User Fees for Installment Agreements, 86955-86960 [2016-28936]
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Federal Register / Vol. 81, No. 232 / Friday, December 2, 2016 / Rules and Regulations
Pursuant to section 7805(f) of the
Code, TD 9757 and notice of the
proposed rulemaking that crossreferenced and included the text of TD
9757 was submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business. No
comments were received.
Drafting Information
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry
in numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
*
*
*
*
Section 1.6035–2 also issued under 26
U.S.C. 6035(b).
*
*
*
§ 1.6035–2T
■
*
*
[Removed]
Par. 2. Section 1.6035–2T is removed.
Par. 3. Section 1.6035–2 is revised to
read as follows:
■
§ 1.6035–2
Transitional relief.
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(a) Statements due before June 30,
2016. Executors and other persons
required to file or furnish a statement
under section 6035(a)(1) or (2) after July
31, 2015 and before June 30, 2016, need
not have done so until June 30, 2016.
(b) Applicability Date. This section is
applicable to executors and other
persons who file a return required by
section 6018(a) or (b) after July 31, 2015.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: November 16, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2016–28906 Filed 12–1–16; 8:45 am]
BILLING CODE 4830–01–P
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Internal Revenue Service
26 CFR Part 300
[TD 9798]
RIN 1545–BN37
User Fees for Installment Agreements
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
The principal author of these final
regulations is Theresa Melchiorre,
Office of the Associate Chief Counsel
(Passthroughs and Special Industries).
Other personnel from the Treasury
Department and the IRS participated in
their development.
*
DEPARTMENT OF THE TREASURY
14:49 Dec 01, 2016
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This document contains final
regulations that provide user fees for
installment agreements. The final
regulations affect taxpayers who wish to
pay their liabilities through installment
agreements.
DATES: Effective date: These regulations
are effective on December 2, 2016.
Applicability date: These regulations
apply to installment agreements entered
into, restructured, or reinstated on or
after January 1, 2017.
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Maria Del
Pilar Austin at (202) 317–5437;
concerning cost methodology, Eva
Williams, at (202) 803–9728 (not tollfree numbers).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background and Explanation of
Provisions
This document contains amendments
to the User Fee Regulations under 26
CFR part 300. On August 22, 2016, the
Treasury Department and the IRS
published in the Federal Register (81
FR 56550) a notice of proposed
rulemaking (REG–108792–16) relating to
the user fees charged for entering into
and reinstating and restructuring
installment agreements. The
Independent Offices Appropriations Act
of 1952 (IOAA), which is codified at 31
U.S.C. 9701, authorizes agencies to
prescribe regulations establishing user
fees for services provided by the agency.
Regulations prescribing user fees are
subject to the policies of the President,
which are currently set forth in the
Office of Management and Budget
Circular A–25 (the OMB Circular), 58
FR 38142 (July 15, 1993). The OMB
Circular allows agencies to impose user
fees for services that confer a special
benefit to identifiable recipients beyond
those accruing to the general public.
The agency must calculate the full cost
of providing those benefits, and, in
general, the amount of a user fee should
recover the full cost of providing the
service, unless the Office of
Management and Budget (OMB) grants
an exception under the OMB Circular.
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The notice of proposed rulemaking
proposed to increase the user fees under
§ 300.1 for entering into an installment
agreement from $120 to $225 and for
entering into a direct debit installment
agreement from $52 to $107. The notice
of proposed rulemaking proposed to
increase the user fee under § 300.2 for
restructuring or reinstating an
installment agreement from $50 to $89.
The notice of proposed rulemaking
proposed the introduction of two new
types of online installment agreements
under § 300.1, each subject to a separate
user fee: (1) An online payment
agreement with a fee of $149 and (2) a
direct debit online payment agreement
with a fee of $31. Under the notice of
proposed rulemaking, the user fee for
low-income taxpayers, as defined in
§ 300.1(b)(3), would continue to be $43
for entering into a new installment
agreement, except that the lower fee of
$31 for a direct debit online payment
agreement would apply to all taxpayers.
Under § 300.2(b), the fee for low-income
taxpayers restructuring or reinstating an
installment agreement would be
reduced to $43 from $50. The new user
fee rates were proposed to be effective
beginning on January 1, 2017. As
explained in the notice of proposed
rulemaking, the proposed fees bring
user fee rates for installment agreements
in line with the full cost to the IRS of
providing these taxpayer-specific
services. In particular, the new user fee
structure offers taxpayers more tailored
installment agreement options,
including a $31 user fee for direct debit
online payment agreements, which
ensures that taxpayers are not charged
more for their chosen installment
agreement option than the actual cost
incurred by the IRS in providing the
type of installment agreement selected
by taxpayers. Because OMB has granted
an exception to the full cost requirement
for low-income taxpayers, low-income
taxpayers would continue to pay the
reduced fee of $43 for any new
installment agreement, except where
they request a $31 direct debit online
payment agreement, and would pay the
reduced $43 fee for restructuring or
reinstating an installment agreement.
No public hearing on the notice of
proposed rulemaking was held because
one was not requested. Five comments
were received. After careful
consideration of the comments, this
Treasury Decision adopts the proposed
regulations without change.
Summary of Comments
The first comment suggested that
filing a tax return and requesting an
installment agreement should not be a
two-step process and that taxpayers
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requesting an installment agreement
with the filing of their returns should
not be subject to a higher user fee. The
comment expressed concern with tying
eligibility for the $31 user fee to
submitting a request for a direct debit
online payment agreement. The
comment also noted the length of time
it takes the IRS to initiate direct debit
installment agreement payments. The
comment asserted that taxpayers
requesting installment agreements with
the filing of their tax returns and paying
via direct debit should be entitled to the
$31 user fee.
These regulations deal with only the
user fees for installment agreements and
not the administration of the installment
agreement program generally, and so
this comment is addressed only to the
extent it relates to user fees for
installment agreements. As explained in
the notice of proposed rulemaking,
agencies are required to set user fees at
an amount that recovers the full cost of
providing the service unless an agency
requests, and the OMB grants, an
exception to the full cost requirement.
The proposed installment agreement
fees are structured to reflect the full cost
to the IRS to establish and monitor the
different types of installment
agreements associated with each user
fee. The costs to the IRS for installment
agreements are the same to the IRS
whether the taxpayer requests an
installment agreement at the same or a
different time from filing its tax return.
The regulations now offer taxpayers
additional types of installment
agreements to choose from, including a
low-cost user fee of $31 for a direct
debit online payment agreement. A
taxpayer may file a return and then
request a direct debit online payment
agreement and would be charged a fee
of only $31. As discussed in the notice
of proposed rulemaking, the IRS incurs
higher costs in establishing and
monitoring all other forms of
installment agreements. If a taxpayer
chooses to request an installment
agreement other than a direct debit
online payment agreement, that
taxpayer must pay the full cost of that
user fee unless the taxpayer qualifies as
a low-income taxpayer. The length of
time required to establish direct debit
installment agreements that the
comment described is due to IRS budget
cuts in recent years that have resulted
in lower staffing levels combined with
increased workloads. During peak times
of the year, the IRS has more installment
agreements to process than available
staff to process them and backlogs
occur. In addition, there are Federal epay requirements that also add time in
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processing installment agreements paid
by direct debit. However, taxpayers
using the online payment agreement
service receive immediate confirmation
of direct debit online payment
agreements. Taxpayers requesting
installment agreements via a Form 9465
when e-filing are not entitled to the
lower $31 user fee under the proposed
regulations because the costs associated
with processing the Form 9465 are
greater than those incurred for taxpayers
using the online payment agreement
service. At the time taxpayers submit
Form 9465 with their e-filed returns, the
IRS has no way of determining whether
the taxpayers qualify for an installment
agreement or whether the payment
proposal meets streamlined processing
criteria. While the IRS continues to
explore ways to make this process
completely automated, at this time the
process to review a regular installment
agreement request requires IRS staff
involvement that direct debit online
payment agreements do not.
