26 USC 6655 - Failure by corporation to pay estimated income tax

View all text of Part I [§ 6651 - § 6661]

§ 6655. Failure by corporation to pay estimated income tax

(a) Addition to taxExcept as otherwise provided in this section, in the case of any underpayment of estimated tax by a corporation, there shall be added to the tax under chapter 1 for the taxable year an amount determined by applying—

(1) the underpayment rate established under section 6621,

(2) to the amount of the underpayment,

(3) for the period of the underpayment.

(b) Amount of underpayment; period of underpaymentFor purposes of subsection (a)—

(1) AmountThe amount of the underpayment shall be the excess of—

(A) the required installment, over

(B) the amount (if any) of the installment paid on or before the due date for the installment.

(2) Period of underpaymentThe period of the underpayment shall run from the due date for the installment to whichever of the following dates is the earlier—

(A) the 15th day of the 4th month following the close of the taxable year, or

(B) with respect to any portion of the underpayment, the date on which such portion is paid.

(3) Order of crediting payments

(1) Payable in 4 installments

(2) Time for payment of installments

(d) Amount of required installmentsFor purposes of this section—

(1) Amount

(A) In general

(B) Required annual paymentExcept as otherwise provided in this subsection, the term “required annual payment” means the lesser of—

(i) 100 percent of the tax shown on the return for the taxable year (or, if no return is filed, 100 percent of the tax for such year), or

(ii) 100 percent of the tax shown on the return of the corporation for the preceding taxable year.

Clause (ii) shall not apply if the preceding taxable year was not a taxable year of 12 months, or the corporation did not file a return for such preceding taxable year showing a liability for tax.

(2) Large corporations required to pay 100 percent of current year tax

(A) In general

(B) May use last year’s tax for 1st installment

(e) Lower required installment where annualized income installment or adjusted seasonal installment is less than amount determined under subsection (d)

(1) In generalIn the case of any required installment, if the corporation establishes that the annualized income installment or the adjusted seasonal installment is less than the amount determined under subsection (d)(1) (as modified by paragraphs (2) and (3) of subsection (d))—

(A) the amount of such required installment shall be the annualized income installment (or, if lesser, the adjusted seasonal installment), and

(B) any reduction in a required installment resulting from the application of this paragraph shall be recaptured by increasing the amount of the next required installment determined under subsection (d)(1) (as so modified) by the amount of such reduction (and by increasing subsequent required installments to the extent that the reduction has not previously been recaptured under this subparagraph).

(2) Determination of annualized income installment

(A) In generalIn the case of any required installment, the annualized income installment is the excess (if any) of—

(i) an amount equal to the applicable percentage of the tax for the taxable year computed by placing on an annualized basis the taxable income, adjusted financial statement income (as defined in section 56A), and modified taxable income—(I) for the first 3 months of the taxable year, in the case of the 1st required installment,(II) for the first 3 months of the taxable year, in the case of the 2nd required installment,(III) for the first 6 months of the taxable year in the case of the 3rd required installment, and(IV) for the first 9 months of the taxable year, in the case of the 4th required installment, over

(ii) the aggregate amount of any prior required installments for the taxable year.

(B) Special rulesFor purposes of this paragraph—

(i) Annualization

(ii) Applicable percentage

(iii) Modified taxable income

(i) If the taxpayer makes an election under this clause—(I) subclause (I) of subparagraph (A)(i) shall be applied by substituting “2 months” for “3 months”,(II) subclause (II) of subparagraph (A)(i) shall be applied by substituting “4 months” for “3 months”,(III) subclause (III) of subparagraph (A)(i) shall be applied by substituting “7 months” for “6 months”, and(IV) subclause (IV) of subparagraph (A)(i) shall be applied by substituting “10 months” for “9 months”.

(ii) If the taxpayer makes an election under this clause—(I) subclause (II) of subparagraph (A)(i) shall be applied by substituting “5 months” for “3 months”,(II) subclause (III) of subparagraph (A)(i) shall be applied by substituting “8 months” for “6 months”, and(III) subclause (IV) of subparagraph (A)(i) shall be applied by substituting “11 months” for “9 months”.

(iii) An election under clause (i) or (ii) shall apply to the taxable year for which made and such an election shall be effective only if made on or before the date required for the payment of the first required installment for such taxable year.

(3) Determination of adjusted seasonal installment

(A) In generalIn the case of any required installment, the amount of the adjusted seasonal installment is the excess (if any) of—

(i) 100 percent of the amount determined under subparagraph (C), over

(ii) the aggregate amount of all prior required installments for the taxable year.

(B) Limitation on application of paragraph

(C) Determination of amountThe amount determined under this subparagraph for any installment shall be determined in the following manner—

(i) take the taxable income for all months during the taxable year preceding the filing month,

(ii) divide such amount by the base period percentage for all months during the taxable year preceding the filing month,

(iii) determine the tax on the amount determined under clause (ii), and

(iv) multiply the tax computed under clause (iii) by the base period percentage for the filing month and all months during the taxable year preceding the filing month.

(D) Definitions and special rulesFor purposes of this paragraph—

(i) Base period percentage

(ii) Filing month

(iii) Reorganization, etc.

