Butanol And Propanol Are Added To List Of Taxable Toxic Substances.

The Service has announced that butanol and propanol have been added to the list of taxable substances in section 4672(a)(3). This determination is effective October 1, 1990.

The Service stated in Notice 94-9 that the rate of tax prescribed for butanol under section 4671(b)(3) is $3.31 per ton; the rate for propanol is $2.58 per ton.

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This notice announces a determination, under Notice 89-61, 1989- 1 C.B. 717, that the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code will be modified to include butanol and propanol. This modification is effective October 1, 1990.

BACKGROUND

Under section 4672(a), an importer or exporter of any substance may request that the Secretary determine whether the substance should be listed as a taxable substance. The Secretary shall add the substance to the list of taxable substances in section 4672(a)(3) if the Secretary determines that taxable chemicals constitute more than 50 percent of the weight, or more than 50 percent of the value, of the materials used to produce the substance. This determination is to be made on the basis of the predominant method of production. Notice 89-61 sets forth the rules relating to the determination process.

DETERMINATION

On December 10, 1993, the Secretary determined that butanol and propanol should be added to the list of taxable substances in section 4672(a)(3), effective October 1, 1990.

The rate of tax prescribed for butanol, under section 4671(b)(3), is $3.31 per ton. This is based upon a conversion factor for propylene of 0.6746 and a conversion factor for methane of 0.0076.

The rate of tax prescribed for propanol, under section 4671(b)(3), is $2.58 per ton. This is based upon a conversion factor for ethylene of 0.5251 and a conversion factor for methane of 0.0076.

The petitioner is Hoechst Celanese, a manufacturer and exporter of these substances. No material comments were received on these petitions. The following information is the basis for the determinations.

BUTANOL

HTS number: 2905.13.00.00

Butanol is derived from the taxable chemicals propylene and methane. Butanol is a liquid produced predominantly by oxo synthesis of propylene with subsequent hydrogenation.

The stoichiometric material consumption formula for butanol is:

C3H6 (propylene) + CH4 (methane) + H2O (water) -----> C4H10O

Butanol has been determined to be a taxable substance because a review, of its stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 76.3 percent by weight of the materials used in its production.

PROPANOL

HTS number: 2905.12.00.10

Propanol is derived from the taxable chemicals ethylene and methane. Propanol is a liquid produced predominantly by oxo synthesis of ethylene with subsequent hydrogenation.

The stoichiometric material consumption formula for propanol is:

C2H4 (ethylene) + CH4 (methane) + H2O (water) -----> C3H8O (propanol)

Propanol has been determined to be a taxable substance because a review of its stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 70.9 percent by weight of the materials used in its production.

The principal author of this notice is Tyrone J. Montague of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Tyrone J. Montague on (202) 622-3130 (not a toll-free call).