BILLING CODE 4830-01-p
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-120137-19]
RIN 1545-BP66
Update of Regulations Regarding Payment of Tax by Commercially
Acceptable Means
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains proposed amendments to regulations
regarding the payment of tax by commercially acceptable means. The proposed
amendments would reflect changes to the law made by the Taxpayer First Act
that would allow the IRS to directly accept payments of tax by credit or debit
card, without having to connect taxpayers to third-party payment processors.
DATES: Electronic or written comments and requests for a public hearing must
be received by [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN
THE FEDERAL REGISTER].
ADDRESSES: Commenters are strongly encouraged to submit public
comments electronically. Submit electronic submissions via the Federal
eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG120137-19) by following the online instructions for submitting comments.
Requests for a public hearing must be submitted as prescribed in the “Comments

and Requests for a Public Hearing” section. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn. The Department
of the Treasury (Treasury Department) and the IRS will publish for any
comments submitted electronically or on paper to the public docket. Send paper
submissions to: CC:PA:01:PR (REG-120137-19), Room 5203, Internal Revenue
Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed
regulations, Crystal Jackson-Kaloz of the Office of the Associate Chief Counsel
(Procedure and Administration), (202) 317-5191 (not a toll-free number);
concerning the submission of comments and requests for a public hearing,
Publications and Regulations Section at (202) 317-6901 (not a toll-free number),
or by sending an email at publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed amendments to the Procedure and
Administration Regulations (26 CFR part 301) under section 6311 of the Internal
Revenue Code (Code). These proposed regulations would amend provisions of
§301.6311-2 of the existing regulations (existing §301.6311-2) to implement the
changes made to section 6311 of the Code by section 2303 of the Taxpayer First
Act (TFA), Public Law 116-25, 133 Stat. 981, 1013 (2019).
Section 6311(a) provides that it is lawful for the Secretary of the Treasury
or her delegate (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 64740-01) 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 rule. 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. Currently, the IRS utilizes third-party processors to process payment of
taxes by credit cards, which includes charge cards, and debit cards for which
taxpayers pay a processing fee directly to the third-party processor. Third-party
processors charge a variable percentage fee for payment by credit card and a
flat fee for payment by 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 similar benefits as 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.R. Rep. 116-39(I), 116th Cong.,
1st Sess. at 90 (2019).1 Section 2303 of the TFA now gives the IRS flexibility to
enter into a contract that would allow taxpayers to pay taxes by credit or debit
card directly to the IRS.
Explanation of Provisions
The proposed regulations would amend existing §301.6311-2 to conform
to the TFA’s amendment to section 6311(d)(2). The proposed regulations would
remove both the prohibition in existing §301.6311-2(f) on the payment of any fee
by the IRS under any contracts related to payment of taxes by credit, debit, or
charge card, and the prohibition in existing §301.6311-2(e) on the IRS imposing
any fee or charge on persons making payment of taxes by credit or debit card.
Under existing §301.6311-2(e), when a taxpayer pays any Internal Revenue tax

In 2019, different versions of the TFA were introduced in the House and Senate and both bills
contained provisions to amend section 6311 of the Code. H.R. 1957 was introduced in the House
on March 28, 2019, and passed the House on April 9, 2019, but did not pass the Senate. Section
2303 of H.R. 1957 contained proposed statutory language amending section 6311(d) that was
identical to the statutory language that was enacted a short time later on July 1, 2019, in section
2303 of H.R. 3151. Due to the procedural way in which H.R. 3151 became a vehicle for enacting
the TFA, there are no separate House, Senate, or Conference Reports regarding H.R. 3151,
which became the TFA, Public Law 116-25. Therefore, it is appropriate for the Treasury
Department and the IRS to look to the House Ways and Means Committee Report for H.R. 1957,
the immediate predecessor to H.R. 3151, to understand the intended scope of section 2303 of the
TFA.
4

by credit or debit card under contracts with third-party processors, the IRS does
not charge the taxpayer a fee, and the IRS does not receive any portion of the
fee charged by the third-party processor. Because the exception added to
section 6311(d)(2) by the TFA is discretionary, proposed §301.6311-2(e)(1)
would continue to authorize the IRS to enter into those contracts with third-party
processors in which it does not pay a fee for services relating to receiving
payments of tax by credit or debit card.
Proposed §301.6311-2(e)(2) would also authorize the IRS to enter into
contracts in which it pays a fee to a third party to process a payment made by a
taxpayer. Under section 6311(d)(2), the IRS must seek to minimize any fee the
IRS is required to pay under such a contract. If the IRS pays a fee under such a
contract, under proposed §301.6311-2(e)(2), the IRS would fully recoup the
amount of the fee paid to the third-party from the persons paying taxes by credit
or debit card pursuant to the contract as a reimbursement fee.
Proposed §301.6311-2(e)(2) would require that the reimbursement fee be
paid by the taxpayer at the time of the credit or debit card tax payment. Section
6402 of the Code allows the Secretary to credit or refund any overpayment “in
respect of an internal revenue tax.” Because the reimbursement fee paid by the
taxpayer is not a tax, the Code’s credit and refund procedures would not apply.
Insofar as a taxpayer is to receive a refund of taxes paid by credit or debit card
under section 6402, the taxpayer cannot receive a refund of the reimbursement
fee paid to the IRS at the time of the tax payment. If the IRS pays a fee to a
third-party under a contract providing for the payment of taxes by credit or debit

cards, section 6311(d)(2), as amended by the TFA, requires that the fee be fully
recouped by the Secretary. The proper regime for adjusting credit or debit card
payment errors, including reimbursement fee errors, is found in section
6311(d)(3) and existing §301.6311-2(d)(1). The TFA does not change those
procedures, although the proposed regulations amend existing §301.63112(d)(1) to include payments of reimbursement fees under proposed §301.63112(e)(2).
Finally, proposed §301.6311-2(e) would authorize the IRS to enter into
contracts with third parties, regardless of whether the IRS pays a fee, but only if
the contract provides a cost benefit to the government. The cost benefit to the
government is derived from a reduction of check processing costs. In addition,
expanding taxpayers’ payment options generally encourages tax compliance, so
it is beneficial for both the government and taxpayers.
Proposed Applicability Date
The regulations are proposed to apply to payments of taxes and
reimbursement fees made on or after the date the regulations are published as
final regulations in the Federal Register.
Special Analyses
I.

