Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules 86871 

38 44 U.S.C. 3507(d); 5 CFR part 1320. 

39 44 U.S.C. Chap. 35. 

40Public Law 105–277, 112 Stat. 2681 (1998). 

requirements.38 For the purpose of the 

PRA, an information collection 

requirement may take the form of a 

reporting, recordkeeping, or a thirdparty disclosure requirement. The 

proposed rule does not contain 

information collection requirements that 

require approval by OMB under the 

PRA.39 The proposed rule provides 

regulatory relief by allowing eligible 

FCUs to expand their investment 

authority to include the purchase of 

MSRs under similar standards 

applicable to the purchase of eligible 

obligations and other investments. 

C. Executive Order 13132 

Executive Order 13132 encourages 

independent regulatory agencies to 

consider the impact of their actions on 

state and local interests. In adherence to 

fundamental federalism principles, the 

NCUA, an independent regulatory 

agency as defined in 44 U.S.C. 3502(5), 

voluntarily complies with the executive 

order. This rulemaking will not have a 

substantial direct effect on the states, on 

the connection between the national 

government and the states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. The NCUA has 

determined that this proposal does not 

constitute a policy that has federalism 

implications for purposes of the 

executive order. 

D. Assessment of Federal Regulations 

and Policies on Families 

The NCUA has determined that this 

proposed rule will not affect family 

well-being within the meaning of 

Section 654 of the Treasury and General 

Government Appropriations Act, 

1999.40

List of Subjects 

12 CFR Part 703 

Credit unions, Investments. 

12 CFR Part 721 

Credit unions, Functions, Implied 

powers. 

By the National Credit Union 

Administration Board on December 17, 2020. 

Melane Conyers-Ausbrooks, 

Secretary of the Board. 

For the reasons discussed above, the 

NCUA Board proposes to amend 12 CFR 

parts 703 and 721 as follows: 

PART 703—INVESTMENT AND 

DEPOSIT ACTIVITIES 

■ 1. The authority citation for part 703 

is revised to read as follows: 

Authority: 12 U.S.C. 1757(7), 1757(8), 

1757(14) and 1757(15). 

■ 2. Amend § 703.14 by adding 

paragraph (l) to read as follows: 

§ 703.14 Permissible investments. 

* * * * * 

(l) Mortgage servicing rights. A 

Federal credit union may purchase 

mortgage servicing rights from other 

federally insured credit unions as an 

investment if all of the following 

conditions are met: 

(1) The underlying mortgage loans of 

the mortgage servicing rights are loans 

the Federal credit union is empowered 

to grant; 

(2) the Federal credit union purchases 

the mortgage servicing rights within the 

limitations of its board of directors’ 

written purchase policies; and 

(3) the board of directors or 

investment committee approves the 

purchase. 

§ 703.16 [Amended] 

■ 2. Amend § 703.16 by removing and 

reserving paragraph (a). 

PART 721—INCIDENTAL POWERS 

■ 4. The authority citation for part 721 

continues to read as follows: 

Authority: 12 U.S.C. 1757(17), 1766 and 

1789. 

■ 5. Amend § 721.3 paragraph (h) by 

revising the last sentence to read as 

follows: 

§ 721.3 What categories of activities are 

preapproved as incidental powers 

necessary or requisite to carry on a credit 

union’s business? 

* * * * * 

(h) * * * These products or activities 

may include debt cancellation 

agreements, debt suspension 

agreements, letters of credit, leases, and 

mortgage loan servicing functions for a 

member as long as the loan is owned by 

a member. 

* * * * * 

[FR Doc. 2020–28278 Filed 12–30–20; 8:45 am] 

BILLING CODE 7535–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 300 

[REG–114615–16] 

RIN 1545–BP75 

User Fee for Estate Tax Closing Letter 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations establishing a new 

user fee for authorized persons who 

wish to request the issuance of IRS 

Letter 627, also referred to as an estate 

tax closing letter. The Independent 

Offices Appropriations Act of 1952 

authorizes charging user fees in 

appropriate circumstances. The 

proposed regulations affect persons who 

request an estate tax closing letter. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by March 1, 2021. Requests 

for a public hearing must be submitted 

as prescribed in the ‘‘Comments and 

Requests for a Public Hearing’’ section. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at http://

www.regulations.gov (indicate IRS and 

REG–114615–16) by following the 

online instructions for submitting 

comments. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The IRS 

expects to have limited personnel 

available to process public comments 

that are submitted on paper through 

mail. Until further notice, any 

comments submitted on paper will be 

considered to the extent practicable. 

