Rev. Proc. 55-9

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to outline the policy of the Internal Revenue Service with respect to corporation declarations of estimated tax required to be filed under the provisions of section 6016 of the Internal Revenue Code of 1954.

SEC. 2. FILING REQUIREMENT.

.01 Section 6016(a) of the Internal Revenue Code provides that for taxable years ending on or after December 31, 1955, a declaration of estimated tax shall be made by every corporation which is subject to taxation under section 11 or 1201(a), or subchapter L of chapter 1 (relating to insurance companies), if its income tax under such sections or such subchapter can reasonably be expected to exceed the sum of $100,000 plus the amount of any estimated credits allowable under part IV of subchapter A of chapter 1.

.02 The term `estimated tax' in the case of a corporation is defined in section 6016(b) of the Code to mean the amount by which the corporation's estimated income tax for the taxable year exceeds the sum of (1) $100,000 and (2) the amount of the corporation's estimated credits against tax. Thus, for example, a corporation which reasonably anticipates its income tax liability for the taxable year to be $105,000 but which does not expect to have any allowable credits has an `estimated tax' of $5,000 (the estimated income tax liability of $105,000 less $100,000, the amount of the exemption).

.03 Under section 6074(a) of the Code, the corporation declaration of estimated tax is required to be filed on or before the fifteenth day of the ninth month of the taxable year. If, however, the requirements necessitating the filing of a declaration are first met after the last day of the eighth month and before the first day of the twelfth month of the taxable year, the declaration must be filed on or before the fifteenth day of the twelfth month of the taxable year.

.04 A declaration filed on or before the fifteenth day of the ninth month of the taxable year may be amended at any time on or before the fifteenth day of the twelfth month of the taxable year.

SEC. 3. PAYMENT OF ESTIMATED TAX.

.01 The amount of the estimated tax required to be paid is a percentage of such tax. The percentage increases from 10 percent for taxable years ending before December 31, 1956, to 50 percent for taxable years ending on or after December 31, 1959, as shown in the following table:

                                                The amount required

.03 In the case of an amended declaration, the installment payable on the 15th day of the twelfth month of the taxable year, if any, is increased or decreased, as the case may be, to reflect the increase or decrease in the estimated tax by reason of the amended declaration. For example, a corporation on the calendar year basis filed a declaration on September 15, 1955, reporting an estimated tax in the amount of $20,000. The first installment of $1,000 (5%of $20,000) accompanied the declaration. However, it files an amended declaration on December 15, 1955, and reports an amended estimated tax of $30,000. Since the corporation already has paid $1,000, it must now make a payment of $2,000 computed as follows:

     Required amount of estimated tax (10% of $30,000)....  $3,000

SEC. 4. DECLARATION FORM.

Form 1120-ES, Corporation Declaration of Estimated Income Tax, is the form to be used by corporations in making the declarations required under the provisions of section 6016(a) of the Code. Form 1120-ES for 1955 was mailed to all corporations which filed corporation income tax returns for the calendar year 1954 and certain fiscal years ending in 1955. Mailings of Form 1120-ES for 1956 and subsequent years will be made only to corporations which file taxable declarations on Form 1120-ES for the preceding year.

SEC. 5. FAILURE TO PAY ESTIMATED TAX.

.01 The addition to tax provided by section 6655 of the Code for failure to comply with the new declaration system with respect to corporations is very similar to that effective in the case of individuals. Such addition is six percent per annum upon the amount of the underpayment, as determined under section 6655(b) of the Code, for the period of the underpayment as determined under section 6655(c) of the Code.

.02 Although no criminal penalties are provided under the Internal Revenue Code for failure to file a corporation declaration of estimated tax, section 7203 of the Code imposes a criminal penalty for willful failure to pay the corporation estimated tax.

SEC. 6. EXTENSIONS OF TIME FOR FILING.

.01 District Directors of Internal Revenue are authorized to grant reasonable extensions of time for filing corporation declarations of estimated income tax on Form 1120-ES and amended declarations on such form and for paying the tax due thereon. District Directors will follow a policy of granting such extensions only if it is shown to their satisfaction that undue hardship, as distinguished from financial inconvenience, would result if payment of the installment due were made on the date prescribed for its payment. Interest is not imposed on any unpaid estimated income tax, whether or not the time for payment of such tax is extended. However, the addition to the tax under section 6655 of the Code for failure to pay the estimated income tax would apply to any unpaid amount of estimated tax deferred under an extension of time and determined to be an underpayment by reason of the provisions of such section, and it would be computed from the original due date, without regard to the deferral.

.02 Applications for extensions of time to file corporation declarations must be in writing and should contain sufficiently complete information to enable District Directors to pass upon the question of undue hardship. In any case in which undue hardship is established, the period of the extension to be granted will depend upon the facts of the case but in no event shall such period exceed three months. Ordinarily, extensions should not be granted for a period of more than one month.

SEC. 7. EFFECTIVE DATE.

This Revenue Procedure is effective August 23, 1955.