[Federal Register Volume 59, Number 161 (Monday, August 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20222]


[[Page Unknown]]

[Federal Register: August 22, 1994]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 47 and 48

[TD 8561]
RINs 1545-AR38, 1545-AR94, 1545-AR95 and 1545-AS32

 

Tax-Free Exports of Vaccines, Vaccine Floor Stocks Tax of 1993, 
and Fuel Floor Stocks Taxes Under the Omnibus Budget Reconciliation Act 
of 1993

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
export of certain vaccines and to the floor stocks tax on vaccines held 
on August 10, 1993. This document also contains final regulations 
relating to the floor stocks taxes on gasoline, diesel fuel, and 
aviation fuel held on October 1, 1993; on diesel fuel held on January 
1, 1994; and on commercial aviation fuel held on October 1, 1995. These 
regulations reflect changes to the law made by the Omnibus Budget 
Reconciliation Act of 1987 and the Omnibus Budget Reconciliation Act of 
1993 (OBRA 1993). The regulations provide guidance relating to the 
floor stocks taxes, including guidance concerning the person liable for 
each tax, exceptions to the taxes, and the time for reporting and 
paying each tax. In addition, the regulations provide guidance to 
manufacturers of exported vaccines.

DATES: These regulations are effective August 22, 1994.
    For dates of applicability, see Secs. 47.2-1, 47.3-1, 48.4221-3(e), 
and 48.6416(b)(2)-2(b)(2).

FOR FURTHER INFORMATION CONTACT: Edward Madden (202) 622-4537 (not a 
toll-free call).

SUPPLEMENTARY INFORMATION:

Vaccines

Background

    The Vaccine Injury Compensation Trust Fund (the Fund) compensates 
individuals who are injured as a result of the administration of 
certain vaccines. Revenue for the Fund is provided by a manufacturers 
tax (section 4131) on these vaccines. The tax, as originally enacted, 
was in effect only from 1988 through 1992, but OBRA 1993 applied the 
tax to vaccine sales after August 10, 1993.
    OBRA 1993 also imposes a floor stocks tax, which does not appear in 
the Internal Revenue Code (Code), on these vaccines. The floor stocks 
tax is a one-time tax on taxable vaccines that were sold by the 
manufacturer, producer, or importer on or before August 10, 1993, on 
which no tax was imposed by section 4131, and that were held at the 
last moment of August 10, 1993, for sale or use. The rates of floor 
stocks tax are equal to the tax rates for sales by the manufacturer, 
producer, or importer.
    On September 20, 1993, a notice of proposed rulemaking (PS-7-93) 
relating to tax-free exports of vaccine was published in the Federal 
Register (58 FR 48801).
    On November 29, 1993, temporary regulations (TD 8497) relating to 
the vaccine floor stocks tax were published in the Federal Register (58 
FR 62524). A notice of proposed rulemaking (PS-50-93) cross-referencing 
the temporary regulations was published in the Federal Register for the 
same day (58 FR 62558).
    No comments responding to PS-7-93 were received. Written comments 
responding to PS-50-93 were received, but no public hearing was 
requested or held. After consideration of all comments, the proposed 
vaccine export regulations and the proposed vaccine floor stocks 
regulations are adopted by this Treasury decision, and the temporary 
regulations relating to the vaccine floor stocks tax are removed.

Summary of Comments

    All of the comments received on PS-50-93 addressed the de minimis 
exception to the floor stocks tax. The proposed regulations provide 
that any person whose liability for tax does not exceed $1,000 is not 
required to report or pay the floor stocks tax. One comment requested 
that the de minimis amount be increased to $10,000. The de minimis 
exception was established for the administrative convenience of the IRS 
to eliminate the necessity of processing returns from persons holding 
small amounts of vaccines and having a small tax liability. The $1,000 
de minimis amount is adequate for this purpose and the comment is, 
therefore, not adopted.
    Another comment suggested that the exception be applied on a 
physician-by-physician basis so that a group practice (such as a 
partnership or professional corporation) would have a de minimis amount 
proportionate to the size of the group. As noted, increasing the amount 
of the de minimis exception is not consistent with its purpose. 
Further, if adopted, this suggestion could increase the administrative 
burdens of the tax. For example, allocation problems would arise if a 
physician is engaged in practice through more than one group (such as a 
partnership and a clinic or hospital). Accordingly, this suggestion is 
not adopted. The comment also suggested that the de minimis exception 
be treated as an exemption and that only amounts of tax in excess of 
$1,000 be reported or paid. This suggestion is inconsistent with the 
limited purpose of the exception--to eliminate small returns. It is, 
therefore, not adopted.

