CCA 1120023: cash-bond deposit should be returned without interest

Plain-English summary

Chief Counsel Advice states that a remittance clearly designated as a cash-bond deposit should be returned when the Service has not applied it to an assessed tax liability and collection is not determined to be in jeopardy. The advice concludes that the deposit should be returned without interest because the taxpayer did not request interest and did not appear to satisfy the requirements for interest under the cited revenue procedure. It also states that returning the deposit would not suspend underpayment interest if a later deficiency were assessed for the same period and tax.

Ruling snapshot

• Question: Should a cash-bond deposit be returned, and should interest be paid with the return?
• Outcome: Advice given.
• Key authorities: IRC § 6603; Rev. Proc. 2005-18, sections 6.01, 7.02, and 8.

Full text (IRS public release)

ID: CCA_2011041513213926 Number: 201120023
Release Date: 5/20/2011
Office: --------------
UILC: 6603.00-00

From: ----------------------------
Sent: Friday, April 15, 2011 1:21:59 PM
To: ---------------------------
Cc: ------------------------------------------
Subject: Return of Deposit

The taxpayer's representative remitted a check accompanied by a letter clearly designating the
remittance as a deposit in the nature of a cash bond rather than a payment. Deposits in the nature of a
cash bond are to be returned to taxpayers upon request, unless the Service has applied them as a
payment against an assessed tax liability. Section 6.01 of Rev Proc. 2005-18. The emails you've sent
confirm that there has been no assessed tax liability against which this deposit could be applied. Nor has
there been a determination that collection of any tax to be assessed against the taxpayers is in jeopardy.

While the letter accompanying the check does not specify the "disputable issue" as required by section
7.02 of the Rev Proc., this only has bearing on whether section 6603 interest will be paid with the return
of the deposit. It does not affect the underlying nature of the remittance as a deposit in the nature of a
cash bond. The full amount of the deposit should be returned to the taxpayer. The representative's letter
requesting the return of the deposit does not request that any interest should be paid on the deposit and it
does not appear that the taxpayer has met the requirements of section 7.02 such that the taxpayer would
be entitled to interest. Accordingly, the deposit should be returned without interest. Also under section 8
of the Rev. Proc., because the deposit is being returned the underpayment interest will not be suspended
during the period for which the remittance was held as a deposit if a deficiency is later assessed against
the taxpayer for the same period and tax.

I will be out next week, but --------------------- has assisted me with this matter and
can help you in my absence.

Thanks,

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