[Code of Federal Regulations]

[Title 26, Volume 16]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 26CFR48.4041-19]



[Page 70-71]

 

                       TITLE 26--INTERNAL REVENUE

 

    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 

                               (CONTINUED)

 

PART 48_MANUFACTURERS AND RETAILERS EXCISE TAXES--Table of Contents

 

                         Subpart F_Special Fuels

 

Sec.  48.4041-19  Exemption for qualified methanol and ethanol fuel.



    (a) In general. Under section 4041(b)(2), the tax imposed upon the 

sale or use of motor fuels under section 4041(a) does not apply to the 

sale or use of qualified methanol or ethanol fuel.

    (b) Qualified methanol or ethanol fuel defined. For purposes of 

section 4041(b)(2) and this section, qualified methanol or ethanol fuel 

is liquid motor fuel, 85% of the volume of which consists of alcohol, as 

defined in section 4081(c) and Sec.  48.4081-2(a)(4) of the regulations 

as modified by the following sentence. For purposes of section 

4041(b)(2) and this section, the alcohol contained in a qualified 

methanol or ethanol fuel may be produced from coal. The actual gallonage 

of each component of the mixture (without adjustment for temperature) 

shall be used in determining whether the 85 percent alcohol has been 

met. Further, in determining whether a particular mixture containing 

less than 85 percent alcohol satisfies this percentage requirement, the 

District Director shall take into account the existence of any facts and 

circumstances, that establish 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. 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 85 percent alcohol.

    (c) Mixtures which do not qualify as qualified methanol or ethanol 

fuel. If a methanol or ethanol fuel does not qualify as qualified 

methanol or ethanol fuel under this section, the entire mixture is taxed 

at the rate of tax applicable to sales of special motor fuels under 

section 4041(a)(2) of the Code.

    (d) Refunds relating to fuels used to produce qualified fuels. See 

section 6427 for rules which relate to the allowance of a refund or 

credit to a person who uses tax-paid diesel, special motor or 

noncommercial aviation fuels to produce a qualified methanol or ethanol 

fuel and section 6416 for rules which relate to the allowance of a 

refund or credit to a person who uses tax-paid gasoline to produce a 

qualified methanol or ethanol fuel.

    (e) Later blending. If a qualified methanol or ethanol fuel is 

blended with other motor fuel in a mixture less than 85 percent of which 

consists of alcohol, the subsequent sale or use of such alcohol mixture 

fuel is taxable under the provisions of section 4041 or section 4081 

subject to the requirements, limitations and exemptions of those 

sections. Thus, if the alcohol mixture fuel is at least 10% alcohol by 

volume, sale or use of the fuel is taxed at the rates provided in 

section 4041(k) or section 4081(c), but if the fuel is less than 10% 

alcohol, sale or use of the fuel is taxed at the rates provided in 

section 4041(a) or section 4081(a).



[[Page 71]]



    (f) Effective date. Section 4041(b)(2) applies to sales or uses 

after March 31, 1983, and before October 1, 1988.



[T.D. 8152, 52 FR 31617, Aug. 21, 1987]