SERVICE EXTENDS GASOHOL TRANSITIONAL PROCEDURES THROUGH END OF 1988.

Notice 88-69

The purpose of this Notice is to inform gasohol blenders and sellers of gasoline that the transitional rules for registered gasohol blenders provided in Notice 88-2, 1988-2 I.R.B. 26 (January 11, 1988), and Notice 88-34, 1988-13 I.R.B. 26 (March 28, 1988), for the first two quarters of 1988 will continue to be effective through December 31, 1988. Under the rules provided by Notice 88-2 and Notice 88-34, and subject to all conditions provided therein, the reduced rate of tax under section 4081(c)(1) of the Internal Revenue Code of 1986 applies to all removals or sales of gasoline to registered gasohol blenders if the gasoline is or will be blended with alcohol to produce gasohol.

Registered gasohol blenders are reminded that they must file a Quarterly Federal Excise Tax Return (Form 720) for each of the last two quarters of 1988 (as was required for each of the first two quarters of 1988) and maintain certain records if they purchase gasoline at the reduced rate of tax for blending with alcohol to produce gasohol. The retention of these records is necessary so that the taxpayer can establish that the gasoline purchased at the reduced rate of tax has been blended with alcohol. Registered gasohol blenders are reminded that use of a registration to purchase gasoline 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.

The extent to which a reduced rate of tax under section 4081(c)(1) should be available to gasohol blenders has been and continues to be an issue. Notice 88-2 and Notice 88-34 provide an approach intended to promote the compliance goals of the Tax Reform Act of 1986 amendments to section 4081 without imposing unnecessary administrative burdens on the Internal Revenue Service or the industry. The continuation of these rules through December 31, 1988, will allow the Service to determine what, if any, new procedures are necessary with respect to removals or sales of gasoline at the reduced rate of tax under section 4081(c)(1).

During the last two quarters of 1988, the Service will continue to closely monitor compliance with the procedures provided in Notice 88-2 and Notice 88-34. The overall objective of the amendments to section 4081 by the Tax Reform Act of 1986 was greater compliance with the gasoline excise tax, the evasion of which was well-documented and widely-publicized. If any compliance problems surface, including attempts to improperly defer payment of gasoline excise tax, then the Service will consider the immediate modification or suspension of these procedures prospectively to prevent abuse, notwithstanding their extension to December 31, 1988.

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).