Section 4.4. Rate of interest applicable to unpaid taxes

(a) Initial rate of interest. The initial interest rate applicable to unpaid taxes is the rate in effect during the calendar year in which the tax is originally required by statute to be reported and paid to the Department, without regard to the dates of accrual, extensions for filing, subsequent amendments or alterations of the report or return, or subsequent resettlements, reassessments or redeterminations. Examples of the initial interest rate are as follows:

Example 1. Personal Income Tax. The initial interest rate on delinquent annual Personal Income Tax is determined by the rate in effect on the date the tax is required by statute to be reported and paid to the Department, even though the tax may relate to incidents which occurred prior to that date.

Example 2. Withheld personal income tax. In the case of personal income tax withheld by an employer, unpaid tax bears interest at the rate in effect on the date the tax is required to be reported and paid by the employer to the Commonwealth.

Example 3. Sales or use tax. Interest on sales or use tax—or other taxes paid to an officer, licensee or other collector—is due at the rate in effect on the date the tax is originally required by statute to be reported and transmitted by the officer, licensee or collector to the Department, even though the tax was collected or incurred prior thereto.

Example 4. Tentative tax. A tax required by statute to be reported and paid in installments prior to the original due date of the annual report or return—for example, tentative tax—bears interest at the rate in effect on the due date for the prepayment. The remaining portion of the tax due shall bear interest at the rate in effect on the date the taxpayer’s annual report or return is required to be filed under the applicable tax statute, determined without reference to an extension of time for filing the report.

Example 5. Corporate net income tax. Underpayments of installments of estimated tax do not bear interest during the period of the underpayment. Tax finally determined to be due, which is not paid by the date the annual report is due—determined without regard to an extension of time for filing—bears interest from the date until paid.

Example 6. Inheritance tax. With respect to inheritance tax and estate tax, the interest rate is the rate in effect on the date the tax becomes delinquent.

(b) Annual interest rate adjustment. The interest rate in effect when a tax is required to be paid remains in effect until the tax is paid or until the end of the calendar year, whichever occurs first. On January 1 of each succeeding year, the new interest rate for that year will commence to apply to unpaid tax.

Notation

Cross References

This section cited in 61 Pa. Code § 4.5 (relating to computation of interest on unpaid taxes); and 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).