Final Regulation - PS-66-93

,

Fr~frl
a1 Rrgis~r~
:

.. .
vljr

ycar-5'' and r~placlngit w i ~ h"pre-1954
years" ~n~ a c h
place rhar it appears.

The r r v ~ s ~paragraphs
d
read as
follows:
Llmitatlon on tax.
(a) Three-yeara~locarionSection
481(b)11j provides a limitation On the
tax under chapter 1 or the Internal
Revenue
for the
year of
change t h a ~is attributable 10 (he
arljustn~er~ls
required under section
481 (3and 5 1.481-1 if t h e entire
amcunt of the adjusrments is taken into
account In the year of change. If such
a d j u s ~ l l e n l rincrease the taxpayer's
taxable income for the taxable year of
Ihe hange by
13.000,then
the tax for such taxable year that is
artributable to ihe adjustments shall not
exceed the lesser of the tax attributable
to taking such adjustlnents into account
In rompuling taxable income for the
taxable year of lhe change under sect ion
481(a) and 5 4E1-1, Or the aggregate Of
the incwases it1 tax that wou Id result if
the adjusr men& were included ratably
in the rayable year of the change and the
t w o receding taxable years. * *
(bfAllocario1: under n e w mrrhad of
accounting. Section 4 8 1 (b){2) provides a
second
limitation
hetax
for the taxable year of change under
chapter 1 of the In~ernalRevenue Code
{hat is attributable to the adjustments
required under section 481 {a) and
5 1.481-I where such adjustments
increase taxable income for the taxable
year of change by more than $3.000.
51.481-2

*+.I
(c) Kules for compuration oftax. (1)

Thc iirst srep rn determining whether
either of the limitations described in
section 481(b) (1) or (2) applies i s to
co~npureihe increase in tar: for the
taxable year of the change that is
at~ributablct o the increase in taxable
income for such year resulting snlely
from the adjustments required under
sectinn 481 (a) and 5 1.481-1
f

Gk3

Tit)

-

-..

r

*

*

*

(4) Thc tax for thc taxable year of the
change shall be the tm for such ypar.
compured without taking any of the
adjustmrnts refcrred to in paragraph
(c) (1) of this section into account,
increas~dby the srnallesr of the
roll ow^ ng amoun&-(i) The amount o f tax for the taxable
year of the change attributable solely to
raking into account the cnrlre amount of
I he ndjli5t mcnts required by section
481!a! and 5 1.481-1:
( i i ) Thc sum ol the increases ~niax
I~abilityfor (he taxable year of t h e
changc and the two immediately
prcccrling [*able years that would have
rcsb~ltrdsolely frnin r ~ k i n gInto acroutlt
one-~hird of t h e arnnunt of such

1.1 1 i L~lu~lclay,
Aug11st 7, 1935 ,' Rulrh rid Regulari~,ri\

-

--

-.

adjustments required for each of such
years as though such amounts had been
properly attributable to such years
(computed in accordance with
paragraph (c)(2) of this section): or
(iii) The net increase in tax
attributable to allocating such
adjustments under the new method of
accounting (computed in accordance
wirh paragraph (cI(3) of this section).
*

*

5 1.481-3

*

*

40079

.

t

[Amended]

Par.5.Section 1.48i-3isamendedas

wpayer. It shall set forth the items to
be adjusted, the amount of the
adjustments, the taxable year or years
for which the adjustments are to be
taken into account, and the amount o f
the adjustments atlocable to each year.

The agreement shall be binding on the
parties except upon a showing of fraud,
malfeasance, or rnisre-presentation of
material fact.
Par. 8. Section 1.481-5 is added ro
read as follows:
Efteclfvedates.

91.481-5

folIows:
Sections 1.481-1,1.481-2, 1.481-3,
1 The language "pre-1954Code
and 1.481-4 are effective for Consent
yexs.. isremoved and the
Agreements signed on or after December
"pre-1954years" is added in 113 place in 21, 1994, F~~ Consent Agreemenu
the section heading and the first second signed before December 27, 1994, see
and third sentences of the sectiD;I,
bS1.481-I, 1.481-2, 1.481-3, 1.481-4,
2 , Remove the last sentence of the
and 1.481-5 (as contained in I he 26 CFR
section.
part 1 edition revised as of April 1.
1995).
g t , 9 8 1 4 [Removcdj
Par. 6. Section 1.481-4 Is removed.

[Removed]

gt.4814

Par. 9. Section 1.481-6 is removed.

3 1.481-5 IRedeslgnat@das 5 t . a l d 1
Par. 7, Section 1.481-5 is
redesignated as 5 1.481-4 and is revised
a wad follow^:

Margaret Milner Richardson,
c , ~ J of~,,term,~evenue.
, ~ ~ ~ ~ ~
Approved July 26. 1995.

91.481-4 Adustments taken into account
with conatnt.

Leslie Samuets,
As~IsianiSecretary of the Treaury.

,

[a) In addition to the terms and
conditions prescribed by the
Commissioner under 9 1.446- 1 (e)(3) for
effecting a change in method of

accounting, including the taxable year
or years in which the amount of the
adjustments required by section 481 (a)
is to be taken into account, or the
rnerhmds of allocation described in
section 48 1(b), a taxpayer may request
approval of an alternative method of
allocating the amount of the
adjustments under section 481. See
section 481(c). Requests for approval or
an alternative method o f allocation shall
set forth in detai 1 the facts and
circumstances upon which the taxpayer
bases Its request.
be
granted only if the taxpayer and the
Commrssiot~eragree to t h e terms and
conditions under which the allocation is
be effected. See 1.446- 1 (e)Tor the
rules regarding how to secure the
Commissioner's consent to a change in
method of accounting.
(b)An
to
terms and
conditions of a rhange in method of
accounting under 5 1.446-1 (e)(3),
including the taxable year or years

~

~

~

~

that sectiotl (or an alternative method
described in paragraph [a) of this
section)ior~akingthemollntofthe
a d j u s ~ ~ n r nunder
ts
section 4 8 1 (a) into
account, shall lw in writing and shall be
signed by the Cornrnirsioner and the

IFR Doc 95-1 9283 Filed 8-4-95. 8:45 am]
e ~ u m [ iCODE

~BW~I-U
-

26 CFR Parts 40,48, and 602
[TD 86091

RIN 1545-AS10

Gasohol; Campressed Natural Gas
AGENCY:

Internal Revenue Service (1RS).

Treasury.

Final regulations,
This document contains final
regulations relating to gasohol blending
and the tax on compressed natural gas
(CNG),~h~ regulations
and
implement
changes made by he
Enwgy pol^ Act of 1992 (the Energy
SUMMARY:

and the Omnibus Budget
Reconci]iatjon
of 1993 (be1993
Act). The regulations relating to gasohol
blending affect certain blenders,
entemrs, refiners, and throu@putters.
The regulations relating t o CMC affect
persons that sell or buy CNG for use as
afi~elinamotorvehicleormotorboat.
~
~
~
Act)

These regulations are
efiective0ct0ber1,1995ERECFlVE DATE:

FOR FUFrmER INFORMATIONCONTACT:

Frank Boland (202) 622-3130 (not a tollTree call).

~

40080

Fedcral Register / Vol. 60. No. 15 1 / Monday, August 7. 1995 1 Rules and Regulations
- .- .. ...
.. .
- .....
. .... ..
-...
--L-.

