Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Proposed Rules 60475 

(h) Advance payment of fees. Fees 

may be paid upon provision of the 

requested records, except that payment 

may be required prior to that time if the 

requester has previously failed to pay 

fees or if the FOIA Officer determines 

the total fee will exceed $250.00. When 

payment is required in advance of the 

processing of a request, the time limits 

prescribed in Sec. 517.6 shall not be 

deemed to begin until the FOIA Officer 

has received payment of the assessed 

fee. 

(i) Payment of fees. Where it is 

anticipated that the cost of providing 

the requested record will exceed $25.00 

after the free duplication and search 

time has been calculated, and the 

requester has not indicated in advance 

a willingness to pay a fee greater than 

$25.00, the FOIA Officer shall promptly 

notify the requester of the amount of the 

anticipated fee or a portion thereof, 

which can readily be estimated. The 

notification shall offer the requester an 

opportunity to confer with agency 

representatives for the purpose of 

reformulating the request so as to meet 

the requester’s needs at a reduced cost. 

[FR Doc. 05–20624 Filed 10–17–05; 8:45 am] 

BILLING CODE 7565–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[REG–114371–05] 

RIN 1545–BE43 

Disregarded Entities; Employment and 

Excise Taxes 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations under which 

qualified subchapter S subsidiaries and 

single-owner eligible entities that 

currently are disregarded as entities 

separate from their owners for federal 

tax purposes would be treated as 

separate entities for employment tax 

and related reporting requirement 

purposes. These regulations also 

propose to treat such disregarded 

entities as separate entities for purposes 

of certain excise taxes reported on 

Forms 720, 730, 2290, and 11–C; excise 

tax refunds or payments claimed on 

Form 8849; and excise tax registrations 

on Form 637. These proposed 

regulations would affect disregarded 

entities and the owners and employees 

of disregarded entities in the payment 

and reporting of federal employment 

taxes. These regulations also would 

affect disregarded entities and their 

owners in the payment and reporting of 

certain Federal excise taxes and in 

registration and claims related to certain 

Federal excise taxes. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by January 17, 2006. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–114371–05), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to: CC:PA:LPD:PR (REG–114371–

05), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC. Alternatively, 

taxpayers may submit electronic 

comments directly to the IRS Internet 

site at http://www.irs.gov/regs or via the 

Federal eRulemaking Portal at http:// 

www.regulations.gov (IRS and REG–

114371–05). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

John Richards at (202) 622–6040 (on the 

employment tax provisions) or Susan 

Athy at (202) 622–3130 (on the excise 

tax provisions); concerning the 

submission of comments or requests for 

a hearing, Robin Jones at (202) 622–7180 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

1. Disregarded Entities 

Under the Internal Revenue Code 

(Code) and its regulations, qualified 

subchapter S subsidiaries (QSubs) 

(under section 1361(b)(3)(B)) and certain 

single-owner eligible entities (under 

§§ 301.7701–1 through 301.7701–3 of 

the Procedure and Administration 

Regulations) are disregarded as entities 

separate from their owners 

(‘‘disregarded entities’’). The 

disregarded entity rules of section 

1361(b)(3)(A) and §§ 301.7701–1 

through 301.7701–3 apply for all 

purposes of the Code, including 

employment and excise taxes. 

2. Employment Taxes 

Employers are required to deduct and 

withhold income and Federal Insurance 

Contributions Act (FICA) taxes from 

their employees’ wages under sections 

3402(a) and 3102(a), and are separately 

liable for their share of FICA taxes as 

well as for Federal Unemployment Tax 

Act (FUTA) taxes under sections 3111 

and 3301 (the withholding, FICA and 

FUTA taxes are collectively referred to 

herein as employment taxes). Sections 

3403, 3102(b), 3111, and 3301 provide 

that the employer is the person liable for 

the withholding and payment of 

employment taxes. In addition, the 

employer is required to make timely tax 

deposits, file employment tax returns, 

and issue wage statements (Forms W–2) 

to employees (collectively, other 

employment tax obligations). An 

employer is generally defined as the 

person for whom an individual 

performs services as an employee. 

Sections 3401(d), 3121(d), and 3306(a). 

Because a disregarded entity is not 

recognized for Federal tax purposes, the 

owner of the disregarded entity is 

treated as the employer for purposes of 

employment tax liabilities and all other 

employment tax obligations related to 

wages paid to employees performing 

services for the disregarded entity. 

