Final Regs on Vaccine and Fuel Floor Stocks Taxes

 [4830-01-u]

 ACTION: Final regulations.

 SUMMARY: This document contains final regulations relating to the export of certain vaccines and to the floor stocks tax on vaccines held on August 10, 1993. This document also contains final regulations relating to the floor stocks taxes on gasoline, diesel fuel, and aviation fuel held on October 1, 1993; on diesel fuel held on January 1, 1994; and on commercial aviation fuel held on October 1, 1995. These regulations reflect changes to the law made by the Omnibus Budget Reconciliation Act of 1987 and the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993). The regulations provide guidance relating to the floor stocks taxes, including guidance concerning the person liable for each tax, exceptions to the taxes, and the time for reporting and paying each tax. In addition, the regulations provide guidance to manufacturers of exported vaccines.

 DATES: These regulations are effective August 22, 1994.

 For dates of applicability, see sections 47.2-1, 47.3-1, 48.4221-3(e), and 48.6416(b)(2)-2(b)(2).

 FOR FURTHER INFORMATION CONTACT: Edward Madden (202) 622-4537 (not a toll-free call).

 SUPPLEMENTARY INFORMATION:

VACCINES

BACKGROUND

The Vaccine Injury Compensation Trust Fund (the Fund) compensates individuals who are injured as a result of the administration of certain vaccines. Revenue for the Fund is provided by a manufacturers tax (section 4131) on these vaccines. The tax, as originally enacted, was in effect only from 1988 through 1992, but OBRA 1993 applied the tax to vaccine sales after August 10, 1993.

 OBRA 1993 also imposes a floor stocks tax, which does not appear in the Internal Revenue Code (Code), on these vaccines. The floor stocks tax is a one-time tax on taxable vaccines that were sold by the manufacturer, producer, or importer on or before August 10, 1993, on which no tax was imposed by section 4131, and that were held at the last moment of August 10, 1993, for sale or use. The rates of floor stocks tax are equal to the tax rates for sales by the manufacturer, producer, or importer.

 On September 20, 1993, a notice of proposed rulemaking (PS-7-93) relating to tax-free exports of vaccine was published in the Federal Register (58 FR 48801).

 On November 29, 1993, temporary regulations (TD 8497) relating to the vaccine floor stocks tax were published in the Federal Register (58 FR 62524). A notice of proposed rulemaking (PS-50-93) cross-referencing the temporary regulations was published in the Federal Register for the same day (58 FR 62558).

 No comments responding to PS-7-93 were received.

 Written comments responding to PS-50-93 were received, but no public hearing was requested or held. After consideration of all comments, the proposed vaccine export regulations and the proposed vaccine floor stocks regulations are adopted by this Treasury decision, and the temporary regulations relating to the vaccine floor stocks tax are removed.

SUMMARY OF COMMENTS

 All of the comments received on PS-50-93 addressed the de minimis exception to the floor stocks tax. The proposed regulations provide that any person whose liability for tax does not exceed $1,000 is not required to report or pay the floor stocks tax. One comment requested that the de minimis amount be increased to $10,000. The de minimis exception was established for the administrative convenience of the IRS to eliminate the necessity of processing returns from persons holding small amounts of vaccines and having a small tax liability. The $1,000 de minimis amount is adequate for this purpose and the comment is, therefore, not adopted.

 Another comment suggested that the exception be applied on a physician-by-physician basis so that a group practice (such as a partnership or professional corporation) would have a de minimis amount proportionate to the size of the group. As noted, increasing the amount of the de minimis exception is not consistent with its purpose. Further, if adopted, this suggestion could increase the administrative burdens of the tax. For example, allocation problems would arise if a physician is engaged in practice through more than one group (such as a partnership and a clinic or hospital). Accordingly, this suggestion is not adopted. The comment also suggested that the de minimis exception be treated as an exemption and that only amounts of tax in excess of $1,000 be reported or paid. This suggestion is inconsistent with the limited purpose of the exception -- to eliminate small returns. It is, therefore, not adopted.

FUEL FLOOR STOCKS

BACKGROUND

 OBRA 1993 makes several changes to the Code with respect to the taxation of motor fuels. First, effective October 1, 1993, it increases the rates of excise taxes on gasoline, diesel fuel, and aviation fuel. The gasoline tax, under section 4081, increases from 14.1 cents per gallon to 18.4 cents per gallon; the diesel fuel tax, under section 4091, increases from 20.1 cents per gallon to 24.4 cents per gallon; and the aviation fuel tax, under section 4091, increases from 17.6 cents per gallon to 21.9 cents per gallon. These new rates include the 0.1-cent-per-gallon tax that funds the Leaking Underground Storage Tank (LUST) Trust Fund. Second, effective January 1, 1994, OBRA 1993 generally moves the point of imposition of tax on diesel fuel to the terminal rack. Third, effective October 1, 1995, OBRA 1993 increases the tax on fuel used in commercial aviation by 4.3 cents per gallon.

 OBRA 1993 also imposes three floor stocks taxes, which are not codified, on these fuels. The taxes are to be paid by persons holding fuel on the effective dates of the changes.

 The first floor stocks tax is a one-time tax on gasoline, diesel fuel, and aviation fuel that are held at the first moment of October 1, 1993, at a point in the distribution chain where these fuels would not otherwise be subject to the increased tax rates. The rate of the October 1, 1993, floor stocks tax is 4.3 cents per gallon.

