Deposits of Excise Taxes

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 40

[TD 8616]

RIN 1545-AT26

Deposits of Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations relating to

deposits of excise taxes. These temporary regulations reflect changes

to the law made by the Uruguay Round Agreements Act and affect persons

required to make deposits of excise taxes. The text of these temporary

regulations also serves as the text of the proposed regulations set

forth in the notice of proposed rulemaking on this subject in the

Proposed Rules section of this issue of the Federal Register.

EFFECTIVE DATE: These regulations are effective August 1, 1995.

FOR FURTHER INFORMATION CONTACT: Ruth Hoffman, (202) 622-3130 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Excise Tax Procedural

Regulations (26 CFR part 40) relating to deposits of excise taxes.

Effective January 1, 1995, the Uruguay Round Agreements Act of 1994

(the Act) amended sections 6302(e) and (f) (relating to deposits of

excise taxes). As amended, these provisions require an additional

deposit of all excise taxes except air transportation taxes in

September of each year. Beginning in 1997, the amendments also apply to

air transportation taxes. These temporary regulations provide safe

harbor rules for that additional deposit of tax.

Under existing rules, deposits of excise taxes for a semimonthly

period generally must equal the amount of tax liability incurred (or in

the case of collected taxes, the amount of tax collected) during that

semimonthly period unless a safe harbor applies. Sections 40.6302(c)-

1(c) and 40.6302(c)-2(b) (2) and (3) provide two safe harbor rules for

computing the amount of tax required to be deposited; the look-back

quarter safe harbor rule and the current liability safe harbor rule.

These temporary regulations modify the safe harbor rules to reflect

the amendments made by the Act.

Special Analyses

It has been determined that this Treasury decision is not a

significant regulatory action as defined in EO 12866. Therefore, a

regulatory assessment is not required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)

and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to

these regulations, and, therefore, a Regulatory Flexibility Analysis is

not required. Pursuant to section 7805(f) of the Internal Revenue Code,

these temporary regulations will be submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on their

impact on small business.

Drafting Information: The principal author of these regulations

is Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and

Special Industries). However, other personnel from the IRS and

Treasury Department participated in their development.

List of Subjects in 26 CFR Part 40

Excise taxes, Reporting and recordkeeping requirements.

[[Page 44759]]

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 40 is amended as follows:

PART 40--EXCISE TAX PROCEDURAL REGULATIONS

Paragraph 1. The authority citation for part 40 continues to read

in part as follows:

Authority: 26 U.S.C. 780 * * *

Par. 2. Section 40.6302(c)-5T is added to read as follows:

Sec. 40.6302(c)-5T Use of Government depositaries; rules under

sections 6302(e) and (f) (temporary).

(a) Applicability; meaning of terms. This section sets forth rules

relating to the excise tax deposits required under sections 6302(e)(2)

and (f). Terms used both in this section and in any other provision of

Sec. 40.6302(c)-1, 40.6302(c)-2, 40.6302(c)-3, or 40.6302(c)-4 have the

same meaning for purposes of this section as when used in such other

provision.

(b) Nine-day rule and 14-day rule taxes--(1) Deposits required. In

the case of deposits of 9-day rule taxes and 14-day rule taxes for the

second semimonthly period in September, separate deposits are required

for the period September 16th-26th and the period September 27th-30th.

(2) Amount of deposit; in general. Each deposit of a class of tax

(that is, 9-day rule taxes or 14-day rule taxes) required under this

paragraph (b) for the periods September 16th-26th and September 27th-

30th must be not less than the amount of net tax liability incurred for

the class of tax during the period. The net tax liability incurred for

a class of tax during these periods may be computed by--

(i) Determining the amount of net tax liability reasonably expected

to be incurred for the class of tax during the second semimonthly

period in September;

(ii) Treating 11/15 (73.34 percent) of such amount as the net tax

liability incurred during the period September 16th-26th; and

(iii) Treating the remainder of the amount determined under

paragraph (b)(2)(i) of this section (adjusted to reflect net tax

liability actually incurred through the end of September) as the net

tax liability incurred during the period September 27th-30th.

(3) Amount of deposit; safe harbor rules. In the case of a class of

tax for which an additional September deposit is required under this

paragraph (b), the safe harbor rules of Sec. 40.6302(c)-1(c) are

modified as follows:

(i) Safe harbor rule based on look-back quarter liability. The safe

harbor rule of Sec. 40.6302(c)-1(c)(2)(i) does not apply for the third

calendar quarter unless--

(A) The deposit of taxes in that class for the period September

16th-26th is not less than \11/90\ (12.23 percent) of the net tax

liability reported for the class of tax for the look-back quarter; and

(B) The total deposit of taxes in that class for the second

semimonthly period in September is not less than \1/6\ (16.67 percent)

of the net tax liability reported for the class of tax for the look-

back quarter.

