Rules on Ozone-Deplting Chemicals -- Final Regulations Under Sections 4681 and 4682

 [4830-01]

 ACTION: Final regulations.

 SUMMARY: This document contains final regulations relating to the tax on chemicals that deplete the ozone layer and on products containing such chemicals. These regulations reflect changes to the law made by the Omnibus Budget Reconciliation Act of 1989 and the Omnibus Budget Reconciliation Act of 1990. They affect manufacturers and importers of ozone-depleting chemicals, manufacturers of rigid foam insulation, and importers of products containing or manufactured with ozone-depleting chemicals. In addition, these regulations affect persons, other than manufacturers and importers of ozone-depleting chemicals, holding such chemicals for sale or for use in further manufacture on January 1, 1990, and on subsequent tax-increase dates.

 EFFECTIVE DATES: These regulations are effective January 1, 1990. Section 52.4682-2(d)(1)(ii) provides, however, that certain information included in the form of the registration certificates set forth in section 52.4682-2(d) need not be provided in certificates executed before January 1, 1992. In addition, section 52.4682-3(f)(2)(ii)(A) provides that listings preceded by a double asterisk (**) in the Imported Products Table set forth in section 52.4682-3(f)(6) are effective October 1, 1990, and section 52.4682-3(f)(2)(ii)(B) provides that listings preceded by a triple asterisk (***) in the Imported Products Table set forth in section 52.4682-3(f)(6) are effective January 1, 1992.

 FOR FURTHER INFORMATION CONTACT: Ruth Hoffman, (202) 566-4475 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

PAPERWORK REDUCTION ACT

The collections of information contained in these final regulations have been reviewed and approved by the Office of Management and Budget in accordance with the requirements of the Paperwork Reduction Act of 1980 (44 U.S.C. 3504(h)) under control number 1545-1153. The estimated average annual burden per recordkeeper is 0.5 hour. The estimated average annual burden per respondent is 0.4 hour.

 These estimates are an approximation of the average time expected to be necessary for a collection of information. They are based on such information as is available to the Internal Revenue Service. Individual respondents and recordkeepers may require more or less time, depending on their particular circumstances.

 Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be sent to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, TR:FP, Washington, D.C. 20224, and to the Office of Management and Budget, Paperwork Reduction Project, Washington, D.C. 20503.

BACKGROUND

 On September 6, 1990, temporary regulations (T.D. 8311) relating to the tax imposed under sections 4681 and 4682 of the Internal Revenue Code on ozone-depleting chemicals (ODCs) and on products containing ODCs were published in the Federal Register (55 FR 36612). A notice of proposed rulemaking (PS-73-89) cross-referencing the temporary regulations was published in the Federal Register for the same day (55 FR 36659). Sections 4681 and 4682 were enacted as part of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239. On January 2, 1991, temporary regulations (T.D. 8327) amending the existing temporary regulations to reflect changes to sections 4681 and 4682 made by the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508 were published in the Federal Register (56 FR 18). A notice of proposed rulemaking (PS-97-90) cross-referencing the temporary regulations was published in the Federal Register (56 FR 50) for the same day. On August 14, 1991, temporary regulations (T.D. 8356) amending the existing temporary regulations with respect to the floor stocks tax imposed on certain ODCs in 1991 were published in the Federal Register (56 FR 40246). A notice of proposed rulemaking (PS-60-91) cross-referencing the temporary regulations was published in the Federal Register (56 FR 40286) for the same day.

 Written comments responding to these notices were received. A public hearing was not requested and none was held. After consideration of all the comments, the proposed regulations under sections 4681 and 4682 are adopted as revised by this Treasury decision, and the corresponding temporary regulations are withdrawn. The comments and revisions are discussed below.

EXPLANATION OF REVISIONS AND SUMMARY OF COMMENTS RETURNS, PAYMENTS, AND DEPOSITS OF TAX

 The proposed regulations provided rules relating to returns, payments, and deposits of the taxes imposed by sections 4681 and 4682. These final regulations do not include those procedural rules. The temporary regulations relating to procedural rules will remain in force until final regulations relating to procedural rules are issued under 26 CFR part 40. Comments on the procedural rules in the proposed regulations, such as the comments requesting that the semimonthly deposit obligation not apply to taxpayers with a de minimis tax liability, will be considered in connection with the part 40 regulations.

EXAMPLES

 In response to questions raised in comments, many additional examples have been added to the final regulations to illustrate the application of the regulations.

ODCs USED AS A FEEDSTOCK

 The proposed regulations provided that an ozone-depleting chemical (ODC) is used as a feedstock only if the ODC is entirely consumed in the manufacture of another chemical (within the meaning of 40 CFR 82.3(s) of the Environmental Protection Agency (EPA) regulations relating to protection of atmospheric ozone). Commenters raised questions regarding whether the use of ODCs in certain refining or incineration processes constituted use as a feedstock. The definition of feedstock use has been changed in the final regulations after consultation with the EPA to clarify that ODCs used in these processes are considered used as a feedstock.

 The proposed regulations set forth the form of the certificate required to be provided in order for a sale of ODCs for use as a feedstock to be a qualifying sale and thus exempt from tax. At the request of the EPA, the final regulations modify slightly the form of the certificate relating to ODCs used as a feedstock to include information needed by the EPA on the number of kilograms of ODCs transformed. Certificates executed on and after January 1, 1992, must contain the additional information; a certificate executed before January 1, 1992, will remain valid, however, and may be used to qualify for exemption after 1991 whether or not the additional information is included. These regulations do not require that certificates be submitted to or otherwise made available to EPA.

IMPORTED PRODUCTS TABLE

 In response to comments, explanations have been added to the Imported Products Table (Table) headings and Part I of the Table has been simplified.

ENTRY INTO THE UNITED STATES

 Sections 4681 and 4682 treat ODCs and products manufactured with ODCs as taxable imports if they are entered into the United States for consumption, use, or warehousing, and define the term "United States" to include foreign trade zones. The tax is imposed, however, only on ODCs and products that are sold or used in the United States. Thus, if a taxable product is admitted into a foreign trade zone, kept in a warehouse, and then shipped outside the United States, there is no tax. If, however, additional processing of the product is done in the zone, the use of the product in processing is a taxable event and tax is imposed. Examples clarifying this rule have been added to the final regulations.

FLOOR STOCKS TAX ON STABILIZED ODCs

 The proposed regulations generally provide that floor stocks tax is not imposed on ODCs that have been mixed with other ingredients. The proposed regulations published on January 2, 1991, provided a special rule that imposed floor stocks tax on ODCs that have been mixed only with stabilizers. Under the proposed regulations published on August 14, 1991, this special rule is not effective for the January 1, 1991, floor stocks tax. In response to comments on the proposed regulations, the final regulations provide additional guidance on the definition of a stabilizer.

FLOOR STOCKS TAX ON ODCs HELD FOR USE BY A GOVERNMENT

 One comment requested clarification of whether ODCs are held for sale if they are held for use by a government agency and will be transferred between subdivisions of that agency. The proposed regulations do not address this issue. Under the final regulations, an ODC that is held by a government for its own use is not held by the government for sale even if the ODC is to be transferred between agencies or other subdivisions that may be treated as different taxpayers because they have or are required to have different employer identification numbers.

FLOOR STOCKS TAX ON ODCs HELD IN FIRE EXTINGUISHERS

 Under the proposed regulations, the floor stocks tax applies to ODCs held in storage containers for sale or for use in further manufacture, but not to ODCs that have been incorporated into manufactured articles in which the ODCs will be used for their intended purpose without being released from the article. The proposed regulations treat fire extinguishers as storage containers and not as manufactured articles. The intended purpose of ODCs contained in fire extinguishers is to extinguish fires, and this purpose is met by releasing the ODCs into the atmosphere. The final regulations retain the rules set forth in the proposed regulations under which the floor stocks tax applies to ODCs contained in fire extinguishers that are held for sale.

FLOOR STOCKS TAX INVENTORY REQUIREMENT

 The proposed regulations require that an inventory be prepared on each floor stocks tax date. In response to comments, the final regulations clarify that the inventory requirement does not apply to persons holding on a tax increase date only ODCs that are nontaxable by reason of a statutory exemption (e.g., use as a feedstock) or regulatory exclusion other than the de minimis exception (e.g., mixtures). In addition, any person otherwise subject to the inventory requirement is not required to inventory any ODCs that are nontaxable under the provisions of section 52.4682-4(b)(2). The final regulations also clarify that the inventory requirement does apply to persons holding on a tax increase date any ODCs that are nontaxable only by reason of the de minimis exception.

RECYCLING AND EXPORT OF ODCs

 The sections of the proposed regulations addressing recycled ODCs and exports of ODCs were reserved. Comments were received regarding the need for guidance in these areas. Such guidance is not provided by the final regulations, but is expected to be provided in future regulations.

SPECIAL ANALYSES

 It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and therefore a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notices of proposed rulemaking were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these regulations is Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and Special Industries), Internal Revenue Service. However, personnel from other offices of IRS and Treasury Department participated in their development.

LIST OF SUBJECTS IN 26 CFR PART 52

 Chemicals, Excise taxes, Petroleum.

LIST OF SUBJECTS IN 26 CFR PART 602

 Reporting and recordkeeping requirements.

Treasury Decision 8370

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, title 26, parts 52 and 602 of the Code of Federal Regulations are amended as follows:

Paragraph 1. The authority for part 52 is revised to read as follows:

Authority: 26 U.S.C. 7805. Section 52.4682-3 also issued under 26 U.S.C. 4682(c)(2); sections 52.6011(a)-1T and 52.6011(a)-2T also issued under 26 U.S.C. 6011(a); sections 52.6071(a)-1, 52.6071(a)-2T, and 52.6071(a)-3T also issued under 26 U.S.C. 6071(a); section 52.6091-IT also issued under 26 U.S.C. 6091; section 52.6101-IT also issued under 26 U.S.C. 6101; section 52.6109(a)-1T also issued under 26 U.S.C. 6109(a); sections 52.6302(c)-1, and 52.6302(c)-2T also issued under 26 U.S.C. 6302(a).

Par. 2. Sections 52.4681-0T, 52.4681-IT, 52.4682-IT, 52.4682-2T, 52.4682-3T, and 52.4682-4T are removed and new sections 52.4681-0, 52.4681-1, 52.4682-1, 52.4682-2, 52.4682-3, and 52.4682-4 are added to read as follows.

