rr-10-21.pdf

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# Part 1

## Section 6621 .-- Determination of Rate of Interest

26 CFR 301.6621-1: Interest rate.

### Rev. Rul. 2010-21

Section 6621 of the Internal Revenue Code establishes the rates for interest on
tax overpayments and tax underpayments. Under section 6621(a)(1), the overpayment
rate is the sum of the federal short-term rate plus 3 percentage points (2 percentage
points in the case of a corporation), except the rate for the portion of a corporate
overpayment of tax exceeding $10,000 for a taxable period is the sum of the federal
short-term rate plus 0.5 of a percentage point. Under section 6621(a)(2), the
underpayment rate is the sum of the federal short-term rate plus 3 percentage points.

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

Section 6621(b)(1) provides that the Secretary will determine the federal short-
term rate for the first month in each calendar quarter. Section 6621(b)(2)(A) provides
that the federal short-term rate determined under section 6621(b)(1) for any month

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applies during the first calendar quarter beginning after that month. Section 6621(b)(3)
provides that the federal short-term rate for any month is the federal short-term rate
determined during that 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 is
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, the Internal Revenue Service will use the federal short-term rate based on daily
compounding because that rate is most consistent with section 6621 which, pursuant to
section 6622, is subject to daily compounding.

The federal short-term rate determined in accordance with section 1274(d) during
July 2010 is the rate published in Revenue Ruling 2010-19, 2010-31 IRB 174 to take
effect beginning August 1, 2010. The federal short-term rate, rounded to the nearest full
percent, based on daily compounding determined during the month of July 2010 is 1
percent. Accordingly, an overpayment rate of 4 percent (3 percent in the case of a
corporation) and an underpayment rate of 4 percent are established for the calendar
quarter beginning October 1, 2010. The overpayment rate for the portion of a corporate
overpayment exceeding $10,000 for the calendar quarter beginning October 1, 2010, is
1.5 percent. The underpayment rate for large corporate underpayments for the
calendar quarter beginning October 1, 2010, is 6 percent. These rates apply to
amounts bearing interest during that calendar quarter.

Interest factors for daily compound interest for annual rates of 1.5 percent, 3
percent, 4 percent, and 6 percent are published in Tables 8, 11, 13, and 17 of Rev.
Proc. 95-17, 1995-1 C.B. 556, 562, 565, 567, and 571.

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

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# DRAFTING INFORMATION

The principal author of this revenue ruling is Deborah Colbert-James of the Office
of Associate Chief Counsel (Procedure & Administration). For further information
regarding this revenue ruling, contact Ms. Colbert-James at (202) 622-8143 (not a toll-
free call).

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