Amendments to Regs on Diesel Fuel Excise Taxes

 [4830-01-u]

 ACTION: Temporary regulations.

 SUMMARY: This document contains temporary regulations that amend the temporary regulations relating to the fuel floor stocks taxes (TD 8498) published in the Federal Register on November 29, 1993 (58 FR 62526) and the diesel fuel excise tax regulations (TD 8496) published in the Federal Register on November 30, 1993 (58 FR 63069). The amendments allow diesel fuel dyed past the terminal rack to qualify for exemption from the floor stocks tax and modify the requirements for dyeing of diesel fuel destined for nontaxable uses. They affect producers, marketers, and users of diesel fuel.

 EFFECTIVE DATE: These regulations are effective January 1, 1994.

 FOR FURTHER INFORMATION CONTACT: Edward Madden (202) 622-4537 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

BACKGROUND

FLOOR STOCKS TAX

The Omnibus Budget Reconciliation Act of 1993 (Act) imposes a floor stocks tax on diesel fuel that is held by any person at the first moment of January 1, 1994, if (A) no tax was imposed on the fuel under section 4041(a) or 4091 of the Internal Revenue Code as in effect on December 31, 1993, and (B) tax would have been imposed by section 4081, as amended by the Act, on any prior removal, entry, or sale of the fuel had section 4081 applied to the fuel for periods before January 1, 1994. The rate of the January 1, 1994, floor stocks tax is 24.4 cents per gallon.

 The temporary floor stocks tax regulations provide an exception to the January 1, 1994, floor stocks tax for diesel fuel that satisfied the requirements of section 4082 (relating to exemption from the diesel fuel tax for dyed fuel) at the time the diesel fuel was removed from the terminal.

DIESEL FUEL EXCISE TAX; EXCEPTION FOR DYED FUEL

 The Act also provides, effective January 1, 1994, that diesel fuel that is determined to be destined for a nontaxable use is not subject to tax if it is indelibly dyed in accordance with regulations prescribed by the Secretary. The temporary diesel fuel tax regulations prescribe the type and concentration of dyes that are to be used to dye diesel fuel.

EXPLANATION OF PROVISIONS

FLOOR STOCKS TAX

 This document removes the requirement that diesel fuel be dyed at the time of its removal from the terminal to be exempt from the floor stocks tax. Thus, diesel fuel that meets the requirements of section 48.4082-1T(b) of the temporary regulations but is dyed past the terminal rack is not subject to the January 1, 1994, floor stocks tax.

DIESEL FUEL EXCISE TAX; EXCEPTION FOR DYED FUEL

 This document modifies the description of the type of the blue dye required to be used for exempt high sulfur diesel fuel and the type of red dye required to be used for exempt low sulfur diesel fuel. It also modifies the concentration of blue dye allowed by the temporary regulations for a transitional period.

SPECIAL ANALYSES

 It has been determined that this Treasury Decision is not a significant regulatory action as defined in Executive Order 12866. 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 temporary regulations is Edward Madden, Office of the Assistant Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and Treasury Department participated in their development.

LIST OF SUBJECTS

26 CFR PARTS 47 AND 48

Excise taxes, Reporting and recordkeeping requirements.

AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR Parts 47 and 48 are amended as follows:

PART 47 -- FLOOR STOCKS TAXES

Paragraph 1. The authority citation for part 47 continues to read in part as follows:

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

Par. 2. Section 47.3-6T(a) is amended by removing the language "Section" and adding in its place "Except as provided in section 47.3-7T, section".

Par. 3. Section 47.3-7T is amended by revising paragraph (b) to read as follows:

SECTION 47.3-7T EXCEPTION TO THE JANUARY 1, 1994, FLOOR STOCKS TAX (TEMPORARY).

* * * * *

(b) EXCEPTION FOR DYED FUEL. The January 1, 1994, floor stocks tax does not apply to diesel fuel that satisfies the dyeing requirements of section 48.4082-1T(b) of this chapter by March 31, 1994, or by the time the fuel is sold by the person holding the fuel at the first moment of January 1, 1994, whichever is earlier. Thus, for example, diesel fuel held by a heating oil retailer for sale for use as home heating oil is exempt from the January 1, 1994, floor stocks tax if the retailer or another person has dyed the fuel and the fuel satisfies the requirements of section 48.4082-1T(b) of this chapter.

PART 48 -- MANUFACTURERS AND RETAILERS EXCISE TAXES

Par. 4. The authority citation for part 48 continues to read in part as follows:

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

Par. 5. Section 48.4082-1T is amended by revising paragraphs (b)(1) and (b)(2)(i) to read as follows:

SECTION 48.4082-1T DIESEL FUEL TAX; EXEMPTION (TEMPORARY).

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(b) DYEING AND MARKING REQUIREMENTS -- (1) DYEING; HIGH SULFUR FUEL. Diesel fuel that is required to be dyed blue pursuant to the Environmental Protection Agency's high sulfur diesel fuel requirement (40 CFR 80.29) satisfies the dyeing requirement of this paragraph (b) only if it contains --

(i) For periods before April 1, 1994, the blue dye 1,4 dialkylamino-anthraquinone in a concentration of at least 1.2 pounds of active ingredient (exclusive of the solvent) per thousand barrels of diesel fuel; and

(ii) For periods after March 31, 1994, the blue dye 1,4 dialkylamino-anthraquinone (Color Index Solvent Blue 98) in a concentration of at least 10 pounds of active ingredient (exclusive of the solvent) per thousand barrels of diesel fuel; or

(iii) Any other dye of a type and in a concentration that is approved by the Commissioner.

(2) * * *

(i) The dye red di-azo (Color Index Solvent Red 164) in a concentration of at least 5.6 pounds of active ingredient (exclusive of the solvent) per thousand barrels of diesel fuel; or

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