 The second floor stocks tax is a one-time tax on diesel fuel held by any person at the first moment of January 1, 1994, if (A) no tax was imposed on the fuel under section 4041(a) or 4091 as in effect on December 31, 1993, and (B) tax would have been imposed by section 4081, as amended by OBRA 1993, on any prior removal, entry, or sale of the fuel had section 4081 applied to the fuel for periods before January 1, 1994. The rate of the January 1, 1994, floor stocks tax is 24.4 cents per gallon.

 The third floor stocks tax is a one-time tax on commercial aviation fuel held by any person at the first moment of October 1, 1995, on which the LUST tax was imposed under section 4091 before October 1, 1995. The rate of the October 1, 1995, floor stocks tax is 4.3 cents per gallon.

 On November 29, 1993, temporary regulations (TD 8498) were published in the Federal Register (58 FR 62526). A notice of proposed rulemaking (PS-49-93) cross-referencing the temporary regulations was published in the Federal Register for the same day (58 FR 62559).

 On December 27, 1993, temporary regulations (TD 8512) amending the existing temporary regulations to allow diesel fuel dyed past the terminal rack to qualify for exemption from the floor stocks tax were published in the Federal Register (58 FR 68304). A notice of proposed rulemaking (PS-76-93) cross-referencing the temporary regulations was published in the Federal Register for the same day (58 FR 68338). On January 31, 1994, a correction to TD 8498 was published in the Federal Register (59 FR 4251).

 Written comments responding to these notices were received, but no public hearing was requested or held. After consideration of all the comments, the proposed floor stocks regulations are adopted by this Treasury decision and the corresponding temporary regulations are removed. The comments made with respect to the temporary and proposed regulations are discussed below.

SUMMARY OF COMMENTS

 Three comments were received. One of the comments suggested that the requirement that diesel fuel be dyed at the time of its removal from the terminal in order to be exempt from the floor stocks tax was too restrictive and that any diesel fuel held for an exempt purpose that is eventually used for an exempt purpose should be free from floor stocks tax. This comment was addressed in TD 8512, which allows diesel fuel that was dyed past the terminal rack to qualify for exemption from the floor stocks tax. Two comments suggested that fuel held in storage tanks below the standpipe (dead storage) should not be subject to floor stocks tax. This suggestion was addressed in the preamble to the temporary regulations (TD 8498) and, for the reasons there stated, is not adopted.

SPECIAL ANALYSES

 It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It also has 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 Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notices of proposed rulemaking preceding these regulations were submitted to the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these regulations is Edward Madden, Office of Assistant Chief Counsel (Passthroughs and Special Industries). However, other personnel from the IRS and Treasury Department participated in their development.

LIST OF SUBJECTS

26 CFR Part 47

 Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 48

 Excise taxes, Reporting and recordkeeping requirements.

Treasury Decision 8561

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR chapter I is amended as follows:

Paragraph 1. Part 47 is revised to read as follows:

PART 47 -- FLOOR STOCKS TAXES

Subpart A -- [Reserved]

 Sec.

Section 47.2-5 also issued under section 13421(c) of Pub. L. 103-66 (107 Stat. 312, 565).

Subpart A -- [Reserved]

Sections 47.1-1 through 47.1-5 [Reserved]

Subpart B -- Vaccine Floor Stocks Tax of 1993

SECTION 47.2-1 SCOPE OF THIS SUBPART B AND EFFECTIVE DATE.

The regulations in this subpart B relate to the vaccine floor stocks tax imposed by section 13421(c) of the Omnibus Budget Reconciliation Act (Pub. L. 103-66; 107 Stat. 312, 565). The tax is imposed on untaxed vaccines held at the last moment of August 10, 1993. The regulations in this subpart B describe the specific articles subject to tax, the rates of tax, and the persons liable for tax. The regulations in this subpart B also provide an exception to the tax and requirements for payment of tax and filing a return reporting the tax. The regulations in this subpart B are effective on August 10, 1993.

SECTION 47.2-2 DEFINITIONS RELATING TO THE VACCINE FLOOR STOCKS TAX.

(a) TERMS USED IN SECTION 4131. For purposes of this subpart, terms that are also used in section 4131 have the same meaning as when so used.

(b) OTHER TERMS. For purposes of this section --

ACT refers to the Omnibus Budget Reconciliation Act of 1993.

CONTROLLED GROUP MEANS --

(1) Any controlled group of corporations within the meaning of section 1563(a), except that the phrase "more than 50 percent" is substituted for the phrase "at least 80 percent" each place it appears therein and a controlled group of corporations includes members that are described in section 1563(b)(2) (relating to excluded members); and

(2) Any other group of organizations, at least one member of which is not a corporation, that is a brother-sister group under common control or a combined group under common control, with terms having the following meanings for this purpose:

(i) ORGANIZATION means a sole proprietorship, a partnership, a trust, an estate, or a corporation.

(ii) BROTHER-SISTER GROUP UNDER COMMON CONTROL means two or more organizations if --

(A) The same five or fewer persons who are individuals, estates, or trusts own (directly and with the application of section 1.414(c)- 4 of this chapter) a controlling interest of each organization;

(B) Taking into account the ownership of each person only to the extent that person's ownership is identical with respect to each organization, such persons are in effective control of each organization; and

(C) The five or fewer persons whose ownership is considered for purposes of the controlling interest requirement for each organization are the same persons whose ownership is considered for purposes of the effective control requirement.

(iii) CONTROLLING INTEREST means --

(A) In the case of a corporation, ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of the shares of all classes of stock of the corporation;

(B) In the case of a trust or estate, ownership of an actuarial interest (determined under section 1.52-1(f) of this chapter) of at least 50 percent of the trust or estate;

(C) In the case of a partnership, ownership of at least 50 percent of the profit interest or capital interest of the partnership; and

(D) In the case of a sole proprietorship, ownership of the sole proprietorship.

