Deposits of Excise Taxes

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 40

[TD 8740]

RIN 1545-AV03

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 the

availability of the safe harbor deposit rule based on look-back quarter

liability and affects persons required to make deposits of excise

taxes. This document also contains temporary regulations relating to

floor stocks taxes and affects persons liable for those taxes. The

regulations implement certain changes made by the Small Business Job

Protection Act of 1996 (the 1996 Act) and the Airport and Airway Trust

Fund Tax Reinstatement Act of 1997 (the 1997 Act). The text of these

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.

DATES: These regulations are effective December 29, 1997. For dates of

applicability, see Secs. 40.6302(c)-1T and 40.6302(c)-2T.

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

toll-free call).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Excise Tax Procedural

Regulations (26 CFR part 40) that implement certain changes made by the

1996 Act and the 1997 Act.

The aviation excise taxes that expired on December 31, 1995, were

reinstated by the 1996 Act for the period from August 27 through

December 31, 1996, by the 1997 Act for the period from March 7 through

September 30, 1997, and were extended, with modifications, for the

period from October 1, 1997, through September 30, 2007.

Deposit Safe Harbor Rules

Sections 40.6302(c)-1(c)(2) and 40.6302(c)-2(b)(2) (relating to

deposit safe harbors) currently provide, generally, that a person can

satisfy excise tax deposit obligations for a calendar quarter by

depositing an amount equal to the person's excise tax liability

reported on the return for the second preceding quarter (the look-back

quarter). For this purpose, the tax liability for the look-back quarter

must be modified to take into account any increase in rates in the

current quarter, but the safe harbor does not specifically address the

effect of the enactment of a new tax or the reinstatement of an expired

tax. Notice 97-15, 1997-8 I.R.B. 23, and section 2(f) of the 1997 Act

provide that the look-back safe harbor shall not apply with respect to

any tax unless the tax was imposed throughout the look-back period.

The temporary regulations modify the look-back safe harbor rules to

reflect this

[[Page 67569]]

change. Under the temporary regulations, the general look-back safe

harbor of Sec. 40.6302(c)-1(c)(2) is modified for a class of tax that

includes a tax that was not in effect at all times during the look-back

quarter (or, in the case of an alternative method tax, that was not in

effect at all times during the look-back quarter and the month

preceding the look-back quarter). The safe harbor does not apply to

that class of tax unless, for each semimonthly period, the deposit is

not less than the greater of (1) \1/6\ of the net tax liability

reported for the class of tax for the look-back quarter, or (2) the sum

of (i) 95 percent of the net tax liability incurred with respect to new

or reinstated taxes during the semimonthly period, and (ii) \1/6\ of

the net tax liability reported for all other taxes in the class for the

look-back quarter. Also, the section 4681 tax (ozone-depleting

chemicals) look-back safe harbor provided under Sec. 40.6302(c)-2(b)(2)

is modified in a similar manner if the tax liability for the quarter

includes liability for any chemical that was not subject to tax at all

times during the look-back quarter.

The new rules apply to liabilities for new or reinstated taxes

incurred after February 28, 1997.

Fuel Floor Stocks Taxes

Section 1609(h) of the 1996 Act imposes a floor stocks tax on

aviation fuel (other than gasoline) on which tax was imposed by section

4091 before August 27, 1996, and that is held on the first moment of

that date by any person. Section 2(d) of the 1997 Act imposes a floor

stocks tax on aviation gasoline and aviation fuel (other than gasoline)

on which tax was imposed by section 4081 or 4091 before March 7, 1997,

and that is held on the first moment of that date by any person.

The temporary regulations provide that the rules set forth in 26

CFR part 40 (relating to administrative provisions for certain excise

taxes, including the excise taxes on aviation fuels) also apply to

related floor stocks taxes. Thus, persons liable for floor stocks taxes

on aviation fuels must file returns reporting those taxes in accordance

with the provisions of 26 CFR part 40.

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)

does not apply to these regulations and, because these regulations do

not impose on small entities a collection of information requirement,

the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.