The Department of the Treasury 

(Treasury Department) and the IRS will 

publish for public availability any 

comment submitted electronically, and 

to the extent practicable on paper, to its 

public docket. Send paper submissions 

to: CC:PA:LPD:PR (REG–114615–16), 

Room 5203, Internal Revenue Service, 

P.O. Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning submissions of comments 

and/or requests for a public hearing, 

Regina Johnson, at (202) 317–5177; 

concerning cost methodology, Michael 

Weber, at (202) 803–9738; concerning 

the proposed regulations, Juli Ro Kim, at 

(202) 317–6859 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 


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86872 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules 

1 In the context of a Form 706 (a ‘‘return’’ as 

defined in section 6103(b)(1)), the term ‘‘return 

information’’ is broadly defined in section 

6103(b)(2) to include not only information 

appearing on the Form 706, but also whether the 

estate’s return was, is being, or will be examined 

or subject to other investigation or processing, or 

any other data, received by, recorded by, prepared 

by, furnished to, or collected by the Secretary of the 

Treasury or his delegate (Secretary) with respect to 

the Form 706 or with respect to the determination 

of the existence, or possible existence, of liability 

(or the amount thereof) of any person under the 

Code for any tax, penalty, interest, fine, forfeiture, 

or other imposition, or offense. 

Background and Explanation of 

Provisions 

A. Overview 

This document contains proposed 

amendments to the User Fee 

Regulations (26 CFR part 300) to 

establish a user fee applicable to 

requests for estate tax closing letters 

provided by the IRS to an authorized 

person. (The term ‘‘authorized person’’ 

is used herein to refer to a decedent’s 

estate or other person properly 

authorized under section 6103 of the 

Internal Revenue Code (Code) to 

receive, and therefore, to request, an 

estate tax closing letter with respect to 

the estate.) The IRS issues estate tax 

closing letters upon request of an 

authorized person only after an estate 

tax return (generally, Form 706, United 

States Estate (and Generation-Skipping 

Transfer) Tax Return) has been accepted 

by the IRS (1) as filed, (2) after an 

adjustment to which the estate has 

agreed, or (3) after an adjustment in the 

deceased spousal unused exclusion 

(DSUE) amount. An estate tax closing 

letter informs an authorized person of 

the acceptance of the estate tax return 

and certain other return information, 

including the amount of the net estate 

tax, the State death tax credit or 

deduction, and any generation-skipping 

transfer tax for which the estate is 

liable.1

The IRS understands that knowledge 

of the acceptance by the IRS of the 

estate tax return—including the amount 

of the gross estate and the estate tax 

liability—is important to executors or 

other persons administering estates 

because of the unique nexus between an 

estate’s Federal estate tax obligations 

and State and local law obligations to 

administer and close a probate estate. 

This knowledge aids an executor’s 

ability to make the final division and 

distribution of estate assets and to avoid 

potential personal liability for unpaid 

estate tax in making such distribution. 

Personal liability can be imposed on an 

executor when the executor makes 

preferential payments to creditors or 

distributions to beneficiaries, leaving 

insufficient funds for the full payment 

of the tax owed to the government. See 

31 U.S.C. 3713(b). On the other hand, an 

estate tax closing letter does not indicate 

whether any of the estate tax has been 

paid or the amount of estate tax that has 

been paid. 

The estate tax closing letter also 

includes relevant procedural and 

substantive explanations. Addressing 

the potential for conflating an estate tax 

closing letter with a formal closing 

agreement, the letter confirms that it is 

not a formal closing agreement with the 

IRS that is described under section 7121 

of the Code. Additionally, the estate tax 

closing letter explains that, consistent 

with Rev. Proc. 2005–32, 2005–1 C.B. 

1206, the IRS will not reopen or 

examine the estate tax return to 

determine the estate tax liability of a 

decedent’s estate unless the estate 

notifies the IRS of changes to the estate 

tax return or if there is (1) evidence of 

fraud, malfeasance, collusion, 

concealment, or misrepresentation of a 

material fact, (2) a clearly defined 

substantial error based upon an 

established IRS position, or (3) a serious 

administrative omission. However, the 

estate tax closing letter does not limit or 

foreclose future adjustments to the 

DSUE amount shown on the estate tax 

return, so the estate tax closing letter 

further explains that the IRS has 

authority to examine returns of a 

decedent in the context of determining 

the DSUE amount for portability 

purposes. (See part C of this section for 

a discussion of portability of the DSUE 

amount.) Finally, the estate tax closing 

letter includes explanations related to 

the potential application of sections 

6166 and 6324A (installment payments 

and special extended lien), 2204 

(discharge of personal liability), and 

6324 (estate tax lien). Currently, the IRS 

does not charge for providing an estate 

tax closing letter to authorized persons. 

B. June 2015 Change to IRS Practice in 

Issuing Estate Tax Closing Letters 

The practice of issuing estate tax 

closing letters to authorized persons is 

not mandated by any provision of the 

Code or other statutory requirement. 

