[Federal Register Volume 62, Number 248 (Monday, December 29, 1997)]
[Rules and Regulations]
[Pages 67568-67570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33248]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 40

[TD 8740]
RIN 1545-AV03


Deposits of Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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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.

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

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

SUPPLEMENTARY INFORMATION:

Background

    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.
    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

    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.
    The temporary regulations modify the look-back safe harbor rules to 
reflect this

[[Page 67569]]

change. Under the temporary regulations, the general look-back safe 
harbor of Sec. 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 Sec. 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.
    The new rules apply to liabilities for new or reinstated taxes 
incurred after February 28, 1997.

Fuel Floor Stocks Taxes

    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.
    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

    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

    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 40.0-1T is added to read as follows:


Sec. 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 Sec. 40.0-1(a), beginning April 
1, 1991.
    Par. 3. Section 40.6011(a)-1T is added to read as follows:


Sec. 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 Sec. 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:


Sec. 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 Sec. 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 Sec. 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 Sec. 40.0-1T(g), 
beginning April 1, 1991.
    Par. 5. Section 40.6302(c)-2T is added to read as follows:


Sec. 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 Sec. 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 Sec. 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

[[Page 67570]]

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.
Michael P. Dolan,
Acting Commissioner of Internal Revenue.

    Approved: November 6, 1997.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 97-33248 Filed 12-24-97; 8:45 am]
BILLING CODE 4830-01-U