- 260 degrees Fahrenheit 1s a liquid
when it is delivered lnro the fuel supply
Paperwork Redt~rtionAcr
cank of a motor vehicle or motorboat,
The collecrions ofinformation
but Is vaporized into a gas when it is
contained in thesc final regulations have
cornbustedi n [he engine.
been reviewed and approved by the
Several commentators suggested that
Office of Mana~cmentand Budget in
the CNC rate, rather than the rate on
accordance with rhe Paperwork
special motor fuels, should apply to
Rt-ducti09 Act (44 U 5.C. 3504(h)) ~ n d e r LNG because (1) Both produck have h e
control number 1545-1270. The
same chemical composition, (2) both
estimated average annual reporting
products are gases when they are
burden per respondent is -2hour.
aciually cornbusted in an engine,and (3)
Comments canccrning the accuracy of LNG
be a
this burden estimate and suggestions
disadvantage if taxed at the liquid rate.
reducing this burden s h ~ u i d
be sent to
The final regulations do not adopt this
rhe Internal Revenue Service, A t t n IRS
B
~ the [1993~A,-[,~the ~
Reports Clearance Officer, PC:FP,
section 4D4 1 special fuels tax applied to
M:~shingron.DC 20224, and to the
liquids sold for use or used as a fuel in
O f f ~ cof
e Management and Budget. Attnr motor
rhus,
DeskOmicerfortheDepafimentofthe
LNGwassubjecttotaxalIhespecja!
Treasury, Office of Information and
fuels rate of 18.4 cents per gallon when
Regulatory Affairs, Wash~ngton.DC
the 1993 Act imposed a tax at a lower
20503.
rate on CNC. The 1993 Act contained no
provision that would change t h e
Background
treatment of LNG,nor is there any
On 0ct&et 19. 1994, the IRS
suggestion in the Iegisiative history that
published in t h e Federal Register (59
FR 52735) proposed regulations (PS-66- Congress intended to do so.
93) t hat generally cor~solidatethe rules
CNC: Gasolirle Gallon Equivalent
relating to the gasoline tax and the
The CNG industry has recently begun
diesel fuel tax into a single set ofrules
sell CNG on
basis of C N C ~ ~
applicable to both fuels. These
Casoljne Gallon Equivalent (GGE).
'Iso proposed
Generally, a GGE represents a particular
to gasohol and CNG.
fuel's energy content relative to the
Written ccmments eard ding these
Pnergy rantent of
thus,
regulations were received and a public
vehicles can travel
hearing was held on January 11. 1995.
samp distance with a GGE o f ~ as
N ~
After consideration of the comments
wirh a gallon of gasoline.
relating to gasohol and CNG, the
Several c o m m e n t a t m suggested that
On these topics are
proposed
the final regulations should express the
adopted as revised by this Treasury
CNG tax rate in terms of CGE Instead of
decision Final reguIatlons relating to
terms of MCF as provided in he
ion provisions 'Ontained
the
Code. The firla1 regula ti nns do n o t adopt
in rhe proposedregulations will be
this suggestmn. However, there is no
issued later.
restrlction on taxpayers engaging in
sales on the basis of CGE provided that
Explanation or Provisions
the tax is actually paid at the rate of
C'NG: Treatment o f Liquefied hlatura!
48,54 cents per MCF,
SUPPLEMENTARY 1NFORMATtON:

,

Gas {LNG)

Sec11on4041(a)(Z)irnposesaspecial
]motor fuels tax on any liquid (other than
kerosene, gas oil, fuel oil, gasoline, or
diesel fuel) that is sold for use or used
as a fuel in a motor vehicle or
mo:orboat. The rate of this cax is 18.4
ccnw per gallon ( I 8 3 cents per gal!on
in the case of liquelied petroleum gas).
Effective October I , 1993, section
404 1 (a)(3) (as added by the 1993 Act)
imposes a rn of 48.54 cents per MCF
(thousand cubic feet) on CNG chat is
sold for use or used in a motor vehicle
of inntorboat.
CNC is a gas a1 h e 1 ime it is delivered
into the fuel supply tank of a motor
vehicle or motorboat and when it i s
ac~tlallycorr~bustedin the engine. LNG,
whirl, i s produced by compressing
pip~lrrlenatural gas and rooling it to

Casoho':To'eranceRule
The gasoline tax rate on most
rernovals and entries is 18.4 cents per
galton (the reguIar tax rate). However, a
reduction from the regular tax rate is
allowed for gasohol (a gasoline/alcohol
mixture containing a speciried amount
of alcohol) and gasoline removed or
entewd for the production of asohol.
Prior to its amendment by e Enera
Act, section 408 1 (c) treated a mixture of
gasoline and alcohol as gasohol only if
at least I0 percent or the mixlure was
alcohol. Regula! ions allow a lolerance
for mixtures that contain less than 1 0
percent alcohol but at ieast 9.8 percent
atcohol. Under the ~olcrancerule, a
ponion or the mixture equal to the
number of gallnns of aIcohol in the
m i s l i ~ r crnultlplied by 10 is considered

8

..

--

to be gasohol. Any excess liquid in t h e
mixture ts tax& at the reguiar rate.
This tolerance rule accommodates
operational problems associated with
the blending or gasohol. For example,
blenders may fall to attain the required
I 0-percent alcohol level because the
device used to meter the amount of
gasoline or alcohol delivered into a h n k
truck i s imprecise or because the highspeed gasoline or alcohol pump used
does not shut off at the proper moment.
As noted in the preamble to an earlier
regulation relating to gasohol tolerances
(published in the Federal Regisler on
August 21. 1987 (52FR 31614)), this 2
percent tolerance is based upon a
standard Industry tolerance
specification for wholesale measuring
devices.
Effective January 1, 1993.section
4081(c) was amended to allow a
reduction from the regular rate for
mixtures containing at least 5.7 percent
aicohol but less than 7.7 percent alcohol
(5.7 Percent gasohol) and mixtures
containing at least 7.7 percent alcohol
but less than 10 percent aicohoI (7.7
percent gasohol).
The proposed regulations did not
extend the tolerance rule to mfxtures
that contain less than 7.7 or 5.7 percent
alcohol. Several commentators
suggested that the tolerance rule be so
extended. They noted that the same
operational problems that occur with
the blending of 10 percent gasohol also
occur with the blendlng of 7.7 or 5.7
percent gasohol.
The final regulations adopt this
suggestion and allow a tolerance for 7.7
and 5.7 percent gasohnl in
approximately the same percentage as
that allowed for 10 percent gasohol. Any
excess liquid in a mixture that qualifies
as 5.7 percent gasohol or 7.7 percent
gasohol because of the tolerance rule is
taxed at the regular rate.
Gasohol: Alcohol-Based Ethers
The proposed regulalions provide that
alcohol (that Is, alcohol that i s not
produced from petroleum, natural gas.
or coal (including peat)) used to
produce ethers such as ethyl tertiary
butyl ether (ETBE) or methyl tertiary
butyl ether (MTBE) i s treated as alcohol
for purposes of the reduced tax rates for
gasohol. Some commentators suggested
that, wlth respect to gasohol produced
by blending gasoline made with alcoholbased ether at a refinery, the regulations
should aIso provide (1) An allocation
the
rule and (2) guidance
application of the income tax credit
allowable by section 40.
AIIocaiion rule. Traditionally, gasnhul
has been produced by drlirering the
requisite amount of alcohol into a

--

Ftldrral Hcgister / 'Jol. I5U, Lo. 15 1 / Monday. August 7, 1995 / Kules and Regulations
...-.
.

