[Code of Federal Regulations] [Title 26, Volume 13] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR] [Page 462-463] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) Procedure and Administration--Table of Contents Sec. 1.6655-1 Addition to the tax in the case of a corporation. (a) In general. (1) Section 6655 imposes an addition to the tax under chapter 1 of the Code in the case of any underpayment of estimated tax by a corporation (with certain exceptions described in section 6655(d)). This addition to the tax is in addition to any applicable criminal penalties and is imposed whether or not there was reasonable cause for the underpayment. The amount of the underpayment for any installment date is the excess of: (i) 70 percent of the tax shown on the return for the taxable year or, if no return was filed, 70 percent of the tax for such year, multiplied by the percentage of estimated tax required to be paid on or before the installment date, over (ii) The amount, if any, of the installment paid on or before the last day prescribed for such payment. (2) The amount of the addition is determined at the annual rate referred to in the regulations under section 6621 upon the underpayment of any installment of estimated tax for the period from the date such installment is required to be paid until the 15th day of the third month following the close of the taxable year, or the date such underpayment is paid, whichever is earlier. For purposes of determining the period of the underpayment (i) the date prescribed for payment of any installment of estimated tax shall be determined without regard to any extension of time, and (ii) a payment of estimated tax on any installment date, to the extent that it exceeds the amount of the installment determined under subparagraph (1)(i) of this paragraph for such date, shall be considered a payment of the previous underpayment, if any. (3) The term tax as used in subparagraph (1)(i) of this paragraph means the excess of the tax imposed by section 11 or 1201(a), or subchapter L, chapter 1 of the Code, whichever is applicable, over the sum of $100,000 and the credits against tax provided by sections 32, 33, and 38. However, for the rule with respect to the limitation upon the $100,000 exemption for members of certain electing affiliated groups, see section 243(b)(3)(C)(v) and the regulations thereunder. (4) For special rules relating to the determination of the amount of the underpayment in the case of a corporation whose income is included in a consolidated return, see Sec. 1.1502-5(b). (b) Statement relating to underpayment. If there has been an underpayment of estimated tax as of the installment date prescribed for its payment and the taxpayer believes that one or more of the exceptions described in Sec. 1.6655-2 [[Page 463]] precludes the assertion of the addition to the tax under section 6655, it should attach to its income tax return for the taxable year a Form 2220 showing the applicability of any exception upon which the taxpayer relies. (c) Example. The method prescribed in paragraph (a) of this section of computing the addition to the tax may be illustrated by the following example: Example. A corporation using the calendar year basis reported on its declaration for 1955, estimated tax in the amount of $50,000. It made payments of $2,500 each on September 15, 1955, and December 15, 1955. On March 15, 1956, it filed its final income tax return showing a tax liability of $200,000. Since the amount of each of the two installments paid by the last date prescribed for payment thereof was less than 5 percent of 70 percent of the tax shown on the return, the addition to the tax under section 6655(a) is applicable and is computed as follows: (1) Tax as defined in paragraph (a) of this section $100,000 ($200,000-$100,000 (no credits allowable under sections 32 and 33))............................................ (2) 70% of item (1)..................................... 70,000 (3) Amount of estimated tax required to be paid on each 3,500 installment date (5% of $70,000)....................... (4) Deduct amount paid on each installment date......... 2,500 --------------- (5) Amount of underpayment for each installment date 1,000 (item (3) minus item (4)).............................. --------------- (6) Addition to the tax: First installment--period 9-15-55 to 3-15-56.......... 30 Second installment--period 12-15-55 to 3-15-56........ 15 --------------- Total............................................. 45 [T.D. 6500, 25 FR 12150, Nov. 26, 1960, as amended by T.D. 6768, 29 FR 14926, Nov. 4, 1964; T.D. 7244, 37 FR 28897, Dec. 30, 1972; T.D. 7384, 40 FR 49322, Oct. 22, 1975]