If an entity is disregarded for Federal 

tax purposes under section 

1361(b)(3)(A) or §§ 301.7701–1 through 

301.7701–3, Notice 99–6 (1999–1 C.B. 

321) provides that employment taxes 

and other employment tax obligations 

with respect to employees performing 

services for the disregarded entity may 

be satisfied in one of two ways: (1) 

Calculation and payment of all 

employment taxes and satisfaction of all 

other employment tax obligations with 

respect to employees performing 

services for the disregarded entity by its 

owner under the owner’s name and 

employer identification number (EIN); 

or (2) separate calculation and payment 

of all employment taxes and satisfaction 

of all other employment tax obligations 

by the disregarded entity with respect to 

employees performing services for the 

disregarded entity by the disregarded 

entity under its own name and EIN. The 

notice states that ultimate liability for 

employment taxes remains with the 

owner of the disregarded entity 

regardless of which alternative is 

chosen. 

3. Excise Taxes 

A. Liability for Excise Taxes 

Liability for federal excise taxes is 

imposed on certain transactions and 

activities under the following chapters 

of the Internal Revenue Code (Code). 

Chapter 31 imposes retail excise taxes 

on the sale or use of special fuels 

(section 4041); the use of fuel in 

commercial transportation on inland 

waterways (section 4042); and the sale 

of heavy trucks and trailers (section 

4051). 

Chapter 32 imposes manufacturers 

excise taxes on the sale of gas guzzler 

automobiles (section 4064); the sale of 

highway-type tires (section 4071); the 

removal, entry, or sale of taxable fuel 

60476 Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Proposed Rules 

(section 4081); the sale of coal (section 

4121); the sale of vaccines (section 

4131); and the sale of sporting goods 

(section 4161). 

Chapter 33 imposes excise taxes on 

payments for communications facilities 

and services (section 4251); payments 

for transportation of persons by air 

(section 4261); and payments for 

transportation of property by air (section 

4271). 

Chapter 34 imposes excise taxes on 

policies issued by foreign insurers 

(section 4371). 

Chapter 35 imposes excise taxes on 

wagers (sections 4401 and 4411). 

Chapter 36 imposes excise taxes on 

transportation by water (section 4471) 

and the use of heavy highway vehicles 

(section 4481). 

Chapter 38 imposes excise taxes on 

the sale of ozone-depleting chemicals 

and imported taxable products (section 

4681). 

The IRS does not administer, and 

these regulations have no effect on the 

chapter 32 tax on firearms (section 

4181) or the chapter 36 tax on port use 

(section 4461). 

B. Excise Tax Registration 

A person may be required to register 

with the IRS for certain excise tax 

purposes. Registration may be required 

under section 4101 with respect to the 

taxes imposed on motor fuels or under 

section 4412 in the case of persons 

subject to the occupational tax on 

wagering. In addition, section 4222 

generally permits sales for certain 

exempt purposes to be made on a taxfree basis only if the sellers and 

purchasers are registered. 

C. Excise Tax Credits, Refunds, and 

Payments 

The Code allows excise taxpayers to 

claim credits or refunds for 

overpayments, including overpayments 

determined under sections 4081(e), 

6415, 6416, and 6419 (section 6402). 

The Code generally allows non-excise 

taxpayers to claim credits or payments 

for fuels used for nontaxable purposes 

(sections 6420, 6421, and 6427) and 

allows blenders to claim credits or 

payments for the production of alcohol 

and biodiesel mixtures (sections 6426 

and 6427(e)). Section 34 provides an 

income tax credit for amounts payable 

for the nontaxable use of fuels under 

sections 6420, 6421, and 6427, if these 

amounts have not been previously 

claimed, and section 38 provides an 

income tax credit (general business 

credit) for alcohol or biodiesel used as 

a fuel (under sections 40 and 40A). 

4. Reason for Change 

Administrative difficulties have 

arisen from the interaction of the 

disregarded entity rules and the federal 

employment tax provisions. Problems 

have arisen for both taxpayers and the 

IRS with respect to reporting, payment 

and collection of employment taxes, 

particularly where state employment tax 

law also sets requirements for reporting, 

payment and collection that may be in 

conflict with the federal disregarded 

entity rules. The Treasury Department 

and the IRS believe that treating the 

disregarded entity as the employer for 

purposes of federal employment taxes 

will improve the administration of the 

tax laws and simplify compliance. 