(iv) EFFECTIVE CONTROL has the meaning given that term in section 1.52-1(d)(3) of this chapter.

(v) COMBINED GROUP UNDER COMMON CONTROL has the meaning given that term in section 1.52-1(e) of this chapter.

SECTION 47.2-3 IMPOSITION OF VACCINE FLOOR STOCKS TAX.

(a) VACCINES SUBJECT TO TAX. Section 13421(c) of the Act imposes a floor stocks tax on any taxable vaccine (as defined in section 4132(a)(1) of the Internal Revenue Code) --

(1) Which was sold by the manufacturer, producer, or importer on or before August 10, 1993;

(2) On which no tax was imposed under section 4131 (or on which such tax was imposed and subsequently credited or refunded); and

(3) Which is held at the last moment of August 10, 1993, by any person for sale or use.

(b) RATES OF TAX. The rate of floor stocks tax on each taxable vaccine is the rate of tax specified in section 4131(b)(1) of the Internal Revenue Code.

(c) PERSON LIABLE FOR TAX. The person liable for the floor stocks tax on any vaccine subject to tax is the person that holds the vaccine at the last moment of August 10, 1993. For purposes of the floor stocks tax, a vaccine is held at the last moment of August 10, 1993, by the person that has title to the vaccine (whether or not delivery to that person has been made) at such time, as determined under applicable local law. There is no exemption from the floor stocks tax for the United States or for State or local governments. 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.

SECTION 47.2-4 DE MINIMIS EXCEPTION TO VACCINE FLOOR STOCKS TAX.

(a) DE MINIMIS EXCEPTION -- (1) IN GENERAL. Except as otherwise provided in this section, if the aggregate amount of floor stocks tax payable by a person does not exceed $1,000, that person is not required to report or pay the tax.

(2) ALL AMOUNTS HELD SUBJECT TO TAX IF THRESHOLD EXCEEDED. If the aggregate amount of floor stocks tax payable by a person exceeds $1,000, that person is required to report and pay the total amount of tax as determined without regard to this section.

(3) CONTROLLED GROUPS. A member of a controlled group (as defined in section 47.2-2) is not excepted from reporting and paying floor stocks tax under this section if the aggregate amount of floor stocks tax payable by all members of the controlled group exceeds $1,000.

(b) EXAMPLES. The following examples illustrate the rules of this section:

EXAMPLE 1. A holds 50 doses of DPT vaccine and 60 doses of polio vaccine on the last moment of August 10, 1993. A is not a member of a controlled group. A is not required to report and pay the floor stocks tax on any of the taxable vaccines because the aggregate amount of floor stocks tax payable by A (determined without regard to this section) does not exceed $1,000 ((50 X $4.56 per dose of DPT vaccine) + (60 X $0.29 per dose of polio vaccine) = $245.40).

EXAMPLE 2. D, E, and F are members of the same controlled group. On the last moment of August 10, 1993, D holds 100 doses of DPT vaccine and 160 doses of polio vaccine; E holds 80 doses of DPT vaccine, 10 doses of MMR vaccine and 60 doses of polio vaccine; and F holds 20 doses of MMR vaccine and 10 doses of DT vaccine. Without regard to this section, D is liable for a tax of $502.40 ((100 X $4.56 per dose of DPT vaccine) + (160 X $0.29 per dose of polio vaccine)); E is liable for a tax of $426.60 ((80 X $4.56 per dose of DPT vaccine) + (10 X $4.44 per dose of MMR vaccine) + (60 X $0.29 per dose of polio vaccine)); and F is liable for a tax of $89.40 ((20 X $4.44 per dose of MMR vaccine) + (10 X $0.06 per dose of DT vaccine)). Because the aggregate amount of floor stocks tax payable by all members of the group ($1,018.40) exceeds $1,000, each member of the controlled group must report and pay the floor stocks tax.

SECTION 47.2-5 REQUIREMENTS WITH RESPECT TO PAYMENT AND RETURN.

(a) PAYMENT OF TAX. The floor stocks tax is to be paid without assessment or notice on or before February 28, 1994.

(b) FILING OF RETURN -- (1) FORM 720. Except as provided in section 47.2-4(a) (relating to the de minimis exception), every person liable for the floor stocks tax must make a return of the tax on Form 720, Quarterly Federal Excise Tax Return. The return is to be prepared and filed in accordance with the instructions relating to the return.

(2) TIME FOR FILING -- (i) IN GENERAL. The Form 720 required by paragraph (b)(1) of this section must be filed on or before February 28, 1994, and is a return for the fourth calendar quarter of 1993. A first return reporting only floor stocks tax is also a final return and therefore, in accordance with the instructions to Form 720, the box for "final return" must be marked.

(ii) RETURN REPORTING OTHER TAXES. A person must file only one Form 720 for a quarter. If a person is required under part 40 of this chapter to file Form 720 for the fourth calendar quarter of 1993 for other excise taxes earlier than February 28, 1994, that person files a single Form 720 for the quarter by February 28, 1994. This paragraph (b)(2)(ii) does not extend the time for making deposits or paying any excise tax.

SUBPART C -- Fuel Floor Stocks Taxes Under the Omnibus Budget Reconciliation Act of 1993

SECTION 47.3-1 SCOPE OF THIS SUBPART C AND EFFECTIVE DATE.

