[Federal Register Volume 73, Number 146 (Tuesday, July 29, 2008)]
[Proposed Rules]
[Pages 43890-43904]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17270]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 40, and 48
[REG-155087-05]
RIN 1545-BF17
Alcohol Fuel and Biodiesel; Renewable Diesel; Alternative Fuel;
Diesel-Water Fuel Emulsion; Taxable Fuel Definitions; Excise Tax
Returns
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations relating to
credits and payments for alcohol mixtures, biodiesel mixtures,
renewable diesel mixtures, alternative fuel mixtures, and alternative
fuel sold for use or used as a fuel, as well as proposed regulations
relating to the definition of gasoline and diesel fuel. These
regulations reflect changes made by the American Jobs Creation Act of
2004, the Energy Policy Act of 2005, the Safe, Accountable, Flexible,
Efficient Transportation Equity Act: A Legacy for Users, and the Tax
Technical Corrections Act of 2007. These regulations affect producers
of alcohol, biodiesel, and renewable diesel; producers of alcohol,
biodiesel, renewable diesel, and alternative fuel mixtures; sellers and
users of alternative fuel; and certain persons liable for the tax on
removals, entries, or sales of gasoline or diesel fuel.
DATES: Written or electronic comments and requests for a public hearing
must be received by October 27, 2008.
ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-155087-05), room 5203,
Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
155087-05), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically, via the Federal
eRulemaking Portal at http://www.regulations.gov (IRS REG-155087-05).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Stephanie Bland, Taylor Cortright, or DeAnn Malone, all of whom can be
reached at (202) 622-3130 (not a toll-free call); concerning the
submission of comments or requests for a public hearing, Oluwafunmilayo
Taylor at (202) 622-7180 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in this notice of proposed
rulemaking have been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the collection of information should be
sent to the Office of Management and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with copies to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on the collection of information should
be received by September 29, 2008. Comments are specifically requested
concerning:
Whether the proposed collection of information is necessary for the
proper performance of the functions of the Internal Revenue Service,
including whether the information will have practical utility;
The accuracy of the estimated burden associated with the proposed
collection of information;
How the quality, utility, and clarity of the information to be
collected may be enhanced;
How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and
Estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of service to provide information.
The collection of information in this proposed regulation is in
Sec. 48.6426-3(e), describing the certificate the biodiesel producer
must give to the claimant of a biodiesel mixture credit or biodiesel
credit; Sec. 48.6426-3(f), describing the statement a biodiesel
reseller must give to the claimant of a biodiesel mixture credit or
biodiesel credit; Sec. 48.6426-4(e), describing the certificate the
renewable diesel producer must give to the claimant of a renewable
diesel mixture credit or renewable diesel credit; Sec. 48.6426-4(f),
describing the statement a renewable diesel reseller must give to the
claimant of a renewable diesel mixture credit or renewable diesel
credit; and Sec. 48.6426-6(c), describing the statement given to a
seller of liquefied natural gas. This information is required to obtain
a tax benefit. This information will be used by the IRS to substantiate
claims for the tax benefits. The likely recordkeepers are business or
other for-profit institutions and small businesses or organizations.
Estimated total annual reporting burden: 17,710 hours.
Estimated average annual burden hours per respondent varies from
2.5 hours to 25 hours, depending on individual circumstances, with an
estimated average of 22 hours.
Estimated number of respondents: 756.
Estimated annual frequency of responses: On occasion.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget.
Books or records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
The Internal Revenue Code (Code) provides incentives for certain
renewable and alternative fuels. Before January 1, 2005, a reduced rate
of tax applied to most alcohol-blended fuels. The American Jobs
Creation Act of 2004 (Pub. L. 108-357) replaced the reduced rate of tax
for alcohol-blended fuels with credits or payments for alcohol and
alcohol mixtures that are sold for use or used as a fuel. The Act also
added credits and payments for biodiesel and biodiesel mixtures sold
for use or used as a fuel. Credit and payment provisions for renewable
diesel, renewable diesel mixtures, alternative fuel, alternative fuel
mixtures, and diesel-water fuel emulsions were added to the Code by the
Energy Policy Act of 2005 (Pub. L. 109-58) and the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users (Pub.
L. 109-59) (SAFETEA). Technical corrections to SAFETEA were made by the
Tax Technical Corrections Act of 2007 (Pub. L. 110-172).
The incentives include a credit under section 6426 for alcohol fuel
mixtures, biodiesel mixtures, renewable diesel mixtures (incorporated
into section
[[Page 43891]]
6426 by section 40A(f)), and alternative fuel mixtures sold for use or
used as a fuel and alternative fuel sold for use or used as a fuel in a
motor vehicle or motorboat. The credit under section 6426 is allowed
against the claimant's fuel tax liability. The incentives for these
fuels also include a payment under section 6427(e) and a refundable
income tax credit under section 34. The amount allowed as a payment or
credit under these provisions is reduced by the claimant's excise tax
liability against which a credit is allowed under section 6426. Section
40 provides a nonrefundable income tax credit for alcohol fuel
mixtures, alcohol that is sold for use or used as a fuel, and for the
production of alcohol by certain small ethanol producers; section 40A
provides similar rules relating to biodiesel and renewable diesel. The
Code includes coordination rules that limit the maximum incentive that
may be claimed for any particular gallon of alcohol, biodiesel,
renewable diesel, and alternative fuel. Generally, for alcohol that is
ethanol, the benefit is $0.51 per gallon; for biodiesel, the incentive
is $0.50 per gallon ($1.00 per gallon in the case of agri-biodiesel);
for renewable diesel, the incentive is $1.00 per gallon; and, for
alternative fuel, the incentive is $0.50 per gallon. In the case of
small ethanol producers and small agri-biodiesel producers, however,
the Code allows an additional income tax credit of $0.10 per gallon.
Notice 2005-4 (2005-1 CB 289) describes the alcohol and biodiesel
credits and payments and provides general guidance for these
incentives. Comments received after the publication of Notice 2005-4
requested additional guidance with regard to the biodiesel producer
certificates in the case of resale, commingled biodiesel, the
definition of agri-biodiesel, and the definition of a biodiesel
mixture. Guidance on these issues was provided in Notice 2005-62 (2005-
2 CB 443). Notice 2005-80 (2005-2 CB 953) describes the registration
requirements related to diesel-water fuel emulsions. Notice 2006-92,
(2006-43 IRB. 774) describes the alternative fuel credits and payments.
Notice 2007-37 (2007-17 IRB 1002) provides guidance on renewable
diesel. Notice 2007-97 (2007-49 IRB 1092) provides guidance on liquid
hydrocarbons for purposes of the definition of alternative fuel.
Comments were received in response to these notices and have been
considered in the development of this notice of proposed rulemaking.
Renewable and Alternative Fuels; Currently Applicable Rules
The IRS has received numerous inquiries about the proper steps that
must be taken to comply with the tax laws and to take full advantage of
the tax incentives for certain renewable and alternative fuels. The
following are general rules that are currently applicable and would not
be changed by these proposed regulations.
Registration
Registration by the IRS is required for each person that produces
alcohol, biodiesel, renewable diesel, or blended taxable fuel or claims
credits or payments with respect to alternative fuel.
Application for registration is made on Form 637, ``Application for
Registration (For Certain Excise Tax Activities).'' A person generally
may not engage in an activity for which registration is required until
the IRS has approved the person's registration with respect to the
activity.
Imposition of Tax
Tax is imposed on the removal of a biodiesel mixture that is diesel
fuel from the terminal at the terminal rack. In the case of blended
taxable fuel, tax is imposed on a blender's sale or removal of the fuel
and the blender is liable for the tax. Blended taxable fuel includes
diesel fuel or gasoline produced outside of the bulk transfer/terminal
system by mixing an untaxed liquid, such as biodiesel or alcohol, with
a taxable fuel, such as diesel fuel or gasoline, that has been
previously taxed (even if only at the Leaking Underground Storage Tank
Trust Fund financing rate). Thus, for example, if a person produces,
outside the bulk transfer/terminal system, a biodiesel mixture that is
diesel fuel, that person is liable for tax on its removal or sale of
the mixture. Further, tax generally is imposed on the delivery of fuel
that has not been taxed into the fuel supply tank of a motor vehicle or
diesel-powered train and on the delivery of alternative fuel (liquid
fuel other than gas oil, fuel oil, or taxable fuel) into the fuel
supply tank of a motorboat unless the delivery of the fuel or
alternative fuel is for a nontaxable purpose.
Liability for these excise taxes is reported on Form 720,
``Quarterly Federal Excise Tax Return.'' Persons that are liable for
excise taxes may also be required to make semi-monthly deposits. See
Form 720 for more information on deposits.
Tax Incentives for Mixtures
The excise tax credits for mixtures containing alcohol, biodiesel,
renewable diesel, or alternative fuel must be claimed on Form 720,
Schedule C. These credits are allowed to the extent of certain fuel tax
liability. The credits are claimed by the person producing the mixture.
The mixture producer may also claim payments (or refundable income
tax credits) for incentives that exceed tax liability; that is, for the
amount by which the maximum incentive allowable for the mixture exceeds
the credit allowed on the Form 720. Notice 2005-62 contains guidance on
the computation of payment limitations. Claims for payment are made
either on Form 8849, ``Claim for Refund of Excise Taxes,'' or Schedule
C, Form 720, ``Quarterly Federal Excise Tax Return.'' (Thus, claims on
Form 720 may be for both an excise tax credit and a payment.) Claims
for the refundable income tax credit are made on Form 4136, ``Credit
for Federal Tax Paid on Fuel,'' which is attached to the claimant's
income tax return.
Tax Incentives for Neat Fuels
A nonrefundable general business tax credit may be claimed for
alcohol, biodiesel, and renewable diesel fuels that are not in a
mixture and are used as a fuel. This is the only credit or payment
allowed with respect to the use of these neat fuels as a fuel. Claims
for the credit are made by the person using the renewable fuel in a
trade or business or by the person that sold the fuel at retail and
delivered it into a vehicle. The small ethanol producer credit and the
small agri-biodiesel producer credit are also nonrefundable general
business credits. Claims for nonrefundable general business credits are
made on Form 6478, ``Credit for Alcohol Used as Fuel,'' and Form 8864,
``Biodiesel and Renewable Diesel Fuels Credit,'' attached to the
claimant's income tax return.
An excise tax credit may be claimed for alternative fuel that is
not in a mixture and is used as a fuel. The excise tax credit is
claimed on Form 720, Schedule C. The credit is allowed to the extent of
certain fuel excise tax liability. The credit is claimed by the
alternative fueler (unmixed fuel). If the incentive for unmixed
alternative fuel exceeds the applicable excise tax liability the excess
may be claimed as a payment on Form 8849 or as a refundable income tax
credit on Form 4136.
