[Federal Register Volume 74, Number 11 (Friday, January 16, 2009)]
[Proposed Rules]
[Pages 2910-2913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-857]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 41

[Reg-116699-07]
RIN 1545-BG63


Highway Use Tax; Sold Vehicles and Electronic Filing

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: This document contains proposed regulations that provide 
guidance on mandatory electronic filing of Form 2290, ``Heavy Highway 
Vehicle Use Tax Return,'' for 25 or more vehicles; credits or refunds 
for sold, destroyed or stolen vehicles; and paying tax on the use of 
certain second-hand vehicles. The regulations reflect changes to the 
law made by the American Jobs Creation Act of 2004. The regulations 
would affect owners and operators of highway motor vehicles with a 
taxable gross weight of 55,000 pounds or more.

DATES: Written or electronic comments and requests for a public hearing 
must be received by April 16, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-116699-07), Room 
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered to: 
CC:PA:LPD:PR Monday through Friday between the hours of 8 a.m. and 4 
p.m. to: CC:PA:LPD:PR (REG-116699-07), Courier's Desk, Internal Revenue 
Service, 1111 Constitution Avenue, NW., Washington, DC, or sent 
electronically via the Federal eRulemaking Portal at 
http:www.regulations.gov (IRS REG-116699-07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Taylor Cortright, (202) 622-3130; concerning submissions of comments 
and requests for a public hearing, 
[email protected], or (202) 622-7180 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Excise Tax on Use 
of Certain Highway Motor Vehicles (26 CFR Part 41) under section 4481 
of the Internal Revenue Code (Code). Section 4481 was amended by 
section 867 of the American Jobs Creation Act of 2004, Public Law 108-
357 (118 Stat. 1418) to require electronic filing of a return for 25 or 
more highway motor vehicles, allow a proration of the tax for vehicles 
that are sold, and eliminate the ability to pay the tax in 
installments.

Explanation of Provisions

    Section 4481 imposes an annual tax on the use of highway vehicles 
with a taxable gross weight of 55,000 pounds or more. For this purpose, 
the tax year is from July 1 to the following June 30. For vehicles used 
in July, the tax is due on August 31 and is filed on Form 2290, ``Heavy 
Highway Vehicle Use Tax Return.'' For vehicles first used in later 
months of the tax year, the tax is prorated. Thus, for example, for a 
vehicle that is not used in July but is used in August, the tax is 11/
12 of the full rate and the return is due September 30. After a return 
is filed with the IRS, the IRS will return Schedule 1 of Form 2290 to 
the taxpayer as proof of payment of the tax. Under 23 U.S.C. 141, state 
governments are required to receive proof of payment of the tax as a 
condition of registering a vehicle for highway use.
    Section 4481(e), as added by the American Jobs Creation Act, 
provides that any taxpayer that files a highway use tax return for 25 
or more vehicles for any taxable period must file the return 
electronically. The proposed regulations provide that submitting a Form 
2290 for 25 or more vehicles on paper rather than electronically 
constitutes a failure to file for purposes of the penalty under section 
6651. In addition, if a Form 2290 for 25 or more vehicles is filed on 
paper rather than electronically, the regulations provide that the IRS 
will not return to the taxpayer the Schedule 1 (Form 2290), which is 
necessary to register the vehicle with the State. The regulations 
provide guidance on the vehicles that are taken into account in 
determining whether the ``25 or more'' requirement applies.
    The regulations provide guidance for claiming a credit or refund of 
the statutory overpayment upon the sale of a vehicle. The regulations 
also clarify that the triggering event for overpayments, and hence the 
ability to claim a prorated credit or refund of tax paid, is the sale, 
destruction, or theft of a vehicle.
    The regulations clarify that when a vehicle is sold during a tax 
period, separate and prorated taxes are imposed on the use of the 
vehicle before the sale and the use after the sale. The regulations 
provide rules for the computation of these taxes.

