Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 10 - Interest, Penalty, Exceptions to Penalty, and Jeopardy Assessments › Rule 701-10.2 - Interest

Current through Register Vol. 47, No. 3, July 24, 2024
Except where a different rate of interest is provided by
				  Title X of the Iowa Code, the rate of interest on interest-bearing taxes and
				  interest-bearing refunds arising under Title X is fixed for each calendar year
				  by the director. In addition to any penalty computed, there shall be added
				  interest as provided by law from the original due date of the return. Any
				  portion of the tax imposed by statute which has been erroneously refunded and
				  is recoverable by the department shall bear interest as provided in Iowa Code
				  section
				  4217., subsection
				  2, from the date of payment of the refund, considering each fraction of a month
				  as an entire month. Interest which is not judgment interest is not payable on
				  sales and use tax, local option tax, and hotel and motel tax refunds.
Herman M. Brown v. Johnson,
248 Iowa 1143, 82 N.W.2d 134
				  (1957);
United Telephone Co. v. Iowa Department of Revenue,
365 N.W.2d 647 (Iowa 1985). However, interest which is not judgment interest
				  accrues on such refunds on or after January 1, 1995, and is payable on sales
				  and use tax, local option tax and hotel and motel tax refunds on or after
				  January 1, 1995.
(1)
Calendar
				year 1982.
The rate of interest upon all unpaid taxes which are due as
				of January 1, 1982, will be 17 percent per annum (1.4% per month). This
				interest rate will accrue on taxes which were due and unpaid as of, or after,
				January 1, 1982. In addition, this interest rate will accrue on tax refunds
				which by law accrue interest, regardless of whether the tax to be refunded is
				due before, on, or after January 1,1982. This interest rate of 17 percent per
				annum, whether for unpaid taxes or tax refunds, will commence to accrue in
				1982. Examples:
1. The taxpayer, X
				corporation, owes corporate income taxes assessed to it for the year 1975. The
				assessment was made by the department in 1977. On January 1,1982, that
				assessment had not been paid. The rate of interest on the unpaid tax assessed
				has accrued at the rate of 9 percent per annum (0.75% per month) through
				December 31, 1981. Commencing on January 1, 1982, the rate of interest on the
				unpaid tax will thereafter accrue at the rate of 17 percent per annum for 1982
				(1.4% per month). If the tax liability is not paid in 1982, the rate of
				interest will then accrue in 1983 in accordance with the rate fixed by the
				director as set forth in Iowa Code section
				4217..
2. The taxpayer, Y, owes retail sales taxes
				assessed to it for the audit period January 1, 1979, through December 31, 1982.
				The assessment is made on March 1, 1983. For the tax periods in which the tax
				became due prior to January 1, 1982, the interest rate on such unpaid sales
				taxes accrued at 9 percent per annum (0.75% per month). Commencing on January
				1, 1982, the entire unpaid portion of the tax assessed which was delinquent at
				that time will begin to accrue interest at the rate of 17 percent per annum.
				Those portions of the tax assessed first becoming delinquent in 1982 will bear
				interest at the rate of 17 percent per annum (1.4% per month). In the event
				that any portion of the tax assessed remains unpaid on January 1, 1983, the
				rate of interest will then accrue in 1983 in accordance with the rate fixed by
				the director as set forth in Iowa Code section
				4217..
3. The taxpayer, Z, files a refund claim for
				1978 individual income taxes in March 1982. The refund claim is allowed in May
				1982, and is paid. Z is entitled to receive interest at the rate of 9 percent
				per annum (0.75 % per month) upon the refunded tax accruing through December
				31,1981, and is entitled to interest at the rate of 17 percent per annum (1.4%
				per month) upon such tax from January 1, 1982, until the refund is
				paid.
4. A's 1981 individual income
				tax liability becomes delinquent on May 1, 1982. A owes interest, commencing on
				May 1, 1982, at the rate of 17 percent per annum (1.4% per month). In the event
				that A does not pay the liability in 1982, the rate of interest will then
				accrue in 1983 in accordance with the rate fixed by the director as set forth
				in Iowa Code section
				4217..
5. Decedent died December 15, 1976. The
				inheritance tax was due 12 months after death, or December 15, 1977. Prior to
				the due date, the estate was granted an extension of time, until September 1,
				1978, to file the return and pay the tax due. The tax, however, was paid March
				15, 1982. Interest accrues on the unpaid tax during the period of the extension
				of time (December 15, 1977, to September 1, 1978) at the rate of 6 percent per
				annum. Interest accrues on the delinquent tax from September 1, 1978, through
				December 31, 1981, at the rate of 8 percent per annum. Interest accrues on the
				delinquent tax from January 1, 1982, to the date of payment on March 15,1982,
				at the rate of 17 percent per annum.
6. B files a refund for sales taxes paid for
				the periods January 1, 1979, through December 31, 1982, in March 1983. The
				refund is allowed in May 1983. Since no interest is payable on sales tax
				refunds, B is not entitled to any interest.
Herman M. Brown Co. v.
				Johnson,
248 Iowa 1143 (1957). However, interest accrues and is
				payable on and after January 1, 1995.
The examples set forth in these rules are not meant to be
				  all-inclusive. In addition, other rules set forth the precise circumstance when
				  interest begins to accrue and whether interest accrues for each month or
				  fraction of a month or annually as provided by law. Interest accrues as
				  provided by law, regardless of whether the department has made a formal
				  assessment of tax.