User Fee for Estate Tax Closing Letter
| Published date | 31 December 2020 |
| Citation | 85 FR 86871 |
| Record Number | 2020-28931 |
| Section | Proposed rules |
| Court | Internal Revenue Service |
86871
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
38
44 U.S.C. 3507(d); 5 CFR part 1320.
39
44 U.S.C. Chap. 35.
40
Public Law 105–277, 112 Stat. 2681 (1998).
requirements.
38
For the purpose of the
PRA, an information collection
requirement may take the form of a
reporting, recordkeeping, or a third-
party disclosure requirement. The
proposed rule does not contain
information collection requirements that
require approval by OMB under the
PRA.
39
The proposed rule provides
regulatory relief by allowing eligible
FCUs to expand their investment
authority to include the purchase of
MSRs under similar standards
applicable to the purchase of eligible
obligations and other investments.
C. Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. In adherence to
fundamental federalism principles, the
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive
order. This rulemaking will not have a
substantial direct effect on the states, on
the connection between the national
government and the states, or on the
distribution of power and
responsibilities among the various
levels of government. The NCUA has
determined that this proposal does not
constitute a policy that has federalism
implications for purposes of the
executive order.
D. Assessment of Federal Regulations
and Policies on Families
The NCUA has determined that this
proposed rule will not affect family
well-being within the meaning of
Section 654 of the Treasury and General
Government Appropriations Act,
1999.
40
List of Subjects
12 CFR Part 703
Credit unions, Investments.
12 CFR Part 721
Credit unions, Functions, Implied
powers.
By the National Credit Union
Administration Board on December 17, 2020.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the
NCUA Board proposes to amend 12 CFR
parts 703 and 721 as follows:
PART 703—INVESTMENT AND
DEPOSIT ACTIVITIES
■1. The authority citation for part 703
is revised to read as follows:
Authority: 12 U.S.C. 1757(7), 1757(8),
1757(14) and 1757(15).
■2. Amend § 703.14 by adding
paragraph (l) to read as follows:
§ 703.14 Permissible investments.
* * * * *
(l) Mortgage servicing rights. A
Federal credit union may purchase
mortgage servicing rights from other
federally insured credit unions as an
investment if all of the following
conditions are met:
(1) The underlying mortgage loans of
the mortgage servicing rights are loans
the Federal credit union is empowered
to grant;
(2) the Federal credit union purchases
the mortgage servicing rights within the
limitations of its board of directors’
written purchase policies; and
(3) the board of directors or
investment committee approves the
purchase.
§ 703.16 [Amended]
■2. Amend § 703.16 by removing and
reserving paragraph (a).
PART 721—INCIDENTAL POWERS
■4. The authority citation for part 721
continues to read as follows:
Authority: 12 U.S.C. 1757(17), 1766 and
1789.
■5. Amend § 721.3 paragraph (h) by
revising the last sentence to read as
follows:
§ 721.3 What categories of activities are
preapproved as incidental powers
necessary or requisite to carry on a credit
union’s business?
* * * * *
(h) * * * These products or activities
may include debt cancellation
agreements, debt suspension
agreements, letters of credit, leases, and
mortgage loan servicing functions for a
member as long as the loan is owned by
a member.
* * * * *
[FR Doc. 2020–28278 Filed 12–30–20; 8:45 am]
BILLING CODE 7535–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[REG–114615–16]
RIN 1545–BP75
User Fee for Estate Tax Closing Letter
AGENCY
: Internal Revenue Service (IRS),
Treasury.
ACTION
: Notice of proposed rulemaking.
SUMMARY
: This document contains
proposed regulations establishing a new
user fee for authorized persons who
wish to request the issuance of IRS
Letter 627, also referred to as an estate
tax closing letter. The Independent
Offices Appropriations Act of 1952
authorizes charging user fees in
appropriate circumstances. The
proposed regulations affect persons who
request an estate tax closing letter.
DATES
: Written or electronic comments
and requests for a public hearing must
be received by March 1, 2021. Requests
for a public hearing must be submitted
as prescribed in the ‘‘Comments and
Requests for a Public Hearing’’ section.
ADDRESSES
: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic
submissions via the Federal
eRulemaking Portal at http://
www.regulations.gov (indicate IRS and
REG–114615–16) by following the
online instructions for submitting
comments. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The IRS
expects to have limited personnel
available to process public comments
that are submitted on paper through
mail. Until further notice, any
comments submitted on paper will be
considered to the extent practicable.
