Estate Tax Closing Letter User Fee Update, 21410-21413 [2025-08928]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 90, Number 96 (Tuesday, May 20, 2025)]
[Rules and Regulations]
[Pages 21410-21413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-08928]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 300

[TD 10031]
RIN 1545-BR28


Estate Tax Closing Letter User Fee Update

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Interim final rule.

-----------------------------------------------------------------------

SUMMARY: This document contains interim final regulations relating to 
the imposition of a user fee on authorized persons requesting the 
issuance of IRS Letter 627, also referred to as an estate tax closing 
letter. These regulations reduce the amount of the user fee imposed on 
a request for the issuance of an estate tax closing letter. The 
Independent Offices Appropriations Act of 1952 authorizes the charging 
of user fees. The text of the interim final regulations also serves as 
the text of the proposed regulations set forth in the notice of 
proposed rulemaking on this subject in the Proposed Rules section of 
this edition of the Federal Register.

DATES: 
    Effective date: These regulations are effective on May 20, 2025.
    Applicability date: For date of applicability, see Sec.  300.12(d).

FOR FURTHER INFORMATION CONTACT: Concerning the interim final 
regulations, Juli Ro Kim at (202) 317-6859; concerning cost 
methodology, Maria E. Arias-Buchanan at (202) 803-9569 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Authority

    This document contains interim final amendments to 26 CFR part 300 
regarding user fees for authorized persons who request the issuance of 
an estate tax closing letter (IRS Letter 627).
    The Independent Offices Appropriations Act of 1952 (IOAA) (31 
U.S.C. 9701) authorizes each agency to prescribe regulations that 
establish user fees for services provided by the agency. The IOAA 
provides that regulations implementing user fees are subject to 
policies prescribed by the President; these policies are set forth in 
the Office of Management and Budget Circular A-25, 58 FR 38142 (July 
15, 1993) (OMB Circular A-25).
    The IOAA states that the services provided by an agency should be 
self-sustaining to the extent possible. Under OMB Circular A-25, 
agencies that provide services that confer special benefits on 
identifiable recipients beyond those accruing to the general public 
must identify those services, determine whether user fees should be 
assessed for those services, and, if so, establish user fees that 
recover the full cost of providing those services, unless an exception 
to the full cost requirement is granted. As required by the IOAA and 
OMB Circular A-25, agencies are to review user fees biennially and 
update them as necessary to reflect changes in the cost of providing 
the underlying services.

Background and Explanation of Provisions

A. Estate Tax Closing Letter User Fee

    On September 28, 2021, the Department of the Treasury (Treasury 
Department) and the IRS published final regulations (TD 9957) in the 
Federal Register (86 FR 53539) establishing a $67 user fee to apply to 
requests for the issuance of an estate tax closing letter, based on a 
2019 Cost Model. As explained in the Background section of the preamble 
of TD 9957, the issuance of an estate tax closing letter constitutes 
the provision of a service and confers special benefits to authorized 
persons requesting such letters beyond those accruing to the general 
public. Therefore, the IRS is authorized, pursuant to the IOAA and OMB 
Circular A-25, to charge a user fee for the issuance of an estate tax 
closing letter that reflects the full cost of providing this service. 
See also section

[[Page 21411]]

6103(p)(2)(B) (allowing for a reasonable fee for furnishing return 
information to any person).
    In 2021, the IRS conducted a biennial review of the estate tax 
closing letter user fee and issued a new Cost Model that resulted in no 
change to the $67 user fee.
    In 2023, the IRS conducted a biennial review of the estate tax 
closing letter user fee and issued a new Cost Model, which determined 
that the full cost of issuing estate tax closing letters to authorized 
persons is $56.

B. Calculation of User Fees Generally

    The IRS follows generally accepted accounting principles (GAAP) in 
calculating the full cost of providing services. The Federal Accounting 
Standards Advisory Board (FASAB) is the body that establishes GAAP that 
apply for Federal reporting entities, such as the IRS. FASAB publishes 
the FASAB Handbook of Accounting Standards and Other Pronouncements, as 
amended, available at https://fasab.gov/accounting-standards/. The 
FASAB Handbook includes the Statement of Federal Financial Accounting 
Standards 4: Managerial Cost Accounting Standards and Concepts (SFFAS 
No. 4) for the Federal government. 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 a cost center. Cost centers usually are 
separate offices 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. 
These costs include the direct costs for the cost center's activities 
and all indirect costs, including overhead, associated with that cost 
center. Each cost is recorded in only one cost center.
2. 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. When cost centers include multiple 
services, the IRS measures the time required to accomplish activities 
associated with each service to estimate the average time spent on the 
service in the related cost center. The average time devoted is 
multiplied by the relevant organizational unit's average labor and 
benefits cost per unit of time to determine the direct labor and 
benefits cost incurred to provide the service. To determine the full 
cost, the IRS then adds an appropriate overhead charge.
3. 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, such as the 
following:

 General management and administrative services of sustaining 
and supporting 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 
multiplies the current overhead rate by the direct labor and benefits 
costs of the service. The overhead rate is the ratio of the IRS's 
indirect labor, benefits, and non-labor costs of business divisions 
that do not interact with taxpayers to the direct labor and benefits 
costs of business divisions that interact with taxpayers. The IRS 
calculates the 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.
    For this estate tax closing letter user fee review, the fiscal year 
(FY) 2023 overhead rate, based on FY 2022 costs, of 62.50 percent was 
used.

C. Full Cost Determination for the Estate Tax Closing Letter User Fee

    The IRS followed the guidance provided by the OMB Circular A-25 
guidance to compute the full cost of issuing estate tax closing letters 
to authorized persons. OMB Circular A-25 explains that the full cost 
includes all indirect and direct costs to any part of the Federal 
Government including but not limited to, direct and indirect personnel 
costs, physical overhead, rents, utilities, travel, and management 
costs.
1. Request Processing Costs
    Requests for estate tax closing letters are processed by employees 
at grades 5, 8, and 11 of the general schedule (GS-5, GS-8, and GS-11). 
Approximately 0.65 staff hours are required to review the return, 
create the estate tax closing letters, and prepare the letters for 
mailing. The IRS received an average of 8,894 annual requests for 
estate tax closing letters in FY 2021 and FY 2022, requiring 5,781 
staff hours.
    Total hours allocated to the cost also must include indirect hours 
for campus employees, which are calculated by multiplying the number of 
direct hours by the applicable 60 percent indirect employee rate. Using 
this information, IRS determined that the total staff hours for 
processing requests for estate tax closing letters are 9,250 annually.

Direct Staff Hours.........................................        5,781
Indirect Hours (60%).......................................      + 3,469
                                                            ------------
  Total Hours..............................................        9,250
 

    To determine the labor and benefits costs, the IRS divided the 
9,250 total hours by 2,080 (the total annual hours worked by a full-
time employee (FTE)) to convert the hours to a 4.45 FTE equivalent. The 
processing of requests for estate tax closing letters is performed 
primarily (87.7 percent) by employees at the GS-5 level, but also by 
employees at the GS-8 level (1.7 percent) and GS-11 level (10.6 
percent). The average salary and benefit cost for each of those levels 
was multiplied by that grade's percentage of processing time to arrive 
at a $67,355 total cost per FTE. Multiplying the cost per FTE by the 
4.45 FTE equivalent resulted in a total labor and benefits cost of 
$299,730, as follows:

Total Cost Per FTE.........................................      $67,355
Total FTE..................................................       x 4.45
                                                            ------------
Processing Labor & Benefits................................     $299,730
 

2. Quality Assurance Review Costs
    Outgoing estate tax closing letters are reviewed by quality 
assurance professionals at the following Internal Revenue (IR) paybands 
of the IRS Payband System: IR-10 (87.7 percent) and IR-06 (12.3 
percent). Three out of every 100 estate tax closing letters mailed are 
reviewed to verify (1) the estate tax closing letter was authorized, 
(2) the information included in the letter was accurate, and (3) the 
address was correct. The 8,894 average number of

[[Page 21412]]

requests for FY 2021 and FY 2022 resulted in 266 letters reviewed. On 
average, quality assurance professionals spend 0.5 hours reviewing one 
estate tax closing letter, totaling 133 direct staff hours. The direct 
staff hours were multiplied by the 60 percent indirect employee rate 
for campus employees, resulting in a combined total of 213 annual staff 
hours allocated for quality assurance (QA) reviews, as follows:

Direct Staff Hours.........................................          133
Indirect Hours (60%).......................................         + 80
                                                            ------------
  Total Hours..............................................          213
 

    QA reviews are processed by employees at various IR levels. 
Dividing the total hours by 2,080 (the total annual hours for each 
FTE), resulted in 0.10 FTEs. The average salary and benefits for both 
IR paybands conducting quality assurance reviews was multiplied by that 
IR payband's percentage of processing time to arrive at the $95,460 
total cost per FTE. The total cost per FTE was then multiplied by the 
total FTE to determine the labor and benefits cost for QA reviews, as 
follows:

Total Cost Per FTE.........................................      $95,460
Total FTE..................................................        x 0.1
                                                            ------------
Quality Assurance & Benefits...............................       $95.46
 

3. Full Cost Per Request Calculation
    The IRS applied the 62.5 percent overhead rate to the total labor 
and benefits cost to calculate the full cost of the estate tax closing 
letter program.

