User Fee for Estate Tax Closing Letter

Published date28 September 2021
Citation86 FR 53539
Record Number2021-21029
SectionRules and Regulations
CourtInternal Revenue Service
Federal Register, Volume 86 Issue 185 (Tuesday, September 28, 2021)
[Federal Register Volume 86, Number 185 (Tuesday, September 28, 2021)]
                [Rules and Regulations]
                [Pages 53539-53542]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-21029]
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                DEPARTMENT OF THE TREASURY
                Internal Revenue Service
                26 CFR Part 300
                [TD 9957]
                RIN 1545-BP75
                User Fee for Estate Tax Closing Letter
                AGENCY: Internal Revenue Service (IRS), Treasury.
                ACTION: Final regulation.
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                SUMMARY: This document contains final regulations that establish a new
                user fee of $67 for persons requesting the issuance of IRS Letter 627,
                also referred to as an estate tax closing letter. The final regulations
                affect persons who may request an estate tax closing letter.
                DATES:
                 Effective date: These regulations are effective October 28, 2021.
                 Applicability date: For date of applicability, see Sec. 300.13(d).
                FOR FURTHER INFORMATION CONTACT: Juli Ro Kim at (202) 317-6859 (not a
                toll-free number).
                SUPPLEMENTARY INFORMATION:
                Background
                 This document amends the User Fee Regulations (26 CFR part 300) to
                establish a user fee applicable to requests for estate tax closing
                letters issued by the IRS (currently, IRS Letter 627).
                A. Authority To Charge User Fees
                 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. The policies currently are set
                forth in the Office of Management and Budget (OMB) Circular A-25, 58 FR
                38142 (July 15, 1993; OMB Circular). The OMB Circular requires agencies
                providing services that confer special benefits on identifiable
                recipients beyond those accruing to the general public to identify
                those services, to determine whether user fees should be assessed for
                those services, and if so, to establish user fees that recover the full
                cost of providing those services, unless the agency requests, and the
                OMB grants, an exception to the full cost requirement.
                B. Notice of Proposed Rulemaking
                 On December 31, 2020, the Department of the Treasury (Treasury
                Department) and the IRS published in the Federal Register (85 FR 86871)
                a notice of proposed rulemaking (REG-114615-16) proposing amendments to
                the User Fee Regulations in part 300 of title 26 of the Code of Federal
                Regulations (proposed regulations). Specifically, the proposed
                regulations proposed the addition of new Sec. 300.13 to the User Fee
                Regulations to establish a $67 user fee for issuing an estate tax
                closing letter for an estate.
                 The preamble to the proposed regulations identifies the issuance of
                an estate tax closing letter as the provision of a service that confers
                special benefits, beyond those accruing to the general public, to an
                estate or other person properly authorized under section 6103 of the
                Internal Revenue Code (Code) to receive an estate tax closing letter.
                Accordingly, the preamble to the proposed regulations concludes that
                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. Additionally, the
                preamble to the proposed regulations explains the special benefits
                conferred by the issuance of estate tax closing letters and analyzes
                how the IRS has computed that the full cost of issuing an estate tax
                closing letter is $67. Finally, the preamble to the proposed
                regulations states that the Treasury Department and the IRS expect to
                implement a web-based procedure that will improve convenience and
                reduce burden for persons requesting estate tax closing letters as
                compared to the current procedure in place for making such requests.\1\
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                 \1\ For an overview of the procedure applicable to a request for
                an estate tax closing letter on or before October 28, 2021, see part
                D of the Background and Explanation of Provisions of the proposed
                regulations.
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                Summary of Comments
                A. Overview
                 The IRS received a total of five written public comments in
                response to the proposed regulations, some addressing multiple aspects
                of the proposed regulations. These comments are available at https://www.regulations.gov or upon request. No public hearing on the proposed
                regulations was requested and accordingly no public hearing was held.
                After careful consideration of the comments received, the Treasury
                Department and the IRS adopt the proposed regulations without
                significant change. Accordingly, new Sec. 300.13 establishes a $67
                user fee for issuing an estate tax closing letter.
                B. Comments Regarding the Imposition of a User Fee
                1. Establishment and Amount of User Fee
                 One commenter opposed the establishment of a user fee to request an
                estate tax closing letter and suggested that the IRS return to issuing
                estate tax closing letters for every estate tax return filed, without
                the need for making a request or paying a user fee, as was the practice
                prior to June 2015.\2\ Another commenter suggested that the user fee be
                reduced so that all estates desiring an estate tax closing letter can
                afford to pay the user fee and request the estate tax closing letter. A
                third commenter stated that the proposed $67 user fee is both
                reasonable and appropriate given the impact of returns filed solely to
                elect portability under section 2010 of the Code and the fact that
                estate tax returns are most often filed in the context of decedents
                with substantial gross estates.