Instead, the practice is fundamentally a 

customer service convenience offered to 

authorized persons in view of the 

unique nature of estate tax return filings 

and the bearing of an estate’s Federal 

estate tax obligations on the obligation 

to administer and close a probate estate 

under applicable State and local law. 

Essentially, the practice takes into 

account estates’ and stakeholders’ need 

for information regarding the status of 

an estate’s Federal tax obligations in 

administering and closing a probate 

estate. Prior to June 2015, the IRS 

generally issued an estate tax closing 

letter for every estate tax return filed. 

However, for estate tax returns filed on 

or after June 1, 2015, the IRS changed 

its practice and now offers an estate tax 

closing letter only upon the request of 

an authorized person. 

The IRS changed its practice of 

issuing estate tax closing letters for 

every filed Form 706 for two primary 

reasons. First, the volume of estate tax 

return filings increased at the same time 

that the IRS experienced additional 

budget and resource constraints. In 

particular, the number of estate tax 

filings increased dramatically due to the 

enactment in December 2010 of 

portability of a deceased spouse’s 

unused applicable exclusion amount 

(DSUE amount) for the benefit of a 

surviving spouse. (See part C for a 

discussion of the impact of portability of 

the DSUE amount on estate tax filings.) 

Second, the IRS recognized that an 

account transcript with a transaction 

code and explanation of ‘‘421—Closed 

examination of tax return’’ is an 

available alternative to the estate tax 

closing letter. See Notice 2017–12, I.R.B. 

2017–5 (describing the utility of the 

account transcript in lieu of the estate 

tax closing letter and its availability at 

no charge). Notwithstanding these 

considerations, the IRS was aware that 

executors, local probate courts, State tax 

departments, and others had come to 

rely on the convenience of estate tax 

closing letters and the return 

information and procedural and 

substantive explanations such letters 

provided for confirmation that the 

examination of the estate tax return by 

the IRS had been completed and the IRS 

file had been closed. Accordingly, in 

2015 the IRS decided to continue 

providing the service of issuing estate 

tax closing letters, still at no charge, but 

only upon the request of an authorized 

person. 

Until restrictions were added due to 

the ongoing Coronavirus Disease 2019 

(COVID–19) pandemic, an authorized 

person was able to request an estate tax 

closing letter by telephone or fax. Now, 

due to the COVID–19 pandemic, an 

authorized person may request an estate 

tax closing letter only by fax (current 

procedure and details available at 

http://www.irs.gov). 

C. The Continuing Impact of Portability 

on Estate Tax Return Filings 

Portability of the DSUE amount 

became effective for estates of decedents 

dying after December 31, 2010, upon 

enactment of the Tax Relief, 

Unemployment Insurance 

Reauthorization, and Job Creation Act of 

2010, Public Law 111–312, 124 Stat. 


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3296, 3302 (Dec. 17, 2010), and became 

permanent upon enactment of the 

American Taxpayer Relief Act of 2012, 

Public Law 112–240, 126 Stat. 2313 

(January 2, 2013). In order to elect 

portability of the DSUE amount for the 

benefit of the surviving spouse, the 

estate of the deceased spouse must 

timely file an estate tax return, even if 

the sum of the value of the gross estate 

and the amount of adjusted taxable gifts 

is insufficient to trigger a filing 

requirement under section 6018(a). In 

calendar year 2016, the number of estate 

tax returns filed solely to elect 

portability of the DSUE amount was 

approximately 20,000, compared to 

approximately 12,000 estate tax returns 

filed because of a filing requirement 

under section 6018(a). 

D. Establishment of User Fee for Estate 

Tax Closing Letters 

The IRS continues to experience 

significant budget and resource 

constraints that require the IRS to 

allocate its existing resources as 

efficiently as possible. The volume of 

estate tax return filings remains high 

(approximately 30,500 estate tax returns 

filed in 2018), in large part attributable 

to estate tax returns that are filed for 

estates having no tax liability or filing 

requirement under section 6018 and 

that are filed solely to elect portability 

of the DSUE amount for the benefit of 

the surviving spouse of a decedent. 

While the practice of issuing estate 

tax closing letters is intended as a 

customer service convenience to 

authorized persons based on an 

understanding of the unique nexus 

between an estate’s Federal estate tax 

obligations and the estate’s obligations 

under applicable local law for State and 

local estate and inheritance taxes and to 

administer and close a probate estate, 

the Treasury Department and the IRS 

received feedback from taxpayers and 

practitioners that the procedure for 

requesting an estate tax closing letter 

can be inconvenient and burdensome. 

When requests had been accepted by 

telephone, a request could not be made 

until the IRS’s examination of the estate 

tax return had been completed. 

Taxpayer representatives, therefore, 

often needed to repeat the telephone 

request, sometimes multiple times, 

before the request could be accepted by 

the IRS. Currently, the instructions on 

http://www.irs.gov advise that, prior to 

faxing a request, an account transcript 

should be requested and reviewed to 

ensure the transaction code and 

explanation of ‘‘421—Closed 

examination of tax return’’ are present. 