Fuel Floor Stocks

Background

    OBRA 1993 makes several changes to the Code with respect to the 
taxation of motor fuels. First, effective October 1, 1993, it increases 
the rates of excise taxes on gasoline, diesel fuel, and aviation fuel. 
The gasoline tax, under section 4081, increases from 14.1 cents per 
gallon to 18.4 cents per gallon; the diesel fuel tax, under section 
4091, increases from 20.1 cents per gallon to 24.4 cents per gallon; 
and the aviation fuel tax, under section 4091, increases from 17.6 
cents per gallon to 21.9 cents per gallon. These new rates include the 
0.1-cent-per-gallon tax that funds the Leaking Underground Storage Tank 
(LUST) Trust Fund. Second, effective January 1, 1994, OBRA 1993 
generally moves the point of imposition of tax on diesel fuel to the 
terminal rack. Third, effective October 1, 1995, OBRA 1993 increases 
the tax on fuel used in commercial aviation by 4.3 cents per gallon.
    OBRA 1993 also imposes three floor stocks taxes, which are not 
codified, on these fuels. The taxes are to be paid by persons holding 
fuel on the effective dates of the changes.
    The first floor stocks tax is a one-time tax on gasoline, diesel 
fuel, and aviation fuel that are held at the first moment of October 1, 
1993, at a point in the distribution chain where these fuels would not 
otherwise be subject to the increased tax rates. The rate of the 
October 1, 1993, floor stocks tax is 4.3 cents per gallon.
    The second floor stocks tax is a one-time tax on diesel fuel held 
by any person at the first moment of January 1, 1994, if (A) no tax was 
imposed on the fuel under section 4041(a) or 4091 as in effect on 
December 31, 1993, and (B) tax would have been imposed by section 4081, 
as amended by OBRA 1993, on any prior removal, entry, or sale of the 
fuel had section 4081 applied to the fuel for periods before January 1, 
1994. The rate of the January 1, 1994, floor stocks tax is 24.4 cents 
per gallon.
    The third floor stocks tax is a one-time tax on commercial aviation 
fuel held by any person at the first moment of October 1, 1995, on 
which the LUST tax was imposed under section 4091 before October 1, 
1995. The rate of the October 1, 1995, floor stocks tax is 4.3 cents 
per gallon.
    On November 29, 1993, temporary regulations (TD 8498) were 
published in the Federal Register (58 FR 62526). A notice of proposed 
rulemaking (PS-49-93) cross-referencing the temporary regulations was 
published in the Federal Register for the same day (58 FR 62559).
    On December 27, 1993, temporary regulations (TD 8512) amending the 
existing temporary regulations to allow diesel fuel dyed past the 
terminal rack to qualify for exemption from the floor stocks tax were 
published in the Federal Register (58 FR 68304). A notice of proposed 
rulemaking (PS-76-93) cross-referencing the temporary regulations was 
published in the Federal Register for the same day (58 FR 68338). On 
January 31, 1994, a correction to TD 8498 was published in the Federal 
Register (59 FR 4251).
    Written comments responding to these notices were received, but no 
public hearing was requested or held. After consideration of all the 
comments, the proposed floor stocks regulations are adopted by this 
Treasury decision and the corresponding temporary regulations are 
removed. The comments made with respect to the temporary and proposed 
regulations are discussed below.

Summary of Comments

    Three comments were received. One of the comments suggested that 
the requirement that diesel fuel be dyed at the time of its removal 
from the terminal in order to be exempt from the floor stocks tax was 
too restrictive and that any diesel fuel held for an exempt purpose 
that is eventually used for an exempt purpose should be free from floor 
stocks tax. This comment was addressed in TD 8512, which allows diesel 
fuel that was dyed past the terminal rack to qualify for exemption from 
the floor stocks tax. Two comments suggested that fuel held in storage 
tanks below the standpipe (dead storage) should not be subject to floor 
stocks tax. This suggestion was addressed in the preamble to the 
temporary regulations (TD 8498) and, for the reasons there stated, is 
not adopted.

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) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notices of proposed rulemaking preceding these regulations were 
submitted to the Small Business Administration for comment on their 
impact on small business.

Drafting Information

    The principal author of these regulations is Edward Madden, 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 Part 47

    Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 48

    Excise taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR chapter I is amended as follows:
    Paragraph 1. Part 47 is revised to read as follows:

PART 47--FLOOR STOCKS TAXES

Subpart A--[Reserved]

Sec.
47.1-1 through 47.1-5  [Reserved]

Subpart B--Vaccine Floor Stocks Tax of 1993

47.2-1  Scope of this subpart B and effective date.
47.2-2  Definitions relating to the vaccine floor stocks tax.
47.2-3  Imposition of vaccine floor stocks tax.
47.2-4  De minimis exception to vaccine floor stocks tax.
47.2-5  Requirements with respect to payment and return.

Subpart C--Fuel Floor Stocks Taxes Under the Omnibus Budget 
Reconciliation Act of 1993

47.3-1  Scope of this subpart C and effective date.
47.3-2  Definitions relating to the floor stocks taxes under this 
subpart C.
47.3-3  Imposition of the October 1, 1993, floor stocks tax on fuel 
held on October 1, 1993.
47.3-4  Exceptions to the October 1, 1993, floor stocks tax.
47.3-5  Requirements with respect to payment and return for the 
October 1, 1993, floor stocks tax.
47.3-6  Imposition of the January 1, 1994, floor stocks tax on 
diesel fuel held on January 1, 1994.
47.3-7  Exception to the January 1, 1994, floor stocks tax.
47.3-8  Requirements with respect to payment and return for the 
January 1, 1994, floor stocks tax.
47.3-9  Imposition of the October 1, 1995, floor stocks tax on 
commercial aviation fuel held on October 1, 1995.
47.3-10  Exceptions to the October 1, 1995, floor stocks tax.
47.3-11  Requirements with respect to payment and return for the 
October 1, 1995, floor stocks tax.

    Authority: 26 U.S.C. 7805.
    Section 47.2-5 also issued under section 13421(c) of Pub. L. 
103-66 (107 Stat.312, 565).

Subpart A--[Reserved]


Secs. 47.1-1 through 47.1-5  [Reserved]

Subpart B--Vaccine Floor Stocks Tax of 1993


Sec. 47.2-1  Scope of this subpart B and effective date.

    The regulations in this subpart B relate to the vaccine floor 
stocks tax imposed by section 13421(c) of the Omnibus Budget 
Reconciliation Act of 1993 (Pub. L. 103-66; 107 Stat. 312, 565). The 
tax is imposed on untaxed vaccines held at the last moment of August 
10, 1993. The regulations in this subpart B describe the specific 
articles subject to tax, the rates of tax, and the persons liable for 
tax. The regulations in this subpart B also provide an exception to the 
tax and requirements for payment of tax and filing a return reporting 
the tax. The regulations in this subpart B are effective on August 10, 
1993.


Sec. 47.2-2  Definitions relating to the vaccine floor stocks tax.

