Regs on Excise Tax Deposits

 [4830-01-u]

[2] ACTION: Temporary regulations.

[3] SUMMARY: This document contains temporary regulations relating to the availability of the safe harbor deposit rule based on look- back quarter liability and affects persons required to make deposits of excise taxes. This document also contains temporary regulations relating to floor stocks taxes and affects persons liable for those taxes. The regulations implement certain changes made by the Small Business Job Protection Act of 1996 (the 1996 Act) and the Airport and Airway Trust Fund Tax Reinstatement Act of 1997 (the 1997 Act). The text of these 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.

[4] DATES: These regulations are effective December 29, 1997. For dates of applicability, see sections 40.6302(c)-1T and 40.6302(c)-2T.

[5] FOR FURTHER INFORMATION CONTACT: Ruth Hoffman (202) 622-3130 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

BACKGROUND

[6] This document contains amendments to the Excise Tax Procedural Regulations (26 CFR part 40) that implement certain changes made by the 1996 Act and the 1997 Act.

[7] The aviation excise taxes that expired on December 31, 1995, were reinstated by the 1996 Act for the period from August 27 through December 31, 1996, by the 1997 Act for the period from March 7 through September 30, 1997, and were extended, with modifications, for the period from October 1, 1997, through September 30, 2007.

DEPOSIT SAFE HARBOR RULES

[8] Sections 40.6302(c)-1(c)(2) and 40.6302(c)-2(b)(2) (relating to deposit safe harbors) currently provide, generally, that a person can satisfy excise tax deposit obligations for a calendar quarter by depositing an amount equal to the person's excise tax liability reported on the return for the second preceding quarter (the look- back quarter). For this purpose, the tax liability for the look-back quarter must be modified to take into account any increase in rates in the current quarter, but the safe harbor does not specifically address the effect of the enactment of a new tax or the reinstatement of an expired tax. Notice 97-15, 1997-8 I.R.B. 23, and section 2(f) of the 1997 Act provide that the look-back safe harbor shall not apply with respect to any tax unless the tax was imposed throughout the look-back period.

[9] The temporary regulations modify the look-back safe harbor rules to reflect this change. Under the temporary regulations, the general look-back safe harbor of section 40.6302(c)-1(c)(2) is modified for a class of tax that includes a tax that was not in effect at all times during the look-back quarter (or, in the case of an alternative method tax, that was not in effect at all times during the look-back quarter and the month preceding the look-back quarter). The safe harbor does not apply to that class of tax unless, for each semimonthly period, the deposit is not less than the greater of (1) 1/6 of the net tax liability reported for the class of tax for the look-back quarter, or (2) the sum of (i) 95 percent of the net tax liability incurred with respect to new or reinstated taxes during the semimonthly period, and (ii) 1/6 of the net tax liability reported for all other taxes in the class for the look-back quarter. Also, the section 4681 tax (ozone-depleting chemicals) look-back safe harbor provided under section 40.6302(c)-2(b)(2) is modified in a similar manner if the tax liability for the quarter includes liability for any chemical that was not subject to tax at all times during the look-back quarter.

[10] The new rules apply to liabilities for new or reinstated taxes incurred after February 28, 1997.

FUEL FLOOR STOCKS TAXES

[11] Section 1609(h) of the 1996 Act imposes a floor stocks tax on aviation fuel (other than gasoline) on which tax was imposed by section 4091 before August 27, 1996, and that is held on the first moment of that date by any person. Section 2(d) of the 1997 Act imposes a floor stocks tax on aviation gasoline and aviation fuel (other than gasoline) on which tax was imposed by section 4081 or 4091 before March 7, 1997, and that is held on the first moment of that date by any person.

[12] The temporary regulations provide that the rules set forth in 26 CFR part 40 (relating to administrative provisions for certain excise taxes, including the excise taxes on aviation fuels) also apply to related floor stocks taxes. Thus, persons liable for floor stocks taxes on aviation fuels must file returns reporting those taxes in accordance with the provisions of 26 CFR part 40.

