90 FR 96 pgs. 21410-21413 - Estate Tax Closing Letter User Fee Update
Type: RULEVolume: 90Number: 96Pages: 21410 - 21413
Pages: 21410, 21411, 21412, 21413Docket number: [TD 10031]
FR document: [FR Doc. 2025-08928 Filed 5-16-25; 8:45 am]
Agency: Treasury Department
Sub Agency: Internal Revenue Service
Official PDF Version: PDF Version
[top]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 300
[TD 10031]
RIN 1545-BR28
Estate Tax Closing Letter User Fee Update
AGENCY:
Internal Revenue Service (IRS), Treasury.
ACTION:
Interim final rule.
SUMMARY:
This document contains interim final regulations relating to the imposition of a user fee on authorized persons requesting the issuance of IRS Letter 627, also referred to as an estate tax closing letter. These regulations reduce the amount of the user fee imposed on a request for the issuance of an estate tax closing letter. The Independent Offices Appropriations Act of 1952 authorizes the charging of user fees. The text of the interim final regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this edition of the Federal Register .
DATES:
Effective date: These regulations are effective on May 20, 2025.
Applicability date: For date of applicability, see §?300.12(d).
FOR FURTHER INFORMATION CONTACT:
Concerning the interim final regulations, Juli Ro Kim at (202) 317-6859; concerning cost methodology, Maria E. Arias-Buchanan at (202) 803-9569 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Authority
This document contains interim final amendments to 26 CFR part 300 regarding user fees for authorized persons who request the issuance of an estate tax closing letter (IRS Letter 627).
The Independent Offices Appropriations Act of 1952 (IOAA) (31 U.S.C. 9701) authorizes each agency to prescribe regulations that establish user fees for services provided by the agency. The IOAA provides that regulations implementing user fees are subject to policies prescribed by the President; these policies are set forth in the Office of Management and Budget Circular A-25, 58 FR 38142 (July 15, 1993) (OMB Circular A-25).
The IOAA states that the services provided by an agency should be self-sustaining to the extent possible. Under OMB Circular A-25, agencies that provide 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, unless an exception to the full cost requirement is granted. As required by the IOAA and OMB Circular A-25, agencies are to review user fees biennially and update them as necessary to reflect changes in the cost of providing the underlying services.
Background and Explanation of Provisions
A. Estate Tax Closing Letter User Fee
[top] On September 28, 2021, the Department of the Treasury (Treasury Department) and the IRS published final regulations (TD 9957) in the Federal Register (86 FR 53539) establishing a $67 user fee to apply to requests for the issuance of an estate tax closing letter, based on a 2019 Cost Model. As explained in the Background section of the preamble of TD 9957, 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. Therefore, the IRS is authorized, pursuant to the IOAA and OMB Circular A-25, 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
In 2021, the IRS conducted a biennial review of the estate tax closing letter user fee and issued a new Cost Model that resulted in no change to the $67 user fee.
In 2023, the IRS conducted a biennial review of the estate tax closing letter user fee and issued a new Cost Model, which determined that the full cost of issuing estate tax closing letters to authorized persons is $56.
B. Calculation of User Fees Generally
The IRS follows generally accepted accounting principles (GAAP) in calculating the full cost of providing services. The Federal Accounting Standards Advisory Board (FASAB) is the body that establishes GAAP that apply for Federal reporting entities, such as the IRS. FASAB publishes the FASAB Handbook of Accounting Standards and Other Pronouncements, as amended, available at https://fasab.gov/accounting-standards/ . The FASAB Handbook 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 below 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 a cost center. Cost centers usually are separate offices distinguished by subject-matter area of responsibility or geographic region. All costs of operating a cost center are recorded in the IRS's cost accounting system and allocated to that cost center. These costs include the direct costs for the cost center's activities and all indirect costs, including overhead, associated with that cost center. Each cost is recorded in only one cost center.
2. 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. When cost centers include multiple services, the IRS measures the time required to accomplish activities associated with each service to estimate the average time spent on the service in the related cost center. The average time devoted is multiplied by the relevant organizational unit's average labor and benefits cost per unit of time to determine the direct labor and benefits cost incurred to provide the service. To determine the full cost, the IRS then adds an appropriate overhead charge.
3. 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, such as the following:
• General management and administrative services of sustaining and supporting 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
• Library and legal services
To calculate the overhead allocable to a service, the IRS multiplies the current overhead rate by the direct labor and benefits costs of the service. The overhead rate is the ratio of the IRS's indirect labor, benefits, and non-labor costs of business divisions that do not interact with taxpayers to the direct labor and benefits costs of business divisions that interact with taxpayers. The IRS calculates the overhead rate annually based on cost elements underlying the Statement of Net Cost included in the IRS Annual Financial Statements, which are audited by the Government Accountability Office.
For this estate tax closing letter user fee review, the fiscal year (FY) 2023 overhead rate, based on FY 2022 costs, of 62.50 percent was used.
C. Full Cost Determination for the Estate Tax Closing Letter User Fee
The IRS followed the guidance provided by the OMB Circular A-25 guidance to compute the full cost of issuing estate tax closing letters to authorized persons. OMB Circular A-25 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 employees at grades 5, 8, and 11 of the general schedule (GS-5, GS-8, and GS-11). Approximately 0.65 staff hours are required to review the return, create the estate tax closing letters, and prepare the letters for mailing. The IRS received an average of 8,894 annual requests for estate tax closing letters in FY 2021 and FY 2022, requiring 5,781 staff hours.