SECTION 52.4681-0 TABLE OF CONTENTS.

This section lists captions contained in sections 52.4681-1, 52.4682-1, 52.4682-2, 52.4682-3, and 52.4682-4.

SECTION 52.4681-1 TAXES IMPOSED WITH RESPECT TO OZONE-DEPLETING CHEMICALS.

 (a) Taxes imposed.

 (a) Overview.

(a) TAXES IMPOSED. Sections 4681 and 4682 impose the following taxes with respect to ozone-depleting chemicals (ODCs):

(1) TAX ON ODCs. Section 4681(a)(1) imposes a tax on ODCs that are sold or used by the manufacturer or importer thereof. Except as otherwise provided in Section 52.4682-1 (relating to the tax on ODCs), the amount of the tax is equal to the product of --

(i) The weight (in pounds) of the ODC;

(ii) The base tax amount (determined under section 4681(b)(1)(B) or (C)) for the calendar year in which the sale or use occurs; and

(iii) The ozone-depletion factor (determined under section 4682(b)) for the ODC.

(2) TAX ON IMPORTED TAXABLE PRODUCTS. Section 4681(a)(2) imposes a tax on imported taxable products that are sold or used by the importer thereof. Except as otherwise provided in section 52.4682-3 (relating to the tax on imported taxable products), the tax is computed by reference to the weight of the ODCs used as materials in the manufacture of the product. The amount of tax is equal to the tax that would have been imposed on the ODCs under section 4681(a)(1) if the ODCs had been sold in the United States on the date of the sale or use of the imported product. The weight of such ODCs is determined under Section 52.4682-3.

(3) FLOOR STOCKS TAX -- (i) IMPOSITION OF TAX. Section 4682(h) imposes a floor stocks tax on ODCs that --

(A) Are held by any person other than the manufacturer or importer of the ODC on a date specified in paragraph (a)(3)(ii) of this section; and

(B) Are held on such date for sale or for use in further manufacture.

(ii) DATES ON WHICH TAX IMPOSED. The floor stocks tax is imposed on January 1 of 1990, 1991, 1992, 1993, and 1994.

(iii) AMOUNT OF TAX. Except as otherwise provided in section 52.4682-4 (relating to the floor stocks tax), the amount of the floor stocks tax is equal to the excess of--

(A) The tax that would be imposed on the ODC under section 4681(a)(1) if a sale or use of the ODC by its manufacturer or importer occurred on the date the floor stocks tax is imposed (the tentative tax amount), over

(B) The sum of the taxes previously imposed (if any) on the ODC under sections 4681 and 4682.

(b) CROSS-REFERENCES -- (1) TAX ON ODCs. Additional rules relating to the tax on ODCs are contained in sections 52.4682-1 and 52.4682-2.

(2) TAX ON IMPORTED TAXABLE PRODUCTS. Additional rules relating to the tax on imported taxable products are contained in section 52.4682-3.

(3) FLOOR STOCKS TAX. Additional rules relating to the floor stocks tax are contained in section 52.4682-4.

(4) RETURNS, PAYMENTS, AND DEPOSITS OF TAX. Rules requiring returns reporting the taxes imposed under sections 4681 and 4682 are contained in sections 40.6011(a)-1T and 40.6011(a)-2T of this chapter. Rules relating to the time for filing such returns are contained in section 40.6071(a)-2T of this chapter and in section 52.6071(a)-3T. Rules relating to the use of Government depositories in connection with taxes imposed under section 4681 are contained in sections 40.6302(c)-1T and 40.6302(c)-2T of this chapter.

(c) DEFINITIONS OF GENERAL APPLICATION. The following definitions set forth the meaning of certain terms for purposes of the regulations under sections 4681 and 4682:

(1) OZONE-DEPLETING CHEMICAL. The term "ozone-depleting chemical" (ODC) means any chemical listed in section 4682(a)(2).

(2) UNITED STATES. The term "United States" has the meaning given such term by section 4612(a)(4). Under section 4612(a)(4) --

(i) The term "United States" means the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands; and

(ii) The term includes --

(A) Submarine seabed and subsoil that would be treated as part of the United States (as defined in paragraph (c)(2)(i) of this section) under the principles of section 638 relating to continental shelf areas; and

(B) Foreign trade zones of the United States.

(3) MANUFACTURE; MANUFACTURER. The term "manufacture" when used with respect to any ODC or imported product includes its production, and the term "manufacturer" includes a producer.

(4) ENTRY INTO UNITED STATES FOR CONSUMPTION, USE, OR WAREHOUSING -- (i) IN GENERAL. Except as otherwise provided in this paragraph (c)(4), the term "entered into the United States for consumption, use, or warehousing" when used with respect to any goods means --

(A) Brought into the customs territory of the United States (the customs territory) if applicable customs law requires that the goods be entered into the customs territory for consumption, use, or warehousing;

(B) Admitted into a foreign trade zone for any purpose if like goods brought into the customs territory for such purpose would be entered into the customs territory for consumption, use, or warehousing; or

(C) Imported into any other part of the United States (as defined in paragraph (c)(2) of this section) for any purpose if like goods brought into the customs territory for such purpose would be entered into the customs territory for consumption, use, or warehousing.

(ii) ENTRY FOR TRANSPORTATION AND EXPORTATION. Goods entered into the customs territory for transportation and exportation are not goods entered for consumption, use, or warehousing.

(iii) ENTRIES DESCRIBED IN TWO OR MORE PROVISIONS. In the case of any goods with respect to which entries are described in two or more provisions of paragraph (c)(4)(i) of this section, only the first such entry is taken into account. Thus, if the admission of goods into a foreign trade zone is an entry into the United States for consumption, use, or warehousing, the subsequent entry of such goods into the customs territory will not be treated as an entry into the United States for consumption, use, or warehousing.

(iv) CERTAIN IMPORTED PRODUCTS NOT ENTERED FOR CONSUMPTION, USE, OR WAREHOUSING. Imported products that are entered into the United States for consumption, use, or warehousing do not include any imported products that --

(A) Are entered into the customs territory under Harmonized Tariff Schedule (HTS) heading 9801, 9802, 9803, or 9813;

(B) Would, if entered into the customs territory, be entered under any such heading; or

(C) Are brought into the United States by an individual if the product is brought in for use by the individual and is not expected to be used in a trade or business other than a trade or business of performing services as an employee.

(5) IMPORTER. The term "importer" means the person that first sells or uses goods after their entry into the United States for consumption, use, or warehousing (within the meaning of paragraph (c)(4) of this section).

(6) SALE. The term "sale" means the transfer of title or of substantial incidents of ownership (whether or not delivery to, or payment by, the buyer has been made) for consideration which may include money, services, or property. The determination as to the time a sale occurs shall be made under applicable local law.

(7) USE -- (i) IN GENERAL. Except as otherwise provided in regulations under sections 4681 and 4682, ODCs and imported taxable products are used when they are --

(A) Used as a material in the manufacture of an article, whether by incorporation into such article, chemical transformation, release into the atmosphere, or otherwise; or

(B) Put into service in a trade or business or for production of income.

(ii) LOSS, DESTRUCTION, PACKAGING, WAREHOUSING, AND REPAIR. The loss, destruction, packaging (including repackaging), warehousing, or repair of ODCs and imported taxable products is not a use of the ODC or product lost, destroyed, packaged, warehoused, or repaired.

(iii) CROSS-REFERENCES TO EXCEPTIONS. For exceptions to the rule contained in paragraph (c)(7)(i) of this section, see --

(A) Section 52.4682-1(b)(2)(iii) (relating to mixture elections);

(B) Section 52.4682-3(c)(2) (relating to the election to treat entry of an imported taxable product as use); and

(C) Section 52.4682-3(c)(3) (relating to treating sale of an article incorporating an imported taxable product as the first sale or use of the product).

(8) POUND. The term "pound" means a unit of weight that is equal to 16 avoirdupois ounces.

(9) POST-1990 ODC; POST-1989 ODC. The term "post-1990 ODC" means any ODC that is listed below Halon-2402 in the table contained in section 4682(a)(2). The term "post-1989 ODC" means any ODC other than a post-1990 ODC.

(d) EFFECTIVE DATE. Sections 52.4681-0, 52.4681-1, 52.4682-1, 52.4682-2, 52.4682-3, and 52.4682-4 are effective as of January 1, 1990, and apply to --

(1) Post-1989 ODCs that the manufacturer or importer thereof first sells or uses after December 31, 1989, and post-1990 ODCs that the manufacturer or importer thereof first sells or uses after December 31, 1990;

(2) Imported taxable products that the importer thereof first sells or uses after December 31, 1989 (but, in the case of products first sold or used before January 1, 1991, by taking into account only the post-1989 ODCs used as materials in their manufacture); and

(3) Post-1989 ODCs held for sale or for use in further manufacture by any person other than the manufacturer or importer thereof on January 1, 1990, and post-1989 and post-1990 ODCs that are so held on January 1 of 1991, 1992, 1993, or 1994.

SECTION 52.4682-1 OZONE-DEPLETING CHEMICALS.

(a) OVERVIEW. This section provides rules relating to the tax imposed on ozone-depleting chemicals (ODCs) under section 4681, including rules for identifying taxable ODCs and determining when the tax is imposed and rules prescribing special treatment for certain ODCs (i.e., ODCs used as feedstocks, ODCs used in the manufacture of rigid foam insulation, and Halons). See section 52.4681-1(a)(1) and (c) for general rules and definitions relating to the tax on ODCs.

(b) TAXABLE ODCs; TAXABLE EVENT -- (1) TAXABLE ODCs -- (i) IN GENERAL. Except as provided in paragraphs (c) through (g) of this section, an ODC is taxable if --

(A) It is listed in section 4682(a)(2) on the date it is sold or used by its manufacturer or importer; and

(B) It is manufactured in the United States or entered into the United States for consumption, use, or warehousing.

(ii) STORAGE CONTAINERS. An ODC described in paragraph (b)(1)(i) of this section is taxable without regard to the type or size of storage container in which the ODC is held.

(iii) EXAMPLE. The application of this paragraph (b)(1) may be illustrated by the following example:

EXAMPLE. A brings CFC-12, an ODC listed in section 4682(a)(2), into the customs territory and enters the CFC-12 for transportation and exportation. The ODC is not taxable because it is not entered for consumption, use, or warehousing. The ODC also would not be taxable if it were admitted to a foreign trade zone (rather than brought into the customs territory) for transportation and exportation.

