Passenger Tax on Water Transportation -- Temporary and Proposed Regulations Under Section 4471

 CC:PS-003-90                                                                                               [4830-01]

 ACTION: Final and Temporary Regulations.

 SUMMARY: This document contains temporary regulations that implement the tax on the transportation of passengers on covered voyages by certain vessels under section 4471 of the Internal Revenue Code as enacted by section 7504 of the Revenue Reconciliation Act of 1989 (Pub. L. 101-239, 103 Stat. 2106, 2362). This document also removes the existing regulations under 26 CFR Part 47 (relating to documentary stamp taxes), which are obsolete.

 EFFECTIVE DATES: These regulations are effective for voyages beginning on or after January 1, 1990.

 FOR FURTHER INFORMATION CONTACT: Edward B. Madden, Jr., 202-566-4077 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

This document contains temporary regulations on the Excise Tax on Transportation by Water (26 CFR Part 43) under sections 4471 and 4472 of the Internal Revenue Code relating to the excise tax on the initial embarkation or disembarkation of passengers on certain commercial passenger vessels and on certain other commercial vessels transporting passengers engaged in gambling.

 As a final action this document also removes the existing regulations under 26 CFR Part 47 (relating to documentary stamp taxes), which are obsolete.

NEED FOR TEMPORARY REGULATIONS

 Immediate guidance is needed on the imposition of tax on transportation of persons by water. Therefore, good cause is found to dispense with the public notice requirement of 5 U.S.C. 553(b) and the delayed effective date requirement of 5 U.S.C. 553(d).

EXPLANATION OF PROVISIONS

 The temporary regulations provide taxpayers with rules for complying with the tax imposed by section 4471 of the Code. Section 4471 of the Code imposes a tax of $3 per passenger on a covered voyage, as that term is defined in section 4472, to be paid by the person providing the covered voyage. The tax is to be imposed only once for each passenger on a covered voyage, either at the time of first embarkation or disembarkation in the United States. Under section 4472(1) of the Code, the term "covered voyage" means a voyage of (a) a commercial passenger vessel that extends over one or more nights, or (b) a commercial vessel transporting passengers engaged in gambling aboard the vessel beyond the territorial waters of the United States. A passenger vessel is any vessel with stateroom or berth accommodations for more than 16 passengers.

REQUIREMENTS FOR FILING RETURNS, PAYING TAX, AND USING GOVERNMENT DEPOSITARIES

 Sections 6011 (relating to requiring returns), 6071 (relating to the time for filing returns), and 6302 (relating to the use of government depositaries) provide that regulations are required in order to impose rules for filing returns and making deposits of tax.

 Under temporary section 43.6011(a)-1T, any person liable for the tax imposed by section 4471 must file Form 720, Quarterly Federal Excise Tax Return, to report that liability. The procedures for filing are contained in the instructions to the form. Temporary section 43.6071(a)-1T(a) provides that returns must be filed by the last day of the month following the end of a calendar quarter.

 Under temporary section 43.6302(c)-1T, semimonthly deposits of tax are required to be made by all persons liable for the tax imposed under section 4471. The deposit for each semimonthly period is due on or before the 9th day of the following semimonthly period.

 Temporary sections 43.6071(a)-1T(c) and 43.6151(a)-1T provide special rules for filing returns and for paying the tax due for the period January 1, 1990, through November 15, 1990.

 In the proposed Rules portion of this issue of the Federal Register, the Internal Revenue Service is issuing a companion Notice of Proposed Rulemaking that announces proposed regulations to address additional issues not addressed in these temporary 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 notice of the proposed rulemaking for the regulations was submitted to the Administrator of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these regulations is Edward B. Madden, Jr., Office of Assistant Chief Counsel (Passthroughs & Special Industries), Internal Revenue Service. Other personnel from the Service and Treasury Department, however, participated in their development.

LIST OF SUBJECTS

26 CFR Part 43

 Excise taxes, Gambling, Transportation by water, Vessels.

26 CFR Part 47

 Documentary stamp taxes, Excise taxes, Insurance, Reporting and recordkeeping requirements, Securities.

Treasury Decision 8314

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR, Ch. I, is amended as follows:

Par. 1. A new Part 43 of the Code of Federal Regulations is added as follows:

PART 43 -- EXCISE TAX ON TRANSPORTATION BY WATER

 Section 43.4471-1T Imposition of tax (temporary).