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 has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations.
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that this regulation will not have a significant 
economic impact on a substantial number of small entities. The 
regulations affect owners and

[[Page 2911]]

operators of highway motor vehicles with a taxable gross weight of 
55,000 pounds or more, some of which may be small entities. Although a 
number of small entities may be subject to the requirements of this 
rule, any economic impact is minimal. First, the regulations merely 
implement the electronic filing requirement under section 4481 and any 
cost associated with electronic filing is minimal. In addition, the 
regulations provide guidance for claiming a refund or credit when a 
vehicle is sold during the tax year. In order to make the claim, the 
taxpayer must submit Form 2290 or Form 8849, ``Claim for Refund of 
Excise Taxes.'' The information to complete these forms is readily 
available to the taxpayer and the forms take little time to complete. 
Without the claim information, the IRS could not determine taxpayer 
eligibility or determine the accuracy of the claim. Accordingly, a 
regulatory flexibility analysis is not required.
    Pursuant to section 7805(f) of the Code, this regulation has been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small entities.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. The IRS and the Treasury Department 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 will 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 Taylor Cortright, 
Office of the Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and the Treasury 
Department participated in their development.

List of Subjects in 26 CFR Part 41

    Excise taxes, Motor vehicles, Reporting and recordkeeping 
requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 41 is proposed to be amended as follows:

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

    Paragraph 1. The authority citation for part 41 is revised to read 
as follows:

    Authority: 26 U.S.C. 7805.

    Section 41.4482(b)-1 also issued under 26 U.S.C. 4482(b).
    Section 41.4483-1 also issued under 26 U.S.C. 4483(a).
    Section 41.4483-2 also issued under 26 U.S.C. 4483(c).
    Section 41.4483-3 also issued under 26 U.S.C. 4483(d).
    Section 41.6001-1 also issued under 26 U.S.C. 6001.
    Section 41.6001-2 also issued under 26 U.S.C. 6001.
    Section 41.6001-3 also issued under sec. 507, Public Law 100-17 
(101 Stat. 260).
    Section 41.6011(a)-1 also issued under 26 U.S.C. 6011(a).
    Section 41.6071(a)-1 also issued under 26 U.S.C. 6071 (a).
    Section 41.6091-1 also issued under 26 U.S.C. 6091(a).
    Section 41.6101-1 also issued under 26 U.S.C. 6101.
    Section 41.6109-1 also issued under 26 U.S.C. 6109(a).
    Section 41.6151(a)-1 also issued under 26 U.S.C. 6151(a).

    Par. 2. Section 41.4481-1 is amended by:
    1. Revising the section heading.
    2. Removing the third sentence from paragraph (b).
    3. Adding headings to paragraphs (c)(1), (c)(2), and (c)(3).
    4. Revising paragraphs (c)(4) and (c)(5).
    5. Removing paragraphs (c)(6) and (d).
    6. Redesignating paragraph (e) as paragraph (d) and revising the 
introductory text.
    7. In newly-redesignated paragraph (d), revising Example (3) and 
adding Example (4).
    8. Adding paragraph (e).
    The additions and revisions read as follows:


Sec.  41.4481-1  Imposition and computation of tax.

* * * * *
    (c) * * *
    (1) In general. * * *
    (2) Certain prorated taxable periods. * * *
    (3) Increase in taxable gross weight during the taxable period. * * 
*
    (4) Prorated taxable period for sold, destroyed, or stolen 
vehicles--(i) In general. The tax on a taxpayer's use of a highway 
vehicle for a taxable period is determined under paragraph (c)(4)(ii) 
of this section if--
    (A) The vehicle is destroyed or stolen before the first day of the 
last month in the taxable period and is not subsequently used during 
the period; or
    (B) The taxpayer sells the vehicle before the first day of the last 
month in the taxable period and does not subsequently use the vehicle 
during the period.
    (ii) Computation of tax. If the tax on a taxpayer's use of a 
highway vehicle for a taxable period is determined under this paragraph 
(c)(4)(ii), the tax is calculated proportionately from the first day of 
the month in the period in which the first use of the highway motor 
vehicle occurs to and including the last day of the month in which the 
highway motor vehicle was sold, destroyed or stolen.
    (iii) Overpayment. If a taxpayer's liability for the tax on the use 
of a highway vehicle for a taxable period is determined under paragraph 
(c)(4)(ii) of this section, any tax the taxpayer paid under section 
4481(a) on the use of the vehicle for such period in excess of the tax 
calculated under paragraph (c)(4)(ii) of this section is an overpayment 
of tax.
    (iv) Definition of destroyed vehicle. For purposes of this 
paragraph (c)(4), a highway motor vehicle is destroyed if the vehicle 
is damaged due to an accident or other casualty to such an extent that 
it is not economical to rebuild.
    (v) Form and content of claim. A claim for refund of an overpayment 
described in paragraph (c)(4)(iii) of this section must be made on Form 
8849, ``Claim for Refund of Excise Taxes'' (or such other form as the 
Commissioner may designate) in accordance with the instructions for 
that form. A claim for a credit must be made on Form 2290, ``Heavy 
Highway Vehicle Use Tax Return,'' (or such other form as the 
Commissioner may designate) in accordance with the instructions for 
that form. A claim for refund or credit for any vehicle must include--
    (A) The Vehicle Identification Number (VIN) and taxable gross 
weight of the vehicle;
    (B) The date of the sale, destruction or theft of the vehicle; and
    (C) If the vehicle was sold, the name and address of the purchaser 
of the vehicle.
    (vi) Tax on use of second-hand vehicles. If a vehicle is sold 
during the taxable period and a credit or refund of the tax imposed by 
section 4481 is allowable upon the sale under paragraph (c)(4)(iii) of 
this section, tax is imposed on the use of the vehicle after the sale 
and before the end of the taxable period.