(2) TAXABLE EVENT -- (i) IN GENERAL -- (A) GENERAL RULE. The tax on an ODC is imposed when the ODC is first sold or used (as defined in section 52.4681-1(c)(6) and (7)) by its manufacturer or importer.

(B) EXAMPLE. The application of this paragraph (b)(2)(i) may be illustrated by the following example:

EXAMPLE. A enters CFC-113, an ODC listed in section 4682(a)(2), into the United States for consumption, use, or warehousing. A warehouses the CFC-113 and then decides to ship the ODC to its factory outside the United States (as defined in section 52.4681-1(c)(2)). The CFC-113 is a taxable ODC because the requirements of paragraph (b)(1)(i) of this section have been met. However, tax is not imposed on the ODC because there is no taxable event. A did not sell the ODC and, under section 52.4681-1(c)(7), warehousing is not a use.

(ii) MIXTURES. Except as otherwise provided in paragraph (b)(2)(iii) of this section, the creation of a mixture containing two or more ingredients is treated as a use of the ODCs contained in the mixture. Thus, except as otherwise provided in paragraph (b)(2)(iii) of this section --

(A) The tax on the post-1989 ODCs (as defined in section 52.4681-1(c) (9)) contained in mixtures created after December 31, 1989, or on the post-1990 ODCs (as defined in section 52.4681-1(c)(9)) contained in mixtures created after December 31, 1990, is imposed when the mixture is created and not on any subsequent sale or use of the mixture; and

(B) No tax is imposed under section 4681 on the post-1989 ODCs contained in mixtures created before January 1, 1990, or on the post- 1990 ODCs contained in mixtures created before January 1, 1991.

(iii) MIXTURE ELECTIONS -- (A) PERMITTED ELECTIONS. The only elections permitted under this paragraph (b)(2)(iii) are --

(1) An election for the first calendar quarter beginning after December 31, 1989, and all subsequent periods (the 1990 election); and

(2) An election for the first calendar quarter beginning after December 31, 1990, and all subsequent periods (the 1991 election).

(B) IN GENERAL. A manufacturer or importer may elect to treat the sale or use of mixtures containing ODCs as the first sale or use of the ODCs contained in the mixtures. If a 1990 election is made under this paragraph (b)(2)(iii), the tax on post-1989 ODCs contained in a mixture sold or used after December 31, 1989 (including any such mixture created before January 1, 1990) is imposed on the date of such sale or use. Similarly, if a 1991 election is made under this paragraph (b)(2)(iii), the tax on post-1990 ODCs contained in a mixture sold or used after December 31, 1990 (including any such mixture created before January 1, 1991) is imposed on the date of such sale or use.

(C) APPLICABILITY OF ELECTIONS. An election under this paragraph (b)(2)(iii) applies --

(1) In the case of a 1990 election, to all post-1989 ODCs contained in mixtures sold or used by the manufacturer or importer after December 31, 1989 (including any such mixture created before January 1, 1990); and

(2) In the case of a 1991 election, to all post-1990 ODCs contained in mixtures sold or used by the manufacturer or importer after December 31, 1990 (including any such mixture created before January 1, 1991).

(D) MAKING THE ELECTION; REVOCATION. An election under this paragraph (b)(2)(iii) shall be made in accordance with the instructions for the return on which the manufacturer or importer reports liability for tax under section 4681. After October 9, 1990, the election may be revoked only with the consent of the Commissioner.

(c) ODCs USED AS A FEEDSTOCK -- (1) EXEMPTION FROM TAX. No tax is imposed on an ODC if the manufacturer or importer of the ODC --

(i) Uses the ODC as a feedstock in the manufacture of another chemical; or

(ii) Sells the ODC in a qualifying sale (within the meaning of paragraph (c) (4) of this section) for use as a feedstock.

(2) EXCESS PAYMENTS -- (i) IN GENERAL. Under section 4682(d)(2)(B), a credit or refund is allowed to a person if --

(A) The person uses an ODC as a feedstock; and

(B) The amount of any tax paid with respect to the ODC under section 4681 or 4682 was not determined under section 4682(d)(2)(A).

(ii) PROCEDURAL RULES. See section 6402 and the regulations thereunder for rules relating to claiming a credit or refund of tax paid with respect to ODCs that are used as a feedstock. A credit against the income tax is not allowed for the amount determined under section 4682(d)(2)(B).

(3) DEFINITION. An ODC is used as a feedstock only if the ODC is entirely consumed (except for trace amounts) in the manufacture of another chemical. Thus, the transformation of an ODC into one or more new compounds (such as the transformation of CFC-113 into chlorotrifluoroethylene (CTFE or 1113), of CFC-113 into CFC-115 and CFC-116, or of carbon tetrachloride into hydrochloric acid during petroleum refining or incineration) is treated as use as a feedstock. On the other hand, the ODCs used in a mixture (including an azeotrope such as R-500 or R-502) are not used as a feedstock.

(4) QUALIFYING SALE. A sale of ODCs for use as a feedstock is a qualifying sale if the requirements of section 52.4682-2(b)(1) are satisfied with respect to such sale.

(d) ODCs USED IN THE MANUFACTURE OF RIGID FOAM INSULATION -- (1) PHASE-IN OF TAX -- (i) IN GENERAL. The amount of tax imposed on an ODC is determined under section 4682(g) if the manufacturer or importer of the ODC --

(A) Uses the ODC during 1990, 1991, 1992, or 1993 in the manufacture of rigid foam insulation; or

(B) Sells the ODC in a qualifying sale (within the meaning of paragraph (d) (5) of this section) during 1990, 1991, 1992, or 1993.

(ii) AMOUNT OF TAX. Under section 4682(g), ODCs described in paragraph (d)(1)(i) of this section are not taxed if sold or used during 1990 and are taxed at a reduced rate if sold or used during 1991, 1992, or 1993.

(2) EXCESS PAYMENTS -- (i) IN GENERAL. Under section 4682(g)(3), a credit against income tax or a refund is allowed to a person if --

(A) The person uses an ODC during 1990, 1991, 1992, or 1993 in the manufacture of rigid foam insulation; and

(B) The amount of any tax paid with respect to the ODC under section 4681 or 4682 was not determined under section 4682(g).

(ii) PROCEDURAL RULES -- (A) The amount determined under section 4682(g)(3) shall be treated as a credit described in section 34(a) (relating to credits for gasoline and special fuels) unless a claim for refund has been filed.

(B) See section 6402 and the regulations thereunder for rules relating to claiming a credit or refund of the tax paid with respect to ODCs that are used in the manufacture of rigid foam insulation.

(3) DEFINITION -- (i) RIGID FOAM INSULATION. The term "rigid foam insulation" means any rigid foam that is designed for use as thermal insulation in buildings, equipment, appliances, tanks, railcars, trucks, or vessels, or on pipes, including any such rigid foam actually used for purposes other than insulation. Information such as test reports on R-values and advertising material reflecting R-value claims for a particular rigid foam may be used to show that such rigid foam is designed for use as thermal insulation.

(ii) RIGID FOAM -- (A) IN GENERAL. The term "rigid foam" means any closed cell polymeric foam (whether or not rigid) in which chlorofluorocarbons are used to fill voids within the polymer.

(B) EXAMPLES OF RIGID FOAM PRODUCTS. Rigid foam includes extruded polystyrene foam, polyisocyanurate foam, spray and pour-in- place polyurethane foam, polyethylene foam, phenolic foam, and any other product that the Commissioner identifies as rigid foam in a pronouncement of general applicability. The form of a product identified under this paragraph (d)(3)(ii)(B) does not affect its character as rigid foam. Thus, such products are rigid foam whether in the form of a board, sheet, backer rod, or wrapping, or in a form applied by spraying, pouring, or frothing.

(4) USE IN MANUFACTURE. An ODC is used in the manufacture of rigid foam insulation if it is incorporated into such product or is expended as a propellant or otherwise in the manufacture or application of such product.

(5) QUALIFYING SALE. A sale of an ODC for use in the manufacture of rigid foam insulation is a qualifying sale if the requirements of section 52.4682-2(b)(2) are satisfied with respect to such sale.

(e) HALONS; PHASE-IN OF TAX. The amount of tax imposed on Halon- 1211, Halon-1301, or Halon-2402 (Halons) is determined under section 4682(g) if the manufacturer or importer of Halons sells or uses Halons during 1990, 1991, 1992, or 1993. Under section 4682(g), Halons are not taxed if sold or used during 1990 and are taxed at a reduced rate if sold or used during 1991, 1992, or 1993.

(f) RECYLING. [Reserved]

(g) EXPORTS. [Reserved]

SECTION 52.4682-2 QUALIFYING SALES.

(a) IN GENERAL -- (1) SPECIAL RULES APPLICABLE TO CERTAIN SALES. Special rules apply to sales of ODCs in the following cases:

(i) Under section 4682(d)(2), section 52.4682-1(c), and section 52.4682-4(b)(2)(v) (relating to ODCs used as a feedstock), ODCs sold in qualifying sales are not taxed.

(ii) Under section 4682(g), section 52.4682-1(d), and section 52.4682-4(d)(2) (relating to ODCs used in the manufacture of rigid foam insulation), ODCs sold in qualifying sales are not taxed in 1990 and are taxed at a reduced rate in 1991, 1992, and 1993.

(2) QUALIFYING SALES. A sale of ODCs is not a qualifying sale unless the requirements of this section are satisfied. Although submission of a document to the Internal Revenue Service is not required to establish that a sale of ODCs is a qualifying sale, the registration certificates required by this section shall be made available for inspection by internal revenue agents and officers.

(b) REQUIREMENTS FOR QUALIFICATION -- (1) USE AS A FEEDSTOCK. A sale of ODCs is a qualifying sale for purposes of sections 52.4682-1(c) and 52.4682-4(b)(2)(v) if the manufacturer or importer of the ODCs --

(i) Obtains a registration certificate in substantially the form set forth in paragraph (d)(2) of this section from the purchaser of the ODCs; and

(ii) Relies on the certificate in good faith.

