1.51 $0.19 $0.08
Cost Per Installment Agreement divided by 12 months)..
Average Term of Installment Agreement (in months)...... 40.31 40.31 40.31
Unit Cost for Telecommunications Labor and Benefits $60.84 $7.62 $3.20
Over the Life of the Installment Agreement............
----------------------------------------------------------------------------------------------------------------
Next, the IRS determined the appropriate allocation of overhead for
installment agreements. As noted above, the IRS adjusted the Corporate
Overhead Rate for the installment agreement program down to 60.89
percent. The IRS applied this adjusted Corporate Overhead rate to the
total labor and benefits costs for monitoring and telecommunications
calculated above. The total labor unit cost including the adjusted
Corporate Overhead allocated to each type installment agreement is as
follows:
----------------------------------------------------------------------------------------------------------------
Restructured/
Non-direct debit Direct debit reinstated
installment installment installment
agreement agreement agreement
----------------------------------------------------------------------------------------------------------------
Unit Cost of Correspondence for Monitoring Agreements $4.91 $4.91 $0
Labor and Benefits Over the Life of Installment
Agreement.............................................
Unit Cost for Telecommunications Labor and Benefits 60.84 7.62 3.20
Over the Life of the Installment Agreement............
--------------------------------------------------------
Subtotal........................................... 65.75 12.53 3.20
Adjusted Corporate Overhead (60.89%)................... 40.03 7.63 1.95
Maintain and Monitor Labor and Benefits Unit Cost...... 105.78 20.16 5.15
----------------------------------------------------------------------------------------------------------------
The final element of the cost analysis for maintaining and
monitoring installment agreements is the cost of non-labor notice and
telecommunications. The IRS maintains a system for tracking notices and
telecommunication costs. Each type of notice has a known number of
pages, postage, and telecommunication costs responding to taxpayer
inquiries related to the notices. The average annual non-labor cost for
all notices and telecommunication related to installment agreements is
$36,219,659. The IRS divided the total average notice and
telecommunication non-labor cost by the total volume of agreements in
inventory at the end of FY 2014 to determine the annual notice and
telecommunication non-labor cost per installment agreement. The IRS
converted the annual cost of notice and telecommunications to a per-
agreement cost as follows:
----------------------------------------------------------------------------------------------------------------
Regular Direct debit Restructured/
installment installment reinstated
agreement agreement agreement
----------------------------------------------------------------------------------------------------------------
Average Annual Non-Labor Cost of All Notices........... $33,005,331 $1,190,147 $608,206
Average Annual Non-Labor Cost of Telecommunication..... $1,342,810 $48,421 $24,745
Total Average Notice and Telecommunication Non-Labor $34,348,141 $1,238,568 $632,950
Costs.................................................
Total Volume of Agreements in Inventory at end of FY 3,084,844 888,364 1,082,303
2014..................................................
Annual Notice and Telecommunication Non-Labor Cost Per $11.13 $1.39 $0.58
Installment Agreement.................................
Monthly Notice and Telecommunication Non-Labor Cost Per $0.93 $0.12 $0.05
Installment Agreement (Annual Notice and
Telecommunication Non-Labor Cost divided by 12 months)
Average Term of Installment Agreement (in months)...... 40.31 40.31 40.31
Unit Cost for Notice and Telecommunication Non-Labor $37.40 $4.68 $1.96
Over the Life of the Installment Agreement............
----------------------------------------------------------------------------------------------------------------
The unit costs for maintaining and monitoring an installment
agreement based on the total cost of maintaining and monitoring all
installment agreements are as follows:
----------------------------------------------------------------------------------------------------------------
Restructured/
Non-direct debit Direct debit reinstated
installment installment installment
agreement agreement agreement
----------------------------------------------------------------------------------------------------------------
Maintain and Monitor Labor Unit Costs.................. $105.78 $20.16 $5.15
[[Page 56549]]
Maintain and Monitor Non-Labor Unit Cost............... 37.40 4.68 1.96
--------------------------------------------------------
Total Maintain and Monitor Unit Cost............... 143.18 24.84 7.11
----------------------------------------------------------------------------------------------------------------
3. Per Unit Full Cost of Each Type of Installment Agreement
The per unit full cost and rates per each type of installment
agreement are as follows:
----------------------------------------------------------------------------------------------------------------
Restructured/ Direct debit
Regular Direct debit reinstated online Online
agreement installment installment payment payment
agreement agreement agreements agreements
----------------------------------------------------------------------------------------------------------------
Unit Cost to Establish.......... $81.76 $81.76 $81.76 $6.00 $6.00
Unit Cost to Maintain and 143.18 24.84 7.11 24.84 143.18
Monitor........................
