Section 6. TAXATION OF

ALTERNATIVE FUEL AND ALTERNATIVE FUEL MIXTURES

(a) Alternative fuels —(1) Liquids . A liquid alternative fuel (that is, any alternative fuel other than compressed natural gas) is a liquid other than gas oil, fuel oil, or taxable fuel and is subject to the tax imposed by § 4041(a)(2) when it is sold for use or used as a fuel in a motor vehicle or motorboat. Rules similar to the rules of §§ 48.4041–3 and 48.4041–5 (relating to the application of the tax on sales of special motor fuels) apply. For exemptions from tax, see §§ 4041(b), (f), (g), and (h).

(2) Compressed natural gas . Compressed natural gas is subject to the tax imposed by § 4041(a)(3) when it is sold for use or used as a fuel in a motor vehicle or motorboat. The rules of § 48.4041–21 apply. For exemptions from tax, see §§ 4041(a)(3)(B), (b), (f), (g), and (h).

(b) Alternative fuel mixtures —(1) If an alternative fuel mixture is taxable fuel, the mixture is subject to tax imposed by § 4081 when it is removed, entered, or sold and the rules of §§ 48.4081–1 through 48.4081–8 apply.

(2) If an alternative fuel mixture is not a taxable fuel and is sold for use or used as a fuel in a diesel-powered highway vehicle or diesel-powered train, the mixture is subject to the tax imposed by § 4041(a)(1) at the time of such sale or use and the rules of § 48.4082–4 apply.

(3) If an alternative fuel mixture is not a taxable fuel and is sold for use or used as a fuel in a motor vehicle (other than a diesel-powered highway vehicle) or motorboat, the mixture is subject to the tax imposed by § 4041(a)(2) at the time of such sale or use and rules similar to the rules of §§ 48.4041–3 and 48.4041–5 (relating to the application of the tax on sales of special motor fuels) apply. For exemptions from tax, see §§ 4041(b), (f), (g), and (h).

(c) Rate of tax . For the rate of tax generally, see §§ 4041 and 4081. The rate of tax for compressed natural gas is $0.183 per 126.67 cubic feet.

2006–43 I.R.B. 776 October 23, 2006

and the resulting permissible range of interest rates used to calculate current liability. That notice establishes that the corporate bond weighted average is based on the monthly composite corporate bond rate derived from designated corporate bond indices. The methodology for determining the monthly composite corporate bond rate as set forth in Notice 2004–34 continues to apply in determining that rate. See Notice 2006–75, 2006–36 I.R.B. 366. The composite corporate bond rate for September 2006 is 5.95 percent. Pursuant to Notice 2004–34, the Service has determined this rate as the average of the monthly yields for the included corporate bond indices for that month.

The following corporate bond weighted average interest rate was determined for plan years beginning in the month shown below.