Account transcripts are available online 

to registered tax professionals using the 

IRS’s Transcript Delivery System (TDS) 

or to authorized persons making 

requests using Form 4506–T. 

In view of the resource constraints 

and purpose of issuing estate tax closing 

letters as a convenience to authorized 

persons, the IRS has identified the 

provision of estate tax closing letters as 

an appropriate service for which to 

establish a user fee to recover the costs 

that the government incurs in providing 

such letters. Accordingly, the Treasury 

Department and the IRS propose 

establishing a user fee for estate tax 

closing letter requests (see parts E and 

F for explanation of the authority to 

establish the user fee). As currently 

determined, the user fee is $67, as 

detailed in part H. 

Guidance on the procedure for 

requesting an estate tax closing letter 

and paying the associated user fee is not 

provided in these proposed regulations. 

The Treasury Department and the IRS 

expect to implement a procedure that 

will improve convenience and reduce 

burden for authorized persons 

requesting estate tax closing letters by 

initiating a one-step, web-based 

procedure to accomplish the request of 

the estate tax closing letter as well as the 

payment of the user fee. As presently 

contemplated, a Federal payment 

website, such as http://www.pay.gov, 

will be used and multiple requests will 

not be necessary. The Treasury 

Department and the IRS believe 

implementing such a one-step 

procedure will reduce the current 

administrative burden on authorized 

persons in requesting estate tax closing 

letters and will limit the burden 

associated with the establishment of a 

user fee for providing such service. 

E. User Fee Authority 

The Independent Offices 

Appropriations Act of 1952 (IOAA) (31 

U.S.C. 9701) authorizes each agency to 

promulgate regulations establishing the 

charge for services provided by the 

agency (user fees). The IOAA provides 

that these user fee regulations are 

subject to policies prescribed by the 

President and shall be as uniform as 

practicable. Those policies are currently 

set forth in the Office of Management 

and Budget (OMB) Circular A–25, 58 FR 

38142 (July 15, 1993; OMB Circular). 

The IOAA states that the services 

provided by an agency should be selfsustaining to the extent possible. 31 

U.S.C. 9701(a). The OMB Circular states 

that agencies providing services that 

confer special benefits on identifiable 

recipients beyond those accruing to the 

general public must identify those 

services, determine whether user fees 

should be assessed for those services, 

and, if so, establish user fees that 

recover the full cost of providing those 

services. 

As required by the IOAA and the 

OMB Circular, agencies are to review 

user fees biennially and update them as 

necessary to reflect changes in the cost 

of providing the underlying services. 

During these biennial reviews, an 

agency must calculate the full cost of 

providing each service, taking into 

account all direct and indirect costs to 

any part of the U.S. Government. The 

full cost of providing a service includes, 

but is not limited to, salaries, retirement 

benefits, rents, utilities, travel, and 

management costs, as well as an 

appropriate allocation of overhead and 

other support costs associated with 

providing the service. 

An agency should set the user fee at 

an amount that recovers the full cost of 

providing the service unless the agency 

requests, and the OMB grants, an 

exception to the full cost requirement. 

The OMB may grant exceptions only 

where the cost of collecting the fees 

would represent an unduly large part of 

the fee for the activity, or where any 

other condition exists that, in the 

opinion of the agency head, justifies an 

exception. When the OMB grants an 

exception, the agency does not collect 

the full cost of providing the service and 

therefore must fund the remaining cost 

of providing the service from other 

available funding sources. When the 

OMB grants an exception, the agency, 

and by extension all taxpayers, 

subsidize the cost of the service to the 

recipients who otherwise would be 

required to pay the full cost of providing 

the service, as the IOAA and the OMB 

Circular directs. 

F. Special Benefits Conferred by 

Issuance of Estate Tax Closing Letters 

The issuance of an estate tax closing 

letter, and the return information and 

procedural and substantive explanations 

such letters provide, constitutes the 

provision of a service and confers 

special benefits on identifiable 

recipients beyond those accruing to the 

general public. Upon receipt of an estate 

tax closing letter, authorized persons 

can make use of the return information 

and procedural and substantive 

explanations provided in the letter for 

non-Federal tax purposes, for example, 

to facilitate the executor’s ability to 

make the final distribution of estate 

assets and to respond as needed to nonFederal tax authorities and entities, 

such as local probate courts, State tax 

departments, and private stakeholders. 

Further, executors of such estates can 

make use of the return information 

pertaining to the estate’s Federal tax 


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86874 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules 

liability to avoid potential personal 

liability for payment of the tax under 31 

U.S.C. 3713. 