Difficulties also have arisen from the 

interaction of the disregarded entity 

rules and certain federal excise tax 

provisions. Many of these provisions 

rely on state law, rather than federal 

law, to determine liability for an excise 

tax, attachment of a tax, and allowance 

of a credit, refund, or payment. For 

example, § 48.0–2(b) of the 

Manufacturers and Retailers Excise Tax 

Regulations provides that such excise 

taxes attach when title to an article 

passes to the purchaser. In general, 

determining when title passes depends 

on the intention of the parties. Absent 

express intention, however, the laws of 

the jurisdiction where the sale is made 

govern this determination. Such a 

determination is required also in 

applying certain excise tax credit, 

refund, and payment provisions that 

allow claims by ultimate purchasers, 

ultimate vendors, and producers. 

Explanation of Provisions 

These proposed regulations would 

treat QSubs and single-owner eligible 

entities that are disregarded entities for 

Federal tax purposes as separate entities 

for purposes of employment taxes and 

other requirements of law arising under 

subtitle C of the Code, certain excise 

taxes, and the application of the rules 

under subtitle F of the Code relating to 

matters such as reporting, assessment, 

collection, and refunds regarding 

employment and certain excise taxes. 

Under the proposed regulations, these 

entities generally would continue to be 

treated as disregarded entities for other 

federal tax purposes. 

1. Employment Taxes 

The proposed regulations would 

eliminate disregarded entity status for 

purposes of federal employment taxes. 

A disregarded entity would be regarded 

for employment tax purposes, and, 

accordingly, become liable for 

employment taxes on wages paid to 

employees of the disregarded entity, and 

be responsible for satisfying other 

employment tax obligations (e.g., 

backup withholding under section 3406, 

making timely deposits of employment 

taxes, filing returns, and providing wage 

statements to employees on Forms W–

2). The owner of the disregarded entity 

would no longer be liable for 

employment taxes or satisfying other 

employment tax obligations with 

respect to the employees of the 

disregarded entity. The disregarded 

entity would continue to be disregarded 

for other Federal tax purposes. The 

proposed regulations contain an 

example illustrating the interaction of 

the income tax provisions and 

employment tax provisions. For 

example, the proposed regulations 

illustrate that an individual owner of a 

disregarded entity would continue to be 

treated as self-employed for purposes of 

Self Employment Contributions Act 

(SECA) taxes (section 1401 et sequitur), 

and not as an employee of the 

disregarded entity for employment tax 

purposes. 

The employment tax provisions of 

these regulations are proposed to apply 

to wages paid on or after January 1 

following the date these regulations are 

published as final regulations in the 

Federal Register. QSubs, single-owner 

eligible entities disregarded under 

§§ 301.7701–1 through 301.7701–3, and 

the owners of such entities may 

continue to use the procedures 

permitted by Notice 99–6 to satisfy the 

owners’ employment tax liabilities and 

other employment tax obligations for 

periods before the effective date of these 

regulations. As required by Notice 99–

6, if the owner currently satisfies the 

employment tax liabilities and other 

employment tax obligations with 

respect to wages paid to employees 

performing services for the disregarded 

entity, then the owner must continue to 

satisfy such liabilities and obligations 

until these regulations become final and 

effective, at which time Notice 99–6 will 

be obsoleted. 

2. Excise Taxes 

The proposed regulations would 

eliminate disregarded entity status for 

purposes of certain excise taxes. An 

entity that is disregarded for other 

federal tax purposes would be required 

to pay and report excise taxes, required 

and allowed to register, and allowed to 

claim any credits (other than income tax 

credits), refunds, and payments. The 

excise tax provisions that are excluded 

from the proposed regulations are 

specified. Because a disregarded entity 

does not file an income tax return, the 

credit on Form 4136 under section 34 is 

Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Proposed Rules 60477 

claimed on the owner’s income tax 

return and appropriate identification of 

the single-owner entity and its taxpayer 

identification number is required. The 

income tax credit under section 38 

(including any credit under sections 40 

and 40A) is not affected by these 

proposed regulations. 