The regulations in this subpart C relate to the fuel floor stocks taxes imposed by sections 13241(h), 13243, and 13245 of the Omnibus Budget Reconciliation Act of 1993 (Act). The tax under section 13241(h) of the Act is imposed on previously taxed gasoline, diesel fuel, and aviation fuel held by any person at the first moment of October 1, 1993 (the October 1, 1993, floor stocks tax). The tax under section 13243 of the Act is imposed on untaxed diesel fuel that does not satisfy the requirements of section 4082 (as amended by section 13242 of the Act) and that is held by any person at the first moment of January 1, 1994, at a point in the distribution chain outside the bulk transfer/terminal system (the January 1, 1994, floor stocks tax). The tax under section 13245 of the Act is imposed on commercial aviation fuel on which tax was imposed under section 4091 (even if only at the Leaking Underground Storage Tank Trust Fund financing rate) before October 1, 1995, and that is held by any person at the first moment of October 1, 1995 (the October 1, 1995, floor stocks tax). The regulations in this subpart describe the specific fuels subject to tax, the rates of tax, and the persons liable for tax. The regulations in this subpart also provide exceptions to tax and requirements for payment of tax and filing a return reporting tax. This subpart is effective on October 1, 1993.

SECTION 47.3-2 DEFINITIONS RELATING TO THE FLOOR STOCKS TAXES UNDER THIS SUBPART C.

ACT is the Omnibus Budget Reconciliation Act of 1993.

AVIATION FUEL is any liquid (other than any product taxable under section 4081) that is commonly or commercially known or sold as a fuel that is suitable for use in an aircraft.

COMMERCIAL AVIATION FUEL is any aviation fuel that is held for use or sale for use in a business of transporting persons or property for compensation or hire by air.

CONTROLLED GROUP means --

(1) Any controlled group of corporations within the meaning of section 1563(a), except that the phrase "more than 50 percent" is substituted for the phrase "at least 80 percent" each place it appears therein and a controlled group of corporations includes members that are described in section 1563(b)(2) (relating to excluded members); and

(2) Any other group of organizations, at least one member of which is not a corporation, that is a brother-sister group under common control or a combined group under common control, with terms having the following meanings for this purpose:

(i) ORGANIZATION means a sole proprietorship, a partnership, a trust, an estate, or a corporation.

(ii) BROTHER-SISTER GROUP UNDER COMMON CONTROL means two or more organizations if --

(A) The same five or fewer persons who are individuals, estates, or trusts own (directly and with the application of section 1.414(c)- 4 of this chapter) a controlling interest of each organization;

(B) Taking into account the ownership of each person only to the extent that person's ownership is identical with respect to each organization, such persons are in effective control of each organization; and

(C) The five or fewer persons whose ownership is considered for purposes of the controlling interest requirement for each organization are the same persons whose ownership is considered for purposes of the effective control requirement.

(iii) CONTROLLING INTEREST means --

(A) In the case of a corporation, ownership of stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of the shares of all classes of stock of the corporation;

(B) In the case of a trust or estate, ownership of an actuarial interest (determined under section 1.52-1(f) of this chapter) of at least 50 percent of the trust or estate;

(C) In the case of a partnership, ownership of at least 50 percent of the profit interest or capital interest of the partnership; and

(D) In the case of a sole proprietorship, ownership of the sole proprietorship.

(iv) EFFECTIVE CONTROL has the meaning given that term in section 1.52-1(d)(3) of this chapter.

(v) COMBINED GROUP UNDER COMMON CONTROL has the meaning given that term in section 1.52-1(e) of this chapter.

DIESEL FUEL means any liquid (other than gasoline) that is suitable for use in a diesel-powered highway vehicle, diesel-powered train, or, after December 31, 1993, diesel-powered boat.

FUEL means gasoline, diesel fuel, and aviation fuel (including after September 30, 1995, commercial aviation fuel).

GASOLINE means --

(1) All products (including gasohol) that are commonly or commercially known or sold as gasoline and are suitable for use as a motor fuel (other than products that are not sold as gasoline and have an American Society for Testing Materials octane number of less than 75 as determined by the motor method); and

(2) Gasoline blend stocks (as defined in section 48.4081-1(j) of this chapter).

PERSON includes each business unit that has, or is required to have, its own employer identification number.

SECTION 47.3-3 IMPOSITION OF THE OCTOBER 1, 1993, FLOOR STOCKS TAX ON FUEL HELD ON OCTOBER 1, 1993.

(a) FUELS SUBJECT TO TAX. Section 13241(h)(1) of the Act imposes a floor stocks tax on gasoline (including gasohol), diesel fuel, and aviation fuel --

(1) On which tax was imposed under section 4081 or 4091 before October 1, 1993; and

(2) That is held at the first moment of October 1, 1993, by any person.

(b) RATE OF TAX. The rate of the October 1, 1993, floor stocks tax is 4.3 cents per gallon.

(c) PERSON LIABLE FOR TAX. The person liable for tax on any fuel subject to the October 1, 1993, floor stocks tax is the person that holds the fuel at the first moment of October 1, 1993. Fuel is held by a person if the person has title to the fuel (whether or not delivery to that person has been made) at such time, as determined under applicable local law.

SECTION 47.3-4 EXCEPTIONS TO THE OCTOBER 1, 1993, FLOOR STOCKS TAX.

(a) EXCEPTION FOR FUEL HELD FOR AN EXEMPT USE -- (1) GASOLINE. The October 1, 1993, floor stocks tax does not apply to gasoline held exclusively for an exempt use. In determining whether gasoline is held exclusively for an exempt use, the following rules in paragraphs (a)(1)(i) through (iii) of this section apply:

(i) An exempt use, with respect to gasoline, is any use of gasoline (other than use in producing gasohol) that is described in section 6420, 6421, or 6427 and that entitles the ultimate purchaser to a credit or payment equal to the tax imposed by section 4081. Thus, for example, exempt use of gasoline includes use on a farm for farming purposes; use in an off-highway business use; use in certain intercity, local, and school buses; exclusive use by a State or local government or nonprofit educational organization; and use in commercial aircraft.