Moreover, letters comparable to estate 

tax closing letters are not universally 

available or provided to taxpayers filing 

Federal tax returns other than estate tax 

returns, upon request by authorized 

persons or otherwise. By comparison, 

account transcripts are universally 

provided by the IRS upon request to all 

taxpayers. After issuing Notice 2017–12 

to publicize the availability and utility 

of an account transcript as an alternative 

in lieu of an estate tax closing letter, the 

feedback the IRS received from 

stakeholders reflects a definite 

preference for the return information 

and procedural and substantive 

explanations provided by the IRS in an 

estate tax closing letter. While the IRS 

will continue to offer transcripts as an 

alternative in lieu of estate tax closing 

letters at no charge, an authorized 

person may choose which service best 

supports their needs based upon the 

specific circumstances of the decedent’s 

estate. Estate tax closing letters are 

uniquely available for authorized 

persons that have need of such special 

benefits. 

For these reasons, the issuance of an 

estate tax closing letter constitutes the 

provision of a service and confers 

special benefits to authorized persons 

requesting such letters beyond those 

accruing to the general public. 

Accordingly, the IRS is authorized, 

pursuant to the IOAA and the OMB 

Circular, to charge a user fee for the 

issuance of an estate tax closing letter 

that reflects the full cost of providing 

this service. See also section 

6103(p)(2)(B) (allowing for a reasonable 

fee for furnishing return information to 

any person). 

G. Calculation of User Fees Generally 

User fee calculations begin by first 

determining the full cost for the service. 

The IRS follows the guidance provided 

by the OMB Circular to compute the full 

cost of the service, which includes all 

indirect and direct costs to any part of 

the U.S. Government including but not 

limited to direct and indirect personnel 

costs, physical overhead, rents, utilities, 

travel, and management costs. The IRS’s 

cost methodology is described later in 

this part G. 

Once the total amount of direct and 

indirect costs associated with a service 

is determined, the IRS follows the 

guidance in the OMB Circular to 

determine the costs associated with 

providing the service to each recipient, 

which represents the average per unit 

cost of that service. This average per 

unit cost is the amount of the user fee 

that will recover the full cost of the 

service. 

The IRS follows generally accepted 

accounting principles (GAAP), as 

established by the Federal Accounting 

Standards Advisory Board (FASAB), in 

calculating the full cost of providing 

services. The FASAB Handbook of 

Accounting Standards and Other 

Pronouncements, as amended, which is 

available at http://files.fasab.gov/ 

pdffiles/2019_fasab-handbook.pdf, 

includes the Statement of Federal 

Financial Accounting Standards 4: 

Managerial Cost Accounting Standards 

and Concepts (SFFAS No. 4) for the 

Federal Government. SFFAS No. 4 

establishes internal costing standards 

under GAAP to accurately measure and 

manage the full cost of Federal 

programs. The methodology described 

in the remainder of this part G is in 

accordance with SFFAS No. 4. 

1. Cost Center Allocation 

The IRS determines the cost of its 

services and the activities involved in 

producing them through a cost 

accounting system that tracks costs to 

organizational units. The lowest 

organizational unit in the IRS’s cost 

accounting system is called a cost 

center. Cost centers are usually separate 

offices that are distinguished by subjectmatter area of responsibility or 

geographic region. All costs of operating 

a cost center are recorded in the IRS’s 

cost accounting system and are 

allocated to that cost center. The costs 

allocated to a cost center are the direct 

costs for the cost center’s activities as 

well as all indirect costs, including 

overhead, associated with that cost 

center. Each cost is recorded in only one 

cost center. 

2. Determining the per Unit Cost 

To establish the per unit cost, the total 

cost of providing the service is divided 

by the volume of services provided. The 

volume of services provided includes 

both services for which a fee is charged 

as well as subsidized services. The 

subsidized services are those where 

OMB has approved an exception to the 

full cost requirement, for example, to 

charge a reduced fee to low-income 

taxpayers. The volume of subsidized 

services is included in the total volume 

of services provided to ensure that the 

IRS, and not those who are paying full 

cost, subsidizes the cost of the reducedcost services. 

3. Cost Estimation of Direct Labor and 

Benefits 

Not all cost centers are fully devoted 

to only one service for which the IRS 

charges a user fee. Some cost centers 

work on a number of different services. 

In these cases, the IRS estimates the cost 

incurred in those cost centers 

attributable to the service for which a 

user fee is being calculated by 

measuring the time required to 

accomplish activities related to the 

service, and estimating the average time 

required to accomplish these activities. 

The average time required to 

accomplish these activities is multiplied 

by the relevant organizational unit’s 

average labor and benefits cost per unit 

of time to determine the labor and 

benefits cost incurred to provide the 

service. To determine the full cost, the 

IRS then adds an appropriate overhead 

charge, as discussed in part G.4. 

