US Internal Revenue Service: td8947

[4830-01-p]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 31, 30, and 602
[TD 8947]
RIN 1545-AY79
Penalties for Underpayments of Deposits and Overstated Deposit

Claims
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of final regulations.
SUMMARY: This document makes conforming amendments to certain
final regulations to reflect the removal of final regulations,
relating to the penalty for underpayment of deposits of taxes and
the penalty for overstated deposit claims. These regulations are
obsolete due to amendments to section 6656 of the Internal
Revenue Code. The removal of these regulations will not affect
taxpayers.
DATES: The amendments and removal of these regulations is
effective June 15, 2001.
FOR FURTHER INFORMATION CONTACT: Robin M. Tuczak, (202) 622-4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions

This document removes two sections from the Procedure and
Administration Regulations (26 CFR part 301) relating to
penalties for underpayment of Federal tax deposits and overstated
deposit claims under section 6656 of the Internal Revenue Code.

2
The Omnibus Budget Reconciliation Act of 1989, Public Law 101-239
(103 Stat. 2106, 1989) amended section 6656, modifying the
penalty rates relating to a failure to make a Federal tax deposit
and removing the penalty relating to overstatement of Federal tax
deposits. These changes have rendered §§301.6656-1 and
301.6656-2 obsolete.
Section 301.6656-1 was revised and §301.6656-2 was added by
TD 7925, published in the Federal Register for December 13, 1983
(LR-311-81, 48 FR 5453). Section 301.6656-2 was added to
implement changes made by the Economic Recovery Tax Act of 1981,
Public Law 97-34 (95 Stat. 172, 1981). Section 301.6656-1 was
revised to remove outdated provisions relating to deposits made
before January 1, 1970, based on the law in effect for those
deposits.
Section 301.6656-1 reflects that, at the time it was
revised, the penalty for underpayment of deposits was five
percent of the amount of the underpayment without regard to the
period during which the underpayment continued, absent reasonable
cause. The Omnibus Budget Reconciliation Act of 1986, Public Law
99-509 (100 Stat. 1874, 1986) amended section 6656 to impose a
ten percent penalty for underpayment. The Omnibus Budget
Reconciliation Act of 1989 further amended this section to
provide for a penalty that is equal to an applicable percentage
of the amount of the underpayment based on the duration of the
underpayment. This regulation does not reflect the most recent
amendments to section 6656. Furthermore, all relevant

3
information regarding underpayment penalties is put forth in the
code section or in other published guidance. This regulation
does not provide any additional guidance regarding the current
underpayment penalties as set forth in section 6656 and therefore
may be removed.
Section 301.6656-2 explains and expands upon former section
6656(b), Overstated Deposit Claims. The Omnibus Budget
Reconciliation Act of 1989 removed former section 6656(b), making
this regulation obsolete.
In addition, §301.6656-3 is redesignated as §301.6656-1.
Further, §§1.6302-1(d) and 1.6302-2(d) of the Income Tax
Regulations and §§31.6302-1(m)(1) and 31.6302(c)-4(a) of the
Employment Tax Regulations are revised to remove references to
the removed regulations under section 6656.
Effect on other Documents

The final regulations §§301.6656-1 and 301.6656-2 published
in the Federal Register for December 13, 1983 (LR-311-81, 48 FR
5453) are removed as of June 15, 2001.
Special Analyses
It has been determined that the removal of these regulations
is not a significant regulatory action as defined in Executive
Order 12866. Therefore, a regulatory assessment is not required.
Because this rule merely removes regulatory provisions made
obsolete by statute, prior notice and comment and a delayed
effective date are unnecessary and contrary to the public
interest. 5 U.S.C. 553(b)(B) and (d). Because no notice of

4
proposed rulemaking is required, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) does not apply.
Drafting Information
The principal author of the removal of the regulations is
Robin M. Tuczak of the Office of Associate Chief Counsel,
Procedure and Administration (Administrative Provisions and
Judicial Practice Division).
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 31
Employment taxes, Income taxes, Penalties, Pensions,
Railroad retirement, Reporting and recordkeeping requirements,
Social security, Unemployment compensation.
26 CFR Part 301
Employment taxes, Estate taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1, 31, 301, and 602 are amended as
follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues
to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

5
Par. 2. In §1.6302-1, paragraph (d) is revised to read as
follows:
§1.6302-1 Use of Government depositaries in connection with
corporation income and estimated income taxes and certain taxes
of tax-exempt organizations.
* * * * *
(d) Failure to deposit. For provisions relating to the
penalty for failure to make a deposit within the prescribed time,
see section 6656.
Par. 3. In §1.6302-2, paragraph (d) is revised to read as
follows:
§1.6302-2 Use of Government depositaries for payment of tax

withheld on nonresident aliens and foreign corporations.
* * * * *
(d) Penalties for failure to make deposits. For provisions
relating to the penalty for failure to make a deposit within the
prescribed time, see section 6656.

