SERVICE EXTENDS GASOHOL TRANSITIONAL PROCEDURES THROUGH JUNE 1988.

Notice 88-34

The purpose of this Notice is to inform gasohol blenders and sellers of gasoline that the transitional procedures provided in Notice 88-2, 1988-2 I.R.B. 26 (January 11, 1988) for the first quarter of 1988 will continue to be effective through June 30, 1988. Under that procedure, a reduced rate of tax under section 4081(c)(1) of the Internal Revenue Code of 1986 ("the Code") applies to sales of gasoline to registered gasohol blenders only if the gasoline is or will be blended with alcohol to produce gasohol. Registered gasohol blenders are also reminded that they must file a Quarterly Federal Excise Tax Return (Form 720) for the second quarter of 1988 and maintain certain records, as provided in Notice 88-2, if they purchase gasoline to blend with alcohol to produce gasohol at the reduced rate of tax.

For the reduced rate of tax to apply to a sale to a gasohol blender, the blender must have complied with the registration and bond requirements of section 4101 of the Code. Thus, any gasohol blender that wishes to purchase gasoline to blend with alcohol to produce gasohol at the reduced rate of tax provided under section 4081(c)(1) must apply for registration on a Form 637 with the district director and obtain a registration number that signifies gasohol blender. Use of registration as a blender to purchase gasoline at the reduced rate that is not to be used to blend with alcohol to produce gasohol is a misuse of the registration and may lead to revocation or suspension of the registration.

Section 4101 of the Code provides that persons registering under section 4101 may be required to give a bond. Effective April 1, 1988, a gasohol blender that wishes to purchase gasoline to blend with alcohol to produce gasohol at the reduced rate of tax may be required to give a bond if the district director is not satisfied with the blender's federal tax filing, deposit, and payment history. See I.R.S. Notice 88-16, 1988-7 I.R.B. 51 (February 16, 1988).

Final regulations will clarify that if a bond is required, effective July 1, 1988, the amount of the bond will be equal to the lesser of (1) $1,000,000 or (2) an amount equal to 5-2/3 cents multiplied by the number of gallons of gasoline the gasohol blender expects to purchase at the reduced rate of tax provided under section 4081(c)(1) in an average 1-month period (as determined by the district director). This calculation of the amount of a bond that may be required of a gasohol blender that purchases gasoline to blend with alcohol to produce gasohol at the reduced rate of tax under section 4081(c)(1) after June 30, 1988, may result in a bond amount different from the amount required under the proposed regulations published in the Federal Register on November 18, 1987 (52 FR 44141) or in Notice 88-16. Therefore, this portion of the proposed regulations, as revised, will be issued in proposed form before being issued in final form.

This document serves as an "administrative pronouncement" as that term is described in section 1.6661-3(b)(2) of the Income Tax Regulations and may be relied upon to the same extent as a revenue ruling or revenue procedure.

The principal author of this Notice is Timothy J. McKenna of the Legislation and Regulations Division. For further information regarding this Notice, contact Tim McKenna on (202) 566-3287 (not a toll-free call).