Deposits of Excise Taxes

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 40 [REG-103827-99] RIN 1545-
AX11

TITLE: Deposits of Excise Taxes

AGENCY: Internal Revenue Service (IRS), Treasury

ACTION: Advance notice of proposed rulemaking.

SUMMARY: This document invites comments from the public on issues
that the IRS may address in proposed regulations relating to the
requirements for excise tax returns and deposits. All materials
submitted will be available for public inspection and copying.

DATES: Written and electronic comments must be submitted by April 6,
2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-103827-99), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday
through Friday between the hours of 8 a.m. and 5 p.m. to:
CC:DOM:CORP:R (REG-103827-99), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue NW., Washington, DC.
Alternatively, taxpayers may send submissions electronically via the
Internet by selecting the "Tax Regs" option on the IRS Home Page, or
directly to the IRS Internet site at FOR

FURTHER INFORMATION CONTACT: Concerning submissions, the Regulations
Unit, (202) 622-7180; concerning the proposals, Susan Athy, (202)
622-3130 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: The Excise Tax Procedural Regulations (26
CFR part 40) set forth the requirements related to filing the
Quarterly Federal Excise Tax Return, Form 720, and making deposits
of excise taxes. Certain provisions of the current regulations are
complicated. The IRS is interested in simplifying the filing and
deposit rules both as to the timing and the calculation of the
correct amount to deposit. Simplification would reduce recordkeeping
burdens and costs for taxpayers, improve compliance, and facilitate
proper administration of the excise taxes and trust funds. The IRS
requests comments on how the regulations can be simplified; comments
are requested in particular on the following issues.

Time for Filing Returns

The regulations currently provide that the Form 720 generally must
be filed by the last day of the first calendar month following the
quarter for which it is made. However, in the case of returns
related to taxes imposed by chapter 33 (communications and air
transportation) and section 4681 (ozone-depleting chemicals), the
due date is the last day of the second calendar month following the
quarter for which it is made.

The IRS requests comments on whether there should be one filing date
for all Form 720 filers, such as 30 days after the end of the
quarter. This would be a simple rule that would apply equally to all
taxpayers.

Use of Government Depositaries

Background. The regulations currently provide that excise taxes must
be deposited on a semimonthly basis. Generally, taxes must be
deposited by the 9 day th of the semimonthly period following the
semimonthly period for which the deposit is made (the 9-day rule).
There are, however, exceptions to this rule. Taxes on ozone-
depleting chemicals must be deposited by the end of the second
semimonthly period following the semimonthly period for which the
deposit is made (the 30-day rule). In addition, for taxes imposed by
section 4081 (gasoline, diesel fuel, and kerosene), communications
taxes, and air transportation taxes, taxpayers may choose a deposit
rule other than the 9-day rule. For section 4081 taxes, section 518
of the Highway Revenue Act of 1982 provides that a qualified person
may deposit by the 14 day of th the semimonthly period following the
semimonthly period for which it is made if the deposit is made by
electronic funds transfer (the 14-day rule). For communications and
air transportation taxes, if a person computes the amount of tax to
be reported and deposited on the basis of amounts considered as
collected, the person may deposit the taxes considered as collected
during a semimonthly period by the third banking day after the
seventh day of the semimonthly period (the alternative method).

The regulations also provide that the amount of the deposit for a
semimonthly period must equal the amount of net tax liability
incurred during that period unless either the look-back quarter safe
harbor rule or the current liability safe harbor rule applies. In
general, the look-back quarter safe harbor rule is met if the
deposits for each semimonthly period in the quarter are at least 1/6
of the net liability reported for that tax in the second calendar
quarter preceding the current quarter, and the current liability
safe harbor rule is met if the deposit for each semimonthly period
is at least 95 percent of the net tax liability for the semimonthly
period. Safe harbor rules apply separately to each class of tax.
Each semimonthly deposit must be timely made at an authorized
Government depository. Also, the amount of any underpayment must be
paid by the due date of the return, without extension. A failure to
meet all the deposit requirements of a safe harbor rule for any
semimonthly period eliminates the availability of that safe harbor
for the entire quarter.

As the above description of current regulations illustrates, the
deposit rules are quite complicated, and taxpayers have experienced
difficulty in complying with them. In addition, under existing safe
harbor rules, penalties for failure to deposit may be imposed for
all semimonthly periods in a quarter if a taxpayer fails to deposit
timely and in the correct amount during any semimonthly period in
that quarter. Request for Comments. With respect to the deposit
rules, the IRS specifically requests comments on the following
issues:

1. Whether there should be a single deposit date for all excise
taxes, such as 14 days after the end of the semimonthly period. (The
IRS believes it would be appropriate to retain the alternative
method allowing communications and air transportation tax collectors
to file returns and make deposits based on amounts billed or tickets
sold.)

2. Whether a taxpayer should have to deposit at least 95 percent of
tax liability incurred for the corresponding semimonthly period (in
lieu of the current requirement of 100 percent with safe harbor
rules).

3. Whether the amount required to be deposited for a quarter should
be computed without reduction for the amounts of any claims made on
Schedule C of Form 720 for that quarter.

Judith C. Dunn
Associate Chief Counsel (Domestic)

SEARCH:

You can search the entire Tax Professionals section, or all of Uncle Fed's Tax*Board. For a more focused search, put your search word(s) in quotes.

2000 Regulations Main | IRS Regulations Main | Home