-.-

-

-.
--

-- . -

--

lransport rrailcr that conlains g a s o l l n ~
wtrile Lhc trailer is a! a tcrminal rack.

l ' h ~!wo co~nponcntsare blended
together by the motion of h e trailer as
il moves on the highway.
Now, ilowcver, gasohol may be
produced at the refinery with alcoholbased ether. This type of gasohol does
not absorb water, which means i t can be
transported through a pipeline.
t lowcvcr, a9cr shipment from the
refinery and before ~ t rernoval
s
at the
terminal rack, much of this gasohol may
have been diluted with non-qualifying
blends because of the use o f commoncarrier pip~iines,barges, and nonsegregated storage facilities. As a result.
the blend removed at the t ~ r m i n arack
l
may nor qualify for dw reduction from
the regular rate due to cornmingline
between the refincry and terminal rack.

To address this issue, several
commentators suggested an allocaiion
system for gasohol that is produced
before It reaches r h~ rermlnal that would
nor depend on rhe actual existence of a
qualified mixture at the taxing point.
For example, a refiner chat removes one
million gallons of gasohol from It-<
refinery for bulk shipment to a terminal

could designate any one million gallons
of gasoline that is removed at the
terminal rack as gasohol, regardleu of
the actual alcohol-based ether content of
the gasoline.
Other commentalors, by contrast.
opposed e~pandlngthe benefit for
gasohol made with ~ t h ~ r - b a s alcohol
ed
by allowing such an allocation rule.
Qafi-r. these commentators argued that
a uatch of mixture s h o ~ l dnot be taxed
ar the reduced rate unless Ihe mixture
aciually contains the requlsiie a~r>uunt
o f alcohol at the taxing point.
The final regulations d o not adapt the
suggested allocation rule. Under secr ion
4n8 l (r).a reduction from the regular tax
rate i s allowable In the case of a taxable
removal or entry of gasohol. Thus, a
taxable removal or enkry of gasoline that
does not contain the requisite amount of
alcohol at !he tilue u i the taxable
removal or entry is not a removal of
gasohol md is ;ubjecr to (ax at the
regular rate.
However, the final regulations do

address concerns arising from this
relatively recent development of
producing gasohol at the refinery rather
than at the terminal rack. Specifimlly,
scctlon 4 10 1 pl-okides that every person
rcquired to be registered with respect to
thr gasoline tax must register at such
time. in such form and manncr, and
sdbject to srlrh term< and conditions as
he Secretary may prescribe by
r~pulations.Pursuant to (ha! provision.
the final regulat Ions protide that a
rer~nerreglstererl by the IRS that

- -.

--

prodllres a batch o f gasohol may ueat
itself as nnt wgisr~redwith respect to a
bulk removal of that gasohol. If the
refiner treats itself in this manner,the
removal would not be exempt from the
tax under sectlon 4081(a) (1) (B), which
provides that the bulk removaI by a
registered refiner for delivery to a
terminal operated by a registered
terinlnal operator is not subject to the
tax. I lawc~cr.because the mixture
would qualify as gasohol at the time of
removal from the refinery, it would be
subieci to tax at the reduced rate The
finch rewlations a I s provide
~
that the
refiner is not required to deposit this tax
before filing the return relating to that

m.
If a refiner chooses this option, tax
also will be Imposed under 5 48.4081Z(b1 at the full rate when the fuel Is
removed at h e terminal rack, but a
refund of thts second tax may then be
alIowabIe to thc position holder under

section 408 1 (e).
AppIica tion of section 40. Sect ion 40
allows an income tax credit to the
producer of certain mixtures of alcnhal
and gasoline. Under section 40(c), the
amount of this credit wi& respect to any
alcohol is mduced to take into account
any benefit provided with respect to
such alcohol solely by reason of the
application of section 4081 (c).

One commentator suggested that the
final regulations provide that a refiner
that produces a mixture of gasoltne whh

-

40081

---

2

--

Dralting 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
26 CFR P a m 40 and 4 8

and

mes.

recordkeeping
26
- -

CFR Part 602

and

rrcordLeeping
requirements.
Adapllon of Amendments to the
Regdllations
Accordingly. 26 CFR parts 40,48, and
602 are amended as follows:

PART 40-EXCISE
REGULATIONS

TAX PROCEDURAL

Paragraph 1. ?he auhority ciration
for part 40 continues to read in part as
follows:
Authority: 26 U.S.C. 7805

5 40.6302(c)-U

* *

(Removed]

Par. 2. Sectlan 40.6302(c)-0 is
removed.

Par. 3. In § 40.6302(~)-1,
paragraph
(e) (4) is added to read as follows:
§40.630Z(cbl
deposltarler.

Use of Gawrnmen~

a n alcohol-based ether always is eliglble ,
*
*
*
*
forthe section 40 credit. without
[e)
* *
reduction under section 4 D(c).
(4) Taxes excluded; certain removals
-1he final regulations d o not adopt thib of gasahol from refineries. Nu deposit i s
suggestion because it is Inconsistent
required In the case of the tax Imposed
with section 40{c), which requires a
under 5 48.4081 -3(b)(I) (ill) of this
reduction in the credit whenever a
chapter.
mixture is ~ w P I Jat a reduced rate for
*
*
*
*
I
gasohol under section 4081(c).
PART 48-MANUFACTURERS AND
Speclal Analyses
RETAILERS EXCISE TAXES
It has been determined that this
Par. 4. The authority citation for part
Treasury decision i s not a significant
48 Is amended by removing the entries
regulatory action as defined in EO
for Sections 48.4041.2 1 and 48.4081-2
12866.Therefore, a regulatory
to read in part as follows:
assessment is not required. 1t also bas
AuthorIiy: 26 U.S.C. 7805 * *
been detern~lnedthat section S53(b) of
the Administrative Procedure Act (5
Par. 5. In § 48.4041-8, paragraph (0 is
U.S.C.chapter 5) and the Regulatory
amended by:
Flexibility Act 15 U.S.C.
chapter 6)do
1. Revising the introductory text of
not apply to thesp r ~ ~ t ~ l a r i nand.
ns,
paragraph (f) (1).
therefore, a Regulatory Flexibility
2. Revising paragraph (fl(1) (1).
Analysis ts not required Pursuanr to
3. Redesignating paragraph (f)(l)(ii) as
section 7805(i) of the Internal Revenue
paragraph (g(1)iiii) and adding a new
Code, the notice o l proposed rulemaking paragraph (0(1)iii).
preceding these regulations was
4. Kemoving lrom paragraph (fj(2) thc
~ u b r n i l t e dto !he SmafI Business
language "diesel fuel or".
Administration for comment on its
The revisions and additions read as
impact on small business.
follows:

40tltTZ

Federal He~isrer/ Vol Ib c ~ , ho. I51
-.

5 40.4041-8
*

Deflnitlons.

*

*

*

a

{fl Special mot& !kc1 ( 1 ) Except as
pmvidpd in paragraph (O(2) of [his
sect ion, special Irlotor fuel means any
liquid fuel, including(i)Any liquefied petroleurn gas (such
a s propane, butane, pentane, or
mixtures of h e same):
(ii) Liquefied natural gas: or
.

*

k

f

f

Par. 6. Section 48.4041-21 is revised
to read as follows:

9 48.4041-21

Compressed natural gaa

(CNG).

