Gasoline and Diesel Fuel Excise Tax; Special Rules for Alaska; Definitions

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 40 and 48

[TD 8748]

RIN 1545-AU53

Gasoline and Diesel Fuel Excise Tax; Special Rules for Alaska;

Definitions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the

application of the diesel fuel excise tax to fuel used in Alaska. This

document also contains final regulations relating to the gasoline and

diesel fuel excise tax definitions. The regulations implement certain

changes made by the Omnibus Budget Reconciliation Act of 1993 and the

Small Business Job Protection Act of 1996. They affect certain

enterers, refiners, retailers, terminal operators, throughputters,

wholesale distributors, and users.

DATES: These regulations are effective January 2, 1998. For dates of

applicability of these regulations, see Secs. 48.4082-5(h) and 48.6715-

1(a)(3).

FOR FURTHER INFORMATION CONTACT: Frank Boland, (202) 622-3130 (not a

toll-free call).

SUPPLEMENTARY INFORMATION:

Background

Section 4081 imposes a tax on certain removals, entries, and sales

of diesel fuel. However, under section 4082, tax is not imposed if,

among other conditions, the diesel fuel is indelibly dyed in accordance

with Treasury regulations. Section 1801 of the Small Business Job

Protection Act of 1996 amends section 4082 to create an exception to

the dyeing requirement that effectively applies only to diesel fuel

that is removed, entered, or sold in Alaska.

Temporary regulations (TD 8693) relating to this change were

published in the Federal Register on December 17, 1996 (61 FR 66215)

along with a notice of proposed rulemaking (REG-247678-96) cross-

referencing the temporary regulations (61 FR 66246). The notice of

proposed rulemaking also proposed other changes to the gasoline and

diesel fuel excise tax regulations that were not contained in the

temporary regulations.

A public hearing was neither requested nor held. After

consideration of written comments, the proposed regulations are adopted

as revised by

[[Page 25]]

this Treasury decision. Comments and revisions are discussed below.

Explanation of Provisions

The proposed regulations provide a definition of kerosene for

purposes of the diesel fuel tax. Several commentators questioned this

proposal. Because the IRS is continuing its review of this issue, the

final regulations do not define kerosene. However, a definition may be

included in a future Treasury decision.

The proposed regulations also include changes to the effective date

of other proposed regulations that were published in the Federal

Register on March 14, 1996 (61 FR 10490). Those regulations propose

requirements relating to dye injection equipment and are not being

finalized at this time. However, the IRS appreciates the concern

expressed by several commentators that, as revised, the proposed

effective dates still would not give taxpayers sufficient time to

comply with the proposed requirements. Thus, the final dye injection

regulations will provide a longer period of time between the

publication date and the effective date than was proposed.

In response to comments, these final regulations modify the

definition of terminal to exclude an otherwise qualifying facility that

stores only taxed gasoline and taxed, undyed diesel fuel. As a result

of this modification, tax will not be imposed again when the fuel is

removed from this type of facility.

The final regulations generally adopt as proposed the provisions

dealing with diesel fuel that is removed, entered, or sold in Alaska.

However, several comments suggested that the definition of qualified

dealer in the proposed regulations was too narrow and prevented

unlicensed vendors from selling diesel fuel for exempt uses. In

response, the final regulations expand the definition of qualified

dealer to include unlicensed diesel fuel retailers that are registered

by the IRS under specified conditions. As a result of this

modification, many retailers that serve remote communities in Alaska

will be able to buy diesel fuel tax free for resale for nontaxable

uses.

The final regulations also make minor modifications to existing

gasoline and diesel fuel regulations. For example, existing regulations

generally require gasoline and diesel fuel refund claims to be filed

with the same service center where the claimant's income tax return is

filed. Because all excise tax refund claims are now processed at the

Cincinnati Service Center, this regulatory provision is removed.

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 a collection of information on small entities, 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, the notice of proposed

rulemaking preceding these regulations was submitted to the Chief

Counsel for Advocacy of the Small Business Administration for comment

on its impact on small business.

Drafting Information

The principal author of these regulations is Frank Boland, 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 Parts 40 and 48

Excise taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 40 and 48 are 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 * * *

Sec. 40.6011(a)-1 [Amended]

Par. 2. Section 40.6011(a)-1(b)(2)(vi) is amended by removing the

language ``a taxable fuel registrant'' and adding ``registered under

section 4101'' in its place.

PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES

Par. 3. The authority citation for part 48 is amended by removing

the entry for Sec. 48.4082-5T and adding an entry in numerical order to

read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 48.4082-5 also issued under 26 U.S.C. 4082. * * *

Par. 4. Section 48.4081-1 is amended as follows:

1. Paragraph (b) is amended by:

a. Adding a definition in alphabetical order; and

b. Revising the definition of terminal.

2. Paragraph (c)(1)(i) is amended by removing the language ``any

mixture'' and adding ``any taxable fuel'' in its place and by removing

the language ``and that consists of'' and adding ``by mixing'' in its

place.

3. Paragraph (d) is revised.

The addition and revisions read as follows:

Sec. 48.4081-1 Taxable fuel; definitions.

* * * * *

(b) * * *

Aviation gasoline means all special grades of gasoline that are

suitable for use in aviation reciprocating engines, as described in

ASTM Specification D 910 and Military Specification MIL-G-5572. The

ASTM specification may be obtained from the American Society for

Testing and Materials and the military specification from the

Standardization Document Order Desk at the addresses provided in

paragraph (c)(2)(i) of this section.

* * * * *

Terminal means a taxable fuel storage and distribution facility

that is supplied by pipeline or vessel and from which taxable fuel may

be removed at a rack. However, the term does not include any facility

at which gasoline blendstocks are used in the manufacture of products

other than finished gasoline and from which no gasoline is removed.

Also, effective January 2, 1998, the term does not include any facility

operated by a taxable fuel registrant if all of the finished gasoline

and diesel fuel (other than diesel fuel dyed in accordance with

Sec. 48.4082-1(b)) stored at the facility has been previously taxed

under section 4081 upon removal from a refinery or terminal.

* * * * *

(d) Effective date. This section is applicable January 1, 1994,

except that in paragraph (b) of this section the definition of aviation

gasoline and the third sentence in the definition of terminal are

effective January 2, 1998.

Sec. 48.4082-5T [Redesignated as Sec. 48.4082-5]

Par. 5. Section 48.4082-5T is redesignated as Sec. 48.4082-5 and

the language ``(temporary)'' is removed from the section heading.

Par. 6. Section 48.4082-5, as redesignated, is amended as follows:

1. Paragraph (b) is amended by revising the definition of qualified

dealer.

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2. Paragraphs (f) and (g) are redesignated as paragraphs (g) and

(h), respectively.

3. A new paragraph (f) is added.

4. Paragraph (h), as redesignated, is revised.

The addition and revisions read as follows:

Sec. 48.4082-5 Diesel fuel; Alaska

* * * * *

(b) * * *

Qualified dealer means any person that holds a qualified dealer

license from the state of Alaska or has been registered by the district

director as a qualified retailer. The district director will register a

person as a qualified retailer only if the district director--

(1) Determines that the person, in the course of its trade or

business, regularly sells diesel fuel for use by its buyer in a

nontaxable use; and

(2) Is satisfied with the filing, deposit, payment, and claim

history for all federal taxes of the person and any related person.

* * * * *

(f) Registration. With respect to each person that has been

registered as a qualified retailer by the district director, the rules

of Sec. 48.4101-1(g), (h), and (i) apply.

* * * * *

(h) Effective date. This section is applicable with respect to

diesel fuel removed or entered after December 31, 1996. A person

registered by the district director as a qualified retailer before

April 2, 1998 may be treated, to the extent the district director

determines appropriate, as a qualified dealer for the period before

that date.

Sec. 48.6416(b)(4)-1 [Removed]

Par. 7. Section 48.6416(b)(4)-1 is removed.

Sec. 48.6421-3 [Amended]

Par. 8. In Sec. 48.6421-3, paragraph (d)(2) is amended by removing

the last sentence.

Sec. 48.6427-3 [Amended]

Par. 9. In Sec. 48.6427-3, paragraph (d)(2) is amended by removing

the last sentence.

Par. 10. In Sec. 48.6715-1, paragraph (a)(3) is revised to read as

follows:

Sec. 48.6715-1 Penalty for misuse of dyed diesel fuel.

(a) * * *

(3) The alteration or attempted alteration occurs in an exempt area

of Alaska after September 30, 1996.

* * * * *

Sec. 48.6715-2T [Removed]

Par. 11. Section 48.6715-2T is removed.

Approved: November 6, 1997.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 97-33988 Filed 12-31-97; 8:45 am]

BILLING CODE 4830-01-P