Cases: United States v. American Insurance Company, 18 F.3d 1104 (3rd Cir. 1994); Robert Demartino v. Commissioner, 862 F.2d 400 (2d Cir. 1988)
Forms: Form 941
(a) General rule
Amended 1976, 1979, 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1511(a), added subsec. (a) and struck out former subsec. (a) which read as follows: “The annual rate established under this section shall be such adjusted rate as is established by the Secretary under subsection (b).”
- 1979 Pub. L. 96-167 Pub. L. 96–167 substituted provisions setting the annual rate established under this section to be such adjusted rate as is established by the Secretary under subsec. (b) of this section for provision that the rate of interest under sections 6601(a), 6602, 6611(a), 6332(c)(1), and 7426(g) of this title, and under section 2411(a) of title 28 was to be 9 percent per annum, or such adjusted rate as was established by the Secretary under subsection (b).
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
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(1) Overpayment rate The overpayment rate established under this section shall be the sum of—
Amended 1994, 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 1604(b)(1), substituted “subsection (c)(3), applied by substituting ‘overpayment’ for ‘underpayment’)” for “subsection (c)(3))” in concluding provisions.
- 1994 Pub. L. 103-465 Pub. L. 103–465 inserted concluding provisions.
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(A) the Federal short-term rate determined under subsection (b), plus
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1015(d)(1), substituted “Federal short-term” for “short-term Federal”.
(B) 3 percentage points (2 percentage points in the case of a corporation).
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 3302(a), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “2 percentage points.”
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To the extent that an overpayment of tax by a corporation for any taxable period (as defined in subsection (c)(3), applied by substituting “overpayment” for “underpayment”) exceeds $10,000, subparagraph (B) shall be applied by substituting “0.5 percentage point” for “2 percentage points”.
(2) Underpayment rate The underpayment rate established under this section shall be the sum of—
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(A) the Federal short-term rate determined under subsection (b), plus
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1015(d)(1), substituted “Federal short-term” for “short-term Federal”.
(B) 3 percentage points.
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(b) Federal short-term rate For purposes of this section—
Amended 1976, 1981, 1982, 1986, 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1015(d)(2), substituted “Federal short-term” for “short-term Federal” in heading.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1511(a), added subsec. (b) relating to determination of Federal short-term rate and struck out former subsec. (b) which related to interest rate adjustments and establishment of adjusted rates.
- 1982 Pub. L. 97-248 Pub. L. 97–248 substituted provisions that if the adjusted prime rate charged by banks (rounded to the nearest full percent) during the 6-month period ending on September 30 of any calendar year, or during the 6-month period ending on March 31 of any calendar year, differs from the interest rate in effect under this section on either such date, respectively, then the Secretary shall establish, within 15 days after the close of the applicable 6-month period, an adjusted rate of interest equal to such adjusted prime rate, and that any adjusted rate of interest established under paragraph (1) shall become effective on January 1 of the succeeding year in the case of an adjustment attributable to paragraph (1)(A), and on July 1 of the same year in the case of an adjustment attributable to paragraph (1)(B), for provisions that the Secretary was to establish an adjusted rate of interest for the purpose of subsection (a) not later than October 15 of any year if the adjusted prime rate charged by banks during September of that year, rounded to the nearest full percent, was at least a full percentage point more or less than the interest rate which was then in effect, and that any such adjusted rate of interest would be equal to the adjusted prime rate charged by banks, rounded to the nearest full percent, and would become effective on January 1 of the immediately succeeding year.
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 711(a), struck out provision that an adjustment provided for under this subsection not be made prior to the expiration of 23 months following the date of any preceding adjustment under this subsection which changes the rate of interest.
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 711(c), substituted “January 1” for “February 1”.
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
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(1) General rule The Secretary shall determine the Federal short-term rate for the first month in each calendar quarter.
Amended 1988
- 1988 Pub. L. 100-647 Pub. L. 100–647, § 1015(d)(1), substituted “Federal short-term” for “short-term Federal”.
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(2) Period during which rate applies
(A) In general Except as provided in subparagraph (B), the Federal short-term rate determined under paragraph (1) for any month shall apply during the first calendar quarter beginning after such month.
(B) Special rule for individual estimated tax In determining the addition to tax under section 6654 for failure to pay estimated tax for any taxable year, the Federal short-term rate which applies during the 3rd month following such taxable year shall also apply during the first 15 days of the 4th month following such taxable year.
