[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Proposed Rules]
[Pages 38913-38915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14231]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 41, 48, and 145

[REG-103829-99]
RIN 1545-AX10


Excise Taxes; Definition of Highway Vehicle

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed rules relating to the 
definition of a highway vehicle for purposes of various excise taxes. 
The regulations affect vehicle manufacturers, dealers, and lessors; 
tire manufacturers; sellers and buyers of certain motor fuels; and 
operators of heavy highway vehicles.

DATES: Written and electronic comments and requests for a public 
hearing must be received by September 4, 2002.

ADDRESSES: Send submissions to: CC:ITA:RU (REG-103829-99), room 5226, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand delivered Monday through Friday 
between the hours of 8 a.m. and 5 p.m. to: CC:ITA:RU (REG-103829-99), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC. Alternatively, taxpayers may submit electronic 
comments directly to the IRS Internet site at www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: Concerning submissions, Treena 
Garrett, (202) 622-7180; concerning the regulations, Bernard H. 
Weberman (202) 622-3130 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Highway Use Tax 
Regulations (26 CFR part 41), the Manufacturers and Retailers Excise 
Tax Regulations (26 CFR part 48), and the Temporary Excise Tax 
Regulations Under the Highway Revenue Act of 1982 (Pub. L. 97-424) (26 
CFR part 145) relating to the definition of highway vehicle. The 
proposed definition of highway vehicle applies for purposes of sections 
4041 and 4081 (fuel taxes), section 4051 (retail tax on heavy 
vehicles), section 4071 (tire tax), section 4481 (heavy vehicle use 
tax), and sections 6421 and 6427 (fuel tax credits and refunds).
    The Highway Trust Fund (Fund) was established in 1956 and provides 
a source of financing for the interstate highway system and other 
federal-aid highway programs. In adopting a financing system for the 
Fund, the Congress expressed its intention to employ taxes ``involving 
vehicles used on, or suitable for use on, highways.'' H. Rep. No. 84-
2022, at 39 (1956). Even though the Fund was established for the 
construction of the highway system, it now functions, both through 
specific projects such as bridge rehabilitation and block grants to 
states, as a financial source for the construction and maintenance of 
almost all public roads. The taxes appropriated to the Fund are the 
taxes on fuel that is generally suitable for use in highway vehicles; 
the first retail sale of certain heavy vehicles, which Treasury 
regulations have limited to vehicles that are highway vehicles; the 
manufacturer's sale of tires of the type used on highway vehicles; and 
the use of certain heavy highway vehicles.
    For purposes of these taxes, Treasury regulations define a highway 
vehicle as any self-propelled vehicle or trailer or semitrailer 
designed to perform a function of transporting a load over the public 
highway, whether or not also designed to perform other functions. 
Excluded from the definition are certain types of vehicles, including 
certain specially designed mobile machinery vehicles (the mobile 
machinery exception) and certain vehicles specially designed for 
offhighway transportation.
    The mobile machinery exception is intended to apply to vehicle 
chassis that serve solely as a permanent mount for jobsite machinery, 
such as jobsite

[[Page 38914]]

cranes. In creating an exception for mobile machinery vehicles, the 
regulations assumed that vehicles that transport mobile machinery, like 
vehicles that are designed for offhighway transportation, would make 
minimal use of the public highway and thus would receive only minimal 
benefit from the construction and maintenance of the highway system. 
However, it has become apparent that the assumption that most mobile 
machinery vehicles would make minimal use of the public highway is 
incorrect. Mobile machinery vehicles generally are constructed using 
highway chassis that are modified only as necessary to accommodate the 
mounting of the jobsite machinery. These vehicles are subject to the 
same licensing, safety, and other nontax regulations as are other 
highway vehicles. Mobile machinery vehicles carry their load, typically 
heavy jobsite machinery, from jobsite to jobsite over the public 
highway, and their ability to use the public highway is in no way 
limited or impaired. Therefore, they derive the same benefit from, and 
cause the same type of damage to, the public highway as other highway 
vehicles, and for tax purposes should be treated the same as other 
highway vehicles. Thus, these regulations propose to remove the mobile 
machinery exception.
    After removal of the mobile machinery exception, mobile machinery 
vehicles will be subject to the retail tax on heavy vehicles unless the 
vehicles qualify under the exception for offhighway transportation 
vehicles. Also, these vehicles may be subject to the heavy vehicle use 
tax; and tax credits, refunds, and exemptions may not be available for 
the fuel they use. Amounts charged for the jobsite machinery, including 
amounts charged for mounting the machinery on the chassis or body, will 
continue to be excluded from the tax base.
    Other exceptions from the definition of highway vehicle will 
continue to apply. Thus, a vehicle will continue to qualify for the 
offhighway transportation exception if it is specially designed for the 
primary function of transporting a particular type of load other than 
over the public highway and the special design substantially limits or 
impairs its capability to transport its load over the public highway. 
Similarly, trailers and semitrailers specially designed to function 
only as an enclosed stationary shelter for the carrying on of an 
offhighway function will continue to be excepted from tax. The 
exemption provided in section 4053(2) for vehicle bodies primarily 
designed to process, haul, spread, or load or unload feed, seed, or 
fertilizer for farms is unaffected by this change and will continue to 
apply. Credits or refunds for taxed fuel used on a farm for farming 
purposes are also unchanged.

