IRS issues statement on Federal Excise Tax law
Althardt says a question the IRS chose to answer regarding a previously taxed donor unit was a particular revenue ruling that is no longer viewed a current law.
“A clear bright-line test was not given. The current statutory law reverts back to Rev Ruling 91-27, which states as long as the modifications to a previously taxed article do not change the transportation function of a unit or restores a wrecked unit the 75 percent rule may be applied. If the modifications do not exceed 75 percent of the comparable new retail unit no additional FET is due,” he says.
The IRS also failed to answer how much of a previously taxed article must be retained to maintain its classification as “previously taxed.”
“The question still has not been directly answered,” says Althardt. “The CCA would lead a person to believe that if a title from a previously taxed article can be produced then a previously taxed article exists and then the 75 percent rule may be applied.”
Althardt says the IRS will need to release more information if it intends to provide dealers a detailed and specific benchmark for how to assess FET. Last week’s CCA ruling did not provide that.
“I think the CCA did not address some of the overall industry outstanding questions as the industry is just trying to gauge what the rules are to comply with them. It’s hard to play the game with the rules are not clear and consistent,” he says.