Comment from Scarborough, James

Re: REG-103193-26; Estate Tax Closing Letter User Fee Update; Docket ID IRS-2026-0694 I submit this comment on the proposed rule increasing the user fee for issuance of an estate tax closing letter from $56 to $76. I do not object in principle to a user fee that reflects the full cost of a service when the agency has statutory authority to charge such a fee and when the service confers a special benefit on identifiable requesters. My concern is narrower: the proposed rule should provide a more transparent public basis for the specific cost-model assumptions used to set the fee at $76. The preamble explains the calculation in summary form. It identifies the annual request volume, staff-hour estimates, grade and payband assumptions, quality-assurance review assumptions, a 60 percent indirect employee rate, and a 62.92 percent overhead rate. These inputs are material to the final fee. However, the docket does not appear to include the underlying 2025 Cost Model or a supporting memorandum that would allow the public to evaluate how those assumptions were derived, validated, and tested. In addition, the final rule should address the administrative cost of updating the fee itself. The proposal relies on an average annual request volume of approximately 8,053 processed requests. At that volume, the proposed $20 increase would generate only about $161,000 in additional annual fee revenue. Treasury and the IRS should explain whether the cost of conducting the biennial review, preparing the proposed and final rules, obtaining clearance, publishing the rulemaking, and responding to comments has been considered in deciding whether this fee-update mechanism is cost-effective. If the rulemaking process consumes a substantial portion of the incremental revenue, the agency should consider whether a more transparent automatic adjustment mechanism, periodic bundled user-fee updates, or another administratively efficient approach would better serve full-cost recovery without repeatedly incurring rulemaking costs disproportionate to the fee change. Before finalizing the rule, Treasury and the IRS should either place the 2025 Cost Model in the docket or provide a fuller public summary addressing at least the following points: 1. How the 0.65 staff-hour estimate for processing each estate tax closing letter request was derived and validated; 2. Why the 60 percent indirect employee rate is appropriate for this service, and how often that rate is reviewed or updated; 3. How the GS grade distribution and IR payband allocation were determined; 4. Whether the FY 2023–FY 2024 average annual volume of 8,053 processed requests remains a reliable forward-looking basis for the fee, especially if a higher fee changes request behavior; 5. Whether the proposed fee is sensitive to plausible changes in request volume, labor time, staffing mix, or overhead; and 6. Whether any process improvements, digital delivery options, transcript-based alternatives, or other operational changes could reduce the per-request cost before or alongside a fee increase. 7. An accounting of the cost of the rulemaking procedure, and exploration of alternatives to frequent new rules. The Regulatory Flexibility Act discussion should also be clarified. The preamble states that decedents’ estates generally are not small entities and therefore the proposed regulations would have no economic impact on small entities. That conclusion may be correct as a matter of direct regulatory impact, but the final rule should explain whether small professional fiduciaries, estate-administration firms, law firms, accountants, or other small entities commonly request or absorb the fee in practice, and whether any such burden is direct, indirect, or merely passed through to estates. A final rule would be stronger if it did not merely present the arithmetic of the fee, but also explained why the selected assumptions are reasonable, why reasonable alternatives were rejected, and how the agency will prevent the fee from becoming stale or distorted as volume and processing practices change. I respectfully request that Treasury and the IRS supplement the public explanation of the cost model and respond to these issues before finalizing the proposed $76 fee.