Processing Labor & Benefits................................     $299,730
Quality Assurance & Benefits...............................      + 9,546
                                                            ------------
  Total Labor and Benefits.................................      309,276
Overhead (62.50%)..........................................    + 193,297
                                                            ------------
  Full Cost................................................     $502.573
 

    The $56 cost per request was determined by dividing the full cost 
by the average annual volume of requests, as follows:

Full Cost..................................................     $502.573
Estimated Annual Request Volume............................      / 8,894
                                                            ------------
Cost Per Request...........................................          $56
 

Special Analyses

I. Regulatory Planning and Review

    The OMB's Office of Information and Regulatory Analysis has 
determined that these regulations are not significant and subject to 
review under section 6(b) of Executive Order 12866.

II. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that these interim final regulations will not have 
a significant economic impact on a substantial number of small 
entities. These regulations, which reduce the amount of a fee to obtain 
a particular service, affect decedents' estates, which generally are 
not small entities as defined under 5 U.S.C. 601(6). Thus, these 
regulations have no economic impact on small entities. In addition, the 
interim final regulations will establish a $56 fee, which is a 
reduction from the previously established fee and is not substantial 
enough to have a significant economic impact on any entities that could 
be affected by establishing such a fee. Accordingly, the Secretary 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.

III. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits and take certain 
other actions before issuing a final rule that includes any Federal 
mandate that may result in expenditures in any one year by a State, 
local, or Tribal government, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. This rule does not include any Federal mandate that may 
result in expenditures by State, local, or Tribal governments, or by 
the private sector in excess of that threshold.

IV. Executive Order 13132: Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial, direct compliance costs on State and local 
governments, and is not required by statute, or preempts State law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive order. These regulations do not have 
federalism implications and do not impose substantial direct compliance 
costs on State and local governments or preempt State law within the 
meaning of the Executive order.

V. Good Cause

    The user fee for the estate tax closing letter applies to all 
individuals who make a request and pay for the estate tax closing 
letter on https://www.pay.gov. It would be unnecessary and contrary to 
the public interest for the IRS to continue to charge the current, 
higher user fee during the period provided for public comment on the 
proposal to reduce that fee. To enable the reduced fee amount to be in 
effect immediately for authorized persons requesting an estate tax 
closing letter, the Treasury Department and the IRS find that there is 
good cause to dispense with (1) notice and public comment pursuant to 5 
U.S.C. 553(b) and (c) and (2) a delayed effective date pursuant to 5 
U.S.C. 553(d). The Treasury Department and the IRS will consider public 
comments submitted in response to the cross-referenced notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register and will promulgate a final rule after 
considering those comments.

VI. Submission to Small Business Administration

    Pursuant to section 7805(f) of the Internal Revenue Code, this 
regulation has been submitted to the Chief Counsel for the Office of 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

VII. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Drafting Information

    The principal author of these regulations is Juli Ro Kim of the 
Office of the Associate Chief Counsel (Passthroughs, Trusts, and 
Estates). Other personnel from the Treasury Department and the IRS 
participated in the development of the regulations.

List of Subjects in 26 CFR Part 300

    Estate taxes, Reporting and recordkeeping requirements.

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 in 
part as follows:

    Authority: 31 U.S.C. 9701.


0
Par. 2. Section 300.12 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec.  300.12  Fee for estate tax closing letter.

* * * * *
    (b) Fee. The fee for issuing an estate tax closing letter is $56.
* * * * *

[[Page 21413]]

    (d) Applicability date. This section applies to requests received 
by the IRS after May 20, 2025.

Edward Killen,
Acting Chief Tax Compliance Officer.
    Approved: May 5, 2025.
Kevin M. Salinger,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2025-08928 Filed 5-16-25; 8:45 am]
BILLING CODE 4830-01-P