The second comment expressed
concern that the proposed increase in
user fees was too high and asked
whether ‘‘any consideration [has] been
given to increasing the time frame for an
exten[s]ion [from] 120[]days to
180[]days.’’ It appears that the latter part
of this comment is referring to the full
pay agreement that has no user fee but
requires the taxpayer to full pay within
120 days. The extension of the time
period for full pay agreements is
unrelated to the proposed increase in
the user fees for installment agreements.
With regard to the increase in fee, the
fee increase is consistent with the
requirement under the OMB Circular
that agencies 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. In the
notice of proposed rulemaking, the IRS
provided a detailed analysis of how it
calculated the full cost of this service
and the fee is consistent with the full
cost of the particular service.
The third comment provided
examples of taxpayers with varying
circumstances and opined that
increasing the user fee for installment
agreements would be unfair to taxpayers
who are so situated. For taxpayers
whose income falls at or below 250
percent of the poverty level as
established by the U.S. Department of
Health and Human Services and
updated annually, the proposed
regulations continue to offer a reduced
fee for low-income taxpayers of $43, and
extend the $43 fee to low-income
taxpayers restructuring or reinstating
installment agreements. In addition, the
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proposed regulations establish a lower
fee of $31 for online direct debit
installment agreements that is available
to all taxpayers. Thus, even if taxpayers
do not qualify for the reduced lowincome taxpayer fee, the proposed
regulations permit all taxpayers the
option to pay the lower $31 fee by
establishing direct debit online payment
agreements.
The fourth comment had four main
concerns and additional concerns with
respect to each of these main concerns.
The fourth comment’s first main
concern challenged the IRS’s
application of the OMB Circular. The
comment opined that an installment
agreement is not a special benefit as
provided under the OMB Circular for
several reasons. Specifically, the
comment noted that if a taxpayer does
not have assets to levy, then relief of
levy is not a benefit to that taxpayer.
The comment suggested that the IRS
receives a benefit when a taxpayer
enters into an installment agreement
and as a result, the installment
agreement does not provide a special
benefit for purposes of the OMB
Circular. The comment questioned how
many installment agreements resulted
in payments that the IRS would not
have otherwise received. The comment
also questioned whether installment
agreement income is a benefit to the fisc
or whether the IRS could use levies to
secure the same amount of payment.
The comment stated that the IRS is
required to enter into certain
installment agreements pursuant to
section 6159(c) and questioned how a
statutory requirement could be
considered a special benefit. The
comment quoted Section 6(1)(4) of the
OMB Circular, which provides that
‘‘[n]o charge should be made for a
service when the identification of the
specific beneficiary is obscure, and the
service can be considered primarily as
benefiting broadly the general public.’’
The comment opined that because the
IRS may receive some benefit, the
specific beneficiary of an installment
agreement is incompletely identified.
Finally, the comment noted that the
OMB Circular allows for exceptions to
charging full cost and questioned
whether it is good public policy to
increase the user fee considering that
some installment agreements are
statutorily required and help bring
noncompliant taxpayers into
compliance.
As described in the preamble to the
proposed regulations, each taxpayer
entering into an installment agreement
receives the special benefit of paying an
outstanding tax obligation over time
rather than immediately. This special
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benefit does not accrue to the general
public because taxpayers are otherwise
obligated to pay any outstanding taxes
immediately when due. The taxpayer
receives this special benefit regardless
of whether the taxpayer has any assets
on which the IRS could levy. In
addition to paying an outstanding tax
obligation over time rather than
immediately, there are also the special
benefits of avoiding enforcement action
generally and, for timely filed returns, a
reduction of the section 6651 failure to
pay penalty to 0.25 percent during any
month during which an installment
agreement is in effect. The enforcement
actions that are put on hold during the
pendency of an installment agreement
include wage garnishments, the filing of
notices of federal tax liens, and the
making of levies. Even if it is argued
that the government derives some
general benefit from collecting
outstanding tax liabilities to which it is
inarguably entitled, it is still appropriate
under the OMB Circular to charge a user
fee for entering into, reinstating, or
restructuring an installment agreement
because installment agreements provide
‘‘specific services to specific
individuals.’’ Seafarers Int’l Union of N.
Am. v. U.S. Coast Guard, 81 F.3d 179,
183 (D.C. Cir. 1996). The benefit to the
government generally of collecting on
outstanding tax liabilities is a benefit
that accrues to the public generally and
does not diminish the special benefit
provided to an identifiable taxpayer
who requests an installment agreement.
As noted in the notice of proposed
rulemaking, the IOAA permits the IRS
to charge a user fee for providing a
‘‘service or thing of value.’’ 31 U.S.C.
9701(b). A government activity
constitutes a ‘‘service or thing of value’’
when it provides ‘‘special benefits to an
identifiable recipient beyond those that
accrue to the general public.’’ See the
OMB Circular Section 6(a)(1). Among
other things, a ‘‘special benefit’’ exists
when a government service is performed
at the request of a taxpayer and is
beyond the services regularly received
by other members of the same group or
the general public. See OMB Circular
Section 6(a)(1)(c). Under the IOAA,
agencies may impose ‘‘specific charges
for specific services to specific
individuals or companies.’’ See Fed.
Power Comm’n v. New England Power
Co., 415 U.S. 345, 349 (1974); see also
Seafarers, 81 F.3d at 182–83 (D.C. Cir.
1996) (‘‘[A] user fee will be justified
under the IOAA if there is a sufficient
nexus between the agency service for
which the fee is charged and the
individuals who are assessed.’’).
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Section 6(a)(3) of the OMB Circular
explains that ‘‘when the public obtains
benefits as a necessary consequence of
an agency’s provision of special benefits
to an identifiable recipient (i.e., the
public benefits are not independent of,
but merely incidental to, the special
benefits), an agency need not allocate
any costs to the public and should seek
to recover from the identifiable recipient
either the full cost to the Federal
Government of providing the special
benefit or the market price, whichever
applies.’’ While it is true that
installment agreements benefit tax
administration and collection, and by
extension the public fisc, the benefit is
incidental to the special benefits of
allowing taxpayers to satisfy their
Federal tax liabilities over time rather
than when due as required by the Code
and avoiding enforcement actions.
By the very nature of government
action, the general public will almost
always experience some benefit from an
activity that is subject to a user fee. See,
e.g., Seafarers, 81 F.3d at 184–85 (D.C.
Cir. 1996). However, as long as the
activity confers a specific benefit upon
an identifiable beneficiary, it is
permissible for the agency to charge the
beneficiary a fee even though the public
will also experience an incidental
benefit. See Engine Mfrs. Ass’n v. E.P.A.,
20 F.3d 1177, 1180 (D.C. Cir. 1994) (‘‘If
the agency does confer a specific benefit
upon an identifiable beneficiary . . .
then it is of no moment that the service
may incidentally confer a benefit upon
the general public as well.’’) citing Nat’l
Cable Television Ass’n v. FCC, 554 F.2d
1094, at 1103 (D.C. Cir. 1976). It is
permissible for a service for which a
user fee is charged to generate an
‘‘incidental public benefit,’’ and there is
no requirement that the agency weigh
this public benefit against the specific
benefit to the identifiable recipient.
