The Internal Revenue Service announced that it would be lowering quarterly interest rates starting on July 1st eight days after it started to do so. The rates are calculated using the federal short-term rates that were determined in April of this year. Under the Internal Revenue Code, the Treasury Secretary determines the federal short-term rate at the beginning of each quarter.
Section 6621 (a) (1) of the Internal revenue code stated that the overpayment rate would now be equal to the federal short-term rate plus 3 percentage points (a seven percent drop from the previous rate), though for corporations it would be 2 percentage points instead of three (a six percent drop) unless the overpayment of tax exceeded $10,000. If it did exceed that amount, then the rate would be equal to the short-term rate plus half a percentage point for the interest calculated after December of 1994, or four and a half percent. Under section 621 (a) (2), the underpayment rate is 3 percentage points added to the short-term rate (a seven percent drop). Section 6621 (a) (2) states that in the case of underpayments by large corporations, the rate would be 5 percentage points instead of three added to the short term rate (a nine percent drop).