[Federal Register Volume 69, Number 146 (Friday, July 30, 2004)]
[Rules and Regulations]
[Pages 45587-45589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17449]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 48 and 602

[TD 9145]
RIN 1545-BD29


Entry of Taxable Fuel

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations 
relating to the tax on the entry of taxable fuel into the United 
States. These regulations affect enterers of taxable fuel, other 
importers of record, and certain sureties. The text of the temporary 
regulations also serves as the text of the proposed regulations (REG-
120616-03) set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section in this issue of the Federal 
Register.

DATES: Effective Date: These regulations are effective September 28, 
2004.
    Applicability Dates: For dates of applicability, see Sec. Sec.  
48.4081-1T(b) and 48.4081-3T(c)(ii) and (iv).

FOR FURTHER INFORMATION CONTACT: Celia Gabrysh (202) 622-3130 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    These temporary regulations are being issued without prior notice 
and public procedure pursuant to the Administrative Procedure Act (5 
U.S.C. 553). For this reason, the collection of information contained 
in these regulations has been reviewed and, pending receipt and 
evaluation of public comments, approved by the Office of Management and 
Budget under control number 1545-1897. Responses to this collection of 
information are required to obtain a tax benefit.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden, and suggestions for reducing this 
burden, please refer to the preamble to the cross-referencing notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Present Law

    Section 4081(a)(1)(A)(iii) of the Internal Revenue Code (Code) 
imposes a tax on the entry into the United States of taxable fuel. 
Taxable fuel means gasoline, diesel fuel, and kerosene. Existing 
regulations provide that the enterer is liable for the tax imposed on 
the entry of taxable fuel.
    The regulations currently define the term enterer as generally 
meaning the importer of record (under customs law) with respect to the 
taxable fuel. However, if the importer of record is acting as an agent 
(for example, the importer of record is a customs broker engaged by the 
owner of the taxable fuel), the person for whom the agent is acting is 
the enterer.
    The regulations require an enterer to be registered by the IRS. The 
IRS will register an applicant only if the IRS determines that the 
applicant meets several tests, including the adequate security test. An 
applicant meets the adequate security test only if the IRS determines 
that the applicant has both adequate financial resources and a 
satisfactory tax history, or the applicant gives the IRS a bond.
    Section 142.4 of the Customs regulations (19 CFR) provides that 
merchandise shall not be released from Customs custody unless a bond on 
Customs Form 301, Customs Bond, has been filed. This bond, which is 
filed by the importer of record, secures the payment of any duty, tax, 
or charge, and compliance with Customs laws and regulations. Section 
141.3 of the Customs regulations provides that the importer's liability 
for duties includes liability for any internal revenue taxes which 
attach upon the importation of merchandise, unless otherwise provided 
by law or regulation. Also, Sec.  113.62(a)(1)(ii) of the Customs 
regulations provides, in part, that if merchandise is imported and 
released from Customs custody, the obligors on

[[Page 45588]]

a Customs bond (principal and surety, jointly and severally) agree to 
pay, as demanded by Customs, all additional duties, taxes, and charges 
subsequently found due, legally fixed, and imposed on any entry secured 
by the bond.

Reason for Change

    The IRS has found that abusive situations exist with regard to the 
entry of taxable fuel into the United States. For example, some 
enterers are not registered and are not paying the tax on their fuel 
entries. This not only gives noncompliant enterers a competitive 
advantage over their compliant competitors, but it also deprives the 
United States Treasury of revenue intended for the Highway Trust Fund.
    When Congress enacted the present fuel tax regime, it noted that 
the Treasury Department is permitted ``to prescribe rules and 
administrative procedures for determining liability for payment of 
tax.'' H.R. Conf. Rep. No. 101-964, at 1052 (1990).

Explanation of Provisions

    Pursuant to these temporary regulations, the importer of record 
(under Customs law) is jointly and severally liable with the enterer 
for the tax if the importer of record is not the enterer of the taxable 
fuel (that is, the importer of record is a customs broker engaged by 
the enterer) and the enterer is not a taxable fuel registrant. Thus, an 
importer of record engaged by an enterer and seeking assurance that it 
will not be jointly and severally liable for the enterer's tax 
liability should verify that the enterer is registered by the IRS. This 
temporary regulation is similar to Sec.  48.4081-2(c)(2) of the 
regulations, which provides that a terminal operator generally is 
jointly and severally liable for the tax imposed on the removal of 
taxable fuel from the rack if the terminal operator allows an 
unregistered position holder to operate in its terminal.
    Customs laws and regulations provide that the importer of record is 
liable for any duties or taxes that attach upon the importation of 
merchandise. Therefore, an importer of record's Customs bond secures 
not only the payment of duties, but also the payment of taxes that are 
imposed on the entry of merchandise, including taxable fuel. 
Consequently, under existing law, a surety could be compelled to meet a 
demand on a Customs bond if the excise tax on the entry of taxable fuel 
is not paid when due. However, the IRS will not charge a surety bond 
for this tax until the effective date of these temporary regulations. 
It should be noted, however, that under these temporary regulations the 
Customs bond posted for the entry of taxable fuel will not be charged 
for the section 4081 tax if the enterer is a taxable fuel registrant.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory flexibility 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. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
refer to the Special Analyses section of the preamble to the cross-
reference notice of proposed rulemaking published in the Proposed Rules 
section in this issue of the Federal Register. Pursuant to section 
7805(f) of the Code, these temporary regulations will be submitted to 
the Chief Counsel for Advocacy of the Small Business Administration for 
comment on their impact on small business.

