Rev. Rul. 89-69

1989-1 C.B. 310, 1989-22 I.R.B. 8.

                       Internal Revenue Service

                                 Revenue Ruling

                 INTEREST RATES; UNDERPAYMENTS AND OVERPAYMENTS

                             Published: May 5, 1989

Section 6621. - Determination of Interest Rate, 26 CFR 301.6621-1: Interest rate.

  Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning July 1, 1989, will increase to 11 percent for overpayments and 12 percent for underpayments.

  Section 6621 of the Internal Revenue Code establishes differential rates for allowance of interest on tax overpayments and assessment of interest on tax underpayments. Under section 6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 2 percentage points. Under section 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

  Section 6621(b)(1) of the Code provides that the Secretary shall determine the federal short-term rate for the first month in each calendar quarter.

  Section 6621(b)(2)(A) of the Code provides that the federal short-term rate determined under section 6621(b)(1) for any month shall apply during the first calendar quarter beginning after such month.

  Section 6621(b)(3) of the Code provides that the federal short-term rate for any month shall be the federal short-term rate determined during such month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate shall be increased to the next highest full percent).

  Notice 88-59, 1988-1 C.B. 546, announced that in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621 of the Code, the Internal Revenue Service will use the federal short-term rate based on daily compounding because the rate is most consistent with section 6621 which, pursuant to section 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 April 1989 is 9 percent. Accordingly, an overpayment rate of 11 percent and an underpayment rate of 12 percent are established for the calendar quarter beginning July 1, 1989.

  Interest factors for daily compound interest for annual rates of 11 percent and 12 percent were published in Tables 17 and 18 of Rev. Proc. 83-7, 1983-1 C.B. 583, 600, 601.

  Annual interest rates to be compounded daily pursuant to section 6622 of the Code that apply for prior periods are set forth in the accompanying tables.

DRAFTING INFORMATION

  The principal author of this revenue ruling is Mary Jane Kossar of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Ms. Kossar on (202) 566-3453 (not a toll-free call).

               TABLE OF INTEREST RATES
     PERIODS BEFORE JUL. 1, 1975 - DEC. 31, 1986
            OVERPAYMENTS AND UNDERPAYMENTS
           PERIOD              RATE  DAILY RATE TABLE
                                      IN 1983-1 C.B.
Before Jul. 1, 1975              6%  Table 2, pg. 586
Jul. 1, 1975-- Jan. 31, 1976     9%  Table 4, pg. 588
Feb. 1, 1976 -- Jan. 31, 1978    7%  Table 3, pg. 587
Feb. 1, 1978 -- Jan. 31, 1980    6%  Table 2, pg. 586
Feb. 1, 1980 -- Jan. 31, 1982   12%  Table 5, pg. 588
Feb. 1, 1982 -- Dec. 31, 1982   20%  Table 6, pg. 588
Jan. 1, 1983 -- Jun. 30, 1983   16%  Table 22, pg. 605
Jul. 1, 1983 -- Dec. 31, 1983   11%  Table 17, pg. 600
Jan. 1, 1984 -- Jun. 30, 1984   11%  Table 41, pg. 625
Jul. 1, 1984 -- Dec. 31, 1984   11%  Table 41, pg. 625
Jan. 1, 1985 -- Jun. 30, 1985   13%  Table 19, pg. 602
Jul. 1, 1985 -- Dec. 31, 1985   11%  Table 17, pg. 600
Jan. 1, 1986 -- Jun. 30, 1986   10%  Table 16, pg. 599

Jul. 1, 1986 -- Dec. 31, 1986    9%  Table 15, pg. 598

                     TABLE OF INTEREST RATES
                   FROM JAN. 1, 1987 - PRESENT
                                 OVERPAYMENTS      UNDERPAYMENTS
                               -----------------------------------
                               RATE  TABLE  PG   RATE  TABLE  PG.
Jan. 1, 1987 -- Mar. 31, 1987    8%     14  597    9%     15   598
Apr. 1, 1987 -- Jun. 30, 1987    8%     14  597    9%     15   598
Jul. 1, 1987 -- Sep. 30, 1987    8%     14  597    9%     15   598
Oct. 1, 1987 -- Dec. 31, 1987    9%     15  598   10%     16   599
Jan. 1, 1988 -- Mar. 31, 1988   10%     40  624   11%     41   625
Apr. 1, 1988 -- Jun. 30, 1988    9%     39  623   10%     40   624
Jul. 1, 1988 -- Sep. 30, 1988    9%     39  623   10%     40   624
Oct. 1, 1988 -- Dec. 31, 1988   10%     40  624   11%     41   625
Jan. 1, 1989 -- Mar. 31, 1989   10%     16  599   11%     17   600
Apr. 1, 1989 -- Jun. 30, 1989   11%     17  600   12%     18   601
Jul. 1, 1989 -- Sep. 30, 1989   11%     17  600   12%     18   601

Rev. Rul. 89-69, 1989-1 C.B. 310, 1989-22 I.R.B. 8.