[Federal Register Volume 65, Number 5 (Friday, January 7, 2000)]
[Proposed Rules]
[Pages 1076-1077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 40

[REG-103827-99]
RIN 1545-AX11


Deposits of Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This document invites comments from the public on issues that 
the IRS may address in proposed regulations relating to the 
requirements for excise tax returns and deposits. All materials 
submitted will be available for public inspection and copying.

DATES: Written and electronic comments must be submitted by April 6, 
2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-103827-99), room 
5226, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-
103827-99), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC. Alternatively, taxpayers may send 
submissions electronically via the Internet by selecting the ``Tax 
Regs'' option on the IRS Home Page, or directly to the IRS Internet 
site at http://www.irs.ustreas.gov/tax__regs/regslist.html.

FOR FURTHER INFORMATION CONTACT: Concerning submissions, the 
Regulations Unit, (202) 622-7180; concerning the proposals, Susan Athy, 
(202) 622-3130 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: The Excise Tax Procedural Regulations (26 
CFR part 40) set forth the requirements related to filing the Quarterly 
Federal Excise Tax Return, Form 720, and making deposits of excise 
taxes. Certain provisions of the current regulations are complicated. 
The IRS is interested in simplifying the filing and deposit rules both 
as to the timing and the calculation of the correct amount to deposit. 
Simplification would reduce recordkeeping burdens and costs for 
taxpayers, improve compliance, and facilitate proper administration of 
the excise taxes and trust funds. The IRS requests comments on how the 
regulations can be simplified; comments are requested in particular on 
the following issues.

Time for Filing Returns

    The regulations currently provide that the Form 720 generally must 
be filed by the last day of the first calendar month following the 
quarter for which it is made. However, in the case of returns related 
to taxes imposed by chapter 33 (communications and air transportation) 
and section 4681 (ozone-depleting chemicals), the due date is the last 
day of the second calendar month following the quarter for which it is 
made.
    The IRS requests comments on whether there should be one filing 
date for all Form 720 filers, such as 30 days after the end of the 
quarter. This would be a simple rule that would apply equally to all 
taxpayers.

Use of Government Depositaries

Background

    The regulations currently provide that excise taxes must be 
deposited on a semimonthly basis. Generally, taxes must be deposited by 
the 9th day of the semimonthly period following the semimonthly period 
for which the deposit is made (the 9-day rule). There are, however, 
exceptions to this rule. Taxes on ozone-depleting chemicals must be 
deposited by the end of the second semimonthly period following the 
semimonthly period for which the deposit is made (the 30-day rule). In 
addition, for taxes imposed by section 4081 (gasoline, diesel fuel, and 
kerosene), communications taxes, and air transportation taxes, 
taxpayers may choose a deposit rule other than the 9-day rule. For 
section 4081 taxes, section 518 of the Highway Revenue Act of 1982 
provides that a qualified person may deposit by the 14th day of the 
semimonthly period following the semimonthly period for which it is 
made if the deposit is made by electronic funds transfer (the 14-day 
rule). For communications and air transportation taxes, if a person 
computes the amount of tax to be reported and deposited on the basis of 
amounts considered as collected, the person may deposit the taxes 
considered as collected during a semimonthly period by the third 
banking day after the seventh day of the semimonthly period (the 
alternative method).

[[Page 1077]]

    The regulations also provide that the amount of the deposit for a 
semimonthly period must equal the amount of net tax liability incurred 
during that period unless either the look-back quarter safe harbor rule 
or the current liability safe harbor rule applies. In general, the 
look-back quarter safe harbor rule is met if the deposits for each 
semimonthly period in the quarter are at least \1/6\ of the net 
liability reported for that tax in the second calendar quarter 
preceding the current quarter, and the current liability safe harbor 
rule is met if the deposit for each semimonthly period is at least 95 
percent of the net tax liability for the semimonthly period. Safe 
harbor rules apply separately to each class of tax. Each semimonthly 
deposit must be timely made at an authorized Government depository. 
Also, the amount of any underpayment must be paid by the due date of 
the return, without extension. A failure to meet all the deposit 
requirements of a safe harbor rule for any semimonthly period 
eliminates the availability of that safe harbor for the entire quarter.
    As the above description of current regulations illustrates, the 
deposit rules are quite complicated, and taxpayers have experienced 
difficulty in complying with them. In addition, under existing safe 
harbor rules, penalties for failure to deposit may be imposed for all 
semimonthly periods in a quarter if a taxpayer fails to deposit timely 
and in the correct amount during any semimonthly period in that 
quarter.

Request for Comments

    With respect to the deposit rules, the IRS specifically requests 
comments on the following issues:
    1. Whether there should be a single deposit date for all excise 
taxes, such as 14 days after the end of the semimonthly period. (The 
IRS believes it would be appropriate to retain the alternative method 
allowing communications and air transportation tax collectors to file 
returns and make deposits based on amounts billed or tickets sold.)
    2. Whether a taxpayer should have to deposit at least 95 percent of 
tax liability incurred for the corresponding semimonthly period (in 
lieu of the current requirement of 100 percent with safe harbor rules).
    3. Whether the amount required to be deposited for a quarter should 
be computed without reduction for the amounts of any claims made on 
Schedule C of Form 720 for that quarter.
Judith C. Dunn,
Associate Chief Counsel (Domestic).
[FR Doc. 00-15 Filed 1-6-00; 8:45 am]
BILLING CODE 4830-01-U