26 CFR §301.6621-3

1. (a)In general. Section 6621 establishes the interest rate for purposes of computing the amount of interest that must be paid under section 6601, relating to interest on underpayments of tax. Section 6621(a)(2) provides that the underpayment rate is the sum of the Federal short-term rate (determined under section 6621(b)) plus 3 percentage points. That underpayment rate is referred to hereinafter as the “section 6621(a)(2) rate.” Section 6621(c) and this section, however, provide that the underpayment rate on any large corporate underpayment is the sum of the Federal short-term rate (determined under section 6621(b)) plus 5 percentage points. This higher underpayment rate is referred to hereinafter as the “section 6621(c) rate.” The section 6621(c) rate applies only for periods after the applicable date (as determined in paragraph (c) of this section).
2. (b)Large corporate underpayment
   1. (1)Defined. For purposes of section 6621(c) and this section, “large corporate underpayment” means any underpayment of a tax by a C corporation for any taxable period if the amount of the threshold underpayment of the tax (as defined in paragraph (b)(2)(ii) of this section) for that taxable period exceeds $100,000.
   2. (2)Underpayment of a tax
      1. (i)In general. As used in section 6621(c) and this section, “underpayment of a tax” means the excess of a tax imposed by the Internal Revenue Code over the amount of such tax paid on or before the last date prescribed for payment. Except as provided in paragraph (b)(2)(ii) of this section, “tax” for such purposes includes interest, penalties, additional amounts, and additions to tax. See sections 6601(e)(1), 6665(a), and 6671(a). Thus, the section 6621(c) rate generally applies to any interest, penalties, additional amounts, and additions to tax, as well as to the underlying tax with respect to which such amounts are imposed.
      2. (ii)Threshold underpayment of a tax. Solely for purposes of this section and not for any other purpose under section 6621(c) or elsewhere in the interpretation or administration of the federal tax laws, a “threshold underpayment of a tax” is the excess of a tax imposed by the Internal Revenue Code (exclusive of interest, penalties, additional amounts, and additions to tax) for the taxable period over the amount of such tax paid on or before the last date prescribed for payment. Thus, any payments made after the last date prescribed for payment (for example, by way of an amended return) will not affect the existence of a threshold underpayment. In determining whether there is a threshold underpayment, different types of taxes (such as income tax and FICA tax) and amounts that relate to different taxable periods are not added together.
      3. (iii)When determined
         1. (A)In general. The existence of a threshold underpayment of a tax and the amount of a large corporate underpayment are generally determined only when an assessment is made with respect to the taxable period. Thus, the amount of a deficiency or proposed deficiency set forth in a letter or notice pursuant to which the applicable date is determined (under paragraph (c) of this section) does not determine whether there is a large corporate underpayment.
         2. (B)Judicial determinations. Notwithstanding any prior assessment made with respect to a taxable period, the section 6621(c) rate does not apply if, after a federal court determines the taxpayer's liability for a period, the threshold underpayment for that taxable period does not exceed $100,000. See Example 3 in paragraph (d) of this section.
      4. (iv)Special rule. The section 6621(c) rate is not used to compute the interest charges that a taxpayer timely assesses against itself in return for using a method of tax accounting or reporting that defers the payment of tax, such as the interest charges relating to passive foreign investment companies under section 1291(c) and installment obligations of nondealers under section 453A(c). However, to the extent such charges are not paid on or before the last date prescribed for payment and therefore become part of an underpayment of a tax, the section 6621(c) rate will apply to such amounts for periods after the applicable date (as determined in paragraph (c) of this section).
   3. (3)C corporation defined. For purposes of section 6621(c)(3)(A) and this section, “C corporation” means, with respect to any taxable period, a corporation that is a C corporation during any part of the taxable period. Interest on a large corporate underpayment for a taxable period continues to be imposed at the section 6621(c) rate even if during or after the taxable period—
      1. (i)The taxpayer ceases to be a C corporation; or
      2. (ii)The underpayment becomes the liability of a successor or transferee that is not a C corporation.
   4. (4)Taxable period. For purposes of section 6621(c) and this section, the “taxable period” is the taxable year in the case of any tax imposed by subtitle A of the Internal Revenue Code. In the case of any other tax, the “taxable period” is the period to which the underpayment relates. For example, the taxable period for an underpayment of FICA taxes is the calendar quarter. If the underpayment does not relate to a particular period (for example, in the case of certain transactional excise taxes), the “taxable period” is the period covered by a return on which the tax is required to be shown.
   5. (5)Last date prescribed for payment. For purposes of this section, the “last date prescribed for payment” means the last date prescribed for payment as determined, without regard to any extension of time, under section 6601(b).
3. (c)Applicable date
   1. (1)In general. The section 6621(c) rate applies only to periods after the applicable date. Pursuant to the effective date of section 6621(c) and paragraph (e) of this section, however, the section 6621(c) rate will not apply prior to January 1, 1991, even if the applicable date is prior to December 31, 1990. A letter or notice relating to a particular type of tax creates an applicable date only for that type of tax. For example, a letter or notice with respect to FUTA tax will not create an applicable date with respect to income tax for the same taxable year.