(2) USE IN THE MANUFACTURE OF RIGID FOAM INSULATION. A sale of ODCs is a qualifying sale for purposes of sections 52.4682-1(d) and 52.4682-4(d)(2) if the manufacturer or importer of the ODCs --

(i) Obtains a registration certificate in substantially the form set forth in paragraph (d)(3) of this section from the purchaser of the ODCs; and

(ii) Relies on the certificate in good faith.

(c) GOOD FAITH RELIANCE -- (1) IN GENERAL. The requirements of paragraph (b) of this section are not satisfied with respect to a sale of ODCs and the sale is not a qualifying sale if at the time of the sale --

(i) The manufacturer or importer has reason to believe that the purchaser will use the ODCs other than for the purpose set forth in the certificate; or

(ii) The Internal Revenue Service has notified the manufacturer or importer that the purchaser's right to provide a certificate has been withdrawn.

(2) WITHDRAWAL OF RIGHT TO PROVIDE A CERTIFICATE. The Internal Revenue Service may withdraw the right of a purchaser to provide a certificate to its supplier if such purchaser uses the ODCs to which its certificate applies other than for the purpose set forth in such certificate, or otherwise fails to comply with the terms of the certificate. The Internal Revenue Service may notify the supplier to whom the purchaser provided the certificate that the purchaser's right to provide a certificate has been withdrawn.

(d) REGISTRATION CERTIFICATE -- (1) IN GENERAL -- (i) RULES RELATING TO ALL CERTIFICATES. This paragraph (d) sets forth the form of the registration certificates that satisfy the requirements of paragraphs (b)(1) and (2) of this section. The registration certificate shall consist of a statement executed and signed under penalties of perjury by a person with authority to bind the purchaser. A certificate provided under paragraph (d)(2) of this section may apply to a single purchase or to multiple purchases and need not specify an expiration date. A certificate provided under paragraph (d)(3) of this section may apply to a single purchase or multiple purchases, and will expire as of December 31, 1993, unless an earlier expiration date is specified in the certificate. A new certificate must be given to the supplier if any information on the current certificate changes. The certificate may be included as part of any business records normally used to document a sale.

(ii) SPECIAL RULE RELATING TO CERTIFICATES EXECUTED BEFORE JANUARY 1, 1992. Certificates provided under this paragraph (d)(2) and executed before January 1, 1992, satisfy the requirements of paragraph (b) of this section if they are in substantially the same form as certificates set forth in Section 52.4682-2T.

(2) CERTIFICATE RELATING TO ODCs USED AS A FEEDSTOCK -- (i) ODCs THAT WILL BE RESOLD FOR USE BY THE SECOND PURCHASER AS A FEEDSTOCK. If the purchaser will resell the ODCs to a second purchaser for use by such second purchaser as a feedstock, the certificate provided by the purchaser must be in substantially the following form:

CERTIFICATE OF PURCHASER OF CHEMICALS THAT WILL BE RESOLD FOR USE BY THE SECOND PURCHASER AS A FEEDSTOCK

(To support tax-free sales under section 4682(d)(2) of the Internal Revenue Code.)

Date _________________________

The undersigned purchaser ("Purchaser") hereby certifies the following under penalties of perjury:

The following percentage of ozone-depleting chemicals purchased from ____________________________________________________________________ (name and address of seller)

will be resold by Purchaser to persons (Second Purchasers) that certify to Purchaser that they are purchasing the ozone-depleting- chemicals for use as a feedstock (as defined in Section 52.4682-1(c)(3) of the Environmental Tax Regulations).

 PRODUCT                 PERCENTAGE

Purchaser understands that any use by Purchaser of the ozone- depleting chemicals to which this certificate applies other than for the purpose set forth in this certificate may result in the withdrawal by the Internal Revenue Service of Purchaser's right to provide a certificate.

Purchaser will retain the business records needed to document the sales covered by this certificate and will make such records available for inspection by Government officers. Purchaser also will retain and make available for inspection by Government officers the certificates of its Second Purchasers.

Purchaser has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. In addition, the Internal Revenue Service has not notified Purchaser that the right to provide a certificate has been withdrawn from any Second Purchaser who will purchase ozone-depleting chemicals to which this certificate applies.

Purchaser understands that the fraudulent use of this certificate may subject Purchaser and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

 _______________________________________________________________

 CERTIFICATE OF PURCHASER OF CHEMICALS THAT WILL BE USED BY

Purchaser understands that any use of the ozone-depleting chemicals to which this certificate applies other than as a feedstock may result in the withdrawal by the Internal Revenue Service of Purchaser's right to provide a certificate.

Purchaser will retain the business records needed to document the use as a feedstock of the ozone-depleting chemicals to which this certificate applies and will make such records available for inspection by Government officers.

Purchaser has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.

Purchaser understands that the fraudulent use of this certificate may subject Purchaser and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

 ________________________________________________________________

CERTIFICATE OF PURCHASER OF CHEMICALS THAT WILL BE RESOLD FOR USE BY THE SECOND PURCHASER IN THE MANUFACTURE OF RIGID FOAM INSULATION

 (To support tax-free or tax-reduced sales under section

Purchaser understands that any use by Purchaser of the ozone- depleting chemicals to which this certificate applies other than for the purpose set forth in this certificate may result in the withdrawal by the Internal Revenue Service of Purchaser's right to provide a certificate.

Purchaser will retain the business records needed to document the sales covered by this certificate and will make such records available for inspection by Government officers. Purchaser also will retain and make available for inspection by Government officers the certificates of its Second Purchasers.

Purchaser has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn. In addition, the Internal Revenue Service has not notified Purchaser that the right to provide a certificate has been withdrawn from any Second Purchaser who will purchase ozone-depleting chemicals to which this certificate applies.

Purchaser understands that the fraudulent use of this certificate may subject Purchaser and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

 ______________________________________________________________

 CERTIFICATE OF PURCHASER OF CHEMICALS THAT WILL BE USED BY

Purchaser understands that any use by Purchaser of the ozone- depleting chemicals to which this certificate applies other than in the manufacture of rigid foam insulation may result in the withdrawal by the Internal Revenue Service of Purchaser's right to provide a certificate.

Purchaser will retain the business records needed to document the use in the manufacture of rigid foam insulation of the ozone- depleting chemicals to which this certificate applies and will make such records available for inspection by Government officers.

Purchaser has not been notified by the Internal Revenue Service that its right to provide a certificate has been withdrawn.

Purchaser understands that the fraudulent use of this certificate may subject Purchaser and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

 _________________________________________________________________

(a) OVERVIEW; REFERENCES TO TABLES; SPECIAL RULE FOR 1990 -- (1) OVERVIEW. This section provides rules relating to the tax imposed on imported taxable products under section 4681, including rules for identifying imported taxable products, determining the weight of the ozone-depleting chemicals (ODCs) used as materials in the manufacture of such products, and computing the amount of tax on such products. See Section 52.4681-1(a)(2) and (c) for general rules and definitions relating to the tax on imported taxable products.

(2) REFERENCES TO TABLES. When used in this section --

(i) The term "Imported Products Table" (Table) refers to the Table set forth in paragraph (f)(6) of this section; and

(ii) The term "current Imported Products Table" (current Table) used with respect to a product refers to the Table in effect on the date such product is first sold or used by the importer thereof.

(3) SPECIAL RULE FOR 1990. In the case of products first sold or used before January 1, 1991, post-1990 ODCs (as defined in Section 52.4681-1(c)(9)) shall not be taken into account in applying the rules of this section.

(b) IMPORTED TAXABLE PRODUCTS -- (1) IN GENERAL -- (i) RULE. Except as provided in paragraph (b)(2) of this section, the term "imported taxable product" means any product that --

(A) Is entered into the United States for consumption, use, or warehousing; and

(B) Is listed in the current Table.

(ii) EXAMPLE. The application of this paragraph (b)(1) may be illustrated by the following example:

EXAMPLE. A brings a light truck with a Harmonized Tariff Schedule classification of 8704 into the customs territory and enters the truck for transportation and exportation. Although the truck is listed in the current Table, it is not an imported taxable product because it is not entered for consumption, use, or warehousing. The truck also would not be an imported taxable product if it were admitted to a foreign trade zone (rather than brought into the customs territory) for transportation and exportation.

(2) EXCEPTIONS -- (i) IN GENERAL. A product is not treated as an imported taxable product if --

(A) The product is listed in Part I of the current Table and the adjusted tax with respect to the product is de minimis (within the meaning of paragraph (b)(2)(ii) of this section); or

(B) The product is listed in Part II of the current Table, the adjusted tax with respect to the product is de minimis (within the meaning of paragraph (b)(2)(ii) of this section), and the ODCs (other than methyl chloroform) used as materials in the manufacture of the product were not used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components.

(ii) DE MINIMIS ADJUSTED TAX. The adjusted tax with respect to a product is de minimis if such tax is less than one/tenth of one percent of the importer's cost of acquiring such product. The term "adjusted tax" means the tax that would be imposed under section 4681 on the ODCs used as materials in the manufacture of such product if such ODCs were sold in the United States and the base tax amount were $1.00.

(c) TAXABLE EVENT -- (1) IN GENERAL. Except as otherwise provided in paragraphs (c)(2) and (3) of this section, the tax on an imported taxable product is imposed when the product is first sold or used (as defined in Section 52.4681-1(c)(6) and (7)) by its importer. Thus, for example, imported taxable products that are warehoused or repackaged after entry and then exported without being sold or used in the United States are not subject to tax.

(2) ELECTION TO TREAT IMPORTATION AS USE -- (i) IN GENERAL. An importer may elect to treat the entry of products into the United States as the use of such products. In the case of imported taxable products to which an election under this paragraph (c)(2) applies --

(A) Tax is imposed on the products on the date of entry (as determined under paragraph (c)(2)(ii) of this section) if the products are entered into the United States after the election becomes effective;

(B) Tax is imposed on the products on the date the election becomes effective if the products were entered into the United States after December 31, 1989, and before the election becomes effective; and

(C) No tax is imposed if the products were entered into the United States before January 1, 1990.

(ii) DATE OF ENTRY. The date of entry is determined by reference to customs law. If the actual date is unknown, the importer may use any reasonable and consistent method to determine the date of entry, provided that such date is within 10 business days of arrival of products in the United States.