The excise tax provisions in these 

regulations are proposed to apply to 

liabilities imposed and actions first 

required or permitted in periods 

beginning on or after January 1 

following the date these regulations are 

published as final regulations in the 

Federal Register. For periods beginning 

before the effective date of these 

regulations, the IRS will treat payments 

made by a disregarded entity, or other 

actions taken by a disregarded entity, 

with respect to the excise taxes affected 

by these regulations as having been 

made or taken by the sole owner of that 

entity. Thus, for such periods, the 

owner of a disregarded entity will be 

treated as satisfying the owner’s 

obligations with respect to the excise 

taxes affected by these regulations, 

provided that those obligations are 

satisfied either (i) by the owner itself or 

(ii) by the disregarded entity on behalf 

of the owner. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 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 proposed regulations, and 

because these proposed regulations do 

not impose a collection of information 

on small entities, the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) does 

not apply. Pursuant to section 7805(f) of 

the Code, this notice of proposed 

rulemaking will be submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business. 

Comments and Requests for a Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (a signed original and (8) copies) 

or electronic comments that are 

submitted timely to the IRS. The IRS 

and the Treasury Department request 

comments on the clarity of the proposed 

regulations and how they may be made 

easier to understand. In addition, 

comments are requested specifically on 

any transition issues that might arise 

with respect to employment taxes, and 

any transition relief that should be 

provided with respect to employment 

tax obligations. All comments will be 

available for public inspection and 

copying. A public hearing will be 

scheduled if requested in writing by any 

person that timely submits written 

comments. If a public hearing is 

scheduled, notice of the date, time, and 

place for the hearing will be published 

in the Federal Register. 

Drafting Information 

The principal authors of these 

regulations are Susan Athy, Office of 

Associate Chief Counsel (Passthroughs 

and Special Industries), and John 

Richards, Office of Associate Chief 

Counsel (Tax Exempt and Government 

Entities). However, other personnel 

from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR parts 1 and 301 

are proposed to be amended as follows: 

PART 1—INCOME TAX 

Paragraph 1. The authority citation 

for part 1 continues to read, in part, as 

follows: 

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

Par. 2. Section 1.34–1 is revised to 

read as follows: 

§ 1.34–1 Special rule for owners of certain 

business entities. 

Amounts payable under sections 

6420, 6421, and 6427 to a business 

entity that is treated as separate from its 

owner under § 1.1361–4(a)(8) (relating 

to certain qualified subchapter S 

subsidiaries) or § 301.7701–2(c)(2)(v) of 

this chapter (relating to certain whollyowned entities) are, for purposes of 

section 34, treated as payable to the 

owner of that entity. 

§§ 1.34–2 through 1.34–6 [Removed] 

Par. 3. Sections 1.34–2 through 1.34–

6 are removed. 

Par. 4. Section 1.1361–4 is amended 

as follows: 

1. In paragraph (a)(1), the language 

‘‘Except as otherwise provided in 

paragraphs (a)(3) and (a)(6)’’ is removed, 

and ‘‘Except as otherwise provided in 

paragraphs (a)(3), (a)(6), (a)(7), and 

(a)(8)’’ is added in its place. 

2. Paragraphs (a)(7) and (a)(8) are 

added. 

The additions read as follows: 

§ 1.1361–4 Effect of QSub election. 

(a) * * * 

(7) Treatment of QSubs for purposes 

of employment taxes—(i) In general. A 

QSub is treated as a separate 

corporation for purposes of Subtitle C—

Employment Taxes and Collection of 

Income Tax (Chapters 21, 22, 23, 23A, 

24, and 25 of the Internal Revenue 

Code). 

(ii) Effective date. This paragraph 

(a)(7) applies with respect to wages paid 

on or after January 1 following the date 

these regulations are published as final 

regulations in the Federal Register. 

(8) Treatment of QSubs for purposes 

of certain excise taxes—(i) In general. A 

QSub is treated as a separate 

corporation for purposes of—

(A) Federal tax liabilities imposed by 

Chapters 31, 32 (other than section 

4181), 33, 34, 35, 36 (other than section 

4461), and 38 of the Internal Revenue 

Code, or any floor stocks tax imposed on 

articles subject to any of these taxes; 

(B) Collection of tax imposed by 

Chapter 33 of the Internal Revenue 

Code; 

(C) Registration under sections 4101, 

4222, and 4412; and 

(D) Claims of a credit (other than a 

credit under section 34), refund, or 

payment related to a tax described in 

paragraph (a)(8)(A) of this section. 

(ii) Effective date. This paragraph 

(a)(8) applies to liabilities imposed and 

actions first required or permitted in 

periods beginning on or after January 1 

following the date these regulations are 

published as final regulations in the 

Federal Register. 