The Department of the Treasury
(Treasury Department) and the IRS will
publish for public availability any
comment submitted electronically, and
to the extent practicable on paper, to its
public docket. Send paper submissions
to: CC:PA:LPD:PR (REG–114615–16),
Room 5203, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT
:
Concerning submissions of comments
and/or requests for a public hearing,
Regina Johnson, at (202) 317–5177;
concerning cost methodology, Michael
Weber, at (202) 803–9738; concerning
the proposed regulations, Juli Ro Kim, at
(202) 317–6859 (not toll-free numbers).
SUPPLEMENTARY INFORMATION
:
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
86872
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
1
In the context of a Form 706 (a ‘‘return’’ as
defined in section 6103(b)(1)), the term ‘‘return
information’’ is broadly defined in section
6103(b)(2) to include not only information
appearing on the Form 706, but also whether the
estate’s return was, is being, or will be examined
or subject to other investigation or processing, or
any other data, received by, recorded by, prepared
by, furnished to, or collected by the Secretary of the
Treasury or his delegate (Secretary) with respect to
the Form 706 or with respect to the determination
of the existence, or possible existence, of liability
(or the amount thereof) of any person under the
Code for any tax, penalty, interest, fine, forfeiture,
or other imposition, or offense.
Background and Explanation of
Provisions
A. Overview
This document contains proposed
amendments to the User Fee
Regulations (26 CFR part 300) to
establish a user fee applicable to
requests for estate tax closing letters
provided by the IRS to an authorized
person. (The term ‘‘authorized person’’
is used herein to refer to a decedent’s
estate or other person properly
authorized under section 6103 of the
Internal Revenue Code (Code) to
receive, and therefore, to request, an
estate tax closing letter with respect to
the estate.) The IRS issues estate tax
closing letters upon request of an
authorized person only after an estate
tax return (generally, Form 706, United
States Estate (and Generation-Skipping
Transfer) Tax Return) has been accepted
by the IRS (1) as filed, (2) after an
adjustment to which the estate has
agreed, or (3) after an adjustment in the
deceased spousal unused exclusion
(DSUE) amount. An estate tax closing
letter informs an authorized person of
the acceptance of the estate tax return
and certain other return information,
including the amount of the net estate
tax, the State death tax credit or
deduction, and any generation-skipping
transfer tax for which the estate is
liable.
1
The IRS understands that knowledge
of the acceptance by the IRS of the
estate tax return—including the amount
of the gross estate and the estate tax
liability—is important to executors or
other persons administering estates
because of the unique nexus between an
estate’s Federal estate tax obligations
and State and local law obligations to
administer and close a probate estate.
This knowledge aids an executor’s
ability to make the final division and
distribution of estate assets and to avoid
potential personal liability for unpaid
estate tax in making such distribution.
Personal liability can be imposed on an
executor when the executor makes
preferential payments to creditors or
distributions to beneficiaries, leaving
insufficient funds for the full payment
of the tax owed to the government. See
31 U.S.C. 3713(b). On the other hand, an
estate tax closing letter does not indicate
whether any of the estate tax has been
paid or the amount of estate tax that has
been paid.
The estate tax closing letter also
includes relevant procedural and
substantive explanations. Addressing
the potential for conflating an estate tax
closing letter with a formal closing
agreement, the letter confirms that it is
not a formal closing agreement with the
IRS that is described under section 7121
of the Code. Additionally, the estate tax
closing letter explains that, consistent
with Rev. Proc. 2005–32, 2005–1 C.B.
1206, the IRS will not reopen or
examine the estate tax return to
determine the estate tax liability of a
decedent’s estate unless the estate
notifies the IRS of changes to the estate
tax return or if there is (1) evidence of
fraud, malfeasance, collusion,
concealment, or misrepresentation of a
material fact, (2) a clearly defined
substantial error based upon an
established IRS position, or (3) a serious
administrative omission. However, the
estate tax closing letter does not limit or
foreclose future adjustments to the
DSUE amount shown on the estate tax
return, so the estate tax closing letter
further explains that the IRS has
authority to examine returns of a
decedent in the context of determining
the DSUE amount for portability
purposes. (See part C of this section for
a discussion of portability of the DSUE
amount.) Finally, the estate tax closing
letter includes explanations related to
the potential application of sections
6166 and 6324A (installment payments
and special extended lien), 2204
(discharge of personal liability), and
6324 (estate tax lien). Currently, the IRS
does not charge for providing an estate
tax closing letter to authorized persons.
