Generally, the IRS charges interest when you fail to pay the amount of tax you owe by the date it is due. The interest rate charged is the federal short term rate plus 3%, and is determined quarterly by the IRS. A special rate applies to C corporations that owe more than $100,000. For these “large corporate underpayments”, Section 6621(c) of the tax code imposes an additional 2% interest rate, called “LCU” interest or “hot” interest.
The extra interest is assessed only after the “applicable date”. The applicable date starts if your corporation fails to pay the underpayment within 30 days of the date of a letter of proposed deficiency sent to you by the IRS (a 30-day letter), or a statutory notice of deficiency (90-day letter). When neither of those notices apply, the applicable date is the 30th day after you receive any notice from the IRS about an assessment, or proposed assessment, of tax.
Note there are three requirements for assessment of the hot rate:
1) Your corporation is a C corporation.
2) The tax you have underpaid must exceed $100,000.
3) The increased rate applies only after the applicable date.
Note, too, that when the hot rate applies, the interest is calculated based on the entire balance you owe–including interest, penalties and other additions to tax.