(ii) Gasoline is held exclusively for an exempt use only if the person that holds gasoline at the first moment of October 1, 1993, actually uses the gasoline in an exempt use.

(iii) Gasoline is not held exclusively for an exempt use if, at the first moment of October 1, 1993, the gasoline is held for resale (including resale to a person that will use the gasoline in an exempt use). Thus, for example, gasoline held by a gasoline service station for sale to a farmer for use on a farm for farming purposes is not exempt from the October 1, 1993, floor stocks tax. However, the farmer would be eligible to claim an income tax credit for an amount equal to the tax under sections 34 and 6420.

(2) DIESEL FUEL. The October 1, 1993, floor stocks tax does not apply to diesel fuel held exclusively for an exempt use. In determining whether diesel fuel is held exclusively for an exempt use, the following rules in paragraphs (a)(2)(i) through (iv) of this section apply:

(i) An exempt use, with respect to diesel fuel, is any use of diesel fuel (other than use in producing a diesel fuel/alcohol mixture or as fuel in a diesel-powered train) that is described in section 6427 and that entitles the ultimate purchaser to a credit or payment equal to the tax imposed by section 4091. Thus, for example, exempt uses of diesel fuel include use other than as a fuel in a diesel-powered highway vehicle (as defined in section 48.4041-8(b)(4) of this chapter), use on a farm for farming purposes, exclusive use by a State or local government or nonprofit educational organization, and use in an off-highway business use.

(ii) Diesel fuel held for use in a diesel-powered train is not exempt from the October 1, 1993, floor stocks tax under this paragraph (a)(2) unless the fuel is held by a State or local government. Thus, the exemptions for use other than as fuel in a diesel-powered highway vehicle and off-highway business use do not apply to fuel used in a diesel-powered train. See section 6427(l)(3) as amended by section 13241 of the Act.

(iii) Diesel fuel is held exclusively for an exempt use only if the person that holds the fuel at the first moment of October 1, 1993, actually uses the diesel fuel in an exempt use.

(iv) Diesel fuel is not held exclusively for an exempt use if, at the first moment of October 1, 1993, the diesel fuel is held for resale (including resale to a person that will use the diesel fuel in an exempt use). Thus, for example, diesel fuel held by a retailer for sale to a construction company for use in the construction company's off-road machinery is not exempt from the October 1, 1993, floor stocks tax. However, the construction company would be eligible to claim a credit or payment equal to the tax under section 6427.

(3) AVIATION FUEL. The October 1, 1993, floor stocks tax does not apply to aviation fuel held exclusively for an exempt use. In determining whether aviation fuel is held exclusively for an exempt use, the following rules in paragraphs (a)(3)(i) through (iii) of this section apply:

(i) An exempt use, with respect to aviation fuel, is any use of aviation fuel that is described in section 6427 and that entitles the ultimate purchaser to a credit or payment equal to the tax imposed by section 4091. Thus, for example, exempt use of aviation fuel includes any use on a farm for farming purposes, exclusive use by a State or local government or nonprofit educational organization, and use other than use as a fuel in an aircraft in noncommercial aviation (as defined in section 4041(c)).

(ii) Aviation fuel is held exclusively for an exempt use only if the person that holds the aviation fuel at the first moment of October 1, 1993, actually uses the aviation fuel in an exempt use.

(iii) Aviation fuel is not held exclusively for an exempt use if, at the first moment of October 1, 1993, the aviation fuel is held for resale (including resale to a person that will use the aviation fuel in an exempt use). Thus, for example, aviation fuel held by a fixed-base operator for sale to an airline for use in commercial aviation is not exempt from the October 1, 1993, floor stocks tax. However, the airline would be eligible to claim a credit or payment equal to the tax under section 6427.

(b) EXCEPTION FOR GASOLINE OR DIESEL FUEL HELD IN VEHICLE FUEL SUPPLY TANK. The October 1, 1993, floor stocks tax does not apply to gasoline or diesel fuel held at the first moment of October 1, 1993, in the fuel supply tank of a motor vehicle (as defined in section 48.4041-8(c) of this chapter) or motorboat. This exception does not apply to fuel held in the fuel supply tank of a train or an aircraft.

(c) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL -- (1) IN GENERAL. The October 1, 1993, floor stocks tax does not apply to --

(i) Gasoline that a person holds at the first moment of October 1, 1993, if the aggregate amount of gasoline held by that person at that moment does not exceed 4,000 gallons; and

(ii) Diesel fuel or aviation fuel that a person holds at the first moment of October 1, 1993, if the aggregate amount of diesel fuel or the aggregate amount of aviation fuel held by that person at that moment does not exceed 2,000 gallons.

(2) ADDITIONAL RULES -- (i) COORDINATION WITH OTHER EXEMPTIONS. In determining the aggregate amount of gasoline, diesel fuel, or aviation fuel held by a person at the first moment of October 1, 1993, there is excluded the amount of gasoline, diesel fuel, or aviation fuel exempt from the October 1, 1993, floor stocks tax by reason of paragraph (a) of this section (relating to fuel held for exempt uses), or paragraph (b) of this section (relating to gasoline and diesel fuel held in the fuel supply tank of a motor vehicle or motorboat).