[[Page 2912]]

    (vii) Computation of tax on second-hand vehicles. The tax under 
paragraph (c)(4)(vi) of this section on the use of a vehicle after a 
sale upon which a credit or refund is allowable is computed by 
multiplying the amount of tax that would be due for a full taxable 
period as computed under paragraph (c)(1) of this section by a 
fraction. This fraction shall have as its numerator the number of 
months in the period from the month of the first taxable use of the 
vehicle after the sale (the month after such month if the first taxable 
use after the sale occurs in the month of the sale) through the end of 
the taxable period and as its denominator the number of months in the 
entire taxable period. For purposes of determining the fraction, any 
part of a month is counted as a full month. (See example (3) of 
paragraph (d) of this section.)
    (5) Decrease in taxable gross weight, discontinued use, or 
converted use. The computation of the tax is not affected, and no right 
to a credit or refund of any tax paid under section 4481 arises, if in 
any taxable period--
    (i) The taxable gross weight of a highway motor vehicle is 
decreased;
    (ii) The use of a highway motor vehicle is discontinued (for 
reasons other than sale, destruction, or theft as described in 
paragraph (c)(4) of this section); or
    (iii) The highway motor vehicle is converted to a use which is 
exempt from the tax imposed by section 4481(a).
    (d) Examples. The application of Sec. Sec.  41.4481-1, 41.4481-2 
and 41.4482(c)-1(c) may be illustrated by the following examples:
* * * * *
    Example (3). (i) In July 2008, X uses a vehicle with a taxable 
gross weight of 70,000 pounds. The vehicle is not a logging vehicle. 
The vehicle is registered in X's name so X pays the tax imposed by 
section 4481 of $430 for the taxable period ending June 30, 2009. On 
January 2, 2009, X sells the vehicle to Y. X's tax for the taxable 
period is determined under this paragraph (c)(4) and is based on the 
number of months in the period from the beginning of July 2008 (the 
month of first use in the taxable period) through the end of January 
2009 (the month of the sale). Thus, X's tax for the period is 
$250.83 (\7/12\ of $430) and X may claim a refund of $179.17 
($430.00-$250.83) immediately after X sells the vehicle.
    (ii) On January 23, 2009, Y uses the vehicle. Y is liable for 
tax on the use of the vehicle during the taxable period ending June 
30, 2009. Y's first use of the vehicle occurs in the month of the 
sale. Accordingly, Y's tax is based on the number of months in the 
period from February (the month following the month of the first 
taxable use) through June, and Y owes a section 4481 tax of $179.17 
(\5/12\ of $430) for the taxable period ending June 30, 2009.
    Example (4). Assume the same facts as in Example (3) except that 
on January 2, 2009, X sells the vehicle to Dealer, a dealer in 
highway motor vehicles. X may claim a refund of $179.17. Dealer 
operates the vehicle exclusively for the purpose of demonstration, 
which is not a ``use'' of the vehicle under Sec.  41.4482(c)-1(c). 
On May 2, 2009, Dealer sells the vehicle to Y. Dealer does not owe a 
section 4481 tax and may not claim a refund. Y's first taxable use 
of the vehicle occurs on May 3, 2009. Y's first taxable use of the 
vehicle does not occur in the month of a sale upon which a credit or 
refund is allowable. Accordingly, Y's tax is based on the number of 
months in the period from May (the month of the first taxable use 
after the sale) through June, and Y owes a section 4481 tax of 
$71.67 (\2/12\ of $430) for the taxable period ending June 30, 2009.

