Final regulations establish a user fee for estate tax closing letters

By Paul Bonner

The IRS issued final regulations Monday (T.D. 9957) instituting a user fee of $67 for the Service to issue an estate tax closing letter.

The final regulations adopt without significant change proposed regulations issued in late December 2020 (REG-114615-16).

An estate tax closing letter informs its authorized recipient of the IRS's acceptance of the estate tax return (generally, Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) and provides some return information, such as the amounts of the net estate tax, any state death tax credit or deduction, and any generation-skipping transfer tax for which the estate is liable.

Formally known as IRS Letter 627, an estate tax closing letter has heretofore been issued free of charge. Prior to June 2015, the letters, although not mandated by any statute, were automatically issued upon closing of every estate tax return filed. Since then, they have been issued only upon request. That change was prompted by the number of estate tax filings having dramatically increased after late 2010, when the "portability" provision in Sec. 2010(c) was enacted.

Portability allows a deceased spouse's unused applicable exclusion (DSUE) amount to pass to a surviving spouse. Since 2010, many or most estate returns are filed for the purpose of establishing the DSUE amount and report no tax due. During the same time, the IRS's available resources and budget were stretched, the proposed regulations' preamble stated. Because of these constraints and the letters' purpose as a convenience to authorized persons, the IRS determined that charging a user fee is appropriate. The amount of $67 was arrived at by estimating direct and indirect costs under Office of Management and Budget policies and guidelines.

The new fee will apply to requests for estate tax closing letters received by the IRS on or after the date 30 days after publication of these final regulations in the Federal Register. The regulations are scheduled to be published on Sept. 28, 2021.

On Feb. 25, 2021, AICPA submitted comments on the proposed regulations.

Paul Bonner (Paul.Bonner@aicpa-cima.com) is a JofA senior editor.

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