Rule2021-21029
User Fee for Estate Tax Closing Letter
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 28, 2021
Effective
October 28, 2021
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
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.
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 185 (Tuesday, September 28, 2021)</title>
</head>
<body><pre>
[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 [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21029]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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 <a href="https://www.regulations.gov">https://www.regulations.gov</a> 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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 <a href="https://www.pay.gov">https://www.pay.gov</a>. 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 <a href="https://www.pay.gov">https://www.pay.gov</a> (and on
the IRS website at <a href="https://www.irs.gov">https://www.irs.gov</a>) 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 <a href="https://www.irs.gov">https://www.irs.gov</a>.
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
</pre></body>
</html>Indexed from Federal Register on September 28, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.