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LEGISLATION & RULES
IRS
Bulletin 2005-46 (a.k.a. IRS Notice 2005-08), November 2005
Clarified that “any means of mechanical injection will be deemed to meet the
‘mechanical injection’ requirements.”
October 25, 2005
The proposed rule is passed. All terminal operators and bulk fuel carriers are
to comply with 26 CFR 48.4082 from this point forward. This legislation as
recorded in the Code of Federal Regulations (CFR), may be viewed at:
26 CFR 48.4082-1
Sections 1(a), 1(b) and 1 (c)
26 CFR 48.4082-1T
Sections 1(d),
and Sections 2 through 7
IRS Proposed Rule Federal Register Notice, April 26, 2005
This proposed regulation would ban the manual dyeing of diesel fuel and kerosene
at bulk liquid terminals and all other upstream and downstream locations in the
distribution system and would require the use of an IRS-approved mechanical dye
injection system containing specified features. The proposed regulations would
also require terminals with mechanical dye injection systems to maintain
detailed records relating to the security features of the system. Reporting
requirements were also established.
American Jobs Creation Act (AJCA), Title VIII: Revenue Provisions, Subtitle C:
Reduction of Fuel Tax Evasion, sections 854-856, October 22, 2004
AJCA amended 26 CFR 48.4082 to impose changes to the dyeing process for a diesel
fuel and kerosene tax exemption from manual to mechanical injection.
Specifically, it requires the Secretary to issue regulations on mechanical dye
injection systems, including rules for making such systems tamper-resistant.
Also, it imposes penalties for: (1) tampering with a mechanical dye injection
system (the greater of $25,000 or $10 for each gallon of fuel involved); and (2)
failure by an operator of a mechanical dye injection system to maintain security
standards ($1,000 for each failure and $1,000 for each day such operator fails
to correct a violation).
UPDATES, COMMENTS & OTHER REPORTS
Excise
Summary Terminal Activity Reporting System (ExSTARS)
The Internal Revenue Service requires “taxable fuel registrants”, and
specifically terminal operators and bulk fuel carriers (pipeline, vessel and
barge operators), to provide monthly “Fuel Transaction Reports” detailing the
movement of ANY liquid product into or out of an IRS approved terminal.
ExSTARS is the electronic
fuel reporting system developed with the cooperation of the IRS, Department of
Transportation, States and Motor Fuel Industry in efforts to comply with the IR
Regulation 48.4101-2. The above link will enable businesses to access Form 637,
which provides companies with a valid IRS registration number. Additionally, the
site contains a link to its Electronic Data Interchange, which serves as the
portal for electronic filing.
ILTA Comments on April 26, 2005
Proposed Rule
At a hearing held on July 19, 2005, representatives of the oil industry
testified that the proposed regulations were overly burdensome and should allow
manual dyeing under certain conditions, such as a breakdown of the mechanical
injection system. A number of written comments were subsequently submitted to
the IRS, including the ILTA comments filed on July 26, 2005.
RELATED ILTA ARTICLES
ILTA provides a monthly newsletter to its membership. Members
may log in to the Member Resources page to access archived newsletters. The
following is a list of articles ILTA has published in its newsletter relating to
the mechanical dye injection requirement.
·
ILTA Clarifies
IRS Mechanical Fuel Dyeing Regulations,
June 2006 Issue (p.2)
·
Mechanical Dye
Injection Mandate,
November 2005 Issue (p.1)
- Oil Industry
Criticizes IRS Proposal on Mechanical Dyeing of Diesel Fuel,
August 2005 Issue (p.3)
- Reminder:
Mechanical Dyeing Requirement for Diesel Begins October 24, 2005,
July 2005 Issue (p.3)
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