B. June 2015 Change to IRS Practice in
Issuing Estate Tax Closing Letters
The practice of issuing estate tax
closing letters to authorized persons is
not mandated by any provision of the
Code or other statutory requirement.
Instead, the practice is fundamentally a
customer service convenience offered to
authorized persons in view of the
unique nature of estate tax return filings
and the bearing of an estate’s Federal
estate tax obligations on the obligation
to administer and close a probate estate
under applicable State and local law.
Essentially, the practice takes into
account estates’ and stakeholders’ need
for information regarding the status of
an estate’s Federal tax obligations in
administering and closing a probate
estate. Prior to June 2015, the IRS
generally issued an estate tax closing
letter for every estate tax return filed.
However, for estate tax returns filed on
or after June 1, 2015, the IRS changed
its practice and now offers an estate tax
closing letter only upon the request of
an authorized person.
The IRS changed its practice of
issuing estate tax closing letters for
every filed Form 706 for two primary
reasons. First, the volume of estate tax
return filings increased at the same time
that the IRS experienced additional
budget and resource constraints. In
particular, the number of estate tax
filings increased dramatically due to the
enactment in December 2010 of
portability of a deceased spouse’s
unused applicable exclusion amount
(DSUE amount) for the benefit of a
surviving spouse. (See part C for a
discussion of the impact of portability of
the DSUE amount on estate tax filings.)
Second, the IRS recognized that an
account transcript with a transaction
code and explanation of ‘‘421—Closed
examination of tax return’’ is an
available alternative to the estate tax
closing letter. See Notice 2017–12, I.R.B.
2017–5 (describing the utility of the
account transcript in lieu of the estate
tax closing letter and its availability at
no charge). Notwithstanding these
considerations, the IRS was aware that
executors, local probate courts, State tax
departments, and others had come to
rely on the convenience of estate tax
closing letters and the return
information and procedural and
substantive explanations such letters
provided for confirmation that the
examination of the estate tax return by
the IRS had been completed and the IRS
file had been closed. Accordingly, in
2015 the IRS decided to continue
providing the service of issuing estate
tax closing letters, still at no charge, but
only upon the request of an authorized
person.
Until restrictions were added due to
the ongoing Coronavirus Disease 2019
(COVID–19) pandemic, an authorized
person was able to request an estate tax
closing letter by telephone or fax. Now,
due to the COVID–19 pandemic, an
authorized person may request an estate
tax closing letter only by fax (current
procedure and details available at
http://www.irs.gov).
C. The Continuing Impact of Portability
on Estate Tax Return Filings
Portability of the DSUE amount
became effective for estates of decedents
dying after December 31, 2010, upon
enactment of the Tax Relief,
Unemployment Insurance
Reauthorization, and Job Creation Act of
2010, Public Law 111–312, 124 Stat.
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
86873
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
3296, 3302 (Dec. 17, 2010), and became
permanent upon enactment of the
American Taxpayer Relief Act of 2012,
Public Law 112–240, 126 Stat. 2313
(January 2, 2013). In order to elect
portability of the DSUE amount for the
benefit of the surviving spouse, the
estate of the deceased spouse must
timely file an estate tax return, even if
the sum of the value of the gross estate
and the amount of adjusted taxable gifts
is insufficient to trigger a filing
requirement under section 6018(a). In
calendar year 2016, the number of estate
tax returns filed solely to elect
portability of the DSUE amount was
approximately 20,000, compared to
approximately 12,000 estate tax returns
filed because of a filing requirement
under section 6018(a).
D. Establishment of User Fee for Estate
Tax Closing Letters
The IRS continues to experience
significant budget and resource
constraints that require the IRS to
allocate its existing resources as
efficiently as possible. The volume of
estate tax return filings remains high
(approximately 30,500 estate tax returns
filed in 2018), in large part attributable
to estate tax returns that are filed for
estates having no tax liability or filing
requirement under section 6018 and
that are filed solely to elect portability
of the DSUE amount for the benefit of
the surviving spouse of a decedent.
