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Irs 1040ez 2013 Form And Instructions

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Irs 1040ez 2013 Form And Instructions

Irs 1040ez 2013 form and instructions 1. Irs 1040ez 2013 form and instructions   Fuel Taxes Table of Contents Definitions Information Returns Registration RequirementsAdditional information. Irs 1040ez 2013 form and instructions Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. Irs 1040ez 2013 form and instructions Reseller statement. Irs 1040ez 2013 form and instructions Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. Irs 1040ez 2013 form and instructions Deep-draft ocean-going vessels. Irs 1040ez 2013 form and instructions Passenger vessels. Irs 1040ez 2013 form and instructions Ocean-going barges. Irs 1040ez 2013 form and instructions State or local governments. Irs 1040ez 2013 form and instructions Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel Definitions Excise taxes are imposed on all the following fuels. Irs 1040ez 2013 form and instructions Gasoline, including aviation gasoline and gasoline blendstocks. Irs 1040ez 2013 form and instructions Diesel fuel, including dyed diesel fuel. Irs 1040ez 2013 form and instructions Diesel-water fuel emulsion. Irs 1040ez 2013 form and instructions Kerosene, including dyed kerosene and kerosene used in aviation. Irs 1040ez 2013 form and instructions Other Fuels (including alternative fuels). Irs 1040ez 2013 form and instructions Compressed natural gas (CNG). Irs 1040ez 2013 form and instructions Fuels used in commercial transportation on inland waterways. Irs 1040ez 2013 form and instructions Any liquid used in a fractional ownership program aircraft as fuel. Irs 1040ez 2013 form and instructions The following terms are used throughout the discussion of fuel taxes. Irs 1040ez 2013 form and instructions Other terms are defined in the discussion of the specific fuels to which they pertain. Irs 1040ez 2013 form and instructions Agri-biodiesel. Irs 1040ez 2013 form and instructions   Agri-biodiesel means biodiesel derived solely from virgin oils, including esters derived from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, and from animal fats. Irs 1040ez 2013 form and instructions Approved terminal or refinery. Irs 1040ez 2013 form and instructions   This is a terminal operated by a registrant that is a terminal operator or a refinery operated by a registrant that is a refiner. Irs 1040ez 2013 form and instructions Biodiesel. Irs 1040ez 2013 form and instructions   Biodiesel means the monoalkyl esters of long chain fatty acids derived from plant or animal matter that meet the registration requirements for fuels and fuel additives established by the Environmental Protection Agency (EPA) under section 211 of the Clean Air Act, and the requirements of the American Society of Testing Materials (ASTM) D6751. Irs 1040ez 2013 form and instructions Blended taxable fuel. Irs 1040ez 2013 form and instructions   This means any taxable fuel produced outside the bulk transfer/terminal system by mixing taxable fuel on which excise tax has been imposed and any other liquid on which excise tax has not been imposed. Irs 1040ez 2013 form and instructions This does not include a mixture removed or sold during the calendar quarter if all such mixtures removed or sold by the blender contain less than 400 gallons of a liquid on which the tax has not been imposed. Irs 1040ez 2013 form and instructions Blender. Irs 1040ez 2013 form and instructions   This is the person that produces blended taxable fuel. Irs 1040ez 2013 form and instructions Bulk transfer. Irs 1040ez 2013 form and instructions   This is the transfer of taxable fuel by pipeline or vessel. Irs 1040ez 2013 form and instructions Bulk transfer/terminal system. Irs 1040ez 2013 form and instructions   This is the taxable fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Irs 1040ez 2013 form and instructions Fuel in the supply tank of any engine, or in any tank car, railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions Cellulosic biofuel. Irs 1040ez 2013 form and instructions   Cellulosic biofuel means any liquid fuel produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis that meets the registration requirements for fuels and fuel additives established by the EPA under section 211 of the Clean Air Act. Irs 1040ez 2013 form and instructions Cellulosic biofuel does not include any alcohol with a proof of less than 150 (without regard to denaturants). Irs 1040ez 2013 form and instructions For fuels sold or used after December 31, 2009, cellulosic biofuel does not include fuel of which more than 4% (determined by weight) is any combination of water and sediment, fuel of which the ash content is more than 1%, or fuel that has an acid number greater than 25. Irs 1040ez 2013 form and instructions Also see Second generation biofuel below. Irs 1040ez 2013 form and instructions Diesel-water fuel emulsion. Irs 1040ez 2013 form and instructions   A diesel-water fuel emulsion means an emulsion at least 14% of which is water. Irs 1040ez 2013 form and instructions The emulsion additive used to produce the fuel must be registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Irs 1040ez 2013 form and instructions Dry lease aircraft exchange. Irs 1040ez 2013 form and instructions   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Irs 1040ez 2013 form and instructions Enterer. Irs 1040ez 2013 form and instructions   This is the importer of record (under customs law) for the taxable fuel. Irs 1040ez 2013 form and instructions However, if the importer of record is acting as an agent, such as a customs broker, the person for whom the agent is acting is the enterer. Irs 1040ez 2013 form and instructions If there is no importer of record, the owner at the time of entry into the United States is the enterer. Irs 1040ez 2013 form and instructions Entry. Irs 1040ez 2013 form and instructions   Taxable fuel is entered into the United States when it is brought into the United States and applicable customs law requires that it be entered for consumption, use, or warehousing. Irs 1040ez 2013 form and instructions This does not apply to fuel brought into Puerto Rico (which is part of the U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions customs territory), but does apply to fuel brought into the United States from Puerto Rico. Irs 1040ez 2013 form and instructions Fractional ownership aircraft program and fractional program aircraft. Irs 1040ez 2013 form and instructions   See later, under Surtax on any liquid used in a fractional ownership program aircraft as fuel. Irs 1040ez 2013 form and instructions Measurement of taxable fuel. Irs 1040ez 2013 form and instructions   Volumes of taxable fuel can be measured on the basis of