The Internal Revenue Service has announced that interest rates for the calendar quarter beginning July 1, 2008, will drop by one percentage point. The new rates will be:
- Five percent for overpayments [four percent in the case of a corporation];
- Five percent for underpayments;
- Seven percent for large corporate underpayments; and
- Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 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 (0.5) of a percentage point.
These interest rates are computed from the federal short-term rate based on daily compounding determined during April 2008.
Revenue Ruling 2008-27, announcing the new rates of interest, will appear in Internal Revenue Bulletin No. 2008-26, dated June 30, 2008.