[Federal Register Volume 72, Number 144 (Friday, July 27, 2007)]
[Rules and Regulations]
[Pages 41222-41224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14491]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 48 and 602

[TD 9346]
RIN 1545-BC08


Entry of Taxable Fuel

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations relating to the tax 
on the entry of taxable fuel into the United States. The final 
regulations affect enterers of taxable fuel, other importers of record, 
and certain sureties.

DATES: Effective Date: These regulations are effective July 27, 2007.
    Applicability Dates: For dates of applicability, see Sec. Sec.  
48.4081-1(f) and 48.4081-3(j).

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

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1897. The collection of information in these final 
regulations is in Sec.  48.4081-3(c)(2)(iii) and (iv). This collection 
of information allows certain importers of record and sureties to avoid 
liability for the tax on the entry of taxable fuel into the United 
States.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    The estimated annual burden per respondent and/or recordkeeper 
varies from 15 minutes to 2.25 hours, depending on individual 
circumstances, with an estimated average of 1.25 hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, 
SE:W:CAR:MP:T:T:SP, Washington, DC 20224, and the Office of Management 
and Budget, Attn: Desk Officer for the Department of the Treasury, 
Office of Information and Regulatory Affairs, Washington, DC 20503.
    Books or records relating to this 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

    This document amends the Manufacturers and Retailers Excise Tax 
Regulations (26 CFR part 48) to provide rules relating to the tax that 
section 4081 of the Internal Revenue Code (Code) imposes on the entry 
of taxable fuel into the United States. On July 30, 2004, a temporary 
regulation (TD 9145, 69 FR 45587) relating to this topic was published 
in the Federal Register. A notice of proposed rulemaking (REG-120616-
03, 69 FR 45631) cross-referencing the temporary regulations was 
published in the Federal Register on the same day. Written and 
electronic comments were received and a public hearing was held on 
January 12, 2005. After considering the written comments and the 
comments made at the public hearing, the proposed regulations are 
adopted as revised by this Treasury decision, and the corresponding 
temporary regulations are removed.
    The temporary and proposed regulations. Effective September 28, 
2004, the temporary regulations provide that the importer of record 
(under Customs law) of taxable fuel is jointly and severally liable 
with the enterer for the tax imposed on the entry of taxable fuel if 
the importer of record is not the enterer (that is, the importer of 
record is a customs broker engaged by the enterer) and the enterer is 
not a taxable fuel registrant. Under the law in effect before September 
28, 2004, an importer of record's Customs bond could have been charged 
for any unpaid tax imposed on the entry of fuel imported under the 
bond. The preamble of the temporary regulations stated, however, that 
the IRS would not charge the Customs bond for the tax imposed on an 
entry of fuel occurring before September 28, 2004. In addition, the 
temporary regulations provide that the Customs bond posted with respect 
to the importation of fuel will not be charged for the tax imposed on 
an entry of fuel occurring after September 27, 2004, if the enterer is 
a taxable fuel registrant or the surety believes, based on the 
enterer's certification, that the enterer is a taxable fuel registrant.
    Public comments. One commentator that represents an association of 
road builders supported the proposed and temporary regulations, calling 
them one of a series of important initiatives necessary to combat fuel 
tax evasion and finance the Highway Trust Fund.
    Several commentators that represent tribal interests in the state 
of New York opposed the regulations. They maintained that the 
regulations will cause fuel prices to increase at service stations 
located on tribal reservations. These higher fuel prices will reduce 
sales and result in the loss of several hundred tribal jobs. In 
addition, a reduction in sales at these stations would cause a decrease 
in receipts from the tribal tax on fuel sold on the reservations. This 
tax funds general tribal government services, including police, health, 
and welfare programs.
    Many of these commentators also suggested that the Treasury 
Department and the IRS failed to comply with section 5 of Executive 
Order 13175 (65 FR 6724) and Executive Order 12866 (58 FR 51735), which 
generally requires each Federal agency to consult with tribal officials 
before the promulgation of any regulation that ``has tribal 
implications'' or that ``imposes substantial direct compliance costs on 
Indian tribal governments.''
    The final regulations. This Treasury decision adopts the proposed 
rules as final regulations without substantive change. Because the 
cross-reference notice of proposed rulemaking referred to the text of 
temporary rules, the Treasury decision includes the nonsubstantive, 
clerical changes need to

