SERVICE ADDS DIPHENYLAMINE AND ANILINE TO TAXABLE SUBSTANCES LIST.

Notice 94-45

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice announces a determination, under Notice 89-61, that the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code will be modified to include diphenylamine and aniline.

EFFECTIVE DATE: This modification is effective January 1, 1993.

FOR FURTHER INFORMATION CONTACT: Tyrone J. Montague, Office of Assistant Chief Counsel (Passthroughs and Special Industries), (202) 622-3130 (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 March 16, 1994, the Secretary determined that diphenylamine and aniline should be added to the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code, effective January 1, 1993.

The rate of tax prescribed for diphenylamine, under section 4671(b)(3), is $5.11 per ton. This is based upon a conversion factor for benzene of 1.010 and a conversion factor for nitric acid of 0.835.

The rate of tax prescribed for aniline, under section 4671(b)(3), is $4.44 per ton. This is based upon a conversion factor for benzene of 0.8780 and a conversion factor for nitric acid of 0.7260.

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

Diphenylamine

HTS number: 2921.44.00.00 CAS number: 122-39-4

Diphenylamine is derived from the taxable chemicals benzene and nitric acid. Diphenylamine is a liquid produced predominantly by liquid phase condensation of aniline over an acid catalyst. The stoichiometric material consumption formula for diphenylamine is:

[Formula omitted]

Diphenylamine 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 95.9 percent by weight of the materials used in its production.

Aniline

HTS number: 2921.41.10.00 CAS number: 62-53-3

Aniline is derived from the taxable chemicals benzene and nitric acid. Aniline is a liquid produced predominantly by the hydrogenation of nitrobenzene.

The stoichiometric material consumption formula for aniline is:

[Formula omitted]

Aniline 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 95.9 percent by weight of the materials used in its production.

                                   Dale D. Goode,