SECTION 1. PURPOSE

.01 The purpose of this revenue procedure is to provide the general rules for filing and to state the requirements of the Internal Revenue Service (IRS) and the Social Security Administration (SSA) for reproducing paper substitutes for Form W–2, Wage and Tax Statement, and Form W–3, Transmittal of Wage and Tax Statements, for amounts paid during the 1998 calendar year. The information reported on Forms W–2 and W–3 is required to establish tax liability for employees and their eligibility for Social Security and Medicare benefits.

Credit for Producing Fuel From a Nonconventional Source, Section 29 Inflation Adjustment Factor, and Section 29 Reference Price

Notice 98–28

This notice publishes the § 29 inflation adjustment factor, the nonconventional source fuel credit, and the §29 reference price for calendar year 1997. These are used to determine the credit allowable on fuel produced from a nonconventional source under § 29 of the Internal Revenue Code. The calendar year 1997 inflationadjusted credit applies to the sales of barrel-of-oil equivalent of qualified fuels sold by a taxpayer to an unrelated person during the 1997 calendar year, the domestic production of which is attributable to the taxpayer.

BACKGROUND

Section 29(a) provides for a credit for producing fuel from a nonconventional source, measured in barrel-of-oil equivalent of qualified fuels, the production of which is attributable to the taxpayer and sold by the taxpayer to an unrelated person during the tax year. The credit is equal to the product of $3.00 and the appropriate inflation adjustment factor.

Section 29(b)(1) and (2) provides for a phaseout of the credit. The credit allowable under § 29(a) must be reduced by an amount which bears the same ratio to the amount of the credit (determined without regard to § 29(b)(1)) as the amount by which the reference price for the calendar year in which the sale occurs exceeds $23.50 bears to $6.00. The $3.00 in § 29(a) and the $23.50 and $6.00 must each be adjusted by multiplying these amounts by the 1997 inflation adjustment factor. In the case of gas from a tight formation, the $3.00 amount in § 29(a) must not be adjusted.

cluding lignite), including such fuels when used as feedstocks.

Section 29(d)(1) provides that the credit is to be applied only for sale of qualified fuels the production of which is within the United States (within the meaning of § 638(1)) or a possession of the United States (within the meaning of § 638(2)).

Section 29(d)(2)(A) requires that the Secretary, not later than April 1 of each calendar year, determine and publish in the Federal Register the inflation adjustment factor and the reference price for the preceding calendar year.

Section 29(d)(2)(B) defines “inflation adjustment factor” for a calendar year as the fraction the numerator of which is the GNP implicit price deflator for the calendar year and the denominator of which is the GNP implicit price deflator for calendar year 1979. The term “GNP implicit price deflator” means the first version of the implicit price deflator for the gross national product as computed and published by the Department of Commerce.

Section 29(d)(2)(C) defines “reference price” to mean with respect to a calendar year the Secretary’s estimate of the annual average wellhead price per barrel of all domestic crude oil the price of which is not subject to regulation by the United States.

Section 29(d)(3) provides that in the case of a property or facility in which more than one person has an interest, except to the extent provided by regulations prepared by the Secretary, production from the property or facility (as the case may be) must be allocated among the persons in proportion to their respective interests in the gross sales from the property or facility.

Section 29(d)(5) and (6) provides that the term “barrel-of-oil equivalent” with respect to any fuel generally means that amount of the fuel which has a Btu content of 5.8 million.

INFLATION ADJUSTMENT FACTOR AND REFERENCE PRICE

The inflation adjustment factor for calendar year 1997 is 2.0331. The reference price for calendar year 1997 is $17.24. As required by § 29(d)(2)(A), the infla

Section 29(c)(1) defines the term “qualified fuels” to include oil produced from shale and tar sands; gas produced from geopressurized brine, Devonian shale, coal seams, or a tight formation, or biomass; and liquid, gaseous, or solid synthetic fuels produced from coal (in

1998–19 I.R.B. 7 May 11, 1998

.02 Forms W–2 and W–3 have only minor changes for 1998 . Please see “Nature of Changes” (Section 2, below) and the exhibits at the end of this revenue procedure for changes to the Form W–2 and W–3.

.03 For the purpose of this revenue procedure, a substitute form is one that is not printed by IRS. A substitute Form W–2 or W–3 MUST conform to the specifications in this revenue procedure to be acceptable to the IRS. Preparers should also refer to the separate instructions for Forms W–2 and the instructions on Form W–3 for details on how to complete these forms. See Part C, Sec. 4.01, for information on obtaining the official IRS forms and instructions. See Part B, Sec. 2, for requirements for substitute forms furnished to employees.

.04 IRS has a centralized call site at the IRS martinsburg Computing Center (IRS/MCC) to answer questions related to information returns (Forms W–2, W–3, 1099, etc.). The Call-Site phone number is (304) 263-8700 (not a toll-free number). The number for Telecommunication Device for the Deaf (TDD) is (304) 267-3367 (not a toll-free number). The hours of operation are Monday through Friday from 8:30 A.M. to 4:30 P.M. eastern time. .05 IRS maintains a personal computer based Information Reporting Program Bulletin Board System (IRP–BBS) at the IRS Martinsburg Computing Center (IRS/MCC). This system provides access to the forms and publications relating to information returns, news of the latest changes, the ability to receive answers to specific questions, access to shareware, and other features. The IRP–BBS is available for public use and can be reached by dialing (304) 264-7070 (not a toll-free number). The IRP–BBS is compatible with most modems. For more information concerning this system, call IRS/MCC at (304) 263-8700 (not a toll- free number).

.06 Employers are reminded that under Section 6722 of the Internal Revenue Code (IRC) they can be assessed a penalty of $50 per Form W–2 that is not furnished to an employee on a form acceptable to the IRS (up to $100,000). To be acceptable to IRS, the Form W–2 must be either the “official” form or a substitute form with the core data placed exactly as specified in Part B., Section 2.04

of this Revenue Procedure. No IRS office is authorized to allow deviations from this Revenue Procedure.

.07 This revenue procedure supersedes Rev. Procs. 97–24 and 97–24A, 1997–16 I.R.B., dated April 21, 1997, and 1997–20 I.R.B., dated May 19, 1997 (Reprinted as Publication 1141).