Regulatory Planning and Review
Pursuant to the Memorandum of Agreement, Review of Treasury

Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions
issued by the IRS are not subject to the requirements of section 6 of Executive
Order 12866, as amended. Therefore, a regulatory impact assessment is not

required.
II.

Regulatory Flexibility Act
It is hereby certified that this proposed 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 current regulations, the IRS may not do either of those things. The
regulation 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 taxes by credit or debit card are ordinarily
required to pay processing fees to a third-party processor, the proposed
regulation, if finalized, would not have a significant economic impact on such
persons.
Pursuant to section 7805(f) of the Code, this notice of proposed
rulemaking has been submitted to the Chief Counsel for the Office of Advocacy
of the Small Business Administration for comment on its impact on small
business.
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 proposed
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.
Comments and Requests for Public Hearing
Before these proposed amendments to the final regulations are adopted
as final regulations, consideration will be given to comments that are submitted
timely to the Treasury Department and the IRS as prescribed in this preamble
under the ADDRESSES heading. The Treasury Department and the IRS
request comments on all aspects of the proposed regulations. Any electronic
and paper comments submitted will be made available at
https://www.regulations.gov or upon request.
A public hearing will be scheduled if requested in writing by any person

who timely submits electronic or written comments. Requests for a public
hearing are also encouraged to be made electronically. If a public hearing is
scheduled, notice of the date, time, and place for the public hearing will be
published in the Federal Register.
Announcement 2023–16, 2023–20 I.R.B. 854 (May 15, 2023), provides
that public hearings will be conducted in person, although the IRS will continue to
provide a telephonic option for individuals who wish to attend or testify at a
hearing by telephone. Any telephonic hearing will be made accessible to people
with disabilities.
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.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and IRS propose to amend 26 CFR
part 301 as follows:
Part 301—PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 continues to read in part
as follows:

Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6311-2 is amended by:
1. Revising paragraph (d)(1).
2. Removing paragraph (e).
3. Redesignating paragraphs (f), (g), and (h) as paragraphs (e), (f), and
(g).
4. Revising newly redesignated paragraph (e).
5. In new paragraph (f), removing the text “Internal Revenue Service” and
adding the text “IRS” in its place.
6. Revising newly redesignated paragraph (g).
The revisions read as follows:
§301.6311-2 Payment by credit card and debit card.
*****
(d) * * * (1) In general. Payments of taxes by credit card or debit card, and
payments of reimbursement fees referred to in paragraph (e)(2) of this section,
are subject to the applicable error resolution procedures of section 161 of the
Truth in Lending Act (15 U.S.C. 1666), section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or any similar provisions of State or local law, for
the purpose of resolving errors relating to the credit card or debit card account,
but not for the purpose of resolving any errors, disputes or adjustments relating
to the underlying tax liability.
*****
(e) Authority to enter into contracts.

(1) In general. The Commissioner may enter into contracts related to
receiving payments of tax by credit card or debit card if such contracts are cost
beneficial to the government. The determination of whether the contract is cost
beneficial will be based on an analysis appropriate for the contract at issue and
at a level of detail appropriate to the size of the government’s investment or
interest.
(2) Contracts under which fees are prohibited. The Commissioner may
enter into contracts that provide that the Internal Revenue Service (IRS) will not
pay a fee, charge, or other monetary consideration under such contracts related
to payments of tax by credit card or debit card. For payments of tax under such
contracts, this section does not prohibit the imposition of fees or charges by
issuers of credit cards or debit cards or by any other financial institutions or
persons participating in the credit card or debit card transaction. The IRS may
not receive any part of any such fees that may be charged.
(3) Contracts under which fees are permitted and must be recouped. The
Commissioner may enter into contracts that provide that the IRS will pay a fee,
charge, or other monetary consideration under such contracts related to
payments of tax by credit card or debit card. If the IRS pays a fee under such
contracts, it must recoup the full amount paid under such contracts as a
reimbursement fee from the persons paying tax by credit card or debit card. The
reimbursement fees will be limited to the amount of the fees that IRS pays under
any such contract and will be paid at the time of, and in addition to, the tax
payment. The reimbursement fee is not a tax imposed by the Code, and no

portion of the reimbursement fee is eligible for refund or credit under section
6402 of the Code. The error resolution procedures described in paragraph (d)(1)
of this section will apply to any errors concerning the reimbursement fee. In
negotiating contracts under this paragraph (e)(3), the Commissioner will seek to
minimize the amount of the fees paid.
*****
(g) Applicability date. The rules of this section apply to payments of taxes
and reimbursement fees made on or after [date of publication of final regulations
in the Federal Register].

Douglas W. O’Donnell,
Deputy Commissioner.

[FR Doc. 2024-14002 Filed: 7/1/2024 8:45 am; Publication Date: 7/2/2024]