
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC6621]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
                          CHAPTER 67--INTEREST
 
  Subchapter C--Determination of Interest Rate; Compounding of Interest
 
Sec. 6621. Determination of rate of interest


(a) General rule

                        (1) Overpayment rate

        The overpayment rate established under this section shall be the 
    sum of--
            (A) the Federal short-term rate determined under subsection 
        (b), plus
            (B) 3 percentage points (2 percentage points in the case of 
        a corporation).

    To the extent that an overpayment of tax by a corporation for any 
    taxable period (as defined in subsection (c)(3), applied by 
    substituting ``overpayment'' for ``underpayment'') exceeds $10,000, 
    subparagraph (B) shall be applied by substituting ``0.5 percentage 
    point'' for ``2 percentage points''.

                        (2) Underpayment rate

        The underpayment rate established under this section shall be 
    the sum of--
            (A) the Federal short-term rate determined under subsection 
        (b), plus
            (B) 3 percentage points.

(b) Federal short-term rate

    For purposes of this section--

                          (1) General rule

        The Secretary shall determine the Federal short-term rate for 
    the first month in each calendar quarter.

                (2) Period during which rate applies

        (A) In general

            Except as provided in subparagraph (B), the Federal short-
        term rate determined under paragraph (1) for any month shall 
        apply during the first calendar quarter beginning after such 
        month.

        (B) Special rule for individual estimated tax

            In determining the addition to tax under section 6654 for 
        failure to pay estimated tax for any taxable year, the Federal 
        short-term rate which applies during the 3rd month following 
        such taxable year shall also apply during the first 15 days of 
        the 4th month following such taxable year.

                     (3) Federal short-term rate

        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). Any such rate shall be rounded to 
    the nearest full percent (or, if a multiple of \1/2\ of 1 percent, 
    such rate shall be increased to the next highest full percent).

(c) Increase in underpayment rate for large corporate underpayments

                           (1) In general

        For purposes of determining the amount of interest payable under 
    section 6601 on any large corporate underpayment for periods after 
    the applicable date, paragraph (2) of subsection (a) shall be 
    applied by substituting ``5 percentage points'' for ``3 percentage 
    points''.

                         (2) Applicable date

        For purposes of this subsection--

        (A) In general

            The applicable date is the 30th day after the earlier of--
                (i) the date on which the 1st letter of proposed 
            deficiency which allows the taxpayer an opportunity for 
            administrative review in the Internal Revenue Service Office 
            of Appeals is sent, or
                (ii) the date on which the deficiency notice under 
            section 6212 is sent.

        The preceding sentence shall be applied without regard to any 
        such letter or notice which is withdrawn by the Secretary.

        (B) Special rules

            (i) Nondeficiency procedures

                In the case of any underpayment of any tax imposed by 
            this title to which the deficiency procedures do not apply, 
            subparagraph (A) shall be applied by taking into account any 
            letter or notice provided by the Secretary which notifies 
            the taxpayer of the assessment or proposed assessment of the 
            tax.
            (ii) Exception where amounts paid in full

                For purposes of subparagraph (A), a letter or notice 
            shall be disregarded if, during the 30-day period beginning 
            on the day on which it was sent, the taxpayer makes a 
            payment equal to the amount shown as due in such letter or 
            notice, as the case may be.
            (iii) Exception for letters or notices involving 
                    small amounts

                For purposes of this paragraph, any letter or notice 
            shall be disregarded if the amount of the deficiency or 
            proposed deficiency (or the assessment or proposed 
            assessment) set forth in such letter or notice is not 
            greater than $100,000 (determined by not taking into account 
            any interest, penalties, or additions to tax).

                  (3) Large corporate underpayment

        For purposes of this subsection--

        (A) In general

            The term ``large corporate underpayment'' means any 
        underpayment of a tax by a C corporation for any taxable period 
        if the amount of such underpayment for such period exceeds 
        $100,000.

        (B) Taxable period

            For purposes of subparagraph (A), the term ``taxable 
        period'' means--
                (i) in the case of any tax imposed by subtitle A, the 
            taxable year, or
                (ii) in the case of any other tax, the period to which 
            the underpayment relates.

(d) Elimination of interest on overlapping periods of tax overpayments 
        and underpayments

    To the extent that, for any period, interest is payable under 
subchapter A and allowable under subchapter B on equivalent 
underpayments and overpayments by the same taxpayer of tax imposed by 
this title, the net rate of interest under this section on such amounts 
shall be zero for such period.