Explanation of Provisions
The proposed regulations add provisions relating to registration
requirements and excise tax credits or payments for alcohol, biodiesel,
renewable diesel and alternative fuel
[[Page 43892]]
mixtures and for alternative fuel and diesel-water fuel emulsions. The
regulations provide definitions and prescribe rules for claiming a
credit or payment. Specifically, the regulations prescribe the
conditions to allowance of a credit or payment, the content of claims
for credit or payment, and the form of applicable certificates. The
proposed regulations also remove obsolete regulations relating to
gasohol and other alcohol fuels.
The proposed regulations generally adopt the rules of Notices 2005-
4, 2005-62, 2005-80, 2006-92, 2007-37, and 2007-97. Differences between
the notices and the proposed regulations are described in this
preamble.
Biodiesel Mixtures and Liability for Tax
Notice 2005-62 provides that biodiesel mixture means a mixture of
biodiesel and diesel fuel that contains at least 0.1 percent (by
volume) of diesel fuel. That rule is unchanged by these proposed
regulations.
Under existing regulations, diesel fuel does not include ``excluded
liquid''; biodiesel mixtures with a high concentration of biodiesel
typically are classified as an excluded liquid. The definition of
``excluded liquid'' predates the biodiesel incentives and was intended
to ensure that the diesel fuel tax was not imposed on certain liquids
typically not used as fuel. The proposed regulations revise the
definition of ``excluded liquid'' so that all biodiesel mixtures, which
are generally used as a substitute for diesel fuel, will be classified
as diesel fuel for tax purposes. As a result, under the proposed
regulations, tax is imposed on a biodiesel mixture when it is removed
from the bulk transfer/terminal system. If a biodiesel mixture is
produced outside the bulk transfer/terminal system, tax is imposed on
the sale or removal of the mixture by the mixture producer. The mixture
producer is liable for the tax and must be registered as a blender of
taxable fuel. The tax incentive for the biodiesel mixture generally
must be taken as a credit against the producer's fuel tax liability and
any excess over the fuel tax liability is allowable as either a payment
or an income tax credit.
Also, the de minimis exception to the definition of ``blended
taxable fuel'' is removed. Under this exception, a mixture is not
blended fuel if the person creating the mixture adds less than 400
gallons of untaxed liquid to previously taxed fuel during the quarter
and the operator of the vehicle using the mixture is liable for the tax
on the untaxed liquid. Thus, in cases in which the untaxed liquid is
alcohol, biodiesel, or alternative fuel, the exception prevents the
credit for which the mixture producer is eligible from being used to
offset the tax. With the removal of this exception, the same person
(the producer of the mixture) will be liable for the tax and eligible
for the credit that can be used to offset the tax.
Biodiesel and EPA Registration Requirements
The Code defines biodiesel as monoalkyl esters of long chain fatty
acids derived from plant or animal matter that meet (1) the
registration requirements of the Environmental Protection Agency (EPA)
for fuel and fuel additives and, (2) ASTM D6751. Under the proposed
regulations, a product meets the EPA registration requirements if the
EPA does not require the product to be registered. Thus, for example,
if a biodiesel mixture is to be sold only at a marina for use in boats,
the biodiesel in the mixture meets the EPA registration requirement
because EPA registration requirements do not apply to fuels or fuel
additives sold for use in boats.
Biodiesel Certificates
The Code provides that a claim relating to a biodiesel mixture is
not allowed unless, among other conditions, the claimant obtains the
prescribed certificate from the biodiesel producer. Under existing
rules, as well as the proposed regulations, this certificate must be
attached to the claim that is filed with the IRS. However, the proposed
regulations do not require a separate certificate to accompany the
claim filed by a mixture producer that is also the producer of the
biodiesel in the mixture. Further, the proposed regulations require, as
a condition to allowance of an excise tax credit or a payment, that the
claimant obtain the certificate from a registered biodiesel producer.
If the claim is for a nonrefundable general business credit, the
certificate may be from the registered producer or importer.
Erroneous Biodiesel Certificates
Under the Code, a claim relating to a biodiesel mixture is not
allowed if the mixture does not actually contain biodiesel. Guidance
was requested on whether a claim would be allowed if the claimant
attached a certificate for biodiesel and the information on the
certificate proved to be incorrect. The proposed regulations make clear
that such a claim is not allowed even if the claim is based on a
biodiesel certificate that the claimant accepted in good faith. In such
a case, however, the proposed regulations generally provide that
reliance on the certificate will be treated as reasonable cause for
purposes of the penalties imposed by sections 6651 (relating to failure
to pay) and 6675 (relating to excessive claims).
Alternative Fuel
The Code allows a credit or payment for alternative fuel that is
not in a mixture if the alternative fuel is sold for use or used as a
fuel in a motor vehicle or motorboat. If the claim is based on a sale,
the claimant must deliver the fuel into the fuel supply tank of the
motor vehicle or motorboat or, in the case of a bulk sale, obtain the
statement described in Sec. 48.4041-5(a)(2), Sec. 48.4041-21(b), or
proposed Sec. 48.6426-6(c).
Registration of Alternative Fuelers
A person must be registered by the IRS before claiming the
alternative fuel or alternative fuel mixture credit or payment. Section
34 allows a refundable income tax credit with respect to alternative
fuel or an alternative fuel mixture. This credit is claimed on Form
4136 filed with the claimant's Federal income tax return. Because
partnerships do not file Federal income tax returns, the refundable
income tax credit allowable with respect to a partnership's sale or use
of alternative fuel is made by its partners. The partners may file Form
4136 with their income tax returns to claim a credit based on the
information provided them on the partnership's Schedule K-1.
The proposed regulations provide that a partner in a partnership is
treated as a registered alternative fueler for purposes of claims on
Form 4136 if the partnership is registered for purposes of claims for
an excise tax credit or payment. A partner that is treated as
registered under this rule is to provide the partnership's registration
number on Form 4136. These rules also apply for purposes of ultimate
vendor claims by partners in partnerships that are ultimate vendors of
diesel fuel or kerosene.
Small Ethanol Producer Credit
Section 40(a)(3) provides an income tax credit for ethanol produced
by eligible small ethanol producers. The amount of ethanol that is
eligible for the credit during any taxable year cannot exceed
15,000,000 gallons for any producer. A small ethanol producer generally
means a person whose productive capacity for all alcohol, including
alcohol for which a credit is not allowable under section 40, does not
exceed 60,000,000 gallons at any time during the taxable year. Section
40(g)(5) authorizes the Secretary to prescribe
[[Page 43893]]
regulations to prevent the credit from benefiting a person that
directly or indirectly has a productive capacity for alcohol in excess
of 60,000,000 gallons and to prevent any person from directly or
indirectly benefiting with respect to more than 15,000,000 gallons
during the taxable year. Section 40A provides similar rules with
respect to the small agri-biodiesel producer credit.
The proposed regulations provide that producer means the person
that has title to the ethanol immediately after the ethanol is created.
Also, the producer must use a feedstock other than ethanol to produce
the ethanol. The proposed regulations do not allow the credit for
ethanol produced at the facilities of a contract manufacturer if the
contract manufacturer has a direct or indirect productive capacity of
more than 60,000,000 gallons of alcohol during the taxable year.
Similarly, if the manufacturer does not have a productive capacity of
more than 60,000,000 gallons but more than 15,000,000 gallons of
ethanol is produced at the manufacturer's facilities during the taxable
year, the proposed regulations allow the credit with respect to only
the first 15,000,000 gallons of ethanol produced at the facilities
during the taxable year. These rules apply to small agri-biodiesel
producers also.
Gasoline and Gasoline Blends
The Code defines gasoline as including gasoline blends. The
proposed regulations generally define a gasoline blend as any liquid
that contains at least 0.1 percent (by volume) of finished gasoline and
that is suitable for use as a fuel in a motor vehicle or motorboat.
Thus, for example, E-85 (a mixture of 85 percent ethanol made from corn
or other agricultural products and 15 percent gasoline) is treated as a
gasoline blend. Tax is imposed on the gasoline blend when it is removed
from the bulk transfer/terminal system or, if it is blended taxable
fuel, when it is sold or removed by the blender. The proposed
regulations also classify leaded gasoline as gasoline. Thus, for
example, gasoline products that are sold as ``racing gasoline''
generally are treated as gasoline even though their lead content make
them unsuitable for highway use.
Excise Tax Returns
The privilege to file consolidated returns under section 1501
applies only to income tax returns and not to excise tax returns. The
proposed regulations note this rule and also reflect the rules of Sec.
301.7701-2(c)(2)(v), which was added by TD 9356 (72 FR 45891, August
16, 2007), relating to the excise tax treatment of certain business
entities that are treated as separate from their owner for income tax
purposes.
Proposed Effective/Applicability Date
The amendments to the regulations generally are proposed to be
effective on the date they are published as final regulations in the
Federal Register.
Future Regulations Projects
Future proposed regulations will address other fuel-related
provisions in the American Jobs Creation Act, the Energy Policy Act,
and SAFETEA. These include provisions related to kerosene used in
aviation, the Leaking Underground Storage Tank Trust Fund tax, the tax
on alternative fuel, and two-party exchanges.
Availability of IRS Documents
IRS notices cited in this preamble are published in the Internal
Revenue Bulletin or Cumulative Bulletin and are available at IRS.gov.
Special Analyses
It has been determined that this notice of proposed rulemaking 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 proposed regulations. It
is hereby certified that this regulation will not have a significant
economic impact on a substantial number of small entities. This
certification is based on IRS estimates that less than 700 small
entities will be required to provide certificates each year, such
certificates will be provided only on occasion, and the average annual
burden per respondent will be 22 hours. The economic impact of the
collection of information is limited to completing a certificate in the
form prescribed by the regulations. The certificate can be completed by
filling in a small number of fields with information that is readily
available to the taxpayer, and completion of a certificate should
generally take less than 15 minutes. Accordingly, the time and
resources required to prepare and provide these certificates is minimal
and will not have a significant effect on those entities providing
them. Therefore, an analysis under the Regulatory Flexibility Act (5
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of proposed rulemaking has been
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. The IRS and the Treasury Department request comments on the
clarity of the proposed regulations and how they may be made easier to
understand. All comments will be available for public inspection and
copying. A public hearing will be scheduled if requested in writing by
any person that timely submits written comments. If a public hearing is
scheduled, notice of the date, time, and place for the hearing will be
published in the Federal Register.
Drafting Information
The principal authors of these regulations are Taylor Cortright and
Frank Boland, Office of Associate Chief Counsel (Passthroughs and
Special Industries). However, other personnel from the IRS and the
Treasury Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Parts 40 and 48
Excise taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1, 40, and 48 are proposed to be amended
as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.40-2 also issued under 26 U.S.C. 40(g)(5); Section
1.40A-1 also issued under 26 U.S.C. 40A(e)(5); * * *
Par. 2. Section 1.40-1 is revised to read as follows:
Sec. 1.40-1 Alcohol used as a fuel.
For the definition of ``alcohol'' for purposes of the credits
allowed by section 40, see Sec. 48.6426-1(c) of this chapter.