While the practice of issuing estate
tax closing letters is intended as a
customer service convenience to
authorized persons based on an
understanding of the unique nexus
between an estate’s Federal estate tax
obligations and the estate’s obligations
under applicable local law for State and
local estate and inheritance taxes and to
administer and close a probate estate,
the Treasury Department and the IRS
received feedback from taxpayers and
practitioners that the procedure for
requesting an estate tax closing letter
can be inconvenient and burdensome.
When requests had been accepted by
telephone, a request could not be made
until the IRS’s examination of the estate
tax return had been completed.
Taxpayer representatives, therefore,
often needed to repeat the telephone
request, sometimes multiple times,
before the request could be accepted by
the IRS. Currently, the instructions on
http://www.irs.gov advise that, prior to
faxing a request, an account transcript
should be requested and reviewed to
ensure the transaction code and
explanation of ‘‘421—Closed
examination of tax return’’ are present.
Account transcripts are available online
to registered tax professionals using the
IRS’s Transcript Delivery System (TDS)
or to authorized persons making
requests using Form 4506–T.
In view of the resource constraints
and purpose of issuing estate tax closing
letters as a convenience to authorized
persons, the IRS has identified the
provision of estate tax closing letters as
an appropriate service for which to
establish a user fee to recover the costs
that the government incurs in providing
such letters. Accordingly, the Treasury
Department and the IRS propose
establishing a user fee for estate tax
closing letter requests (see parts E and
F for explanation of the authority to
establish the user fee). As currently
determined, the user fee is $67, as
detailed in part H.
Guidance on the procedure for
requesting an estate tax closing letter
and paying the associated user fee is not
provided in these proposed regulations.
The Treasury Department and the IRS
expect to implement a procedure that
will improve convenience and reduce
burden for authorized persons
requesting estate tax closing letters by
initiating a one-step, web-based
procedure to accomplish the request of
the estate tax closing letter as well as the
payment of the user fee. As presently
contemplated, a Federal payment
website, such as http://www.pay.gov,
will be used and multiple requests will
not be necessary. The Treasury
Department and the IRS believe
implementing such a one-step
procedure will reduce the current
administrative burden on authorized
persons in requesting estate tax closing
letters and will limit the burden
associated with the establishment of a
user fee for providing such service.
E. User Fee Authority
The Independent Offices
Appropriations Act of 1952 (IOAA) (31
U.S.C. 9701) authorizes each agency to
promulgate regulations establishing the
charge for services provided by the
agency (user fees). The IOAA provides
that these user fee regulations are
subject to policies prescribed by the
President and shall be as uniform as
practicable. Those policies are currently
set forth in the Office of Management
and Budget (OMB) Circular A–25, 58 FR
38142 (July 15, 1993; OMB Circular).
The IOAA states that the services
provided by an agency should be self-
sustaining to the extent possible. 31
U.S.C. 9701(a). The OMB Circular states
that agencies providing 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.
As required by the IOAA and the
OMB Circular, agencies are to review
user fees biennially and update them as
necessary to reflect changes in the cost
of providing the underlying services.
During these biennial reviews, an
agency must calculate the full cost of
providing each service, taking into
account all direct and indirect costs to
any part of the U.S. Government. The
full cost of providing a service includes,
but is not limited to, salaries, retirement
benefits, rents, utilities, travel, and
management costs, as well as an
appropriate allocation of overhead and
other support costs associated with
providing the service.
An agency should set the user fee at
an amount that recovers the full cost of
providing the service unless the agency
requests, and the OMB grants, an
exception to the full cost requirement.
The OMB may grant exceptions only
where the cost of collecting the fees
would represent an unduly large part of
the fee for the activity, or where any
other condition exists that, in the
opinion of the agency head, justifies an
exception. When the OMB grants an
exception, the agency does not collect
the full cost of providing the service and
therefore must fund the remaining cost
of providing the service from other
available funding sources. When the
OMB grants an exception, the agency,
and by extension all taxpayers,
subsidize the cost of the service to the
recipients who otherwise would be
required to pay the full cost of providing
the service, as the IOAA and the OMB
Circular directs.