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                 \2\ See part B of the Background and Explanation of Provisions
                of the preamble of the proposed regulations for a full discussion of
                the June 2015 change to the prior IRS practice of issuing estate tax
                closing letters for every estate tax return filed.
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                 As described in the preamble to the proposed regulations, 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 that confers special benefits on
                identifiable recipients beyond those accruing to the general public.
                Because of these special benefits, the IOAA and the OMB Circular
                require the imposition of a user fee for the issuance of an estate tax
                closing letter to reflect the full cost of providing the service unless
                the IRS requests, and the OMB grants, an exception to the full cost
                requirement. The IRS has not requested an exception to the full cost
                requirement, for the
                [[Page 53540]]
                following reasons. First, the IRS views the $67 user fee as not onerous
                or excessive, but reasonable in relation to the service provided.
                Second, as also discussed in the preamble to the proposed regulations,
                an account transcript is a free alternative to the estate tax closing
                letter that provides certain return information comparable to that
                found in an estate tax closing letter. Account transcripts can be used
                to confirm that the examination of an estate tax return has been
                completed and the IRS file has been closed, which most often is
                identified as the primary purpose for requesting an estate tax closing
                letter. See Notice 2017-12, I.R.B. 2017-5 742 (describing the utility
                of the account transcript in lieu of the estate tax closing letter and
                its availability at no charge). Thus, if affording the user fee for the
                issuance of an estate tax closing letter presents a challenge, an
                estate instead can request an account transcript free of charge. The
                suggestions of the commenters to reduce or eliminate the user fee,
                therefore, are not adopted.
                2. Comments Regarding a Single User Fee When Multiple Letters Are
                Issued
                 The Treasury Department and the IRS note that the preamble to the
                proposed regulations incorrectly states that the estate tax closing
                letter is issued to each executor. Instead, regardless of who requests
                an estate tax closing letter, the letter generally is issued to only
                one of multiple executors. Generally, the executor to whom the estate
                tax closing letter is issued is the executor identified on line 6a of
                Part 1 of the Form 706, United States Estate (and Generation-Skipping
                Transfer) Tax Return; the address of such executor that is entered on
                line 6b becomes the estate's address of record (unless subsequently
                updated using Form 8822, Change of Address (For Individual, Gift,
                Estate, or Generation-Skipping Transfer Tax Returns). Currently, estate
                tax closing letters also are sent to the recognized representative
                identified in Part 4 of the Form 706 and up to two representatives
                listed on Form 2848, Power of Attorney and Declaration of
                Representative. Therefore, in almost all cases, each request and
                corresponding $67 user fee will generate the issuance of an estate tax
                closing letter to three or four persons.
                 One commenter referred to the costing analysis in the preamble of
                the proposed regulations and sought an explanation of the decision to
                charge the same user fee per request, regardless of the number of
                estate tax closing letters to be issued in response to that single
                request. The commenter noted the incremental cost impact that occurs
                with the need to issue multiple letters in response to a single
                request, and contended that requests requiring the issuance of only one
                letter will subsidize the user fee cost of such requests requiring the
                issuance of multiple letters.
                 The costing analysis described in part H of the Background and
                Explanation of Provisions of the proposed regulations is based in large
                part on the number of requests for estate tax closing letters, rather
                than the total number of letters issued. The fact that one request
                generates, on average, three issued letters has only a marginal impact
                on the calculated user fee. The number of letters factors into the
                costing analysis in two places: Request processing and quality
                assurance review.
                 For request processing costs, the costing analysis in the proposed
                regulations provides for 0.65 staff hours to review the return, create
                the estate tax closing letters, and prepare the letters for mailing.
                Although a detailed description of what each of these tasks entails and
                a breakdown of the time required for each task is not provided in the
                proposed regulations, the bulk of the time in processing the request is
                attributable to the research and analysis of IRS records by qualified
                personnel and not to the issuance of additional letters to additional
                persons. Thus, the incremental request processing cost of issuing the
                same estate tax closing letter at the same time to multiple persons is
                minimal.
                 For quality assurance review costs, the costing analysis in the
                proposed regulations provides that five out of every 100 estate tax
                closing letters are reviewed for quality assurance. While the issuance
                of multiple letters per request increases the number of letters
                reviewed for quality assurance and, therefore, increases the cost
                estimate for quality assurance review, the impact on the full costing
                is relatively small, only $3 per letter.