Proposed Effective Date

    These regulations are proposed to apply on and after the first day 
of the first calendar quarter beginning after the day of publication of 
the final regulations in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It also has 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations and, because 
these regulations do not impose on small entities a collection of 
information requirement, the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis 
is not required. Pursuant to section 7805(f) of the Internal Revenue 
Code, this notice of proposed rulemaking will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written and electronic comments that 
are submitted timely to the IRS. The IRS and Treasury Department 
specifically request comments on the clarity of the proposed 
regulations and how they may be made easier to understand. All comments 
will be available for public inspection and copying. A public hearing 
may be scheduled if requested in writing by any person that timely 
submits written comments. If a public hearing is scheduled, notice of 
the date, time, and place for the hearing will be published in the 
Federal Register.

Drafting Information

    The principal author of these regulations is Bernard H. Weberman, 
Office of Associate 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 41

    Excise taxes, Motor vehicles, Reporting and recordkeeping 
requirements.

26 CFR Parts 48 and 145

    Excise taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, under the authority of 26 U.S.C. 7805, chapter I of 26 
CFR is proposed to be amended as follows:

PART 41--EXCISE TAX ON USE OF CERTAIN HIGHWAY MOTOR VEHICLES

    1. The authority citation for part 41 continues to read in part as 
follows:

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

    2. In Sec. 41.4482(a)-1, paragraph (a)(2) is amended by removing 
the language ``Sec. 48.4061(a)-1(d)'' and adding ``Sec. 48.4051-1'' in 
its place.

PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES

    3. The authority citation for part 48 continues to read in part as 
follows:

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

    4. In Sec. 48.4041-8, paragraph (b) is amended as follows:
    1. Paragraph (b)(1) is revised.
    2. Paragraphs (b)(2) and (b)(3) are removed.
    3. Paragraph (b)(4) is redesignated as paragraph (b)(2).
    The revision reads as follows:


Sec. 48.4041-8  Definitions.

* * * * *
    (b) * * * (1) Definition. For the definition of highway vehicle, 
see Sec. 48.4051-1.
* * * * *
    5. In Subpart H, Sec. 48.4051-1 is added under the undesignated 
center heading ``Motor Vehicles'' to read as follows:


Sec. 48.4051-1  Heavy trucks and trailers; definition of highway 
vehicle.

    (a) Highway vehicle--(1) In general. A highway vehicle is any self-
propelled vehicle, or any trailer or semitrailer, that is capable of 
transporting a load over the public highway. In determining whether a 
vehicle is capable of transporting a load over the public highway, it 
is immaterial that the vehicle is capable of performing other 
functions, that the load is permanently mounted on the vehicle, or that 
the load is towed instead of carried.
    (2) Exception--(i) Offhighway transportation vehicles. A vehicle is 
not

[[Page 38915]]

treated as a highway vehicle if it is specially designed for the 
primary function of transporting a particular type of load other than 
over the public highway and because of this special design its 
capability to transport a load over the public highway is substantially 
limited or impaired. A vehicle's design is determined solely on the 
basis of its physical characteristics. In determining whether 
substantial limitation or impairment exists, account may be taken of 
factors such as the size of the vehicle, whether it is subject to the 
licensing, safety, and other requirements applicable to highway 
vehicles, and whether it can transport a load at a sustained speed of 
at least 25 miles per hour. It is immaterial that a vehicle can 
transport a greater load off the public highway than it is permitted to 
transport over the public highway.
    (ii) Nontransportation trailers and semitrailers. A trailer or 
semitrailer is not treated as a highway vehicle if it is specially 
designed to function only as an enclosed stationary shelter for the 
carrying on of an offhighway function at an offhighway site. For 
example, a trailer that is capable only of functioning as an office for 
an offhighway construction operation is not a highway vehicle.
    (b) Public highway. Public highway means any road (whether a 
federal or state highway, city street, or otherwise) in the United 
States that is not a private roadway.
    (c) Examples. The following examples illustrate the provisions of 
this section:

    Example 1. Vehicle A consists of a truck chassis on which a 
telescoping boom-type crane that extends to a length of 130 feet has 
been permanently mounted. The vehicle is capable of transporting the 
crane over the public highway. Because Vehicle A is a self-propelled 
vehicle capable of transporting a load (the crane) over the public 
highway, it is a highway vehicle described in paragraph (a)(1) of 
this section. It is immaterial that the load is permanently mounted 
on the chassis.
    Example 2. Vehicle B consists of a truck chassis on which a dump 
body has been installed. The vehicle's empty (tare) weight is 15,000 
pounds and its gross vehicle weight rating is 46,000 pounds. It is 
capable of transporting a load over the public highway. Its drive 
train and suspension enable it to transport a load off road over 
soft, uneven terrain but do not limit its ability to transport its 
load at public highway speeds. Because Vehicle B is a self-propelled 
vehicle capable of transporting a load over the public highway, it 
is a highway vehicle. Although Vehicle B has some physical 
characteristics for transporting its load other than over the public 
highway (its drive train and suspension), those characteristics are 
not of a magnitude, when compared with its physical characteristics 
for transporting the load over the public highway, to establish that 
it is specially designed for the primary function of transporting 
its load other than over the public highway. Therefore, Vehicle B is 
not a vehicle described in the exception provided in paragraph 
(a)(2)(i) of this section.
    Example 3. Vehicle C consists of a truck chassis on which an 
oversize body designed to transport and apply liquid agricultural 
chemicals on farms has been installed. It is capable of transporting 
a load over the public highway. It is 132 inches in width, which is 
considerably in excess of standard highway vehicle width. For travel 
on uneven and soft terrain, it is equipped with oversize wheels with 
high-flotation tires, and nonstandard axles, brakes, and 
transmission. It has a special fuel and carburetor air filtration 
system that enable it to perform efficiently in an environment of 
dirt and dust. It is not able to maintain a speed of 25 miles per 
hour for more than one mile while fully loaded. Because Vehicle C is 
a self-propelled vehicle capable of transporting a load over the 
public highway, it is a highway vehicle described in paragraph 
(a)(1) of this section. However, its considerable physical 
characteristics for transporting its load other than over the public 
highway, when compared with its physical characteristics for 
transporting the load over the public highway, establish that it is 
specially designed for the primary function of transporting its load 
other than over the public highway. Further, the physical 
characteristics for transporting its load other than over the public 
highway substantially limit its capability to transport a load over 
the public highway. Therefore, Vehicle C is a vehicle described in 
the exception provided in paragraph (a)(2)(i) of this section and is 
not treated as a highway vehicle.

    (d) Effective date. This section is applicable on and after the 
first day of the first calendar quarter beginning after the day of 
publication of the final regulations in the Federal Register.


Sec. 48.4072-1  [Amended]

    6. In Sec. 48.4072-1, paragraphs (c)(1)(i) and (c)(1)(ii) are 
amended by removing the language ``Sec. 48.4061(a)-1(d)'' and adding 
``Sec. 48.4051-1'' in its place.


Sec. 48.4081-1  [Amended]

    7. In Sec. 48.4081-1, paragraph (b), the definition of Diesel-
powered highway vehicle is amended by removing the language 
``Sec. 48.4041-8(b)'' and adding ``Sec. 48.4051-1'' in its place.
    8. In Sec. 48.6421-4, paragraph (c) is revised to read as follows:


Sec. 48.6421-4  Meaning of terms.

* * * * *
    (c) Highway vehicle. For the definition of highway vehicle, see 
Sec. 48.4051-1.
* * * * *

PART 145--TEMPORARY EXCISE TAX REGULATIONS UNDER THE HIGHWAY 
REVENUE ACT OF 1982 (PUB. L. 97-424)

    9. The authority citation for part 145 continues to read in part as 
follows:

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


Sec. 145.4051-1  [Amended]

    10. Section 145.4051-1 is amended as follows:
    1. In paragraph (a)(2), first sentence, the language ``(as defined 
in paragraph (d) of Sec. 48.4061(a)-1 (Regulations on Manufacturers and 
Retailers Excise Taxes))'' is removed and ``as defined in Sec. 48.4051-
1 of this chapter'' is added in its place.
    2. In paragraph (a)(4), last sentence, the language 
``Sec. 48.4061(a)-1'' is removed and ``Sec. 48.4051-1 of this chapter'' 
is added in its place.
    3. Paragraph (d) is removed and reserved.

David A. Mader,
Acting Deputy Commissioner of Internal Revenue.
[FR Doc. 02-14231 Filed 6-5-02; 8:45 am]
BILLING CODE 4830-01-P