(iii) APPLICABILITY OF ELECTION. An election under this paragraph (c)(2) applies to all imported taxable products that are owned (and have not been used) by the importer at the time the election becomes effective and all imported taxable products that are entered into the United States by the importer after the election becomes effective. An election under this paragraph (c)(2) becomes effective at the beginning of the first calendar quarter to which the election applies. After October 9, 1990, the election may be revoked only with the consent of the Commissioner.

(iv) MAKING THE ELECTION. An election under this paragraph (c)(2) shall be made in accordance with the instructions for the return on which the importer is required to report liability for tax under section 4681.

(3) TREATING THE SALE OF AN ARTICLE INCORPORATING AN IMPORTED TAXABLE PRODUCT AS THE FIRST SALE OR USE OF SUCH PRODUCT -- (i) IN GENERAL. In the case of articles to be sold, an importer may treat the sale of an article manufactured or assembled in the United States as the first sale or use of an imported taxable product incorporated in such article, but only if the importer --

(A) Has consistently treated the sale of similar articles as the first sale or use of similar imported taxable products; and

(B) Has not made an election under paragraph (c)(2) of this section.

(ii) SIMILAR ARTICLES AND IMPORTED TAXABLE PRODUCTS. An importer may establish any reasonable criteria for determining whether articles or imported taxable products are similar for purposes of this paragraph (c)(3).

(iii) ESTABLISHMENT OF CONSISTENT TREATMENT. An importer has consistently treated the sale of similar articles as the first sale or use of similar imported taxable products only if such treatment is reflected in the computation of tax on the importer's returns for all prior calendar quarters in which such treatment would affect tax liability.

(iv) EXAMPLE. The application of this paragraph (c)(3) may be illustrated by the following example:

EXAMPLE. (a) An importer of printed circuits and other electronic components uses those products in assembling television receivers in the United States and also uses the printed circuits in assembling VCRs in the United States. Under the importer's criteria for determining similarity, printed circuits are similar to other printed circuits, but not to the other electronic components. In addition, television receivers are similar to other television receivers, but not to VCRs. The importer has not made an election under paragraph (c)(2) of this section.

(b) Under this paragraph (c)(3), the importer may treat the sale of the television receivers as the first sale or use of the imported printed circuits incorporated into the television receivers. In that case, the tax on the printed circuits would be imposed when the television receivers are sold rather than when the printed circuits are used in assembling the television receivers.

(c) The importer may treat the sale of the television receivers as the first sale or use of the printed circuits incorporated into the television receivers even if the sale of the television receivers is not treated as the first sale or use of the other electronic components incorporated into the television receivers and even if the sale of VCRs is not treated as the first sale or use of the printed circuits incorporated into the VCRs. Under paragraph (c)(3)(i)(A) of this section, however, the importer must have consistently treated the sale of television receivers as the first sale or use of printed circuits incorporated into the receivers. Thus, in the case of television receivers that were assembled before January 1, 1990, and sold after December 31, 1989, the importer must have treated the sale of the television receivers as the first sale or use of the printed circuits incorporated into the television receivers when reporting tax under section 4681 with respect to such printed circuits.

(d) ODCs USED AS MATERIALS IN THE MANUFACTURE OF IMPORTED TAXABLE PRODUCTS -- (1) ODC WEIGHT. The tax imposed on an imported taxable product under section 4681 is computed by reference to the weight of the ODCs used as materials in the manufacture of the product (ODC weight). The ODC weight of a product includes the weight of ODCs used as materials in the manufacture of any components of the product.

(2) ODCs USED AS MATERIALS IN THE MANUFACTURE OF A PRODUCT. Except as provided in paragraph (d)(3) of this section, an ODC is used as a material in the manufacture of a product if the ODC is --

(i) Incorporated into the product;

(ii) Released into the atmosphere in the process of manufacturing the product; or

(iii) Otherwise used in the manufacture of the product (but only to the extent the cost of the ODC is properly allocable to the product).

(3) PROTECTIVE PACKAGING. ODCs used in the manufacture of the protective material in which a product is packaged are not treated as ODCs used as materials in the manufacture of such product.

(4) EXAMPLES. The provisions of this paragraph (d) may be illustrated by the following examples:

EXAMPLE 1. A, a manufacturer located outside the United States, uses ODCs as a solvent to clean the printed circuits it manufactures and as a coolant in the air-conditioning system of the factory in which the printed circuits are manufactured. The ODCs used as a solvent are released into the atmosphere, and, under paragraph (d)(2)(ii) of this section, are used as materials in the manufacture of the printed circuits. The ODCs used as a coolant in the air- conditioning system are also used in the manufacture of the printed circuits. Under paragraph (d)(2)(iii) of this section, these ODCs are used as materials in the manufacture of the printed circuits only to the extent the cost of the ODCs is properly allocable to the printed circuits.

EXAMPLE 2. B manufactures television receivers outside the United States and wraps them for shipping in a protective packing material manufactured with ODCs. Under paragraph (d)(3) of this section, the ODCs used in the manufacture of the protective packing material are not treated as ODCs used as a material in the manufacture of the television receivers.

(e) METHODS OF DETERMINING ODC WEIGHT COMPUTATION OF TAX -- (1) IN GENERAL. This paragraph (e) sets forth the methods to be used for determining the ODC weight of an imported taxable product and a method to be used in computing the tax when the ODC weight cannot be determined. The amount of tax is computed separately for each imported taxable product and the method to be used in determining the ODC weight or otherwise computing the tax is separately determined for each such product. Thus, an importer may use one method in computing the tax on some imported taxable products and different methods in computing the tax on other products. For example, an importer of telephone sets may compute the tax using the exact method described in paragraph (e)(2) of this section for determining the ODC weight of telephone sets supplied by one manufacturer and using the Table method described in paragraph (e)(3) of this section for telephone sets supplied by other manufacturers that have not provided sufficient information to allow the importer to use the exact method.

(2) EXACT METHOD. If the importer determines the weight of each ODC used as a material in the manufacture of an imported taxable product and supports that determination with sufficient and reliable information, the ODC weight of the product is the weight so determined. Under this method, the ODC weight of a mixture is equal to the weight of the ODCs contained in the mixture. Representations by the manufacturer of the product to the importer as to the weight of the ODCs used as materials in the manufacture of the product may be sufficient and reliable information for this purpose. Thus, a letter to the importer signed by the manufacturer may constitute sufficient and reliable information if the letter adequately identifies the product and states the weight of each ODC used as a material in the product's manufacture.

(3) TABLE METHOD -- (i) IN GENERAL. If the ODC weight of an imported taxable product is not determined using the exact method described in paragraph (e)(2) of this section and the current Table specifies an ODC weight for the product, the ODC weight of the product is the Table ODC weight, regardless of what ODCs were used in the manufacture of the product. In computing the amount of tax, the Table ODC weight shall not be rounded.

(ii) SPECIAL RULES -- (A) ARTICLES ASSEMBLED IN THE UNITED STATES. An importer that assembles finished articles in the United States may compute the amount of tax imposed on the imported taxable products incorporated into the finished article by using the Table ODC weight specified for the article instead of the Table ODC weights specified for the components. In order to compute the tax under this special rule, the importer must determine the actual number of articles manufactured. For example, if an importer manufactures 100 camcorders using imported subassemblies, the importer may compute the amount of tax on the subassemblies by using the Table ODC weight specified for camcorders. Thus, the tax imposed on the subassemblies is equal to the tax that would be imposed on 100 camcorders.

(B) COMBINATION METHOD. This paragraph (e)(3)(ii)(B) applies to an imported taxable product if the current Table specifies weights for two or more ODCs with respect to the product and the importer of the product can determine the weight of any such ODC (and of any ODC used as a substitute for such ODC) and can support such determination with sufficient and reliable information. In determining the ODC weight of any such product, the importer may replace the weight specified in the Table for such ODC with the weight (as determined by the importer) of such ODC and its substitutes. For example, if an importer has sufficient and reliable information to determine the amount of CFC-12 included in a product as a coolant (and to determine that no ODCs have been used as substitutes for CFC-12) but cannot determine the amount of CFC-113 used in manufacturing the product's electronic components, the importer may use the weight specified in the Table for CFC-113 and the actual weight determined by the importer for CFC-12 in determining the ODC weight of the product.

(C) ODCs USED IN THE MANUFACTURE OF RIGID FOAM INSULATION. In computing the tax using the method described in this paragraph (e)(3), any ODC for which the Table specifies a weight followed by an asterisk (*) shall be treated as an ODC used in the manufacture of rigid foam insulation (as defined in section 52.4682-1(d)(3) and (4)).

(4) VALUE METHOD -- (i) GENERAL RULE. If the importer cannot determine the ODC weight of an imported taxable product under the exact method described in paragraph (e)(2) of this section and the Table ODC weight of the product is not specified, the tax imposed on the product under section 4681 is one percent of the entry value of the product.

(ii) SPECIAL RULE FOR MIXTURES. If, in the case of an imported taxable product that is a mixture, the tax was determined under the method described in this paragraph (e)(4), the Commissioner may redetermine the tax based on the ODC weight of the mixture.

(5) ADJUSTMENT FOR PRIOR TAXES -- (i) IN GENERAL. If any manufacture with respect to an imported taxable product occurred in the United States or the product incorporates a taxed component or a taxed chemical was used in its manufacture, the product's ODC weight (or value) attributable to manufacture within the United States or to taxed components or taxed chemicals shall be disregarded in computing the tax on such product using a method described in paragraph (e)(2), (3), or (4) of this section.

(ii) TAXED COMPONENT. The term "taxed component" means any component that previously was subject to tax as an imported taxable product or that would have been so taxed if section 4681 had been in effect for periods before January 1, 1990.

(iii) TAXED CHEMICAL. The term "taxed chemical" means any ODC that previously was subject to tax.

(6) EXAMPLES. The application of this paragraph (e) may be illustrated by the following examples:

EXAMPLE 1. A is an importer (as defined in section 52.4681-1(c)(5)) of VCRs. The HTS classification for the VCRs is 8528.10.40. VCRs classified under HTS heading 8528.10.40 are imported taxable products because they are listed in the Table (contained in paragraph (f)(6) of this section) by name and HTS heading (as described in paragraph (f)(3)(i) of this section). Each VCR is wrapped in protective packing material manufactured with ODCs. A imports and sells 100 VCRs during the first calendar quarter of 1991. A may determine the ODC weight for the VCRs by reference to the Table. The Table ODC weight specified for VCRs classified under HTS heading 8528.10.40 is 0.0586 pound of CFC-113. This weight does not take protective packaging into account. The amount of tax for the first quarter of 1991 is $6.42 (0.0586 (the ODC weight) x 100 (the number of VCRs sold in the quarter) x $1.37 (the base tax amount for CFC-113 in 1991) x 0.8 (the ozone-depletion factor for CFC-113)). If A uses the exact method (as described in paragraph (e)(2) of this section) to determine the ODC weight for the VCRs, A does not take into account the ODCs used in the manufacture of the protective packaging. (Imported protective packaging containing foams made with ODCs other than foams defined in section 52.4682-1(d)(3) is subject to tax, however, if the packaging is sold as packaging or first used as packaging in the United States.)