Seafarers, 81 F.3d at 183–84 (D.C. Cir.
1996). Furthermore, the benefit to the
fisc of collecting outstanding taxes is
not an additional benefit to the
government because the IRS would
collect those amounts through other
means absent the installment agreement.
Even so, an agency is still entitled to
charge for services that assist a person
in complying with her statutory duties.
See In Elec. Indus Ass’n v. FCC, 554
F.2d 1109, 1115 (D.C. Cir. 1976).
While the IRS is required to enter into
certain installment agreements pursuant
to section 6159(c), the IRS may still
charge a fee for providing that service.
In fact, under the OMB Circular, there
are several examples of special benefits
(e.g., passport, visa, patent) for which
the issuing agency may charge a fee
even though the agency is required to
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issue such benefit if the individual
meets certain statutory or regulatory
requirements. In addition, a taxpayer
meeting the criteria in section 6159(c)
must still submit a request for an
installment agreement before one is
established. Section 6159(c) requires
that the IRS enter into the installment
agreement provided that the taxpayer
establishes its eligibility for such an
agreement. In that situation, the IRS
incurs the costs of establishing and
monitoring these installment
agreements as with any other
installment agreement. Therefore, it is
proper under the OMB Circular to
charge a user fee for providing this
service.
The IRS has taken public policy into
consideration and is providing multiple
user fee options to tailor the user fees to
the specific IRS costs in establishing
and monitoring the installment
agreements. As a result, the IRS has
introduced a reduced fee of $31 for
direct debit online payment agreements.
This $31 reduced fee is available to all
taxpayers choosing to obtain the special
benefits of installment agreements by
using this service. The $31 reduced fee
reflects the substantially lower costs the
IRS incurs for establishing and
monitoring direct debit online payment
agreements. Thus, the installment
agreement user fee structure now more
closely reflects the full cost of
processing each specific type of
installment agreement.
The fourth comment’s second main
concern was that the IRS charges user
fees inconsistently because, for
example, the IRS does not charge user
fees for toll-free telephone service,
estimated income tax payments, walk-in
service, notice letters, annual filing
season program record of completion,
and administrative appeals within the
IRS.
The IRS’s user fee policies are
consistent with the OMB Circular. The
IOAA authorizes agencies to prescribe
regulations that establish charges for
services provided by the agency, that is,
user fees that ‘‘are subject to policies
prescribed by the President. . . .’’ One
of the OMB Circular’s stated objectives
is to ‘‘ensure that each service . . .
provided by an agency to specific
recipients be self-sustaining.’’ OMB
Circular Section 5(a). The General
Policy of the OMB Circular states that ‘‘a
user charge . . . will be assessed against
each identifiable recipient for special
benefits derived from Federal activities
beyond those received by the general
public.’’ OMB Circular Section 6. The
presumption under the OMB Circular is
that agencies are encouraged, but not
mandated, to charge user fees where
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special benefits are provided to
identifiable individuals. Installment
agreements are such special benefits.
For purposes of these regulations, the
IRS need only take into consideration
comments relating to the installment
agreement user fees and need not
address comments relating to other
services for which no fee is charged.
With respect to installment agreement
user fees, the IRS has charged fees since
1995 in accordance with the OMB
Circular that requires full cost unless an
exception is granted. The OMB Circular
requires the IRS to review the user fees
it charges for special services biennially
to ensure that the fees are adjusted for
cost. See OMB Circular Section 8(e).
The new installment agreement user fee
structure is consistent with that
requirement.
The fourth comment’s third main
concern questioned the ‘‘optics’’ of
increasing installment agreement user
fees because of IRS budget constraints.
As discussed in this Summary of
Comments, the IRS has determined that
the proposed installment agreement
user fees are appropriate and consistent
with the OMB Circular, and the
question of ‘‘optics’’ raised in this
comment is not relevant in this analysis.
Section 6(a)(2)(a) of the OMB Circular
provides that user fees will be sufficient
to recover the full cost to the
Government of providing the service
except as provided in Section 6(c) of the
OMB Circular. The exceptions in
Section 6(c)(2) of the OMB Circular
provide that agency heads may
recommend to the OMB that exceptions
to the full cost requirement be made
when either (1) the cost of collecting the
user fee would represent an unduly
large part of the fee or (2) any other
condition exists that, in the opinion of
the agency head, justifies an exception.
The cost of collecting the proposed user
fees for the various types of installment
agreements will not represent an unduly
large part of the fee for the activity
because it occurs automatically with the
first installment payment. As noted
above, Section 6(a)(2)(a) of the OMB
Circular requires that user fees recover
the full cost to the government of
providing the service and nothing in the
OMB Circular mandates agency heads to
seek an exception to the full cost
requirement. Nonetheless, the
Commissioner of Internal Revenue has
determined that there is a compelling
tax administration reason for seeking an
exception to the full cost requirement
for low-income taxpayers.
The fourth comment’s fourth main
concern focused on the overall amount
of the proposed user fees and included
a number of related comments on the
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size of the fees, the agency’s
methodology in calculating the fees, and
the efforts the IRS has taken to minimize
the costs of providing these services.
The comment questioned why the IRS
decided not to change the $43 user fee
for low-income taxpayers. The comment
asked why the increase in costs of these
services exceeded the rate of inflation
during the past two years. The comment
also questioned the IRS’s efficiency in
providing this special benefit and the
IRS’s concern in ensuring that its costs
are driven down when providing this
service. The comment expressed
concern that if installment agreement
volumes remained the same, the agency
would increase its user fee receipts by
tens of millions of dollars. Finally, the
comment noted that the user fees do not
depend on the balance due under an
installment agreement and questioned
why the user fee is taken from the first
payments due under the installment
agreement.
Contrary to what the comment
asserted, the per-unit cost of the
installment agreement program has not
generally increased, rather it has
generally decreased. In the 2013
biennial review, the IRS determined that
the full cost of an installment agreement
was $282, the full cost of an installment
agreement paid by way of direct debit
was $122, and the full cost of
restructuring and reinstating an
installment agreement was $85. See 78
FR 53702 (2013 Regulations). In
connection with the 2013 biennial
review and the 2013 Regulations, the
IRS had requested and received an
exception to the full cost requirement
under the OMB Circular for the
installment agreement user fees. As a
result, the 2013 Regulations did not
charge full cost for any of the
installment agreement options.
Requesting an exception to the full cost
requirement of the OMB Circular is
within the discretion of the agency head
and must be approved by the Office of
Management and Budget. In the 2015
biennial review, the IRS determined that
the full cost of an installment agreement
is $225, the full cost of an installment
agreement paid by way of direct debit is
$107, and the full cost of restructuring
and reinstating an installment
agreement is $89. Thus, contrary to the
comment’s assertion, the cost of the
installment agreement program has
generally decreased rather than
generally increased during the span of
two years. Furthermore, the IRS always
strives to make its services costeffective. The decrease in the
installment agreement costs since 2013
demonstrates one of the ways the IRS
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seeks to make its services most cost
effective for the public. The IRS also
seeks new ways to makes its services
more accessible to taxpayers. The IRS
has worked to improve the usability of
the online payment agreement
application that provides for
significantly lower costs. The user fee
for the online payment agreement is
$149, and if the installment agreement
is paid by way of direct debit, is only
$31. Practitioners can submit an online
payment agreement application on
behalf of their clients to secure lower
fees. For smaller tax liabilities, the IRS
has established procedures for setting
up installment agreements utilizing
guaranteed, streamlined, or in-business
express criteria that are quicker to
process and do not require securing a
collection of information statement. See
I.R.M. 5.14.5. The IRS has never based
its user fee on the amount of liability
due under the agreement, which would
be inconsistent with the full cost
requirement under the OMB Circular.