(a) Deliver?, o f CNG into the fuel
supply rank of a motor vehicle or
motorboar-(1) Imposition of tax. Tax is
imposed on the delivery uf compressed
natural gas (CNC) into the fuel supply
rank of the propulsion engine of a motor
vehicle or motorboat unless tax was
previol~slyimposed on the CNC under
paragraph (b) of thls section.
(2) Liability Tor tax Ifthe delivery of
the CNG i s in connecrron with a sale,
the seller of the CNG i s liable for the tax
imposed under paragraph (a)(l) of this
section. If h e delivery of the CNG is not
in connectjorr with a saIe, the operator
of rhe motor vehicle or molorboat, as the
case may be, i s liable i'or the tax
i~nposedunder paragraph (a)(l) of this
section.
(b) Bulk sales of CNG-(1) In general.
Tax is imposed on the sale of CNG that
i s nor in connection with the delivery of
the CNG I
t h rue1
~ supply tank of the
propulsion e n i ' r l ~r" a motor vehicle or
motnrboar if. by the lime of the sale(i) T h e buyer has given the w l l e r a
written statement stating that the entire
quantity of the CNG covered by the
sratement i s for USF as a fuel in a motor
vehicle or motorboar:and
( l i ) The seller has givrn the buyer a
written acknowledgement of receipt of
h e stalement described in paragraph
(b)(I)(i)
of this section.
(2) Liability for tax. The seller of the
CNG Is liable ror the i a x imposed under
t h i s paragraph (b) .

(c) Exemptions-(I)

In general. The

taxes imposed u n d ~ rthis

section drr not
apply to a delivety or sale of CNG for
a use described in 5 48.4082-4T(c)(1)
through (5){A) or (c)(6) through (1 1).
liowever, i L the person otherwise liable
For tax under his section Is the seller of
the CNG, the e3emptian under this
section applies only if, by the time of
sale, the seller receives an unexpired
certifkare (as described in (his

paragraph [c)) from the buyer and has
no reason lo believe any inforrnatinn in
the cerlificate I S false.
.
(2) C ~ r t i f i cre;
a irl general The
cerfificate 1 0 be provided by a buyer of

! Monday,

Augusr 7, 1995 i Rules and Regulations
-

-"-

Buyer understands that if Buyer violales
CNC is to consist of a statement that is
iht: terms of !his certlficate. !he Lnternal
slgned under penalties of pe jury by a
person with authority to bind the buyer. Revenue Service may withdraw Buyer's right
should be in substantially h e same form to provlde a certificate.
Buyer has not been notified by the Internal
as the model certificate provided in
Revenue Service that Its right to provldr: a
paragraph (c) (4) af this section, and
certificate has been withdrawn. In addit~on.
should contain all information
the Internal Revenue Sewlce has not notified
necessary to complete the model
Buyer that the right to provide a certificate
certificate. A new certificate must be
has been withdrawn from a purchaser to
which Buyer sells CNG tau free.
given if any Information in the current
Buyer understands that the frauddent use
certificate changes.The cenificate may
of thls certificate may subject Buyer and all
be Included as part of any business
parties making any fraudulent use of this
records normally used to document a
certificate to a fine or Imprisonment. or both.
sale. The certiftcate expires on the
together w i t h the costs of prosecution.
earliest of the following dates:
(i) The date one year after the effective Prrnted or typed name of person signing
date of the certificate (which may be no
earlier than the date it Is signed).
Title of person signing
(il) The date a new certlficate is
provided ro the sever.
Employer identification number
(iii) The date the seller is noclfied by
the Internal Revenue Service or the
Address of Buyer

buyer that the buyer's dght to provide
a certificate has been withdrawn.
(3) Wirhdra wal of the right to provide
a certificare. The Internal Revenue
Service may withdraw the right of a
buyer oiCNG to provide a certificate
undw this paragraph (c) If the buyer
uses CNG to whlch a certlficate applies
in a taxable use.The Internal Revenue
Service may notify any seller to whom
the buyer has provided a certificate that
the buyer's right to provide a cenificate
has been withdrawn.
(4) Model certificate.
Certificate of Person Buying Compressed
Natural Gas (CNG) for a Nontaxable Use

(To support tax-free sales of CNG under
section 404 1 of the Internal Revcnue Code )

Name. address, and employer Identif~catlon
number of seller

"Buyer")cenifies
the following under penalties of perjury:
The CNG to which this certificate relates
will be used in a nontaxable use.
This ceriillcate applies to the following
(cnrnplele as applicable):
1I ihis is a slngle purchase cerlificate, check
here
and enter:
1 . Invoicp or delivery tlcket number
2. (number of MCFs)
Ii this Is a certificate covering all purchases
under a speclfled account or order number.

check here
and enter:
1. ETfectlve date
2. Explrarlon date
(period no4 ao exceed 1 year after the effective

date)
3. Buyer account or order number
Buyer wit1 not clalm a credit or refund
under secdion 6427 OF the Inlernal Revenue
Code for any C N C 10 which thls certificate
relates

Buyer w i l l provide a new certiflcale to the
seller if any informa~j~in
In this certificate
changes.

Signature and date signed

--

(d) Rate of tax. The rate of the tax
imposed under this section is the rate
prescribed by section 404 1 (a) (3).
(e) EfTective date. This section is
effective October 1, 1995.

9 48.40814 [Removed]
Par. 7. Sectlon 48.4081-0 is removed
Par. 8. In S 48.4081-3, paragraph
(b)(l) is revised to read as follows:
5 48.4081-3

Gasoline lax; taxable events
other than removalat the terminal rack
*

*

a

*

*

(b) *

(1) In general. Except as
provided in 5 48.4081-4 (relating to
gasuline blendstocks) and paragraph
(b)(2) of this section (relating to an
exception for certain refineries], tax is
imposed on the iollowing removals of
gasoline from a ref nery:
(i) The removal is by bulk transfer and
the refiner or the owner of the gasoline
l~nmedlatelybefore the removal i s not a
gasoline registrant.
{Ii) The removal is at the rack.
(iii)After September 30, 1995, the
removal is of a batch orgasohol horn an
approved refinery by bulk transfer and
the reflner treats itself with respect to
the removal as a person that is not
registered undw section 41 01. See
3 48.4101-3. For the rule providing that
no deposit is required In the case of the
tax imposed under this paragraph
@)(l)(iii),see 5 40.6302(c)-1(e)(4) of this
chapter. For the rule allowing
inspeclions of racil ities where gasohol is
produced, see section 4083.
Far. 9. Section 48.4081-6 is revised to
read as follows:

6 48.40814 Gasoline tax: gasohol.
(a) Overview. This section provides
rules for determining the applicability

Federal Register / Vol 610 No. 151 / Mondav Au~ust7 1995 / Rules and Re~ulations

40083

-

oi ~ r d l r c rates
d
of lax on a r ~ m n v a lor
or or gasoline used 10
produce gasohol. Rules are also
provided for the imposilion of tax on
the separation oT gasoline from gasohol
and the failure to use gasoline that ha .
been laxed at a reduced rate to produce
gasohol.
(b) Explana rian of terms-( 1 )
Alcohol-(i) In general: source of the
alcohol Except as provided in
~aragraph(b)(l)(il)of h i s section,
alcohol means any alcohol that is not a
derivative product ofpetroleu~n,natural
gas, or coal (jncluding peat). Thus, the
term includes methanol and ethanol
that are nor derived from petroleum.
natural gas, or coal (including peat). The
leim also ir lludes alcohol produced
either within or outside the United
entry uf gasohol

Slates.