    (a) Terms used in section 4131. For purposes of this subpart, terms 
that are also used in section 4131 have the same meaning as when so 
used.
    (b) Other terms. For purposes of this section--
    Act refers to the Omnibus Budget Reconciliation Act of 1993.
    Controlled group means--
    (1) Any controlled group of corporations within the meaning of 
section 1563(a), except that the phrase ``more than 50 percent'' is 
substituted for the phrase ``at least 80 percent'' each place it 
appears therein and a controlled group of corporations includes members 
that are described in section 1563(b)(2) (relating to excluded 
members); and
    (2) Any other group of organizations, at least one member of which 
is not a corporation, that is a brother-sister group under common 
control or a combined group under common control, with terms having the 
following meanings for this purpose:
    (i) Organization means a sole proprietorship, a partnership, a 
trust, an estate, or a corporation.
    (ii) Brother-sister group under common control means two or more 
organizations if--
    (A) The same five or fewer persons who are individuals, estates, or 
trusts own (directly and with the application of Sec. 1.414(c)-4 of 
this chapter) a controlling interest of each organization;
    (B) Taking into account the ownership of each person only to the 
extent that person's ownership is identical with respect to each 
organization, such persons are in effective control of each 
organization; and
    (C) The five or fewer persons whose ownership is considered for 
purposes of the controlling interest requirement for each organization 
are the same persons whose ownership is considered for purposes of the 
effective control requirement.
    (iii) Controlling interest means--
    (A) In the case of a corporation, ownership of stock possessing at 
least 50 percent of the total combined voting power of all classes of 
stock entitled to vote or at least 50 percent of the total value of the 
shares of all classes of stock of the corporation;
    (B) In the case of a trust or estate, ownership of an actuarial 
interest (determined under Sec. 1.52-1(f) of this chapter) of at least 
50 percent of the trust or estate;
    (C) In the case of a partnership, ownership of at least 50 percent 
of the profit interest or capital interest of the partnership; and
    (D) In the case of a sole proprietorship, ownership of the sole 
proprietorship.
    (iv) Effective control has the meaning given that term in 
Sec. 1.52-1(d)(3) of this chapter.
    (v) Combined group under common control has the meaning given that 
term in Sec. 1.52-1(e) of this chapter.


Sec. 47.2-3  Imposition of vaccine floor stocks tax.

    (a) Vaccines subject to tax. Section 13421(c) of the Act imposes a 
floor stocks tax on any taxable vaccine (as defined in section 
4132(a)(1) of the Internal Revenue Code)--
    (1) Which was sold by the manufacturer, producer, or importer on or 
before August 10, 1993;
    (2) On which no tax was imposed under section 4131 (or on which 
such tax was imposed and subsequently credited or refunded); and
    (3) Which is held at the last moment of August 10, 1993, by any 
person for sale or use.
    (b) Rates of tax. The rate of floor stocks tax on each taxable 
vaccine is the rate of tax specified in section 4131(b)(1) of the 
Internal Revenue Code.
    (c) Person liable for tax. The person liable for the floor stocks 
tax on any vaccine subject to tax is the person that holds the vaccine 
at the last moment of August 10, 1993. For purposes of the floor stocks 
tax, a vaccine is held at the last moment of August 10, 1993, by the 
person that has title to the vaccine (whether or not delivery to that 
person has been made) at such time, as determined under applicable 
local law. There is no exemption from the floor stocks tax for the 
United States or for State or local governments. Each business unit 
that has, or is required to have, its own employer identification 
number is treated as a separate person for purposes of the floor stocks 
tax.


Sec. 47.2-4  De minimis exception to vaccine floor stocks tax.

    (a) De minimis exception--(1) In general. Except as otherwise 
provided in this section, if the aggregate amount of floor stocks tax 
payable by a person does not exceed $1,000, that person is not required 
to report or pay the tax.
    (2) All amounts held subject to tax if threshold exceeded. If the 
aggregate amount of floor stocks tax payable by a person exceeds 
$1,000, that person is required to report and pay the total amount of 
tax as determined without regard to this section.
    (3) Controlled groups. A member of a controlled group (as defined 
in Sec. 47.2-2) is not excepted from reporting and paying floor stocks 
tax under this section if the aggregate amount of floor stocks tax 
payable by all members of the controlled group exceeds $1,000.
    (b) Examples. The following examples illustrate the rules of this 
section:

    Example 1. A holds 50 doses of DPT vaccine and 60 doses of polio 
vaccine on the last moment of August 10, 1993. A is not a member of 
a controlled group. A is not required to report and pay the floor 
stocks tax on any of the taxable vaccines because the aggregate 
amount of floor stocks tax payable by A (determined without regard 
to this section) does not exceed $1,000 ((50 x $4.56 per dose of DPT 
vaccine) + (60 x $0.29 per dose of polio vaccine) = $245.40).
    Example 2. D, E, and F are members of the same controlled group. 
On the last moment of August 10, 1993, D holds 100 doses of DPT 
vaccine and 160 doses of polio vaccine; E holds 80 doses of DPT 
vaccine, 10 doses of MMR vaccine and 60 doses of polio vaccine; and 
F holds 20 doses of MMR vaccine and 10 doses of DT vaccine. Without 
regard to this section, D is liable for a tax of $502.40 
((100 x $4.56 per dose of DPT vaccine)+(160 x $0.29 per dose of 
polio vaccine)); E is liable for a tax of $426.60 ((80 x $4.56 per 
dose of DPT vaccine)+(10 x $4.44 per dose of MMR 
vaccine)+(60 x $0.29 per dose of polio vaccine)); and F is liable 
for a tax of $89.40 ((20 x $4.44 per dose of MMR vaccine)+(10 X 
$0.06 per dose of DT vaccine)). Because the aggregate amount of 
floor stocks tax payable by all members of the group ($1,018.40) 
exceeds $1,000, each member of the controlled group must report and 
pay the floor stocks tax.


Sec. 47.2-5  Requirements with respect to payment and return.

