Rev. Rul. 55-22

Advice has been requested as to the date from which interest should be computed on additional amounts shown to be due on amended corporation returns filed to reflect the changes in law referred to in section 3.01 of Revenue Ruling 54-366, C.B. 1954-2, 36.

Section 7851(a)(1)(D) of the Internal Revenue Code of 1954, which was enacted August 16, 1954, amends the Internal Revenue Code of 1939 to eliminate the reduction of the normal tax rate for corporations from 30 percent to 25 percent which was to take place on April 1, 1954. Accordingly, all corporations computing their tax under the 1939 Code for taxable years ending after March 31, 1954, are required to compute such taxes without regard to such reduction in the corporation's normal tax rate.

Revenue Ruling 54-366, supra , states, in part, that any corporation which has made a return for a taxable year beginning in 1953 and ending after March 31, 1954, or a short taxable year beginning in 1954 and ending after March 31, 1954, but before the date of enactment of the 1954 Code, upon specified forms, should file an amended return as promptly as possible and should `pay any additional tax due.' No reference was made in the Revenue Ruling to interest upon such additional tax.

Any taxpayer which had filed its return for a period in question, and paid the tax due under the 1939 Code, had fully complied with the taxing statute as it existed, and did not, prior to the enactment of the Internal Revenue Code of 1954, owe any tax or withhold from the Government any tax then payable or to which the United States then had a right of collection. In this connection, attention is called to the fact that `interest' upon Federal income tax is not a penalty, but is `clearly intended to compensate the delay in payment of the tax-the detriment of its nonpayment, to be continued during the time of its nonpayment-compensation, not punishment.' United States v. Edward II. Childs , 266 U.S. 304, T.D. 3671, C.B. IV-1, 241 (1925).

Not until the effective date of enactment of section 7851(a)(1)(D) of the 1954 Code, could the additional amount of tax become actually payable. The effect of that section, for interest purposes, is similar to that of a new imposition of a 5 percent additional tax which itself could not be considered due or payable prior to date of enactment. Accordingly, it is held that interest on any additional tax considered due as a result of this section, will not commence to run until August 17, 1954, the day after the date of enactment of the 1954 Code