Groups Seek Guidance on Dual Use of Taxable Liquid Fuel

May 16, 2017

Mr. Thomas West
Acting Assistant Secretary
Office of Tax Policy
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Mr. Christopher Kelley
Acting Deputy Associate Chief Counsel
Office of Associate Chief Counsel (Passthroughs & Special Industries)
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Re: Request to Update Treasury Regulations Providing Exemptions from Excise Taxes for Fuel Used for Non-Transportation Purposes — 2017-2018 Priority Guidance Plan

Dear Messrs. West and Kelley:

On August 15, 2016, the United States Department of Treasury (“Treasury”) and the Internal Revenue Service (“Service”) released the 2016-2017 Priority Guidance Plan identifying “Guidance under § 48.4041-7 on dual use of taxable liquid fuel” as a top priority for Excise Tax. Waste Management, Inc. (“Waste Management”), Republic Services, Inc. (“Republic”), and CEMEX, Inc. (“CEMEX”) (collectively “Taxpayers”) respectfully submit this letter to reaffirm the importance of this project and request that it be included on the 2017-2018 Priority Guidance Plan to the extent it is not completed before the end of the current plan’s year, June 30, 2017.

We appreciate your time and effort to date in meeting with us and considering the various letters and information we have provided to you throughout the development of this guidance project. We understand that you are busy with many other important projects. Although you may be working on issuing this guidance in the near term, in the event that guidance is not published prior to the end of the 2017 guidance plan year, we want to impress upon you the continued and growing importance for this project to be included on the next Priority Guidance Plan and afforded as much priority as possible.

By updating Treas. Reg. § 48.4041-7, the Service and Treasury can implement the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (“SAFETEA-LU”).¹ The Act specifically tasked Treasury and the Department of Transportation to research several power take-off (“PTO”) related issues, including determining options for exempting from excise tax liability PTO fuel usage in single-motor vehicles.² The fuel consumed to power non-propulsion equipment by means of a PTO is not directly used to traverse a public road and, thus, should be exempt from fuel taxes.

By updating Treas. Reg. § 48.4041-7, the Service and Treasury can also implement the policy objectives outlined in recent White House Executive Orders³ and in Notice 2017-28: Public Comment Invited on Recommendations for 2017-2018 Priority Guidance Plan"⁴.

The Executive Orders signed by President Donald Trump during his first 100 days in office have specifically requested regulatory changes in order to reduce unnecessary regulations and burdens on taxpayers, grow the economy, create jobs, promote cleaner air and develop domestic energy resources.

In addition to the statutory and regulatory authority discussed to date supporting the update to Treas. Reg. § 48.4041-7, modernizing this regulation in a way that aligns with states using a fixed dollar credit amount would reduce unnecessary burdens on taxpayers. Taxpayers would no longer have to comply with a regulation that was drafted with obsolete technology in mind where a separate motor would be required for PTO purposes. One motor can be used for both non-PTO and PTO purposes, and technology exists to measure and estimate non-PTO versus PTO usage.

An update to Treas. Reg. § 48.4041-7 as described would reduce financial burdens on many taxpayers across all types of industries (e.g., construction, waste disposal, farming, telecommunications). Reducing such a regulatory and financial burden would allow taxpayers to invest in their fleets of vehicles and company growth, leading to new jobs. In cases where taxpayers have used dual motors to comply with Treas. Reg. § 48.4041-7, an update to this regulation could reduce reliance on two motors thereby resulting in environmental benefits and conservation of fuel. As suggested, both taxpayers and the Service would benefit from a simpler application and administration of Treas. Reg. § 48.4041-7.

We are happy to provide any additional information and/or meet with the drafting team upon request. Should you have any questions, please feel free to contact me at (713) 265-1489 or FineLgold@win.com.

Respectfully submitted on behalf of the Taxpayers,

Leonard Finegold
Senior Director — State Transaction Tax
Waste Management

cc:
Jonathan Peterson
Director of Tax
Republic Services, Inc.

Javier F. Suarez
Vice President, Tax
CEMEX Holdings, Inc.

Hannah Hawkins
Attorney Advisor (Tax Legislative Counsel)
Department of the Treasury

Stephanie N. Bland
Branch Chief (P&SI Branch 7)
Internal Revenue Service

Charles J. Langley, Jr,
Senior Technician Reviewer (P&SI Branch 7)
Internal Revenue Service

Natalie A. Payne 
Tax Attorney (P&SI Branch 7)
Internal Revenue Service