4. Calculating Overhead 

Overhead is an indirect cost of 

operating an organization that cannot be 

immediately associated with an activity 

that the organization performs. 

Overhead includes costs of resources 

that are jointly or commonly consumed 

by one or more organizational unit’s 

activities but are not specifically 

identifiable to a single activity. 

These costs can include: 

• General management and 

administrative services of sustaining 

and support organizations; 

• Facilities management and ground 

maintenance services (security, rent, 

utilities, and building maintenance); 

• Procurement and contracting 

services; 

• Financial management and 

accounting services; 

• Information technology services; 

• Services to acquire and operate 

property, plants, and equipment; 

• Publication, reproduction, and 

graphics and video services; 

• Research, analytical, and statistical 

services; 

• Human resources/personnel 

services; and 

• Library and legal services. 

To calculate the overhead allocable to 

a service, the IRS multiplies a corporate 

overhead rate (Corporate Overhead rate) 

by the direct labor and benefits costs 

determined as discussed above in part 

G.3. The Corporate Overhead rate is the 

ratio of the sum of the IRS’s indirect 

labor and benefits costs from the 

supporting and sustaining 

organizational units—those that do not 

interact directly with taxpayers—and all 

non-labor costs to the IRS’s labor and 

benefits costs of its organizational units 

that interact directly with taxpayers. 

The IRS calculates the Corporate 

Overhead rate annually based on cost 

elements underlying the Statement of 

Net Cost included in the IRS Annual 

Financial Statements, which are audited 


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by the Government Accountability 

Office. 

The Corporate Overhead rate of 74 

percent (rounded to the nearest 

hundredth) for costs reviewed during 

fiscal year (FY) 2018 was calculated 

based on (FY) 2017 costs, as follows: 

Indirect Labor and Benefits Costs: 

$1,705,152,274 

Non-Labor Costs: + $3,213,504,014 

Total Indirect Costs: $4,918,656,288 

Direct Labor and Benefits Costs: 

÷ $6,640,044,003 

Corporate Overhead Rate: 74.08% 

H. Description and Tables Showing Full 

Cost Determination for Estate Tax 

Closing Letter 

The IRS followed the guidance 

provided by the OMB Circular to 

compute the full cost of issuing estate 

tax closing letters to an authorized 

person. The OMB Circular explains that 

the full cost includes all indirect and 

direct costs to any part of the Federal 

Government including but not limited 

to direct and indirect personnel costs, 

physical overhead, rents, utilities, 

travel, and management costs. 

1. Request Processing Costs 

Requests for estate tax closing letters 

are processed by GS Grade 5 and Grade 

8 customer service representatives. 

Grade 5 representatives perform 80 

percent of the work and Grade 8 

representatives perform the remaining 

20 percent of the work. The customer 

service representative verifies that the 

request is authorized and that the 

address information is correct. Because 

a separate estate tax closing letter is 

prepared for each executor, responding 

to requests often requires more than one 

letter, with an average of three letters 

per request. It requires approximately 

0.65 staff hours for a customer service 

representative to review the return, 

create the estate tax closing letters, and 

prepare the letters for mailing. The IRS 

received an average of 17,249 requests 

for estate tax closing letters in FY 2017 

and FY 2018 requiring 11,154 staff 

hours. 

Total hours allocated to the cost must 

also include indirect hours for campus 

employees. Indirect hours are calculated 

by multiplying the direct hours by the 

indirect rate for employees, which is 60 

percent. Using this information, IRS 

determined the total staff hours to 

process requests for estate tax closing 

letters are 17,846 as follows: 

Staff Hours: 11,154 

Indirect Hours (60%): 6,692 

Total Hours: 17,846 

To determine the labor and benefits 

costs, IRS converted total hours to full 

time employees (FTE) by dividing the 

total hours by 2,080, which is the 

number of hours worked by a full time 

employee during the year, resulting in 

8.58 FTE. IRS calculated the cost per 

FTE by adding 80 percent of the average 

salary and benefits for a GS 5 to 20 

percent of the average salary and 

benefits for a GS 8 campus employee 

and determined the cost of labor and 

benefits related to this program is $ 

578,831 (rounded to the nearest whole 

dollar), as follows: 

GS–5 Salary and Benefits ($62,330 × 

80%): $49,864 

GS–8 Salary and Benefits ($87,993 × 

20%): $17,599 

Total Cost per FTE: $67,463 

Total FTE: 8.58 

Total Labor & Benefits for processing 

requests: $578,831 

2. Quality Assurance Review Costs 

Outgoing estate tax closing letters are 

subjected to quality review performed 

by GS 8 Grade quality assurance 

professionals. Specifically, five of every 

100 estate tax closing letters mailed are 

reviewed for quality assurance. A 

quality assurance professional opens the 

return to (1) ensure the estate tax closing 

letter was authorized, (2) verify that the 

correct information was included in the 

letter, and (3) verify the address 

information. Quality assurance 

professionals then document their 

review. On average, quality assurance 

professionals spend .5 staff hours to 

review one estate tax closing letter. The 

estimated labor hours for quality 

assurance related to estate tax closing 

letters are 1,294, determined as follows: 