actual volumetric gallons or gallons adjusted to 60 degrees Fahrenheit. Irs 1040ez 2013 form and instructions Other fuels. Irs 1040ez 2013 form and instructions   See Other Fuels (Including Alternative Fuels), later, and Alternative Fuel Credit and Alternative Fuel Mixture Credit in chapter 2. Irs 1040ez 2013 form and instructions Pipeline operator. Irs 1040ez 2013 form and instructions   This is the person that operates a pipeline within the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions Position holder. Irs 1040ez 2013 form and instructions   This is the person that holds the inventory position in the taxable fuel in the terminal, as reflected in the records of the terminal operator. Irs 1040ez 2013 form and instructions You hold the inventory position when you have a contractual agreement with the terminal operator for the use of the storage facilities and terminaling services for the taxable fuel. Irs 1040ez 2013 form and instructions A terminal operator that owns taxable fuel in its terminal is a position holder. Irs 1040ez 2013 form and instructions Rack. Irs 1040ez 2013 form and instructions   This is a mechanism capable of delivering fuel into a means of transport other than a pipeline or vessel. Irs 1040ez 2013 form and instructions Refiner. Irs 1040ez 2013 form and instructions   This is any person that owns, operates, or otherwise controls a refinery. Irs 1040ez 2013 form and instructions Refinery. Irs 1040ez 2013 form and instructions   This is a facility used to produce taxable fuel and from which taxable fuel may be removed by pipeline, by vessel, or at a rack. Irs 1040ez 2013 form and instructions However, this term does not include a facility where only blended fuel, and no other type of fuel, is produced. Irs 1040ez 2013 form and instructions For this purpose, blended fuel is any mixture that would be blended taxable fuel if produced outside the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions Registrant. Irs 1040ez 2013 form and instructions   This is a taxable fuel registrant (see Registration Requirements, later). Irs 1040ez 2013 form and instructions Removal. Irs 1040ez 2013 form and instructions   This is any physical transfer of taxable fuel. Irs 1040ez 2013 form and instructions It also means any use of taxable fuel other than as a material in the production of taxable fuel or Other Fuels. Irs 1040ez 2013 form and instructions However, taxable fuel is not removed when it evaporates or is otherwise lost or destroyed. Irs 1040ez 2013 form and instructions Renewable diesel. Irs 1040ez 2013 form and instructions   See Renewable Diesel Credits in chapter 2. Irs 1040ez 2013 form and instructions Sale. Irs 1040ez 2013 form and instructions   For taxable fuel not in a terminal, this is the transfer of title to, or substantial incidents of ownership in, taxable fuel to the buyer for money, services, or other property. Irs 1040ez 2013 form and instructions For taxable fuel in a terminal, this is the transfer of the inventory position if the transferee becomes the position holder for that taxable fuel. Irs 1040ez 2013 form and instructions Second generation biofuel. Irs 1040ez 2013 form and instructions   This is any liquid fuel derived by, or from, qualified feedstocks, and meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (42 U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions C. Irs 1040ez 2013 form and instructions 7545). Irs 1040ez 2013 form and instructions It also includes certain liquid fuel which is derived by, or from, any cultivated algae, cyanobacteria, or lemna. Irs 1040ez 2013 form and instructions It is not alcohol of less than 150 proof (disregard any added denaturants). Irs 1040ez 2013 form and instructions See Form 6478 for more information. Irs 1040ez 2013 form and instructions State. Irs 1040ez 2013 form and instructions   This includes any state, any of its political subdivisions, the District of Columbia, and the American Red Cross. Irs 1040ez 2013 form and instructions An Indian tribal government is treated as a state only if transactions involve the exercise of an essential tribal government function. Irs 1040ez 2013 form and instructions Taxable fuel. Irs 1040ez 2013 form and instructions   This means gasoline, diesel fuel, and kerosene. Irs 1040ez 2013 form and instructions Terminal. Irs 1040ez 2013 form and instructions   This is a storage and distribution facility supplied by pipeline or vessel, and from which taxable fuel may be removed at a rack. Irs 1040ez 2013 form and instructions It does not include a facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline if no gasoline is removed from the facility. Irs 1040ez 2013 form and instructions A terminal does not include any facility where finished gasoline, diesel fuel, or kerosene is stored if the facility is operated by a registrant and all such taxable fuel stored at the facility has been previously taxed upon removal from a refinery or terminal. Irs 1040ez 2013 form and instructions Terminal operator. Irs 1040ez 2013 form and instructions   This is any person that owns, operates, or otherwise controls a terminal. Irs 1040ez 2013 form and instructions Throughputter. Irs 1040ez 2013 form and instructions   This is any person that is a position holder or that owns taxable fuel within the bulk transfer/terminal system (other than in a terminal). Irs 1040ez 2013 form and instructions Vessel operator. Irs 1040ez 2013 form and instructions   This is the person that operates a vessel within the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions However, vessel does not include a deep draft ocean-going vessel. Irs 1040ez 2013 form and instructions Information Returns Form 720-TO and Form 720-CS are information returns used to report monthly receipts and disbursements of liquid products. Irs 1040ez 2013 form and instructions A liquid product is any liquid transported into storage at a terminal or delivered out of a terminal. Irs 1040ez 2013 form and instructions For a list of products, see the product code table in the Instructions for Forms 720-TO and 720-CS. Irs 1040ez 2013 form and instructions The returns are due the last day of the month following the month in which the transaction occurs. Irs 1040ez 2013 form and instructions Generally, these returns can be filed on paper or electronically. Irs 1040ez 2013 form and instructions For information on filing electronically, see Publication 3536, Motor Fuel Excise Tax EDI Guide. Irs 1040ez 2013 form and instructions Publication 3536 is only available on the IRS website. Irs 1040ez 2013 form and instructions Form 720-TO. Irs 1040ez 2013 form and instructions   This information return is used by terminal operators to report receipts and disbursements of all liquid products to and from all approved terminals. Irs 1040ez 2013 form