Par 5. Section 1.1361–6 is amended as 

follows: 

The language ‘‘Except as provided in 

§§ 1.1361–4(a)(3)(iii), 1.1361–4(a)(5)(i), 

and 1.1361–5(c)(2)’’ is removed, and 

‘‘Except as otherwise provided in 

§§ 1.1361–4(a)(3)(iii), 1.1361–4(a)(5)(i), 

1.1361–4(a)(6)(iii), 1.1361–4(a)(7)(ii), 

1.1361–4(a)(8)(ii), and 1.1361–5(c)(2)’’ is 

added in its place. 

PART 301—PROCEDURE AND 

ADMINISTRATION 

Par. 6. The authority citation for part 

301 continues to read in part as follows: 

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

Par. 7. Section 301.7701–2 is 

amended as follows: 

1. In paragraph (a), a sentence is 

added at the end. 

60478 Federal Register / Vol. 70, No. 200 / Tuesday, October 18, 2005 / Proposed Rules 

2. In paragraph (c)(2)(i), the language 

‘‘A business’’ is removed, and ‘‘Except 

as otherwise provided in this paragraph 

(c), a business’’ is added in its place. 

3. Paragraphs (c)(2)(iv), (c)(2)(v), 

(e)(3), and (e)(4) are added. 

The additions read as follows: 

§ 301.7701–2 Business entities; 

definitions. 

(a) * * * But see paragraphs (c)(2)(iv) 

and (v) of this section for special 

employment and excise tax rules that 

apply to an eligible entity that is 

otherwise disregarded as an entity 

separate from its owner. 

* * * * * 

(c) * * * 

(2) * * * 

(iv) Special rule for employment tax 

purposes—(A) In general. Paragraph 

(c)(2)(i) of this section (relating to 

certain wholly owned entities) does not 

apply to taxes imposed under Subtitle 

C—Employment Taxes and Collection of 

Income Tax (Chapters 21, 22, 23, 23A, 

24, and 25 of the Internal Revenue 

Code). 

(B) Example. The following example 

illustrates the application of paragraph 

(c)(2)(iv) of this section: 

Example. (i) LLCA is an eligible entity 

owned by individual A and is generally 

disregarded as an entity separate from its 

owner for federal tax purposes. However, 

LLCA is treated as an entity separate from its 

owner for purposes of subtitle C of the 

Internal Revenue Code. LLCA has employees 

and pays wages as defined in sections 

3121(a), 3306(b), and 3401(a). 

(ii) LLCA is subject to the provisions of 

subtitle C of the Internal Revenue Code and 

related provisions under 26 CFR subchapter 

C, Employment Taxes and Collection of 

Income Tax at Source, parts 31 through 39. 

Accordingly, LLCA is required to perform 

such acts as are required of an employer 

under those provisions of the Code and 

regulations thereunder that apply. All 

provisions of law (including penalties) and 

the regulations prescribed in pursuance of 

law applicable to employers in respect of 

such acts are applicable to LLCA. Thus, for 

example, LLCA is liable for income tax 

withholding, Federal Insurance 

Contributions Act (FICA) taxes, and Federal 

Unemployment Tax Act (FUTA) taxes. See 

sections 3402 and 3403 (relating to income 

tax withholding); 3102(b) and 3111 (relating 

to FICA taxes), and 3301 (relating to FUTA 

taxes). In addition, LLCA must file under its 

name and EIN the applicable Forms in the 

94X series, for example, Form 941, 

‘‘Employer’s Quarterly Employment Tax 

Return,’’ Form 940, ‘‘Employer’s Annual 

Federal Unemployment Tax Return;’’ file 

with the Social Security Administration and 

furnish to LLCA’s employees statements on 

Forms W–2, ‘‘Wage and Tax Statement;’’ and 

make timely employment tax deposits. See 

§§ 31.6011(a)-1, 31.6011(a)-3, 31.6051–1, 

31.6051–2, and 31.6302–1 of this chapter. 

(iii) A is self-employed for purposes of 

subtitle A, chapter 2, Tax on SelfEmployment Income, of the Internal Revenue 

Code. Thus, A is subject to tax under section 

1401 on A’s net earnings from selfemployment with respect to LLCA’s 

activities. A is not an employee of LLCA for 

purposes of subtitle C of the Code. Because 

LLCA is treated as a sole proprietorship of A 

for income tax purposes, A is entitled to 

deduct trade or business expenses paid or 

incurred with respect to activities carried on 

through LLCA, including the employer’s 

share of employment taxes imposed under 

sections 3111 and 3301, on A’s Form 1040, 

Schedule C, ‘‘Profit or Loss for Business (Sole 

Proprietorship).’’

