Corporate estimated tax payments.

The Tax Extension Act of 1991 made a well-publicized change to the estimated tax requirements of large corporations (those with over $1 million in taxable income). These entities, which are not entitled to rely on the prior year's taxes in setting quarterly estimates, now must pay 93%, rather than 90%, of their current tax liability.

The IRS points out this change also may affect estimates required of S corporations and exempt organizations subject to the unrelated business income tax (IRS announcement 92-5, IRB no. 1992-2). Where S corporations and exempt organizations formerly faced a 90% requirement, a 93% threshold applies for 1992. S corporations incur an estimated tax filing requirement when they are subject to the built-in gains tax, the excess passive gross receipts tax or business credit recapture.

Observation: The IRS explained that the 1991 instructions for form 1120S and form 990-T were printed before the law change and erroneously indicate a 90% rate for 1992 quarterly estimates rather than the knew 93% threshold.