Par. 3. Sections 1.40-2 and 1.40A-1 are added to read as follows:
[[Page 43894]]
Sec. 1.40-2 Small ethanol producer credit.
(a) In general. Section 40 provides a small ethanol producer credit
for each gallon of qualified ethanol production of an eligible small
ethanol producer. Section 40(b)(4)(B) defines ``qualified ethanol
production''. Section 40(g)(1) defines ``eligible small ethanol
producer''. Section 40(g)(5) provides authority to prescribe such
regulations as may be necessary to prevent the credit from directly or
indirectly benefiting any person with a direct or indirect productive
capacity of more than 60 million gallons of alcohol during the taxable
year. A person has produced ethanol if the person has title to the
ethanol immediately after it is created.
(b) Qualified ethanol production. Section 40(b)(4)(B) limits
qualified ethanol production to ethanol that is produced by an eligible
small ethanol producer. Ethanol is ``produced'' for this purpose only
when a feedstock other than ethanol is transformed into ethanol.
(c) Denial of credit for ethanol produced at certain facilities.
The person at whose facilities ethanol is produced is treated for
purposes of section 40(g)(5) as an indirect beneficiary of any credit
allowed with respect to the ethanol. Accordingly, the small ethanol
producer credit is not allowed with respect to ethanol that is produced
at the facilities of a contract manufacturer or other person if such
contract manufacturer or other person has a direct or indirect
productive capacity of more than 60 million gallons of alcohol during
the taxable year. Similarly, if the manufacturer does not have a
productive capacity of more than 60 million gallons but more than 15
million gallons of ethanol is produced at the manufacturer's facilities
during the taxable year, the small ethanol producer credit is allowed
with respect to only the first 15 million gallons of ethanol produced
at the facilities during the taxable year.
(d) Examples. The following examples illustrate the application of
this section:
Example 1. X purchases hydrous ethanol and processes it into
anhydrous ethanol. X is not the producer of the ethanol because X
does not transform a feedstock other than ethanol into ethanol.
Example 2. Y arranges with contract manufacturer Z to produce 10
million gallons of ethanol. Y is not related to Z. Y provides the
raw materials and retains title to them and to the finished ethanol.
Z has the capacity to produce 100 million gallons of alcohol per
year. The small producer credit is not allowed with respect to the
10 million gallons of ethanol because it is produced at the
facilities of a contract manufacturer that has a productive capacity
of more than 60 million gallons of alcohol during the taxable year.
(e) Effective/applicability date. This section is applicable on and
after the date of publication of these regulations in the Federal
Register as final regulations.
Sec. 1. 40A-1 Biodiesel.
(a) In general. Rules similar to the rules of Sec. 1.40-2 apply
for purposes of the small agri-biodiesel producer credit allowed by
section 40A.
(b) Definitions. For the definitions of ``biodiesel'' and
``renewable diesel'' for purposes of the credits allowed by section
40A, see Sec. 48.6426-1(b) of this chapter.
(c) Effective/applicability date. This section is applicable on and
after the date of publication of these regulations in the Federal
Register as final regulations.
PART 40--EXCISE TAX PROCEDURAL REGULATIONS
Par. 4. The authority citation for part 40 is amended by removing
the entry for section 40.6071(a)-3 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. Section 40.0-1 is amended by revising paragraph (d) and
adding paragraph (e) to read as follows:
Sec. 40.0-1 Introduction.
* * * * *
(d) Person. For purposes of this part, each business unit that has,
or is required to have, a separate employer identification number is
treated as a separate person. Thus, business units (for example, a
parent corporation and a subsidiary corporation, a proprietorship and a
related partnership, or the various members of a consolidated group),
each of which has a different employer identification number, are
separate persons.
(e) Effective/applicability date. This part is effective for
returns and deposits that relate to calendar quarters beginning after
September 30, 2008. For rules applicable to returns and deposits that
relate to prior periods, see 26 CFR part 40 (revised as of April 1,
2008).
Sec. 40.6302(c)-1 [Amended]
Par. 6. Section 40.6302(c)-1 is amended as follows:
1. Paragraph (e)(1)(ii) is amended by removing the language
``components);'' and adding ``components); and'' in its place.
2. Paragraph (e)(1)(iii) is amended by removing the language
``chemicals); and'' and adding ``chemicals).'' in its place.
3. Paragraph (e)(1)(iv) is removed.
PART 48--MANUFACTURERS AND RETAILERS EXCISE TAXES
Par. 7. The authority citation for part 48 is amended by removing
the entries for Sec. Sec. 48.4081-6, 48.6427-8, 48.6427-9, 48.6427-10,
and 48.6427-11 and adding entries in numerical order to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 48.6426-3 also issued under 26 U.S.C. 6426(c). Section
48.6426-4 also issued under 26 U.S.C. 6426(c). Section 48.6427-8
also issued under 26 U.S.C. 6427(n). Section 48.6427-9 also issued
under 26 U.S.C. 6427(n). Section 48.6427-10 also issued under 26
U.S.C. 6427(n). Section 48.6427-11 also issued under 26 U.S.C.
6427(n). Section 48.6427-12 also issued under 26 U.S.C. 6427(n).
Sec. 48.0-1 [Amended]
Par. 8. Section 48.0-1 is amended as follows:
1. In the second sentence, ``and related credits, refunds, and
payments'' is added after ``Code''.
2. In the third sentence, ``certain luxury items,'' is removed.
3. In the fourth sentence, ``aviation fuel,'' is removed.
Par. 9. Section 48.0-4 is added to read as follows:
Sec. 48.0-4 Forms.
Any reference to a form in this part is also a reference to any
other form designated for the same use by the Commissioner after the
date these regulations are published in the Federal Register as final
regulations. All such forms must be completed in accordance with the
instructions for the forms and contain any additional information
required by this part.
Sec. 48.4041-0 [Amended]
Par. 10. Section 48.4041-0 is amended as follows:
1. In the first sentence, the language ``sales or uses of diesel
fuel'' is removed and ``any liquid (other than biodiesel) that is sold
for use or used as a fuel in a diesel-powered highway vehicle or
diesel-powered train'' is added in its place.
2. In the second sentence, the language ``diesel fuel tax'' is
removed and ``tax with respect to these liquids'' is added in its
place.
Sec. 48.4041-18 [Removed and Reserved]
Par. 11. Section 48.4041-18 is removed and reserved.
Par. 12. Section 48.4041-19 is revised to read as follows:
[[Page 43895]]
Sec. 48.4041-19 Reduction in tax for qualified methanol or ethanol
fuel and partially exempt methanol or ethanol fuel.
(a) In general. Section 4041(b)(2) provides a reduced rate of tax
under sections 4041(a)(2) and (d) for qualified methanol or ethanol
fuel. Section 4041(m) provides a reduced rate of tax under section
4041(a)(2) for partially exempt methanol or ethanol fuel.
(b) Qualified methanol or ethanol fuel and partially exempt
methanol or ethanol fuel defined. For purposes of section 4041(b)(2)
and this section, qualified methanol or ethanol fuel is liquid motor
fuel, at least 85 percent of which (by volume) consists of alcohol
produced from coal (including peat). For purposes of section 4041(m)
and this section, partially exempt methanol or ethanol fuel is a liquid
motor fuel, at least 85 percent of which (by volume) consists of
alcohol produced from natural gas (including ethanol produced through
the process of thermally cracking ethane that is a constituent of
natural gas). The actual gallonage of each component of the mixture
(without adjustment for temperature) shall be used in determining
whether, at the time of the taxable sale or use, the applicable 85
percent alcohol requirement has been met. A mixture containing less
than 85 percent alcohol produced from coal (or less than 85 percent
alcohol produced from natural gas) may be treated as satisfying the
applicable percentage requirement. In determining whether a particular
mixture should be so treated, the Commissioner shall take into account
the existence of any facts and circumstances establishing that, but for
the commercial and operational realities of the blending process, it
may reasonably be concluded that the mixture would have contained at
least 85 percent alcohol from the appropriate source. The necessary
facts and circumstances will not be found to exist if over a period of
time the mixtures blended by a blender show a consistent pattern of
failing to contain at least 85 percent alcohol from the appropriate
source.
(c) Effective/applicablity date. This section is applicable on and
after the date of publication of these regulations in the Federal
Register as final regulations. For provisions applicable to prior
periods, see 26 CFR 48.4041-19 (revised as of April 1, 2008).
Sec. 48.4041-20 [Removed and Reserved]
Par. 13. Section 48.4041-20 is removed and reserved.
Par. 14. Section 48.4081-1 is amended as follows:
1. Paragraph (b) is amended by:
a. Revising the definition of Blender.
b. Adding the definition of Diesel-water fuel emulsion in
alphabetical order.
c. Adding the language ``(other than a mixture as defined in Sec.
48.6426-1(b))'' after ``any liquid'' in the introductory text of the
definition of Excluded liquid.
d. Revising the definition of Finished gasoline.
e. Revising the definition of Gasoline.
f. Adding the definition of Gasoline blend in alphabetical order.
g. Revising the definition of Refinery.
h. Removing the language ``effective January 2, 1998,'' from the
last sentence in the definition of Terminal.
2. Paragraph (c) is amended by:
a. In paragraph (c)(1)(i), removing the language ``paragraphs
(c)(1)(ii) and (c)(1)(iii)'' in the introductory text and adding
``paragraph (c)(1)(ii)'' in its place.
b. In paragraph (c)(1)(ii), removing the language ``A mixture'' and
adding ``In calendar quarters beginning before the date of publication
of these regulations in the Federal Register as final regulations, a
mixture'' in its place.
c. Removing paragraph (c)(1)(iii).
d. In paragraph (c)(2)(i), first sentence, adding the language
``any of the following: a mixture (as defined in Sec. 48.6426-1(b))
that contains diesel fuel; renewable diesel as defined in section
40A(f)(3); transmix (as defined in section 4083(a)(3)(B)); and'' after
``diesel fuel means''.
e. In paragraph (c)(2)(ii), first sentence, adding the language
``biodiesel, alternative fuel (as defined in section 6426(d)(2)),
qualified methanol or ethanol fuel (as defined in section
4041(b)(2)(B)), partially exempt methanol or ethanol fuel (as defined
in section 4041(m)(2)),'' after ``kerosene,''.
f. In paragraph (c)(3)(i)(V) removing the language ``gasoline;''
and adding ``gasoline; and'' in its place.
g. In paragraph (c)(3)(i)(W), removing the language ``Toluene;
and'' and adding ``Toluene.'' in its place.
h. Removing paragraph (c)(3)(i)(X).
3. Paragraph (e) is amended by removing the language ``48.4081-
6(b),'' and by adding the language ``48.6426-1(b)'' after ``48.4101-
1(b),''.
4. Revising paragraph (f).
The revisions and additions read as follows:
Sec. 48.4081-1 Taxable fuel; definitions
* * * * *
(b) * * *
Blender means the person that has title to blended taxable fuel
immediately after it is created.
