Internal Revenue Code:Sec. 6603. Deposits made to suspend running of interest on potential underpayments, etc.

From TaxAlmanac

Location in Internal Revenue Code

    TITLE 26 - INTERNAL REVENUE CODE
     Subtitle A - Income Taxes
      CHAPTER 67 - INTEREST
       Subchapter A - Interest on Underpayments
         

Statute

     Sec. 6603. Deposits made to suspend running of interest on  
                 potential underpayments, etc.
       
     (a) Authority To Make Deposits Other Than As Payment of Tax.--A 
   taxpayer may make a cash deposit with the Secretary which may be
   used by the Secretary to pay any tax imposed under subtitle A or B
   or chapter 41, 42, 43, or 44 which has not been assessed at the time
   of the deposit. Such a deposit shall be made in such manner as the
   Secretary shall prescribe.
     (b) No Interest Imposed.--To the extent that such deposit is used 
   by the Secretary to pay tax, for purposes of section 6601 (relating  
   to interest on underpayments), the tax shall be treated as paid when
   the deposit is made.
     (c) Return of Deposit.--Except in a case where the Secretary 
   determines that collection of tax is in jeopardy, the Secretary
   shall return to the taxpayer any amount of the deposit (to the extent
   not used for a payment of tax) which the taxpayer requests in 
   writing.
     (d) Payment of Interest.--
       (1) In general.--For purposes of section 6611 (relating to 
        interest on overpayments), except as provided in paragraph (4), 
        a deposit which is returned to a taxpayer shall be treated as a 
        payment of tax for any period to the extent (and only to the 
        extent) attributable to a disputable tax for such period. Under 
        regulations <<NOTE: Regulations. Applicability.>> prescribed by 
        the Secretary, rules similar to the rules of section 6611(b)(2) 
        shall apply.
       (2) Disputable tax.--
          (A) In general.--For purposes of this section, the 
        term `disputable tax' means the amount of tax specified 
        at the time of the deposit as the taxpayer's reasonable 
        estimate of the maximum amount of any tax attributable 
        to disputable items.
          (B) Safe harbor based on 30-day letter.--In the 
        case of a taxpayer who has been issued a 30-day letter, 
        the maximum amount of tax under subparagraph (A) shall 
        not be less than the amount of the proposed deficiency 
        specified in such letter.
       (3) Other definitions.--For purposes of paragraph (2)--
          (A) Disputable item.--The term `disputable item' 
         means any item of income, gain, loss, deduction, or 
         credit if the taxpayer--
           (i) has a reasonable basis for its treatment 
              of such item, and
          (ii) reasonably believes that the Secretary 
              also has a reasonable basis for disallowing the 
              taxpayer's treatment of such item.
          (B) 30-day letter.--The term `30-day letter' means 
              the first letter of proposed deficiency which allows the 
              taxpayer an opportunity for administrative review in the 
              Internal Revenue Service Office of Appeals.
       (4) Rate of interest.--The rate of interest under this 
        subsection shall be the Federal short-term rate determined
        under section 6621(b), compounded daily.
     (e) Use of Deposits.--
       (1) Payment of tax.--Except as otherwise provided by the 
        taxpayer, deposits shall be treated as used for the payment of 
        tax in the order deposited.
       (2) Returns of deposits.--Deposits shall be treated as 
        returned to the taxpayer on a last-in, first-out basis.

Sources

    Pub.L.108-357, Sec.842(a), October 2004.

Miscellaneous

                          AMENDMENTS
    Pub.L.108-357, Sec.842(a), Approved October 22, 2004.
    Effective Date.--
      (1) In general.--The amendments made by this section shall 
        apply to deposits made after the date of the enactment of this 
        Act.
      (2) Coordination with deposits made under revenue procedure 
        84-58.--In the case of an amount held by the Secretary of the 
        Treasury or his delegate on the date of the enactment of this 
        Act as a deposit in the nature of a cash bond deposit pursuant 
        to Revenue Procedure 84-58, the date
        that the taxpayer identifies such amount as a deposit made 
        pursuant to section 6603 of the Internal Revenue Code (as added 
        by this Act) shall be treated as the date such amount is 
        deposited for purposes of such section 6603.