    (a) Payment of tax. The floor stocks tax is to be paid without 
assessment or notice on or before February 28, 1994.
    (b) Filing of return--(1) Form 720. Except as provided in 
Sec. 47.2-4(a) (relating to the de minimis exception), every person 
liable for the floor stocks tax must make a return of the tax on Form 
720, Quarterly Federal Excise Tax Return. The return is to be prepared 
and filed in accordance with the instructions relating to the return.
    (2) Time for filing--(i) In general. The Form 720 required by 
paragraph (b)(1) of this section must be filed on or before February 
28, 1994, and is a return for the fourth calendar quarter of 1993. A 
first return reporting only floor stocks tax is also a final return and 
therefore, in accordance with the instructions to Form 720, the box for 
``final return'' must be marked.
    (ii) Return reporting other taxes. A person must file only one Form 
720 for a quarter. If a person is required under part 40 of this 
chapter to file Form 720 for the fourth calendar quarter of 1993 for 
other excise taxes earlier than February 28, 1994, that person files a 
single Form 720 for the quarter by February 28, 1994. This paragraph 
(b)(2)(ii) does not extend the time for making deposits or paying any 
excise tax.

Subpart C--Fuel Floor Stocks Taxes Under the Omnibus Budget 
Reconciliation Act of 1993


Sec. 47.3-1  Scope of this subpart C and effective date.

    The regulations in this subpart C relate to the fuel floor stocks 
taxes imposed by sections 13241(h), 13243, and 13245 of the Omnibus 
Budget Reconciliation Act of 1993 (Act). The tax under section 13241(h) 
of the Act is imposed on previously taxed gasoline, diesel fuel, and 
aviation fuel held by any person at the first moment of October 1, 1993 
(the October 1, 1993, floor stocks tax). The tax under section 13243 of 
the Act is imposed on untaxed diesel fuel that does not satisfy the 
requirements of section 4082 (as amended by section 13242 of the Act) 
and that is held by any person at the first moment of January 1, 1994, 
at a point in the distribution chain outside the bulk transfer/terminal 
system (the January 1, 1994, floor stocks tax). The tax under section 
13245 of the Act is imposed on commercial aviation fuel on which tax 
was imposed under section 4091 (even if only at the Leaking Underground 
Storage Tank Trust Fund financing rate) before October 1, 1995, and 
that is held by any person at the first moment of October 1, 1995 (the 
October 1, 1995, floor stocks tax). The regulations in this subpart 
describe the specific fuels subject to tax, the rates of tax, and the 
persons liable for tax. The regulations in this subpart also provide 
exceptions to tax and requirements for payment of tax and filing a 
return reporting tax. This subpart is effective on October 1, 1993.


Sec. 47.3-2  Definitions relating to the floor stocks taxes under this 
subpart C.

    Act is the Omnibus Budget Reconciliation Act of 1993.
    Aviation fuel is any liquid (other than any product taxable under 
section 4081) that is commonly or commercially known or sold as a fuel 
that is suitable for use in an aircraft.
    Commercial aviation fuel is any aviation fuel that is held for use 
or sale for use in a business of transporting persons or property for 
compensation or hire by air.
    Controlled group means--
    (1) Any controlled group of corporations within the meaning of 
section 1563(a), except that the phrase ``more than 50 percent'' is 
substituted for the phrase ``at least 80 percent'' each place it 
appears therein and a controlled group of corporations includes members 
that are described in section 1563(b)(2) (relating to excluded 
members); and
    (2) Any other group of organizations, at least one member of which 
is not a corporation, that is a brother-sister group under common 
control or a combined group under common control, with terms having the 
following meanings for this purpose:
    (i) Organization means a sole proprietorship, a partnership, a 
trust, an estate, or a corporation.
    (ii) Brother-sister group under common control means two or more 
organizations if--
    (A) The same five or fewer persons who are individuals, estates, or 
trusts own (directly and with the application of Sec. 1.414(c)-4 of 
this chapter) a controlling interest of each organization;
    (B) Taking into account the ownership of each person only to the 
extent that person's ownership is identical with respect to each 
organization, such persons are in effective control of each 
organization; and
    (C) The five or fewer persons whose ownership is considered for 
purposes of the controlling interest requirement for each organization 
are the same persons whose ownership is considered for purposes of the 
effective control requirement.
    (iii) Controlling interest means--
    (A) In the case of a corporation, ownership of stock possessing at 
least 50 percent of the total combined voting power of all classes of 
stock entitled to vote or at least 50 percent of the total value of the 
shares of all classes of stock of the corporation;
    (B) In the case of a trust or estate, ownership of an actuarial 
interest (determined under Sec. 1.52-1(f) of this chapter) of at least 
50 percent of the trust or estate;
    (C) In the case of a partnership, ownership of at least 50 percent 
of the profit interest or capital interest of the partnership; and
    (D) In the case of a sole proprietorship, ownership of the sole 
proprietorship.
    (iv) Effective control has the meaning given that term in 
Sec. 1.52-1(d)(3) of this chapter.
    (v) Combined group under common control has the meaning given that 
term in Sec. 1.52-1(e) of this chapter.
    Diesel fuel means any liquid (other than gasoline) that is suitable 
for use in a diesel-powered highway vehicle, diesel-powered train, or, 
after December 31, 1993, diesel-powered boat.
    Fuel means gasoline, diesel fuel, and aviation fuel (including 
after September 30, 1995, commercial aviation fuel).
    Gasoline means--
    (1) All products (including gasohol) that are commonly or 
commercially known or sold as gasoline and are suitable for use as a 
motor fuel (other than products that are not sold as gasoline and have 
an American Society for Testing Materials octane number of less than 75 
as determined by the motor method); and
    (2) Gasoline blend stocks (as defined in Sec. 48.4081-1(j) of this 
chapter).
    Person includes each business unit that has, or is required to 
have, its own employer identification number.


Sec. 47.3-3  Imposition of the October 1, 1993, floor stocks tax on 
fuel held on October 1, 1993.