Drafting Information

    The principal author of these regulations is Celia Gabrysh, Office 
of Associate Chief Counsel (Passthroughs and Special Industries). 
However, other personnel from the IRS, the Treasury Department, and the 
Bureau of Customs and Border Protection, Department of Homeland 
Security, participated in their development.

List of Subjects

26 CFR Part 48

    Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and Recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 48 and 602 are amended as follows:

PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES

0
Paragraph 1. The authority citation for part 48 continues to read, in 
part, as follows:

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


0
Par. 2. In Sec.  48.4081-1, paragraph (b) is amended by adding a new 
sentence to the end of the definition of enterer to read as follows:


Sec.  48.4081-1  Taxable fuel; definitions.

* * * * *
    (b) * * * This definition of enterer does not apply with respect to 
an entry if the definition of enterer in Sec.  48.4081-1T(b) is 
applicable with respect to that entry.
* * * * *
0
Par. 3. Section 48.4081-1T is added to read as follows:


Sec.  48.4081-1T  Taxable fuel; definitions (temporary).

    (a) [Reserved]. For further guidance, see Sec.  48.4081-1(a).
    (b) Definitions.
    Definitions of approved terminal or refinery through diesel-powered 
train [Reserved].
    Enterer generally means, in the case of an entry of taxable fuel on 
or after September 28, 2004, the importer of record (under customs law) 
with respect to the taxable fuel, except that--
    (1) If the importer of record is a customs broker engaged by the 
owner of the taxable fuel, the person for whom the broker is acting is 
the enterer; and
    (2) If there is no importer of record for taxable fuel entered into 
the United States, the owner of the taxable fuel at the time it is 
brought into the United States is the enterer.
    Definition of entry through (f)(2) [Reserved]. For further 
guidance, see Sec.  48.4081-1(b) definition of entry through (f)(2).

0
Par. 4. In Sec.  48.4081-3, revise paragraph (c)(2) to read as follows:


Sec.  48.4081-3  Taxable fuel; taxable events other than removal at the 
terminal rack.

* * * * *
    (c) * * *
    (2) Liability for tax--(i) In general. The enterer is liable for 
the tax imposed under paragraph (c)(1) of this section.
    (ii) through (iv) For further guidance, see Sec.  48.4081-
3T(c)(2)(ii) through (iv).
* * * * *

0
Par. 5. Section 48.4081-3T is added to read as follows:


Sec.  48.4081-3T  Taxable fuel; taxable events other than removal at 
the terminal rack (temporary).

    (a) through (c)(2)(i) [Reserved]. For further guidance, see Sec.  
48.4081-3(a) through (c)(2)(i).
    (c)(2)(ii) Joint and several liability of the importer of record. 
In the case of an entry of taxable fuel on or after September 28, 2004, 
the importer of record with respect to the taxable fuel is jointly and 
severally liable with the enterer for the tax imposed under Sec.  
48.4081-3(c)(1) if--
    (A) The importer of record is not the enterer of the taxable fuel; 
and
    (B) The enterer is not a taxable fuel registrant.
    (iii) Conditions for avoidance of liability. The importer of record 
is not

[[Page 45589]]

liable for the tax under paragraph (c)(2)(ii) of this section if, at 
the time of the entry, the importer of record--
    (A) Has an unexpired notification certificate (as described in 
Sec.  48.4081-5) from the enterer; and
    (B) Has no reason to believe that any information in the 
notification certificate is false.
    (iv) Customs bond. In the case of an entry of taxable fuel on or 
after September 28, 2004, the Customs bond posted with respect to the 
importation of the fuel will not be charged for the tax imposed on the 
entry of the fuel if the enterer is a taxable fuel registrant. A surety 
bond will not be charged for the tax imposed on the entry of the fuel 
covered by the bond, if at the time of entry, the surety--
    (A) Has an unexpired notification certificate (as described in 
Sec.  48.4081-5) from the enterer; and
    (B) Has no reason to believe that any information in the 
notification certificate is false.
    (d) through (j) [Reserved]. For further guidance, see Sec.  
48.4081-3(d) through (j).


Sec.  48.4081-5  [Amended]

0
Par. 6. Section 48.4081-5 is amended as follows:
0
a. Paragraph (a) is amended by removing the language ``48.4081-
2(c)(3),'' and by adding ``48.4081-2(c)(2)(ii), 48.4081-3T(c)(2)(iii) 
and (iv),'' in its place.
0
b. Paragraph (b)(2) is amended by removing the language ``gasoline 
registrant'' and adding ``taxable fuel registrant'' in its place.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 7. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

0
Par. 8. In Sec.  602.101, paragraph (b) is amended by adding an entry 
in numerical order to the table to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

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                                                             Current OMB
     CFR part or section where identified and described      control No.
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                                * * * * *
48.4081-3T.................................................    1545-1897
 
                                * * * * *
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Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
    Approved: July 14, 2004.
Gregory Jenner,
Acting Assistant Secretary of the Treasury.
[FR Doc. 04-17449 Filed 7-29-04; 8:45 am]
BILLING CODE 4830-01-P