The IRS, however, has provided
taxpayers the option to pay their
liability in full over 120 days without
being charged any user fee.
Furthermore, under the new fee
structure, taxpayers choose a specific
installment agreement service and pay
the cost of the service. For example, a
taxpayer may choose a direct debit
online payment agreement and pay only
$31 or a taxpayer may choose a regular
installment agreement and pay $225.
With regard to the user fee being taken
from the first payments due under the
installment agreement, this is not
relevant for purposes of the regulations
as this is not addressed in the
regulations. Regardless, the OMB
Circular requires user fees to be
‘‘collected in advance of, or
simultaneously with, the rendering of
services unless appropriations and
authority are provided in advance to
allow reimbursable services.’’ Section
6(a)(2)(C) of the OMB Circular. Instead
of requiring the taxpayer to pay the
entire fee in advance of the IRS entering
into the installment agreement, the IRS
allows the taxpayer to pay the fee with
the first installment agreement
payments, thereby lessening the burden
on the taxpayer and making installment
agreements more accessible to
taxpayers.
The fifth comment had three
suggestions: (1) Eliminate installment
agreement user fees for low-income
taxpayers, (2) revise internal guidelines
to place less emphasis on speedy
collection practices and more emphasis
on viable collection practices, and (3)
increase the transparency of the
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installment agreement user fees in
publications.
The fifth comment’s first suggestion
was that the IRS should waive the entire
user fee for low-income taxpayers and
thereby incentivize them to enter into
installment agreements instead of being
placed in currently not collectible status
or entering into an offer in compromise.
According to the comment, this would
increase the amount of revenue that the
IRS collects and encourage taxpayers to
enter into compliance. The comment
pointed out that there is no user fee for
a low-income taxpayer entering an offer
in compromise. The IRS’s response to a
similar comment made to the
installment agreement fee increase
proposed in the 2013 notice of proposed
rulemaking pointed out that the offer in
compromise fee is charged for mere
consideration of the offer and is not
refunded if it is not accepted. The
comment claimed that the IRS
contradicted itself by further responding
that the purpose of a user fee is to
recover the cost to the government for
a particular service to the recipient.
The comment opined that by waiving
the low-income taxpayer user fee
entirely, the number of low-income
taxpayers making payments on their tax
liabilities could increase. By way of
example, the comment posited the
possibility of a low-income taxpayer
submitting an offer in compromise,
paying no fee, and the IRS ultimately
collecting less than it would have if it
had allowed the low-income taxpayer to
enter into an installment agreement
with a complete fee waiver. According
to the comment, if a low-income
taxpayer enters into currently not
collectible status and makes voluntary
payments, those payments will be
sporadic and less than would be
collected from an installment agreement
since the taxpayer would not receive
monthly reminders. The comment
referenced the IRS’s response to a
similar comment made to the
installment agreement fee increase
proposed in the 2013 notice of proposed
rulemaking, to which the IRS responded
that generally taxpayers who have the
ability to pay their tax liability over time
(and thus are eligible for installment
agreements) will not qualify for
currently not collectible status. In
response, the comment suggested that
many taxpayers that qualify for
currently not collectible status may be
mistakenly placed into installment
agreements because the taxpayers may
feel pressured to make payments, the
taxpayers misstate their expenses and
income, or the taxpayers are willing to
cut back on their monthly living
expenses. The comment provided
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examples to show how the $43 fee
created disincentives for low-income
taxpayers to enter into installment
agreements in cases where the liability
was relatively small. The comment
requested that the IRS clarify that the
user fee does not have to be paid up
front but may be paid in installments if
the taxpayer’s monthly installment
payment is less than the user fee.
The IRS considered the effect of the
user fee on low-income taxpayers in
2006 and 2013 when the installment
agreement user fees were updated. Both
times, the IRS determined that the user
fee should remain $43 for low-income
taxpayers. The IRS again has
determined that the user fee for
installment agreements (other than for a
direct debit online payment agreement)
should remain at $43 for low-income
taxpayers, both because requiring the
full rate would be financially
burdensome to low-income taxpayers
and because waiving the fee entirely is
not fiscally sustainable for the IRS given
the constraints on its resources for tax
administration. Typically, a taxpayer
that is able to pay in full the liability
under an installment agreement is not
eligible to enter into an offer in
compromise. As discussed in the
preamble to T.D. 9647, 78 FR 72016–01,
a taxpayer that is in currently not
collectible status is typically not eligible
to enter into an installment agreement.
The low-income taxpayers that enter
into installment agreements described
in the examples the comment presented
do so as a result of the taxpayers’
choices or erroneous submissions of
information to the IRS. Thus, the
comment’s hypothetical low-income
taxpayer is the exception not the general
rule. To ensure that low-income
taxpayers are more aware of the fee
options for the various types of
installment agreements, the IRS will be
revising its publications to make them
consistent with the final regulations.
The fifth comment’s second main
concern was that low-income taxpayers
are not always aware of the availability
of the reduced fee and as a consequence
some low-income taxpayers pay the
regular fee. The comment suggested that
IRS employees could do more to make
low-income taxpayers aware of their
options. The comment also asserted that
installment agreements are set up not to
allow low-income taxpayers to modify
payments based on unforeseen changes
in economic circumstances. The
comment stated this can result in lowincome taxpayers defaulting and either
become subject to collection action or
subject to the installment agreement
reinstatement fee of $89 under the
proposed regulations.
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86959
The comment requested that the IRS
revise its procedures in the Internal
Revenue Manual to place less emphasis
on timely collection practices and more
emphasis on viable collection practices.
The fifth comment’s concerns about
tax administration are generally beyond
the scope of these regulations. However,
for purposes of clarification, under the
proposed regulations the user fee for
reinstating an installment agreement for
a low-income taxpayer would be $43,
not $89. Furthermore, while these
concerns do not affect the content of
these final regulations, the IRS will
consider these comments when
updating the procedures in the Internal
Revenue Manual for entering into
installment agreements.
The fifth comment’s third suggestion
was for the IRS to clearly communicate
to the public both through the internet
and in hard copy publications the
revised fee schedule so that taxpayers
may make informed decisions when
deciding the manner of setting up an
installment agreement. The comment
suggested that taxpayers who lack
access to the internet, lack computer
efficiency, lack a bank account, or have
other disabilities or barriers should not
be subjected to the higher user fees.
The IRS will be updating its
electronic and hard copy publications to
reflect the user fees in the final
regulations. As explained in the
proposed notice of rulemaking and in
this Summary of Comments, the
purpose of the user fees for installment
agreements is to recover the full cost to
the IRS of providing this special benefit
to specific beneficiaries and the user
fees in these final regulations are in
accordance with the OMB Circular.
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
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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, the notice of proposed rulemaking
was submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business and no
comments were received.
Drafting Information
The principal author of these
regulations is Maria Del Pilar Austin of
the Office of the Associate Chief
Counsel (Procedure and
Administration). Other personnel from
the Treasury Department and the IRS
participated in their development.
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping
requirements, User fees.
Par. 3. In § 300.2, paragraphs (b) and
(d) are revised to read as follows:
■
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 300 is
amended as follows:
§ 300.2 Restructuring or reinstatement of
installment agreement fee.
