SUPPLEMENTARY INFORMATION:

Authority

This document contains amendments to the Procedure and Administration Regulations (26 CFR part 301) issued by the Secretary of the Treasury or the Secretary's delegate (Secretary) under the authority granted by sections 6311 and 7805(a) of the Internal Revenue Code (Code) regarding the payment of internal revenue taxes by commercially acceptable means.

Section 6311(a) provides an express delegation of authority to the Secretary, stating that the Secretary may receive payment of internal revenue taxes by any commercially accepted means under conditions provided by regulations prescribed by the Secretary. Section 6311(d)(1)(A) directs the Secretary to prescribe regulations as the Secretary deems necessary to receive payment by commercially acceptable means, including regulations that specify which methods of payment by commercially acceptable means will be accepted.

Section 7805(a) authorizes the Secretary to “prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”

Background and Explanation of Provisions

This document contains final regulations under section 6311. These final regulations amend provisions of § 301.6311-2 of the existing regulations (existing § 301.6311-2) to implement the changes made to section 6311 by section 2303 of the Taxpayer First Act (TFA), Public Law 116-25, 133 Stat. 981, 1013 (July 1, 2019).

Section 6311(a) provides that it is lawful for the Secretary to receive payment for internal revenue taxes by any commercially acceptable means that the Secretary deems appropriate to the extent and under the conditions provided in regulations prescribed by the Secretary. Existing § 301.6311-2, which was adopted by the publication of TD 8969 in the Federal Register (66 FR 64740) on December 14, 2001, authorizes payment of internal revenue taxes by credit or debit card so long as such payments are made in the manner and in accordance with the forms, instructions, and procedures prescribed by the Commissioner of Internal Revenue (Commissioner).

Prior to passage of the TFA, section 6311(d)(2) authorized the Secretary to enter into contracts to obtain services related to receiving payment of taxes by credit card or debit card, or charge card, but prohibited the Secretary from paying any fee or other consideration under any such contract. Existing § 301.6311-2(f) implements this provision. Existing § 301.6311-2(e) prohibits the IRS from imposing any fee or charge on persons making payment of taxes by credit card or debit card.

Section 2303 of the TFA amended section 6311(d)(2) by adding a discretionary exception whereby the Secretary is no longer prohibited from paying a fee under a contract related to receiving payment of taxes by credit or debit card to the extent that the Secretary ensures that any such fee is fully recouped from the persons paying taxes by credit or debit card pursuant to such contract. This provision enables the IRS to receive benefits similar to other entities that accept credit or debit cards, including guaranteed receipt of funds and reduction of paper check processing costs. This provision also enables taxpayers to make a payment more easily by credit or debit card directly to the IRS, such as over the telephone, without having to separately wait for the IRS to connect them to third-party processors. See H. Rept. 116-39(I), 116th Cong., 1st Sess. at 90 (2019).^[1]

On July 02, 2024, the Treasury Department and the IRS published in the Federal Register (89 FR 54746) a notice of proposed rulemaking (REG-120137-19) proposing amendments to § 301.6311-2 (proposed regulations). In response to proposed amendments to the regulations, the Treasury Department and the IRS received eight comments. The comments are available at www.regulations.gov. A public hearing was requested; however, because no one requested to speak at the public hearing, the hearing was cancelled. After careful consideration of the comments, the Treasury Department and the IRS adopt the text of the proposed regulations with no change.

Summary of Comments

Most comments were supportive of the proposed amendments to the regulations. Commenters generally noted that the ability of taxpayers to pay taxes by credit or debit card directly to the IRS would simplify the payment process, reduce the costs to taxpayers, and would encourage more taxpayers to timely pay their taxes.

One comment neither supported nor opposed the proposed amendments but requested that the IRS implement a better fee reimbursement model to improve the costs to taxpayers who pay taxes using credit or debit cards regardless of whether the proposed amendments are adopted. The concerns identified in the comment are outside the scope of these regulations, which do not actually implement any particular payment process or contract. Accordingly, a change to the proposed regulatory text is not necessary and the final regulations do not adopt this comment. ( printed page 65981)

Another comment expressed the view that simpler language could be used in the proposed regulations and that certain terms may be ambiguous or have multiple interpretations. The Treasury Department and the IRS considered these recommendations but determined that the language used in the proposed regulations, which these final regulations adopt, is drafted in a straightforward way that is consistent with the statutory text, and that no further changes are necessary.

Another comment expressed support for the proposed regulations with the caveat that no fee should be associated with using a credit or debit card. The final regulations, consistent with the proposed regulations and the requirements of section 2303 of the TFA, will provide the Secretary with the discretion to pay a fee under a contract relating to receiving payment of taxes by credit or debit card to the extent the Secretary ensures that any such fee is fully recouped from the persons paying taxes by credit or debit card pursuant to such contract.

Another comment argued that the IRS must undertake a cost-comparison under Office of Management and Budget (OMB) Circular A-76 (Circular) “in keeping with the philosophy of” the Federal Activities Inventory Reform Act of 1998 (FAIR Act), codified at 31 U.S.C. 501, which identifies activities that are commercial in nature. The comment stated that the proposed regulations “would potentially unwind the longstanding policy of the Federal Government to contract with the private sector to provide purely commercial services such as card payment processing.” Because neither section 6311 nor these regulations change the IRS's obligations under the Circular, and to the extent that IRS activities regarding collection of taxes by credit and debit card are subject to the requirements of the Circular and related laws, those activities will continue to be reviewed, and all applicable requirements will be met upon implementation of the final rule. Accordingly, the Treasury Department and the IRS have determined that the requested cost comparison is beyond the scope of these regulations.

Finally, the Treasury Department and the IRS received one submitted comment that did not address the proposed regulations.

Special Analyses

I. Regulatory Planning and Review

These regulations are not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (July 4, 2025) between the Treasury Department and the OMB regarding review of tax regulations. Therefore, a regulatory impact assessment is not required.

II. Regulatory Flexibility Act

It is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is based on the fact that the regulation would apply only to the IRS's ability to (1) pay a fee under a contract related to receiving payment of taxes by credit or debit card, and (2) recoup processing fees from the person paying taxes by credit or debit card. Under existing regulations, the IRS may not do either of those things. These final regulations would also implement a requirement under the TFA that the IRS must seek to minimize any fee the IRS is required to pay under such a contract. Because persons choosing to pay tax by credit or debit card are ordinarily required to pay processing fees to a third-party processor, the final regulations would not have a significant economic impact on such persons.

III. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold.

IV. Executive Order 13132: Federalism

Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order.

V. Small Business Administration

Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.

VI. Congressional Review Act

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Office of Information and Regulatory Affairs designated this rule as not a major rule, as defined by 5 U.S.C. 804(2).

Drafting Information

The principal author of these regulations is Crystal Jackson-Kaloz of the Office of the Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department and the IRS participated in their development.

Adoption of Amendments to the Regulations

Accordingly, the Treasury Department and IRS amend 26 CFR part 301 as follows:

91 FR 65980