F. Special Benefits Conferred by
Issuance of Estate Tax Closing Letters
The issuance of an estate tax closing
letter, and the return information and
procedural and substantive explanations
such letters provide, constitutes the
provision of a service and confers
special benefits on identifiable
recipients beyond those accruing to the
general public. Upon receipt of an estate
tax closing letter, authorized persons
can make use of the return information
and procedural and substantive
explanations provided in the letter for
non-Federal tax purposes, for example,
to facilitate the executor’s ability to
make the final distribution of estate
assets and to respond as needed to non-
Federal tax authorities and entities,
such as local probate courts, State tax
departments, and private stakeholders.
Further, executors of such estates can
make use of the return information
pertaining to the estate’s Federal tax
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
86874
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
liability to avoid potential personal
liability for payment of the tax under 31
U.S.C. 3713.
Moreover, letters comparable to estate
tax closing letters are not universally
available or provided to taxpayers filing
Federal tax returns other than estate tax
returns, upon request by authorized
persons or otherwise. By comparison,
account transcripts are universally
provided by the IRS upon request to all
taxpayers. After issuing Notice 2017–12
to publicize the availability and utility
of an account transcript as an alternative
in lieu of an estate tax closing letter, the
feedback the IRS received from
stakeholders reflects a definite
preference for the return information
and procedural and substantive
explanations provided by the IRS in an
estate tax closing letter. While the IRS
will continue to offer transcripts as an
alternative in lieu of estate tax closing
letters at no charge, an authorized
person may choose which service best
supports their needs based upon the
specific circumstances of the decedent’s
estate. Estate tax closing letters are
uniquely available for authorized
persons that have need of such special
benefits.
For these reasons, 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.
Accordingly, the IRS is authorized,
pursuant to the IOAA and the OMB
Circular, 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
6103(p)(2)(B) (allowing for a reasonable
fee for furnishing return information to
any person).
G. Calculation of User Fees Generally
User fee calculations begin by first
determining the full cost for the service.
The IRS follows the guidance provided
by the OMB Circular to compute the full
cost of the service, which includes all
indirect and direct costs to any part of
the U.S. Government including but not
limited to direct and indirect personnel
costs, physical overhead, rents, utilities,
travel, and management costs. The IRS’s
cost methodology is described later in
this part G.
Once the total amount of direct and
indirect costs associated with a service
is determined, the IRS follows the
guidance in the OMB Circular to
determine the costs associated with
providing the service to each recipient,
which represents the average per unit
cost of that service. This average per
unit cost is the amount of the user fee
that will recover the full cost of the
service.
The IRS follows generally accepted
accounting principles (GAAP), as
established by the Federal Accounting
Standards Advisory Board (FASAB), in
calculating the full cost of providing
services. The FASAB Handbook of
Accounting Standards and Other
Pronouncements, as amended, which is
available at http://files.fasab.gov/
pdffiles/2019_fasab-handbook.pdf,
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
in the remainder of this part G is in
accordance with SFFAS No. 4.
1. Cost Center Allocation
The IRS determines the cost of its
services and the activities involved in
producing them through a cost
accounting system that tracks costs to
organizational units. The lowest
organizational unit in the IRS’s cost
accounting system is called a cost
center. Cost centers are usually separate
offices that are distinguished by subject-
matter area of responsibility or
geographic region. All costs of operating
a cost center are recorded in the IRS’s
cost accounting system and are
allocated to that cost center. The costs
allocated to a cost center are the direct
costs for the cost center’s activities as
well as all indirect costs, including
overhead, associated with that cost
center. Each cost is recorded in only one
cost center.
2. Determining the per Unit Cost
To establish the per unit cost, the total
cost of providing the service is divided
by the volume of services provided. The
volume of services provided includes
both services for which a fee is charged
as well as subsidized services. The
subsidized services are those where
OMB has approved an exception to the
full cost requirement, for example, to
charge a reduced fee to low-income
taxpayers. The volume of subsidized
services is included in the total volume
of services provided to ensure that the
IRS, and not those who are paying full
cost, subsidizes the cost of the reduced-
cost services.
3. Cost Estimation of Direct Labor and
Benefits
Not all cost centers are fully devoted
to only one service for which the IRS
charges a user fee. Some cost centers
work on a number of different services.
In these cases, the IRS estimates the cost
incurred in those cost centers
attributable to the service for which a
user fee is being calculated by
measuring the time required to
accomplish activities related to the
service, and estimating the average time
required to accomplish these activities.
The average time required to
accomplish these activities is multiplied
by the relevant organizational unit’s
average labor and benefits cost per unit
of time to determine the labor and
benefits cost incurred to provide the
service. To determine the full cost, the
IRS then adds an appropriate overhead
charge, as discussed in part G.4.
