March 15, 1999
IRS Announces Quarterly Interest Rates
WASHINGTON  The Internal Revenue Service today
announced that interest rates for the calendar quarter beginning April 1, 1999, will be
eight (8) percent for overpayments (seven (7) percent in the case of a corporation), eight
(8) percent for underpayments, and ten (10) percent for large corporate underpayments. The
overpayment rate for the portion of a corporate overpayment exceeding $10,000 will be five
and onehalf (5.5) percent.
The interest rates in this revenue ruling reflect the amendment to section
6621(a) of the Code eliminating the interest rate differential between overpayments and
underpayments for taxpayers other than corporations.
Under the Internal Revenue Code, the rate of interest is determined on a
quarterly basis. For taxpayers other than corporations, the overpayment and underpayment
rate is the federal shortterm rate plus 3 percentage points. Generally, in the case of a
corporation, the underpayment rate is the federal shortterm rate plus 3 percentage points
and the overpayment rate is the federal shortterm rate plus 2 percentage points. The rate
for large corporate underpayments is the federal shortterm rate plus 5 percentage points.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable
period is the federal shortterm rate plus onehalf (0.5) of a percentage point. The
interest rates announced today are computed from the federal shortterm rate based on
daily compounding determined during January 1999.
Rev. Rul. 9916, announcing the new rates of interest, is attached and will
appear in Internal Revenue Bulletin No. 199913, dated March 29, 1999.
PART I
Section 6621. Determination of Interest Rate 26 CFR 301.66211: Interest
rate.
Rev. Rul. 9916
Section 6621 of the Internal Revenue Code establishes the rates for interest on
tax overpayments and tax underpayments. Under § 6621 (a) (1), the overpayment rate
beginning April 1, 1999, is the sum of the federal shortterm rate plus 3 percentage
points (2 percentage points in the case of a corporation), except the rate for the portion
of a corporate overpayment of tax exceeding $10,000 for a taxable period is the sum of the
federal shortterm rate plus 0.5 of a percentage point for interest computations made
after December 31, 1994. Under § 6621(a) (2), the underpayment rate is the sum of the
federal shortterm rate plus 3 percentage points.
Section 6621(c) provides that for purposes of interest payable under § 6601 on
any large corporate underpayment, the underpayment rate under § 6621(a) (2) is determined
by substituting “5 percentage points” for “3 percentage points.” See
§ 6621(c) and § 301.66213 of the Regulations on Procedure and Administration for the
definition of a large corporate underpayment and for the rules for determining the
applicable date. Section 6621(c) and § 301.66213 are generally effective for periods
after December 31, 1990. Section 6621(b) (1) provides that the Secretary will determine
the federal shortterm rate for the first month in each calendar quarter.
Section 6621(b) (2) (A) provides that the federal short term rate determined
under § 6621(b) (1) for any month applies during the first calendar quarter beginning
after such month.
Section 6621(b) (2) (B) provides that in determining the addition to tax under
§ 6654 for failure to pay estimated tax for any taxable year, the federal shortterm rate
that applies during the third month following such taxable year also applies during the
first 15 days of the fourth month following such taxable year.
Section 6621(b) (3) provides that the federal shortterm rate for any month is
the federal shortterm rate determined during such month by the Secretary in accordance
with § 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1
percent, the rate is increased to the next highest full percent).
Notice 8859, 19881 C.B. 546, announced that, in determining the quarterly
interest rates to be used for overpayments and underpayments of tax under § 6621, the
Internal Revenue Service will use the federal shortterm rate based on daily compounding
because that rate is most consistent with § 6621 which, pursuant to § 6622, is subject
to daily compounding.
Rounded to the nearest full percent, the federal short term rate based on
daily compounding determined during the month of January 1999 is 5 percent. Accordingly,
an overpayment rate of 8 percent (7 percent in the case of a corporation) and an
underpayment rate of 8 percent are established for the calendar quarter beginning April 1,
1999. The overpayment rate for the portion of a corporate overpayment exceeding $10,000
for the calendar quarter beginning April 1, 1999, is 5.5 percent. The underpayment rate
for large corporate underpayments for the calendar quarter beginning April 1, 1999, is 10
percent. These rates apply to amounts bearing interest during that calendar quarter.
Under § 6621(b) (2) (B), the 7 percent rate that applies to estimated tax
underpayments for the first calendar quarter in 1999, as provided in Rev. Rul. 9861,
199851 I.R.B. 8, also applies to such underpayments for the first 15 days in April 1999.
Interest factors for daily compound interest for annual rates of 5.5 percent, 7
percent, 8 percent, and 10 percent are published in Tables 16, 19, 21, and 25 of Rev.
Proc. 9517, 1995—1 C.B. 556, 570, 573, 575, and 579.
Annual interest rates to be compounded daily pursuant to § 6622 that apply for
prior periods are set forth in the tables accompanying this revenue ruling.
INFORMATION
The principal author of this revenue ruling is Raymond Bailey of the Office of
Assistant Chief Counsel (Income Tax and Accounting). For further information regarding
this revenue ruling, contact Mr. Bailey on (202) 6226226 (not a tollfree call).
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