Deposits of Excise Taxes

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 40

[REG-103827-99]

RIN 1545-AX11

Deposits of Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This document invites comments from the public on issues that

the IRS may address in proposed regulations relating to the

requirements for excise tax returns and deposits. All materials

submitted will be available for public inspection and copying.

DATES: Written and electronic comments must be submitted by April 6,

2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-103827-99), room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions may be hand delivered Monday through

Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-

103827-99), Courier's Desk, Internal Revenue Service, 1111 Constitution

Avenue NW., Washington, DC. Alternatively, taxpayers may send

submissions electronically via the Internet by selecting the ``Tax

Regs'' option on the IRS Home Page, or directly to the IRS Internet

site at http://www.irs.ustreas.gov/tax__regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Concerning submissions, the

Regulations Unit, (202) 622-7180; concerning the proposals, Susan Athy,

(202) 622-3130 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: The Excise Tax Procedural Regulations (26

CFR part 40) set forth the requirements related to filing the Quarterly

Federal Excise Tax Return, Form 720, and making deposits of excise

taxes. Certain provisions of the current regulations are complicated.

The IRS is interested in simplifying the filing and deposit rules both

as to the timing and the calculation of the correct amount to deposit.

Simplification would reduce recordkeeping burdens and costs for

taxpayers, improve compliance, and facilitate proper administration of

the excise taxes and trust funds. The IRS requests comments on how the

regulations can be simplified; comments are requested in particular on

the following issues.

Time for Filing Returns

The regulations currently provide that the Form 720 generally must

be filed by the last day of the first calendar month following the

quarter for which it is made. However, in the case of returns related

to taxes imposed by chapter 33 (communications and air transportation)

and section 4681 (ozone-depleting chemicals), the due date is the last

day of the second calendar month following the quarter for which it is

made.

The IRS requests comments on whether there should be one filing

date for all Form 720 filers, such as 30 days after the end of the

quarter. This would be a simple rule that would apply equally to all

taxpayers.

Use of Government Depositaries

Background

The regulations currently provide that excise taxes must be

deposited on a semimonthly basis. Generally, taxes must be deposited by

the 9th day of the semimonthly period following the semimonthly period

for which the deposit is made (the 9-day rule). There are, however,

exceptions to this rule. Taxes on ozone-depleting chemicals must be

deposited by the end of the second semimonthly period following the

semimonthly period for which the deposit is made (the 30-day rule). In

addition, for taxes imposed by section 4081 (gasoline, diesel fuel, and

kerosene), communications taxes, and air transportation taxes,

taxpayers may choose a deposit rule other than the 9-day rule. For

section 4081 taxes, section 518 of the Highway Revenue Act of 1982

provides that a qualified person may deposit by the 14th day of the

semimonthly period following the semimonthly period for which it is

made if the deposit is made by electronic funds transfer (the 14-day

rule). For communications and air transportation taxes, if a person

computes the amount of tax to be reported and deposited on the basis of

amounts considered as collected, the person may deposit the taxes

considered as collected during a semimonthly period by the third

banking day after the seventh day of the semimonthly period (the

alternative method).

[[Page 1077]]

The regulations also provide that the amount of the deposit for a

semimonthly period must equal the amount of net tax liability incurred

during that period unless either the look-back quarter safe harbor rule

or the current liability safe harbor rule applies. In general, the

look-back quarter safe harbor rule is met if the deposits for each

semimonthly period in the quarter are at least \1/6\ of the net

liability reported for that tax in the second calendar quarter

preceding the current quarter, and the current liability safe harbor

rule is met if the deposit for each semimonthly period is at least 95

percent of the net tax liability for the semimonthly period. Safe

harbor rules apply separately to each class of tax. Each semimonthly

deposit must be timely made at an authorized Government depository.

Also, the amount of any underpayment must be paid by the due date of

the return, without extension. A failure to meet all the deposit

requirements of a safe harbor rule for any semimonthly period

eliminates the availability of that safe harbor for the entire quarter.

As the above description of current regulations illustrates, the

deposit rules are quite complicated, and taxpayers have experienced

difficulty in complying with them. In addition, under existing safe

harbor rules, penalties for failure to deposit may be imposed for all

semimonthly periods in a quarter if a taxpayer fails to deposit timely

and in the correct amount during any semimonthly period in that

quarter.

Request for Comments

With respect to the deposit rules, the IRS specifically requests

comments on the following issues:

1. Whether there should be a single deposit date for all excise

taxes, such as 14 days after the end of the semimonthly period. (The

IRS believes it would be appropriate to retain the alternative method

allowing communications and air transportation tax collectors to file

returns and make deposits based on amounts billed or tickets sold.)

2. Whether a taxpayer should have to deposit at least 95 percent of

tax liability incurred for the corresponding semimonthly period (in

lieu of the current requirement of 100 percent with safe harbor rules).

3. Whether the amount required to be deposited for a quarter should

be computed without reduction for the amounts of any claims made on

Schedule C of Form 720 for that quarter.

Judith C. Dunn,

Associate Chief Counsel (Domestic).

[FR Doc. 00-15 Filed 1-6-00; 8:45 am]

BILLING CODE 4830-01-U