    (a) Fuels subject to tax. Section 13241(h)(1) of the Act imposes a 
floor stocks tax on gasoline (including gasohol), diesel fuel, and 
aviation fuel--
    (1) On which tax was imposed under section 4081 or 4091 before 
October 1, 1993; and
    (2) That is held at the first moment of October 1, 1993, by any 
person.
    (b) Rate of tax. The rate of the October 1, 1993, floor stocks tax 
is 4.3 cents per gallon.
    (c) Person liable for tax. The person liable for tax on any fuel 
subject to the October 1, 1993, floor stocks tax is the person that 
holds the fuel at the first moment of October 1, 1993. Fuel is held by 
a person if the person has title to the fuel (whether or not delivery 
to that person has been made) at such time, as determined under 
applicable local law.


Sec. 47.3-4  Exceptions to the October 1, 1993, floor stocks tax.

    (a) Exception for fuel held for an exempt use--(1) Gasoline. The 
October 1, 1993, floor stocks tax does not apply to gasoline held 
exclusively for an exempt use. In determining whether gasoline is held 
exclusively for an exempt use, the following rules in paragraphs (a)(1) 
(i) through (iii) of this section apply:
    (i) An exempt use, with respect to gasoline, is any use of gasoline 
(other than use in producing gasohol) that is described in section 
6420, 6421, or 6427 and that entitles the ultimate purchaser to a 
credit or payment equal to the tax imposed by section 4081. Thus, for 
example, exempt use of gasoline includes use on a farm for farming 
purposes; use in an off-highway business use; use in certain intercity, 
local, and school buses; exclusive use by a State or local government 
or nonprofit educational organization; and use in commercial aircraft.
    (ii) Gasoline is held exclusively for an exempt use only if the 
person that holds gasoline at the first moment of October 1, 1993, 
actually uses the gasoline in an exempt use.
    (iii) Gasoline is not held exclusively for an exempt use if, at the 
first moment of October 1, 1993, the gasoline is held for resale 
(including resale to a person that will use the gasoline in an exempt 
use). Thus, for example, gasoline held by a gasoline service station 
for sale to a farmer for use on a farm for farming purposes is not 
exempt from the October 1, 1993, floor stocks tax. However, the farmer 
would be eligible to claim an income tax credit for an amount equal to 
the tax under sections 34 and 6420.
    (2) Diesel fuel. The October 1, 1993, floor stocks tax does not 
apply to diesel fuel held exclusively for an exempt use. In determining 
whether diesel fuel is held exclusively for an exempt use, the 
following rules in paragraphs (a)(2) (i) through (iv) of this section 
apply:
    (i) An exempt use, with respect to diesel fuel, is any use of 
diesel fuel (other than use in producing a diesel fuel/alcohol mixture 
or as fuel in a diesel-powered train) that is described in section 6427 
and that entitles the ultimate purchaser to a credit or payment equal 
to the tax imposed by section 4091. Thus, for example, exempt uses of 
diesel fuel include use other than as a fuel in a diesel-powered 
highway vehicle (as defined in Sec. 48.4041-8(b)(4) of this chapter), 
use on a farm for farming purposes, exclusive use by a State or local 
government or nonprofit educational organization, and use in an off-
highway business use.
    (ii) Diesel fuel held for use in a diesel-powered train is not 
exempt from the October 1, 1993, floor stocks tax under this paragraph 
(a)(2) unless the fuel is held by a State or local government. Thus, 
the exemptions for use other than as fuel in a diesel-powered highway 
vehicle and off-highway business use do not apply to fuel used in a 
diesel-powered train. See section 6427(l)(3) as amended by section 
13241 of the Act.
    (iii) Diesel fuel is held exclusively for an exempt use only if the 
person that holds the fuel at the first moment of October 1, 1993, 
actually uses the diesel fuel in an exempt use.
    (iv) Diesel fuel is not held exclusively for an exempt use if, at 
the first moment of October 1, 1993, the diesel fuel is held for resale 
(including resale to a person that will use the diesel fuel in an 
exempt use). Thus, for example, diesel fuel held by a retailer for sale 
to a construction company for use in the construction company's off-
road machinery is not exempt from the October 1, 1993, floor stocks 
tax. However, the construction company would be eligible to claim a 
credit or payment equal to the tax under section 6427.
    (3) Aviation fuel. The October 1, 1993, floor stocks tax does not 
apply to aviation fuel held exclusively for an exempt use. In 
determining whether aviation fuel is held exclusively for an exempt 
use, the following rules in paragraphs (a)(3) (i) through (iii) of this 
section apply:
    (i) An exempt use, with respect to aviation fuel, is any use of 
aviation fuel that is described in section 6427 and that entitles the 
ultimate purchaser to a credit or payment equal to the tax imposed by 
section 4091. Thus, for example, exempt use of aviation fuel includes 
any use on a farm for farming purposes, exclusive use by a State or 
local government or nonprofit educational organization, and use other 
than use as a fuel in an aircraft in noncommercial aviation (as defined 
in section 4041(c)).
    (ii) Aviation fuel is held exclusively for an exempt use only if 
the person that holds the aviation fuel at the first moment of October 
1, 1993, actually uses the aviation fuel in an exempt use.
    (iii) Aviation fuel is not held exclusively for an exempt use if, 
at the first moment of October 1, 1993, the aviation fuel is held for 
resale (including resale to a person that will use the aviation fuel in 
an exempt use). Thus, for example, aviation fuel held by a fixed-base 
operator for sale to an airline for use in commercial aviation is not 
exempt from the October 1, 1993, floor stocks tax. However, the airline 
would be eligible to claim a credit or payment equal to the tax under 
section 6427.
    (b) Exception for gasoline or diesel fuel held in vehicle fuel 
supply tank. The October 1, 1993, floor stocks tax does not apply to 
gasoline or diesel fuel held at the first moment of October 1, 1993, in 
the fuel supply tank of a motor vehicle (as defined in Sec. 48.4041-
8(c) of this chapter) or motorboat. This exception does not apply to 
fuel held in the fuel supply tank of a train or an aircraft.
    (c) Exception for certain amounts of fuel--(1) In general. The 
October 1, 1993, floor stocks tax does not apply to--
    (i) Gasoline that a person holds at the first moment of October 1, 
1993, if the aggregate amount of gasoline held by that person at that 
moment does not exceed 4,000 gallons; and
    (ii) Diesel fuel or aviation fuel that a person holds at the first 
moment of October 1, 1993, if the aggregate amount of diesel fuel or 
the aggregate amount of aviation fuel held by that person at that 
moment does not exceed 2,000 gallons.
    (2) Additional rules--(i) Coordination with other exemptions. In 
determining the aggregate amount of gasoline, diesel fuel, or aviation 
fuel held by a person at the first moment of October 1, 1993, there is 
excluded the amount of gasoline, diesel fuel, or aviation fuel exempt 
from the October 1, 1993, floor stocks tax by reason of paragraph (a) 
of this section (relating to fuel held for exempt uses), or paragraph 
(b) of this section (relating to gasoline and diesel fuel held in the 
fuel supply tank of a motor vehicle or motorboat).
    (ii) All amounts held subject to tax if threshold exceeded. The 
October 1, 1993, floor stocks tax applies to all amounts of gasoline, 
diesel fuel, or aviation fuel (as the case may be) held by a person 
(and not exempt from tax under paragraph (a) or (b) of this section) if 
the aggregate amount of fuel held by the person at the first moment of 
October 1, 1993, exceeds 4,000 gallons in the case of gasoline or 2,000 
gallons in the case of diesel fuel or aviation fuel.
    (iii) Controlled groups. A member of a controlled group (as defined 
in Sec. 47.3-2) holds more than 4,000 gallons of gasoline if the 
aggregate amount of all gasoline held by all members of the controlled 
group exceeds 4,000 gallons. A member of a controlled group holds more 
than 2,000 gallons of diesel fuel or aviation fuel if the aggregate 
amount of all diesel fuel or aviation fuel, as the case may be, held by 
all members of the controlled group exceeds 2,000 gallons.
    (3) Examples. The following examples illustrate the rules of this 
section:

    Example 1. On October 1, 1993, A holds 10,000 gallons of 
gasoline, 6,000 gallons of which are held exclusively for use on a 
farm for farming purposes. The remaining 4,000 gallons are held for 
use in A's highway vehicles. A is not a member of a controlled 
group. A is not liable for the floor stocks tax on any of the 10,000 
gallons because the aggregate amount of fuel held by A for uses 
other than exempt uses does not exceed 4,000 gallons.
    Example 2. On October 1, 1993, B holds 1,900 gallons of diesel 
fuel and 3,900 gallons of gasoline. B is not a member of a 
controlled group. B is not liable for the floor stocks tax on diesel 
fuel because B's holdings of diesel fuel do not exceed 2,000 
gallons. B is not liable for the floor stocks tax on gasoline 
because B's holdings of gasoline do not exceed 4,000 gallons.
    Example 3. On October 1, 1993, C holds 4,100 gallons of gasoline 
for resale at a service station. C is liable for a floor stocks tax 
of $176.30 (4,100 X $.043) on that gasoline.


Sec. 47.3-5  Requirements with respect to payment and return for the 
October 1, 1993, floor stocks tax.

    (a) Payment of tax. The October 1, 1993, floor stocks tax is to be 
paid without assessment or notice on or before November 30, 1993.
    (b) Filing of returns--(1) Form 720. Every person liable for the 
October 1, 1993, floor stocks tax must make a return of the tax on Form 
720, Quarterly Federal Excise Tax Return. The return is to be prepared 
and filed in accordance with the instructions relating to the return.
    (2) Time for filing--(i) In general. The Form 720 required by 
paragraph (b)(1) of this section must be filed on or before November 
30, 1993, and is a return for the third calendar quarter of 1993. A 
first return reporting only the October 1, 1993, floor stocks tax is 
also a final return and therefore, in accordance with the instructions 
to Form 720, the box for ``final return'' must be marked.
    (ii) Return reporting other taxes. A person must file only one Form 
720 for a quarter. If a person is required under part 40 of this 
chapter to file Form 720 for the third calendar quarter of 1993 for 
other excise taxes earlier than November 30, 1993, that person files a 
single Form 720 for the quarter on or before November 30, 1993. This 
paragraph (b)(2)(ii) does not extend the time for making deposits or 
paying any excise tax.


Sec. 47.3-6  Imposition of the January 1, 1994, floor stocks tax on 
diesel fuel held on January 1, 1994.

    (a) Fuel subject to tax. Section 13243 of the Act imposes a floor 
stocks tax on diesel fuel held at the first moment of January 1, 1994, 
by any person if--
    (1) No tax was imposed on the diesel fuel under section 4041(a) or 
4091 as in effect on December 31, 1993; and
    (2) Tax would have been imposed by section 4081, as amended by 
section 13242 of the Act, on any prior removal, entry, or sale of the 
diesel fuel had section 4081 applied to the diesel fuel for periods 
before January 1, 1994.
    (b) Rate of tax. The rate of the January 1, 1994, floor stocks tax 
is 24.4 cents per gallon.
    (c) Person liable for tax. The person liable for tax on any diesel 
fuel subject to the January 1, 1994, floor stocks tax is the wholesale 
distributor or other registered producer, recreational boat operator, 
or other person that holds the fuel at the first moment of January 1, 
1994. Fuel is held by a person if the person has title to the fuel 
(whether or not delivery to that person has been made) at such time, as 
determined under applicable local law.


Sec. 47.3-7  Exception to the January 1, 1994, floor stocks tax.