SECTION 43.4471-1T IMPOSITION OF TAX (TEMPORARY).

(a) IN GENERAL. Section 4471 imposes a tax of $3 per passenger on a covered voyage as is defined in section 4472.

(b) BY WHOM PAID. The tax is imposed on the person providing the covered voyage (the operator of the vessel).

SECTION 43.6011(A)-1T RETURNS (TEMPORARY).

(a) IN GENERAL. Liability for tax imposed under section 4471 shall be reported on Form 720, Quarterly Federal Excise Tax Return, (or any other form designated by the Commissioner subsequent to publication of these regulations for reporting such liability). Except as provided in paragraph (b) of this section and section 43.6071(a)-1T(c), a return shall be made for a period of one calendar quarter. A return shall be filed for the first calendar quarter in which the person incurs liability for tax imposed under section 4471, and for each subsequent calendar quarter, whether or not liability was incurred under section 4471 during that quarter, until the person has filed a final return in accordance with section 43.6011(a)-2T.

(b) MONTHLY AND SEMIMONTHLY RETURNS -- (1) REQUIREMENT. If the district director determines that any person that is required to make deposit of taxes under the provisions of section 43.6302(c)-1T has failed to timely deposit those taxes, that person shall be required, if so notified in writing by the district director, to file a monthly or semimonthly return. Every person so notified by the district director shall make a return for the calendar month or semimonthly period (as defined in section 43.6302(c)-1T(c)) in which the notice is received and for each calendar month or semimonthly period thereafter until that person has filed a final return (as defined in section 43.6011(a)-2T) or is notified to make returns for a different return period as provided in paragraph (b)(2) of this section.

(2) CHANGE OF REQUIREMENT. As circumstances dictate, the district director may notify a person in writing that the person is required to make quarterly or monthly returns instead of semimonthly returns or to make quarterly or semimonthly returns instead of monthly returns.

(3) RETURN FOR PERIOD CHANGE TAKES EFFECT. The first return required pursuant to the notice of a change of requirement shall include all prior periods for which the person has not filed a return.

(c) CROSS REFERENCE. For provisions relating to the time to file returns, see section 43.6071(a)-1T. For provisions relating to the place for filing returns, see section 43.6091-1T. For provisions relating to use of government depositaries, see section 43.6302(c)- 1T.

SECTION 43.6011(A)-2T FINAL RETURNS (TEMPORARY).

Any person required by section 43.6011(a)-1T to make a return who in any return period ceases operations in respect of which a return is required, shall make a final return in accordance with the instructions to the return. Each final return shall be marked "Final Return" by the person filing the return. A person who has only temporarily ceased to incur liability for tax shall not make a final return but shall continue to file returns.

SECTION 43.6071(A)-1T TIME FOR FILING RETURNS (TEMPORARY).

(a) QUARTERLY RETURNS. Each return required to be made under section 43.6011(a)-1T(a) for a return period of one calendar quarter shall be filed on or before the last day of the first calendar month following the close of the quarter for which it is made.

(b) MONTHLY AND SEMIMONTHLY RETURNS -- (1) MONTHLY RETURNS. Each return required to be made under section 43.6011(a)-1T(b) for a monthly period shall be filed not later than the last day of the month following the period for which it is made.

(2) SEMIMONTHLY RETURNS. Each return required to be made under section 43.6011(a)-1T(b) for a semimonthly period shall be filed not later than the last day of the semimonthly period following the period for which it is made.

(c) RETURNS FOR THE PERIOD JANUARY 1, 1990, THROUGH NOVEMBER 15, 1990. Liability for tax incurred during the period January 1, 1990, through November 15, 1990, shall be reported on a single return filed not later than November 30, 1990.

(d) CROSS REFERENCE. For provisions relating to timely mailing treated as timely filing and paying, see section 7502. For provisions relating to time for performance of acts where the last day falls on Saturday, Sunday, or a legal holiday, see section 7503.

SECTION 43.6091-1T PLACE FOR FILING RETURNS (TEMPORARY).

(a) QUARTERLY RETURNS. Quarterly returns shall be filed according to the instructions applicable to those returns.

(b) MONTHLY AND SEMIMONTHLY RETURNS. Monthly and semimonthly returns required under section 43.6011(a)-1T(b) shall be filed in accordance with the instructions of the district director requiring such filing.