and instructions Each terminal operator must file a separate form for each approved terminal. Irs 1040ez 2013 form and instructions Form 720-CS. Irs 1040ez 2013 form and instructions   This information return must be filed by bulk transport carriers (barges, vessels, and pipelines) who receive liquid product from an approved terminal or deliver liquid product to an approved terminal. Irs 1040ez 2013 form and instructions Registration Requirements The following discussion applies to excise tax registration requirements for activities relating to fuels only. Irs 1040ez 2013 form and instructions See Form 637 for other persons who must register and for more information about registration. Irs 1040ez 2013 form and instructions Persons that are required to be registered. Irs 1040ez 2013 form and instructions   You are required to be registered if you are a: Blender; Enterer; Pipeline operator; Position holder; Refiner; Terminal operator; Vessel operator; Producer or importer of alcohol, biodiesel, agri-biodiesel, and renewable diesel; or Producer of cellulosic or second generation biofuel. Irs 1040ez 2013 form and instructions Persons that may register. Irs 1040ez 2013 form and instructions   You may, but are not required to, register if you are a: Feedstock user, Industrial user, Throughputter that is not a position holder, Ultimate vendor, Diesel-water fuel emulsion producer, Credit card issuer, or Alternative fuel claimant. Irs 1040ez 2013 form and instructions Ultimate vendors, credit card issuers, and alternative fuel claimants do not need to be registered to buy or sell fuel. Irs 1040ez 2013 form and instructions However, they must be registered to file claims for certain sales and uses of fuel. Irs 1040ez 2013 form and instructions See Form 637 for more information. Irs 1040ez 2013 form and instructions Taxable fuel registrant. Irs 1040ez 2013 form and instructions   This is an enterer, an industrial user, a refiner, a terminal operator, or a throughputter who received a Letter of Registration under the excise tax registration provisions and whose registration has not been revoked or suspended. Irs 1040ez 2013 form and instructions The term registrant as used in the discussions of these fuels means a taxable fuel registrant. Irs 1040ez 2013 form and instructions Additional information. Irs 1040ez 2013 form and instructions   See the Form 637 instructions for the information you must submit when you apply for registration. Irs 1040ez 2013 form and instructions Failure to register. Irs 1040ez 2013 form and instructions   The penalty for failure to register if you must register, unless due to reasonable cause, is $10,000 for the initial failure, and then $1,000 each day thereafter you fail to register. Irs 1040ez 2013 form and instructions Gasoline and Aviation Gasoline Gasoline. Irs 1040ez 2013 form and instructions   Gasoline means all products commonly or commercially known or sold as gasoline with an octane rating of 75 or more that are suitable for use as a motor fuel. Irs 1040ez 2013 form and instructions Gasoline includes any gasoline blend other than: Qualified ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from coal, including peat), Partially exempt ethanol and methanol fuel (at least 85 percent of the blend consists of alcohol produced from natural gas), or Denatured alcohol. Irs 1040ez 2013 form and instructions Gasoline also includes gasoline blendstocks, discussed later. Irs 1040ez 2013 form and instructions Aviation gasoline. Irs 1040ez 2013 form and instructions   This means all special grades of gasoline suitable for use in aviation reciprocating engines and covered by ASTM specification D910 or military specification MIL-G-5572. Irs 1040ez 2013 form and instructions Taxable Events The tax on gasoline is $. Irs 1040ez 2013 form and instructions 184 per gallon. Irs 1040ez 2013 form and instructions The tax on aviation gasoline is $. Irs 1040ez 2013 form and instructions 194 per gallon. Irs 1040ez 2013 form and instructions When used in a fractional ownership program aircraft, gasoline also is subject to a surtax of $. Irs 1040ez 2013 form and instructions 141 per gallon. Irs 1040ez 2013 form and instructions See Surtax on any liquid used in a fractional ownership program aircraft as fuel, later. Irs 1040ez 2013 form and instructions Tax is imposed on the removal, entry, or sale of gasoline. Irs 1040ez 2013 form and instructions Each of these events is discussed later. Irs 1040ez 2013 form and instructions Also, see the special rules that apply to gasoline blendstocks, later. Irs 1040ez 2013 form and instructions If the tax is paid on the gasoline in more than one event, a refund may be allowed for the “second” tax paid. Irs 1040ez 2013 form and instructions See Refunds of Second Tax in chapter 2. Irs 1040ez 2013 form and instructions Removal from terminal. Irs 1040ez 2013 form and instructions   All removals of gasoline at a terminal rack are taxable. Irs 1040ez 2013 form and instructions The position holder for that gasoline is liable for the tax. Irs 1040ez 2013 form and instructions Two-party exchanges. Irs 1040ez 2013 form and instructions   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Irs 1040ez 2013 form and instructions A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Irs 1040ez 2013 form and instructions The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Irs 1040ez 2013 form and instructions The exchange transaction occurs before or at the same time as removal across the rack by the receiving person. Irs 1040ez 2013 form and instructions The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Irs 1040ez 2013 form and instructions The transaction is subject to a written contract. Irs 1040ez 2013 form and instructions Terminal operator's liability. Irs 1040ez 2013 form and instructions   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Irs 1040ez 2013 form and instructions   However, a terminal operator meeting all the following conditions at the time of the removal will not be liable for the tax. Irs 1040ez 2013 form and instructions The terminal operator is a registrant. Irs 1040ez 2013 form and instructions The terminal operator has an unexpired notification certificate (discussed later) from the position holder. Irs 1040ez 2013 form and instructions The terminal operator has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions Removal from refinery. Irs 1040ez 2013 form and instructions   The removal of gasoline from a refinery is taxable if the removal meets either of the following conditions. Irs 1040ez 2013 form and instructions It is made by bulk transfer and the refiner, the owner of the gasoline immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions It is made at the refinery rack. Irs 1040ez 2013 form and instructions The refiner is liable for the tax. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   The tax does not apply to a removal of gasoline at the refinery rack if all the following requirements are met. Irs 1040ez 2013 form and instructions The gasoline is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Irs 1040ez 2013 form and instructions The gasoline is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions The removal from the refinery is by railcar. Irs 1040ez 2013 form and instructions The same person operates the refinery and the facility at which the gasoline is received. Irs 1040ez 2013 form and instructions Entry into the United States. Irs 1040ez 2013 form and instructions   The entry of gasoline into the United States is taxable if the entry meets either of the following conditions. Irs 1040ez 2013 form and instructions It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions It is not made by bulk transfer. Irs 1040ez 2013 form and instructions The enterer is liable for the tax. Irs 1040ez 2013 form and instructions Importer of record's liability. Irs 1040ez 2013 form and instructions   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Irs 1040ez 2013 form and instructions   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Irs 1040ez 2013 form and instructions The importer of record has an unexpired notification certificate (discussed later) from the enterer. Irs 1040ez 2013 form and instructions The importer of record has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Customs bond. Irs 1040ez 2013 form and instructions   The customs bond will not be charged for the tax imposed on the entry of the gasoline if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Irs 1040ez 2013 form and instructions   The removal by bulk transfer of gasoline from a terminal is taxable if the position holder for the gasoline or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions The position holder is liable for the tax. Irs 1040ez 2013 form and instructions The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Irs 1040ez 2013 form and instructions However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Irs 1040ez 2013 form and instructions Bulk transfers not received at approved terminal or refinery. Irs 1040ez 2013 form and instructions   The removal by bulk transfer of gasoline from a terminal or refinery, or the entry of gasoline by bulk transfer into the United States, is taxable if the following conditions apply. Irs 1040ez 2013 form and instructions No tax was previously imposed (as discussed earlier) on any of the following events. Irs 1040ez 2013 form and instructions The removal from the refinery. Irs 1040ez 2013 form and instructions The entry into the United States. Irs 1040ez 2013 form and instructions The removal from a terminal by an unregistered position holder. Irs 1040ez 2013 form and instructions Upon removal from the pipeline or vessel, the gasoline is not received at an approved terminal or refinery (or at another pipeline or vessel). Irs 1040ez 2013 form and instructions   The owner of the gasoline when it is removed from the pipeline or vessel is liable for the tax. Irs 1040ez 2013 form and instructions However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Irs 1040ez 2013 form and instructions The owner is a registrant. Irs 1040ez 2013 form and instructions The owner has an unexpired notification certificate (discussed later) from the operator of the terminal or refinery where the gasoline is received. Irs 1040ez 2013 form and instructions The owner has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions The operator of the facility where the gasoline is received is liable for the tax if the owner meets these conditions. Irs 1040ez 2013 form and instructions The operator is jointly and severally liable if the owner does not meet these conditions. Irs 1040ez 2013 form and instructions Sales to unregistered person. Irs 1040ez 2013 form and instructions   The sale of gasoline located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Irs 1040ez 2013 form and instructions   The seller is liable for the tax. Irs 1040ez 2013 form and instructions However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Irs 1040ez 2013 form and instructions   The seller is a registrant. Irs 1040ez 2013 form and instructions The seller has an unexpired notification certificate (discussed later) from the buyer. Irs 1040ez 2013 form and instructions The seller has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions The buyer of the gasoline is liable for the tax if the seller meets these conditions. Irs 1040ez 2013 form and instructions The buyer is jointly and severally liable if the seller does not meet these conditions. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   The tax does not apply to a sale if all of the following apply. Irs 1040ez 2013 form and instructions The buyer's principal place of business is not in the United States. Irs 1040ez 2013 form and instructions The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Irs 1040ez 2013 form and instructions The seller is a registrant and the exporter of record. Irs 1040ez 2013 form and instructions The fuel was exported. Irs 1040ez 2013 form and instructions Removal or sale of blended gasoline. Irs 1040ez 2013 form and instructions   The removal or sale of blended gasoline by the blender is taxable. Irs 1040ez 2013 form and instructions See Blended taxable fuel under Definitions, earlier. Irs 1040ez 2013 form and instructions   The blender is liable for the tax. Irs 1040ez 2013 form and instructions The tax is figured on the number of gallons not previously subject to the tax on gasoline. Irs 1040ez 2013 form and instructions   Persons who blend alcohol with gasoline to produce an alcohol fuel mixture outside the bulk transfer/terminal system must pay the gasoline tax on the volume of alcohol in the mixture. Irs 1040ez 2013 form and instructions See Form 720 to report this tax. Irs 1040ez 2013 form and instructions You also must be registered with the IRS as a blender. Irs 1040ez 2013 form and instructions See Form 637. Irs 1040ez 2013 form and instructions   However, if an untaxed liquid is sold as taxed taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Irs 1040ez 2013 form and instructions Notification certificate. Irs 1040ez 2013 form and instructions   The notification certificate is used to notify a person of the registration status of the registrant. Irs 1040ez 2013 form and instructions A copy of the registrant's letter of registration cannot be used as a notification certificate. Irs 1040ez 2013 form and instructions A model notification certificate is shown in the Appendix as Model Certificate C. Irs 1040ez 2013 form and instructions A notification certificate must contain all information necessary to