* * * * *
Diesel-water fuel emulsion means diesel fuel at least 14 percent of
which is water and with respect to which the emulsion additive is
registered by a United States manufacturer with the Environmental
Protection Agency pursuant to section 211 of the Clear Air Act (as in
effect on March 31, 2003).
* * * * *
Finished gasoline means all products that are commonly or
commercially known or sold as gasoline and are suitable for use as a
motor fuel, other than--
(1) Products that have an ASTM octane number of less than 75 as
determined by the motor method; and
(2) Alternative fuel as defined in section 6426(d)(2).
Gasoline means aviation gasoline, finished gasoline, gasoline
blends, gasoline blendstocks, and leaded gasoline.
Gasoline blend includes any liquid (other than finished gasoline)
that contains at least 0.1 percent (by volume) of finished gasoline and
that is suitable for use as a fuel in a motor vehicle or motorboat.
However, the term does not include qualified methanol or ethanol fuel
(as defined in section 4041(b)(2)(B)), partially exempt methanol or
ethanol fuel (as defined in section 4041(m)(2)), or alcohol that is
denatured under a formula approved by the Secretary.
* * * * *
Refinery means a facility used to produce taxable fuel and from
which taxable fuel may be removed by pipeline, by vessel, or at a rack.
However, the term does not include a facility where only blended
taxable fuel, and no other type of taxable fuel, is produced.
* * * * *
(f) Effective/applicability date. This section is applicable on and
after the date of publication of these regulations in the Federal
Register as final regulations. For provisions applicable to prior
periods, see 26 CFR 48.4081-1 (revised as of April 1, 2008).
Sec. 48.4081-2 [Amended]
Par. 15. Section 48.4081-2 is amended by removing the last sentence
of paragraph (d).
Sec. 48.4081-3 [Amended]
Par. 16. Section 48.4081-3 is amended as follows:
1. Paragraph (b)(1)(iii) is removed.
2. Removing the last sentence in paragraphs (g)(1) and (h).
Sec. 48.4081-6 [Removed and Reserved]
Par. 17. Section 48.4081-6 is removed and reserved.
[[Page 43896]]
Sec. 48.4082-4 [Amended]
Par. 18. Section 48.4082-4, is amended by adding the language ``or
biodiesel'' after ``taxable fuel'' in paragraphs (a)(1)(iii) and
(b)(1)(iii).
Par. 19. Section 48.4101-1 is amended as follows:
1. Paragraph (a)(1) is amended by removing the language ``4081
and'' and adding ``4081, for certain producers and importers of
alcohol, biodiesel, and renewable diesel, and alternative fuelers under
sections 6426 and 6427, and for purposes of'' in its place.
2. Revising paragraphs (a)(2), (c)(1)(vi), (c)(1)(vii), and adding
paragraph (c)(1)(viii).
3. Paragraphs (a)(3) and (b)(3) are removed and reserved.
4. Paragraph (b)(9) is amended by removing the language ``48.4081-
6(b), 48.4082-5(b), 48.4082-6(b), 48.4082-7(b)'' and adding ``48.4082-
5(b), 48.4082-7(b), 48.6426-1(b),'' in its place.
5. Revising paragraph (d)(2) and adding paragraph (d)(7).
6. Paragraph (d)(5) is amended by, removing the language ``vendor;
or'' and adding ``vendor;'' in its place.
7. Paragraph (d)(6) is amended by removing the language ``pump).''
and adding ``pump); or'' in its place.
8. Paragraph (f)(1)(i) is amended by removing from the heading the
language ``and vessel operators.'' and adding ``vessel operators,
alternative fuelers, producers or importers of alcohol, biodiesel, or
renewable diesel, and diesel-water fuel emulsion producers.'' in its
place.
9. Paragraph (f)(1)(ii) is amended by removing the language in the
heading ``and vessel operators'' and adding ``vessel operators,
alternative fuelers, producers or importers of alcohol, biodiesel, or
renewable diesel, and diesel-water fuel emulsion producers'' in its
place.
10. Paragraph (f)(1)(ii) is amended by removing the language in the
introductory text ``or vessel operator'' and adding ``vessel operator,
alternative fueler, producer or importer of alcohol, biodiesel, or
renewable diesel, or diesel-water fuel emulsion producer'' in its
place.
11. Paragraph (f)(1)(ii)(B) is amended by adding the language
``reporting,'' after ``payment,''.
12. Paragraph (f)(4)(ii)(A) is amended by removing the language in
the introductory text ``district director'' and adding ``Commissioner''
in its place.
13. Paragraph (f)(4)(ii)(A)(1) is amended by removing the language
``district director);'' and adding ``Commissioner); and'' in its place.
14. Paragraph (f)(4)(ii)(A)(2) is amended by removing the language
``district director); and'' and adding ``Commissioner.'' in its place.
15. Removing paragraph (f)(4)(i)(A)(3).
16. Paragraph (f)(4)(iii) is amended by removing the language
``deposit, and payment'' and adding ``deposit, payment, reporting, and
claim'' in its place.
17. Revising paragraph (h)(2)(iii).
18. Paragraph (j)(2) is amended by removing the language in the
introductory text ``district director'' and adding ``Commissioner'' in
its place.
19. Paragraph (j)(2)(i), is amended by removing the language
``district director);'' and adding ``Commissioner); and'' in its place.
20. Paragraph (j)(2)(ii) is amended by removing the language
``district director); and'' and adding ``Commissioner).'' in its place.
21. Removing paragraph (j)(2)(iii).
22. Paragraph (k) is amended by adding a new sentence between the
existing second and third sentences.
23. Paragraph (l)(5) is added.
The revisions and additions read as follows:
Sec. 48.4101-1 Taxable fuel; registration.
(a) * * *
(2) A person is registered under section 4101 only if the
Commissioner has issued a registration letter to the person and the
registration has not been revoked or suspended or the person is treated
under this paragraph (a)(2) as registered under section 4101. The
following persons are treated as registered under section 4101:
(i) The United States is treated as registered under section 4101
for all purposes.
(ii) A partner in a partnership is treated as registered under
section 4101 for purposes of claims filed under section 34 if the
partnership is registered under section 4101 for purposes of filing
claims under section 6426 or 6427.
(iii) A taxable fuel registrant is treated as registered under
section 4101 as a diesel-water fuel emulsion producer.
(iv) A foreign person is treated as registered under section 4101
as a producer of alcohol, biodiesel, or renewable diesel if--
(A) The person produces alcohol, biodiesel, or renewable diesel
outside the United States and does not produce alcohol, biodiesel, or
renewable diesel within the United States; and
(B) The alcohol, biodiesel, or renewable diesel is imported into
the United States by a person registered under section 4101 as a
producer or importer of alcohol, biodiesel, or renewable diesel.
* * * * *
(c) * * *
(1) * * *
(vi) A terminal operator;
(vii) A vessel operator; or
(viii) A producer or importer of alcohol, biodiesel, or renewable
diesel.
* * * * *
(d) * * *
(2) An alternative fueler;
* * * * *
(7) A diesel-water fuel emulsion producer.
* * * * *
(h) * * *
(2) * * *
(iii) Make any false statement on, or violate the terms of, any
certificate given to another person to support--
(A) Any claim for credit, refund, or payment; or
(B) An exemption from, or reduced rate of, tax imposed by section
4081; or
* * * * *
(k) * * * For rules relating to claims with respect to alcohol,
biodiesel, renewable diesel and alternative fuel, see Sec. Sec.
48.6426-1 through 48.6426-7. * * *
(l) * * *
(5) References in this section to biodiesel and alcohol are
applicable after December 31, 2004. References in this section to
renewable diesel and diesel-water fuel emulsion are applicable after
December 31, 2005. References in this section to alternative fuel are
applicable after September 30, 2006.
Par. 20. Sections 48.6426-1 through 48.6426-7 are added to read as
follows:
Sec. 48.6426-1 Renewable and alternative fuels; explanation of terms.
(a) Overview. This section provides an explanation of terms for
purposes of the credits allowed by sections 34 and 6426 and the
payments allowed by section 6427(e). The definition of alcohol in
paragraph (c) of this section is also applicable for purposes of the
credits allowed by section 40. The definitions of biodiesel and
renewable diesel in paragraph (b) of this section are also applicable
for purposes of the credits allowed by section 40A.
(b) Explanation of terms.
Agri-biodiesel means biodiesel derived solely from virgin oils.
Virgin oils include virgin vegetable oils from the sources listed in
section 40A(d)(2), as well as virgin oils not listed, such as palm oil
and fish oil. Biodiesel produced from a feedstock that includes any
recycled oils (such as recycled cooking oils) is not agri-biodiesel
[[Page 43897]]
because it is not derived solely from virgin oils.
Alcohol is defined in paragraph (c) of this section.
Alcohol fuel mixture means a mixture of alcohol and taxable fuel
that contains at least 0.1 percent (by volume) of taxable fuel.
Alternative fuel means, except as otherwise provided in the
following sentence, liquefied petroleum gas, P Series Fuels (as defined
by the Secretary of Energy under 42 U.S.C. 13211(2)), compressed or
liquefied natural gas, liquefied hydrogen, any liquid fuel derived from
coal (including peat) through the Fischer-Tropsch process, and liquid
fuel derived from biomass (as defined in section 45K(c)(3)). The term
does not include ethanol, methanol, biodiesel, or renewable diesel.
Alternative fuel mixture means a mixture of alternative fuel and
taxable fuel that contains at least 0.1 percent (by volume) of taxable
fuel.
Alternative fueler means a person that--
(1) Is an alternative fueler (unmixed fuel); or
(2) Produces alternative fuel mixtures for sale or use in its trade
or business.
Alternative fueler (unmixed fuel) with respect to any alternative
fuel that is sold for use or used as a fuel in a motor vehicle or
motorboat is--
(1) In the case of alternative fuel on which tax is imposed by
section 4041(a)(2) or (3), the person liable for such tax (determined
in the case of compressed natural gas after the application of Sec.
48.4041-21 and in the case of any other alternative fuel after the
application of rules similar to the rules of Sec. Sec. 48.4041-3 and
48.4041-5);
(2) In the case of alternative fuel that is not described in
paragraph (1) or (3) of this definition, the person that would be so
liable for such tax but for the application of an exemption provided by
section 4041(a)(3)(B), (b), (f), (g), or (h); and
(3) In the case of liquefied natural gas (LNG) that is sold in bulk
for the exclusive use of a State that provides the written waiver
described in Sec. 48.6426-6(c)(4) and is delivered into a bulk supply
tank that can only fuel motor vehicles and motorboats of the State, the
person that sells the alternative fuel to the State.
Biodiesel means biodiesel as defined in section 40A(d)(1).
Biodiesel may be produced either within or outside the United States.
Fuel meets the Environmental Protection Agency (EPA) registration
requirements described in section 40A(d)(1)(A) if the EPA does not
require the fuel to be registered.