SPECIAL ANALYSES

[13] 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 on small entities a collection of information requirement, 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, 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

[14] 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

[15] 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 40.0-1T is added to read as follows:

SECTION 40.0-1T INTRODUCTION (TEMPORARY).

(a) through (f). [Reserved]

(g) APPLICABILITY TO FLOOR STOCKS TAXES. The regulations in this part 40 also apply with respect to floor stocks taxes imposed on articles subject to a tax described in section 40.0-1(a), beginning April 1, 1991.

Par. 3. Section 40.6011(a)-1T is added to read as follows:

SECTION 40.6011(A)-1T RETURNS (TEMPORARY).

(a)(1) through (a)(2)(ii). [Reserved]

(a)(2)(iii) FLOOR STOCKS TAX RETURN. A return reporting liability for a floor stocks tax described in section 40.0-1T(g) is a return for the calendar quarter in which the tax payment is due and not for the calendar quarter in which the liability for tax is incurred, beginning April 1, 1991.

Par. 4. Section 40.6302(c)-1T is added to read as follows:

SECTION 40.6302(c)-1T USE OF GOVERNMENT DEPOSITARIES (TEMPORARY).

(a) through (c)(2)(iii). [Reserved]

(c)(2)(iv) MODIFICATION FOR NEW OR REINSTATED TAXES -- (A) APPLICABILITY. The safe harbor rule of section 40.6302(c)-1(c)(2)(i) is modified for any calendar quarter in which a person's liability for a class of tax includes liability for any new or reinstated tax. For this purpose, a new or reinstated tax is--

(1) Any tax (including an alternative method tax) that was not in effect at all times during the look-back quarter; and

(2) Any alternative method tax that was not in effect at all times during the month preceding the look-back quarter.

(B) MODIFICATION. The safe harbor rule of section 40.6302(c)- 1(c)(2)(i) does not apply to a class of tax unless the deposit of taxes in that class for each semimonthly period in the calendar quarter is not less than the greater of --

(1) 1/6 of the net tax liability reported for the class of tax for the look-back quarter; or

(2) The sum of --

(i) 95 percent of the net tax liability incurred with respect to new or reinstated taxes during the semimonthly period; and

(ii) 1/6 of the net tax liability reported for all other taxes in the class for the look-back quarter.

(C) Effective date. This paragraph (c)(2)(iv) applies to tax liabilities for new or reinstated taxes incurred after February 28, 1997, except that paragraph (c)(2)(iv)(A)(2) of this section applies only for calendar quarters beginning after December 31, 1997.

(c)(3) through (f)(4). [Reserved]

(f)(5) TAXES EXCLUDED; FLOOR STOCKS TAXES. No deposit is required in the case of any floor stocks tax described in section 40.0-1T(g), beginning April 1, 1991.

Par. 5. Section 40.6302(c)-2T is added to read as follows:

SECTION 40.6302(C)-2T SPECIAL RULE FOR USE OF GOVERNMENT DEPOSITARIES UNDER SECTION 4681 (TEMPORARY).

(a) through (b)(2)(ii). [Reserved]

(b)(2)(iii) MODIFICATION FOR NEW CHEMICALS -- (A) APPLICABILITY. The safe harbor rule of section 40.6302(c)-2(b)(2)(i) is modified for any calendar quarter in which a person's liability for section 4681 tax includes liability with respect to any new chemical. For this purpose, a new chemical is any chemical that was not subject to tax at all times during the look-back quarter.

(B) MODIFICATION. The safe harbor rule of section 40.6302(c)- 2(b)(2)(i) does not apply unless the deposit of section 4681 taxes for each semimonthly period in the calendar quarter is not less than the greater of --

(1) 1/6 of the net tax liability reported under section 4681 for the look-back quarter; or

(2) The sum of --

(i) 95 percent of the net tax liability incurred under section 4681 with respect to the new chemical during the semimonthly period; and

(ii) 1/6 of the net tax liability reported under section 4681 with respect to all other chemicals for the look-back quarter.

(C) EFFECTIVE DATE. This paragraph (b)(2)(iii) applies to tax liabilities for new chemicals incurred after February 28, 1997.