(4) Treatment of subpart F income

(A) In general

(B) Prior year safe harbor

(i) In generalIf a taxpayer elects to have this subparagraph apply for any taxable year—(I) subparagraph (A) shall not apply, and(II) for purposes of computing any annualized income installment for such taxable year, the taxpayer shall be treated as having received ratably during such taxable year items of income and credit described in subparagraph (A) in an amount equal to 115 percent of the amount of such items shown on the return of the taxpayer for the preceding taxable year (the second preceding taxable year in the case of the first and second required installments for such taxable year).

(ii) Special rule for noncontrolling shareholder(I) In general(II) Noncontrolling shareholder

(5) Treatment of certain REIT dividends

(A) In general

(B) Closely held REIT

(f) Exception where tax is small amount

(g) Definitions and special rules

(1) TaxFor purposes of this section, the term “tax” means the excess of—

(A) the sum of—

(i) the tax imposed by section 11 or subchapter L of chapter 1, whichever applies,

(ii) the tax imposed by section 55,

(iii) the tax imposed by section 59A, plus

(iv) the tax imposed by section 887, over

(B) the credits against tax provided by part IV of subchapter A of chapter 1.

For purposes of the preceding sentence, in the case of a foreign corporation subject to taxation under section 11 or 1201(a), or under subchapter L of chapter 1, the tax imposed by section 881 shall be treated as a tax imposed by section 11.

(2) Large corporation

(A) In general

(B) Rules for applying subparagraph (A)

(i) Testing period

(ii) Members of controlled group

(iii) Certain carrybacks and carryovers not taken into account

(3) Certain tax-exempt organizationsFor purposes of this section—

(A) Any organization subject to the tax imposed by section 511, and any private foundation, shall be treated as a corporation subject to tax under section 11.

(B) Any tax imposed by section 511, and any tax imposed by section 1 or 4940 on a private foundation, shall be treated as a tax imposed by section 11.

(C) Any reference to taxable income shall be treated as including a reference to unrelated business taxable income or net investment income (as the case may be).

In the case of any organization described in subparagraph (A), subsection (b)(2)(A) shall be applied by substituting “5th month” for “4th month”, subsection (e)(2)(A) shall be applied by substituting “2 months” for “3 months” in clause (i)(I), the election under clause (i) of subsection (e)(2)(C) may be made separately for each installment, and clause (ii) of subsection (e)(2)(C) shall not apply. In the case of a private foundation, subsection (c)(2) shall be applied by substituting “May 15” for “April 15”.

(4) Application of section to certain taxes imposed on S corporationsIn the case of an S corporation, for purposes of this section—

(A) The following taxes shall be treated as imposed by section 11:

(i) The tax imposed by section 1374(a).

(ii) The tax imposed by section 1375(a).

(iii) Any tax for which the S corporation is liable by reason of section 1371(d)(2).

(B) Paragraph (2) of subsection (d) shall not apply.

“(ii) the sum of—“(I) the amount determined under clause (i) by only taking into account the taxes referred to in clauses (i) and (iii) of subsection (g)(4)(A), and“(II) 100 percent of the tax imposed by section 1375(a) which was shown on the return of the corporation for the preceding taxable year.”

(D) The requirement in the last sentence of subsection (d)(1)(B) that the return for the preceding taxable year show a liability for tax shall not apply.

(E) Subsection (b)(2)(A) shall be applied by substituting “3rd month” for “4th month”.

(F) Any reference in subsection (e) to taxable income shall be treated as including a reference to the net recognized built-in gain or the excess passive income (as the case may be).

(h) Excessive adjustment under section 6425

(1) Addition to tax

(2) Excessive amountFor purposes of paragraph (1), the excessive amount is equal to the amount of the adjustment or (if smaller) the amount by which—

(A) the income tax liability (as defined in section 6425(c)) for the taxable year as shown on the return for the taxable year, exceeds

(B) the estimated income tax paid during the taxable year, reduced by the amount of the adjustment.

(i) Fiscal years and short years

(1) Fiscal years

(2) Short taxable year

(j) Regulations

(Aug. 16, 1954, ch. 736, 68A Stat. 825; Pub. L. 88–272, title I, § 122(c), Feb. 26, 1964, 78 Stat. 28; Pub. L. 90–364, title I, § 103(c), (d)(2), (e)(1), June 28, 1968, 82 Stat. 262, 264; Pub. L. 93–625, § 7(c), Jan. 3, 1975, 88 Stat. 2115; Pub. L. 94–455, title XIX, § 1906(b)(3)(A)–(C)(i), (13)(A), Oct. 4, 1976, 90 Stat. 1833, 1834; Pub. L. 95–600, title III, § 301(b)(20)(B), Nov. 6, 1978, 92 Stat. 2824; Pub. L. 96–499, title XI, § 1111(a), (b), Dec. 5, 1980, 94 Stat. 2681, 2682; Pub. L. 97–34, title VI, § 601(a)(6)(B), title VII, § 731(a), (b), Aug. 13, 1981, 95 Stat. 336, 346, 347; Pub. L. 97–248, title II, § 234(a), (c), (d), Sept. 3, 1982, 96 Stat. 503, 504; Pub. L. 97–448, title II, § 201(j)(4), Jan. 12, 1983, 96 Stat. 2396; Pub. L. 99–499, title V, § 516(b)(4)(D), Oct. 17, 1986, 100 Stat. 1771; Pub. L. 99–514, title VII, § 701(d)(3), title XV, § 1511(c)(15), Oct. 22, 1986, 100 Stat. 2342, 2745; Pub. L. 100–203, title X, § 10301(a), Dec. 22, 1987,