EXAMPLE 2. The facts are the same as in Example 1, except that A's VCRs are manufactured using methyl chloroform as the solvent instead of CFC-113. If A does not use the exact method to determine the weight of the methyl chloroform used in the manufacture of the VCRs, A must, under paragraphs (e)(3)(i) and (e)(4)(i) of this section, determine the ODC weight by reference to the Table. If A uses the Table ODC weight, the computation of tax is the same as in EXAMPLE 1, using the base tax amount and ozone-depletion factor for CFC-113. A does not substitute the base tax amount and ozone- depletion factor of methyl chloroform for those of CFC-113.

EXAMPLE 3. B imports and sells mixtures of ethylene oxide and CFC-12. The mixture is 88 percent CFC-12 by weight. B also imports and sells R-502. The R-502 is 51 percent CFC-115 by weight. In the first calendar quarter of 1991 B sells 100 pounds of imported ethylene oxide/CFC-12 mixture and 10,000 pounds of imported R-502. The ethylene/CFC-12 mixture and the R-502 are imported taxable products because they are listed in Part I of the Table (contained in paragraph (f)(6) of this section). Under the exact method described in paragraph (e)(2) of this section, B computes the tax based on 88 pounds of CFC-12, the amount of ODCs contained in the imported ethylene oxide mixture, and based on 5100 pounds of CFC-115, the amount of ODCs in the imported R-502.

(f) IMPORTED PRODUCTS TABLE -- (1) IN GENERAL. This paragraph (f) contains rules relating to the Imported Products Table (Table) and sets forth the Table. The Table lists all the products that are subject to the tax on imported taxable products and specifies the Table ODC weight of each product for which such a weight has been determined.

(2) APPLICABILITY OF TABLE -- (i) IN GENERAL. Except as provided in paragraph (f)(2)(ii) of this section, the Table contained in paragraph (f)(6) of this section is effective on January 1, 1990.

(ii) TREATMENT OF CERTAIN PRODUCTS -- (A) Products included in a listing that is preceded by a double asterisk (* *) in the Table shall not be treated as imported taxable products until October 1, 1990.

(B) Products included in a listing that is preceded by a triple asterisk (* * *) in the Table shall not be treated as imported taxable products until January 1, 1992.

(3) IDENTIFICATION OF PRODUCTS -- (i) IN GENERAL. Each listing in the Table identifies a product by name and includes only products that are described by that name. Most listings (other than listings for mixtures) identify a product by both name and HTS heading. In such cases, a product is included in that listing only if the product is described by that name and the rate of duty on the product is determined by reference to that HTS heading. However, the product is included in that listing even if it is manufactured with or contains a different ODC than the ODC specified in the Table.

(ii) ELECTRONIC ITEMS NOT LISTED BY SPECIFIC NAME -- (A) IN GENERAL. Part II of the Table contains listings for electronic items that are not included within any other listing in the Table. An imported product is included in these listings only if such imported product --

(1) Is an electronic component listed in chapters 84, 85, or 90 of the Harmonized Tariff Schedule; or

(2) Contains components described in paragraph (f)(3)(ii)(A)(1) of this section and more than 15 percent the cost of the imported product is attributable to such components.

(B) ELECTRONIC COMPONENT. For purposes of this paragraph (f)(3)(ii), an electronic component is a component whose operation involves the use of nonmechanical amplification switching devices such as tubes, transistors, and integrated circuits. Such components do not include passive electrical devices such as resistors and capacitors.

(C) CERTAIN ITEMS NOT INCLUDED. Items such as screws, nuts, bolts, plastic parts, and similar specially fabricated parts that may be used to construct an electronic item are not themselves included in the listing for electronic items not otherwise listed in the Table.

(iii) EXAMPLES. The application of this paragraph (f)(3) may be illustrated by the following examples:

EXAMPLE 1. The Table lists "electronic integrated circuits and microassemblies; HTS heading 8542." A bipolar transistor under HTS heading 8542.11.00.05 is included in this listing because a bipolar transistor is a type of electronic integrated circuit and HTS heading 8542.11.00.05 is included within HTS heading 8542.

EXAMPLE 2. The Table lists "radios; HTS heading 8527.19," "radio combinations; HTS heading 8527.11" and "radio combinations; HTS heading 8527.31." A radio classified under HTS heading 8527.19 is not included within either listing for radio combinations. However, a radio classified under HTS heading 8527.19.00.20 is included within the listing for radios; HTS heading 8527.19, A radio combination classified under HTS heading 8527.11.20 is included within the listing for radio combinations; HTS heading 8527.11 but not the listing for radio combinations; HTS heading 8527.31. Any radio or radio combination not classified under the HTS heading for any other listing is included in the listing for electronic items not otherwise listed.

(4) RULES FOR LISTING PRODUCTS. Products are listed in the Table in accordance with the following rules:

(i) LISTING IN PART I. A product is listed in Part I of the Table if it is a mixture containing ODCs. In addition, a product other than a mixture containing ODCs will be listed in Part I of a revised Table if the Commissioner has determined that --

(A) The ODC weight of the product is not de minimis when the product is produced using the predominant method of manufacturing the product; and

(B) None of the ODCs used as materials in the manufacture of the product under the predominant method are used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components.

(ii) LISTING IN PART II. A product is listed in Part II of the Table if the Commissioner has determined that the ODCs used as materials in the manufacture of the product under the predominant method are used for purposes of refrigeration or air conditioning, creating an aerosol or foam, or manufacturing electronic components.

(iii) LISTING IN PART III. A product is listed in Part III of the Table if the Commissioner has determined that the product is not an imported taxable product and the product would otherwise be included within a listing in Part II of the Table. For example, floppy disk drive units are listed in Part III because they are not imported taxable products and they would, but for their listing in Part III, be included within the Part II listing for electronic items not specifically identified.

(5) TABLE ODC WEIGHT. The Table ODC weight of a product is the weight, determined by the Commissioner, of the ODCs that are used as materials in the manufacture of the product under the predominant method of manufacturing. The Table ODC weight is given in pounds per single unit of product unless otherwise specified.

(6) TABLE. The Table is set forth below:

IMPORTED PRODUCTS TABLE

PART I -- Products that are mixtures containing ODCs

Mixtures containing ODCs, including but not limited to:

• anti-static sprays o automotive products such as "carburetor cleaner," "stop leak," and "oil charge" o cleaning solvents o contact cleaners o degreasers o dusting sprays o electronic circuit board coolants o electronic solvents o ethylene oxide/CFC-12 o fire extinguisher preparations and charges o flux removers for electronics o insect and wasp sprays o mixtures of ODCs o propellants o refrigerants

 Harmonized Tariff

** See paragraph (f)(2)(ii)(A) of this section. Denotes product for which the effective date is October 1, 1990.

*** See paragraph (f)(2)(ii)(B) of this section. Denotes products for which the effective date is January 1, 1992.

(g) REQUESTS FOR MODIFICATION OF TABLE -- (1) IN GENERAL. Any manufacturer or importer of a product may request that the Secretary modify the Table in any of the following respects:

(i) Adding a product to the Table and specifying its Table ODC weight.

(ii) Removing a product from the Table.

(iii) Changing or specifying the Table ODC weight of a product.

(2) FORM OF REQUEST. The Secretary will consider a request for modification that includes the following:

(i) The name, address, taxpayer identifying number, and principal place of business of the requester.

(ii) For each product with respect to which a modification is requested:

(A) The name of the product;

(B) The HTS heading or subheading;

(C) The type of modification requested;

(D) The Table ODC weight that should be specified for the product if the request relates to adding a product or changing or specifying its Table ODC weight; and

(E) The data supporting the request.

(3) ADDRESS. The address for submission of requests under this paragraph (g) is: Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Attn: CC:CORP:T:R (Imported Products Table), room 5228, Washington, D.C. 20044.

(4) PUBLIC INSPECTION AND COPYING. Requests submitted under this paragraph (g) will be available in the Internal Revenue Service Freedom of Information Reading Room for public inspection and copying.

SECTION 52.4682-4 FLOOR STOCKS TAX.

(a) OVERVIEW. This section provides rules for identifying ozone- depleting chemicals (ODCs) that are subject to the floor stocks tax imposed by section 4682(h)(1), determining the person that is liable for the tax, and computing the amount of the tax. See 52.4681-1(a)(3) and (c) for general rules and definitions relating to the floor stocks tax.

(b) IDENTIFYING RULES -- (1) ODCs SUBJECT TO FLOOR STOCKS TAX; ODCs HELD FOR SALE OR FOR USE IN FURTHER MANUFACTURE -- (i) IN GENERAL. The floor stocks tax is imposed only on an ODC that is held for sale or for use in further manufacture on the date the tax is imposed. This paragraph (b)(1) provides rules for identifying ODCs held for sale or for use in further manufacture.

(ii) HELD FOR SALE -- (A) IN GENERAL. For purposes of determining whether an ODC is held for sale, the term "sale" shall have the meaning set forth in section 52.4681-1(c)(6). ODCs held for sale include ODCs that will be sold in connection with the provision of services or in connection with the sale of a manufactured article and, in such cases, include ODCs that will be sold without the statement of a separate charge for those ODCs.

(B) ODCs HELD BY A GOVERNMENT. An ODC that is held by a government for its own use is not held for sale even if the ODC will be transferred between agencies or other subdivisions that have or are required to have different employer identification numbers.

(iii) HELD FOR USE IN FURTHER MANUFACTURE. Except as otherwise provided in paragraph (b)(2)(v) of this section, an ODC is held for use in further manufacture if --

(A) The ODC will be used as a material (within the meaning of paragraph (b)(1)(iv) of this section) in the manufacture of an article; and

(B) Such article will be held for sale.

