REVENUE RULE 94-21

1994-1 C.B. 293, 1994-14 I.R.B. 9.

Internal Revenue Service
Revenue Ruling

INTEREST RATES; UNDERPAYMENTS AND OVERPAYMENTS

March 16, 1994

§6621.-- Determination Rate of Interest, 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 April 1, 1994, will be 6 percent for overpayments, 7 percent for overpayments, and 9 percent for large corporate overpayments.

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 s 6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 2 percentage points. Under s 6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

Section 6621(c) of the Code provides that for purposes of interest payable under s 6601 on any large corporate underpayment, the underpayment rate under s 6621(a)(2) shall be applied by substituting "5 percentage points" for "3 percentage points." See s 6621(c) and s 301.6621-3 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 s 301.6621-3 are generally effective for periods after December 31, 1990.

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 s 6621(b)(1) for any month shall apply during the first calendar quarter beginning after such month.

Section 6621(b)(2)(B) of the Code provides that in determining the addition to tax under s 6654 for failure to pay individual estimated tax for any taxable year, the federal short-term rate which applies_during the third month following such taxable year shall also apply during the first 15 days of the fourth month following such taxable year.

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 s 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 s 6621 of the Code, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with s 6621 which, pursuant to s 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 1994 is 4 percent. Accordingly, an overpayment rate of 6 percent and an underpayment rate of 7 percent are established for the calendar quarter beginning April 1, 1994. The underpayment rate for large corporate underpayments for the calendar quarter beginning April 1, 1994, is 9 percent. These rates apply to amounts bearing interest during that calendar quarter.

In addition, pursuant to s 6621(b)(2)(B) of the Code, the rate applicable to underpayments for the calendar quarter beginning January 1, 1994, continues to be applicable to individual estimated tax underpayments from April 1, 1994, through April 15, 1994. The underpayment rate for the calendar quarter beginning January 1, 1994, is 7 percent. Therefore, the rate applicable to individual estimated tax underpayments is 7 percent from April 1, 1994 through April 15, 1994, and 7 percent from April 16, 1994 through June 30, 1994.

Interest factors for daily compound interest for annual rates of 6 percent, 7 percent and 9 percent were published in Tables 12, 13 and 15 of Rev. Proc. 83-7, 1983-1 C.B. 583, 595, 596, and 598. Annual interest rates to be compounded daily pursuant to s 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 Marcia Rachy of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Ms. Rachy on (202) 622-4940 (not a toll- free call).

TABLE OF INTEREST RATES

PERIODS BEFORE JUL. 1, 1975 - DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS

TABLE OF INTEREST RATES FROM JAN. 1, 1987 - PRESENT

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

Oct. 1, 1989-Dec. 31, 1989 10% 16 599 11% 17 600

Jan. 1, 1990-Mar. 31, 1990 10% 16 599 11% 17 600

Apr. 1, 1990-Jun. 30, 1990 10% 16 599 11% 17 600

Jul. 1, 1990-Sep. 30, 1990 10% 16 599 11% 17 600

Oct. 1, 1990-Dec. 31, 1990 10% 16 599 11% 17 600

Jan. 1, 1991-Mar. 31, 1991 10% 16 599 11% 17 600

Apr. 1, 1991-Jun. 30, 1991  9% 15 598 10% 16 599

Jul. 1, 1991-Sep. 30, 1991  9% 15 598 10% 16 599

Oct. 1, 1991-Dec. 31, 1991  9% 15 598 10% 16 599

Jan. 1, 1992-Mar. 31, 1992  8% 38 622  9% 39 623

Apr. 1, 1992-Jun. 30, 1992  7% 37 621  8% 38 622

Jul. 1, 1992-Sep. 30, 1992  7% 37 621  8% 38 622

Oct. 1, 1992-Dec. 31, 1992  6% 36 620  7% 37 621

Jan. 1, 1993-Mar. 31, 1993  6% 12 595  7% 13 596

Apr. 1, 1993-Jun. 30, 1993  6% 12 595  7% 13 596

Jul. 1, 1993-Sep. 30, 1993  6% 12 595  7% 13 596

Oct. 1, 1993-Dec. 31, 1993  6% 12 595  7% 13 596

Jan. 1, 1994-Mar. 31, 1994  6% 12 595  7% 13 596

Apr. 1, 1994-Jun. 30, 1994  6% 12 595  7% 13 596

RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT

Jan. 1, 1991-Mar. 31, 1991 13% 19 602

Apr. 1, 1991-Jun. 30, 1991 12% 18 601

Jul. 1, 1991-Sep. 30, 1991 12% 15 601

Oct. 1, 1991-Dec. 31, 1991 12% 18 601

Jan. 1, 1992-Mar. 31, 1992 11% 41 625

Apr. 1, 1992-Jun. 30, 1992 10% 40 624

Jul. 1, 1992-Sep. 30, 1992 10% 40 624

Oct. 1, 1992-Dec. 31, 1992  9% 39 623

Jan. 1, 1993-Mar. 31, 1993  9% 15 598

Apr. 1, 1993-Jun. 30, 1993  9% 15 598

Jul. 1, 1993-Sep. 30, 1993  9% 15 598

Oct. 1, 1993-Dec. 31, 1993  9% 15 598

Jan. 1, 1994-Mar. 31, 1994  9% 15 598

Apr. 1, 1994-Jun. 30, 1994  9% 15 598

Rev. Rul. 94-21, 1994-1 C.B. 293, 1994-14 I.R.B. 9.