4. Calculating Overhead
Overhead is an indirect cost of
operating an organization that cannot be
immediately associated with an activity
that the organization performs.
Overhead includes costs of resources
that are jointly or commonly consumed
by one or more organizational unit’s
activities but are not specifically
identifiable to a single activity.
These costs can include:
•General management and
administrative services of sustaining
and support organizations;
•Facilities management and ground
maintenance services (security, rent,
utilities, and building maintenance);
•Procurement and contracting
services;
•Financial management and
accounting services;
•Information technology services;
•Services to acquire and operate
property, plants, and equipment;
•Publication, reproduction, and
graphics and video services;
•Research, analytical, and statistical
services;
•Human resources/personnel
services; and
•Library and legal services.
To calculate the overhead allocable to
a service, the IRS multiplies a corporate
overhead rate (Corporate Overhead rate)
by the direct labor and benefits costs
determined as discussed above in part
G.3. The Corporate Overhead rate is the
ratio of the sum of the IRS’s indirect
labor and benefits costs from the
supporting and sustaining
organizational units—those that do not
interact directly with taxpayers—and all
non-labor costs to the IRS’s labor and
benefits costs of its organizational units
that interact directly with taxpayers.
The IRS calculates the Corporate
Overhead rate annually based on cost
elements underlying the Statement of
Net Cost included in the IRS Annual
Financial Statements, which are audited
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
86875
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
by the Government Accountability
Office.
The Corporate Overhead rate of 74
percent (rounded to the nearest
hundredth) for costs reviewed during
fiscal year (FY) 2018 was calculated
based on (FY) 2017 costs, as follows:
Indirect Labor and Benefits Costs:
$1,705,152,274
Non-Labor Costs: + $3,213,504,014
Total Indirect Costs: $4,918,656,288
Direct Labor and Benefits Costs:
÷ $6,640,044,003
Corporate Overhead Rate: 74.08%
H. Description and Tables Showing Full
Cost Determination for Estate Tax
Closing Letter
The IRS followed the guidance
provided by the OMB Circular to
compute the full cost of issuing estate
tax closing letters to an authorized
person. The OMB Circular 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 GS Grade 5 and Grade
8 customer service representatives.
Grade 5 representatives perform 80
percent of the work and Grade 8
representatives perform the remaining
20 percent of the work. The customer
service representative verifies that the
request is authorized and that the
address information is correct. Because
a separate estate tax closing letter is
prepared for each executor, responding
to requests often requires more than one
letter, with an average of three letters
per request. It requires approximately
0.65 staff hours for a customer service
representative to review the return,
create the estate tax closing letters, and
prepare the letters for mailing. The IRS
received an average of 17,249 requests
for estate tax closing letters in FY 2017
and FY 2018 requiring 11,154 staff
hours.
Total hours allocated to the cost must
also include indirect hours for campus
employees. Indirect hours are calculated
by multiplying the direct hours by the
indirect rate for employees, which is 60
percent. Using this information, IRS
determined the total staff hours to
process requests for estate tax closing
letters are 17,846 as follows:
Staff Hours: 11,154
Indirect Hours (60%): 6,692
Total Hours: 17,846
To determine the labor and benefits
costs, IRS converted total hours to full
time employees (FTE) by dividing the
total hours by 2,080, which is the
number of hours worked by a full time
employee during the year, resulting in
8.58 FTE. IRS calculated the cost per
FTE by adding 80 percent of the average
salary and benefits for a GS 5 to 20
percent of the average salary and
benefits for a GS 8 campus employee
and determined the cost of labor and
benefits related to this program is $
578,831 (rounded to the nearest whole
dollar), as follows:
GS–5 Salary and Benefits ($62,330 ×
80%): $49,864
GS–8 Salary and Benefits ($87,993 ×
20%): $17,599
Total Cost per FTE: $67,463
Total FTE: 8.58
Total Labor & Benefits for processing
requests: $578,831
2. Quality Assurance Review Costs
Outgoing estate tax closing letters are
subjected to quality review performed
by GS 8 Grade quality assurance
professionals. Specifically, five of every
100 estate tax closing letters mailed are
reviewed for quality assurance. A
quality assurance professional opens the
return to (1) ensure the estate tax closing
letter was authorized, (2) verify that the
correct information was included in the
letter, and (3) verify the address
information. Quality assurance