(v) Special rule for certain excise tax 

purposes—(A) In general. Paragraph 

(c)(2)(i) of this section (relating to 

certain wholly owned entities) does not 

apply for purposes of—

(1) Federal tax liabilities imposed by 

Chapters 31, 32 (other than section 

4181), 33, 34, 35, 36 (other than section 

4461), and 38 of the Internal Revenue 

Code, or any floor stocks tax imposed on 

articles subject to any of these taxes; 

(2) Collection of tax imposed by 

Chapter 33 of the Internal Revenue 

Code; 

(3) Registration under sections 4101, 

4222, and 4412; and 

(4) Claims of a credit (other than a 

credit under section 34), refund, or 

payment related to a tax described in 

paragraph (c)(2)(v)(A)(1) of this section. 

(B) Example. The following example 

illustrates the provisions of this 

paragraph (c)(2)(v). 

Example. (i) LLCB is an eligible entity that 

has a single owner, B. LLCB is generally 

disregarded as an entity separate from its 

owner. However, under paragraph (c)(2)(v) of 

this section, LLCB is treated as an entity 

separate from its owner for certain purposes 

relating to excise taxes. 

(ii) LLCB mines coal from a coal mine 

located in the United States. Section 4121 of 

chapter 32 of the Internal Revenue Code 

imposes a tax on the producer’s sale of such 

coal. Section 48.4121–1(a) of this chapter 

defines a ‘‘producer’’ generally as the person 

in whom is vested ownership of the coal 

under state law immediately after the coal is 

severed from the ground. LLCB is the person 

that owns the coal under state law 

immediately after it is severed from the 

ground. Under paragraph (c)(2)(v)(A)(1) of 

this section, LLCB is the producer of the coal 

and is liable for tax on its sale of such coal 

under chapter 32 of the Internal Revenue 

Code. LLCB must report and pay tax on Form 

720, ‘‘Quarterly Federal Excise Tax Return,’’

under its own name and taxpayer 

identification number. 

(iii) LLCB uses undyed diesel fuel in an 

earthmover that is not registered or required 

to be registered for highway use. Such use is 

an off-highway business use of the fuel. 

Under section 6427(l), the ultimate purchaser 

is allowed to claim an income tax credit or 

payment related to the tax imposed on diesel 

fuel used in an off-highway business use. 

Under paragraph (c)(2)(v) of this section, for 

purposes of the credit or payment allowed 

under section 6427(l), LLCB is the person 

that could claim the amount on its Form 720 

or on a Form 8849, ‘‘Claim for Refund of 

Excise Taxes.’’ Alternatively, if LLCB did not 

claim a payment during the time prescribed 

in section 6427(i)(2) for making a claim 

under section 6427, § 1.34–1 of this chapter 

provides that B, the owner of LLCB, could 

claim the income tax credit allowed under 

section 34 for the nontaxable use of diesel 

fuel by LLCB. 

* * * * * 

(e) * * * 

(3) Paragraph (c)(2)(iv) of this section 

applies with respect to wages paid on or 

after January 1 following the date these 

regulations are published as final 

regulations in the Federal Register. 

(4) Paragraph (c)(2)(v) of this section 

applies to liabilities imposed and 

actions first required or permitted in 

periods beginning on or after January 1 

following the date these regulations are 

published as final regulations in the 

Federal Register. 

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 05–20765 Filed 10–17–05; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE INTERIOR 

Office of Surface Mining Reclamation 

and Enforcement 

30 CFR Part 915 

[Docket No. IA–015–FOR] 

Iowa Regulatory Program 

AGENCY: Office of Surface Mining 

Reclamation and Enforcement, Interior. 

ACTION: Proposed rule; public comment 

period and opportunity for public 

hearing on proposed amendment. 

SUMMARY: We, the Office of Surface 

Mining Reclamation and Enforcement 

(OSM), are announcing a proposed 

amendment to the Iowa regulatory 

program (Iowa program) under the 

Surface Mining Control and 

Reclamation Act of 1977 (SMCRA or the 

Act). Iowa proposes to amend its rules 

regarding small operator assistance. 

Iowa intends to revise its program to be 

consistent with the corresponding 

Federal regulations and SMCRA. 

This document gives the times and 

locations that the Iowa program and 

proposed amendment to that program 

are available for your inspection, the 

comment period during which you may 

submit written comments on the