    (e) Effective/Applicability date. This section applies on and after 
the date of publication of the Treasury decision adopting these rules 
as final regulations in the Federal Register. For rules applicable 
before that date, see 26 CFR Sec.  41.4481-1 (revised as of April 1, 
2008).
    Par. 3. Section 41.4481-2 is amended by:
    1. Removing the language ``or any installment payment of the tax'' 
in paragraph (a)(1)(i)(D).
    2. Revising paragraph (a)(2).
    3. Adding paragraphs (a)(3) and (a)(4).
    4. Removing paragraph (c).
    The addition and revisions read as follows:


Sec.  41.4481-2  Persons liable for tax.

    (a) * * *
    (2) If a vehicle is sold during the taxable period and a credit or 
refund is allowable upon the sale under Sec.  41.4481-1(c)(4)(iii), 
paragraph (a)(1) of this section is applied with the following 
modifications:
    (i) For purposes of determining the person liable for the tax 
determined under Sec.  41.4481-1(c)(4)(ii), each reference to a taxable 
period in paragraph (a)(1) of this section is treated as a reference to 
the period that begins on the first day of the taxable period in which 
the vehicle is sold and ends on the date of the sale.
    (ii) For purposes of determining the person liable for the tax 
determined under Sec.  41.4481-1(c)(4)(vi), each reference to a taxable 
period in paragraph (a)(1) of this section is treated as a reference to 
the period that begins on the date of the sale and ends on the last day 
of the taxable period in which the vehicle is sold.
    (3) The application of this section may be illustrated by Example 
(3) in Sec.  41.4481-1(d).
    (4) Effective/Applicability date. This section applies on and after 
the date of publication of the Treasury decision adopting these rules 
as final regulations in the Federal Register. For rules applicable 
before that date, see 26 CFR 41.4481-2 (revised as of April 1, 2008).
* * * * *
    Par. 4. Section 41.4483-3(f), fourth sentence, is amended by 
removing the language ``to the extent that the tax or an installment 
payment of the tax has'' and adding ``(determined in the case of a 
transfer described in Sec.  41.4481-1(c)(4)(i) under Sec.  41.4481-
1(c)(4)(ii)) to the extent that the tax has'' in its place.


Sec.  41.4483-7  [Removed]

    Par. 5. Section 41.4483-7 is removed.
    Par. 6. Section 41.6001-1 is amended to read as follows:
    1. In the first sentence of paragraph (a), the language ``district 
director'' is removed and ``Commissioner'' is added in its place.
    2. In paragraph (a)(3), the language ``In the case of any such 
vehicle acquired after June 30, 1956, the date'' is removed and ``The 
date'' is added in its place.
    Par. 7. Section 41.6001-2 is amended as follows:
    1. In paragraph (a), the third and fourth sentences are removed.
    2. Paragraph (c)(1) is revised.
    3. In paragraph (c)(2), the third sentence is revised.
    4. Paragraph (e) is added.
    The revisions and addition read as follows:


Sec.  41.6001-2  Proof of payment for State registration purposes.

* * * * *
    (c) * * *
    (1) In general. The proof of payment required in paragraph (b) of 
this section shall consist of a receipted Schedule 1 (Form 2290 ``Heavy 
Highway Vehicle Use Tax Return'') that is returned by the Internal 
Revenue Service, by mail or electronically, to a taxpayer that files a 
return of tax under section 4481(a), meets the requirements of Sec.  
41.6011(a)-1, and pays the amount of tax due with such return. A 
photocopy of such receipted Schedule 1 shall also serve as proof of 
payment. Such Schedule 1 shall serve as proof of suspension of such tax 
under Sec.  41.4483-3 for the number of vehicles entered in that part 
of the Schedule 1 designated for vehicles for which tax has been 
suspended. The vehicle identification number of the vehicle being 
registered must appear on the Schedule 1 (or an attached page) in order 
for the Schedule 1 to be a valid proof of payment for such vehicle.
    (2) * * * However, a State shall not accept any substitute proof of 
payment if 25 or more vehicles are reported for