(ii) ALL AMOUNTS HELD SUBJECT TO TAX IF THRESHOLD EXCEEDED. The October 1, 1993, floor stocks tax applies to all amounts of gasoline, diesel fuel, or aviation fuel (as the case may be) held by a person (and not exempt from tax under paragraph (a) or (b) of this section) if the aggregate amount of fuel held by the person at the first moment of October 1, 1993, exceeds 4,000 gallons in the case of gasoline or 2,000 gallons in the case of diesel fuel or aviation fuel.

(iii) CONTROLLED GROUPS. A member of a controlled group (as defined in section 47.3-2) holds more than 4,000 gallons of gasoline if the aggregate amount of all gasoline held by all members of the controlled group exceeds 4,000 gallons. A member of a controlled group holds more than 2,000 gallons of diesel fuel or aviation fuel if the aggregate amount of all diesel fuel or aviation fuel, as the case may be, held by all members of the controlled group exceeds 2,000 gallons.

(3) EXAMPLES. The following examples illustrate the rules of this section:

EXAMPLE 1. On October 1, 1993, A holds 10,000 gallons of gasoline, 6,000 gallons of which are held exclusively for use on a farm for farming purposes. The remaining 4,000 gallons are held for use in A's highway vehicles. A is not a member of a controlled group. A is not liable for the floor stocks tax on any of the 10,000 gallons because the aggregate amount of fuel held by A for uses other than exempt uses does not exceed 4,000 gallons.

EXAMPLE 2. On October 1, 1993, B holds 1,900 gallons of diesel fuel and 3,900 gallons of gasoline. B is not a member of a controlled group. B is not liable for the floor stocks tax on diesel fuel because B's holdings of diesel fuel do not exceed 2,000 gallons. B is not liable for the floor stocks tax on gasoline because B's holdings of gasoline do not exceed 4,000 gallons.

EXAMPLE 3. On October 1, 1993, C holds 4,100 gallons of gasoline for resale at a service station. C is liable for a floor stocks tax of $176.30 (4,100 X $.043) on that gasoline.

SECTION 47.3-5 REQUIREMENTS WITH RESPECT TO PAYMENT AND RETURN FOR THE OCTOBER 1, 1993, FLOOR STOCKS TAX.

(a) PAYMENT OF TAX. The October 1, 1993, floor stocks tax is to be paid without assessment or notice on or before November 30, 1993.

(b) FILING OF RETURNS -- (1) FORM 720. Every person liable for the October 1, 1993, floor stocks tax must make a return of the tax on Form 720, Quarterly Federal Excise Tax Return. The return is to be prepared and filed in accordance with the instructions relating to the return.

(2) TIME FOR FILING -- (i) IN GENERAL. The Form 720 required by paragraph (b)(1) of this section must be filed on or before November 30, 1993, and is a return for the third calendar quarter of 1993. A first return reporting only the October 1, 1993, floor stocks tax is also a final return and therefore, in accordance with the instructions to Form 720, the box for "final return" must be marked.

(ii) RETURN REPORTING OTHER TAXES. A person must file only one Form 720 for a quarter. If a person is required under part 40 of this chapter to file Form 720 for the third calendar quarter of 1993 for other excise taxes earlier than November 30, 1993, that person files a single Form 720 for the quarter on or before November 30, 1993. This paragraph (b)(2)(ii) does not extend the time for making deposits or paying any excise tax.

SECTION 47.3-6 IMPOSITION OF THE JANUARY 1, 1994, FLOOR STOCKS TAX ON DIESEL FUEL HELD ON JANUARY 1, 1994.

(a) FUEL SUBJECT TO TAX. Section 13243 of the Act imposes a floor stocks tax on diesel fuel held at the first moment of January 1, 1994, by any person if --

(1) No tax was imposed on the diesel fuel under section 4041(a) or 4091 as in effect on December 31, 1993; and

(2) Tax would have been imposed by section 4081, as amended by section 13242 of the Act, on any prior removal, entry, or sale of the diesel fuel had section 4081 applied to the diesel fuel for periods before January 1, 1994.

(b) RATE OF TAX. The rate of the January 1, 1994, floor stocks tax is 24.4 cents per gallon.

(c) PERSON LIABLE FOR TAX. The person liable for tax on any diesel fuel subject to the January 1, 1994, floor stocks tax is the wholesale distributor or other registered producer, recreational boat operator, or other person that holds the fuel at the first moment of January 1, 1994. Fuel is held by a person if the person has title to the fuel (whether or not delivery to that person has been made) at such time, as determined under applicable local law.

SECTION 47.3-7 EXCEPTION TO THE JANUARY 1, 1994, FLOOR STOCKS TAX.

(a) IN GENERAL. The January 1, 1994, floor stocks tax does not apply to diesel fuel held exclusively for an exempt use. In determining whether diesel fuel is held exclusively for an exempt use, the following rules apply:

(1) An exempt use, with respect to diesel fuel, is any use of diesel fuel (other than in producing a diesel fuel/alcohol mixture or as fuel in a diesel-powered train) that is described in section 6427 (as in effect on January 1, 1994) and that would entitle the ultimate purchaser to a credit or payment equal to any tax imposed by section 4081 (as in effect on such date). Thus, for example, exempt uses of diesel fuel include use other than as a fuel in a diesel-powered highway vehicle (as defined in section 48.4041-8(b)(4) of this chapter), use on a farm for farming purposes, exclusive use by a State or local government or nonprofit educational organization, and use in an off-highway business use.