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.

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. 7805 * * *

Par. 2. Section 40.0-1T is added to read as follows:

Sec. 40.0-1T Introduction (temporary).

(a) through (f). [Reserved]

(g) Applicability to floor stocks taxes. The regulations in this

part 40 also apply with respect to floor stocks taxes imposed on

articles subject to a tax described in Sec. 40.0-1(a), beginning April

1, 1991.

Par. 3. Section 40.6011(a)-1T is added to read as follows:

Sec. 40.6011(a)-1T Returns (temporary).

(a)(1) through (a)(2)(ii). [Reserved]

(a)(2)(iii) Floor stocks tax return. A return reporting liability

for a floor stocks tax described in Sec. 40.0-1T(g) is a return for the

calendar quarter in which the tax payment is due and not for the

calendar quarter in which the liability for tax is incurred, beginning

April 1, 1991.

Par. 4. Section 40.6302(c)-1T is added to read as follows:

Sec. 40.6302(c)-1T Use of Government depositaries (temporary).

(a) through (c)(2)(iii). [Reserved]

(c)(2)(iv) Modification for new or reinstated taxes--(A)

Applicability. The safe harbor rule of Sec. 40.6302(c)-1(c)(2)(i) is

modified for any calendar quarter in which a person's liability for a

class of tax includes liability for any new or reinstated tax. For this

purpose, a new or reinstated tax is--

(1) Any tax (including an alternative method tax) that was not in

effect at all times during the look-back quarter; and

(2) Any alternative method tax that was not in effect at all times

during the month preceding the look-back quarter.

(B) Modification. The safe harbor rule of Sec. 40.6302(c)-

1(c)(2)(i) does not apply to a class of tax unless the deposit of taxes

in that class for each semimonthly period in the calendar quarter is

not less than the greater of--

(1) \1/6\ of the net tax liability reported for the class of tax

for the look-back quarter; or

(2) The sum of--

(i) 95 percent of the net tax liability incurred with respect to

new or reinstated taxes during the semimonthly period; and

(ii) \1/6\ of the net tax liability reported for all other taxes in

the class for the look-back quarter.

(C) Effective date. This paragraph (c)(2)(iv) applies to tax

liabilities for new or reinstated taxes incurred after February 28,

1997, except that paragraph (c)(2)(iv)(A)(2) of this section applies

only for calendar quarters beginning after December 31, 1997.

(c)(3) through (f)(4). [Reserved]

(f)(5) Taxes excluded; floor stocks taxes. No deposit is required

in the case of any floor stocks tax described in Sec. 40.0-1T(g),

beginning April 1, 1991.

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

Sec. 40.6302(c)-2T Special rule for use of Government depositaries

under section 4681 (temporary).

(a) through (b)(2)(ii). [Reserved]

(b)(2)(iii) Modification for new chemicals--(A) Applicability. The

safe harbor rule of Sec. 40.6302(c)-2(b)(2)(i) is modified for any

calendar quarter in which a person's liability for section 4681 tax

includes liability with respect to any new chemical. For this purpose,

a new chemical is any chemical that was not subject to tax at all times

during the look-back quarter.

(B) Modification. The safe harbor rule of Sec. 40.6302(c)-

2(b)(2)(i) does not apply unless the deposit of section 4681 taxes for

each semimonthly period in the calendar quarter is not less than the

greater of--

(1) \1/6\ of the net tax liability reported under section 4681 for

the look-back quarter; or

(2) The sum of--

(i) 95 percent of the net tax liability incurred under section 4681

with

[[Page 67570]]

respect to the new chemical during the semimonthly period; and

(ii) \1/6\ of the net tax liability reported under section 4681

with respect to all other chemicals for the look-back quarter.

(C) Effective date. This paragraph (b)(2)(iii) applies to tax

liabilities for new chemicals incurred after February 28, 1997.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

Approved: November 6, 1997.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 97-33248 Filed 12-24-97; 8:45 am]

BILLING CODE 4830-01-U