The Internal Revenue Service announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2024.
For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here is a complete list of the new rates:
- 8% for overpayments (payments made more than the amount owed), 7% for corporations.
- 5.5% for the portion of a corporate overpayment exceeding $10,000.
- 8% for underpayments (taxes owed but not fully paid).
- 10% for large corporate underpayments.
How It’s Determined
Under the Internal Revenue Code, the rate of interest is determined quarterly. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points, according to a news release.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the overpayment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.
The interest rates announced are computed from the federal short-term rate determined during Oct. 2023. See the revenue ruling for details.
Revenue Ruling 2023-22 announcing the rates of interest will appear in Internal Revenue Bulletin 2023-49, dated Dec. 4, 2023.
Treasury, IRS Issue Proposed Regulations Defining Energy Property
The Department of the Treasury and the Internal Revenue Service also issued proposed regulations updating rules for the investment tax credit under section 48 (ITC) that have been unchanged since 1987. The proposed rules update the types of energy properties eligible for the section 48 ITC, reflecting changes in the energy industry, technological advances, and updates from the Inflation Reduction Act of 2022 (IRA).
Energy industry participants will appreciate that the proposed regulations provide definitions of energy properties for which the ITC was available before the IRA. These include but are not limited to, solar process heat, fiber-optic solar property, combined heat and power system property, qualified fuel cell property, and qualified microturbine property.
These proposed regulations also address technologies that were added to the ITC as energy property by the IRA, including electrochromic glass, energy storage technology, microgrid controllers, and biogas property. Importantly, the IRA added new provisions to the ITC to allow smaller projects to include the cost of certain types of interconnection property in their credit amount.
Additionally, the proposed regulations provide general rules for the ITC including the application of the “80/20” Rule to retrofitted energy property, dual-use property, and issues related to multiple owners of energy property.
Additional information about guidance issued under the IRA is available in the Inflation Reduction Act of 2022.