    (a) In general. The January 1, 1994, floor stocks tax does not 
apply to diesel fuel held exclusively for an exempt use. In determining 
whether diesel fuel is held exclusively for an exempt use, the 
following rules apply:
    (1) An exempt use, with respect to diesel fuel, is any use of 
diesel fuel (other than in producing a diesel fuel/alcohol mixture or 
as fuel in a diesel-powered train) that is described in section 6427 
(as in effect on January 1, 1994) and that would entitle the ultimate 
purchaser to a credit or payment equal to any tax imposed by section 
4081 (as in effect on such date). Thus, for example, exempt uses of 
diesel fuel include use other than as a fuel in a diesel-powered 
highway vehicle (as defined in Sec. 48.4041-8(b)(4) of this chapter), 
use on a farm for farming purposes, exclusive use by a State or local 
government or nonprofit educational organization, and use in an off-
highway business use.
    (2) Diesel fuel held for use in a diesel-powered train is not 
exempt from the January 1, 1994, floor stocks tax under paragraph 
(a)(1) of this section unless the fuel is held by a State or local 
government. Thus, the exemptions for use other than as fuel in a 
diesel-powered highway vehicle and off-highway business use do not 
apply to fuel used in a diesel-powered train. For circumstances in 
which diesel fuel held for use in a diesel-powered train may be exempt 
from the January 1, 1994, floor stocks tax, see paragraph (b) of this 
section (relating to the exemption for dyed fuel) and Sec. 47.3-
6(a)(1), which exempts fuel that was previously taxed under section 
4041(a) or 4091 (as in effect on December 31, 1993).
    (3) Diesel fuel is held exclusively for an exempt use only if the 
person that holds the fuel at the first moment of January 1, 1994, 
actually uses the diesel fuel in an exempt use.
    (4) Diesel fuel is not held exclusively for an exempt use if, at 
the first moment of January 1, 1994, the diesel fuel is held for resale 
(including resale to a person that will use the diesel fuel in an 
exempt use). Thus, for example, except in the case of dyed fuel 
described in paragraph (b) of this section, diesel fuel held by a 
heating oil retailer for sale for use as home heating oil is not exempt 
from the January 1, 1994, floor stocks tax. However, a homeowner who 
uses the fuel for heating purposes would be eligible to claim a credit 
or may be eligible for a payment equal to the tax under section 6427.
    (b) Exception for dyed fuel. The January 1, 1994, floor stocks tax 
does not apply to diesel fuel that satisfies the dyeing requirements of 
Sec. 48.4082-1T(b) of this chapter by March 31, 1994, or by the time 
the fuel is sold by the person holding the fuel at the first moment of 
January 1, 1994, whichever is earlier. Thus, for example, diesel fuel 
held by a heating oil retailer for sale for use as home heating oil is 
exempt from the January 1, 1994, floor stocks tax if the retailer or 
another person has dyed the fuel and the fuel satisfies the 
requirements of Sec. 48.4082-1T(b) of this chapter.


Sec. 47.3-8  Requirements with respect to payment and return for the 
January 1, 1994, floor stocks tax.

    (a) Payment of tax. The January 1, 1994, floor stocks tax is to be 
paid without assessment or notice on or before July 31, 1994.
    (b) Filing of returns--(1) Form 720. Every person liable for the 
January 1, 1994, floor stocks tax must make a return of the tax on Form 
720, Quarterly Federal Excise Tax Return. The return is to be prepared 
and filed in accordance with the instructions relating to the return.
    (2) Time for filing--(i) In general. The Form 720 required by 
paragraph (b)(1) of this section must be filed on or before July 31, 
1994, and is a return for the second calendar quarter of 1994. A first 
return reporting only January 1, 1994, floor stocks tax is also a final 
return and therefore, in accordance with the instructions to Form 720, 
the box for ``final return'' must be marked.
    (ii) Return reporting other taxes. A person must file only one Form 
720 for a quarter. If a person is required under part 40 of this 
chapter to file Form 720 for the second calendar quarter of 1994 for 
other excise taxes on or before August 31, 1994, that person files a 
single Form 720 for the quarter on or before August 31, 1994. This 
paragraph (b)(2)(ii) does not extend the time for making deposits or 
paying any excise tax.


Sec. 47.3-9  Imposition of the October 1, 1995, floor stocks tax on 
commercial aviation fuel held on October 1, 1995.

    (a) Fuel subject to tax. Section 13245 of the Act imposes a floor 
stocks tax on commercial aviation fuel on which tax was imposed under 
section 4091 before October 1, 1995, and which is held on the first 
moment of that date by any person. Tax is imposed under section 4091 
even if imposed only at the Leaking Underground Storage Tank Trust Fund 
financing rate under that section.
    (b) Rate of tax. The rate of the October 1, 1995, floor stocks tax 
is 4.3 cents per gallon.
    (c) Person liable for tax. The person liable for tax on any 
commercial aviation fuel subject to the October 1, 1995, floor stocks 
tax is the person that holds the commercial aviation fuel at the first 
moment of October 1, 1995. Fuel is held by a person if the person has 
title to the fuel (whether or not delivery to that person has been 
made) at such time, as determined under applicable local law.


Sec. 47.3-10  Exceptions to the October 1, 1995, floor stocks tax.