(ii) Safe harbor rule based on current liability. The safe harbor

rule of Sec. 40.6302(c)-1(c)(3)(i) does not apply for the third

calendar quarter unless--

(A) The deposit of taxes in that class for the period September

16th-26th is not less than 69.67 percent of the net tax liability for

the class of tax for the second semimonthly period in September; and

(B) The total deposit of taxes in that class for the second

semimonthly period in September is not less than 95 percent of the net

tax liability for the class of tax for that semimonthly period.

(4) Time to deposit. The deposit required under this paragraph (b)

for the period beginning September 16th must be made on or before

September 29. The deposit required under this paragraph (b) for the

period ending September 30th must be made at the time prescribed in

Sec. 40.6302(c)-1(b)(6)(i) (or, to the extent applicable, at the time

prescribed in Sec. 40.6302(c)-4(b)) for making deposits for the second

semimonthly period in September.

(c) 30-day rule taxes--(1) Deposits required. In the case of

deposits of 30-day rule taxes for the first semimonthly period in

September, separate deposits are required for the period September 1st-

11th and the period September 12th-15th.

(2) Amount of deposit; in general. Each deposit of 30-day rule

taxes required under this paragraph (c) for the periods September 1st-

11th and September 12th-15th must be not less than the amount of net

tax liability incurred for 30-day rule taxes during the period. The net

tax liability incurred during these periods may be computed by--

(i) Determining the amount of net tax liability incurred during the

first semimonthly period in September (or, if semimonthly liability is

computed by dividing monthly liability by two, the amount reasonably

expected to be incurred);

(ii) Treating \11/15\ (73.34 percent) of such amount as the net tax

liability incurred during the period September 1st-11th; and

(iii) Treating the remainder of the amount determined under

paragraph (c)(2)(i) of this section (adjusted, if such amount is based

on reasonable expectations, to reflect net tax liability actually

incurred through the end of September) as the net tax liability

incurred during the period September 12th-15th.

(3) Amount of deposit; safe harbor rules. In the case of 30-day

rule taxes for which an additional September deposit is required under

this paragraph (c), the safe harbor rules of Sec. 40.6302(c)-2(b) are

modified as follows:

(i) Safe harbor rule based on look-back quarter liability. The safe

harbor rule of Sec. 40.6302(c)-2(b)(2) does not apply for the third

calendar quarter unless--

(A) The deposit of 30-day rule taxes for the period September 1st-

11th is not less than \11/90\ (12.23 percent) of the net tax liability

reported for 30-day rule taxes for the look-back quarter; and

(B) The total deposit of 30-day rule taxes for the first

semimonthly period in September is not less than \1/6\ (16.67 percent)

of the net tax liability reported for 30-day rule taxes for the look-

back quarter.

(ii) Safe harbor rule based on current liability. The safe harbor

rule of Sec. 40.6302(c)-2(b)(3) does not apply for the third calendar

quarter unless--

(A) The deposit of 30-day rule taxes for the period September 1st-

11th is not less than 69.67 percent of the net tax liability for 30-day

rule taxes for the first semimonthly period in September; and

(B) The total deposit of 30-day rule taxes for the first

semimonthly period in September is not less than 95 percent of the net

tax liability for 30-day rule taxes for that semimonthly period.

(4) Time to deposit. The deposit required under this paragraph (c)

for the period beginning September 1st and the deposit of 30-day rule

taxes for the second semimonthly period in August must be made on or

before September 29. The deposit required under this paragraph (c) for

the period ending September 15th must be made at the time prescribed in

Sec. 40.6302(c)-2(b)(1) for making deposits for the first semimonthly

period in September.

(d) Alternative method taxes--(1) Deposits required. In the case of

alternative method taxes charged (that is, included in amounts billed

or tickets sold) during the first semimonthly period in September,

separate deposits are required for the taxes charged during the period

September 1st-11th and the period September 12th-15th.