complete the model. Irs 1040ez 2013 form and instructions   The certificate may be included as part of any business records normally used for a sale. Irs 1040ez 2013 form and instructions A certificate expires on the earlier of the date the registrant provides a new certificate, or the date the recipient of the certificate is notified that the registrant's registration has been revoked or suspended. Irs 1040ez 2013 form and instructions The registrant must provide a new certificate if any information on a certificate has changed. Irs 1040ez 2013 form and instructions Additional persons liable. Irs 1040ez 2013 form and instructions   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax is imposed on: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty, or Anyone who willfully causes the person to fail to pay the tax. Irs 1040ez 2013 form and instructions Gasoline Blendstocks Gasoline blendstocks may be subject to $. Irs 1040ez 2013 form and instructions 001 per gallon LUST tax as discussed below. Irs 1040ez 2013 form and instructions Gasoline includes gasoline blendstocks. Irs 1040ez 2013 form and instructions The previous discussions apply to these blendstocks. Irs 1040ez 2013 form and instructions However, if certain conditions are met, the removal, entry, or sale of gasoline blendstocks are taxed at $. Irs 1040ez 2013 form and instructions 001 per gallon or are not subject to the excise tax. Irs 1040ez 2013 form and instructions Blendstocks. Irs 1040ez 2013 form and instructions   Gasoline blendstocks are: Alkylate, Butane, Butene, Catalytically cracked gasoline, Coker gasoline, Ethyl tertiary butyl ether (ETBE), Hexane, Hydrocrackate, Isomerate, Methyl tertiary butyl ether (MTBE), Mixed xylene (not including any separated isomer of xylene), Natural gasoline, Pentane, Pentane mixture, Polymer gasoline, Raffinate, Reformate, Straight-run gasoline, Straight-run naphtha, Tertiary amyl methyl ether (TAME), Tertiary butyl alcohol (gasoline grade) (TBA), Thermally cracked gasoline, and Toluene. Irs 1040ez 2013 form and instructions   However, gasoline blendstocks do not include any product that cannot be used without further processing in the production of finished gasoline. Irs 1040ez 2013 form and instructions Not used to produce finished gasoline. Irs 1040ez 2013 form and instructions   Gasoline blendstocks not used to produce finished gasoline are not taxable (other than LUST) if the following conditions are met. Irs 1040ez 2013 form and instructions Removals and entries not connected to sale. Irs 1040ez 2013 form and instructions   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant. Irs 1040ez 2013 form and instructions Removals and entries connected to sale. Irs 1040ez 2013 form and instructions   Nonbulk removals and entries are not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) is a registrant, and at the time of the sale, meets the following requirements. Irs 1040ez 2013 form and instructions The person has an unexpired certificate (discussed later) from the buyer. Irs 1040ez 2013 form and instructions The person has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Sales after removal or entry. Irs 1040ez 2013 form and instructions   The sale of a gasoline blendstock that was not subject to tax on its nonbulk removal or entry, as discussed earlier, is taxable. Irs 1040ez 2013 form and instructions The seller is liable for the tax. Irs 1040ez 2013 form and instructions However, the sale is not taxable if, at the time of the sale, the seller meets the following requirements. Irs 1040ez 2013 form and instructions The seller has an unexpired certificate (discussed next) from the buyer. Irs 1040ez 2013 form and instructions The seller has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Certificate of buyer. Irs 1040ez 2013 form and instructions   The certificate from the buyer certifies the gasoline blendstocks will not be used to produce finished gasoline. Irs 1040ez 2013 form and instructions The certificate may be included as part of any business records normally used for a sale. Irs 1040ez 2013 form and instructions A model certificate is shown in the Appendix as Model Certificate D. Irs 1040ez 2013 form and instructions The certificate must contain all information necessary to complete the model. Irs 1040ez 2013 form and instructions   A certificate expires on the earliest of the following dates. Irs 1040ez 2013 form and instructions The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs 1040ez 2013 form and instructions The date a new certificate is provided to the seller. Irs 1040ez 2013 form and instructions The date the seller is notified that the buyer's right to provide a certificate has been withdrawn. Irs 1040ez 2013 form and instructions The buyer must provide a new certificate if any information on a certificate has changed. Irs 1040ez 2013 form and instructions   The IRS may withdraw the buyer's right to provide a certificate if that buyer uses the gasoline blendstocks in the production of finished gasoline or resells the blendstocks without getting a certificate from its buyer. Irs 1040ez 2013 form and instructions Received at approved terminal or refinery. Irs 1040ez 2013 form and instructions   The nonbulk removal or entry of gasoline blendstocks received at an approved terminal or refinery is not taxable if the person otherwise liable for the tax (position holder, refiner, or enterer) meets all the following requirements. Irs 1040ez 2013 form and instructions The person is a registrant. Irs 1040ez 2013 form and instructions The person has an unexpired notification certificate (discussed earlier) from the operator of the terminal or refinery where the gasoline blendstocks are received. Irs 1040ez 2013 form and instructions The person has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions Bulk transfers to registered industrial user. Irs 1040ez 2013 form and instructions   The removal of gasoline blendstocks from a pipeline or vessel is not taxable (other than LUST) if the blendstocks are received by a registrant that is an industrial user. Irs 1040ez 2013 form and instructions An industrial user is any person that receives gasoline blendstocks by bulk transfer for its own use in the manufacture of any product other than finished gasoline. Irs 1040ez 2013 form and instructions Credits or Refunds. Irs 1040ez 2013 form and instructions   A credit or refund of the gasoline tax may be allowable if gasoline is used for a nontaxable purpose or exempt use. Irs 1040ez 2013 form and instructions For more information, see chapter 2. Irs 1040ez 2013 form and instructions Diesel Fuel and Kerosene Generally, diesel fuel and kerosene are taxed in the same manner as gasoline (discussed earlier). Irs 1040ez 2013 form and instructions However, special rules (discussed