Section 2. LUST

(a) In general —(1) This section describes the changes made by § 1362 of the Energy Act to the LUST tax.

(2) Except as provided in paragraph (b) of this section, tax is imposed at the LUST financing rate of $0.001 per gallon

on removals, entries, and sales of gasoline, diesel fuel, and kerosene that are described as exempt transactions in §§ 48.4081–4(b) and (d) (relating to certain uses of gasoline blendstocks), 48.4082–1 (relating to dyed fuel), 48.4082–5 (relating to diesel fuel and kerosene in Alaska), 48.4082–7 (relating to kerosene used for feedstock purposes), and § 4 of Notice 2005–4 (relating to kerosene used in aircraft). Thus, for example, the LUST tax applies to removals of dyed diesel fuel for use as heating oil or use on a farm for farming purposes and to removals of kerosene for use in foreign trade or in military aircraft.

(3) Section 6430 of the Code provides that no refund, credit, or payment under §§ 6411–6430 shall be made for the LUST tax, except in the case of fuels destined for export.

(4) Under this notice, the position holder is liable for the LUST tax imposed on removals of kerosene directly into the fuel supply tank of an aircraft for a use exempt from tax under § 4041(c). See § 3(c)(1)(iii) of this notice. Thus, for example, for kerosene removed directly into the fuel tank of an aircraft for use in foreign trade or for use in military aircraft, the position holder is liable for tax of $0.001 per gallon. For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation other than foreign trade, the aircraft operator continues to be liable for tax of $0.044 per gallon (the sum of the $0.043-per-gallon rate under § 4081(a)(2)(C) and the $0.001-per-gallon LUST tax). See § 4(d) of Notice 2005–4 (relating to § 4081(a)(4)).

(b) Removals for export —(1) In gen- eral . The LUST tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene for export if—

(i) The conditions of § 48.4082–1 (relating to the exemption for dyed fuel) are met; and

(ii) The person otherwise liable for tax has an unexpired export certificate (described in paragraph (b)(2) of this section) from the buyer of the fuel and has no reason to believe any information in the certificate is false.

(2) Export certificate . The export certificate is a statement that is signed under penalties of perjury by a person with authority to bind the buyer and contains—

(i) The name, address, and employer identification number of the buyer;

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payment for kerosene used in domestic commercial aviation or may waive such right to the ultimate vendor, but the operator may not claim a credit or payment under § 6427(l)(4)(B) for fuel used in foreign trade or other nontaxable uses.

(3) If an aircraft operator buys kerosene partly for use in commercial aviation and partly for use in noncommercial aviation, the following rules apply:

(i) The operator may identify, either at the time of the purchase or after the kerosene has been used, the amount of kerosene that will be (or has been) used in commercial aviation and either claim or waive the right to any credit or payment under paragraph (e)(2) of this notice with respect to such kerosene. The credit or payment related to the amount that will be (or has been) used in noncommercial aviation may be claimed under paragraph (f) of this section (relating to use in noncommercial aviation).

(ii) Alternatively, if the operator does not identify the amount of kerosene that will be (or has been) used in commercial aviation, the operator may provide a certificate under paragraph (f) of this section with respect to the kerosene (including the portion of the kerosene that will (or may) be used in commercial aviation). In such a case, “for a nonexempt use in noncommercial aviation” should be checked on the certificate. To the extent the kerosene purchased under the certificate is used in commercial aviation, the certificate will be treated, in the case of kerosene taxed at a rate of $0.244 per gallon, as a waiver of the right to claim a credit or payment under paragraph (e)(2) of this section with respect to $0.025 of the tax imposed on such kerosene. The operator may claim the remainder of the income tax credit or payment ($0.175 per gallon) with respect to such kerosene but may not waive the right to the credit or payment after providing a certificate with respect to the kerosene under paragraph (f) of this section.

(f) Claims for kerosene used in noncom- mercial aviation and foreign trade —(1) In general . Under § 6427(l)(5)(B), as added by SAFETEA, only the registered ultimate vendor may claim a credit or payment for kerosene used in foreign trade or used (other than by a state or local government) in noncommercial aviation. For claims related to kerosene used by states and local governments in noncommercial aviation,

SAFETEA changes. Thus, in the case of kerosene removed into an aircraft from a refueler truck, tanker or tank wagon, the $0.044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal located in a secured area of the airport. See § 4(d) of Notice 2005–4.

(iii) For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under § 4041(c) (such as use in foreign trade or in an aircraft for the exclusive use of a state or local government), including removals from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport, the rate of tax is $0.001 per gallon.