professionals then document their
review. On average, quality assurance
professionals spend .5 staff hours to
review one estate tax closing letter. The
estimated labor hours for quality
assurance related to estate tax closing
letters are 1,294, determined as follows:
Estimated Volume of Requests: 17,249
Average Number of Letters per Request:
× 3
Total Letters Available for Review:
51,747
Estimated Letters Reviewed (5%): 2,587
Hours per Review: × 0.5
Estimated Quality Assurance Hours:
1,294
Indirect Hours (60%): 776
Total Quality Assurance Hours: 2,070
Total FTE: 1.00
Cost Per Grade 8: $87,993
Total Salary and Benefits for Quality
Assurance: $87,563
3. Overhead Calculation
The IRS applied the Corporate
Overhead rate to the labor and benefits
costs to calculate the full cost for issuing
an estate tax closing letter. The full cost
of the program is $ 1,160,058,
determined as follows:
Total Processing Labor & Benefits:
$578,831
Total Quality Assurance Labor &
Benefits: $87,563
Total Labor and Benefits: $666,394
Corporate Overhead (74.08%):
+ $493,664
Full Cost: $1,160,058
To calculate the cost per request, IRS
divided $ 1,160,058 by the volume of
17,249 requests. The cost to issue an
estate tax closing letter is $ 67 (rounded
to the nearest whole dollar), determined
as follows:
Full Cost: $1,160,058
Estimated Volume: ÷ 17,249
Cost Per Request: $67
Proposed Applicability Date
These regulations are proposed to
apply to requests for an estate tax
closing letter received by the IRS after
the date that is 30 days after the date of
publication in the Federal Register of a
Treasury decision adopting these rules
as final regulations.
Special Analyses
This regulation is not subject to
review under section 6(b) of Executive
Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and
Budget regarding review of tax
regulations. Pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is
hereby certified that these regulations
will not have a significant economic
impact on a substantial number of small
entities. The proposed regulations,
which prescribe 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 dollar amount of the fee
($67 as currently determined) 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.
Pursuant to section 7805(f) of the
Code, this notice of proposed
rulemaking will be submitted to the
Chief Counsel for the Office of
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
comments that are submitted timely to
the IRS as prescribed in this preamble
under the
ADDRESSES
heading. The
Treasury Department and IRS request
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
86876
Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules
1
In that decision, the Board found five carriers
(BNSF Railway Company, CSX Transportation, Inc.
(CSXT), Norfolk Southern Combined Railroad
Subsidiaries, Soo Line Corporation, and UP)
revenue adequate in 2019. R.R. Revenue
Adequacy—2019 Determination, EP 552 (Sub-No.
24), slip op. at 2.
2
The petition also proposes certain modifications
to the calculation of ROI, as discussed below. (See
also Pet. 35–36.)
3
The Joint Carriers state that banking and real
estate companies were excluded from the
comparison groups because they have different
comments on all aspects of the proposed
regulations. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
available at http://www.regulations.gov
or upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written
comments as prescribed in this
preamble under the
DATES
heading.
Requests for a public hearing are also
encouraged to be made electronically. If
a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal
Register. Announcement 2020–4, 2020–
17 I.R.B. 1, provides that until further
notice, public hearings conducted by
the IRS will be held telephonically. Any
telephonic hearing will be made
accessible to people with disabilities.
Drafting Information
The principal author of these
regulations is Juli Ro Kim of the Office
of Associate Chief Counsel
(Passthroughs and Special Industries).
Other personnel from the Treasury
Department and the IRS participated in
the development of the regulations.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings notices, and other guidance
cited in this document are published in
the Internal Revenue Bulletin (or
Cumulative Bulletin) and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at http://www.irs.gov.
List of Subjects in 26 CFR Part 300
Estate taxes, Excise taxes, Gift taxes,
Income taxes, Reporting and
recordkeeping requirements, User fees.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 300 is
proposed to be amended as follows:
PART 300—USER FEES
■Paragraph 1. The authority citation
for part 300 continues to read as
follows:
Authority: 31 U.S.C. 9701.
■Par. 2. Section 300.0 is amended by
adding paragraph (b)(13) to read as
follows:
§ 300.0 User fees; in general.
* * * * *
(b) * * *
(13) Requesting an estate tax closing
letter.
