Rev. Proc. 62-27

The purpose of this Revenue Procedure is to amend section 6.03(2) of Revenue Procedure 60-17, C.B. 1960-2, 942.

Section 6.03(2) of Revenue Procedure 60-17 provides that if the credit claimed on a return was for accrued taxes which have since been abated by the foreign country or possession of the United States, interest is computed on the increase in tax resulting from the reduction in the credit allowable, from the date such adjustment was made by the foreign country to the date of payment of the tax.

Section 6601(a) of the Internal Revenue Code of 1954 provides that if any amount of tax imposed by this title (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at the rate of six percent per annum shall be paid for the period from such last date to the date paid.

Section 301.6601-1 of the Regulations on Procedure and Administration provides that interest at the rate of six percent per annum shall be paid on any unpaid amount of tax from the last date prescribed for payment of the tax (determined without regard to any extension of time for payment) to the date on which payment is received.

Section 905(c) of the Code, relating to adjustments on payment of accrued foreign taxes, provides, in part, that no interest shall be assessed or collected on any amount of tax due on any redetermination by the Secretary of the Treasury or his delegate, resulting from a refund to the taxpayer, for any period before the receipt of such refund , except to the extent interest was paid by the foreign country or possession of the United States on such refund for such period.

Thus, in reading the applicable law and regulations, there is an inconsistency between the provisions of such law and regulations and section 6.03(2) of Revenue Procedure 60-17. The exception to the general rule as to interest on tax deficiencies provides by section 905(c) of the Code deals only with cases in which there has been a refund of a paid foreign tax. See H.R. Report No. 920, Eighty-first Congress, C.B. 1949-2, 285; Senate Report No. 831, Eighty-first Congress, C.B. 1949-2, 289. There is no provision either in the Internal Revenue Code of 1954 or the regulations thereunder for a waiver of interest with respect to accrued foreign taxes which have been adjusted.

Accordingly, section 6.03(2) of Revenue Procedure 60-17 is modified to read as follows:

(2) Accrued foreign tax abated .-If the credit claimed on the return was for accrued taxes which have since been abated , the provisions of section 6601 of the Code are applicable to the computation of interest on the deficiency arising because of the abatement.