Biodiesel mixture means a mixture of biodiesel and diesel fuel that
contains at least at least 0.1 percent (by volume) of diesel fuel. The
kerosene in a biodiesel mixture is not included in either the overall
volume of the mixture or the volume of diesel fuel in the mixture for
purposes of determining whether the biodiesel mixture satisfies the 0.1
percent requirement. The diesel fuel in a biodiesel mixture may be dyed
or undyed. See, however, section 6715 for the penalty for willful
alteration of the strength or composition of any dye in dyed fuel and
Sec. 48.6715-1 for related rules.
Commingled biodiesel means biodiesel that is held by--
(1) Its producer in a storage tank at a time when the tank is used
only for the storage of biodiesel and is used to store both biodiesel
(other than agri-biodiesel) and agri-biodiesel; or
(2) A person other than its producer in a storage tank at a time
when the tank is used only for the storage of biodiesel and is used to
store biodiesel to which more than a single Certificate for Biodiesel
applies.
Commingled renewable diesel means renewable diesel held by a person
other than its producer in a storage tank at a time when the tank is
used only for the storage of renewable diesel and is used to store
renewable diesel to which more than a single Certificate for Renewable
Diesel applies.
Mixture means an alcohol fuel mixture, a biodiesel mixture, a
renewable diesel mixture, or an alternative fuel mixture.
Mixture producer is the person that has title to the mixture
immediately after it is created.
Motor vehicle has the meaning given to the term by Sec. 48.4041-
8(c). Thus, for example, the term includes forklift trucks used to
carry loads at industrial plants and warehouses.
Producer means the person that produces alcohol, biodiesel, or
renewable diesel.
Registered biodiesel producer means a biodiesel producer that is
registered under section 4101 as a producer of biodiesel.
Registered renewable diesel producer means a renewable diesel
producer that is registered under section 4101 as a producer of
renewable diesel.
Renewable diesel means renewable diesel as defined in section
40A(f)(3). For this purpose, a fuel meets the Environmental Protection
Agency's (EPA's) registration requirements described in section
40A(f)(3)(A) if the EPA does not require the fuel to be registered or
if diesel fuel coproduced from renewable diesel and petroleum
feedstocks is registered. Renewable diesel may be produced either
within or outside the United States.
Renewable diesel mixture is defined in paragraph (d) of this
section.
Reseller means, with respect to any biodiesel or renewable diesel,
a person that buys and subsequently sells such fuel without using the
fuel to produce a biodiesel or renewable diesel mixture.
Thermal depolymerization process means, for purposes of the
definition of renewable diesel in section 40A(f)(3), a process for the
reduction of complex organic materials through the use of pressure and
heat to decompose long chain polymers of hydrogen, oxygen, and carbon
into short-chain petroleum hydrocarbons with a maximum length of around
18 carbons. A process may qualify as thermal depolymerization even if
catalysts are used in the process.
Use as a fuel is defined in paragraph (e) of this section.
(c) Alcohol; definition--(1) In general. Except as otherwise
provided in this paragraph (c), alcohol means any alcohol, including
methanol and ethanol, that is not a derivative product of petroleum,
natural gas, or coal (including peat). Thus, for example, the term does
not include an ethanol by-product produced from a derivative of
petroleum or natural gas. However, the term does include alcohol made
from renewable resources, such as agricultural or forestry products.
The term also includes alcohol made from urban wastes, such as methanol
made from methane gas formed at waste disposal sites.
(2) Source of the alcohol. Alcohol may be produced either within or
outside the United States.
(3) Proof and denaturants. Except for purposes of section 40,
alcohol does not include alcohol with a proof of less than 190 degrees
(determined without regard to added denaturants). For purposes of
section 40, alcohol does not include alcohol with a proof of less than
150 degrees (determined without regard to added denaturants). If
alcohol includes impurities or denaturants, the volume of alcohol is
determined under the following rules:
(i) Except for purposes of section 40, the volume of alcohol
includes the volume of any impurities (other than added denaturants and
any fuel with which the alcohol is mixed) that reduce the purity of the
alcohol to not less than 190 proof (determined without regard to added
denaturants and any fuel with which the alcohol is mixed).
(ii) For purposes of section 40, the volume of alcohol includes the
volume of any impurities (other than added denaturants and any fuel
with which
[[Page 43898]]
the alcohol is mixed) that reduce the purity of the alcohol to not less
than 150 proof (determined without regard to added denaturants and any
fuel with which the alcohol is mixed).
(iii) The volume of alcohol includes the volume of any approved
denaturants that reduce the purity of the alcohol, but only to the
extent that the volume of the approved denaturants does not exceed five
percent of the unadjusted volume of the alcohol. The unadjusted volume
of the alcohol is determined for this purpose by including in
unadjusted volume the approved denaturants and the impurities included
in volume under paragraph (c)(3)(i) or (ii) of this section. If the
volume of the approved denaturants exceeds five percent of the
unadjusted volume of the alcohol, the excess over five percent is not
considered alcohol.
(iv) For purposes of this paragraph (c)(3), approved denaturants
are any denaturants (including gasoline and other nonalcohol fuel
denaturants) that reduce the purity of the alcohol and are added to
such alcohol under a formula approved by the Secretary.
(4) ETBE. Ethyl tertiary butyl ether (ETBE) and other ethers
produced from alcohol are treated as alcohol. The ether is treated as
alcohol of the same type as the alcohol used to produce the ether and
the volume of alcohol resulting from such treatment is the volume of
alcohol of such type with an energy content equal to the energy content
of the ether.
(d) Renewable diesel mixture; definition--(1) In general. Renewable
diesel mixture means--
(i) A mixture of renewable diesel and diesel fuel (other than
renewable diesel) that contains at least 0.1 percent (by volume) of
diesel fuel (other than renewable diesel); and
(ii) Fuel produced from biomass (as defined in section 45K(c)(3))
and petroleum feedstocks using a thermal depolymerization process if
such fuel has been registered by the Environmental Protection Agency
(EPA) under section 211 of the Clean Air Act (42 U.S.C. 7545) and meets
the requirements of ASTM D975 or D396.
(2) Special rules. The kerosene in a renewable diesel mixture is
not included in either the overall volume of the mixture or the volume
of diesel fuel in the mixture for purposes of determining whether the
renewable diesel mixture satisfies the 0.1 percent requirement. The
diesel fuel in the renewable diesel mixture may be dyed or undyed. See,
however, section 6715 for the penalty for willful alteration of the
strength or composition of any dye in dyed fuel and Sec. 48.6715-1 for
related rules. For availability for ASTM specifications, see Sec.
48.4081-1(d).
(e) Use as a fuel; definitions--(1) A mixture is used as a fuel
when it is consumed in the production of energy. Thus, for example, a
mixture is used as a fuel when it is consumed in an internal combustion
engine to power a vehicle or in a furnace to produce heat. However, a
mixture that is destroyed in a fire or other casualty loss is not used
as a fuel.
(2) A mixture is sold for use as a fuel if the producer sells the
fuel and has reason to believe that the mixture will be used as a fuel
by either the producer's buyer or any later buyer of the mixture.
(3) Alternative fuel (not in a mixture) is sold for use or used as
a fuel in a motor vehicle or motorboat when the alternative fueler
(unmixed fuel) with respect to the fuel delivers it into the fuel
supply tank of a motor vehicle or motorboat or sells it in bulk for use
by the buyer as a fuel in a motor vehicle or motorboat.
(f) Other definitions. For the definitions of taxable fuel and
diesel fuel, see Sec. 48.4081-1.
(g) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register.
Sec. 48.6426-2 Alcohol fuel mixtures.
(a) Overview. This section provides rules under which an alcohol
fuel mixture producer may claim an excise tax credit under section
6426, a payment under section 6427, or an income tax credit under
section 34. These claims relate to the mixture producer's sale or use
of an alcohol fuel mixture and are based on the amount of alcohol used
to produce the alcohol fuel mixture. For the applicable claim rate, see
section 6426.
(b) Conditions to allowance--(1) Excise tax credit. A claim for the
alcohol fuel mixture credit with respect to an alcohol fuel mixture is
allowed under section 6426 only if each of the following conditions is
satisfied:
(i) The claimant produced the alcohol fuel mixture for sale or use
in the trade or business of the claimant.
(ii) The claimant sold the alcohol fuel mixture for use as a fuel
or used the alcohol fuel mixture as a fuel.
(iii) The claimant has made no other claim with respect to the
alcohol in the mixture or, if another claim has been made, such other
claim is disregarded under this paragraph (b)(1)(iii). A claim is
disregarded under this paragraph (b)(1)(iii) if it is--
(A) A claim for the small ethanol producer credit under section 40;
or
(B) An erroneous claim under section 6427 and either the claim has
been disallowed or the claimant has repaid the government the amount
received under section 6427 with interest.
(iv) The claimant has filed a timely claim on Form 720, ``Quarterly
Federal Excise Tax Return,'' that contains all the information required
in paragraph (c) of this section.
(2) Payment or income tax credit. A claim for an alcohol fuel
mixture payment under section 6427 or an income tax credit under
section 34 is allowed only if--
(i) The conditions of paragraphs (b)(1)(i) and (ii) of this section
are met; and
(ii) The claimant has filed a timely claim for payment on Form 720
or Form 8849, ``Claim for Refund of Excise Taxes,'' or for a credit on
Form 4136, ``Credit for Federal Tax Paid on Fuels,'' that contains all
the information required by paragraph (c) of this section.
(3) ETBE; sold for use or used as a fuel. An alcohol fuel mixture
that is produced at a refinery and that includes ethyl tertiary butyl
ether or other ethers produced from alcohol is treated as meeting the
requirement of paragraph (b)(1)(ii) of this section when the mixture is
removed from the refinery and any subsequent sale or use of the mixture
is disregarded for purposes of this section.
(4) Overall limitations on credits and payments. See Sec. 48.6426-
7(a) for overall limitations on credits and payments allowed with
respect to mixtures under sections 34, 6426, and 6427.
(c) Content of claim. Each claim for an alcohol fuel mixture credit
or payment must contain the following information with respect to the
mixture covered by the claim:
(1) The amount of alcohol in the alcohol fuel mixture.
(2) A statement that the conditions to allowance described in
paragraph (b) of this section have been met.
(3) A statement that the claimant either--
(i) Produced the alcohol it used in the mixture; or
(ii) Has in its possession a record of the name, address, and
employer identification number of the person(s) that sold the alcohol
to the claimant and the date of purchase.
(d) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register.
Sec. 48.6426-3 Biodiesel mixtures.
(a) Overview. This section provides rules under which a biodiesel
mixture producer may claim an excise tax credit
[[Page 43899]]
under section 6426, a payment under section 6427, or an income tax
credit under section 34. These claims relate to the mixture producer's
sale or use of a biodiesel mixture and are based on the amount of
biodiesel used to produce the biodiesel mixture. For the applicable
claim rate, see section 6426.
(b) Conditions to allowance--(1) Excise tax credit. A claim for the
biodiesel mixture credit with respect to a biodiesel mixture is allowed
under section 6426 only if each of the following conditions is
satisfied:
(i) The claimant produced the biodiesel mixture for sale or use in
the trade or business of the claimant.