(Added Pub. L. 93-625, Sec. 7(a)(1), Jan. 3, 1975, 88 Stat. 2114; 
amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 
Stat. 1834; Pub. L. 96-167, Sec. 4(b), Dec. 29, 1979, 93 Stat. 1275; 
Pub. L. 97-34, title VII, Sec. 711(a)-(c), Aug. 13, 1981, 95 Stat. 340; 
Pub. L. 97-248, title III, Sec. 345(a), Sept. 3, 1982, 96 Stat. 636; 
Pub. L. 98-369, div. A, title I, Sec. 144(a), July 18, 1984, 98 Stat. 
682; Pub. L. 99-514, title XV, Secs. 1511(a), (c)(1), 1535(a), Oct. 22, 
1986, 100 Stat. 2744, 2750; Pub. L. 100-647, title I, Sec. 1015(d), Nov. 
10, 1988, 102 Stat. 3569; Pub. L. 101-239, title VII, Sec. 7721(b), Dec. 
19, 1989, 103 Stat. 2399; Pub. L. 101-508, title XI, Sec. 11341(a), Nov. 
5, 1990, 104 Stat. 1388-470; Pub. L. 103-465, title VII, Sec. 713(a), 
Dec. 8, 1994, 108 Stat. 5001; Pub. L. 104-188, title I, Sec. 1702(c)(6), 
(7), Aug. 20, 1996, 110 Stat. 1870; Pub. L. 105-34, title XIV, 
Sec. 1463(a), title XVI, Sec. 1604(b)(1), Aug. 5, 1997, 111 Stat. 1057, 
1097; Pub. L. 105-206, title III, Secs. 3301(a), 3302(a), July 22, 1998, 
112 Stat. 741.)