[[Page 41223]]

incorporate the temporary rule text into the final regulations.
    The rules in these regulations address the nonpayment of tax on 
fuel that is entered into the United States. An enterer's failure to 
pay this tax not only gives it a competitive price advantage over its 
compliant competitors, but it also deprives the United States Treasury 
of revenue intended for the Highway Trust Fund. The final regulations 
do not impose a new tax burden on enterers of taxable fuel. Instead, 
the regulations simply provide the IRS with an additional enforcement 
tool to collect the tax that is owed under existing law and give an 
additional incentive for enterers to be registered.
    The imposition of tax on the entry of fuel sold on reservations 
results not from these regulations but from the statute, which does not 
provide an exemption from the tax for fuel sold on reservations. The 
only effect of these regulations is to improve the ability of the IRS 
to apply the tax consistently and fairly with respect to all taxpayers 
subject to the tax, without regard to whether or not the fuel is 
ultimately sold on tribal reservations.
    The Treasury Department and IRS determined that these regulations 
are not subject to Executive Order 13175 (65 FR 67249) which obligates 
an agency to consult with tribal officials when developing ``policies 
that have tribal implications.'' This executive order defines 
``policies that have tribal implications,'' in part, as regulations 
that have substantial direct effects on one or more Indian tribes. The 
regulations do not have tribal implications, as specified in Executive 
Order 13175, because they do not significantly or uniquely affect the 
communities of Indian tribal governments, nor do they impose direct 
compliance costs on them. Any economic effect of the fuel tax on tribal 
economies is a consequence of the statutory imposition of the tax, not 
the manner in which the regulations operate to implement the statute. 
Thus, Executive Order 13175 does not apply to the final or temporary 
regulations.

Special Analyses

    It has been determined that these regulations are 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. It is hereby certified that the 
collection of information in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based upon the fact that any burden on taxpayers 
is minimal. Accordingly, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking preceding these final regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on the impact of the regulations 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. Section 48.4081-1 is amended as follows:
0
1. Paragraph (b) is amended by revising the definition of Enterer.
0
2. The first sentence of paragraph (f)(2) is revised.
    The revisions read as follows:


Sec.  48.4081-1  Taxable fuel; definitions.

* * * * *
    (b) * * *
    Enterer generally means 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.
* * * * *
    (f) * * *
    (2) In paragraph (b) of this section the definition of aviation 
gasoline and the third sentence in the definition of terminal are 
applicable after January 1, 1998, the definition of kerosene, excluded 
liquid, and taxable fuel are applicable after June 30, 1998, and the 
definition of enterer is applicable to entries of taxable fuel after 
September 27, 2004. * * *


Sec.  48.4081-1T  [Removed]

0
Par. 3. Section 48.4081-1T is removed.

0
Par. 4. Section 48.4081-3 is amended by revising paragraphs (c)(2)(ii) 
through (iv), and (j) to read as follows:


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

* * * * *
    (c) * * *
    (2) * * *
    (ii) Joint and several liability of the importer of record. The 
importer of record with respect to the taxable fuel is jointly and 
severally liable with the enterer for the tax imposed under paragraph 
(c)(1) of this section 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 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. 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 
Customs 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.
* * * * *
    (j) Effective/applicability date: This section is applicable 
January 1, 1994, except that paragraphs (c)(2)(ii) through (iv) of this 
section are applicable to

[[Page 41224]]

entries of taxable fuel after September 27, 2004.


Sec.  48.4081-3T  [Removed]

0
Par. 5. Section 48.4081-3T is removed.


Sec.  48.4081-5  [Amended]

0
Par. 6. Section 48.4081-5 is amended by revising paragraph (a) to read 
as follows:
    (a) Overview. This section sets forth requirements for the 
notification certificate under Sec. Sec.  48.4081-2(c)(2)(ii), 48.4081-
3(c)(2)(iii) and (iv), 48.4081-3(d)(2)(iii), 48.4081-3(e)(2)(iii), 
48.4081-3(f)(2)(ii), and 48.4081-4(c) to notify another person of the 
taxable fuel registrant's registration status.
* * * * *

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 removing the 
entry for Sec.  48.4081-3T, and revising the entry for Sec.  48.4081-3 
in 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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                                * * * * *
48.4081-3...............................................       1545-1270
                                                               1545-1418
                                                               1545-1897
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* * * * *

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved: July 16, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E7-14491 Filed 7-26-07; 8:45 am]
BILLING CODE 4830-01-P