(2) Secured airport terminals . The list of qualifying airport terminals located within secured areas of airports identified in § 4(d)(2)(ii) of Notice 2005–4 is modified by adding the following airport terminals: Los Angeles International Airport, T–95–CA–4812; and Federal Express Corporation Memphis Airport, T–62–TN–2220.

(3) Exigent circumstances —(i) Section 4081(a)(3)(A)(iv) provides that, except in the case of exigent circumstances identified by the Secretary in regulations, the rule treating refueler trucks, tankers, and tank wagons as part of a terminal located within an airport applies only if no vehicle registered for highway use is loaded with kerosene at the terminal. If, in such exigent circumstances, a highway vehicle is loaded with kerosene at a terminal located within an airport, tax is imposed on the removal at a rate of $0.244 per gallon.

(ii) This notice identifies as an exigent circumstance the refueling of the off-airport storage tanks used exclusively by the governmental public safety agencies in Oahu. Accordingly, kerosene may be removed from the terminal located within Honolulu International Airport, T–91–HI–4570, into a vehicle registered for highway use for this purpose only without affecting the treatment of refueler trucks, tankers, and tank wagons as part of the terminal.

(iii) This notice identifies as an exigent circumstance the fuel shortages caused by Hurricane Katrina and its aftermath. Accordingly, kerosene may be removed at the following terminals into vehicles registered for highway use without affecting the treatment of refueler trucks, tankers, and

tank wagons as part of the terminal. Effective September 2, 2005 and remaining in effect through November 1, 2005: Louis Armstrong New Orleans International Airport, T–72–LA–2356; Memphis International Airport, T–62–TN–2212; Dallas Love Field Airport, T–75–TX–2663; Dallas Fort Worth International Airport, T–75–TX–2673; and George Bush Intercontinental Airport, Houston, T–76–TX–2818. See IR–2005–95 (September 7, 2005). Effective October 1, 2005 and remaining in effect through November 1, 2005: Federal Express Corporation Memphis Airport, T–62–TN–2220.

(d) Full rate buyers . The registration requirement for full rate buyers in sections 4(f)(3) and (4) of Notice 2005–4 is not applicable after September 30, 2005.

(e) Claims for kerosene used in com- mercial aviation (other than foreign trade) —(1) Before October 1, 2005, § 6427(l)(4)(B) provided that if an ultimate purchaser of aviation-grade kerosene used for a nontaxable use waived its right to an income tax credit or payment, in the form and manner prescribed by the Secretary, and assigned such right to the registered ultimate vendor, then the ultimate vendor, and not the ultimate purchaser, could claim a payment or income tax credit. Section 4(h) of Notice 2005–4 provides rules regarding the conditions to allowance of a credit or payment, the form of the claim, the content of the claim, and a model waiver. Before October 1, 2005, these rules were applicable with respect to aviation-grade kerosene used in domestic commercial aviation and aviation-grade kerosene used in foreign trade, for export, for use in certain helicopter and fixed-wing air ambulance uses, for the exclusive use of a nonprofit educational organization, for use in an aircraft owned by an aircraft museum, for use in a military aircraft, and for other nontaxable uses such as use as heating oil.

(2) Effective October 1, 2005, the rules in § 4(h) of Notice 2005–4 are applicable only with respect to kerosene used in commercial aviation (as defined in § 4083(b)) and, even in the case of commercial aviation, the rules do not apply to kerosene used as supplies for vessels or aircraft within the meaning of § 4221(d)(3). Thus, after September 30, 2005, an aircraft operator may continue to claim a credit or

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penalties of perjury by a person with authority to bind the buyer, is in substantially the same form as the model certificate in paragraph (f)(4)(ii) of this section and contains all of the information necessary to complete such model certificate. A new certificate must be given if any information in the current certificate changes. The claimant must have the certificate at the time the credit or payment is claimed under § 6427(l)(5)(B). The certificate may be included as part of any business records normally used to document a sale. The certificate expires on the earlier of the following dates:

(A) The date one year after the effective date of the certificate.

(B) The date a new certificate is provided.

(ii) Model certificate .

see § 4 of this notice. Noncommercial aviation means any use of an aircraft not described in § 4083(b). An ultimate vendor is a person that sells kerosene to an ultimate purchaser for use in noncommercial aviation or foreign trade.