(2) Diesel fuel held for use in a diesel-powered train is not exempt from the January 1, 1994, floor stocks tax under paragraph (a)(1) of this section unless the fuel is held by a State or local government. Thus, the exemptions for use other than as fuel in a diesel-powered highway vehicle and off-highway business use do not apply to fuel used in a diesel-powered train. For circumstances in which diesel fuel held for use in a diesel-powered train may be exempt from the January 1, 1994, floor stocks tax, see paragraph (b) of this section (relating to the exemption for dyed fuel) and section 47.3-6(a)(1), which exempts fuel that was previously taxed under section 4041(a) or 4091 (as in effect on December 31, 1993).

(3) Diesel fuel is held exclusively for an exempt use only if the person that holds the fuel at the first moment of January 1, 1994, actually uses the diesel fuel in an exempt use.

(4) Diesel fuel is not held exclusively for an exempt use if, at the first moment of January 1, 1994, the diesel fuel is held for resale (including resale to a person that will use the diesel fuel in an exempt use). Thus, for example, except in the case of dyed fuel described in paragraph (b) of this section, diesel fuel held by a heating oil retailer for sale for use as home heating oil is not exempt from the January 1, 1994, floor stocks tax. However, a homeowner who uses the fuel for heating purposes would be eligible to claim a credit or may be eligible for a payment equal to the tax under section 6427.

(b) EXCEPTION FOR DYED FUEL. The January 1, 1994, floor stocks tax does not apply to diesel fuel that satisfies the dyeing requirements of section 48.4082-1T(b) of this chapter by March 31, 1994, or by the time the fuel is sold by the person holding the fuel at the first moment of January 1, 1994, whichever is earlier. Thus, for example, diesel fuel held by a heating oil retailer for sale for use as home heating oil is exempt from the January 1, 1994, floor stocks tax if the retailer or another person has dyed the fuel and the fuel satisfies the requirements of section 48.4082-1T(b) of this chapter.

SECTION 47.3-8 REQUIREMENTS WITH RESPECT TO PAYMENT AND RETURN FOR THE JANUARY 1, 1994, FLOOR STOCKS TAX.

(a) PAYMENT OF TAX. The January 1, 1994, floor stocks tax is to be paid without assessment or notice on or before July 31, 1994.

(b) FILING OF RETURNS -- (1) FORM 720. Every person liable for the January 1, 1994, floor stocks tax must make a return of the tax on Form 720, Quarterly Federal Excise Tax Return. The return is to be prepared and filed in accordance with the instructions relating to the return.

(2) TIME FOR FILING -- (i) IN GENERAL. The Form 720 required by paragraph (b)(1) of this section must be filed on or before July 31, 1994, and is a return for the second calendar quarter of 1994. A first return reporting only January 1, 1994, floor stocks tax is also a final return and therefore, in accordance with the instructions to Form 720, the box for "final return" must be marked.

(ii) RETURN REPORTING OTHER TAXES. A person must file only one Form 720 for a quarter. If a person is required under part 40 of this chapter to file Form 720 for the second calendar quarter of 1994 for other excise taxes on or before August 31, 1994, that person files a single Form 720 for the quarter on or before August 31, 1994. This paragraph (b)(2)(ii) does not extend the time for making deposits or paying any excise tax.

SECTION 47.3-9 IMPOSITION OF THE OCTOBER 1, 1995, FLOOR STOCKS TAX ON COMMERCIAL AVIATION FUEL HELD ON OCTOBER 1, 1995.

(a) FUEL SUBJECT TO TAX. Section 13245 of the Act imposes a floor stocks tax on commercial aviation fuel on which tax was imposed under section 4091 before October 1, 1995, and which is held on the first moment of that date by any person. Tax is imposed under section 4091 even if imposed only at the Leaking Underground Storage Tank Trust Fund financing rate under that section.

(b) RATE OF TAX. The rate of the October 1, 1995, floor stocks tax is 4.3 cents per gallon.

(c) PERSON LIABLE FOR TAX. The person liable for tax on any commercial aviation fuel subject to the October 1, 1995, floor stocks tax is the person that holds the commercial aviation fuel at the first moment of October 1, 1995. Fuel is held by a person if the person has title to the fuel (whether or not delivery to that person has been made) at such time, as determined under applicable local law.

SECTION 47.3-10 EXCEPTIONS TO THE OCTOBER 1, 1995, FLOOR STOCKS TAX.

(a) EXCEPTION FOR COMMERCIAL AVIATION FUEL HELD FOR USE AS SUPPLIES FOR VESSELS OR AIRCRAFT. The October 1, 1995, floor stocks tax does not apply to commercial aviation fuel held exclusively for use as supplies for vessels or aircraft within the meaning of section 4221(d)(3). In determining whether commercial aviation fuel is held exclusively for such use, the following rules in paragraphs (a)(1) and (2) of this section apply:

(1) Commercial aviation fuel is held exclusively for use as supplies for vessels or aircraft only if the person that holds the commercial aviation fuel at the first moment of October 1, 1995, actually uses the aviation fuel in that exempt use.

(2) Commercial aviation fuel is not held exclusively for use as supplies for vessels or aircraft if, at the first moment of October 1, 1995, the commercial aviation fuel is held for resale (including resale to a person that will use the aviation fuel as supplies for vessels or aircraft). Thus, for example, commercial aviation fuel held by a fixed base operator for sale to an airline for use in foreign trade is not exempt from the October 1, 1995, floor stocks tax. However, the airline would be eligible to claim a credit or payment equal to the tax under section 6427.

(b) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL -- (1) IN GENERAL. The October 1, 1995, floor stocks tax does not apply to commercial aviation fuel that a person holds at the first moment of October 1, 1995, if the aggregate amount of commercial aviation fuel held by that person at that moment does not exceed 2,000 gallons.