(ii) Pro~fanddenaturanfsAkohol
does nor ~ncludealcohol with a proof of
less rhan 190 degrees (detennined
without regard to added denaturants). If
h e alcohol added to a fuel/aIcohol
rnixture (the added alcohol) includes
impurities or denaturants, the volume of
alcohol in the mixture i s determined
under the following rules:
(A) The volume of alcohol in the
mixture includes the volume oi any
impurities (other than added
denaturants and any fuel with which
the alcohol i s mixed) that reduce the
purity of the added alcohol to not less
than 190 proof (determined without
regard 10 added denaturants).
(B) The volume of alto hol in the
mixture includes the voIu.,,e of any
approved dena~urants that rea", . h e
puriry of the added alcohol, but only to
rhe extent ~ h a rthe volume of the
approred denaturants does not exceed
five percpnr of the volume of the added
alcohol (including the approved
denaturants). I f the volume of the
approved denaturants exceeds flve
percent of the volume of the added
alcohol, the excess over five percent is
considered part of the nonalcohol
content of the mixture.
(C) For purpnses of chis paragraph
(b)(1) ( i i ) , approved denaturants are any
denaturank (including gasoline and
nonalrohol fuel denaturants) that
reduce the purity of i he added alcohol
and are added to such alcohol under a
formula approved by the Secretary.
(iii) Producrs derived from alcohol. If
alcohol rl~scribedin paragraphs @)(l)(I)
and (ii) of thrs section has been
chcrn ically transformed in producing
another produc~(thar Is,the alcohol is
no longer prescrlt a s a separate chemical
in the other product) and there is no
significant loss in the energy cnntent o f
thr alcohol, an!, mixture containing the
product includes thc volume of alcohol

t~sedto produce he product. Thus, for
example, a mixture of gasn!ine and ethyl
tertiary butyl ether (E'FBE), or or
gasoline and methyl tertiary butyl ether
IMTBE), Includes any alcohol described
In paragraphs [b)(I) (i) and (ii) of this
section thar is used to produce the ETBE
or MTBE,respectively, In a chemical
reaction in which there is n o significant
loss In the ener content of the alcohol.
(2)
in genera!-(/\)
Gasohol is a mixture o f gasoline and
alcohol that i s 10 percent gasohol, 7.7
percent gasohol, or 5.7 percent gasohol.
The determination of whether a
particular mixture is 10 percent gasohol.
7.7 percent gasohol, or 5.7 percent
g a s ~ h o li s made on a batch-by-batch
basis. A batch of gasohol l5 a discrete
mixture ofgasoline and alcohol.
@) If a particular mixture is produced
within t h e bulk transfer/tenninal system
(for example, at a refinery),the
determination of whether the mixture is
gasohol is made at the time of the
taxable removal or entry of the mixture.
(C) If a particular mlxture is produced
outside of the bulk transfer/termlnal
system (for example, by splash blending
after the gasoline has been removed
from the terminal at the rack), the
detennlnatjon of whether the mixture k
gasohol is made immediately after the
mixture is produced. In such a case, the
contents of ~e batch typically
correspond to a gasoline meter delivery
ticket and an alcohol meter delivery
ticket, each of which shows the number
of gallons of liquid delivered into the
mixture. The volume of each component
in a batch (without adjustment for
temperature) ordinarily is determined
by the number of metered gallons
shown on the delivery tickets for the
gasoline and alcohol delivered.
However, If metered gallons of gasoIine
and alcohol are added to a tank already
containing more than a minor amount of
liquid, the d e t e r m i ~ t i o naf whether a
batch satisfies the alcohol-content
requirement will be made by taking into
account the amount of alcohol and nonalcohol fuel contained in the liquid
already in the tank. Ordinarily, any
amount In excess of 0.5 percent of h e
capacity of the tank will not be
considered minor.
(ii) 10 percent gasohol-(A) In
general A batch of gas~Iine/alcohol
mixture i s I0 percent gasohol if i t
contains at Ieast 9.8 percent alcohol by
volume, without rounding.
(B) Batches containing less than 10
percent but at least 9.8pcrccn t alcohol
If a batch of mixlure contains ipss than
10 percent alcohol but at least 9.8
percenl alcohol, without rounding, only
a portion of the batch is considered to
be 10 percent gasohol. That portion

GBSO~OI-0

-

equais the ~ i u m b e roJ gallons of alcohnl
In the batch multiplied by 10. Any
remaining liquid In the mixture i s
excess liquid.
(ill)7.7 percent gasohol-(A) In
general. A batch of gasollne/alcohol
mixture Is 7.7 percent gasohol if it
contains less than 9.8 percent alcohol
but at Ieast 7.55 percent alcohol by
volume, without rounding.
(B) Batches containing less than 7.7
percent but at leasf 7.55percenr
alcohol. If a batch of mixture contains
less than 7.7 percent alcohol but a t least
7.55 percent alcohol, without rounding.
only a portion ofthe batch is considered
to be 7.7 percent gasohol. That portion
equals the number of gallons of alcohol
in the batch multlplled by 12.987. Any
remaining liquid in the mixture is
excess liquid.
(iv) 5.7percent gasohol-(A) In

general. A batch of gasoline/alcuhol
mixture is 5.7 percent gasohol if it
contains less than 7.55 percent alcohol
but at least 5.59 percent alcohol by
volume. without rounding.
(B) Batches containing less than 5 7
percent but at least 5 59 percent
alcohol. If a batch of mixture contains
less than 5.7 percent alcohol but at least
5.59 percent alcohol, without rounding.
only a portion of the batch is considered
to be 5.7 percent gasohol. That portion
equals the number of gallons of alcohol
in the batch multiplied by 17.544. Any
remaining liquld in the mixture is
excess liquid.
(v) Tax on excess liquid. If tax was
imposed on the e x c e s liquid in any
gasohol at the gasohol production tax
rate (as defined in paragraph ( e ) ( l )or
this section), the excess liquid in the
batch is considered to be gasoline with
respect to which there ts a failure to
blend into gasohol for purposes of
paragraph (0 of this section. If tax was
imposed on the excess liquid at the rate
of tax described in section 4081 (a),a
credit or refund under section 6427(f) 1s
not allowed with respect to the excess
Ilquld.
(vi) Examples. The following
exampIes illustrate this paragraph (b)(2).
h these examples, a gasohol blender
creates a gasolinelalcohol mixture by
pumping a specified amount of gasoline
into an empty tank and then adding a
specified amount of alcohol.

Example I . Mixtures containing exactly 10

percenr alcohol. T h e applicable delivery
tickets show that the mkture Is made wlih
7200 metered gallons algasoline and 800
metered gallnns or alcohol. Accordingiy, the
mixture conlains 10 percent a l c ~ h o l(as
determined bared o n the dellvery tlckets
provided lo the blender) and qual~fiesas 10
percent gasohol.
Exan~pIe2. Mixtures containing Ieslr rhan
10 percent alcahoJ but at least 9.Bpercenl

40084
-.

Federal Regihter / Vol. GU. No. 15 1 / ,Monday, August 7, 19'35 / Rules and Regulations
-

. .