[[Page 44760]]

(2) Amount of deposit; in general. Each deposit of alternative

method taxes required under this paragraph (d) for the periods

September 1st-11th and September 12th-15th must be not less than the

amount of alternative method taxes charged during the period. The

amount of alternative method taxes charged during these periods may be

computed by--

(i) Determining the net amount of alternative method taxes

reflected in the separate account for the first semimonthly period in

September (or one-half of the net amount of alternative method taxes

reasonably expected to be reflected in the separate account for the

month of September);

(ii) Treating \11/15\ (73.34 percent) of such amount as the amount

charged during the period September 1st-11th; and

(iii) Treating the remainder of the amount determined under

paragraph (d)(2)(i) of this section (adjusted, if such amount is based

on reasonable expectations, to reflect actual charges through the end

of September) as the amount charged during the period September 12th-

15th.

(3) Amount of deposit; safe harbor rules. In the case of

alternative method taxes for which an additional September deposit is

required under this paragraph (d), the safe harbor rules of

Sec. 40.6302(c)-1(c) are modified as follows:

(i) Safe harbor rule based on look-back quarter liability. The safe

harbor rule of Sec. 40.6302(c)-1(c)(2)(i) does not apply for the fourth

calendar quarter unless--

(A) The deposit for alternative method taxes charged during the

period September 1st-11th is not less than \11/90\ (12.23 percent) of

the net tax liability reported for alternative method taxes for the

look-back quarter; and

(B) The total deposit for alternative method taxes charged during

the first semimonthly period in September is not less than \1/6\ (16.67

percent) of the net tax liability reported for alternative method taxes

for the look-back quarter.

(ii) Safe harbor rule based on current liability. The safe harbor

rule of Sec. 40.6302(c)-1(c)(3)(i) does not apply for the fourth

calendar quarter unless--

(A) The deposit for alternative method taxes charged during the

period September 1st-11th is not less than 69.67 percent of the

alternative method taxes charged during the first semimonthly period in

September; and

(B) The total deposit for alternative method taxes charged during

the first semimonthly period in September is not less than 95 percent

of the alternative method taxes charged during that semimonthly period.

(4) Time to deposit. The deposit required under this paragraph (d)

for taxes charged during the period beginning September 1st must be

made on or before September 29. The deposit of alternative method taxes

required under this paragraph (d) for taxes charged during the period

ending September 15th must be made at the time prescribed in

Sec. 40.6302(c)-3(c) for making deposits for the first semimonthly

period in October.

(e) Modifications for persons not required to use electronic funds

transfer. In the case of a person that is not required to deposit

excise taxes by electronic funds transfer (a non-EFT depositor), the

rules of paragraphs (b), (c), and (d) apply with the following

modifications:

(1) The periods for which separate deposits must be made under

paragraph (b) of this section are September 16th-25th and September

26th-30th. In addition, the deposit required for the period beginning

September 16th must be made on or before September 28.

(2) The periods for which separate deposits must be made under

paragraph (c) of this section are September 1st-10th and September

11th-15th. In addition, the deposit required for the period beginning

September 1st and the deposit of 30-day rule taxes for the second

semimonthly period in August must be made on or before September 28.

(3) The taxes for which separate deposits must be made under

paragraph (d) of this section are those charged during the periods

September 1st-10th and September 11th-15th. In addition, the deposit

required for taxes charged during the period beginning September 1st

must be made on or before September 28.

(4) The generally applicable fractions and percentages are modified

to reflect the different deposit periods in accordance with the

following table:

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Generally applicable fractions and

percentages Modification for non-EFT depositors

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\11/15\ (73.34 percent)............ \10/15\ (66.67 percent).

\11/90\ (12.23 percent)............ \10/90\ (11.12 percent).

69.67 percent...................... 63.34 percent.

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(f) Due date on Saturday or Sunday--(1) EFT depositors. A deposit

that, under the rules of this section, would otherwise be due on

September 29 must be made on or before September 28 if September 29 is

a Saturday and on or before September 30 if September 29 is a Sunday.

(2) Non-EFT depositors. A deposit that, under the rules of this

section, would otherwise be due on September 28 must be made on or

before September 27 if September 28 is a Saturday and on or before

September 29 if September 28 is a Sunday.

(g) Special rules for section 4081 taxes superseded. Deposits for

the second semimonthly period in September of taxes imposed by section

4081 must be made under the rules of this section and without regard to

the special rules for such deposits under Sec. 40.6302(c)-1.

(h) Effective date--(1) In general. Except as provided in paragraph

(h)(2) of this section, this section is effective August 1, 1995.

(2) Air transportation taxes. For air transportation taxes, this

section is effective January 1, 1997.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: August 3, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95-21438 Filed 8-28-95; 8:45 am]

BILLING CODE 4830-01-U