(ii) The claimant sold the biodiesel mixture for use as a fuel or
used the biodiesel mixture as a fuel.
(iii) The claimant--
(A) Produced the biodiesel in the mixture; or
(B) Has obtained a certificate from the registered biodiesel
producer as described in paragraph (e) of this section and, if
applicable, a statement described in paragraph (f) of this section, for
such biodiesel and has no reason to believe any information in the
certificate and statement is false.
(iv) The claimant has made no other claim with respect to the
biodiesel in the mixture or, if another claim has been made, such other
claim is disregarded under this paragraph (b)(1)(iv). A claim is
disregarded under this paragraph (b)(1)(iv) if it is--
(A) A claim for the small agri-biodiesel producer credit under
section 40A; or
(B) An erroneous claim under section 6427 and either the claim has
been disallowed or the claimant has repaid the government the amount
received under section 6427 with interest.
(v) The claimant has filed a timely claim on Form 720, ``Quarterly
Federal Excise Tax Return,'' that contains all the information required
in paragraph (c) of this section.
(2) Payment or income tax credit. A claim for a biodiesel mixture
payment under section 6427 or an income tax credit under section 34 is
allowed only if--
(i) The conditions of paragraphs (b)(1)(i), (ii), and (iii) of this
section are met; and
(ii) The claimant has filed a timely claim for payment on Form 720
or Form 8849, ``Claim for Refund of Excise Tax,'' or for a credit on
Form 4136, ``Credit for Federal Tax Paid on Fuels,'' that contains all
the information required by paragraph (c) of this section.
(3) Overall limitations on credits and payments. See Sec. 48.6426-
7(a) for overall limitations on credits and payments allowed with
respect to mixtures under sections 34, 6426, and 6427.
(c) Content of claim. Each claim for a biodiesel mixture credit or
payment must contain the following information with respect to the
mixture covered by the claim:
(1) The amount of agri-biodiesel and biodiesel other than agri-
biodiesel in the biodiesel mixture.
(2) Unless the claimant is the producer of the biodiesel in the
biodiesel mixture, a copy of the applicable Certificate for Biodiesel
described in paragraph (e) of this section and Statement(s) of
Biodiesel Reseller described in paragraph (f) of this section. In the
case of a certificate and statement that support a claim made on more
than one claim form, the certificate and statement are to be included
with the first claim and the claimant is to provide information related
to the certificate and statement on any subsequent claim in accordance
with the instructions applicable to the claim form.
(3) A statement that the conditions to allowance described in
paragraph (b) of this section have been met.
(4) A statement that the claimant either--
(i) Is a registered biodiesel producer and produced the biodiesel
it used in the mixture; or
(ii) Has in its possession a record of the name, address, and
employer identification number of the person(s) that sold the biodiesel
to the claimant and the date of purchase.
(d) Commingled biodiesel; accounting method. For purposes of
determining the certificate applicable to commingled biodiesel, a
person that holds commingled biodiesel may identify the biodiesel it
sells or uses by any reasonable method, including the first-in, first-
out method applied either on a tank-by-tank basis or on an aggregate
basis to all commingled biodiesel the person holds.
(e) Certificate for Biodiesel--(1) In general. The certificate to
be obtained by the claimant is a statement that is signed under
penalties of perjury by a person with authority to bind the registered
biodiesel producer, is in substantially the same form as the model
certificate in paragraph (e)(4) of this section, and contains all the
information necessary to complete such model certificate.
(2) Certificate identification number. The certificate
identification number is determined by the producer and must be unique
to each certificate.
(3) Multiple certificates for single sale. A registered biodiesel
producer may, with respect to a particular sale of biodiesel, provide
multiple separate certificates, each applicable to a portion of the
total volume of biodiesel sold. Thus, for example, a biodiesel producer
that sells 5,000 gallons of biodiesel may provide its buyer with five
certificates for 1,000 gallons each. The multiple certificates may be
provided either to the buyer at or after the time of sale or to a
reseller in the circumstances described in paragraph (f)(2) of this
section.
(4) Model certificate.
CERTIFICATE FOR BIODIESEL
Certificate Identification Number: --------------------
(To support a claim related to biodiesel or a biodiesel mixture
under the Internal Revenue Code)
The undersigned biodiesel producer (``Producer'') hereby
certifies the following under penalties of perjury:
1.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Producer's name, address, and employer identification number
2.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of person buying
the biodiesel from Producer
3.---------------------------------------------------------------------
Date and location of sale to buyer
4. This certificate applies to -------- gallons of biodiesel.
5. Producer certifies that the biodiesel to which this certificate
relates is:
--------% Agri-biodiesel (derived solely from virgin oils)
-------- % Biodiesel other than agri-biodiesel
6. This certificate applies to the following sale:
-------- Invoice or delivery ticket number
-------- Total number of gallons of biodiesel sold under that
invoice or delivery ticket number (including biodiesel not covered
by this certificate)
7. -------- Total number of certificates issued for that invoice or
delivery ticket number
8.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of reseller to
whom certificate is issued (only in the case of certificates
reissued to a reseller after the return of the original certificate)
9. -------- Original Certificate Identification Number (only in the
case of certificates reissued to a reseller after return of the
original certificate)
10. Producer is registered as a biodiesel producer with registration
number --------. Producer's registration has not been suspended or
revoked by the Internal Revenue Service.
Producer certifies that the biodiesel to which this certificate
relates is monoalkyl
[[Page 43900]]
esters of long chain fatty acids derived from plant or animal matter
and that it meets the requirements of the American Society of
Testing and Materials D6751 and the registration requirements for
fuels and fuel additives established by EPA under section 211 of the
Clean Air Act (42 U.S.C. 7545).
Producer understands that the fraudulent use of this certificate
may subject Producer and all parties making any fraudulent use of
this certificate to a fine or imprisonment, or both, together with
the costs of prosecution.
-----------------------------------------------------------------------
Printed or typed name of person signing this certificate
-----------------------------------------------------------------------
Title of person signing
-----------------------------------------------------------------------
Signature and date signed
(f) Statement of Biodiesel Reseller--(1) In general. A person that
receives a Certificate for Biodiesel, and subsequently sells the
biodiesel without producing a biodiesel mixture, is to give the
certificate and a statement that satisfies the requirements of this
paragraph (f) to its buyer. The statement must contain all of the
information necessary to complete the model statement in paragraph
(f)(4) of this section and be attached to the Certificate for
Biodiesel. A reseller cannot make multiple copies of a Certificate for
Biodiesel to divide the certificate between multiple buyers.
(2) Multiple resales. If a single Certificate for Biodiesel applies
to biodiesel that a reseller expects to sell to multiple buyers, the
reseller should return the certificate (together with any statements
provided by intervening resellers) to the producer who may reissue to
the reseller multiple Certificates for Biodiesel in the appropriate
volumes. The reissued certificates must include the Certificate
Identification Number from the certificate that has been returned.
(3) Withdrawal of the right to provide a certificate. The Internal
Revenue Service may withdraw the right of a reseller of biodiesel to
provide the certificate and a statement under this section if the
Internal Revenue Service cannot verify the accuracy of the reseller's
statements. The Internal Revenue Service may notify any person to whom
the buyer has provided a statement that the reseller's right to provide
the certificate and a statement has been withdrawn.
(4) Model statement of biodiesel reseller.
STATEMENT OF BIODIESEL RESELLER
(To support a claim related to biodiesel or a biodiesel mixture
under the Internal Revenue Code)
The undersigned biodiesel reseller (``Reseller'') hereby
certifies the following under penalties of perjury:
1.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Reseller's name, address, and employer identification number
2.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of Reseller's
buyer
3.---------------------------------------------------------------------
Date and location of sale to buyer
4.---------------------------------------------------------------------
Volume of biodiesel sold
5.---------------------------------------------------------------------
Certificate Identification Number on the Certificate for Biodiesel
Reseller has bought the biodiesel described in the accompanying
Certificate for Biodiesel and Reseller has no reason to believe that
any information in the certificate is false.
Reseller has not been notified by the Internal Revenue Service
that its right to provide a certificate and a statement has been
withdrawn.
Reseller understands that the fraudulent use of this statement
may subject Reseller and all parties making any fraudulent use of
this statement to a fine or imprisonment, or both, together with the
costs of prosecution.
-----------------------------------------------------------------------
Printed or typed name of person signing this certificate
-----------------------------------------------------------------------
Title of person signing
-----------------------------------------------------------------------
Signature and date signed
(g) Erroneous certificates; reasonable cause. If a claim for credit
or payment described in this section is based on erroneous information
in a certificate or statement described in paragraph (e)(4) or (f)(4)
of this section, the claim is not allowed. Thus, for example, if a
producer identifies a product as agri-biodiesel on a Certificate for
Biodiesel and the product does not meet the registration requirements
established by EPA, a claim for a biodiesel mixture credit based on the
certificate is not allowed. However, if the claimant has met the
conditions of paragraph (b)(1)(iii)(B) of this section with respect to
the certificate or statement, reliance on the certificate or statement
will be treated as reasonable cause for purposes of the penalties
imposed by sections 6651 (relating to failure to pay) and 6675
(relating to excessive claims).
(h) Effective/applicability date. This section is applicable on and
after the date of publication of these regulations as final regulations
in the Federal Register.
Sec. 48.6426-4 Renewable diesel mixtures.
(a) Overview. This section provides rules under which a renewable
diesel mixture producer may claim an excise tax credit under section
6426, a payment under section 6427, or an income tax credit under
section 34. These claims relate to the mixture producer's sale or use
of a renewable diesel mixture and are based on the amount of renewable
diesel used to produce the renewable diesel mixture. For the applicable
claim rate, see section 40A(f)(2).
(b) Conditions to allowance--(1) Excise tax credit. A claim for the
renewable diesel mixture credit with respect to a renewable diesel
mixture is allowed under section 6426 only if each of the following
conditions is satisfied:
(i) The claimant produced the renewable diesel mixture for sale or
use in the trade or business of the claimant.
(ii) The claimant sold the renewable diesel mixture for use as a
fuel or used the renewable diesel mixture as a fuel.
(iii) The claimant--
(A) Produced the renewable diesel in the mixture; or
(B) Has obtained a certificate from the registered renewable diesel
producer as described in paragraph (e) of this section and, if
applicable, a statement described in paragraph (f) of this section, for
such renewable diesel and has no reason to believe any information in
the certificate and statement is false.
(iv) The claimant has made no other claim with respect to the
renewable diesel in the mixture or, if another claim has been made,
such other claim is disregarded under this paragraph (b)(1)(iv). A
claim is disregarded under this paragraph (b)(1)(iv) if it is an
erroneous claim under section 6427 and either the claim has been
disallowed or the claimant has repaid the government the amount
received under section 6427 with interest.
(v) The claimant has filed a timely claim on Form 720, ``Quarterly
Federal Excise Tax Return,'' that contains all the information required
in paragraph (c) of this section.
