IRS ADDS TETRAHYDROFURAN AND 1,4 BUTANEDIOL TO TAXABLE SUBSTANCES LIST.

Notice 94-76

TAX ON CERTAIN IMPORTED SUBSTANCES (TETRAHYDROFURAN, ET AL.); NOTICE OF DETERMINATIONS

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice announces determinations, under Notice 89-61, that the list of taxable substances in section 4672(a)(3) will be modified to include tetrahydrofuran and 1,4 butanediol.

EFFECTIVE DATE: This modification is effective October 1, 1994.

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), 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 June 10, 1994, the Secretary determined that tetrahydrofuran and 1,4 butanediol should be added to the list of taxable substances in section 4672(a)(3), effective October 1, 1994. However, if these substances are produced from acetylene derived from coal they are not taxable substances.

The rate of tax prescribed for tetrahydrofuran, under section 4671(b)(3), is $5.28 per ton unless it is produced from acetylene derived from coal. This is based upon a conversion factor for acetylene of 0.40 and a conversion factor for methane of 0.97.

The rate of tax prescribed for 1,4 butanediol, under section 4671(b)(3), is $4.20 per ton unless it is produced from acetylene derived from coal. This is based upon a conversion factor for methane of 0.77 an a conversion factor for acetylene of 0.32.

The petitioner is E. I. DuPont de Nemours and Company, a manufacturer and exporter of these substances. No material comments were received on these petitions. The following information is the basis for the determinations.

Tetrahyrofuran

     HTS number: 2932.11.00.00

The stoichiometric material consumption formula for tetrahydrofuran is:

(acetylene) + 3(methane) + 0.5(oxygen) + 2(water) ---> (tetrahydrofuran) + 5(hydrogen) + (carbon dioxide)

Tetrahydrofuran 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 58.7 percent by weight of the materials used in its production.

1,4 butanediol

     HTS number: 2905.39.10.00

The stoichiometric material consumption formula for 1,4 butanediol is:

3(methane) + (acetylene) + 3(water) + 0.5(oxygen) ---> (1,4 butanediol) + 5(hydrogen) + (carbon dioxide)

1,4 butanediol 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 51.3 percent by weight of the materials used in its production.

                                   Dale D. Goode,