*
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.
jstallworth on DSK7TPTVN1PROD with RULES
*
*
*
*
*
(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
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14:49 Dec 01, 2016
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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) Applicability date. This section is
applicable beginning January 1, 2017.
*
*
*
*
(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) Applicability date. This section is
applicable beginning January 1, 2017.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved: November 16, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2016–28936 Filed 11–29–16; 11:15 am]
BILLING CODE 4830–01–P
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ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 180
[EPA–HQ–OPP–2015–0560; FRL–9954–63]
Bicyclopyrone; Pesticide Tolerances
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
This regulation establishes
tolerances for residues of bicyclopyrone
in or on wheat and barley. Syngenta
Crop Protection, LLC. requested these
tolerances under the Federal Food,
Drug, and Cosmetic Act (FFDCA).
DATES: This regulation is effective
December 2, 2016. Objections and
requests for hearings must be received
on or before January 31, 2017, and must
be filed in accordance with the
instructions provided in 40 CFR part
178 (see also Unit I.C. of the
SUPPLEMENTARY INFORMATION).
ADDRESSES: The docket for this action,
identified by docket identification (ID)
number EPA–HQ–OPP–2015–0560, is
available at https://www.regulations.gov
or at the Office of Pesticide Programs
Regulatory Public Docket (OPP Docket)
in the Environmental Protection Agency
Docket Center (EPA/DC), West William
Jefferson Clinton Bldg., Rm. 3334, 1301
Constitution Ave. NW., Washington, DC
20460–0001. The Public Reading Room
is open from 8:30 a.m. to 4:30 p.m.,
Monday through Friday, excluding legal
holidays. The telephone number for the
Public Reading Room is (202) 566–1744,
and the telephone number for the OPP
Docket is (703) 305–5805. Please review
the visitor instructions and additional
information about the docket available
at https://www.epa.gov/dockets.
FOR FURTHER INFORMATION CONTACT:
Michael Goodis, Registration Division
(7505P), Office of Pesticide Programs,
Environmental Protection Agency, 1200
Pennsylvania Ave. NW., Washington,
DC 20460–0001; main telephone
number: (703) 305–7090; email address:
RDFRNotices@epa.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. General Information
A. Does this action apply to me?
You may be potentially affected by
this action if you are an agricultural
producer, food manufacturer, or
pesticide manufacturer. The following
list of North American Industrial
Classification System (NAICS) codes is
not intended to be exhaustive, but rather
provides a guide to help readers
determine whether this document
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Agencies
[Federal Register Volume 81, Number 232 (Friday, December 2, 2016)]
[Rules and Regulations]
[Pages 86955-86960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28936]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[TD 9798]
RIN 1545-BN37
User Fees for Installment Agreements
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations that provide user
fees for installment agreements. The final regulations affect taxpayers
who wish to pay their liabilities through installment agreements.
DATES: Effective date: These regulations are effective on December 2,
2016.
Applicability date: These regulations apply to installment
agreements entered into, restructured, or reinstated on or after
January 1, 2017.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Maria Del
Pilar Austin at (202) 317-5437; concerning cost methodology, Eva
Williams, at (202) 803-9728 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document contains amendments to the User Fee Regulations under
26 CFR part 300. On August 22, 2016, the Treasury Department and the
IRS published in the Federal Register (81 FR 56550) a notice of
proposed rulemaking (REG-108792-16) relating to the user fees charged
for entering into and reinstating and restructuring installment
agreements. The Independent Offices Appropriations Act of 1952 (IOAA),
which is codified at 31 U.S.C. 9701, authorizes agencies to prescribe
regulations establishing user fees for services provided by the agency.
Regulations prescribing user fees are subject to the policies of the
President, which are currently set forth in the Office of Management
and Budget Circular A-25 (the OMB Circular), 58 FR 38142 (July 15,
1993). The OMB Circular allows agencies to impose user fees for
services that confer a special benefit to identifiable recipients
beyond those accruing to the general public. The agency must calculate
the full cost of providing those benefits, and, in general, the amount
of a user fee should recover the full cost of providing the service,
unless the Office of Management and Budget (OMB) grants an exception
under the OMB Circular.
The notice of proposed rulemaking proposed to increase the user
fees under Sec. 300.1 for entering into an installment agreement from
$120 to $225 and for entering into a direct debit installment agreement
from $52 to $107. The notice of proposed rulemaking proposed to
increase the user fee under Sec. 300.2 for restructuring or
reinstating an installment agreement from $50 to $89. The notice of
proposed rulemaking proposed the introduction of two new types of
online installment agreements under Sec. 300.1, each subject to a
separate user fee: (1) An online payment agreement with a fee of $149
and (2) a direct debit online payment agreement with a fee of $31.
Under the notice of proposed rulemaking, the user fee for low-income
taxpayers, as defined in Sec. 300.1(b)(3), would continue to be $43
for entering into a new installment agreement, except that the lower
fee of $31 for a direct debit online payment agreement would apply to
all taxpayers. Under Sec. 300.2(b), the fee for low-income taxpayers
restructuring or reinstating an installment agreement would be reduced
to $43 from $50. The new user fee rates were proposed to be effective
beginning on January 1, 2017. As explained in the notice of proposed
rulemaking, the proposed fees bring user fee rates for installment
agreements in line with the full cost to the IRS of providing these
taxpayer-specific services. In particular, the new user fee structure
offers taxpayers more tailored installment agreement options, including
a $31 user fee for direct debit online payment agreements, which
ensures that taxpayers are not charged more for their chosen
installment agreement option than the actual cost incurred by the IRS
in providing the type of installment agreement selected by taxpayers.
Because OMB has granted an exception to the full cost requirement for
low-income taxpayers, low-income taxpayers would continue to pay the
reduced fee of $43 for any new installment agreement, except where they
request a $31 direct debit online payment agreement, and would pay the
reduced $43 fee for restructuring or reinstating an installment
agreement.
No public hearing on the notice of proposed rulemaking was held
because one was not requested. Five comments were received. After
careful consideration of the comments, this Treasury Decision adopts
the proposed regulations without change.
Summary of Comments
The first comment suggested that filing a tax return and requesting
an installment agreement should not be a two-step process and that
taxpayers
[[Page 86956]]
requesting an installment agreement with the filing of their returns
should not be subject to a higher user fee. The comment expressed
concern with tying eligibility for the $31 user fee to submitting a
request for a direct debit online payment agreement. The comment also
noted the length of time it takes the IRS to initiate direct debit
installment agreement payments. The comment asserted that taxpayers
requesting installment agreements with the filing of their tax returns
and paying via direct debit should be entitled to the $31 user fee.