(2) Conditions to allowance of credit or payment . A claim for an income tax credit or payment with respect to kerosene is allowable under § 6427(l)(5)(B) if—

(i) Tax was imposed on the kerosene under § 4081;

(ii) The claimant sold the kerosene to the ultimate purchaser for use in noncommercial aviation or foreign trade;

(iii) The claimant is a registered ultimate vendor;

(iv) The ultimate purchaser has provided a Certificate of Ultimate Purchaser of Kerosene for Use in Foreign Trade or

Use (Other than by State or Local Government) in Noncommercial Aviation to the ultimate vendor as provided in paragraph (f)(4) of this section; and

(v) The claimant has filed a timely claim for a credit or payment and the claim contains all the information required in paragraph (f)(3) of this section.

(3) Form of claim; content of claim . Rules similar to the rules in § 4(h)(4) and (5) of Notice 2005–4 are applicable to claims for credit or payment under § 6427(l)(5)(B), except that the claimant is not required to satisfy § 4(h)(5)(iv) of Notice 2005–4 (relating to possession of a waiver by the ultimate purchaser).

(4) Certificate —(i) In general . The certificate to be provided to the ultimate vendor for purposes of § 6427(l)(5)(B) consists of a statement that is signed under

CERTIFICATE OF ULTIMATE PURCHASER OF KEROSENE FOR USE IN FOREIGN

TRADE OR USE (OTHER THAN BY STATE OR LOCAL GOVERNMENT) IN

NONCOMMERCIAL AVIATION

(To support vendor’s claim for a credit or payment under § 6427(l)(5)(B) of the Internal Revenue Code.)

Name, address, and employer identification number of ultimate vendor

The undersigned ultimate purchaser (“Buyer”) hereby certifies the following under the penalties of perjury:

The kerosene to which this certificate relates is purchased (check one): for use on a farm for farming purposes; for use in foreign trade (reciprocal benefits required for foreign registered airlines); for use in certain helicopter and fixed-wing air ambulance uses; for the exclusive use of a nonprofit educational organization; for use in an aircraft owned by an aircraft museum; for use in military aircraft; or for a nonexempt use in noncommercial aviation.

This certificate applies to the following (complete as applicable):

This is a single purchase certificate:

1. Invoice or delivery ticket number

2. Number of gallons

This is a certificate covering all purchases under a specified account or order number:

1. Effective date

2. Expiration date (period not to exceed 1 year after the effective date)

3. Buyer account number

Buyer will provide a new certificate to the vendor if any information in this certificate changes.

If Buyer uses the kerosene to which this certificate relates for a use other than the nontaxable use stated above, Buyer will be liable for tax.

Buyer understands that the fraudulent use of this certificate may subject Buyer and all parties making such fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

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Printed or typed name of person signing

Title of person signing

Name of Buyer

Employer identification number

Address of Buyer

Signature and date signed

(iii) Transition rules . A Waiver for Use by Ultimate Purchasers of Aviation-Grade Kerosene Used in Nontaxable Uses executed before October 1, 2005, as described in § 4(h)(6) of Notice 2005–4, will be treated as a certificate described in this section, and a new certificate will not have to be given until such waiver expires. In addition, for kerosene sold for a nonexempt use in noncommercial aviation, the business records used to document sales occurring before November 1, 2005, will be treated as a certificate described in this section (unless the records clearly establish that the kerosene will be used on the highway).

(5) Registration . Claims under this paragraph (f) may be made only by a registered ultimate vendor. Registration rules similar to those in § 4(h)(7) of Notice 2005–4 are applicable to ultimate vendors of kerosene used in foreign trade or used (other than by a state or local government) in noncommercial aviation. A person that is registered under § 4101 under Activity Letter “UA” (Ultimate vendor that sells aviation-grade kerosene for a nontaxable use or any use in commercial aviation) is treated as registered for purposes of claims filed with respect to kerosene used in foreign trade or used (other than by a state or local government) in noncommercial aviation. In addition, for claims relating to sales before January 1, 2006, for a nonexempt use in noncommercial aviation, an ultimate vendor that has obtained a valid TIN will be treated as registered.

(g) Claims for kerosene used by states and local governments . For rules relating to claims by registered ultimate vendors of kerosene used in aviation by state and

local governments, see § 4 of this notice and § 48.6427–9.

(h) Effective date . Except as otherwise noted, this section is effective October 1, 2005, and applies to kerosene on which tax is imposed after September 30, 2005. A person making a claim for credit or payment under paragraph (e) or (f) of this section may use any reasonable method and assumptions to establish that tax was imposed after September 30, 2005, on the kerosene to which the claim relates.