GAS GUZZLER TAX; COMPUTATION OF LIABILITY FOR IMPORTERS OF AUTOS WITHOUT EPA FUEL ECONOMY RATING

Rev. Proc. 86-9

SECTION 1. PURPOSE

The purpose of this revenue procedure is to set forth guidelines for importers of automobiles to compute gas guzzler tax liability under section 4064 of the Internal Revenue Code for automobiles that are imported without a fuel economy rating assigned by the Environmental Protection Agency (EPA).

SECTION 2. BACKGROUND

01 Section 4064 of the Code imposes on the sale by the manufacturer (the definition of which includes an importer) of each automobile a tax in accordance with the tables set forth in section 4064(a). The liability for tax is based on the model year of the automobile and the fuel economy rating of the model type into which the automobile falls.

02 Rev. Rul. 86-20, page 16, this Bulletin, concerns automobiles that are imported without a prototype-based fuel economy rating assigned by the EPA. The ruling holds that the sale, use, or first lease of such an automobile is subject to the gas guzzler tax imposed by section 4064(a) of the Code.

03 Unless specifically excepted, automobiles imported into the United States must conform to federal emission standards. The large importers usually apply for a "certificate of conformity" to those emission standards by having prototype models tested for compliance. The certificate then becomes the importer's license to import vehicles into the United States. EPA also normally assigns fuel economy ratings to those prototype automobiles. The fuel economy rating is a combination of the urban economy rating, which is based on the emission test results, and the highway economy rating.

04 Automobiles that are imported without a "certificate of conformity" must either be (1) converted, by installation of emission controls, to conform in all material respects to an automobile that is already certified for sale in the United States or (2) modified by installation of emission control components and individually tested to demonstrate emission compliance. See EPA regulations, Importation of Motor Vehicles and Motor Vehicle Engines, 40 C.F.R. section 85.1504 (1984). A fuel economy rating is not generally available for these vehicles because EPA does not require a highway fuel economy test on them and thus a separate highway fuel economy test would be required in order to devise a fuel economy rating.

SEC. 3. SCOPE AND OBJECTIVE

01 Section 4064(c)(1) of the Code provides that, for purposes of the gas guzzler tax, fuel economy for any model type shall be measured in accordance with testing and calculation procedures established by the EPA Administrator by regulation. Procedures so established shall be the procedures utilized by the EPA Administrator for model year 1975 (weighted 55 percent urban cycle, and 45 percent highway cycle), or procedures which yield comparable results. Such procedures, to the extent practicable, shall require that fuel economy tests be conducted in conjunction with emissions tests conducted under section 206 of the Clear Air Act, 42 U.S.C. section 7521 (1982). The EPA Administrator shall report any measurements of fuel economy to the Secretary.

02 Although those automobiles that are imported into the United States and are modified under the two methods described in section 2.04 are not assigned fuel economy ratings at the time of emission testing or modification, these vehicles are subject to the gas guzzler tax under Rev. Rul. 86-20, and liability is computed as follows:

SEC. 4. PROCEDURE

01 Except as provided in section 4.04, in those instances where the importer modifies, or causes to be modified, an imported automobile under the first method set forth in section 2.04, the fuel economy rating for such automobile shall be equal to the EPA- prescribed rating for the original manufacturer's certified prototype to which such automobile has been modified to conform for emission purposes. The EPA-prescribed fuel economy ratings for model years, 1980 through 1986 are listed below.

                                                               FUEL

03 Certain imported automobiles are exempted from compliance with the federal emission standards by virtue of EPA enforcement and regulatory exemptions. Those vehicles may be driven in the United States without modification or testing. For purposes of the gas guzzler tax, such a vehicle is ascribed the lowest fuel economy rating in the tables in section 4064(a) of the Code for the particular model year of the automobile. An automobile that is imported under an EPA exemption and is later modified to conform to federal emission standards is ascribed a fuel economy rating as if it had been imported and modified according to one of the methods described in section 2.04.

04 In any instance where an importer believes that an ascribed fuel economy rating is inappropriate for a particular vehicle, the importer may, at the importer's own expense, have the vehicle individually tested. The testing must be in accordance with EPA procedures for a fuel economy rating and must be carried out at one of the EPA (Office of Air, Noise and Radiation) recognized laboratories that are capable of conducting motor vehicle emission tests. State emission checks or tests performed at service stations or repair shops are not acceptable. The taxpayer shall retain the fuel economy test documentation for a period of three years from the date the tax becomes due or the date the tax is paid, whichever is later.

SEC. 5. EFFECTIVE DATE

This revenue procedure is effective with respect to 1980 and later model year automobiles.