(3) Gasohol blender Gasohol blender
means any person that regularly buys
gasoline and alcnhol and produces
gasohol for use in its trade or business
or for resale.
(4) Regarered gasoho! blender.
Registered gasohol blender means a
person that is registered under section
4 101 as a gasohol blender.
(c) Rate of ran on gasoline removed or
en rered for gasohol production-(I) In
general The rate of tax imposed on

gasoline under 5 48.4081-2(b) (relating
to lax irnposed at the terminal rack).
548,4081-3(b)(I) (relating to tax
imposed at the refinery). or 5 48.408 1
3(c)(l)(relating to tax imposrd on
entries) is rhe gasohol production tax

-

rate if-

(i) The

-

--

alrrahdl The applicable drlivery tickets show
that the mixture is made whth 7205 metered
gallons o f gasoline and 795 metered gallons
of alcohol. Because the mixture contams less
than 10 prcent alcohol. but more than 9.E
p r r r ~ alcohol
n~
(as determined based on the
d e l i ~ w ytickets provided to the blender).
7950 p!]ons nf the mixlure qualify as 10
percent gasohol. II law n-as impased on t h e
gasoline in the rn~uhlreat the gasohol
production rale applicable to 10 percent
gastlhol lhe remaining 5U gallons of the
mixture (the cncess llquid) are trealed as
gasoline with I.espect to which there was a
failure
l ournoses of
-..-. .t.r.l blend l n l o ~ a l o h o for
1'3raglapi-i {n oT lhis section. If tax was
lmposrd on the gasoline in the mixture at the
rate or lak described in section 4081(a). a
c r t d j ~or refund under section 64?7(f) is
allou,rd only with respccl to 71 55 gallons of
gas01 ine.
Example 3. hfixtrifes iwt~lalningless than
5 59 percent alrohoi. The applicable delivery
t~cketsshow lhar rhe mixiure Is made wllh
7568 mftered aallons of ~asollneand 436
merered g a l l o k of alcoh;~. Because the
rnlvturp contains only 5 45 percent alcohol
(as determint!d b a s 4 an the delivery tlc!4et5
~ m v i d e dto the blender) !he mixture d w s
not qualify as gasohnl.

person liablc for tax under

5 48.4081 -2(c)(l) (the position holder),
5 48.4081 -3(b](3) (the refiner). or
5 48.4081 -3(c)(2) (the ent~rer)is a
taxable fuel registrant and a registered
gasohol blender, and surh person
produces gasohol with the gasoline
within 2 4 hours after removing or
en;eri,np the gasoline: or
11) The gas01 ine is sold in connection
with the removal or entry, the person
liable for tax under 5 48,4081-Z(c)(l)
(the position holder), 9 48.4081-3(b)(3)
(the refiner). ~r 5 48.4081-3(c)(Z) [the
~ n ~ e r eisr )a taxable fuel regislrant and
the prrson, at the time of the sale.(A) H a s an unexpired certificate (as
described in paragraph (c) (2) of this
wction) From the buyer; and
(B)Has no reason to believe that any
informar ion in the certificate is false.
(2) Certificntc--(i) In p n ~ r a l?'he
.
ccrl~ficatcrderrcd 10 i : ~paragraph

of this section is a statement
that 13to be providedby a registered
under
blender that is
penalties of perjury by a person with
to bind the registered gasohol
blender, i:. In substantially the same
form as the model certificate provided
in paragraph (c)(2)(ii) of this sect ion,
and contains all Information necessary
to complete such model certificate. A
new certificate must be given if any
in the current cer'ficate
changes. The certificate may be
included as part of any business records
normally used to document a sale. The
cert iricate expires on t h e earliest of the
(c) (I ] (ii) (A)

fol lowing dates:
(A) The date one year after the
effective date of the certificate (which
may be no earlier than the date i t is
signed).
(0) The date the registered gasohol
blender provides a new certificate to the
seller.
(C)The dale the seller is notified by
heinternal R~~~~~~ service or the
gasoho t blender that the gasohol
blender's registration has been revoked
or suspended.
(ii) Model certificate.

Buyer will not claim a credit or reru'und
under section 6427(0 of the Internal Rwenut?
Code for any gasollne covered by this

cerilliuate.
Buyer agrees to provide seller wltha new
certificate if any hforrnatlon on this
catlfjcace changes,
Buyer understands that Buyer's registrat~an
may be revoked if the gasoline covered by
lhls rerriflcate is resold or is used other than
production of Ihe v p of gasohol
In
klentlhed above.
Buyer will reduce any alcohol mixlure
credit under sectian 4O(b) by an amount
equal to the benefit of the ~asoholproduction
t i rate under setion 408i(c) for the gasahol
to which thls certificate relates
Buyer undemands that the Fraudulent use
oC this certificate may subject Buyer and at1
parties making any fraudulent use 05 this
certificate to a flne or imprisonment. or both,
togelher with the costs of prosecurion,
Printed or typed name of person signing

~

o

~

~

B

n

l

n

g

--

&ployer ideni;ilcatlon
number
Address of Buyer

--

~ l ~ n a t u t e & date
d signed

(iii) Use of Form 637 Dr lerter of
regisRatian as a gasohd blender's
cwtificate prohibited. A copy of the
certificate of registry (Form 637) or letter
of registration h u e d to a gasohol
blender by the Internal Revenue Service
Name, address, and employer ident1ficatloT i s not a gasohol blender's certificate
number of seller
described in paragraph (c)(2)(ii) of this
(Buyer] certifies the
section.
(allowing under penal ti- ofperjury:
(d) Rate of tax on gasohol removed or
- ' .- . is registered as a gasohol blender
entered.
The rate of k s imposed on
w I t h registralion number
.
removals o r entries of any gasohol under
Buyer's registration has not been suspended
59 48.4081-2(b), 48.408 1-3(b)(l), and
or revoked by the Internal Revenue Service.
The gasoline bought under this cerlificate
48.4081-3(c)(1) is the gasohol tax rate.
will be used by Buyer to produce gasohol (as The rate of tax imposed on removals
deFined In 5 48.40%1 -fi(b) of the
and entries of exckss liquid described in
Manufacturers and RetaiIers Excise Tax
paragraph (h)(2)of this section Is the
Regulations) w$thin 24 hours after buying the rate of tax applicable to gasoline under
gasoline
Type ~igasoho1Buyer will produce (check section 4081(a).
(e) Tax rates- (1 ) Gasohol production
o n e only):
tax rate. The gasohol production tax rate
10% gasohol
is t h e applicable rate of tax determined
-7.7% gasohol
under sectlon 4081 (c)(Z)(A).
5.7% gasahol
(2)Gasohol tax rate. The gasohol tax
If the gasohol the Buyer will produce will
rate
is the applicable alcohol mixture
c o n t a i n ethanol, check here.
rate determined under section
This certiflcale applles to the following
4081(c)( 4 )( A ) .
(to mplete as applIcable]:
(I)Later separation and fa~adurero
If his is a single purchase certilica~e.check
blend- ( 1 ) Later separation--(I)
here -and enter.
1 . Account number Imposition of tax. A t a x ls imposed on
2 . Number of gallons tbe removal or sale of gasoline separared
If !his is a certificate covering all purchasm from gasohol with respect to which tax
~ l n d e ar specified account o r order number.
was imposed at a rate described In
check here -and enter:
paragraph (e) of this section or with
I . Effectivc dare ..
Certificate o t Registered Gasohol Blender
(Tosupport sales of gasoline at the gasohol
production tax rate under section 4081 (c) of
the internal Revenue Cade)

-

respect to which a credit or payment
2 Expiralton date
(period not to exceed I year after the erfective was allowed or made by reason of
section 6427(f)(1).
date)
(ii) Liability for tax. The person that
3. Buyer arcouni or orclcr number
owns the gasohol at t h time
~ gasollne is

Federal R~gisrer/ Vol 60,
_

.