                               Amendments

    1998--Subsec. (a)(1)(B). Pub. L. 105-206, Sec. 3302(a), amended 
subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: 
``2 percentage points.''
    Subsec. (d). Pub. L. 105-206, Sec. 3301(a), added subsec. (d).
    1997--Subsec. (a)(1). Pub. L. 105-34, Sec. 1604(b)(1), substituted 
``subsection (c)(3), applied by substituting `overpayment' for 
`underpayment')'' for ``subsection (c)(3))'' in concluding provisions.
    Subsec. (c)(2)(B)(iii). Pub. L. 105-34, Sec. 1463(a), added cl. 
(iii).
    1996--Subsec. (c)(2)(A). Pub. L. 104-188, Sec. 1702(c)(6), inserted 
closing provisions ``The preceding sentence shall be applied without 
regard to any such letter or notice which is withdrawn by the 
Secretary.''
    Subsec. (c)(2)(B)(i). Pub. L. 104-188, Sec. 1702(c)(7), substituted 
``this title'' for ``this subtitle''.
    1994--Subsec. (a)(1). Pub. L. 103-465 inserted concluding 
provisions.
    1990--Subsec. (c). Pub. L. 101-508 added subsec. (c).
    1989--Subsec. (c). Pub. L. 101-239 repealed subsec. (c) which 
related to attribution of interest on substantial underpayments to tax 
motivated transactions.
    1988--Subsec. (a)(1)(A), (2)(A). Pub. L. 100-647, Sec. 1015(d)(1), 
substituted ``Federal short-term'' for ``short-term Federal''.
    Subsec. (b). Pub. L. 100-647, Sec. 1015(d)(2), substituted ``Federal 
short-term'' for ``short-term Federal'' in heading.
    Subsec. (b)(1). Pub. L. 100-647, Sec. 1015(d)(1), substituted 
``Federal short-term'' for ``short-term Federal''.
    1986--Subsec. (a). Pub. L. 99-514, Sec. 1511(a), added subsec. (a) 
and struck out former subsec. (a) which read as follows: ``The annual 
rate established under this section shall be such adjusted rate as is 
established by the Secretary under subsection (b).''
    Subsec. (b). Pub. L. 99-514, Sec. 1511(a), added subsec. (b) 
relating to determination of Federal short-term rate and struck out 
former subsec. (b) which related to interest rate adjustments and 
establishment of adjusted rates.
    Subsec. (c). Pub. L. 99-514, Sec. 1511(a), (c)(1), redesignated 
subsec. (d) as (c), in par. (1), struck out ``annual'' before ``rate of 
interest'' and substituted ``the underpayment rate established under 
this section'' for ``the adjusted rate established under subsection 
(b)'', and struck out former subsec. (c) definition of prime rate, which 
read as follows: ``For purposes of subsection (b), the term `adjusted 
prime rate charged by banks' means the average predominant prime rate 
quoted by commercial banks to large businesses, as determined by the 
Board of Governors of the Federal Reserve System.''
    Subsec. (c)(3)(A)(v). Pub. L. 99-514, Sec. 1535(a), added cl. (v).
    Subsec. (d). Pub. L. 99-514, Sec. 1511(c)(1)(A), redesignated 
subsec. (d) as (c).
    1984--Subsec. (d). Pub. L. 98-369 added subsec. (d).
    1982--Subsec. (b). Pub. L. 97-248 substituted provisions that if the 
adjusted prime rate charged by banks (rounded to the nearest full 
percent) during the 6-month period ending on September 30 of any 
calendar year, or during the 6-month period ending on March 31 of any 
calendar year, differs from the interest rate in effect under this 
section on either such date, respectively, then the Secretary shall 
establish, within 15 days after the close of the applicable 6-month 
period, an adjusted rate of interest equal to such adjusted prime rate, 
and that any adjusted rate of interest established under paragraph (1) 
shall become effective on January 1 of the succeeding year in the case 
of an adjustment attributable to paragraph (1)(A), and on July 1 of the 
same year in the case of an adjustment attributable to paragraph (1)(B), 
for provisions that the Secretary was to establish an adjusted rate of 
interest for the purpose of subsection (a) not later than October 15 of 
any year if the adjusted prime rate charged by banks during September of 
that year, rounded to the nearest full percent, was at least a full 
percentage point more or less than the interest rate which was then in 
effect, and that any such adjusted rate of interest would be equal to 
the adjusted prime rate charged by banks, rounded to the nearest full 
percent, and would become effective on January 1 of the immediately 
succeeding year.
    1981--Subsec. (b). Pub. L. 97-34, Sec. 711(a), struck out provision 
that an adjustment provided for under this subsection not be made prior 
to the expiration of 23 months following the date of any preceding 
adjustment under this subsection which changes the rate of interest.
    Pub. L. 97-34, Sec. 711(c), substituted ``January 1'' for ``February 
1''.
    Subsec. (c). Pub. L. 97-34, Sec. 711(b), struck out ``90 percent 
of'' before ``the average predominant prime rate''.
    1979--Subsec. (a). Pub. L. 96-167 substituted provisions setting the 
annual rate established under this section to be such adjusted rate as 
is established by the Secretary under subsec. (b) of this section for 
provision that the rate of interest under sections 6601(a), 6602, 
6611(a), 6332(c)(1), and 7426(g) of this title, and under section 
2411(a) of title 28 was to be 9 percent per annum, or such adjusted rate 
as was established by the Secretary under subsection (b).
    1976--Subsecs. (a), (b). Pub. L. 94-455 struck out ``or his 
delegate'' after ``Secretary''.


                    Effective Date of 1998 Amendment

    Amendment by section 3301(a) of Pub. L. 105-206 applicable to 
interest for periods beginning after July 22, 1998, and, subject to 
applicable statutes of limitation, to interest for periods beginning 
before July 22, 1998, if taxpayer reasonably identifies and establishes 
periods of overpayments and underpayments for which zero rate applies, 
and not later than Dec. 31, 1999, requests application of subsec. (d) of 
this section to such periods, see section 3301(c) of Pub. L. 105-206, 
set out as a note under section 6601 of this title.
    Pub. L. 105-206, title III, Sec. 3302(b), July 22, 1998, 112 Stat. 
742, provided that: ``The amendment made by this section [amending this 
section] shall apply to interest for the second and succeeding calendar 
quarters beginning after the date of the enactment of this Act [July 22, 
1998].''


                    Effective Date of 1997 Amendment

    Section 1463(b) of Pub. L. 105-34 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply for purposes 
of determining interest for periods after December 31, 1997.''
    Amendment by section 1604(b)(1) of Pub. L. 105-34 effective as if 
included in the sections of the Uruguay Round Agreements Act, Pub. L. 
103-465, to which it relates, see section 1604(b)(4) of Pub. L. 105-34, 
set out as a note under section 412 of this title.