later) apply to dyed diesel fuel and dyed kerosene, and to undyed diesel fuel and undyed kerosene sold or used in Alaska for certain nontaxable uses and undyed kerosene used for a feedstock purpose. Irs 1040ez 2013 form and instructions Diesel fuel means: Any liquid that without further processing or blending is suitable for use as a fuel in a diesel-powered highway vehicle or train, and Transmix. Irs 1040ez 2013 form and instructions A liquid is suitable for this use if the liquid has practical and commercial fitness for use in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Irs 1040ez 2013 form and instructions A liquid may possess this practical and commercial fitness even though the specified use is not the predominant use of the liquid. Irs 1040ez 2013 form and instructions However, a liquid does not possess this practical and commercial fitness solely by reason of its possible or rare use as a fuel in the propulsion engine of a diesel-powered highway vehicle or diesel-powered train. Irs 1040ez 2013 form and instructions Diesel fuel does not include gasoline, kerosene, excluded liquid, No. Irs 1040ez 2013 form and instructions 5 and No. Irs 1040ez 2013 form and instructions 6 fuel oils covered by ASTM specification D396, or F-76 (Fuel Naval Distillate) covered by military specification MIL-F-16884. Irs 1040ez 2013 form and instructions An excluded liquid is either of the following. Irs 1040ez 2013 form and instructions A liquid that contains less than 4% normal paraffins. Irs 1040ez 2013 form and instructions A liquid with all the following properties. Irs 1040ez 2013 form and instructions Distillation range of 125 degrees Fahrenheit or less. Irs 1040ez 2013 form and instructions Sulfur content of 10 ppm or less. Irs 1040ez 2013 form and instructions Minimum color of +27 Saybolt. Irs 1040ez 2013 form and instructions Transmix means a by-product of refined products created by the mixing of different specification products during pipeline transportation. Irs 1040ez 2013 form and instructions Kerosene. Irs 1040ez 2013 form and instructions   This means any of the following liquids. Irs 1040ez 2013 form and instructions One of the two grades of kerosene (No. Irs 1040ez 2013 form and instructions 1-K and No. Irs 1040ez 2013 form and instructions 2-K) covered by ASTM specification D3699. Irs 1040ez 2013 form and instructions Kerosene-type jet fuel covered by ASTM specification D1655 or military specification MIL-DTL-5624T (Grade JP-5) or MIL-DTL-83133E (Grade JP-8). Irs 1040ez 2013 form and instructions See Kerosene for Use in Aviation, later. Irs 1040ez 2013 form and instructions   However, kerosene does not include excluded liquid, discussed earlier. Irs 1040ez 2013 form and instructions   Kerosene also includes any liquid that would be described above but for the presence of a dye of the type used to dye kerosene for a nontaxable use. Irs 1040ez 2013 form and instructions Diesel-powered highway vehicle. Irs 1040ez 2013 form and instructions   This is any self-propelled vehicle designed to carry a load over public highways (whether or not also designed to perform other functions) and propelled by a diesel-powered engine. Irs 1040ez 2013 form and instructions Specially designed mobile machinery for nontransportation functions and vehicles specially designed for off-highway transportation are generally not considered diesel-powered highway vehicles. Irs 1040ez 2013 form and instructions For more information about these vehicles and for information about vehicles not considered highway vehicles, see Off-Highway Business Use (No. Irs 1040ez 2013 form and instructions 2) in chapter 2. Irs 1040ez 2013 form and instructions Diesel-powered train. Irs 1040ez 2013 form and instructions   This is any diesel-powered equipment or machinery that rides on rails. Irs 1040ez 2013 form and instructions The term includes a locomotive, work train, switching engine, and track maintenance machine. Irs 1040ez 2013 form and instructions Taxable Events The tax on diesel fuel and kerosene is $. Irs 1040ez 2013 form and instructions 244 per gallon. Irs 1040ez 2013 form and instructions It is imposed on the removal, entry, or sale of diesel fuel and kerosene. Irs 1040ez 2013 form and instructions Each of these events is discussed later. Irs 1040ez 2013 form and instructions Only the $. Irs 1040ez 2013 form and instructions 001 LUST tax applies to dyed diesel fuel and dyed kerosene, discussed later. Irs 1040ez 2013 form and instructions If the tax is paid on the diesel fuel or kerosene in more than one event, a refund may be allowed for the “second” tax paid. Irs 1040ez 2013 form and instructions See Refunds of Second Tax in chapter 2. Irs 1040ez 2013 form and instructions Use in certain intercity and local buses. Irs 1040ez 2013 form and instructions   Dyed diesel fuel and dyed kerosene cannot be used in certain intercity and local buses. Irs 1040ez 2013 form and instructions A claim for $. Irs 1040ez 2013 form and instructions 17 per gallon may be made by the registered ultimate vendor (under certain conditions) or the ultimate purchaser for undyed diesel fuel or undyed kerosene sold for use in certain intercity or local buses. Irs 1040ez 2013 form and instructions An intercity or local bus is a bus engaged in furnishing (for compensation) passenger land transportation available to the general public. Irs 1040ez 2013 form and instructions The bus must be engaged in one of the following activities. Irs 1040ez 2013 form and instructions Scheduled transportation along regular routes regardless of the size of the bus. Irs 1040ez 2013 form and instructions Nonscheduled transportation if the seating capacity of the bus is at least 20 adults (not including the driver). Irs 1040ez 2013 form and instructions A bus is available to the general public if the bus is available for hire to more than a limited number of persons, groups, or organizations. Irs 1040ez 2013 form and instructions Removal from terminal. Irs 1040ez 2013 form and instructions   All removals of diesel fuel and kerosene at a terminal rack are taxable. Irs 1040ez 2013 form and instructions The position holder for that fuel is liable for the tax. Irs 1040ez 2013 form and instructions Two-party exchanges. Irs 1040ez 2013 form and instructions   In a two-party exchange, the receiving person, not the delivering person, is liable for the tax imposed on the removal of taxable fuel from the terminal at the terminal rack. Irs 1040ez 2013 form and instructions A two-party exchange means a transaction (other than a sale) where the delivering person and receiving person are both taxable fuel registrants and all of the following apply. Irs 1040ez 2013 form and instructions The transaction includes a transfer from the delivering person, who holds the inventory position for the taxable fuel