[[Page 2913]]

purposes of Sec.  41.6011(a)-1(c) on the Form 2290, ``Heavy Highway 
Vehicle Use Tax Return,'' for the vehicle being registered.
* * * * *
    (e) Effective/Applicability date. This section applies to 
registrations of highway motor vehicles pursuant to applications that 
are received by a State on or after the date of publication of the 
Treasury decision adopting these rules as final regulations in the 
Federal Register. For this purpose, an application for registration 
that is mailed will be considered to be received by a State on the date 
on which it is postmarked. For rules applicable with respect to 
applications received before that date, see 26 CFR 41.6001-2 (revised 
as of April 1, 2008).
    Par. 8. Section 41.6011(a)-1 is amended by adding paragraphs (a)(4) 
and (c) to read as follows:


Sec.  41.6011(a)-1  Returns.

    (a) * * *
    (4) A person that is liable for tax under Sec.  41.4481-
2(a)(1)(i)(A), (B), (C), or (D), after taking into account the 
modification required under Sec.  41.4481-2(a)(2), is treated as liable 
for tax by the same provision of Sec.  41.4481-2(a)(1)(i) for purposes 
of this section and must file a return.
* * * * *
    (c) Required use of electronic filing--(1) Rule for 25 or more 
vehicles. A person that files any return reporting 25 or more vehicles 
must file the return electronically, as prescribed by the Commissioner. 
For this purpose, the number of vehicles reported on a return is the 
total number of vehicles for which tax is reported and does not include 
vehicles for which a suspension from tax is claimed.
    (2) Effect of failure to file. If a person fails to file a return 
electronically when required to do so by this section, the person has 
failed to file the return. In such a case, the Internal Revenue Service 
(IRS) will not return a receipted Schedule 1 (Form 2290 ``Heavy Highway 
Vehicle Use Tax Return'') as proof of payment as defined in Sec.  
41.6001-2(c). See section 6651 for the addition to tax for failure to 
file a tax return.
    (3) Examples. The application of this paragraph (c) may be 
illustrated by the following examples:

    Example 1. A has 100 vehicles registered in its name, all of 
which have a taxable gross weight in excess of 55,000 pounds. 
Seventy-five of the vehicles are in use on July 1, 2009. Twenty-five 
are in dead storage as described in 41.4482(c)-1(c). The vehicles in 
dead storage are not in use and they are not listed on the Schedule 
1. A files Form 2290 electronically for the 75 vehicles in use on 
July 1 and receives a receipted Schedule 1. On August 23, 2009, A 
uses the remaining 25 vehicles. A does not file Form 2290 
electronically but uses a paper Form 2290. A has failed to file a 
return as required by section 4481(e) for the remaining 25 vehicles. 
Accordingly, the IRS does not return the receipted Schedule 1 (Form 
2290) for those vehicles, and A may be liable for additions to tax 
under section 6651.
    Example 2. Assume the same facts as in Example (1) except that 
on August 23, 2009, A uses 15 of the vehicles that were not used in 
July. The remaining 10 vehicles are not used in August. A does not 
file Form 2290 electronically but uses a paper Form 2290. A has 
correctly filed and the IRS returns the receipted Schedule 1 (Form 
2290) to A for 15 vehicles.

    (4) Effective/Applicability date. This paragraph (c) applies to 
returns filed after the date of publication of the Treasury decision 
adopting these rules as final regulations in the Federal Register.
    Par. 9. Section 41.6071(a)-1 is amended by adding paragraph (c) to 
read as follows:


Sec.  41.6071(a)-1  Time for filing returns.

* * * * *
    (c) Effect of sale during taxable period. A person that is liable 
for tax under Sec.  41.4481-2(a)(1)(i)(A), (B), (C), or (D) after 
taking into account the modification required under Sec.  41.4481-
2(a)(2) is treated as liable for tax under the same provision of Sec.  
41.4481-2(a)(1)(i) for purposes of this section.


Sec.  41.6156-1  [Removed]

    Par. 10. Section 41.6156-1 is removed.

 Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E9-857 Filed 1-15-09; 8:45 am]
BILLING CODE 4830-01-P