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(3) Federal short-term rate The Federal short-term rate for any month shall be the Federal short-term rate determined during such month by the Secretary in accordance with section 1274(d). Any such rate shall be rounded to the nearest full percent (or, if a multiple of ½ of 1 percent, such rate shall be increased to the next highest full percent).
(c) Increase in underpayment rate for large corporate underpayments
Amended 1981, 1986, 1989, 1990
- 1990 Pub. L. 101-508 Pub. L. 101–508 added subsec. (c).
- 1989 Pub. L. 101-239 Pub. L. 101–239 repealed subsec. (c) which related to attribution of interest on substantial underpayments to tax motivated transactions.
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1511(a), (c)(1), redesignated subsec. (d) as (c), in par. (1), struck out “annual” before “rate of interest” and substituted “the underpayment rate established under this section” for “the adjusted rate established under subsection (b)”, and struck out former subsec. (c) definition of prime rate, which read as follows: “For purposes of subsection (b), the term ‘adjusted prime rate charged by banks’ means the average predominant prime rate quoted by commercial banks to large businesses, as determined by the Board of Governors of the Federal Reserve System.”
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 711(b), struck out “90 percent of” before “the average predominant prime rate”.
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(1) In general For purposes of determining the amount of interest payable under section 6601 on any large corporate underpayment for periods after the applicable date, paragraph (2) of subsection (a) shall be applied by substituting “5 percentage points” for “3 percentage points”.
(2) Applicable date For purposes of this subsection—
(A) In general The applicable date is the 30th day after the earlier of—
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1702(c)(6), inserted closing provisions “The preceding sentence shall be applied without regard to any such letter or notice which is withdrawn by the Secretary.”
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(i) the date on which the 1st letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Independent Office of Appeals is sent, or
Amended 2019
- 2019 Pub. L. 116-25 Pub. L. 116–25 substituted “Internal Revenue Service Independent Office of Appeals” for “Internal Revenue Service Office of Appeals”.
(ii) the date on which the deficiency notice under section 6212 is sent.
The preceding sentence shall be applied without regard to any such letter or notice which is withdrawn by the Secretary.
(B) Special rules
(i) Nondeficiency procedures In the case of any underpayment of any tax imposed by this title to which the deficiency procedures do not apply, subparagraph (A) shall be applied by taking into account any letter or notice provided by the Secretary which notifies the taxpayer of the assessment or proposed assessment of the tax.
Amended 1996
- 1996 Pub. L. 104-188 Pub. L. 104–188, § 1702(c)(7), substituted “this title” for “this subtitle”.
(ii) Exception where amounts paid in full For purposes of subparagraph (A), a letter or notice shall be disregarded if, during the 30-day period beginning on the day on which it was sent, the taxpayer makes a payment equal to the amount shown as due in such letter or notice, as the case may be.
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(iii) Exception for letters or notices involving small amounts For purposes of this paragraph, any letter or notice shall be disregarded if the amount of the deficiency or proposed deficiency (or the assessment or proposed assessment) set forth in such letter or notice is not greater than $100,000 (determined by not taking into account any interest, penalties, or additions to tax).
Amended 1997
- 1997 Pub. L. 105-34 Pub. L. 105–34, § 1463(a), added cl. (iii).
(3) Large corporate underpayment For purposes of this subsection—
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(A) In general The term “large corporate underpayment” means any underpayment of a tax by a C corporation for any taxable period if the amount of such underpayment for such period exceeds $100,000.
Amended 1986
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1535(a), added cl. (v).
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(B) Taxable period For purposes of subparagraph (A), the term “taxable period” means—
(i) in the case of any tax imposed by subtitle A, the taxable year, or
(ii) in the case of any other tax, the period to which the underpayment relates.
(d) Elimination of interest on overlapping periods of tax overpayments and underpayments To the extent that, for any period, interest is payable under subchapter A and allowable under subchapter B on equivalent underpayments and overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under this section on such amounts shall be zero for such period.
Amended 1984, 1986, 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 3301(a), added subsec. (d).
- 1986 Pub. L. 99-514 Pub. L. 99–514, § 1511(c)(1)(A), redesignated subsec. (d) as (c).
- 1984 Pub. L. 98-369 Pub. L. 98–369 added subsec. (d).