Temporary and Proposed Regs on Deposits of Excise Taxes Reflect Changes to Law by Uruguay Round Agreements Act

 [4830-01-u]

ACTION: Temporary regulations.

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.

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 40.6302(c)-5T is added to read as follows:

SECTION 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 section 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 section 40.6302(c)-1(c) are modified as follows:

(i) SAFE HARBOR RULE BASED ON LOOK-BACK QUARTER LIABILITY. The safe harbor rule of section 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 section 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 section 40.6302(c)-1(b)(6)(i) (or, to the extent applicable, at the time prescribed in section 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 section 40.6302(c)-2(b) are modified as follows:

(i) SAFE HARBOR RULE BASED ON LOOK-BACK QUARTER LIABILITY. The safe harbor rule of section 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 section 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 section 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.

(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 section 40.6302(c)-1(c) are modified as follows:

(i) SAFE HARBOR RULE BASED ON LOOK-BACK QUARTER LIABILITY. The safe harbor rule of section 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 section 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 section 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:

 Generally applicable              Modification for

(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 section 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.