(2) ADDITIONAL RULES RELATING TO THE 2,000 GALLON EXCEPTION -- (i) COORDINATION WITH OTHER EXEMPTIONS. In determining the aggregate amount of commercial aviation fuel held by a person at the first moment of October 1, 1995, there is to be excluded the amount of commercial aviation fuel exempt from the October 1, 1995, floor stocks tax by reason of paragraph (a) of this section (relating to fuel held for an exempt use).

(ii) ALL AMOUNTS HELD SUBJECT TO TAX IF THRESHOLD EXCEEDED. The October 1, 1995, floor stocks tax applies to all amounts of commercial aviation fuel held by a person (and not exempt from tax under paragraph (a) of this section) if the aggregate amount of commercial aviation fuel held by the person at the first moment of October 1, 1995, exceeds 2,000 gallons.

(iii) CONTROLLED GROUPS. A member of a controlled group (as defined in section 47.3-2) holds more than 2,000 gallons of commercial aviation fuel if the aggregate amount of all commercial aviation fuel held by all members of the controlled group exceeds 2,000 gallons.

(3) EXAMPLE. The following example illustrates the rules of this paragraph (b):

EXAMPLE. D, E, and F are members of the same controlled group. On October 1, 1995, D holds 2,000 gallons of commercial aviation fuel. E holds 1,500 gallons of commercial aviation fuel, and F holds 500 gallons of commercial aviation fuel. None of the commercial aviation fuel is held for an exempt use. Because the aggregate amount held by all members of the group is 4,000 gallons, which exceeds 2,000 gallons, all commercial aviation fuel held by each member is subject to the floor stocks tax. Thus, D is liable for tax of $86.00 (2,000 X $.043), E is liable for tax of $64.50 (1,500 X $.043), and F is liable for tax of $21.50 (500 X $.043).

SECTION 47.3-11 REQUIREMENTS WITH RESPECT TO PAYMENT AND RETURN FOR THE OCTOBER 1, 1995, FLOOR STOCKS TAX.

(a) PAYMENT OF TAX. The October 1, 1995, floor stocks tax is to be paid without assessment or notice on or before April 30, 1996.

(b) FILING OF RETURNS -- (1) FORM 720. Every person liable for the October 1, 1995, floor stocks tax must make a return of the tax on Form 720, Quarterly Federal Excise Tax Return. The return is to be prepared and filed in accordance with the instructions relating to the return.

(2) TIME FOR FILING -- (i) IN GENERAL. The Form 720 required by paragraph (b)(1) of this section must be filed on or before April 30, 1996, and is a return for the first calendar quarter of 1996. A first return reporting only October 1, 1995, floor stocks tax is also a final return and therefore, in accordance with the instructions to Form 720, the box for "final return" must be marked.

(ii) RETURN REPORTING OTHER TAXES. A person must file only one Form 720 for a quarter. If a person is required under part 40 of this chapter to file Form 720 for the first calendar quarter of 1996 for other excise taxes on or before May 31, 1996, that person files a single Form 720 for the quarter on or before May 31, 1996. This paragraph (b)(2)(ii) does not extend the time for making deposits or paying any excise tax.

PART 48 -- MANUFACTURERS AND RETAILERS EXCISE TAXES

Par. 2. The authority citation for part 48 is amended by adding the following entries in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 48.4221-3(e) also issued under 26 U.S.C. 4221(a).

Section 48.6416(b)(2)-2(b) also issued under 26 U.S.C. 6416(b).

* * * * *

Par. 3. Section 48.4221-3 is amended by adding paragraph (e) to read as follows:

SECTION 48.4221-3 TAX-FREE SALE OF ARTICLES FOR EXPORT, OR FOR RESALE BY THE PURCHASER TO A SECOND PURCHASER FOR EXPORT.

* * * * *

(e) VACCINES. The exemption provided by section 4221(a)(2) applies after August 10, 1993, to the tax imposed on vaccines by section 4131, but only if --

(1) The vaccine is sold by the manufacturer after August 10, 1993; and

(2) In the case of vaccine sold to, or sold for resale to, the United States or any of its agencies or instrumentalities, the United States or such agency or instrumentality notifies the manufacturer that the vaccine is intended for uses other than the vaccination of persons described in 42 U.S.C. 300aa-11(c)(1)(B)(i)(II) (relating to certain U.S. citizens who are vaccinated outside the United States).

Par. 4. Section 48.6416(b)(2)-2 is amended by:

1. Redesignating the text of paragraph (b) following the heading as paragraph (b)(1).

2. Adding a heading to paragraph (b)(1).

3. Revising the first sentence of paragraph (b)(1).

4. Adding paragraph (b)(2).

5. The revisions and additions read as follows:

SECTION 48.6416(b)(2)-2 EXPORTATIONS, USES, SALES, AND RESALES INCLUDED.

* * * * *

(b) EXPORTATION OF TAX-PAID ARTICLES -- (1) IN GENERAL. Subject to the limitations of section 6416(b)(2) and paragraph (b)(2) of this section, tax paid under chapter 31 or 32 on the sale of any article will be considered to be an overpayment under section 6416(b)(2)(A) if the article is exported by any person. * * *

(2) Rule for exportation of vaccines. Paragraph (b)(1) of this section applies to tax paid under section 4131 on the sale of a vaccine, but only if the sale by the manufacturer occurs after August 10, 1993, and, in the case of vaccine sold to the United States or any of its agencies or instrumentalities, the condition of section 48.4221-3(e)(2) is satisfied.

* * * * *