                    Effective Date of 1996 Amendment

    Amendment by Pub. L. 104-188 effective, except as otherwise 
expressly provided, as if included in the provision of the Revenue 
Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which such 
amendment relates, see section 1702(i) of Pub. L. 104-188, set out as a 
note under section 38 of this title.


                    Effective Date of 1994 Amendment

    Section 713(b) of Pub. L. 103-465 provided that: ``The amendment 
made by this section [amending this section] shall apply for purposes of 
determining interest for periods after December 31, 1994.''


                    Effective Date of 1990 Amendment

    Section 11341(b) of Pub. L. 101-508 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply for purposes 
of determining interest for periods after December 31, 1990.''


                    Effective Date of 1989 Amendment

    Amendment by Pub. L. 101-239 applicable to returns the due date for 
which (determined without regard to extensions) is after Dec. 31, 1989, 
see section 7721(d) of Pub. L. 101-239, set out as a note under section 
461 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 1511(a), (c)(1) of Pub. L. 99-514 applicable 
for purposes of determining interest for periods after Dec. 31, 1986, 
see section 1511(d) of Pub. L. 99-514, set out as a note under section 
47 of this title.
    Section 1535(b) of Pub. L. 99-514 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to interest 
accruing after December 31, 1984; except that such amendment shall not 
apply in the case of any underpayment with respect to which there was a 
final court decision before the date of the enactment of this Act [Oct. 
22, 1986].''


                    Effective Date of 1984 Amendment

    Section 144(c) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [amending this section and section 6214 of this 
title] shall apply with respect to interest accruing after December 31, 
1984.''


                    Effective Date of 1982 Amendment

    Section 345(b) of Pub. L. 97-248, as amended by Pub. L. 98-369, div. 
A, title VII, Sec. 714(m), July 18, 1984, 98 Stat. 963, provided that: 
``The amendment made by this section [amending this section] shall apply 
to adjustments taking effect on or after January 1, 1983.''


                    Effective Date of 1981 Amendment

    Section 711(d) of Pub. L. 97-34 provided that:
    ``(1) For subsections (a) and (b).--The amendments made by 
subsections (a) and (b) [amending this section] shall apply to 
adjustments made after the date of the enactment of this Act [Aug. 13, 
1981].
    ``(2) For subsection (c).--The amendment made by subsection (c) 
[amending this section] shall apply to adjustments made for periods 
after 1982.''


                    Effective Date of 1979 Amendment

    Section 4(c)(2) of Pub. L. 96-167 provided that: ``The amendment 
made by subsection (b) [amending this section] shall take effect on the 
date of the enactment of this Act [Dec. 29, 1979].''


                             Effective Date

    Section 7(e) of Pub. L. 93-625 provided that: ``The amendments made 
by this section [enacting this section and amending sections 514, 6163, 
6166, 6167, 6332, 6504, 6601, 6602, 6611, 6654, 6655, and 7426 of this 
title and section 2411 of Title 28, Judiciary and Judicial Procedure] 
shall take effect on July 1, 1975, and apply to amounts outstanding on 
such date or arising thereafter.''


                               Regulations

    Section 1511(b) of Pub. L. 99-514 provided that: ``The Secretary of 
the Treasury or his delegate may issue regulations to coordinate section 
6621 of the Internal Revenue Code of 1954 [now 1986] (as amended by this 
section) with section 6601(f) of such Code. Such regulations shall not 
apply to any period after the date 3 years after the date of the 
enactment of this Act [Oct. 22, 1986].''

                  Section Referred to in Other Sections

    This section is referred to in sections 42, 45D, 148, 412, 453A, 
460, 664, 668, 852, 1258, 1291, 2057, 6325, 6332, 6343, 6427, 6601, 
6602, 6611, 6654, 6655, 7426 of this title; title 5 section 5596; title 
10 section 2306a; title 14 section 830; title 15 sections 1116, 1117; 
title 19 sections 1557, 1592, 1593a, 1677g; title 28 sections 1961, 
2411, 2644; title 29 sections 1083, 1084, 1132; title 30 sections 934, 
1721; title 41 sections 254b, 422; title 42 sections 7413, 7511d, 7524, 
7661a.