(iv) USE AS MATERIAL -- (A) IN GENERAL. Except as provided in paragraph (b)(1)(iv)(B) of this section, an ODC will used as a material in the manufacture of an article if the ODC will be --

(1) Incorporated into the article; or

(2) Released into the atmosphere in the process of manufacturing the article.

(B) ODCs USED IN EQUIPMENT. For purposes of the floor stocks tax, an ODC is not used as a material in the manufacture of an article if the ODC is (or will be) contained in equipment used in such manufacture and the ODC will be used for its intended purpose without being released from such equipment. Thus, ODCs that are (or will be) used as coolants in a factory's air-conditioning system are not used as materials in the manufacture of articles produced in the factory.

(v) STORAGE CONTAINERS. The floor stocks tax is imposed on an ODC without regard to the type or size of the storage container in which the ODC is held. Thus, the tax may apply to an ODC whether it is in a 14-ounce can or a 30-pound tank.

(vi) EXAMPLES. The provisions of this paragraph (b)(1) may be illustrated by the following examples:

EXAMPLE 1. A, a manufacturer of air conditioners, holds an ODC for use in air conditioners that it will manufacture and sell. A holds the ODC for use in further manufacture.

EXAMPLE 2. B, a manufacturer of electronic components, holds an ODC for use as a solvent to clean printed circuits that it will sell to computer manufacturers. B holds the ODC for use in further manufacture.

EXAMPLE 3. C, an automobile dealer, holds an ODC for use in charging air conditioners installed in automobiles that it sells to retail customers. C does not hold the ODC for use in further manufacture. C does, however, hold the ODC for sale, even if the customers are not separately charged for ODCs used in the automobile air conditioners.

EXAMPLE 4. D operates an air-conditioning repair service and holds an ODC for use in repairing air conditioners for its customers. D holds the ODC for sale even if the customers are not separately charged for ODCs used in the repairs.

EXAMPLE 5. E, a grocery-store chain, holds an ODC for use in its refrigeration units. E does not hold the ODC for sale or for use in further manufacture.

EXAMPLE 6. F, a bank, holds an ODC for use in its fire extinguishers to protect the computer system. F does not hold the ODC for sale or for use in further manufacture.

EXAMPLE 7. G, a government agency, holds an ODC for use in the refrigeration equipment of its various units. The units have separate employer identification numbers. The ODC is stored in a central warehouse until needed by a unit and then transferred to the unit upon request. G does not hold the ODC for sale or for use in further manufacture.

(2) NONTAXABLE ODCs. Except as otherwise provided in paragraphs (d)(2) and (d)(3) of this section, the floor stocks tax is not imposed on any ODC in any year in which the base tax amount does not increase.

(i) MIXTURES -- (A) TAX IMPOSED ON JANUARY 1, 1990. In the case of the floor stocks tax imposed on January 1, 1990, the tax is not imposed on an ODC that has been mixed with any other ingredients.

(B) TAXES IMPOSED AFTER 1990 -- (1) IN GENERAL. In the case of the floor stocks tax imposed on January 1 of 1991, 1992, 1993, or 1994, the tax is not imposed on an ODC that has been mixed with any other ingredients, but only if it is established that such ingredients contribute to the accomplishment of the purpose for which the mixture will be used. A mixture is not exempt from tax under this paragraph (b)(2)(i)(B), however, if it contains only an ODC and an inert ingredient that does not contribute to the accomplishment of the purpose for which the mixture will be used.

(2) EXCEPTION. In the case of a floor stocks tax imposed on or after January 1, 1992, a mixture is not exempt from floor stocks tax under this paragraph (b)(2)(i)(B) if it contains only ODCs and one or more stabilizers. For this purpose, the term "stabilizer" means an ingredient needed to maintain the chemical integrity of the ODC.

(C) EXAMPLES. The provisions of this paragraph (b)(2)(i) may be illustrated by the following examples:

EXAMPLE 1. The floor stocks tax is not imposed on the ODCs contained in refrigerants such as R-500 and R-502 because such products are mixtures of ODCs and other chemicals that contribute to the accomplishment of the purpose for which the mixture will be used.

EXAMPLE 2. The floor stocks tax is not imposed on the ODCs contained in automotive products used for checking for leaks because such products are a mixture of ODCs and small amounts of dyes and oils that contribute to the accomplishment of the purpose for which the mixture will be used.

EXAMPLE 3. The floor stocks tax is not imposed on Halon 1301 pressurized with nitrogen. Although nitrogen is an inert ingredient, it contributes to the accomplishment of the purpose for which the mixture will be used.

EXAMPLE 4. On January 1, 1993, the floor stocks tax is imposed on methyl chloroform that is stabilized to prevent hydrolization or chemical reaction during transportation or use, unless the stabilized methyl chloroform has also been mixed with other ingredients that contribute to the accomplishment of the purpose for which the mixture will be used.

(ii) MANUFACTURED ARTICLES. The floor stocks tax is not imposed on an ODC that is contained in a manufactured article in which the ODC will be used for its intended purpose without being released from such article. For example, the tax is not imposed on the ODCs contained in the cooling coils of a refrigerator even if the refrigerator is held for sale. However, the tax is imposed on a can of ODC used to recharge an air conditioning unit because the ODC must be expelled from the can in order to be used. Similarly, beginning in 1991, the tax is imposed on Halons contained in a fire extinguisher held for sale because such ODCs must be expelled from the fire extinguisher in order to be used.

(iii) RECYCLED ODCs. The floor stocks tax is not imposed on ODCs that have been reclaimed or recycled. For example, the tax is not imposed on an ODC that is held for use in further manufacture after being used as a solvent and recycled.

(iv) ODCs HEAD BY THE MANUFACTURER OR IMPORTER. The floor stocks tax is not imposed on ODCs held by their manufacturer or importer.

(v) ODCs USED AS A FEEDSTOCK -- (A) IN GENERAL. The floor stocks tax is not imposed on any ODC that was sold in a qualifying sale for use as a feedstock (as defined in section 52.4682-1(c)).

(B) POST-1989 ODCs SOLD BEFORE JANUARY 1, 1990; POST-1990 ODCs SOLD BEFORE JANUARY 1, 1991. A post-1989 ODC that was sold by its manufacturer or importer before January 1, 1990, or a post-1990 ODC that was sold by its manufacturer or importer before January 1, 1991, shall be treated, for purposes of this paragraph (b)(2)(v), as an ODC that was sold in a qualifying sale for purposes of section 52.4682-1(c) if the ODC will be used as a feedstock (within the meaning of section 52.4682-1(c)(3)).

(c) PERSON LIABLE FOR TAX -- (1) IN GENERAL. The person liable for the floor stocks tax on an ODC is the person that holds the ODC on a date on which the tax is imposed. The person who holds the ODC is the person who has title to the ODC (whether or not delivery to such person has been made) as of the first moment of such date. The person who has title at such time is determined under applicable local law.

(2) SPECIAL RULE. Each business unit that has, or is required to have, its own employer identification number is treated as a separate person for purposes of the floor stocks tax. For example, a chain of automotive parts stores that has one employer identification number is one person for purposes of the floor stocks tax, and a parent corporation and subsidiary corporation that each have a different employer identification number are two persons for purposes of the floor stocks tax.

(d) COMPUTATION OF TAX; TENTATIVE TAX AMOUNT -- (1) IN GENERAL -- (i) GENERALLY APPLICABLE RULES. This paragraph (d) provides rules for determining the tentative tax amount and the amount of the floor stocks tax. Section 52.4681-1(a)(3) provides that the amount of the floor stocks tax on an ODC is determined by reference to a tentative tax amount. The tentative tax amount is the amount of tax that would be imposed on the ODC under section 4681(a)(1) if a sale of the ODC by the manufacturer or importer had occurred on the date the floor stocks tax is imposed.

(ii) FLOOR STOCKS TAX IMPOSED ON POST-1989 ODCs ON JANUARY 1, 1990. The floor stocks tax imposed on post-1989 ODCs (as defined in section 52.4681-1(c)(9)) on January 1, 1990, is equal to the tentative tax amount. See paragraph (d)(2) of this section for rules relating to the floor stocks tax imposed on ODCs used in the manufacture of rigid foam insulation. See paragraph (d)(3) of this section for rules relating to the floor stocks tax imposed on Halons.

(iii) FLOOR STOCKS TAX IMPOSED ON POST-1990 ODCs ON JANUARY 1, 1991. The floor stocks tax imposed on post-1990 ODCs (as defined in section 52.4681-1(c)(9)) on January 1, 1991, is equal to the tentative tax amount.

(iv) OTHER FLOOR STOCKS TAXES -- (A) IN GENERAL. The following rules apply for floor stocks taxes imposed on post-1989 ODCs after January 1, 1990, and on post-1990 ODCs after January 1, 1991:

(1) The tentative tax amount is determined, except as provided in paragraph (d)(2) or (3) of this section, by reference to the rate of tax prescribed in section 4681(b)(1)(B) and the ozone-depletion factors prescribed in section 4682(b).

(2) The amount of the floor stocks tax on an ODC is equal to the amount by which the tentative tax amount exceeds the amount of taxes previously imposed on the ODC.

(B) EXAMPLE. The application of this paragraph (d)(1)(iv) may be illustrated by the following example:

EXAMPLE. The floor stocks tax imposed on one pound of CFC- 12 held for sale on January 1, 1992, is $0.30 (the amount by which $1.67, the tentative tax, exceeds $1.37, the tax previously imposed on CFC-12).

(2) ODCs USED IN THE MANUFACTURE OF RIGID FOAM INSULATION; 1990, 1991, 1992, AND 1993 -- (i) IN GENERAL. In the case of an ODC that was sold in a qualifying sale for purposes of 52.4682-1(d) (relating to use in the manufacture of rigid foam insulation) the tentative tax amount is determined under section 4682(g) for purposes of computing the floor stocks tax imposed on the ODC on January 1 of 1990, 1991, 1992 or 1993. For purposes of computing the floor stocks tax imposed on the ODC on January 1, 1990, the tentative tax amount is zero. The floor stocks tax is not imposed on ODCs for use in the manufacture of rigid foam insulation in 1992 and 1993.

