Internal Revenue Bulletin: 2004-38
September 20, 2004
Table of Contents
This document contains final and temporary regulations relating to the obligations of persons that receive payments for air transportation or communications services subject to excise tax when persons liable for tax refuse to pay the tax. These temporary regulations affect persons that receive payments subject to tax and persons liable for those taxes. The text of the temporary regulations also serves as the text of the proposed regulations (REG-163909-02) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.
Effective Date: These regulations are effective October 1, 2004.
Applicability Date: For dates of applicability, see §§40.6302(c)-3T(b)(2)(ii) and 49.4291-1T.
This document contains amendments to the Excise Tax Procedural Regulations (26 CFR part 40) and the Facilities and Services Excise Tax Regulations (26 CFR part 49). Section 4251 of the Internal Revenue Code (Code) imposes an excise tax on amounts paid for certain communications services. Sections 4261(a) and (b) impose excise taxes on amounts paid for taxable transportation of persons by air. Section 4261(e)(3) provides that any amount paid to an air carrier or related party for the right to provide mileage awards for (or other reductions in the cost of) any transportation of persons by air is treated for purposes of section 4261(a) as an amount paid for taxable transportation and is therefore subject to tax. Section 4261(c) imposes an excise tax on any amount paid for the air transportation of persons that begins or ends in the United States. Section 4271 imposes an excise tax on amounts paid for taxable transportation of property by air. These taxes collectively are referred to as collected excise taxes.
For each of the collected excise taxes, the person liable for the tax is the person making the payment on which tax is imposed (the taxpayer). Under section 4291, the person receiving the payment on which tax is imposed (the collector) generally must collect the tax from the person making the payment and pay it over to the government.
If the taxpayer refuses to pay the tax the collector is required, under §49.4291-1, to report this refusal to the IRS. The IRS will then assert the tax against the taxpayer. Current regulations do not specify the time within which the collector must report this refusal to the IRS.
Collectors are responsible for filing returns with respect to the collected excise taxes and for making deposits of tax as required by section 6302. Section 40.6302(c)-3 provides an alternative method for computing the amount of deposits of collected excise taxes. Under the alternative method, collectors may compute the amount of tax to be deposited on the basis of amounts considered as collected instead of on the basis of actual collections of tax. A person may use the alternative method with respect to a tax only if the person separately accounts for the tax. The separate account must reflect for each month all items of tax that are included in amounts billed or tickets sold to customers during the month and items of adjustment (including bad debts and errors) relating to the tax for prior months within the period of limitations for credits or refunds. When a collector using the alternative method determines that a taxpayer has refused to pay the tax, the collector adjusts the separate account to reflect that the tax was not collected. Current regulations do not specify the time for adjusting the separate account to reflect that refusal.
The temporary regulations provide that the collector must report the refusal to pay the tax to the IRS by the due date of the return on which the tax would have been reported but for the refusal to pay. In addition, the temporary regulations provide that, for a person using the alternative method, the separate account cannot be adjusted to reflect a refusal to pay tax for the month unless such refusal has been reported.
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 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) does not apply to these regulations. For applicability of the the Regulatory Flexibility Act, please refer to the cross-referenced notice of proposed rulemaking published elsewhere in this issue of the Bulletin. Pursuant to section 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
Accordingly, 26 CFR parts 40 and 49 are amended as follows:
Paragraph 1. The authority citation for part 40 is amended by adding an entry in numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 40.6302(c)-3T also issued under 26 U.S.C. 6302 * * *
Par. 2. Paragraph (b)(2)(ii) of §40.6302(c)-3 is amended by:
a. Removing the language “and” at the end of paragraph (b)(2)(ii)(A).
b. Redesignating paragraph (b)(2)(ii)(B) as paragraph (b)(2)(ii)(C) and removing the language “Items” and adding “Other items” in its place.
c. Adding new paragraph (b)(2)(ii)(B) to read as follows:
* * * * *
(b) * * *
(2) * * *
(ii) * * *
(B) [Reserved]. For further guidance, see §40.6302(c)-3T(b)(2)(ii)(B).
* * * * *
Par. 3. Section 40.6302(c)-3T is added to read as follows:
(a) through (b)(2)(ii)(A) [Reserved]. For further guidance, see §40.6302(c)-3(a) through (b)(2)(ii)(A).
(b)(2)(ii)(B) Applicable October 1, 2004, the account required under §40.6302(c)-3(b)(2)(i)(A) may not reflect an item of adjustment for any month during a quarter if the adjustment results from a refusal to pay or inability to collect the tax and the uncollected tax has not been reported under §49.4291-1 of this chapter on or before the due date of the return for that quarter; and
(b)(2)(ii)(C) through (g) [Reserved]. For further guidance, see §40.6302(c)-3(b)(2)(ii)(C) through (g).
Par. 4. The authority citation for part 49 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. Section 49.4291-1 is amended by adding a sentence after the third sentence to read as follows:
* * * For further guidance, see §49.4291-1T. * * *
Par. 6. Section 49.4291-1T is added to read as follows:
Applicable October 1, 2004, a person required to report uncollected tax under §49.4291-1 must make the report on or before the due date of the return on which the refusal to pay or inability to collect such tax is reflected (or could be reflected but for the limitation in §40.6302(c)-3T).
Mark E. Matthews,
Deputy Commissioner for
Services and Enforcement.
Approved June 21, 2004.
Gregory F. Jenner,
Acting Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on August 9, 2004, 8:45 a.m., and published in the issue of the Federal Register for August 10, 2004, 69 F.R. 48393)
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