These regulations deal with only the user fees for installment
agreements and not the administration of the installment agreement
program generally, and so this comment is addressed only to the extent
it relates to user fees for installment agreements. As explained in the
notice of proposed rulemaking, agencies are required to set user fees
at an amount that recovers the full cost of providing the service
unless an agency requests, and the OMB grants, an exception to the full
cost requirement. The proposed installment agreement fees are
structured to reflect the full cost to the IRS to establish and monitor
the different types of installment agreements associated with each user
fee. The costs to the IRS for installment agreements are the same to
the IRS whether the taxpayer requests an installment agreement at the
same or a different time from filing its tax return. The regulations
now offer taxpayers additional types of installment agreements to
choose from, including a low-cost user fee of $31 for a direct debit
online payment agreement. A taxpayer may file a return and then request
a direct debit online payment agreement and would be charged a fee of
only $31. As discussed in the notice of proposed rulemaking, the IRS
incurs higher costs in establishing and monitoring all other forms of
installment agreements. If a taxpayer chooses to request an installment
agreement other than a direct debit online payment agreement, that
taxpayer must pay the full cost of that user fee unless the taxpayer
qualifies as a low-income taxpayer. The length of time required to
establish direct debit installment agreements that the comment
described is due to IRS budget cuts in recent years that have resulted
in lower staffing levels combined with increased workloads. During peak
times of the year, the IRS has more installment agreements to process
than available staff to process them and backlogs occur. In addition,
there are Federal e-pay requirements that also add time in processing
installment agreements paid by direct debit. However, taxpayers using
the online payment agreement service receive immediate confirmation of
direct debit online payment agreements. Taxpayers requesting
installment agreements via a Form 9465 when e-filing are not entitled
to the lower $31 user fee under the proposed regulations because the
costs associated with processing the Form 9465 are greater than those
incurred for taxpayers using the online payment agreement service. At
the time taxpayers submit Form 9465 with their e-filed returns, the IRS
has no way of determining whether the taxpayers qualify for an
installment agreement or whether the payment proposal meets streamlined
processing criteria. While the IRS continues to explore ways to make
this process completely automated, at this time the process to review a
regular installment agreement request requires IRS staff involvement
that direct debit online payment agreements do not.
The second comment expressed concern that the proposed increase in
user fees was too high and asked whether ``any consideration [has] been
given to increasing the time frame for an exten[s]ion [from] 120[]days
to 180[]days.'' It appears that the latter part of this comment is
referring to the full pay agreement that has no user fee but requires
the taxpayer to full pay within 120 days. The extension of the time
period for full pay agreements is unrelated to the proposed increase in
the user fees for installment agreements. With regard to the increase
in fee, the fee increase is consistent with the requirement under the
OMB Circular that agencies 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. In
the notice of proposed rulemaking, the IRS provided a detailed analysis
of how it calculated the full cost of this service and the fee is
consistent with the full cost of the particular service.
The third comment provided examples of taxpayers with varying
circumstances and opined that increasing the user fee for installment
agreements would be unfair to taxpayers who are so situated. For
taxpayers whose income falls at or below 250 percent of the poverty
level as established by the U.S. Department of Health and Human
Services and updated annually, the proposed regulations continue to
offer a reduced fee for low-income taxpayers of $43, and extend the $43
fee to low-income taxpayers restructuring or reinstating installment
agreements. In addition, the proposed regulations establish a lower fee
of $31 for online direct debit installment agreements that is available
to all taxpayers. Thus, even if taxpayers do not qualify for the
reduced low-income taxpayer fee, the proposed regulations permit all
taxpayers the option to pay the lower $31 fee by establishing direct
debit online payment agreements.
The fourth comment had four main concerns and additional concerns
with respect to each of these main concerns.
The fourth comment's first main concern challenged the IRS's
application of the OMB Circular. The comment opined that an installment
agreement is not a special benefit as provided under the OMB Circular
for several reasons. Specifically, the comment noted that if a taxpayer
does not have assets to levy, then relief of levy is not a benefit to
that taxpayer. The comment suggested that the IRS receives a benefit
when a taxpayer enters into an installment agreement and as a result,
the installment agreement does not provide a special benefit for
purposes of the OMB Circular. The comment questioned how many
installment agreements resulted in payments that the IRS would not have
otherwise received. The comment also questioned whether installment
agreement income is a benefit to the fisc or whether the IRS could use
levies to secure the same amount of payment. The comment stated that
the IRS is required to enter into certain installment agreements
pursuant to section 6159(c) and questioned how a statutory requirement
could be considered a special benefit. The comment quoted Section
6(1)(4) of the OMB Circular, which provides that ``[n]o charge should
be made for a service when the identification of the specific
beneficiary is obscure, and the service can be considered primarily as
benefiting broadly the general public.'' The comment opined that
because the IRS may receive some benefit, the specific beneficiary of
an installment agreement is incompletely identified. Finally, the
comment noted that the OMB Circular allows for exceptions to charging
full cost and questioned whether it is good public policy to increase
the user fee considering that some installment agreements are
statutorily required and help bring noncompliant taxpayers into
compliance.
As described in the preamble to the proposed regulations, each
taxpayer entering into an installment agreement receives the special
benefit of paying an outstanding tax obligation over time rather than
immediately. This special
[[Page 86957]]
benefit does not accrue to the general public because taxpayers are
otherwise obligated to pay any outstanding taxes immediately when due.
The taxpayer receives this special benefit regardless of whether the
taxpayer has any assets on which the IRS could levy. In addition to
paying an outstanding tax obligation over time rather than immediately,
there are also the special benefits of avoiding enforcement action
generally and, for timely filed returns, a reduction of the section
6651 failure to pay penalty to 0.25 percent during any month during
which an installment agreement is in effect. The enforcement actions
that are put on hold during the pendency of an installment agreement
include wage garnishments, the filing of notices of federal tax liens,
and the making of levies. Even if it is argued that the government
derives some general benefit from collecting outstanding tax
liabilities to which it is inarguably entitled, it is still appropriate
under the OMB Circular to charge a user fee for entering into,
reinstating, or restructuring an installment agreement because
installment agreements provide ``specific services to specific
individuals.'' Seafarers Int'l Union of N. Am. v. U.S. Coast Guard, 81
F.3d 179, 183 (D.C. Cir. 1996). The benefit to the government generally
of collecting on outstanding tax liabilities is a benefit that accrues
to the public generally and does not diminish the special benefit
provided to an identifiable taxpayer who requests an installment
agreement. As noted in the notice of proposed rulemaking, the IOAA
permits the IRS to charge a user fee for providing a ``service or thing
of value.'' 31 U.S.C. 9701(b). A government activity constitutes a
``service or thing of value'' when it provides ``special benefits to an
identifiable recipient beyond those that accrue to the general
public.'' See the OMB Circular Section 6(a)(1). Among other things, a
``special benefit'' exists when a government service is performed at
the request of a taxpayer and is beyond the services regularly received
by other members of the same group or the general public. See OMB
Circular Section 6(a)(1)(c). Under the IOAA, agencies may impose
``specific charges for specific services to specific individuals or
companies.'' See Fed. Power Comm'n v. New England Power Co., 415 U.S.
345, 349 (1974); see also Seafarers, 81 F.3d at 182-83 (D.C. Cir. 1996)
(``[A] user fee will be justified under the IOAA if there is a
sufficient nexus between the agency service for which the fee is
charged and the individuals who are assessed.'').
Section 6(a)(3) of the OMB Circular explains that ``when the public
obtains benefits as a necessary consequence of an agency's provision of
special benefits to an identifiable recipient (i.e., the public
benefits are not independent of, but merely incidental to, the special
benefits), an agency need not allocate any costs to the public and
should seek to recover from the identifiable recipient either the full
cost to the Federal Government of providing the special benefit or the
market price, whichever applies.'' While it is true that installment
agreements benefit tax administration and collection, and by extension
the public fisc, the benefit is incidental to the special benefits of
allowing taxpayers to satisfy their Federal tax liabilities over time
rather than when due as required by the Code and avoiding enforcement
actions.
By the very nature of government action, the general public will
almost always experience some benefit from an activity that is subject
to a user fee. See, e.g., Seafarers, 81 F.3d at 184-85 (D.C. Cir.