Total hours allocated to the cost also must include indirect hours for campus employees, which are calculated by multiplying the number of direct hours by the applicable 60 percent indirect employee rate. Using this information, IRS determined that the total staff hours for processing requests for estate tax closing letters are 9,250 annually.
| Direct Staff Hours | 5,781 |
| Indirect Hours (60%) | + 3,469 |
| Total Hours | 9,250 |
To determine the labor and benefits costs, the IRS divided the 9,250 total hours by 2,080 (the total annual hours worked by a full-time employee (FTE)) to convert the hours to a 4.45 FTE equivalent. The processing of requests for estate tax closing letters is performed primarily (87.7 percent) by employees at the GS-5 level, but also by employees at the GS-8 level (1.7 percent) and GS-11 level (10.6 percent). The average salary and benefit cost for each of those levels was multiplied by that grade's percentage of processing time to arrive at a $67,355 total cost per FTE. Multiplying the cost per FTE by the 4.45 FTE equivalent resulted in a total labor and benefits cost of $299,730, as follows:
| Total Cost Per FTE | $67,355 |
| Total FTE | × 4.45 |
| Processing Labor & Benefits | $299,730 |
2. Quality Assurance Review Costs
[top] Outgoing estate tax closing letters are reviewed by quality assurance professionals at the following Internal Revenue (IR) paybands of the IRS Payband System: IR-10 (87.7 percent) and IR-06 (12.3 percent). Three out of every 100 estate tax closing letters mailed are reviewed to verify (1) the estate tax closing letter was authorized, (2) the information included in the letter was accurate, and (3) the address was correct. The 8,894 average number of
| Direct Staff Hours | 133 |
| Indirect Hours (60%) | + 80 |
| Total Hours | 213 |
QA reviews are processed by employees at various IR levels. Dividing the total hours by 2,080 (the total annual hours for each FTE), resulted in 0.10 FTEs. The average salary and benefits for both IR paybands conducting quality assurance reviews was multiplied by that IR payband's percentage of processing time to arrive at the $95,460 total cost per FTE. The total cost per FTE was then multiplied by the total FTE to determine the labor and benefits cost for QA reviews, as follows:
| Total Cost Per FTE | $95,460 |
| Total FTE | × 0.1 |
| Quality Assurance & Benefits | $95.46 |
3. Full Cost Per Request Calculation
The IRS applied the 62.5 percent overhead rate to the total labor and benefits cost to calculate the full cost of the estate tax closing letter program.
| Processing Labor & Benefits | $299,730 |
| Quality Assurance & Benefits | + 9,546 |
| Total Labor and Benefits | 309,276 |
| Overhead (62.50%) | + 193,297 |
| Full Cost | $502.573 |
The $56 cost per request was determined by dividing the full cost by the average annual volume of requests, as follows:
| Full Cost | $502.573 |
| Estimated Annual Request Volume | ÷ 8,894 |
| Cost Per Request | $56 |
Special Analyses
I. Regulatory Planning and Review
The OMB's Office of Information and Regulatory Analysis has determined that these regulations are not significant and subject to review under section 6(b) of Executive Order 12866.
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these interim final regulations will not have a significant economic impact on a substantial number of small entities. These regulations, which reduce the amount of 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 interim final regulations will establish a $56 fee, which is a reduction from the previously established fee and 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.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.
V. Good Cause
The user fee for the estate tax closing letter applies to all individuals who make a request and pay for the estate tax closing letter on https://www.pay.gov. It would be unnecessary and contrary to the public interest for the IRS to continue to charge the current, higher user fee during the period provided for public comment on the proposal to reduce that fee. To enable the reduced fee amount to be in effect immediately for authorized persons requesting an estate tax closing letter, the Treasury Department and the IRS find that there is good cause to dispense with (1) notice and public comment pursuant to 5 U.S.C. 553(b) and (c) and (2) a delayed effective date pursuant to 5 U.S.C. 553(d). The Treasury Department and the IRS will consider public comments submitted in response to the cross-referenced notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register and will promulgate a final rule after considering those comments.
VI. Submission to Small Business Administration
Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business.
VII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Office of Information and Regulatory Affairs designated this rule as not a major rule, as defined by 5 U.S.C. 804(2).
Drafting Information
The principal author of these regulations is Juli Ro Kim of the Office of the Associate Chief Counsel (Passthroughs, Trusts, and Estates). Other personnel from the Treasury Department and the IRS participated in the development of the regulations.
List of Subjects in 26 CFR Part 300
Estate taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 300 is amended as follows:
PART 300-USER FEES
Paragraph 1. The authority citation for part 300 continues to read in part as follows:
Authority:
31 U.S.C. 9701.
Par. 2. Section 300.12 is amended by revising paragraphs (b) and (d) to read as follows:
§?300.12 Fee for estate tax closing letter.
(b) Fee. The fee for issuing an estate tax closing letter is $56.
[top]
(d) Applicability date. This section applies to requests received by the IRS after May 20, 2025.
Edward Killen,
Acting Chief Tax Compliance Officer.
Approved: May 5, 2025.
Kevin M. Salinger,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2025-08928 Filed 5-16-25; 8:45 am]
BILLING CODE 4830-01-P