in the terminal as reflected in the records of the terminal operator. Irs 1040ez 2013 form and instructions The exchange transaction occurs before or at the same time as completion of removal across the rack by the receiving person. Irs 1040ez 2013 form and instructions The terminal operator in its records treats the receiving person as the person that removes the product across the terminal rack for purposes of reporting the transaction on Form 720-TO. Irs 1040ez 2013 form and instructions The transaction is subject to a written contract. Irs 1040ez 2013 form and instructions Terminal operator's liability. Irs 1040ez 2013 form and instructions   The terminal operator is jointly and severally liable for the tax if the terminal operator provides any person with any bill of lading, shipping paper, or similar document indicating that diesel fuel or kerosene is dyed (discussed later). Irs 1040ez 2013 form and instructions   The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator and is not a registrant. Irs 1040ez 2013 form and instructions However, a terminal operator will not be liable for the tax in this situation if, at the time of the removal, the following conditions are met. Irs 1040ez 2013 form and instructions The terminal operator is a registrant. Irs 1040ez 2013 form and instructions The terminal operator has an unexpired notification certificate (discussed under Gasoline) from the position holder. Irs 1040ez 2013 form and instructions The terminal operator has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions Removal from refinery. Irs 1040ez 2013 form and instructions   The removal of diesel fuel or kerosene from a refinery is taxable if the removal meets either of the following conditions. Irs 1040ez 2013 form and instructions It is made by bulk transfer and the refiner, the owner of the fuel immediately before the removal, or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions It is made at the refinery rack. Irs 1040ez 2013 form and instructions The refiner is liable for the tax. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   The tax does not apply to a removal of diesel fuel or kerosene at the refinery rack if all the following conditions are met. Irs 1040ez 2013 form and instructions The diesel fuel or kerosene is removed from an approved refinery not served by pipeline (other than for receiving crude oil) or vessel. Irs 1040ez 2013 form and instructions The diesel fuel or kerosene is received at a facility operated by a registrant and located within the bulk transfer/terminal system. Irs 1040ez 2013 form and instructions The removal from the refinery is by: Railcar and the same person operates the refinery and the facility at which the diesel fuel or kerosene is received, or For diesel fuel only, a trailer or semi-trailer used exclusively to transport the diesel fuel from a refinery (described in (1)) to a facility (described in (2)) less than 20 miles from the refinery. Irs 1040ez 2013 form and instructions Entry into the United States. Irs 1040ez 2013 form and instructions   The entry of diesel fuel or kerosene into the United States is taxable if the entry meets either of the following conditions. Irs 1040ez 2013 form and instructions It is made by bulk transfer and the enterer or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions It is not made by bulk transfer. Irs 1040ez 2013 form and instructions The enterer is liable for the tax. Irs 1040ez 2013 form and instructions Importer of record's liability. Irs 1040ez 2013 form and instructions   The importer of record is jointly and severally liable for the tax with the enterer if the importer of record is not the enterer of the taxable fuel and the enterer is not a taxable fuel registrant. Irs 1040ez 2013 form and instructions   However, an importer of record meeting both of the following conditions at the time of the entry will not be liable for the tax. Irs 1040ez 2013 form and instructions The importer of record has an unexpired notification certificate (discussed under Gasoline) from the enterer. Irs 1040ez 2013 form and instructions The importer of record has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Customs bond. Irs 1040ez 2013 form and instructions   The customs bond will not be charged for the tax imposed on the entry of the diesel fuel or kerosene if at the time of entry the surety has an unexpired notification certificate from the enterer and has no reason to believe any information in the certificate is false. Irs 1040ez 2013 form and instructions Removal from a terminal by unregistered position holder or unregistered pipeline or vessel operator. Irs 1040ez 2013 form and instructions   The removal by bulk transfer of diesel fuel or kerosene from a terminal is taxable if the position holder for that fuel or the operator of the pipeline or vessel is not a registrant. Irs 1040ez 2013 form and instructions The position holder is liable for the tax. Irs 1040ez 2013 form and instructions The terminal operator is jointly and severally liable for the tax if the position holder is a person other than the terminal operator. Irs 1040ez 2013 form and instructions However, see Terminal operator's liability under Removal from terminal, earlier, for an exception. Irs 1040ez 2013 form and instructions Bulk transfers not received at approved terminal or refinery. Irs 1040ez 2013 form and instructions   The removal by bulk transfer of diesel fuel or kerosene from a terminal or refinery or the entry of diesel fuel or kerosene by bulk transfer into the United States is taxable if the following conditions apply. Irs 1040ez 2013 form and instructions No tax was previously imposed (as discussed earlier) on any of the following events. Irs 1040ez 2013 form and instructions The removal from the refinery. Irs 1040ez 2013 form and instructions The entry into the United States. Irs 1040ez 2013 form and instructions The removal from a terminal by an unregistered position holder. Irs 1040ez 2013 form and instructions Upon removal from the pipeline or vessel, the diesel fuel or kerosene is not received at an approved terminal or refinery (or at another pipeline or vessel). Irs 1040ez 2013 form and instructions   The owner of the diesel fuel or kerosene when it is removed from the pipeline or vessel is liable for the tax. Irs 1040ez 2013 form and instructions However, an owner meeting all the following conditions at the time of the removal will not be liable for the tax. Irs 1040ez 2013 form and instructions The owner is a registrant. Irs 1040ez 2013 form and instructions The owner has an unexpired notification certificate (discussed under Gasoline) from the operator of the terminal or refinery where the diesel fuel or kerosene is received. Irs 1040ez 2013 form and instructions The owner