    (a) Exception for commercial aviation fuel held for use as supplies 
for vessels or aircraft. The October 1, 1995, floor stocks tax does not 
apply to commercial aviation fuel held exclusively for use as supplies 
for vessels or aircraft within the meaning of section 4221(d)(3). In 
determining whether commercial aviation fuel is held exclusively for 
such use, the following rules in paragraphs (a) (1) and (2) of this 
section apply:
    (1) Commercial aviation fuel is held exclusively for use as 
supplies for vessels or aircraft only if the person that holds the 
commercial aviation fuel at the first moment of October 1, 1995, 
actually uses the aviation fuel in that exempt use.
    (2) Commercial aviation fuel is not held exclusively for use as 
supplies for vessels or aircraft if, at the first moment of October 1, 
1995, the commercial aviation fuel is held for resale (including resale 
to a person that will use the aviation fuel as supplies for vessels or 
aircraft). Thus, for example, commercial aviation fuel held by a fixed 
base operator for sale to an airline for use in foreign trade is not 
exempt from the October 1, 1995, floor stocks tax. However, the airline 
would be eligible to claim a credit or payment equal to the tax under 
section 6427.
    (b) Exception for certain amounts of fuel--(1) In general. The 
October 1, 1995, floor stocks tax does not apply to commercial aviation 
fuel that a person holds at the first moment of October 1, 1995, if the 
aggregate amount of commercial aviation fuel held by that person at 
that moment does not exceed 2,000 gallons.
    (2) Additional rules relating to the 2,000 gallon exception--(i) 
Coordination with other exemptions. In determining the aggregate amount 
of commercial aviation fuel held by a person at the first moment of 
October 1, 1995, there is to be excluded the amount of commercial 
aviation fuel exempt from the October 1, 1995, floor stocks tax by 
reason of paragraph (a) of this section (relating to fuel held for an 
exempt use).
    (ii) All amounts held subject to tax if threshold exceeded. The 
October 1, 1995, floor stocks tax applies to all amounts of commercial 
aviation fuel held by a person (and not exempt from tax under paragraph 
(a) of this section) if the aggregate amount of commercial aviation 
fuel held by the person at the first moment of October 1, 1995, exceeds 
2,000 gallons.
    (iii) Controlled groups. A member of a controlled group (as defined 
in Sec. 47.3-2) holds more than 2,000 gallons of commercial aviation 
fuel if the aggregate amount of all commercial aviation fuel held by 
all members of the controlled group exceeds 2,000 gallons.
    (3) Example. The following example illustrates the rules of this 
paragraph (b):

    Example. D, E, and F are members of the same controlled group. 
On October 1, 1995, D holds 2,000 gallons of commercial aviation 
fuel. E holds 1,500 gallons of commercial aviation fuel, and F holds 
500 gallons of commercial aviation fuel. None of the commercial 
aviation fuel is held for an exempt use. Because the aggregate 
amount held by all members of the group is 4,000 gallons, which 
exceeds 2,000 gallons, all commercial aviation fuel held by each 
member is subject to the floor stocks tax. Thus, D is liable for tax 
of $86.00 (2,000 x $.043), E is liable for tax of $64.50 
(1,500 x $.043), and F is liable for tax of $21.50 (500 x $.043).


Sec. 47.3-11  Requirements with respect to payment and return for the 
October 1, 1995, floor stocks tax.

    (a) Payment of tax. The October 1, 1995, floor stocks tax is to be 
paid without assessment or notice on or before April 30, 1996.
    (b) Filing of returns--(1) Form 720. Every person liable for the 
October 1, 1995, floor stocks tax must make a return of the tax on Form 
720, Quarterly Federal Excise Tax Return. The return is to be prepared 
and filed in accordance with the instructions relating to the return.
    (2) Time for filing--(i) In general. The Form 720 required by 
paragraph (b)(1) of this section must be filed on or before April 30, 
1996, and is a return for the first calendar quarter of 1996. A first 
return reporting only October 1, 1995, floor stocks tax is also a final 
return and therefore, in accordance with the instructions to Form 720, 
the box for ``final return'' must be marked.
    (ii) Return reporting other taxes. A person must file only one Form 
720 for a quarter. If a person is required under part 40 of this 
chapter to file Form 720 for the first calendar quarter of 1996 for 
other excise taxes on or before May 31, 1996, that person files a 
single Form 720 for the quarter on or before May 31, 1996. This 
paragraph (b)(2)(ii) does not extend the time for making deposits or 
paying any excise tax.

PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES

    Par. 2. The authority citation for part 48 is amended by adding the 
following entries in numerical order to read as follows:

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

    Section 48.4221-3(e) also issued under 26 U.S.C. 4221(a).
    Section 48.6416(b)(2)-2(b) also issued under 26 U.S.C. 6416(b).
* * * * *
    Par. 3. Section 48.4221-3 is amended by adding paragraph (e) to 
read as follows:


Sec. 48.4221-3  Tax-free sale of articles for export, or for resale by 
the purchaser to a second purchaser for export.

* * * * *
    (e) Vaccines. The exemption provided by section 4221(a)(2) applies 
after August 10, 1993, to the tax imposed on vaccines by section 4131, 
but only if--
    (1) The vaccine is sold by the manufacturer after August 10, 1993; 
and
    (2) In the case of vaccine sold to, or sold for resale to, the 
United States or any of its agencies or instrumentalities, the United 
States or such agency or instrumentality notifies the manufacturer that 
the vaccine is intended for uses other than the vaccination of persons 
described in 42 U.S.C. 300aa-11(c)(1)(B)(i)(II) (relating to certain 
U.S. citizens who are vaccinated outside the United States).
    Par. 4. Section 48.6416(b)(2)-2 is amended by:
    1. Redesignating the text of paragraph (b) following the heading as 
paragraph (b)(1).
    2. Adding a heading to paragraph (b)(1).
    3. Revising the first sentence of paragraph (b)(1).
    4. Adding paragraph (b)(2).
    5. The revisions and additions read as follows:


Sec. 48.6416(b)(2)-2  Exportations, uses, sales, and resales included.

* * * * *
    (b) Exportation of tax-paid articles--(1) In general. Subject to 
the limitations of section 6416(b)(2) and paragraph (b)(2) of this 
section, tax paid under chapter 31 or 32 on the sale of any article 
will be considered to be an overpayment under section 6416(b)(2)(A) if 
the article is exported by any person. * * *
    (2) Rule for exportation of vaccines. Paragraph (b)(1) of this 
section applies to tax paid under section 4131 on the sale of a 
vaccine, but only if the sale by the manufacturer occurs after August 
10, 1993, and, in the case of vaccine sold to the United States or any 
of its agencies or instrumentalities, the condition of Sec. 48.4221-
3(e)(2) is satisfied.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
    Approved: July 21, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-20222 Filed 8-19-94; 8:45 am]
BILLING CODE 4830-01-U