(2) Payment or income tax credit. A claim for a renewable diesel
mixture payment under section 6427 or an income tax credit under
section 34 is allowed only if--
(i) The conditions of paragraphs (b)(1)(i), (ii), and (iii) of this
section are met; and
(ii) The claimant has filed a timely claim for payment on Form 720
or Form 8849, ``Claim for Refund of Excise
[[Page 43901]]
Taxes,'' or for a credit on Form 4136, ``Credit for Federal Tax Paid on
Fuels,'' that contains all the information required by paragraph (c) of
this section.
(3) Overall limitations on credits and payments. See Sec. 48.6426-
7(a) for overall limitations on credits and payments allowed with
respect to mixtures under sections 34, 6426, and 6427.
(c) Content of claim. Each claim for a renewable diesel mixture
credit or payment must contain the following information with respect
to the mixture covered by the claim:
(1) The amount of renewable diesel in the renewable diesel mixture.
(2) Unless the claimant is the producer of the renewable diesel in
the renewable diesel mixture, a copy of the applicable Certificate for
Renewable Diesel described in paragraph (e) of this section and
Statement(s) of Renewable Diesel Reseller described in paragraph (f) of
this section. In the case of a certificate and statement that support a
claim made on more than one claim form, the certificate and statement
are to be included with the first claim and the claimant is to provide
information related to the certificate and statement on any subsequent
claim in accordance with the instructions applicable to the claim form.
(3) A statement that the conditions to allowance described in
paragraph (b) of this section have been met.
(4) A statement that the claimant either--
(i) Is a registered renewable diesel producer and produced the
renewable diesel it used in the mixture; or
(ii) Has in its possession a record of the name, address, and
employer identification number of the person(s) that sold the renewable
diesel to the claimant and the date of purchase.
(d) Commingled renewable diesel; accounting method. For purposes of
determining the certificate applicable to commingled renewable diesel,
a person that holds commingled renewable diesel may identify the
renewable diesel it sells or uses by any reasonable method, including
the first-in, first-out method applied either on a tank-by-tank basis
or on an aggregate basis to all commingled renewable diesel the person
holds.
(e) Certificate for Renewable Diesel--(1) In general. The
certificate to be obtained by the claimant is a statement that is
signed under penalties of perjury by a person with authority to bind
the registered renewable diesel producer, is substantially in the same
form as the model certificate in paragraph (e)(4) of this section, and
contains all the information necessary to complete such model
certificate.
(2) Certificate identification number. The certificate
identification number is determined by the producer and must be unique
to each certificate.
(3) Multiple certificates for single sale. A registered renewable
diesel producer may, with respect to a particular sale of renewable
diesel, provide multiple separate certificates, each applicable to a
portion of the total volume of renewable diesel sold. Thus, for
example, a renewable diesel producer that sells 5,000 gallons of
renewable diesel may provide its buyer with five certificates for 1,000
gallons each. The multiple certificates may be provided either to the
buyer at or after the time of sale or to a reseller in the
circumstances described in paragraph (f)(2) of this section.
(4) Model certificate.
CERTIFICATE FOR RENEWABLE DIESEL
-----------------------------------------------------------------------
Certificate Identification Number:
-----------------------------------------------------------------------
(To support a claim related to renewable diesel or a renewable
diesel mixture under the Internal Revenue Code)
The undersigned renewable diesel producer (``Producer'') hereby
certifies the following under penalties of perjury:
1.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Producer's name, address, and employer identification number
2.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of person buying
the renewable diesel from Producer
3.---------------------------------------------------------------------
Date and location of sale to buyer
4. This certificate applies to -------- gallons of renewable diesel.
5. This certificate applies to the following sale:
-------- Invoice or delivery ticket number
-------- Total number of gallons of renewable diesel sold under
that invoice or delivery ticket number (including renewable diesel
not covered by this certificate)
6. -------- Total number of certificates issued for that invoice or
delivery ticket number
7.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of reseller to
whom certificate is issued (only in the case of certificates
reissued to a reseller after the return of the original certificate)
8. ------------ Original Certificate Identification Number (only in
the case of certificates reissued to a reseller after return of the
original certificate)
9. Producer is registered as a renewable diesel producer with
registration number --------. Producer's registration has not been
suspended or revoked by the Internal Revenue Service.
Producer certifies that the renewable diesel to which this
certificate relates is diesel fuel derived from biomass (as defined
in section 45K(c)(3) of the Internal Revenue Code) using a thermal
depolymerization process and that it meets the requirements of the
American Society of Testing and Materials D975 or D396 and the
registration requirements for fuels and fuel additives established
by EPA under section 211 of the Clean Air Act (42 U.S.C. 7545).
Producer understands that the fraudulent use of this certificate
may subject Producer and all parties making any fraudulent use of
this certificate to a fine or imprisonment, or both, together with
the costs of prosecution.
-----------------------------------------------------------------------
Printed or typed name of person signing this certificate
-----------------------------------------------------------------------
Title of person signing
-----------------------------------------------------------------------
Signature and date signed
(f) Statement of Renewable Diesel Reseller--(1) In general. A
person that receives a Certificate for Renewable Diesel, and
subsequently sells the renewable diesel without producing a renewable
diesel mixture, is to give the certificate and a statement that
satisfies the requirements of this paragraph (f) to its buyer. The
statement must contain all of the information necessary to complete the
model statement in paragraph (f)(4) of this section and be attached to
the Certificate for Renewable Diesel. A reseller cannot make multiple
copies of a Certificate for Renewable Diesel to divide the certificate
between multiple buyers.
(2) Multiple resales. If a single Certificate for Renewable Diesel
applies to renewable diesel that a reseller expects to sell to multiple
buyers, the reseller should return the certificate (together with any
statements provided by intervening resellers) to the producer who may
reissue to the reseller multiple Certificates for Renewable Diesel in
the appropriate volumes. The reissued certificates must include the
Certificate Identification Number from the certificate that has been
returned.
(3) Withdrawal of the right to provide a certificate. The Internal
Revenue Service may withdraw the right of a reseller of renewable
diesel to provide the certificate and a statement under this section if
the Internal Revenue Service cannot verify the accuracy of the
reseller's statements. The Internal Revenue Service may notify any
person to whom the buyer has provided a statement that the reseller's
right to
[[Page 43902]]
provide the certificate and a statement has been withdrawn.
(4) Model statement of renewable diesel reseller.
STATEMENT OF RENEWABLE DIESEL RESELLER
(To support a claim related to renewable diesel or a renewable
diesel mixture under the Internal Revenue Code)
The undersigned renewable diesel reseller (``Reseller'') hereby
certifies the following under penalties of perjury:
1.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Reseller's name, address, and employer identification number
2.---------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name, address, and employer identification number of Reseller's
buyer
3.---------------------------------------------------------------------
Date and location of sale to buyer
4.---------------------------------------------------------------------
Volume of renewable diesel sold
5.---------------------------------------------------------------------
Certificate Identification Number on the Certificate for Renewable
Diesel
Reseller has bought the renewable diesel described in the
accompanying Certificate for Renewable Diesel and Reseller has no
reason to believe that any information in the certificate is false.
Reseller has not been notified by the Internal Revenue Service
that its right to provide a certificate and a statement has been
withdrawn.
Reseller understands that the fraudulent use of this statement
may subject Reseller and all parties making any fraudulent use of
this statement to a fine or imprisonment, or both, together with the
costs of prosecution.
-----------------------------------------------------------------------
Printed or typed name of person signing this certificate
-----------------------------------------------------------------------
Title of person signing
-----------------------------------------------------------------------
Signature and date signed
(g) Erroneous certificates; reasonable cause. If a claim for credit
or payment described in this section is based on erroneous information
in a certificate or statement described in paragraph (e)(4) or (f)(4)
of this section, the claim is not allowed. Thus, for example, if a
producer identifies a product as renewable diesel on a Certificate for
Renewable Diesel and the product does not meet the registration
requirements established by EPA, a claim for a renewable diesel mixture
credit based on the certificate is not allowed. However, if the
claimant has met the conditions of paragraph (b)(1)(iii)(B) of this
section with respect to the certificate or statement, reliance on the
certificate or statement will be treated as reasonable cause for
purposes of the penalties imposed by sections 6651 (relating to failure
to pay) and 6675 (relating to excessive claims).
(h) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register.
Sec. 48.6426-5 Alternative fuel mixtures.
(a) Overview. This section provides rules under which an
alternative fueler that produces an alternative fuel mixture may claim
an excise tax credit under section 6426, a payment under section 6427,
or an income tax credit under section 34. These claims relate to the
mixture producer's sale or use of an alternative fuel mixture and are
based on the amount of alternative fuel used to produce the alternative
fuel mixture. For the applicable claim rate, see section 6426.
(b) Conditions to allowance--(1) Excise tax credit. A claim for the
alternative fuel mixture credit with respect to an alternative fuel
mixture is allowed under section 6426 only if each of the following
conditions is satisfied:
(i) The claimant produced the alternative fuel mixture for sale or
use in the trade or business of the claimant.
(ii) The claimant sold the alternative fuel mixture for use as a
fuel or used the alternative fuel mixture as a fuel.
(iii) The claimant is registered under section 4101 as an
alternative fueler.
(iv) The claimant has made no other claim with respect to the
alternative fuel in the mixture or, if another claim has been made,
such other claim is disregarded under this paragraph (b)(1)(iv). A
claim is disregarded under this paragraph (b)(1)(iv) if it is an
erroneous claim under section 6427 and either the claim has been
disallowed or the claimant has repaid the government the amount
received under section 6427 with interest.
(v) The claimant has filed a timely claim on Form 720, ``Quarterly
Federal Excise Tax Return,'' that contains all the information required
by the claim form described in paragraph (c) of this section.
(2) Payment or income tax credit. A claim for an alternative fuel
mixture payment under section 6427 or an alternative fuel mixture
credit under sections 34 and 6427 is allowed only if--
(i) The conditions of paragraphs (b)(1)(i), (ii), and (iii) of this
section are met; and
(ii) The claimant has filed a timely claim for payment on Form 720
or Form 8849, ``Claim for Refund of Excise Taxes,'' or for a credit on
Form 4136, ``Credit for Fuel Tax Paid on Fuels,'' that contains all the
information required by the claim form described in paragraph (c) of
this section.
(3) Overall limitations on credits and payments. See Sec. 48.6426-
7(a) for overall limitations on credits and payments allowed with
respect to mixtures under sections 34, 6426, and 6427.
(c) Content of claim. Each claim for an alternative fuel mixture
credit or payment must contain the following information with respect
to the mixture covered by the claim:
(1) The amount of alternative fuel in the alternative fuel mixture.
(2) A statement that the conditions to allowance described in
paragraph (b) of this section have been met.
(3) A statement that the claimant either--
(i) Produced the alternative fuel it used in the mixture; or
(ii) Has in its possession--
(A) A record of the name, address, and employer identification
number of the person(s) that sold the alternative fuel to the claimant
and the date of purchase; and
(B) An invoice or other purchase documentation identifying the
alternative fuel.
