SERVICE ADDS TWO CHEMICALS TO LIST OF SUPERFUND TAXABLE SUBSTANCES.

SUMMARY:

EFFECTIVE DATE: This modification is effective as of April 1, 1990.

FOR FURTHER INFORMATION CONTACT: Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and Special Industries), (202) 566-4475 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

Under section 4672(a) of the Internal Revenue Code, an importer or exporter of any substance may request that the secretary determine whether such substance should be listed as a taxable substance. The Secretary shall add such 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 such substance. This determination is to be made on the basis of the predominant method of production. Notice 89-61, 1989-1 C.B. 717, sets forth the rules relating to the determination process.

DETERMINATION

On December 26, 1989, the Secretary determined that linear alpha olefins and polyalphaolefins should be added to the list of taxable substances in section 2672(a)(3) of the Internal Revenue Code, effective as of April 1, 1990.

The petitions to add linear alpha olefins and polyalphaolefins were submitted by Ethyl Corporation, a manufacturer and exporter of these substances. No material comments were received on these petitions.

LINEAR ALPHA OLEFINS

Linear alpha olefins have been determined to be a taxable substance because a review of the stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 100 percent by weight of the materials used in its production.

HTS number: 2901.29.10.10

The stoichiometric material consumption formula for this substance is:

n/2 C2H4 --------> CnH2n

POLYALPHAOLEFINS

Polyalphaolefins have been determined to be a taxable substance because a review of the stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 99.6 percent by weight of the materials used in its production.

HTS number: 3902.90.00.50

The stoichiometric material consumption formula for this substance is:

n/2 C2H4 + H2 ---> CnH2n+2 ethylene hydrogen polyalphaolefin

The rate of tax prescribed for this substance, under section 4671(b)(3), is $4.85 per ton. This is based upon a conversion factor for ethylene of 0.9961.

Dale D. Goode,