Estimated Volume of Requests: 17,249 

Average Number of Letters per Request: 

× 3 

Total Letters Available for Review: 

51,747 

Estimated Letters Reviewed (5%): 2,587 

Hours per Review: × 0.5 

Estimated Quality Assurance Hours: 

1,294 

Indirect Hours (60%): 776 

Total Quality Assurance Hours: 2,070 

Total FTE: 1.00 

Cost Per Grade 8: $87,993 

Total Salary and Benefits for Quality 

Assurance: $87,563 

3. Overhead Calculation 

The IRS applied the Corporate 

Overhead rate to the labor and benefits 

costs to calculate the full cost for issuing 

an estate tax closing letter. The full cost 

of the program is $ 1,160,058, 

determined as follows: 

Total Processing Labor & Benefits: 

$578,831 

Total Quality Assurance Labor & 

Benefits: $87,563 

Total Labor and Benefits: $666,394 

Corporate Overhead (74.08%): 

+ $493,664 

Full Cost: $1,160,058 

To calculate the cost per request, IRS 

divided $ 1,160,058 by the volume of 

17,249 requests. The cost to issue an 

estate tax closing letter is $ 67 (rounded 

to the nearest whole dollar), determined 

as follows: 

Full Cost: $1,160,058 

Estimated Volume: ÷ 17,249 

Cost Per Request: $67 

Proposed Applicability Date 

These regulations are proposed to 

apply to requests for an estate tax 

closing letter received by the IRS after 

the date that is 30 days after the date of 

publication in the Federal Register of a 

Treasury decision adopting these rules 

as final regulations. 

Special Analyses 

This regulation is not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. Pursuant to the Regulatory 

Flexibility Act (5 U.S.C. chapter 6), it is 

hereby certified that these regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. The proposed regulations, 

which prescribe a fee to obtain a 

particular service, affect decedents’ 

estates, which generally are not ‘‘small 

entities’’ as defined under 5 U.S.C. 

601(6). Thus, these regulations have no 

economic impact on small entities. In 

addition, the dollar amount of the fee 

($67 as currently determined) is not 

substantial enough to have a significant 

economic impact on any entities that 

could be affected by establishing such a 

fee. Accordingly, the Secretary certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Pursuant to section 7805(f) of the 

Code, this notice of proposed 

rulemaking will be submitted to the 

Chief Counsel for the Office of 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Requests for a Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in this preamble 

under the ADDRESSES heading. The 

Treasury Department and IRS request 


khammond on DSKJM1Z7X2PROD with PROPOSALS
86876 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Proposed Rules 

1 In that decision, the Board found five carriers 

(BNSF Railway Company, CSX Transportation, Inc. 

(CSXT), Norfolk Southern Combined Railroad 

Subsidiaries, Soo Line Corporation, and UP) 

revenue adequate in 2019. R.R. Revenue 

Adequacy—2019 Determination, EP 552 (Sub-No. 

24), slip op. at 2. 

2The petition also proposes certain modifications 

to the calculation of ROI, as discussed below. (See 

also Pet. 35–36.) 

3The Joint Carriers state that banking and real 

estate companies were excluded from the 

comparison groups because they have different 

comments on all aspects of the proposed 

regulations. Any electronic comments 

submitted, and to the extent practicable 

any paper comments submitted, will be 

available at http://www.regulations.gov 

or upon request. 

A public hearing will be scheduled if 

requested in writing by any person who 

timely submits electronic or written 

comments as prescribed in this 

preamble under the DATES heading. 

Requests for a public hearing are also 

encouraged to be made electronically. If 

a public hearing is scheduled, notice of 

the date and time for the public hearing 

will be published in the Federal 

Register. Announcement 2020–4, 2020– 

17 I.R.B. 1, provides that until further 

notice, public hearings conducted by 

the IRS will be held telephonically. Any 

telephonic hearing will be made 

accessible to people with disabilities. 

Drafting Information 

The principal author of these 

regulations is Juli Ro Kim of the Office 

of Associate Chief Counsel 

(Passthroughs and Special Industries). 

Other personnel from the Treasury 

Department and the IRS participated in 

the development of the regulations. 

Statement of Availability of IRS 

Documents 

IRS Revenue Procedures, Revenue 

Rulings notices, and other guidance 

cited in this document are published in 

the Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at http://www.irs.gov. 

List of Subjects in 26 CFR Part 300 

Estate taxes, Excise taxes, Gift taxes, 

Income taxes, Reporting and 

recordkeeping requirements, User fees. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 300 is 

proposed to be amended as follows: 

PART 300—USER FEES 

■ Paragraph 1. The authority citation 

for part 300 continues to read as 

follows: 

Authority: 31 U.S.C. 9701. 