(ii) POST-1989 ODCs SOLD BEFORE JANUARY 1, 1990; POST-1990 ODCs SOLD BEFORE JANUARY 1, 1991. A post-1989 ODC that was sold by its manufacturer or importer before January 1, 1990, or a post-1990 ODC that was sold by its manufacturer or importer before January 1, 1991, shall be treated, for purposes of paragraphs (d)(2) and (e) of this section, as an ODC that was sold in a qualifying sale for purposes of section 52.4682-1(d) if the ODC will be used in the manufacture of rigid foam insulation (within the meaning of section 52.4682-1(d)(3) and (4)).

(3) HALONS; 1990, 1991, 1992, AND 1993. In the case of Halon- 1211, Halon-1301, or Halon-2402 (Halons), the tentative tax amount is determined under section 4682(g) for purposes of computing the floor stocks tax imposed on Halons on January 1 of 1990, 1991, 1992, or 1993. For purposes of computing the floor stocks tax imposed on Halons on January 1, 1990, the tentative tax amount is zero. The floor stocks tax is not imposed on Halons in 1992 and 1993.

(e) DE MINIMIS EXCEPTION -- (1) 1990 AND 1992. In the case of the floor stocks tax imposed on January 1 of 1990 or 1992, a person is liable for the tax only if, on the date the tax is imposed, the person holds at least 400 pounds of post-1989 ODCs that are not described in paragraph (d)(2) or (3) of this section and are otherwise subject to tax.

(2) 1991. In the case of the floor stocks tax imposed on January 1, 1991, a person is liable for the tax only if, on such date, the person holds at least 400 pounds of ODCs subject to the 1991 floor stocks tax. For this purpose, ODCs subject to the 1991 floor stocks tax are --

(i) Post-1990 ODCs that are subject to tax; and

(ii) Post-1989 ODCs that are described in paragraph (d)(2) or (3) of this section and are otherwise subject to tax.

(3) 1993. In the case of the floor stocks tax imposed on January 1, 1993, a person is liable for the tax only if, on such date, the person holds at least 400 pounds of ODCs that are not described in paragraph (d)(2) or (3) of this section and are otherwise subject to tax.

(4) 1994. In the case of the floor stocks tax imposed on January 1, 1994, a person is liable for the tax only if, on such date, the person holds --

(i) At least 400 pounds of post-1990 ODCs that are not described in paragraph (d)(2) of this section and are otherwise subject to tax;

(ii) At least 200 pounds of ODCs that are described in paragraph (d)(2) of this section and are otherwise subject to tax; or

(iii) At least 20 pounds of ODCs that are described in paragraph (d)(3) of this section and are otherwise subject to tax.

(5) EXAMPLES. The rules of this paragraph (e) may be illustrated by the following examples:

EXAMPLE 1. On January 1, 1990, A holds for sale 300 pounds of CFC-12 (a post-1989 ODC not described in paragraph (d)(2) or (d)(3) of this section)) and 500 pounds of R-500 (a mixture). A does not hold at least 400 pounds of ODCs that are taken into account under paragraph (e)(1) of this section and, under paragraph (b)(2)(i) of this section, mixtures are not subject to the floor stocks tax. Thus, A is not liable for the floor stocks tax imposed on January 1, 1990.

EXAMPLE 2. On January 1, 1990, B holds for sale 250 pounds of CFC-12 and 250 pounds of CFC-113 (post-1989 ODCs not described in paragraph (d)(2) or (3) of this section). B holds 500 pounds of ODCs that are taken into account under paragraph (e)(1) of this section. Thus, B is liable for the floor stocks tax imposed on January 1, 1990, because B holds at least 400 pounds of ODCs for sale.

EXAMPLE 3. On January 1, 1990, C holds 200 pounds of post- 1990 ODCs and 500 pounds of post-1989 ODCs for use in further manufacture. C will use 300 pounds of the post-1989 ODCs in the manufacture of rigid foam insulation (as defined in section 52.4682-1(d)(3) and (4)). The remainder of the ODCs are not described in paragraph (d)(2) or (3) of this section. Under paragraph (e)(1) of this section, post-1990 ODCs and ODCs that will be used in the manufacture of rigid foam insulation are disregarded in determining whether the de minimis exception is applicable in 1990. Thus, C holds only 200 pounds of ODCs that are taken into account under paragraph (e)(1) of this section and is not liable for the floor stocks tax imposed on January 1, 1990.

EXAMPLE 4. (a) The facts are the same as in Example 3, except that the ODCs are held on January 1, 1991. Under paragraph (e)(2) of this section, the 200 pounds of post-1990 ODCs and the 300 pounds of post-1989 ODCs that will be used in the manufacture of rigid foam insulation are taken into account in determining whether the de minimis exception is applicable in 1991. Under paragraph (b)(2) of this section, the remaining 200 pounds of post-1989 ODCs are not taken into account because the base tax amount applicable to post-1989 ODCs does not increase in 1991. Thus, C holds 500 pounds of ODCs that are taken into account under paragraph (e)(2) of this section and is liable for the floor stocks tax imposed on January 1, 1991.

(b) The amount of the floor stocks tax imposed on the 200 pounds of post-1990 ODCs and the 300 pounds of post-1989 ODCs that will be used in the manufacture of rigid foam insulation is equal to the tentative tax amount because those ODCs were not previously subject to tax.

EXAMPLE 5. (a) On January 1, 1994, D holds for sale 300 pounds of CFC-113 (a post-1989 ODC not described in paragraph (d)(2) or (d)(3) of this section), 200 pounds of methyl chloroform (a post-1990 ODC not described in paragraph (d)(2) of this section), and 25 pounds of Halon-1301 (an ODC described in paragraph (d)(3) of this section). D is liable for the floor stocks tax imposed on January 1, 1994, because 25 pounds of Halon-1301 exceeds the de minimis amount specified in paragraph (e)(4)(iii) of this section. The 200 pounds of methyl chloroform is less than the amount specified in paragraph (e)(4)(i) of this section. Nevertheless, tax is imposed on both the 25 pounds of Halon-1301 and the 200 pounds of methyl chloroform. Under paragraph (b)(2) of this section, the 300 pounds of CFC-113 are not subject to floor stocks tax in 1994 because the base tax amount applicable to post-1989 ODCs does not increase in 1994.

(b) The amount of the floor stocks tax is determined separately for the 200 pounds of methyl chloroform and the 25 pounds of Halon-1301 and is equal to the difference between the tentative tax amount and the amount of tax previously imposed on those ODCs. For Halon-1301, for example, the tax is determined as follows. The tentative tax amount is $662.50 ($2.65 (the base tax amount in 1994) x 10 (the ozone-depletion factor for Halon- 1301) x 25 (the number of pounds held)). The tax previously imposed on the Halon-1301 is $6.63 ($2.65 (the base tax amount in 1993) x 10 (the ozone-depletion factor for Halon-1301) x one percent (the applicable percentage determined under section 4682 (g)(2)(A)) x 25 (the number of pounds sold)). Thus, the floor stocks tax imposed on the 25 pounds of Halon-1301 in 1994 is $658.87, the difference between $662.50 (the tentative tax amount) and $6.63 (the tax previously imposed).

(f) INVENTORY -- (1) IN GENERAL. If, on the date on which the floor stocks tax is imposed, a person holds ODCs for sale or for use in further manufacture and the ODCs were not manufactured or imported by such person, the following rules apply:

(i) The person shall prepare an inventory of all such ODCs that the person holds on the date on which the tax is imposed.

(ii) The inventory shall be taken as of the first moment of the date on which the tax is imposed, but work-back or work-forward inventories will be acceptable if supported by adequate commercial records of receipt, use, and disposition of ODCs held for sale or for use in further manufacture.

(iii) The person must maintain records of the inventory and make such records available for inspection and copying by internal revenue agents and officers. Records of the inventory are not to be filed with the Internal Revenue Service.

(2) CIRCUMSTANCES IN WHICH AN INVENTORY IS NOT REQUIRED. The inventory requirement of paragraph (f)(1) of this section does not apply to any person holding, on a date on which floor stocks tax is imposed, only ODCs that are not subject to tax by reason of a statutory exemption (e.g., use as a feedstock) or regulatory exclusion other than the de minimis exception provided by paragraph (e) of this section e.g., mixtures). In addition, any person that holds ODCs subject to the floor stocks tax and also holds ODCs that are nontaxable under the provisions of paragraph (b)(2) of this section, is not required to inventory the nontaxable ODCs. However, any person that holds any ODCs that either are subject to the floor stocks tax or would be subject to the floor stocks tax but for the de minimis exception must inventory those ODCs.

(3) EXAMPLES. The rules of this paragraph (f) may be illustrated by the following examples:

EXAMPLE 1. On January 1, 1990, A holds for sale 300 pounds of CFC-12 (a post-1989 ODC not described in paragraph (d)(2) or (d)(3) of this section) and 500 pounds of R-500 (a mixture). As required by paragraph (f)(1) of this section, A must prepare an inventory of the CFC-12 A holds for sale on that date even though, under paragraph (e)(1) of this section, the 300 pounds of CFC-12 is not taken into account because it is de minimis. However, as provided in paragraph (f)(2) of this section, A is not required to inventory the R-500 because, under paragraph (b)(2) of this section, mixtures are not subject to the floor stocks tax.

EXAMPLE 2. On January 1, 1991, B holds for sale 1,000 pounds of CFC-12 (a post-1989 ODC not described in paragraph (d)(2) or (d)(3) of this section). As provided under paragraph (f)(2) of this section, B is not required to prepare an inventory because CFC-12 is not subject to the floor stocks tax in 1991.

(g) TIME FOR PAYING TAX. The floor stocks tax imposed under section 4682(h) shall be paid without assessment or notice. In the case of the floor stocks tax imposed on January 1, 1990, the tax shall be paid by April 1, 1990. In the case of floor stocks taxes imposed after January 1, 1990, the tax shall be paid by June 30 of the year in which the tax is imposed.

Par. 3. The authority for part 602 continues to read as follows:

Authority: (26 U.S.C. 7805)

Par. 4. Section 602.101(c) is amended by removing the "T" from the following entries: "52.4682-1T(b)(2)(iii) . . . 1545-1153", "52.4682-2T(b) . . . 1545-1153", "52.4682-2T(d) . . . 1545-1153", "52.4682-3T(c)(2) . . . 1545-1153", "52.4682-3T(g) . . . 1545-1153", and "52.4682-4T(f) . . . 1545-1153".