[Federal Register Volume 69, Number 127 (Friday, July 2, 2004)]
[Proposed Rules]
[Page 40345]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15125]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 49

[REG-137076-02]
RIN 1545-BB04


Excise Taxes; Communications Services

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This document requests information from the public on issues 
that the IRS may address in proposed regulations relating to the tax on 
amounts paid for communications services. All materials submitted will 
be available for public inspection and copying.

DATES: Written and electronic comments must be received by September 
30, 2004.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-137076-02), room 
5203, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-137076-02), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, DC, or sent electronically, via the IRS Internet site at 
www.irs.gov/regs or via the Federal eRulemaking Portal at 
www.regulations.gov (indicate IRS and REG-137076-02).

FOR FURTHER INFORMATION CONTACT: Concerning submissions generally, the 
Regulations Unit, (202) 622-3628; concerning the proposals, Cynthia 
McGreevy (202) 622-3130 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    Section 4251 imposes tax on amounts paid for certain communications 
services, including local and toll telephone service. Section 4252(a) 
provides that local telephone service means the access to a local 
telephone system, and the privilege of telephonic quality communication 
with substantially all persons having telephone or radio telephone 
stations constituting a part of such local telephone system. Section 
4252(b)(1) provides that toll telephone service includes a telephonic 
quality communication for which there is a toll charge that varies in 
amount with the distance and elapsed transmission time of each 
individual communication. Section 4252(b)(2) provides that toll 
telephone service also includes a service that entitles the subscriber, 
upon payment of a periodic charge (determined as a flat amount or upon 
the basis of total elapsed transmission time), to the privilege of an 
unlimited number of telephonic communications to or from all or a 
substantial portion of the persons having telephone or radio telephone 
stations in a specified area which is outside the local telephone 
system area in which the station provided with this service is located.
    A tax on communications services has existed for over 100 years. 
The communications services that currently are subject to the tax are 
defined in section 4252, which was enacted in its current form in 1965. 
That section describes the local and long distance telephone service 
sold under the 1965 Federal Communications Commission rules. Existing 
Treasury regulations do not reflect the 1965 statutory change.
    Sections 4252(a) and (b) define local and toll telephone service in 
terms of telephonic or telephonic quality communication, which means 
voice quality communication. Since 1965, numerous communications 
services have been developed and marketed, the methods of transmission 
have expanded, and the industry has been deregulated.
    As a result of these changes, questions have arisen concerning the 
application of section 4251 to certain communications services that 
were not available in 1965. In response to these questions, Treasury 
and the IRS are considering proposing regulations that would revise the 
existing regulations to reflect changes in technology.
    The test for taxability under section 4251 is whether a service for 
which an amount is paid is a communications service described in 
section 4252. The purpose of this ANPRM is to solicit information from 
the public on how present technology should be treated within the 
description of telephonic or telephonic quality communication in the 
definitions of local and toll telephone service under section 4252.
    To ensure that any new regulations accurately reflect the state of 
today's communications services industry, Treasury and the IRS request 
that communications services providers and other interested parties 
submit comments and suggestions describing the various technologies, 
services, and methods of transmission currently available for 
transmitting data and voice communications and how they should be 
treated under section 4251.

Special Analysis

    This advance notice of proposed rulemaking is not a significant 
regulatory action for purposes of Executive Order 12866, ``Regulatory 
Planning and Review.''

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 04-15125 Filed 7-1-04; 8:45 am]
BILLING CODE 4830-01-P