Per Unit Full Cost.............. 224.94 106.60 88.87 30.84 149.18
Rate............................ 225 107 89 31 149
----------------------------------------------------------------------------------------------------------------
4. Low Income Installment Agreement User Fee
The proposed regulations maintain the low-income taxpayer user fee
of $43 for regular installment agreements and direct debit installment
agreements and extend the low-income taxpayer user fee of $43 to
restructured/reinstated installment agreements and online payment
agreements. When the IRS first instituted the $43 user fee for low-
income taxpayers, it determined that this amount would not unduly
burden or disproportionately dissuade low-income taxpayers from seeking
installment agreements. Historically, approximately one-third of all
installment agreement requests have come from low-income taxpayers, a
percentage that has remained relatively consistent since the
introduction of the $43 low-income taxpayer rate. In light of this, the
IRS has determined to maintain the existing $43 user fee for low-income
taxpayers and to extend this reduced user fee to restructured/
reinstated installment agreements and online payment agreements
requested by low-income taxpayers. Because the full cost of direct
debit online payment agreements of $31 is less than the low-income
taxpayer user fee, all taxpayers will be charged the same $31 user fee
for direct debit online payment agreements.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It is hereby certified that these regulations will not
have a significant economic impact on a substantial number of small
entities. 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. The dollar amount
of the fee is not, however, substantial enough to have a significant
economic impact on any entity subject to the fee. Low-income taxpayers
and taxpayers entering into direct debit online payment agreements will
be charged a lower fee, which lessens the economic impact of these
regulations. Accordingly, a regulatory flexibility analysis is not
required. 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 amendments to the regulations are adopted as
final regulations, consideration will be given to any comments that are
submitted timely to the IRS as prescribed in this preamble under the
ADDRESSES heading. The Treasury Department and the IRS request comments
on all aspects of the proposed regulations. All comments will be
available at www.regulations.gov or upon request.
A public hearing has been scheduled for October 19, 2016, beginning
at 2:00 p.m. in the Main IR Auditorium of the Internal Revenue Service
Building, 1111 Constitution Avenue NW., Washington, DC 20224. Due to
building security procedures, visitors must enter at the Constitution
Avenue entrance. In addition, all visitors must present photo
identification to enter the building. Because of access restrictions,
visitors will not be admitted beyond the immediate entrance area more
than 30 minutes before the hearing starts. For information about having
your name placed on the building access list to attend the hearing, see
the FOR FURTHER INFORMATION CONTACT section of this preamble.
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 or electronic comments by October 6, 2016 and submit an
outline of the topics to be discussed and the amount of time to be
devoted to each topic (a signed original and 8 copies) by October 6,
2016. 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 outlines has passed. Copies
of the agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these regulations is Maria Del Pilar Puerto
of the Office of Associate Chief Counsel (Procedure and
Administration). Other personnel from the Treasury Department and the
IRS participated in their development.
[[Page 56550]]
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping requirements, User fees.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 300 is proposed to be amended as follows:
PART 300--USER FEES
0
Paragraph 1. The authority citation for part 300 continues to read as
follows:
Authority: 31 U.S.C. 9701.
0
Par. 2. In Sec. 300.1, paragraphs (b) and (d) are revised to read as
follows:
Sec. 300.1 Installment agreement fee.
* * * * *
(b) Fee. The fee for entering into an installment agreement before
January 1, 2017, is $120. The fee for entering into an installment
agreement on or after January 1, 2017, is $225. A reduced fee applies
in the following situations:
(1) For installment agreements entered into before January 1, 2017,
the fee is $52 when the taxpayer pays by way of a direct debit from the
taxpayer's bank account. The fee is $107 when the taxpayer pays by way
of a direct debit from the taxpayer's bank account for installment
agreements entered into on or after January 1, 2017;
(2) For online payment agreements entered into before January 1,
2017, the fee is $120, except that the fee is $52 when the taxpayer
pays by way of a direct debit from the taxpayer's bank account. The fee
is $149 for entering into online payment agreements on or after January
1, 2017, except that the fee is $31 when the taxpayer pays by way of a
direct debit from the taxpayer's bank account; and
(3) Notwithstanding the type of installment agreement and method of
payment, the fee is $43 if the taxpayer is a low-income taxpayer, that
is, an individual who falls at or below 250 percent of the dollar
criteria established by the poverty guidelines updated annually in the
Federal Register by the U.S. Department of Health and Human Services
under authority of section 673(2) of the Omnibus Budget Reconciliation
Act of 1981 (95 Stat. 357, 511), or such other measure that is adopted
by the Secretary, except that the fee is $31 when the taxpayer pays by
way of a direct debit from the taxpayer's bank account with respect to
online payment agreements entered into on or after January 1, 2017;
* * * * *
(d) Effective/applicability date. This section is applicable
beginning January 1, 2017.
0
Par. 3. In Sec. 300.2, paragraphs (b) and (d) are revised to read as
follows:
Sec. 300.2 Restructuring or reinstatement of installment agreement
fee.
* * * * *
(b) Fee. The fee for restructuring or reinstating an installment
agreement before January 1, 2017, is $50. The fee for restructuring or
reinstating an installment agreement on or after January 1, 2017, is
$89. If the taxpayer is a low-income taxpayer, that is, an individual
who falls at or below 250 percent of the dollar criteria established by
the poverty guidelines updated annually in the Federal Register by the
U.S. Department of Health and Human Services under authority of section
673(2) of the Omnibus Budget Reconciliation Act of 1981 (95 Stat. 357,
511), or such other measure that is adopted by the Secretary, then the
fee for restructuring or reinstating an installment agreement on or
after January 1, 2017 is $43.
* * * * *
(d) Effective/applicability date. This section is applicable
beginning January 1, 2017.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-19836 Filed 8-19-16; 8:45 am]
BILLING CODE 4830-01-P