                 Notwithstanding the marginal impact of issuing multiple letters per
                request on the calculation of the user fee, a variable user fee
                structure raises significant administrability concerns. Incorrect
                payments of the user fee are likely to occur in the event of a variable
                fee because persons that request the issuance of an estate tax closing
                letter may not have sufficient information regarding the estate's
                account to accurately identify the number of persons currently
                authorized under IRS procedures to receive an estate tax closing
                letter; the determination of the number of letters to be issued
                sometimes depends on more information than is shown on the estate tax
                return. Thus, varying the user fee based on the number of letters to be
                issued would require the IRS to modify the request processing
                procedures to add procedures for overpayments and underpayments of the
                user fee and likely would cause administrative delays as the personnel
                processing the requests take necessary steps and wait for correction of
                the payment before issuing letters. The changes to the request
                processing procedures necessary to accommodate a variable fee in place
                of a fixed fee would increase the request processing costs that factor
                into the overall cost estimate for the user fee; it is possible that
                the increase caused by the changes to the request processing procedures
                could exceed the marginal increase of issuing multiple letters per
                request under a fixed fee.
                 Based on all of these considerations, and recognizing that most
                requests for estate tax closing letters will require the issuance of
                multiple letters, the Treasury Department and the IRS have determined
                that the most economical and least complex approach is to have a fixed
                user fee based on the average number of letters issued per request.
                Thus, no change to the costing analysis is required and the proposed
                user fee of $67 is adopted without change.
                C. Comments Regarding Procedural Aspects of Requesting Estate Tax
                Closing Letters and Paying the User Fee
                1. Making the Request and Paying the User Fee With the Estate Tax
                Return
                 Two commenters suggested amending the estate tax return or using a
                separate form to allow an estate to request the estate tax closing
                letter and pay the user fee with the filing of the estate tax return.
                The commenters sought to further reduce or eliminate the administrative
                burden on both the estate and the IRS by removing the need for a
                separate web-based process. Under this suggestion, an estate would not
                be required to make a separate request subsequent to filing the estate
                tax return. The commenters stated that this suggestion would allow for
                efficient administration of the estate and provide the IRS with
                immediate notice of the request.
                 The Treasury Department and the IRS concur that the ability to pay
                the user fee and make the request for an estate tax closing letter at
                the time of filing the estate tax return would reduce or eliminate the
                burden on estates intending to make such requests. However, estate tax
                closing letters are not issued by the same IRS personnel who are
                involved in the examination of, and the decision to close the IRS file
                on,
                [[Page 53541]]
                the estate tax return. Personnel issuing estate tax closing letters are
                alerted to begin that process only after the examination of the estate
                tax return has been completed and the IRS file has been closed. Thus,
                implementing such a change to current IRS procedures and return
                processing systems would substantially increase the burden on the IRS
                and would require increases in budget, staffing, and resources not
                currently available. In addition, as discussed elsewhere in this
                preamble, the procedure to be put in place for paying the user fee and
                requesting the estate tax closing letter is a convenient and not unduly
                burdensome alternative that balances the administrability concerns of
                both the IRS and the estates making requests for estate tax closing
                letters. For these reasons, this suggestion is not adopted.
                2. Additional User Fee for Requests Related to Supplemental Estate Tax
                Returns
                 One commenter requested further clarification of whether an
                additional user fee is required for estate tax closing letters after
                the filing of a supplemental estate tax return. Specifically, the
                commenter references Rev. Proc. 81-27, 1981-2 C.B. 547, and identifies
                supplemental estate tax returns filed in relation to elections made
                under section 6166 of the Code as creating an undue burden on such
                estates if an additional user fee is required for a new estate tax
                closing letter after each subsequent filing of a supplemental estate
                tax return. The commenter suggests that only one user fee should be
                imposed per estate, regardless of how many estate tax returns are
                filed.
                 As directed by the OMB Circular, the cost analysis described in the
                proposed regulations is based on the number of estate tax closing
                letters requested over a specified period of time, whether related to
                an initial estate tax return or to a supplemental estate tax return,
                and the labor and benefits costs of campus employees required to
                process the requests. Each request requires the same amount of IRS
                resources to issue the estate tax closing letter, whether the request
                is related to the initial estate tax return or a supplemental estate
                tax return. In particular, each such request necessitates research and
                analysis of IRS records, which makes up a significant part of the cost
                of the user fee. Therefore, accommodating the commenter's suggestion
                likely would increase the cost of a single request, and such increase
                would be borne equally by all estates requesting estate tax closing
                letters, including simpler estates filing only an initial estate tax
                return. Further, an estate filing a supplemental estate tax return is
                not required to request an estate tax closing letter in relation to
                both the initial estate tax return and the supplemental estate tax
                return, and presumably will request multiple estate tax closing letters
                only if the estate determines that the benefits of receiving a second
                estate tax closing letter merit the payment of the additional user fee.
                Accordingly, the suggestion is not adopted and each request for an
                estate tax closing letter will require a separate user fee.