.

.

No. 15 1

/ Monday, August 7, 1995 / Rules and Regulations
.
... "...
- -

tank. and then pumping 780 metered gallons
of alcohol into rhe lank. Because the rnlxture
contains 9.75 percent aP7hol (as determined
(fl(1)(i)of this secrion.
based on the delivery tickets provided to the
( i i i ) Rarp of tax The rate of tax
blender) the entlre rnlxture gualiiiesas 7 . 7
ilnposed under paragraph (f) (I)(i) ofthis p,ent
g-hol, rather than .J percent
section Is h e difference between the
gasDhol
rate of lax applicable to gasoline not
(1i1)Because the 7220 gallons or gasoline
described in this section and the
were taxed at the gasohol production tax rate
applicable to 10 percent gasohol b u the
~
ap iicable gasohol production tax rate
Failure to blend-(i) Imposirion of gasoline war blended into 7.7 pprcerd
gasohol, a Failure to blend has occurred wlth
tax. Tax is imposed on the entry.
remova],orsa]eofgas~linp(inc]uding 'espec'loIhegasoline.AsihePersonthat
bought the gasoline in connection with the
excess liquid described In paragraph
tawableremoval, t h blender is liable for the
to
(b)( 2 ) ~ f t h i section)
s
with
tax imposed underparagraph (fl(2)(1) of this
which tax was imposed at a gasohol
section. The amount o l tax imposed Is the
produrtion tax rate ifdliierence betwren(A) 'The ~ a s o l i n ewas not blended into
(A)i)22OgallonsIlmes the gasohol
gasohol; or
produc~iontax rate applicable to 7.7 percenl
(B)The gasoline was blended inlo
gasohol; and
gasohol but the gasohol production tax
(0) 7220 gallons times the gasohol
productlon tax rate applicable to 10 percent
rate applicable to the type of gasohol
gasohol.
produced is greater than the rate of tax
(iv) I3ecaus-e the gasohol dnes not contain
originally imposed on the gasolln~.
exactly 7.7 percent alcohol, the k n e t l t of the
(ii) LjabjIjty for f a x , (A) In the case of
~ a o h o production
l
t* ¶a'' with respec' '0
gasoline witfi respec[ t which tax was
the alcohol is less than the amount of the
imposed at the gasohol production tax
a]cohol
under wctlon
rate under paragraph (c) ( I ) (i) of this
(deiermlned before the application of section
section, the person liable lor the tax
40(c)).Accordingly, the blender may be
imposed by paragmph (0 ( 2 ) (i)of this
ent!aled to claim an alcohol mixture credit lor
the alcohol used in the gasohol. Under
sect ion i s the person that was liabre for
rar on the entry or removal.
sec~ion40(c),however,theamountof1he
(BJ In rhe case of gasoline with respect alcohol mixture credit musf be reduced 10
to which tax was imposed at the gasohol take Intoaccount the benent provided with
~
~
~
by
~ the garoh''
t
~
~
production tax rate under paragraph
(c)( I ) (11) of this section, the person that
(g)Effective date This section is
bought thp gas01ine in connection with
the entry or removal is liable for the tax effective A ~ g u s t7. 1995.
Par. 10. Section 48.4081 -7 is
imposed under paragraph (f)(2)(i)of this
section.
amended as li!!ows:
(iii) Rate of tax The rate o f tax
I . The headingr;' 5 .8.4081-7 is
imposed o n gas01 ine described in
revised.
paragraph ti) (2)(i)(A) of this section Is
2. In paragraphs (a) and (b), t h e
the difference between the rate of tax
language "gasoline" is removed each
applicable to gasoline not descrf bed in
place it appears and "taxable fuel" is
this section and the rate of tw
added in Its d a c e .
previously imposed on the gasoline. The
3.paragra;hs [b)(4) and (=)(I) are
rate of tax imposed on gasoline
revised.
described in paragraph (Q{Z}(i)(B) of this
4. In paragraph (c)(2),the language
section is the difference berween the
"gasoline" is removed each place it
gasohol production tax rate applicable
appears and "taxable fuel" Is added in
to the VFP or gasohol produced and the
its place.
rate of t a x previously imposed on the
5 . Paragraph (c) (3) is revised.
scparatcd from the gasohnl is liable for
the rax imposed under paragraph

6)

gasoline.
(iv) Example. The following example
illustrates this paragraph (o(2):

6. In paragraphs (c)(4)(i)(A]and (B).
(ii)(A) and (B), and (iii), the language
"gasoline" i s removed each place It
appears and "taxable fuel" Is added in

Example. (I) A regislered gasohol blender
bought gasoline in connection with a removal ik'p~ace.
7 . In paragraph (c)(4)(iv)(A), the
described in paragraph (c)(l)(ll) or this
section. Based on t h e blender'scerlificatlon
language "(or such other model
(descrjbed in paragraph {c)[Z)or this section)
statement as Ihe Commissjoner may
that the blender would produce I O percent
prescribe)'' is added immediately after
gasohol wiih the gasotlne, tax at the gasohol
"paragraph (c)(4) (iv) (B) of this section".
production tax rate applicable to 10 percent
8. In paragraph (c)(4) (iv)(B):
gasnh~,]w m ~rnposedon the rerrlaval.
a. The description of line 4 is revised
( 1 1 ) I he blender then prcduced a mlxture
to read: " ~ o l u r n eand type o f taxabIe
by splash blending in a tank holding
fuel sold".
apprtrx~mately8000 gallons of mixlure The
b. in the first paragraph following line
spplicnhlr delivery tickets show that the
4 the language "gasoline" is removed
rnixturc \%as hlended by flrsl pumping 7220
and "taxable fuel" is added in its place.
metered gallons of gasoline i n t o the rmptv

40085

9.Paragraph (c)(5) is retnaved.
10- Paragraph (d) is

1 paragraph (0, ~~~~~l~ I,
paragraph('" Isamended by:
a. Removing the language "1 993" in
the first and fourth sentences and
adding " 1996" in Its place.
b. Removing h e language "paragraph
(c)(2)" and adding "paragraph (c)" in its
,

place.
2, paragraph(o, E
~
~
paragraph (iguIs amended removing
the language "1993" in the first and
second sentences and adding " 1996" in
its place.
13. Paragraph (g)is revised.
The revisions read as follows:

3 48.4081-7 Taxable fuel; conditlons lor
relunds of taxable fuel tax under aectlon
4Q81(*).

*

(b)

*
*
* * *

*

*

(4) The person h a t paid the first tax
the government has met the reporting
requirements of paragraph (c) of this
to

(c) *
(1) Repofling bypersons
paying the first tax. Except as provided
in paragraph (c) (3) of this section, the

person~atpaidtheflrsttaxunder
5 48.4081-3 (the first
must file
a report that is In substantially the same
~ as the
~ model
~ report
, provided
o
l
form
in
paragraph (c){2) of this section (or such
other model report as the Commissioner
may prescribe) and contains aH
infomation necessary to complete such
model report (the first taxpayer's
report). A first taxpayer's report must be
filed with the return to which the report
relates (or at s u c h other time, or in such
othermanner, as
by he
Commissioner),

*

*

*

*

*

(3) Optional reporting for certain
taxable events. Pamgraph (c) ( I ) of this
section does nor apply with respect to
a tax imposed under 5 48.4081-2
(removal at a terminal rack), 5 48.40813{c)(l)(ll) (nonbuk entries inio the
United States), or 548.4081-30
(removals or sales by blenders).
However. if the person liable for the tax
expects that another tax will be imposed
under section 4081 with respect to the
taxable fuel, that person should (but is
not required to) file a first taxpayer's
report.

