`[Federal Register Volume 63, Number 1 (Friday, January 2, 1998)]
[Rules and Regulations]
[Pages 24-26]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33988]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 40 and 48

[TD 8748]
RIN 1545-AU53


Gasoline and Diesel Fuel Excise Tax; Special Rules for Alaska; 
Definitions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
application of the diesel fuel excise tax to fuel used in Alaska. This 
document also contains final regulations relating to the gasoline and 
diesel fuel excise tax definitions. The regulations implement certain 
changes made by the Omnibus Budget Reconciliation Act of 1993 and the 
Small Business Job Protection Act of 1996. They affect certain 
enterers, refiners, retailers, terminal operators, throughputters, 
wholesale distributors, and users.

DATES: These regulations are effective January 2, 1998. For dates of 
applicability of these regulations, see Secs. 48.4082-5(h) and 48.6715-
1(a)(3).

FOR FURTHER INFORMATION CONTACT: Frank Boland, (202) 622-3130 (not a 
toll-free call).

SUPPLEMENTARY INFORMATION:

Background

    Section 4081 imposes a tax on certain removals, entries, and sales 
of diesel fuel. However, under section 4082, tax is not imposed if, 
among other conditions, the diesel fuel is indelibly dyed in accordance 
with Treasury regulations. Section 1801 of the Small Business Job 
Protection Act of 1996 amends section 4082 to create an exception to 
the dyeing requirement that effectively applies only to diesel fuel 
that is removed, entered, or sold in Alaska.
    Temporary regulations (TD 8693) relating to this change were 
published in the Federal Register on December 17, 1996 (61 FR 66215) 
along with a notice of proposed rulemaking (REG-247678-96) cross-
referencing the temporary regulations (61 FR 66246). The notice of 
proposed rulemaking also proposed other changes to the gasoline and 
diesel fuel excise tax regulations that were not contained in the 
temporary regulations.
    A public hearing was neither requested nor held. After 
consideration of written comments, the proposed regulations are adopted 
as revised by

[[Page 25]]

this Treasury decision. Comments and revisions are discussed below.

Explanation of Provisions

    The proposed regulations provide a definition of kerosene for 
purposes of the diesel fuel tax. Several commentators questioned this 
proposal. Because the IRS is continuing its review of this issue, the 
final regulations do not define kerosene. However, a definition may be 
included in a future Treasury decision.
    The proposed regulations also include changes to the effective date 
of other proposed regulations that were published in the Federal 
Register on March 14, 1996 (61 FR 10490). Those regulations propose 
requirements relating to dye injection equipment and are not being 
finalized at this time. However, the IRS appreciates the concern 
expressed by several commentators that, as revised, the proposed 
effective dates still would not give taxpayers sufficient time to 
comply with the proposed requirements. Thus, the final dye injection 
regulations will provide a longer period of time between the 
publication date and the effective date than was proposed.
    In response to comments, these final regulations modify the 
definition of terminal to exclude an otherwise qualifying facility that 
stores only taxed gasoline and taxed, undyed diesel fuel. As a result 
of this modification, tax will not be imposed again when the fuel is 
removed from this type of facility.
    The final regulations generally adopt as proposed the provisions 
dealing with diesel fuel that is removed, entered, or sold in Alaska. 
However, several comments suggested that the definition of qualified 
dealer in the proposed regulations was too narrow and prevented 
unlicensed vendors from selling diesel fuel for exempt uses. In 
response, the final regulations expand the definition of qualified 
dealer to include unlicensed diesel fuel retailers that are registered 
by the IRS under specified conditions. As a result of this 
modification, many retailers that serve remote communities in Alaska 
will be able to buy diesel fuel tax free for resale for nontaxable 
uses.
    The final regulations also make minor modifications to existing 
gasoline and diesel fuel regulations. For example, existing regulations 
generally require gasoline and diesel fuel refund claims to be filed 
with the same service center where the claimant's income tax return is 
filed. Because all excise tax refund claims are now processed at the 
Cincinnati Service Center, this regulatory provision is removed.

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 a collection of information on small entities, 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, the notice of proposed 
rulemaking preceding these regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these regulations is Frank Boland, 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 Parts 40 and 48

    Excise taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 40 and 48 are 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 * * *


Sec. 40.6011(a)-1  [Amended]

    Par. 2. Section 40.6011(a)-1(b)(2)(vi) is amended by removing the 
language ``a taxable fuel registrant'' and adding ``registered under 
section 4101'' in its place.

PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES

    Par. 3. The authority citation for part 48 is amended by removing 
the entry for Sec. 48.4082-5T and adding an entry in numerical order to 
read in part as follows:

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

    Section 48.4082-5 also issued under 26 U.S.C. 4082. * * *
    Par. 4. Section 48.4081-1 is amended as follows:
    1. Paragraph (b) is amended by:
    a. Adding a definition in alphabetical order; and
    b. Revising the definition of terminal.
    2. Paragraph (c)(1)(i) is amended by removing the language ``any 
mixture'' and adding ``any taxable fuel'' in its place and by removing 
the language ``and that consists of'' and adding ``by mixing'' in its 
place.
    3. Paragraph (d) is revised.
    The addition and revisions read as follows:


Sec. 48.4081-1  Taxable fuel; definitions.

* * * * *
    (b) * * *
    Aviation gasoline means all special grades of gasoline that are 
suitable for use in aviation reciprocating engines, as described in 
ASTM Specification D 910 and Military Specification MIL-G-5572. The 
ASTM specification may be obtained from the American Society for 
Testing and Materials and the military specification from the 
Standardization Document Order Desk at the addresses provided in 
paragraph (c)(2)(i) of this section.
* * * * *
    Terminal means a taxable fuel storage and distribution facility 
that is supplied by pipeline or vessel and from which taxable fuel may 
be removed at a rack. However, the term does not include any facility 
at which gasoline blendstocks are used in the manufacture of products 
other than finished gasoline and from which no gasoline is removed. 
Also, effective January 2, 1998, the term does not include any facility 
operated by a taxable fuel registrant if all of the finished gasoline 
and diesel fuel (other than diesel fuel dyed in accordance with 
Sec. 48.4082-1(b)) stored at the facility has been previously taxed 
under section 4081 upon removal from a refinery or terminal.
* * * * *
    (d) Effective date. This section is applicable January 1, 1994, 
except that in paragraph (b) of this section the definition of aviation 
gasoline and the third sentence in the definition of terminal are 
effective January 2, 1998.


Sec. 48.4082-5T  [Redesignated as Sec. 48.4082-5]

    Par. 5. Section 48.4082-5T is redesignated as Sec. 48.4082-5 and 
the language ``(temporary)'' is removed from the section heading.
    Par. 6. Section 48.4082-5, as redesignated, is amended as follows:
    1. Paragraph (b) is amended by revising the definition of qualified 
dealer.

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    2. Paragraphs (f) and (g) are redesignated as paragraphs (g) and 
(h), respectively.
    3. A new paragraph (f) is added.
    4. Paragraph (h), as redesignated, is revised.
    The addition and revisions read as follows:


Sec. 48.4082-5  Diesel fuel; Alaska

* * * * *
    (b) * * *
    Qualified dealer means any person that holds a qualified dealer 
license from the state of Alaska or has been registered by the district 
director as a qualified retailer. The district director will register a 
person as a qualified retailer only if the district director--
    (1) Determines that the person, in the course of its trade or 
business, regularly sells diesel fuel for use by its buyer in a 
nontaxable use; and
    (2) Is satisfied with the filing, deposit, payment, and claim 
history for all federal taxes of the person and any related person.
* * * * *
    (f) Registration. With respect to each person that has been 
registered as a qualified retailer by the district director, the rules 
of Sec. 48.4101-1(g), (h), and (i) apply.
* * * * *
    (h) Effective date. This section is applicable with respect to 
diesel fuel removed or entered after December 31, 1996. A person 
registered by the district director as a qualified retailer before 
April 2, 1998 may be treated, to the extent the district director 
determines appropriate, as a qualified dealer for the period before 
that date.


Sec. 48.6416(b)(4)-1  [Removed]

    Par. 7. Section 48.6416(b)(4)-1 is removed.


Sec. 48.6421-3  [Amended]

    Par. 8. In Sec. 48.6421-3, paragraph (d)(2) is amended by removing 
the last sentence.


Sec. 48.6427-3  [Amended]

    Par. 9. In Sec. 48.6427-3, paragraph (d)(2) is amended by removing 
the last sentence.
    Par. 10. In Sec. 48.6715-1, paragraph (a)(3) is revised to read as 
follows:


Sec. 48.6715-1  Penalty for misuse of dyed diesel fuel.

    (a) * * *
    (3) The alteration or attempted alteration occurs in an exempt area 
of Alaska after September 30, 1996.
* * * * *


Sec. 48.6715-2T  [Removed]

    Par. 11. Section 48.6715-2T is removed.

    Approved: November 6, 1997.
Michael P. Dolan,
Acting Commissioner of Internal Revenue.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 97-33988 Filed 12-31-97; 8:45 am]
BILLING CODE 4830-01-P`