1996). However, as long as the activity confers a specific benefit upon
an identifiable beneficiary, it is permissible for the agency to charge
the beneficiary a fee even though the public will also experience an
incidental benefit. See Engine Mfrs. Ass'n v. E.P.A., 20 F.3d 1177,
1180 (D.C. Cir. 1994) (``If the agency does confer a specific benefit
upon an identifiable beneficiary . . . then it is of no moment that the
service may incidentally confer a benefit upon the general public as
well.'') citing Nat'l Cable Television Ass'n v. FCC, 554 F.2d 1094, at
1103 (D.C. Cir. 1976). It is permissible for a service for which a user
fee is charged to generate an ``incidental public benefit,'' and there
is no requirement that the agency weigh this public benefit against the
specific benefit to the identifiable recipient. Seafarers, 81 F.3d at
183-84 (D.C. Cir. 1996). Furthermore, the benefit to the fisc of
collecting outstanding taxes is not an additional benefit to the
government because the IRS would collect those amounts through other
means absent the installment agreement. Even so, an agency is still
entitled to charge for services that assist a person in complying with
her statutory duties. See In Elec. Indus Ass'n v. FCC, 554 F.2d 1109,
1115 (D.C. Cir. 1976).
While the IRS is required to enter into certain installment
agreements pursuant to section 6159(c), the IRS may still charge a fee
for providing that service. In fact, under the OMB Circular, there are
several examples of special benefits (e.g., passport, visa, patent) for
which the issuing agency may charge a fee even though the agency is
required to issue such benefit if the individual meets certain
statutory or regulatory requirements. In addition, a taxpayer meeting
the criteria in section 6159(c) must still submit a request for an
installment agreement before one is established. Section 6159(c)
requires that the IRS enter into the installment agreement provided
that the taxpayer establishes its eligibility for such an agreement. In
that situation, the IRS incurs the costs of establishing and monitoring
these installment agreements as with any other installment agreement.
Therefore, it is proper under the OMB Circular to charge a user fee for
providing this service.
The IRS has taken public policy into consideration and is providing
multiple user fee options to tailor the user fees to the specific IRS
costs in establishing and monitoring the installment agreements. As a
result, the IRS has introduced a reduced fee of $31 for direct debit
online payment agreements. This $31 reduced fee is available to all
taxpayers choosing to obtain the special benefits of installment
agreements by using this service. The $31 reduced fee reflects the
substantially lower costs the IRS incurs for establishing and
monitoring direct debit online payment agreements. Thus, the
installment agreement user fee structure now more closely reflects the
full cost of processing each specific type of installment agreement.
The fourth comment's second main concern was that the IRS charges
user fees inconsistently because, for example, the IRS does not charge
user fees for toll-free telephone service, estimated income tax
payments, walk-in service, notice letters, annual filing season program
record of completion, and administrative appeals within the IRS.
The IRS's user fee policies are consistent with the OMB Circular.
The IOAA authorizes agencies to prescribe regulations that establish
charges for services provided by the agency, that is, user fees that
``are subject to policies prescribed by the President. . . .'' One of
the OMB Circular's stated objectives is to ``ensure that each service .
. . provided by an agency to specific recipients be self-sustaining.''
OMB Circular Section 5(a). The General Policy of the OMB Circular
states that ``a user charge . . . will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public.'' OMB Circular
Section 6. The presumption under the OMB Circular is that agencies are
encouraged, but not mandated, to charge user fees where
[[Page 86958]]
special benefits are provided to identifiable individuals. Installment
agreements are such special benefits. For purposes of these
regulations, the IRS need only take into consideration comments
relating to the installment agreement user fees and need not address
comments relating to other services for which no fee is charged. With
respect to installment agreement user fees, the IRS has charged fees
since 1995 in accordance with the OMB Circular that requires full cost
unless an exception is granted. The OMB Circular requires the IRS to
review the user fees it charges for special services biennially to
ensure that the fees are adjusted for cost. See OMB Circular Section
8(e). The new installment agreement user fee structure is consistent
with that requirement.
The fourth comment's third main concern questioned the ``optics''
of increasing installment agreement user fees because of IRS budget
constraints. As discussed in this Summary of Comments, the IRS has
determined that the proposed installment agreement user fees are
appropriate and consistent with the OMB Circular, and the question of
``optics'' raised in this comment is not relevant in this analysis.
Section 6(a)(2)(a) of the OMB Circular provides that user fees will be
sufficient to recover the full cost to the Government of providing the
service except as provided in Section 6(c) of the OMB Circular. The
exceptions in Section 6(c)(2) of the OMB Circular provide that agency
heads may recommend to the OMB that exceptions to the full cost
requirement be made when either (1) the cost of collecting the user fee
would represent an unduly large part of the fee or (2) any other
condition exists that, in the opinion of the agency head, justifies an
exception. The cost of collecting the proposed user fees for the
various types of installment agreements will not represent an unduly
large part of the fee for the activity because it occurs automatically
with the first installment payment. As noted above, Section 6(a)(2)(a)
of the OMB Circular requires that user fees recover the full cost to
the government of providing the service and nothing in the OMB Circular
mandates agency heads to seek an exception to the full cost
requirement. Nonetheless, the Commissioner of Internal Revenue has
determined that there is a compelling tax administration reason for
seeking an exception to the full cost requirement for low-income
taxpayers.
The fourth comment's fourth main concern focused on the overall
amount of the proposed user fees and included a number of related
comments on the size of the fees, the agency's methodology in
calculating the fees, and the efforts the IRS has taken to minimize the
costs of providing these services. The comment questioned why the IRS
decided not to change the $43 user fee for low-income taxpayers. The
comment asked why the increase in costs of these services exceeded the
rate of inflation during the past two years. The comment also
questioned the IRS's efficiency in providing this special benefit and
the IRS's concern in ensuring that its costs are driven down when
providing this service. The comment expressed concern that if
installment agreement volumes remained the same, the agency would
increase its user fee receipts by tens of millions of dollars. Finally,
the comment noted that the user fees do not depend on the balance due
under an installment agreement and questioned why the user fee is taken
from the first payments due under the installment agreement.
Contrary to what the comment asserted, the per-unit cost of the
installment agreement program has not generally increased, rather it
has generally decreased. In the 2013 biennial review, the IRS
determined that the full cost of an installment agreement was $282, the
full cost of an installment agreement paid by way of direct debit was
$122, and the full cost of restructuring and reinstating an installment
agreement was $85. See 78 FR 53702 (2013 Regulations). In connection
with the 2013 biennial review and the 2013 Regulations, the IRS had
requested and received an exception to the full cost requirement under
the OMB Circular for the installment agreement user fees. As a result,
the 2013 Regulations did not charge full cost for any of the
installment agreement options. Requesting an exception to the full cost
requirement of the OMB Circular is within the discretion of the agency
head and must be approved by the Office of Management and Budget. In
the 2015 biennial review, the IRS determined that the full cost of an
installment agreement is $225, the full cost of an installment
agreement paid by way of direct debit is $107, and the full cost of
restructuring and reinstating an installment agreement is $89. Thus,
contrary to the comment's assertion, the cost of the installment
agreement program has generally decreased rather than generally
increased during the span of two years. Furthermore, the IRS always
strives to make its services cost-effective. The decrease in the
installment agreement costs since 2013 demonstrates one of the ways the
IRS seeks to make its services most cost effective for the public. The
IRS also seeks new ways to makes its services more accessible to
taxpayers. The IRS has worked to improve the usability of the online
payment agreement application that provides for significantly lower
costs. The user fee for the online payment agreement is $149, and if
the installment agreement is paid by way of direct debit, is only $31.