* * * * *
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Par. 4. The authority citation for part 31 continues to
read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. In §31.6302-1, paragraph (m)(1) is revised to read
as follows:
§31.6302-1 Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA)

6
attributable to payments made after December 31, 1992.
* * * * *
(m) * * * (1) Failure to deposit penalty. For provisions
relating to the penalty for failure to make a deposit within the
prescribed time, see section 6656.
* * * * *
Par. 6. In §31.6302(c)-4, paragraph (a) is revised to read
as follows:
§31.6302(c)-4 Cross references.

(a) Failure to deposit. For provisions relating to the
penalty for failure to make a deposit within the prescribed time,
see section 6656.
* * * * *
PART 301--PROCEDURE AND ADMINISTRATION
read in part as follows:
Authority: 26 U.S.C. 7805 * * *
§§301.6656-1 and 301.6656-2 [Removed]

Par. 8. Sections 301.6656-1 and 301.6656-2 are removed.
§301.6656-3 [Redesignated as §301.6656-1]

Par. 9. Section 301.6656-3 is redesignated as new
§301.6656-1.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
read as follows:
7
Authority: 26 U.S.C. 7805.
Par. 11. In §602.101, paragraph (b) is amended by removing
the entries for 301.6656-1 and 301.6656-2 from the table.
Robert E. Wenzel
Deputy Commissioner of Internal Revenue
Approved: June 1, 2001
Mark A. Weinberger
Assistant Secretary of the Treasury

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[4830-01-p]

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 30, and 602

Penalties for Underpayments of Deposits and Overstated Deposit

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of final regulations.

SUMMARY: This document makes conforming amendments to certain

final regulations to reflect the removal of final regulations,

relating to the penalty for underpayment of deposits of taxes and

the penalty for overstated deposit claims. These regulations are

obsolete due to amendments to section 6656 of the Internal

Revenue Code. The removal of these regulations will not affect

DATES: The amendments and removal of these regulations is

effective June 15, 2001.

FOR FURTHER INFORMATION CONTACT: Robin M. Tuczak, (202) 622-4940

(not a toll-free number).

Background and Explanation of Provisions

Administration Regulations (26 CFR part 301) relating to

penalties for underpayment of Federal tax deposits and overstated

deposit claims under section 6656 of the Internal Revenue Code.

The Omnibus Budget Reconciliation Act of 1989, Public Law 101-239

(103 Stat. 2106, 1989) amended section 6656, modifying the

penalty rates relating to a failure to make a Federal tax deposit

and removing the penalty relating to overstatement of Federal tax

deposits. These changes have rendered §§301.6656-1 and

Section 301.6656-1 was revised and §301.6656-2 was added by

TD 7925, published in the Federal Register for December 13, 1983

(LR-311-81, 48 FR 5453). Section 301.6656-2 was added to

implement changes made by the Economic Recovery Tax Act of 1981,

revised to remove outdated provisions relating to deposits made

before January 1, 1970, based on the law in effect for those

Section 301.6656-1 reflects that, at the time it was

revised, the penalty for underpayment of deposits was five

percent of the amount of the underpayment without regard to the

period during which the underpayment continued, absent reasonable

cause. The Omnibus Budget Reconciliation Act of 1986, Public Law

99-509 (100 Stat. 1874, 1986) amended section 6656 to impose a

ten percent penalty for underpayment. The Omnibus Budget

Reconciliation Act of 1989 further amended this section to

provide for a penalty that is equal to an applicable percentage

of the amount of the underpayment based on the duration of the

underpayment. This regulation does not reflect the most recent

amendments to section 6656. Furthermore, all relevant

information regarding underpayment penalties is put forth in the

code section or in other published guidance. This regulation

does not provide any additional guidance regarding the current

underpayment penalties as set forth in section 6656 and therefore

Section 301.6656-2 explains and expands upon former section

6656(b), Overstated Deposit Claims. The Omnibus Budget

Reconciliation Act of 1989 removed former section 6656(b), making

this regulation obsolete.

In addition, §301.6656-3 is redesignated as §301.6656-1.

Further, §§1.6302-1(d) and 1.6302-2(d) of the Income Tax

Regulations and §§31.6302-1(m)(1) and 31.6302(c)-4(a) of the

Employment Tax Regulations are revised to remove references to

the removed regulations under section 6656.

Effect on other Documents

in the Federal Register for December 13, 1983 (LR-311-81, 48 FR

5453) are removed as of June 15, 2001.