   2. (2)When deficiency procedures apply. The applicable date, in the case of any underpayment of a tax to which the deficiency procedures of subchapter B of chapter 63 of the Internal Revenue Code apply, is the 30th day after the earlier of—
      1. (i)The date on which the Service sends the taxpayer the first letter of proposed deficiency that allows the taxpayer an opportunity for administrative review in the Service's Office of Appeals (commonly called a “30-day letter”); or
      2. (ii)The date on which the Service sends a deficiency notice under section 6212 of the Internal Revenue Code (commonly called a “90-day letter”).
   3. (3)When deficiency procedures do not apply. The applicable date, in the case of any underpayment of a tax to which the deficiency procedures do not apply, is the 30th day after the date on which the Service sends the first letter or notice that notifies the taxpayer of an assessment or proposed assessment of the tax. In the case of income taxes, for example, the deficiency procedures do not apply to amounts shown as due on the taxpayer's return if the taxpayer fails to remit the full amount on or before the last date prescribed for payment, and to amounts attributable to mathematical or clerical errors on a return (unless a request for abatement is filed by the taxpayer under section 6213(b)). Because no 30-day letter or 90-day letter is issued to the taxpayer in such cases, the applicable date is the 30th day after the date on which an assessment notice under section 6303 of the Internal Revenue Code is sent.
   4. (4)Partnership items. For purposes of section 6621(c) and this paragraph (c), 60-day letters and the notices described in sections 6223(a)(1) and 6223(a)(2) (relating to administrative proceedings at the partnership level) are not treated as letters of proposed deficiency that allow the taxpayer an opportunity for administrative review in the Service's Office of Appeals, deficiency notices under section 6212 of the Internal Revenue Code, or letters or notices that notify the taxpayer of an assessment or proposed assessment of the tax. Thus, in the absence of any other letter or notice described in paragraph (c)(2) or (c)(3) of this section that establishes an earlier applicable date, the applicable date in the case of any underpayment of a tax attributable, in whole or in part, to a partnership item (as defined in section 6231(a)(3)) is the 30th day after the date on which the Service sends the first letter or notice that notifies the taxpayer of an assessment of the tax.
   5. (5)Exception of payment of amount shown as due
      1. (i)In general. A letter of notice will be disregarded for purposes of determining the applicable date if the taxpayer makes a payment equal to the amount shown as due in the letter or notice within 30 days from the date that the Service sends the letter or notice.
      2. (ii)Special transition rule. A letter or notice sent by the Service prior to January 1, 1991, will be disregarded by the Service for purposes of determining the applicable date if the taxpayer makes a payment on or before January 31, 1991, equal to the amount shown as due in the letter or notice plus a reasonable estimate of the interest payable on such amount computed by applying the section 6621(a)(2) rate. If the taxpayer has received two or more letters or notices with respect to the same tax for the same taxable period and pays the amount shown as due in the last letter or notice sent prior to December 19, 1990, (plus a reasonable estimate of the interest), all of the prior letters and notices with respect to the same tax for the same taxable period will be disregarded under this paragraph (c)(5)(ii). In the case of an assessment notice, the payment of the amount of interest shown as due on the last assessment notice sent to the taxpayer prior to December 19, 1990, will be treated as a payment of a reasonable estimate of the interest payable on the amount shown in that assessment notice or in any prior assessment notice sent with respect to the same tax for the same taxable period. The special transition rule in this paragraph (c)(5)(ii) applies even if the payment is not made within 30 days of the date on which the Service sent the letter or notice.
      3. (iii)Amount shown as due. For purposes of section 6621(c)(2)(B)(ii) and this paragraph (c)(5), the “amount shown as due” in any letter or notice means the total amount of tax, as well as any interest, penalties, additional amounts, and additions to tax that are set forth in the letter or notice. A deposit in the nature of a cash bond will not be considered a payment of the amount shown as due.
   6. (6)Exception for withdrawn letters and notices
      1. (i)Letters of proposed deficiency. A letter of proposed deficiency will be disregarded for purposes of determining the applicable date if the letter of proposed deficiency is issued as a result of an administrative error either to the wrong taxpayer or for the wrong taxable period.
      2. (ii)Deficiency notices. A deficiency notice under section 6212 of the Internal Revenue Code will be disregarded for purposes of determining the applicable date if the deficiency notice is rescinded under section 6212(d).
      3. (iii)Assessment letters and notices. A letter or notice that notifies the taxpayer of an assessment or proposed assessment of tax will be disregarded for purposes of determining the applicable date if the full amount of tax assessed is subsequently abated.
4. (d)Examples. The application of this section may be illustrated by the following examples.
5. (e)Effective date. Section 6621(c) and this section are effective for determining interest for periods after December 31, 1990, regardless of the taxable period to which the underlying tax may relate and even if the applicable date is prior to December 31, 1990.