SECTION 43.6101-1T PERIOD COVERED BY RETURNS (TEMPORARY).

See section 43.6011(a)-1T for the rules relating to the period covered by the return.

SECTION 43.6109(A)-1T IDENTIFYING NUMBERS (TEMPORARY).

Every person required by section 43.6011(a)-1T to make a return shall provide the taxpayer identifying number required by the instructions applicable to the return.

SECTION 43.6151(A)-1T TIME AND PLACE FOR PAYING TAX SHOWN ON RETURN (TEMPORARY).

The tax required to be reported on each tax return under this subpart is due and payable at the time prescribed in section 43.6071(a)-1T and the place prescribed in section 43.6091-1T for filing the return. The tax required to be reported for the period January 1, 1990, through November 15, 1990, shall be due and payable not later than November 30, 1990. See the applicable sections in Part 301 of this chapter (Regulations on Procedure and Administration) for provisions relating to interest on underpayments, additions to tax, and penalties. For provisions relating to the use of Federal Reserve banks and authorized financial institutions in depositing the taxes, see section 43.6302(c)-1T.

SECTION 43.6302(1)(C)-1T USE OF GOVERNMENT DEPOSITARIES (TEMPORARY).

(a) IN GENERAL. This section provides rules relating to deposits of tax imposed by section 4471. The provisions of this section shall not apply to taxes for the month or the semimonthly period in which the taxpayer receives notice from the district director that returns are required under section 43.6011(a)-1T(b), or for any subsequent month or semimonthly period for which such a return is required.

(b) SEMIMONTHLY DEPOSITS -- (1) IN GENERAL. Each person required by section 43.6011(a)-1T(a) to file a return shall make semimonthly deposits of the tax imposed by section 4471. The taxes payable under section 4471 for a semimonthly period (as defined in paragraph (c) of this section) shall be deposited (except as provided in paragraph (d) of this section) on or before the 9th day of the semimonthly period following the semimonthly period for which the taxes are reportable.

(2) SAFE HARBOR RULE. A person will be considered to have complied with the semimonthly deposit requirement if the deposit for such semimonthly period is not less than 1/6 (16.67 percent) of the total tax liability under section 4471 for the second preceding calendar quarter, and the person deposits any underpayment for the current quarter on or before the last day of the first calendar month following the end of the quarter. This safe harbor rule does not apply to any person who did not report liability for tax under section 4471 for the second preceding quarter.

(c) SEMIMONTHLY PERIOD. The term "semimonthly period" means the first 15 days of a calendar month or the portion of a calendar month following the 15th day of that month.

(d) NO DEPOSITS OF TAX FOR THE PERIOD JANUARY 1, 1990, THROUGH NOVEMBER 15, 1990. No person required to file an excise tax return for any part of the period beginning January 1, 1990, and ending November 15, 1990, is required under this section to deposit the amount of liability for excise taxes imposed under section 4471 incurred during that period, but shall make payment of the tax as provided by section 43.6151(a)-1T. Any person required to file a return to report taxes incurred under section 4471 for any part of the period beginning January 1, 1990 and ending November 15, 1990, may, however, deposit the amount of that liability with a Federal Reserve bank or authorized financial institution on or before November 30, 1990.

(e) DEPOSITARY FORMS AND PROCEDURES -- (1) IN GENERAL. A person required by this section to make deposits may make one or more remittances with respect to the amount required to be deposited. An amount of tax that is not otherwise required by this section to be deposited may, nevertheless, be deposited if the person liable for the tax so desires.

(2) REMITTANCE OF DEPOSITS. Each deposit shall be accompanied by Form 8109, Federal Tax Deposit Coupon (or any other form designated by the Commissioner for making deposits) and remitted in accordance with the instructions applicable to that form and to the return.

(3) PROCUREMENT OF PRESCRIBED FORMS. Copies of the Federal Tax Deposit Coupon will be furnished, so far as possible, to persons required to make deposits under this section. Those persons will not be excused from making a deposit, however, if no coupon has been furnished. A person not supplied with the coupon is required to apply for it in ample time to make the required deposits within the time prescribed. Copies of the Federal Tax Deposit Coupon may be obtained by applying for them with the district director or the director of a service center.

Paragraph 2. Title 26, Part 47, of the Code of Federal Regulations is removed.

PART 47 -- [Removed]