(d) Form and content of cbim-(1) In
general. The faIlowing r u k s apply to
claims for refund under section 4081 (e)(i) The claim must be made by the
person that paid the second tax to the
government and must include all the
information described in paragraph
(d)(2) of this section.

~

40086
,.

.-

Federal Register
.

/

b-01. 8U, No, 151 1 Monday, August 7. 1995 i Rules and Regulations
.. .

( I * ) The claim must be made on Form
8849 {or such other Tom1 as the
Commissioner may designate) in
accordance with thc instructions on the
rorm. The rorm should be marked
Section 408 1 (e) Claim at the top.
Sect ion 4081 (e) claims must not be
included with a claim for a refund
under any other provision of the
Internal Revenue Code.
(2)lrlfomation to be induded in the
rlaim. Each claim for a refund under
secr ion 408 1 (e) must conlain the
following information with respect to
the taxable fuel covered by the claim:
( i ) Volume and type of taxable fuel.
(ii) Date on which thp claimant
incurred the tax liability 10which his
claim relates (the second tax).
(iii) Amount of second tax that
claimant paid to the government and a
sratemen! that claimant has not
included the amount of this tax in the
s a l ~ pricr
s
o f ~e laxable fuel to which
this claim relates and has nor collected
h a t amounr from the person that bought
the taxable fuel from claimant.
(iv) Name, address, a n d employer
identification number of the person that
paid the firs[ tax to the government.
(v) A copy ofthe firs; taxpayer's
report that relates to t h e taxable fuel
covered by the claim.
(vi) If the taxable fuel covered by the
claim was bought other than from the
first laxpayer. a ropy of the statement of
subsequent seller that the claimant
received with respect to that taxable
fuel.

the entry "48.4041 -21 ... 1545-1270" in
numerical order to the table.
Margaret Milner Richardson,
Con~~nisioner
af Internal Revenue.
Approved. July 25. 1995.
Leslie Samuels,
Assistant S e c r e l a ofthe
~
Treasury.
[FR Dm.95-1 9284 Filed 8-4-95; 8:45 am]

that uslng fair market value Tor the asset
composition tests creates uncertainty
and administrative difficulties. The final
regulations, therefore, relaln the rule in
the proposed regulations.

Section 301.7701 (I) -1 (c) (5)-Seriously
Impaired Real &fate Mortgages Nor
Treated as Debt Obligations
BIUIHQ CODE 4 1 3 0 1 4
Under the proposed regulations. real
estate mortgages that are seriously
impaired are not treated as debt
26 CFR Part 301
obligations for purposes of the asset
composition tests. Whether real estate
VD 8610)
morigages are serlously impaired
R1N t 545-AP98
generally depends on all the facts and
circumstances. The proposed
Taxable Mortgag~Pools
regulations, however, provide two safe
AGENCY: Intern ~l Revenue Service (1RS), harbors. Under those provisions,
whether mortgages areseriously
Treasury.
Impaired depends only on the number
ACTION: Final regulations.
of days the payments on the mortgages
SUMMARY: This document contains final
are delinquent (more than 89 days for
regulations relating to taxable mortgage single family residential real estate
pools. This action i s necessary because
mbrtgages and more than 59 days for
of changes made to the law by the Tax
multi-family residen~ialand commercial
Reform Act of 1986. T h e flnal
real estate mortgages). The safe harbors
regulations provide guidance to entities are not available, however, if an entity
for determining whether they are subject Is receiving or anticipates receiving
to the taxable mortgage pool rules.
certain payments on the mortgages such
as payments of principal and interest
EFFEC~IVEDAfE: These regulatiom are
that are substantial and relatively
effective September 6,1995.
certain as to amount.
FOR FURTHER IWORMAIlOEI C M A C T :
Several commentators have asked fw
Arnold P. Golub or Marshall D. Feirfng,
(202) 622-3950 (not a toll-free number). additional safe harbors based on factors
other than the number of days a
SUPPLEMENTARY INFORMATION:
mortgage is delinquent. For example,
one suggested a safe harbor for
Background
having excessively high loan
A notice of proposed rulen,:king (FI- mortgages
to
vatue ratios. Others suggested a safe
*
l
*
t
l
55-91) under section 7701 (i) of 11,:
harbor for mortgages that are purchas~d
Internal Revenue Code was published in at a substantial discount.
(g) Effective date This section is
the Federal Register on December 23.
effect w e in the case of taxahle fuel with
The final regulations retain,
respect ro which the first tax is imposed 1992 (57FR 6 1029). Written comments
unchanged, the safe harbors of the
relating to this notice were received, hut proposed regulations. The IRS and
after September 30. 1995.
Par. 11. Section 48.4 101-3 is added to no public hearing was requested or
Treasury believe that no single factor i s
held. After consideration of the
read a s follows:
as clear an indication that a mortgage is
cornmenu, the proposed regulations
s ~ r i o u s l yimpaired as days delinquent.
under section 7701 (i) are adopted as
For example, a mortgage may be
(a) A refiner that i s registered under
revised by this Treasury decision.
purchased at a discomi for a variety of
section 4101 may treat itself wlth
reasons, some of which bear no relalion
Explanatinn of Provisions
respect to the bulk removal oi any batch
to the quality of the mortgage. To
of gasohol from its refinery as a person
Section 301.7701(i)-1
(cJ(1)-Basis Used provide further guidance, however, the
that rs not registered under section
To Determine she Composition of an
final regulations list some of the facts
4 101. See 5 48.408 i-3(b)(l)(itI).
Entity's Assets
and circumstances that should be
(b) This section Is effective October 1,
Among other requirements, to be
considered in determining whether a
1995.
classified as a taxable mortgage pool,
mortga e i s serlously impaired.
Anot er commentator has criticized
si~bstantially
all
of
an
entity's
assets
PART 602-OM8 CONTROL NUMBEFIS
must consist of debt obligations, and
the safe harbors because they are
UNDER THE PAPERWORK
more than 50 percent of those debt
unavailable if an entity anticipates
REDUCTJON ACT
obligations must consist of real estate
receiving certain payments on a
delinquent mortgage. The commentator
Par. 12. 'The authority citation lor part mortgages (or interests therein). Under
602 continues ro read a5 follows:
the proposed regula~lons,an entity must is concerned that a test based on
apply these tests using the tax bases of
whether an entity anticipates receiving
A~tl~ority:
26 U.S.C. 7805
its assets. One cornlncntator, however.
paymenw on a mortgage is both
§602.101 [Arnendcd]
suggested that [he entity should have
subjective and open-ended. To address
the choice of using either the tax bases
h i s concern, the final regulations creatc
Par. 13. In 5 602.101, paragraph (c) is
of its asrets or the f ~ i market
r
value of
a new rule, rrnder which if an entity
amended hy removing he entry for
makes reasonable eflorts to resolve a
its assets. The IHS and Treasury believe
48.404 1-21 from the table and adding

a