(d) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register.
Sec. 48.6426-6 Alternative fuel.
(a) Overview. This section provides rules under which an
alternative fueler (unmixed fuel) may claim an excise tax credit under
section 6426, a payment under section 6427, or an income tax credit
under section 34. These claims are based on the amount of alternative
fuel sold or used. For the applicable claim rate, see section 6426.
(b) Conditions to allowance--(1) Excise tax credit. A claim for the
alternative fuel excise tax credit with respect to alternative fuel
sold for use or used as a fuel in a motor vehicle or motorboat is
allowed under section 6426 only if each of the following conditions is
satisfied:
(i) The claimant is the alternative fueler (unmixed fuel) with
respect to the fuel.
(ii) The claimant is registered under section 4101 as an
alternative fueler (unmixed fuel).
(iii) The claimant has made no other claim with respect to the
alternative fuel or, if another claim has been made, such other claim
is disregarded under this paragraph (b)(1)(iii). A claim is disregarded
under this paragraph (b)(1)(iii) if it is an erroneous claim under
section 6427 and either the claim
[[Page 43903]]
has been disallowed or the claimant has repaid the government the
amount received under section 6427 with interest.
(iv) The claimant has filed a timely claim on Form 720, ``Quarterly
Federal Excise Tax Return,'' that contains all the information required
by the claim form described in paragraph (c) of this section.
(2) Payment or income tax credit. A claim for an alternative fuel
payment under section 6427 or an income tax credit under section 34 is
allowed only if--
(i) The conditions of paragraphs (b)(1)(i) and (ii) of this section
are met;
(ii) The sale or use is in the claimant's trade or business; and
(iii) The claimant has filed a timely claim for payment on Form
8849, ``Claim for Refund of Excise Taxes,'' or for a credit on Form
4136, ``Credit for Fuel Tax Paid on Fuels,'' that contains all the
information required by paragraph (c) of this section.
(3) Overall limitations on credits and payments. See Sec. 48.6426-
7(b) for overall limitations on credits and payments allowed with
respect to alternative fuel under sections 34, 6426, and 6427.
(c) Content of claim. Each claim for an alternative fuel credit or
payment must contain the following information with respect to the
alternative fuel covered by the claim:
(1) The amount of alternative fuel sold or used.
(2) A statement that the conditions to allowance described in
paragraph (b) of this section have been met.
(3) A statement that the claimant either--
(i) Produced the alternative fuel it sold or used; or
(ii) Has in its possession--
(A) A record of the name, address, and employer identification
number of the person(s) that sold the alternative fuel to the claimant
and the date of purchase; and
(B) An invoice or other purchase documentation identifying the
alternative fuel.
(4) In the case of liquefied natural gas (LNG) that the claimant
sold in bulk for the exclusive use of the State and delivered into a
bulk supply tank that can only fuel motor vehicles or motorboats of the
State, a statement that the claimant has in its possession a written
waiver, signed under penalties of perjury by a person with authority to
bind the State, stating that the LNG is delivered in bulk for the
exclusive use of the State in a motor vehicle or motorboat and that the
State gives up its right to claim any alternative fuel credit for such
LNG.
(d) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register
Sec. 48.6426-7 Overall limitations on credits and payments.
(a) Limitations applicable to mixtures. In the case of mixtures,
the following limitations apply:
(1) The aggregate amount that, but for the coordination rules in
sections 6426(g) and 6427(e)(3), would be allowable to a claimant
either as a credit under section 6426 or a payment under section 6427
with respect to sales and uses of mixtures during a calendar quarter is
allowed only as a credit under section 6426 to the extent such amount
does not exceed the claimant's tax liability under section 4081 for the
calendar quarter.
(2) The aggregate amount allowed to a claimant as a payment under
section 6427 or an income tax credit under section 34 with respect to
sales and uses of mixtures during a calendar quarter shall not exceed
the amount that, but for the coordination rules in sections 6426(g) and
6427(e)(3), would be allowable to the claimant with respect to such
sales and uses reduced by the claimant's tax liability under section
4081 for the calendar quarter.
(b) Limitations applicable to alternative fuel. In the case of
alternative fuel, the following limitations apply:
(1) The aggregate amount that, but for the coordination rules in
sections 6426(g) and 6427(e)(3), would be allowable to a claimant
either as a credit under section 6426 or a payment under section 6427
with respect to sales and uses of alternative fuel during a calendar
quarter is allowed only as a credit under section 6426 to the extent
such amount does not exceed the claimant's tax liability under section
4041 for the calendar quarter.
(2) The aggregate amount allowed to a claimant as a payment under
section 6427 or an income tax credit under section 34 with respect to
sales and uses of alternative fuel during a calendar quarter shall not
exceed the amount that, but for the coordination rules in sections
6426(g) and 6427(e)(3), would be allowable to the claimant with respect
to such sales and uses reduced by the claimant's tax liability under
section 4041 for the calendar quarter.
(c) Effective/applicability dates. This section is applicable on
and after the date of publication of these regulations as final
regulations in the Federal Register.
Par. 21. Section 48.6427-8 is amended as follows:
1. Revising paragraph (b)(1)(v) and adding (b)(1)(vii)(E).
2. Paragraph (b)(1)(vii)(C) is amended by removing the language
``vehicle; or'' and adding ``vehicle;'' in its place.
3. Paragraph (b)(1)(vii)(D) is amended by removing the language
``6427(b)(3)).'' and adding ``6427(b)(3)); or'' in its place.
4. Paragraph (f) is amended by removing the language from the first
sentence ``1994.'' and adding ``1994, and paragraph (b)(1)(vii)(E),
which is applicable after the date these regulations are published as
final regulations in the Federal Register.'' in its place.''
The revision and addition read as follows:
Sec. 48.6427-8 Diesel fuel and kerosene; claims by ultimate
purchasers.
* * * * *
(b) * * *
(1) * * *
(v) The diesel fuel or kerosene was not used on a farm for farming
purposes (as defined in Sec. 48.6420-4) or, except in the case of fuel
described in paragraph (b)(1)(vii)(E) of the section, by a State;
* * * * *
(vii) * * *
(E) For the exclusive use, in the case of blended taxable fuel that
is produced by a State and is both diesel fuel and a mixture (as
defined in Sec. 48.6426-1(b)), of the State that produced the blended
taxable fuel.
* * * * *
Par. 22. Section 48.6427-12 is added to read as follows:
Sec. 48.6427-12 Alcohol, alternative fuel, biodiesel, and renewable
diesel.
(a) In general. This section contains special rules for payments
related to fuels containing alcohol, alternative fuel, biodiesel, and
renewable diesel. Other rules for these payments are in Sec. Sec.
48.6426-1 through 48.6426-7.
(b) Coordination with excise tax credit. If the aggregate amount a
person receives as a payment under section 6427(e) with respect to
sales and uses of mixtures during a calendar quarter exceeds the amount
allowed under Sec. 48.6426-7(a), the excess constitutes an excessive
amount for purposes of section 6206 and such amount, as well as the
civil penalty under section 6675, may be assessed as if it were a tax
imposed by section 4081. If the excessive amount is repaid to the
government, with interest from the date of the payment (section 6602),
on or before the due date of the Form 720, ``Quarterly Federal Excise
Tax Return,'' for the calendar quarter, the claim for the excessive
amount will be treated as due to reasonable cause and the penalty
[[Page 43904]]
under section 6675 will not be imposed with respect to the claim. If a
person claims an income tax credit under section 34 in lieu of a
payment under section 6427(e) with respect to sales and uses of
mixtures during a calendar quarter and the aggregate amount claimed as
an income tax credit with respect to such sales and uses exceeds the
amount allowed under Sec. 48.6426-7(a)(2), the income tax rules
related to assessing an underpayment of income tax liability apply. The
section 6675 penalty for excessive claims with respect to fuels does
not apply in the case of section 34 income tax credits. Similar rules
apply to excessive claims under sections 34 or 6427 with respect to
sales and uses of alternative fuel.
(c) Payment computation for certain blenders--(1) In general. This
paragraph (c) applies to a blender for any calendar quarter in which
the blender's entire tax liability under section 4081 is based solely
on the volume of alcohol in alcohol fuel mixtures, biodiesel in
biodiesel mixtures, renewable diesel in renewable diesel mixtures, or
alternative fuel in alternative fuel mixtures. If this paragraph (c)
applies for a calendar quarter, the blender may use the following
procedure to determine the amount it may claim as an income tax credit
under section 34 or a payment under section 6427(e) with respect to
each mixture that it sells or uses during the quarter:
(i) First, determine the amount allowed under section 6426 as a
credit on Form 720 by multiplying the volume of untaxed liquid used to
produce the mixture by the tax imposed per gallon on the untaxed
liquid.
(ii) Then, determine the total credit and payment allowable by
multiplying the volume of untaxed liquid used to produce the mixture by
the tax credit rate per gallon.
(iii) Then, subtract the amount determined in paragraph (c)(1)(i)
of this section (the section 6426 credit amount) from the amount
determined in paragraph (c)(1)(ii) of this section. This difference is
the amount of the payment or income tax credit that may be claimed with
respect to that mixture.
(2) Example. The following example illustrates the provisions of
this paragraph (c):
(i) P is a biodiesel mixture producer.
P produces blended taxable fuel outside of the bulk transfer/
terminal system by adding biodiesel that is agri-biodiesel to taxed
diesel fuel. See Sec. Sec. 48.4081-1(c)(1) and 48.4081-3(g). P has
no Sec. 4081 liability other than its liability as a blender on its
sale of the biodiesel mixture. During the period August 1 through
August 10 (at which time the tax rate on diesel fuel is $0.244 per
gallon and the claim amount on agri-biodiesel is $1.00 per gallon),
P uses 5,000 gallons of agri-biodiesel to produce a biodiesel
mixture. P determines that it may claim $3,780 as a payment under
section 6427(e) with respect to this mixture. P computes this amount
by--
(A) Multiplying 5,000 (gallons of agri-biodiesel) x $0.244 (tax
imposed per gallon) = $1,220;
(B) Multiplying 5,000 (gallons of agri-biodiesel) x $1.00 (tax
credit rate per gallon) = $5,000; and
(C) Subtracting $1,220 from $5,000 = $3,780.
(ii) On August 11, P files Form 8849 for the period August 1-
August 10. To avoid an excessive claim, P limits the claim on Form
8849 to $3,780 reporting 3,780 gallons of agri-biodiesel.
(iii) On Form 720 P reports liability for IRS No. 60(c) of
$1,220 (5,000 gallons x $.244) and claims a credit on Schedule C for
$1,220 for period August 1-August 10, reporting on Schedule C 1,220
gallons of agri-biodiesel.
(d) Effective/applicability date. This section is applicable on and
after the date these regulations are published as final regulations in
the Federal Register.
Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E8-17270 Filed 7-28-08; 8:45 am]
BILLING CODE 4830-01-P