                3. Procedures for the Request and Issuance of Estate Tax Closing
                Letters
                 Several commenters requested clarification on some of the
                procedural aspects of requesting estate tax closing letters. For
                example, commenters sought information on who is permitted to make the
                request, when the request can be made, how many letters will be issued
                in response to a single request, and who will be the recipients of the
                estate tax closing letters.
                 The procedure for requesting the estate tax closing letter and
                paying the user fee utilizes https://www.pay.gov. In this web-based
                procedure, a request for the estate tax closing letter and the payment
                of the user fee will be accomplished by a single request, thus
                eliminating the potential under the current procedure for multiple
                requests and necessary duplicative follow-up.
                 As noted in the preamble to the proposed regulations, specific
                procedures for requesting an estate tax closing letter and paying the
                associated user fee for that request are not provided in these
                regulations. Such procedures change from time to time and therefore are
                best addressed and kept current in subregulatory guidance. It is clear
                that, while any person with sufficient information about the estate may
                request the issuance of a closing letter and pay the user fee, the
                closing letter will be provided only to certain authorized persons, a
                category that might not include the person making the request (for
                example, an employee of the attorney, certified public accountant, or
                enrolled agent for the estate). Information about who will receive an
                estate tax closing letter in response to a request, together with
                specific instructions for requesting the estate tax closing letter and
                paying the user fee, will be available on https://www.pay.gov (and on
                the IRS website at https://www.irs.gov) on or before October 28, 2021.
                To the extent possible, the procedures will reflect the comments and
                questions from these commenters, and the instructions and information
                are expected to address the issues these commenters raised.
                 In identifying the person liable for the fee for the estate tax
                closing letter, Sec. 300.13(c) of the proposed regulations includes
                persons properly authorized under section 6103 of the Code to request
                and receive the estate tax closing letter with respect to the estate.
                Consistent with the decision to exclude the relevant procedural
                guidance for requesting estate tax closing letters from these
                regulations, Sec. 300.13 is revised in the final regulations by
                removing the reference to section 6103, which governs the disclosure of
                return information but does not necessarily govern who would be liable
                for payment of the user fee for requesting the estate tax closing
                letter.
                4. Recommended Changes to Account Transcripts
                 One commenter stated that, although the account transcript is a
                free alternative to the estate tax closing letter, the account
                transcript does not provide all of the information needed by an estate,
                including potentially the amount of net estate tax and the amount of
                generation-skipping transfer tax (information that an estate tax
                closing letter provides). The commenter suggested that the IRS should
                modify the account transcript to include additional detailed
                information.
                 As discussed in Notice 2017-12, an account transcript may be an
                acceptable substitute for an estate tax closing letter, even though the
                information provided by each is not identical. As discussed earlier in
                this preamble, both documents can be relied upon for confirmation that
                the IRS examination of the estate tax return has been closed, which
                most often is identified as the primary purpose for requesting an
                estate tax closing letter. The commenter's suggestion to change the
                information provided in the account transcript to include additional
                information also included in the estate tax closing letter is
                consistent with the determination that the issuance of an estate tax
                closing letter confers special benefits on identifiable recipients.
                Making changes to the account transcript as the commenter suggests
                would require costly programming changes and, moreover, is beyond the
                scope of this rulemaking. Accordingly, the commenter's suggestion is
                not adopted.
                Special Analyses
                 These regulations are 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
                [[Page 53542]]
                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 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). 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 (including
                small entities) that could be affected by establishing such a fee.
                Accordingly, the Secretary of the Treasury's delegate 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, the proposed regulations
                (85 FR 86871) preceding these regulations were submitted to the Chief
                Counsel for the Office of Advocacy of the Small Business Administration
                for comment on their impact on small business. No comments on the
                proposed regulations were received from the Chief Counsel for the
                Office of Advocacy of the Small Business Administration.
                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 https://www.irs.gov.
                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.
                List of Subjects in 26 CFR Part 300
                 Estate taxes, Excise taxes, Gift taxes, Income taxes, 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. Section 300.0 is amended by adding paragraph (b)(13) to read as
                follows:
                Sec. 300.0 User fees; in general.
                * * * * *
                 (b) * * *
                 (13) Requesting an estate tax closing letter.
                0
                Par. 3. Section 300.13 is added to read as follows:
                Sec. 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 requesting, in accordance with
                applicable procedures and policies, an estate tax closing letter to be
                issued with respect to the estate.
                 (d) Applicability date. This section applies to requests for estate
                tax closing letters received by the IRS on or after October 28, 2021.
                Douglas W. O'Donnell,
                Deputy Commissioner for Services and Enforcement.
                 Approved: September 22, 2021.
                Mark J. Mazur,
                Acting Assistant Secretary of the Treasury (Tax Policy).
                [FR Doc. 2021-21029 Filed 9-27-21; 8:45 am]
                BILLING CODE 4830-01-P
                

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