■ Par. 2. Section 300.0 is amended by 

adding paragraph (b)(13) to read as 

follows: 

§ 300.0 User fees; in general. 

* * * * * 

(b) * * * 

(13) Requesting an estate tax closing 

letter. 

■ Par. 3. Section 300.13 is added to read 

as follows: 

§ 300.13 Fee for estate tax closing letter. 

(a) Applicability. This section applies 

to the request by a person described in 

paragraph (c) of this section for an estate 

tax closing letter from the IRS. 

(b) Fee. The fee for issuing an estate 

tax closing letter is $67. 

(c) Person liable for the fee. The 

person liable for the fee is the estate of 

the decedent or other person properly 

authorized under section 6103 of the 

Internal Revenue Code to receive and 

therefore to request the estate tax 

closing letter with respect to the estate. 

(d) Applicability date. This section 

applies to requests received by the IRS 

after [date that is 30 days after these 

regulations are published as final 

regulations in the Federal Register]. 

Douglas W. O’Donnell, 

Acting Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2020–28931 Filed 12–29–20; 4:15 pm] 

BILLING CODE 4830–01–P 

SURFACE TRANSPORTATION BOARD 

49 CFR Chapter X 

[Docket No. EP 766] 

Joint Petition For Rulemaking—Annual 

Revenue Adequacy Determinations 

AGENCY: Surface Transportation Board. 

ACTION: Petition for rulemaking. 

SUMMARY: The Surface Transportation 

Board (Board or STB) opens a 

rulemaking proceeding to consider a 

petition by several Class I railroads to 

change the Board’s procedures for 

annually determining whether Class I 

rail carriers are revenue adequate. The 

Board seeks public comment on the 

petition and several specific related 

issues. 

DATES: Comments are due March 1, 

2021; replies are due March 31, 2021. 

ADDRESSES: Comments and replies may 

be filed with the Board via e-filing on 

the Board’s website at www.stb.gov and 

will be posted to the Board’s website. 

FOR FURTHER INFORMATION CONTACT: 

Amy Ziehm at (202) 245–0391. 

Assistance for the hearing impaired is 

available through the Federal Relay 

Service at (800) 877–8339. 

SUPPLEMENTARY INFORMATION: On 

September 1, 2020, Union Pacific 

Railroad Company (UP), Norfolk 

Southern Railway Company, and the 

U.S. rail operating affiliates of Canadian 

National Railway Company 

(collectively, Joint Carriers) filed a joint 

petition for rulemaking to change the 

Board’s procedures for determining 

which Class I rail carriers are earning 

adequate revenues under 49 U.S.C. 

10704(a)(3). 

The Board annually determines each 

Class I railroad’s revenue adequacy in 

successive subdockets under Docket No. 

EP 552, most recently in Railroad 

Revenue Adequacy—2019 

Determination, EP 552 (Sub-No. 24) 

(STB served Oct. 1, 2020).1 Under the 

Board’s procedures, ‘‘a railroad is 

considered revenue adequate under 49 

U.S.C. 10704(a) if it achieves a rate of 

return on net investment (ROI) equal to 

at least the current cost of capital for the 

railroad industry.’’ Id. at 1. 

The Joint Carriers propose two 

changes to the Board’s procedures for 

annually determining revenue 

adequacy. First, the Joint Carriers 

propose that the Board determine 

whether a railroad is revenue adequate 

by comparing the extent by which its 

ROI exceeds the rail industry’s cost of 

capital to the extent by which 

companies in the S&P 500 exceed their 

cost of capital—in short, to examine 

railroads in comparison with the larger 

universe of S&P 500 companies (the 

Comparison Proposal). (Pet. 3, 8.) The 

Joint Carriers contend that railroads 

compete against other firms for capital, 

and that the financial health of the 

railroad industry ‘‘must be considered 

in relation to the competition railroads 

face in the capital markets from other, 

unregulated firms.’’ (Id. at 3.) More 

specifically, the Joint Carriers argue that 

the Board should define annual revenue 

adequacy to mean that a railroad’s 

‘‘Adjusted STB ROI’’ 2 exceeds the rail 

industry cost of capital by more than the 

median S&P 500 firm’s ROI exceeds its 

cost of capital. (Id. at 20–21.) Under the 

Comparison Proposal, the Board would 

direct the Association of American 

Railroads to submit ‘‘Adjusted STB 

ROI’’ and cost of capital calculations for 

every S&P 500 company, and the Board 

‘‘would calculate the median difference 

between the Adjusted STB ROI and the 

cost of capital for all companies in the 

S&P 500, except for banking and real 

estate companies.’’ 3 (Id. at 21.) As part 


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