Practitioners can submit an online payment agreement application on
behalf of their clients to secure lower fees. For smaller tax
liabilities, the IRS has established procedures for setting up
installment agreements utilizing guaranteed, streamlined, or in-
business express criteria that are quicker to process and do not
require securing a collection of information statement. See I.R.M.
5.14.5. The IRS has never based its user fee on the amount of liability
due under the agreement, which would be inconsistent with the full cost
requirement under the OMB Circular. The IRS, however, has provided
taxpayers the option to pay their liability in full over 120 days
without being charged any user fee. Furthermore, under the new fee
structure, taxpayers choose a specific installment agreement service
and pay the cost of the service. For example, a taxpayer may choose a
direct debit online payment agreement and pay only $31 or a taxpayer
may choose a regular installment agreement and pay $225. With regard to
the user fee being taken from the first payments due under the
installment agreement, this is not relevant for purposes of the
regulations as this is not addressed in the regulations. Regardless,
the OMB Circular requires user fees to be ``collected in advance of, or
simultaneously with, the rendering of services unless appropriations
and authority are provided in advance to allow reimbursable services.''
Section 6(a)(2)(C) of the OMB Circular. Instead of requiring the
taxpayer to pay the entire fee in advance of the IRS entering into the
installment agreement, the IRS allows the taxpayer to pay the fee with
the first installment agreement payments, thereby lessening the burden
on the taxpayer and making installment agreements more accessible to
taxpayers.
The fifth comment had three suggestions: (1) Eliminate installment
agreement user fees for low-income taxpayers, (2) revise internal
guidelines to place less emphasis on speedy collection practices and
more emphasis on viable collection practices, and (3) increase the
transparency of the
[[Page 86959]]
installment agreement user fees in publications.
The fifth comment's first suggestion was that the IRS should waive
the entire user fee for low-income taxpayers and thereby incentivize
them to enter into installment agreements instead of being placed in
currently not collectible status or entering into an offer in
compromise. According to the comment, this would increase the amount of
revenue that the IRS collects and encourage taxpayers to enter into
compliance. The comment pointed out that there is no user fee for a
low-income taxpayer entering an offer in compromise. The IRS's response
to a similar comment made to the installment agreement fee increase
proposed in the 2013 notice of proposed rulemaking pointed out that the
offer in compromise fee is charged for mere consideration of the offer
and is not refunded if it is not accepted. The comment claimed that the
IRS contradicted itself by further responding that the purpose of a
user fee is to recover the cost to the government for a particular
service to the recipient.
The comment opined that by waiving the low-income taxpayer user fee
entirely, the number of low-income taxpayers making payments on their
tax liabilities could increase. By way of example, the comment posited
the possibility of a low-income taxpayer submitting an offer in
compromise, paying no fee, and the IRS ultimately collecting less than
it would have if it had allowed the low-income taxpayer to enter into
an installment agreement with a complete fee waiver. According to the
comment, if a low-income taxpayer enters into currently not collectible
status and makes voluntary payments, those payments will be sporadic
and less than would be collected from an installment agreement since
the taxpayer would not receive monthly reminders. The comment
referenced the IRS's response to a similar comment made to the
installment agreement fee increase proposed in the 2013 notice of
proposed rulemaking, to which the IRS responded that generally
taxpayers who have the ability to pay their tax liability over time
(and thus are eligible for installment agreements) will not qualify for
currently not collectible status. In response, the comment suggested
that many taxpayers that qualify for currently not collectible status
may be mistakenly placed into installment agreements because the
taxpayers may feel pressured to make payments, the taxpayers misstate
their expenses and income, or the taxpayers are willing to cut back on
their monthly living expenses. The comment provided examples to show
how the $43 fee created disincentives for low-income taxpayers to enter
into installment agreements in cases where the liability was relatively
small. The comment requested that the IRS clarify that the user fee
does not have to be paid up front but may be paid in installments if
the taxpayer's monthly installment payment is less than the user fee.
The IRS considered the effect of the user fee on low-income
taxpayers in 2006 and 2013 when the installment agreement user fees
were updated. Both times, the IRS determined that the user fee should
remain $43 for low-income taxpayers. The IRS again has determined that
the user fee for installment agreements (other than for a direct debit
online payment agreement) should remain at $43 for low-income
taxpayers, both because requiring the full rate would be financially
burdensome to low-income taxpayers and because waiving the fee entirely
is not fiscally sustainable for the IRS given the constraints on its
resources for tax administration. Typically, a taxpayer that is able to
pay in full the liability under an installment agreement is not
eligible to enter into an offer in compromise. As discussed in the
preamble to T.D. 9647, 78 FR 72016-01, a taxpayer that is in currently
not collectible status is typically not eligible to enter into an
installment agreement. The low-income taxpayers that enter into
installment agreements described in the examples the comment presented
do so as a result of the taxpayers' choices or erroneous submissions of
information to the IRS. Thus, the comment's hypothetical low-income
taxpayer is the exception not the general rule. To ensure that low-
income taxpayers are more aware of the fee options for the various
types of installment agreements, the IRS will be revising its
publications to make them consistent with the final regulations.
The fifth comment's second main concern was that low-income
taxpayers are not always aware of the availability of the reduced fee
and as a consequence some low-income taxpayers pay the regular fee. The
comment suggested that IRS employees could do more to make low-income
taxpayers aware of their options. The comment also asserted that
installment agreements are set up not to allow low-income taxpayers to
modify payments based on unforeseen changes in economic circumstances.
The comment stated this can result in low-income taxpayers defaulting
and either become subject to collection action or subject to the
installment agreement reinstatement fee of $89 under the proposed
regulations.
The comment requested that the IRS revise its procedures in the
Internal Revenue Manual to place less emphasis on timely collection
practices and more emphasis on viable collection practices.
The fifth comment's concerns about tax administration are generally
beyond the scope of these regulations. However, for purposes of
clarification, under the proposed regulations the user fee for
reinstating an installment agreement for a low-income taxpayer would be
$43, not $89. Furthermore, while these concerns do not affect the
content of these final regulations, the IRS will consider these
comments when updating the procedures in the Internal Revenue Manual
for entering into installment agreements.
The fifth comment's third suggestion was for the IRS to clearly
communicate to the public both through the internet and in hard copy
publications the revised fee schedule so that taxpayers may make
informed decisions when deciding the manner of setting up an
installment agreement. The comment suggested that taxpayers who lack
access to the internet, lack computer efficiency, lack a bank account,
or have other disabilities or barriers should not be subjected to the
higher user fees.
The IRS will be updating its electronic and hard copy publications
to reflect the user fees in the final regulations. As explained in the
proposed notice of rulemaking and in this Summary of Comments, the
purpose of the user fees for installment agreements is to recover the
full cost to the IRS of providing this special benefit to specific
beneficiaries and the user fees in these final regulations are in
accordance with the OMB Circular.
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
[[Page 86960]]
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, the notice of
proposed rulemaking was submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business and no comments were received.
Drafting Information
The principal author of these regulations is Maria Del Pilar Austin
of the Office of the Associate Chief Counsel (Procedure and
Administration). Other personnel from the Treasury Department and the
IRS participated in their development.
List of Subjects in 26 CFR Part 300
Reporting and recordkeeping requirements, User fees.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 300 is 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) 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) Applicability date. This section is applicable beginning
January 1, 2017.
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: November 16, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-28936 Filed 11-29-16; 11:15 am]
BILLING CODE 4830-01-P