■Par. 3. Section 300.13 is added to read
as follows:
§ 300.13 Fee for estate tax closing letter.
(a) Applicability. This section applies
to the request by a person described in
paragraph (c) of this section for an estate
tax closing letter from the IRS.
(b) Fee. The fee for issuing an estate
tax closing letter is $67.
(c) Person liable for the fee. The
person liable for the fee is the estate of
the decedent or other person properly
authorized under section 6103 of the
Internal Revenue Code to receive and
therefore to request the estate tax
closing letter with respect to the estate.
(d) Applicability date. This section
applies to requests received by the IRS
after [date that is 30 days after these
regulations are published as final
regulations in the Federal Register].
Douglas W. O’Donnell,
Acting Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2020–28931 Filed 12–29–20; 4:15 pm]
BILLING CODE 4830–01–P
SURFACE TRANSPORTATION BOARD
49 CFR Chapter X
[Docket No. EP 766]
Joint Petition For Rulemaking—Annual
Revenue Adequacy Determinations
AGENCY
: Surface Transportation Board.
ACTION
: Petition for rulemaking.
SUMMARY
: The Surface Transportation
Board (Board or STB) opens a
rulemaking proceeding to consider a
petition by several Class I railroads to
change the Board’s procedures for
annually determining whether Class I
rail carriers are revenue adequate. The
Board seeks public comment on the
petition and several specific related
issues.
DATES
: Comments are due March 1,
2021; replies are due March 31, 2021.
ADDRESSES
: Comments and replies may
be filed with the Board via e-filing on
the Board’s website at www.stb.gov and
will be posted to the Board’s website.
FOR FURTHER INFORMATION CONTACT
:
Amy Ziehm at (202) 245–0391.
Assistance for the hearing impaired is
available through the Federal Relay
Service at (800) 877–8339.
SUPPLEMENTARY INFORMATION
: On
September 1, 2020, Union Pacific
Railroad Company (UP), Norfolk
Southern Railway Company, and the
U.S. rail operating affiliates of Canadian
National Railway Company
(collectively, Joint Carriers) filed a joint
petition for rulemaking to change the
Board’s procedures for determining
which Class I rail carriers are earning
adequate revenues under 49 U.S.C.
10704(a)(3).
The Board annually determines each
Class I railroad’s revenue adequacy in
successive subdockets under Docket No.
EP 552, most recently in Railroad
Revenue Adequacy—2019
Determination, EP 552 (Sub-No. 24)
(STB served Oct. 1, 2020).
1
Under the
Board’s procedures, ‘‘a railroad is
considered revenue adequate under 49
U.S.C. 10704(a) if it achieves a rate of
return on net investment (ROI) equal to
at least the current cost of capital for the
railroad industry.’’ Id. at 1.
The Joint Carriers propose two
changes to the Board’s procedures for
annually determining revenue
adequacy. First, the Joint Carriers
propose that the Board determine
whether a railroad is revenue adequate
by comparing the extent by which its
ROI exceeds the rail industry’s cost of
capital to the extent by which
companies in the S&P 500 exceed their
cost of capital—in short, to examine
railroads in comparison with the larger
universe of S&P 500 companies (the
Comparison Proposal). (Pet. 3, 8.) The
Joint Carriers contend that railroads
compete against other firms for capital,
and that the financial health of the
railroad industry ‘‘must be considered
in relation to the competition railroads
face in the capital markets from other,
unregulated firms.’’ (Id. at 3.) More
specifically, the Joint Carriers argue that
the Board should define annual revenue
adequacy to mean that a railroad’s
‘‘Adjusted STB ROI’’
2
exceeds the rail
industry cost of capital by more than the
median S&P 500 firm’s ROI exceeds its
cost of capital. (Id. at 20–21.) Under the
Comparison Proposal, the Board would
direct the Association of American
Railroads to submit ‘‘Adjusted STB
ROI’’ and cost of capital calculations for
every S&P 500 company, and the Board
‘‘would calculate the median difference
between the Adjusted STB ROI and the
cost of capital for all companies in the
S&P 500, except for banking and real
estate companies.’’
3
(Id. at 21.) As part
VerDate Sep<11>2014 17:54 Dec 30, 2020 Jkt 253001 PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 E:\FR\FM\31DEP1.SGM 31DEP1
khammond on DSKJM1Z7X2PROD with PROPOSALS
