SERVICE PROVIDES GUIDELINES FOR COMPUTATION OF GAS GUZZLER TAX.

Rev. Proc. 87-10

SECTION 1. PURPOSE

The purpose of this revenue procedure is to amplify Rev. Proc. 86-9, 1986-1 C.B. 530, by adding alternative methods by which importers of automobiles can compute gas guzzler tax liability under section 4064 of the Internal Revenue Code for automobiles that are imported without a fuel economy rating assigned by the Environmental Protection Agency (EPA). Specifically, this revenue procedure provides additional guidance to those importers who seek to rebut the presumption of a "lowest fuel economy rating" for an automobile as set forth in section 4.02 and 4.03 of Rev. Proc. 86-9.

SEC. 2. BACKGROUND

01 Section 4064 of the Code imposes on the sale by the manufacturer (the definition of which includes an importer) of each automobile a tax in accordance with the tables set forth in section 4064(a). The liability for tax is based on the model year of the automobile and the fuel economy rating of the model type into which the automobile falls.

02 Rev. Proc. 86-9 sets forth guidelines for importers of automobiles to compute gas guzzler tax liability under section 4064 of the Code for automobiles that are imported without an engine emission "certificate of conformity" and fuel economy rating assigned by the E.P.A.

03 In general, under section 4.01 of Rev. Proc. 86-9, an importer who installs emission controls in order to convert an automobile to conform to a prototype automobile that is already EPA- certified for sale in the United States may use the EPA-prescribed fuel economy rating for the original manufacturer's certified prototype automobile as listed in Section 4.01 of that revenue procedure.

04 In the case of an importer who modifies an automobile through the installation of emission and safety control components and has the automobile tested for emission compliance, and no certified automobile is available for comparison, section 4.02 of Rev. Proc. 86-9 provides that the imported automobile is presumed to fall within the lowest fuel economy rating prescribed for the particular model year of the automobile in the tax rate tables contained in section 4064(a) of the Code.

05 Section 4.03 of Rev. Proc. 86-9 also provides for a presumption of a lowest fuel economy rating for automobiles that are imported under an exemption from compliance with the federal emission standards by virtue of EPA enforcement and regulatory exemptions.

06 Under section 4.04 of Rev. Proc. 86-9, where an importer believes that an ascribed fuel economy rating is inappropriate for a particular vehicle, the importer may have the vehicle individually tested in accordance with EPA procedures at one of the EPA (Office of Air, Noise and Radiation) recognized laboratories that are capable of conducting motor vehicle emissions tests.

SEC. 3. SCOPE AND OBJECTIVE

It has come to the attention of the Internal Revenue Service that the individual testing of automobiles in order to rebut the presumption of lowest fuel economy rating can be quite burdensome. Accordingly, in order to allow an importer more flexibility to rebut the presumption, the Service will allow other methods of rebuttal as described below.

SEC. 4. PROCEDURE

01 As provided in section 4.04 or Rev. Proc. 86-9, where an importer believes that the ascribed lowest fuel economy rating is inappropriate for a particular vehicle, the importer may, at its own expense, test that particular vehicle for a fuel economy rating at an E.P.A.-recognized laboratory. That importer shall retain the fuel economy test documentation for a period of three years from the date the tax becomes due or the date the tax is paid, whichever is later.

02 In the case of a person who is engaged in the business of importing automobiles, that person may rebut an ascribed lowest fuel economy rating by using the E.P.A.-recognized laboratory test results of a vehicle of the same year, make, model and engine that the person has modified in the same manner as the vehicle in question. That person shall retain documentation supporting that fuel economy rating for a period of three years from the date the tax becomes due or the date the tax is paid, whichever is later.

03 Any person (including a person engaged in the business of importing automobiles who cannot rebut the presumption utilizing the method set forth in subsection 02 immediately above) may, as an alternative to undergoing an E.P.A.-recognized test, rebut an ascribed lowest fuel economy rating by using the E.P.A.-recognized test results of any vehicle of the same year, make, model and engine that has been converted or modified in the same manner as the vehicle in question. Documentation shall be retained by the person for a three year period as described in section 4.02, and shall consist of (1) the year, make, model and engine of the vehicle that was tested, (2) the fact that the vehicle that was tested was modified or converted in the same manner as the vehicle in question, and (3) the E.P.A.-recognized test results for the vehicle that was tested.

04 The District Director having jurisdiction may, in those circumstances where no test results have been presented as described in subsections .01, .02, and .03 above, accept a non-ascribed fuel economy rating where, to the District Director's satisfaction, the rating can be supported by sufficient other documentation.

05 In the case of those imported vehicles that are exempted from compliance with federal emission standards by virtue of EPA enforcement and regulatory exemptions, and that are accordingly ascribed the lowest fuel economy rating for that vehicle's particular model year, the District Director having jurisdiction may accept a fuel economy rating, other than the lowest fuel economy rating, where to the District Director's satisfaction the rating can be supported by sufficient documentation.

SEC. 5. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 86-9 is amplified.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective with respect to 1980 and later model year automobiles.