has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions The operator of the facility where the diesel fuel or kerosene is received is liable for the tax if the owner meets these conditions. Irs 1040ez 2013 form and instructions The operator is jointly and severally liable if the owner does not meet these conditions. Irs 1040ez 2013 form and instructions Sales to unregistered person. Irs 1040ez 2013 form and instructions   The sale of diesel fuel or kerosene located within the bulk transfer/terminal system to a person that is not a registrant is taxable if tax was not previously imposed under any of the events discussed earlier. Irs 1040ez 2013 form and instructions   The seller is liable for the tax. Irs 1040ez 2013 form and instructions However, a seller meeting all the following conditions at the time of the sale will not be liable for the tax. Irs 1040ez 2013 form and instructions The seller is a registrant. Irs 1040ez 2013 form and instructions The seller has an unexpired notification certificate (discussed under Gasoline) from the buyer. Irs 1040ez 2013 form and instructions The seller has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions The buyer of the diesel fuel or kerosene is liable for the tax if the seller meets these conditions. Irs 1040ez 2013 form and instructions The buyer is jointly and severally liable if the seller does not meet these conditions. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   The tax does not apply to a sale if all of the following apply. Irs 1040ez 2013 form and instructions The buyer's principal place of business is not in the United States. Irs 1040ez 2013 form and instructions The sale occurs as the fuel is delivered into a transport vessel with a capacity of at least 20,000 barrels of fuel. Irs 1040ez 2013 form and instructions The seller is a registrant and the exporter of record. Irs 1040ez 2013 form and instructions The fuel was exported. Irs 1040ez 2013 form and instructions Removal or sale of blended diesel fuel or kerosene. Irs 1040ez 2013 form and instructions   The removal or sale of blended diesel fuel or blended kerosene by the blender is taxable. Irs 1040ez 2013 form and instructions Blended taxable fuel produced using biodiesel is subject to the tax. Irs 1040ez 2013 form and instructions See Blended taxable fuel under Definitions, earlier. Irs 1040ez 2013 form and instructions   The blender is liable for the tax. Irs 1040ez 2013 form and instructions The tax is figured on the number of gallons not previously subject to the tax. Irs 1040ez 2013 form and instructions   Persons who blend biodiesel with undyed diesel fuel to produce and sell or use a biodiesel mixture outside the bulk transfer/terminal system must pay the diesel fuel tax on the volume of biodiesel in the mixture. Irs 1040ez 2013 form and instructions Generally, the biodiesel mixture must be diesel fuel (defined earlier). Irs 1040ez 2013 form and instructions See Form 720 to report this tax. Irs 1040ez 2013 form and instructions You also must be registered by the IRS as a blender. Irs 1040ez 2013 form and instructions See Form 637 for more information. Irs 1040ez 2013 form and instructions   However, if an untaxed liquid is sold as taxable fuel and that untaxed liquid is used to produce blended taxable fuel, the person that sold the untaxed liquid is jointly and severally liable for the tax imposed on the blender's sale or removal of the blended taxable fuel. Irs 1040ez 2013 form and instructions Additional persons liable. Irs 1040ez 2013 form and instructions   When the person liable for the tax willfully fails to pay the tax, joint and several liability for the tax applies to: Any officer, employee, or agent of the person who is under a duty to ensure the payment of the tax and who willfully fails to perform that duty; or Anyone who willfully causes the person to fail to pay the tax. Irs 1040ez 2013 form and instructions Credits or Refunds. Irs 1040ez 2013 form and instructions   A credit or refund is allowable for the tax on undyed diesel fuel or undyed kerosene used for a nontaxable use. Irs 1040ez 2013 form and instructions For more information, see chapter 2. Irs 1040ez 2013 form and instructions Dyed Diesel Fuel and Dyed Kerosene Dyed diesel fuel and dyed kerosene are subject to $. Irs 1040ez 2013 form and instructions 001 per gallon LUST tax as discussed below, unless the fuel is for export. Irs 1040ez 2013 form and instructions The excise tax is not imposed on the removal, entry, or sale of diesel fuel or kerosene (other than the LUST tax) if all the following tests are met. Irs 1040ez 2013 form and instructions The person otherwise liable for tax (for example, the position holder) is a registrant. Irs 1040ez 2013 form and instructions In the case of a removal from a terminal, the terminal is an approved terminal. Irs 1040ez 2013 form and instructions The diesel fuel or kerosene satisfies the dyeing requirements (described next). Irs 1040ez 2013 form and instructions Dyeing requirements. Irs 1040ez 2013 form and instructions   Diesel fuel or kerosene satisfies the dyeing requirements only if it satisfies the following requirements. Irs 1040ez 2013 form and instructions It contains the dye Solvent Red 164 (and no other dye) at a concentration spectrally equivalent to at least 3. Irs 1040ez 2013 form and instructions 9 pounds of the solid dye standard Solvent Red 26 per thousand barrels of fuel or any dye of a type and in a concentration that has been approved by the Commissioner. Irs 1040ez 2013 form and instructions Is indelibly dyed by mechanical injection. Irs 1040ez 2013 form and instructions See section 6 of Notice 2005-80 for transition rules that apply until final regulations are issued by the IRS. Irs 1040ez 2013 form and instructions Notice required. Irs 1040ez 2013 form and instructions   A legible and conspicuous notice stating either: DYED DIESEL FUEL, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE or DYED KEROSENE, NONTAXABLE USE ONLY, PENALTY FOR TAXABLE USE must be: Provided by the terminal operator to any person that receives dyed diesel fuel or dyed kerosene at a terminal rack of that operator, and Posted by a seller on any retail pump or other delivery facility where it sells dyed diesel fuel or dyed kerosene for use by its buyer. Irs 1040ez 2013 form and instructions   The notice under item (1) must be provided by the time of the removal and must appear on all shipping papers, bills of lading, and similar documents accompanying the removal of the fuel. Irs 1040ez 2013 form and instructions   Any seller that fails to post the required notice under item (2) is presumed to know that the fuel will be used for a taxable use (a use other than a nontaxable use listed later). Irs 1040ez 2013 form and instructions That seller is subject to the penalty described next. Irs 1040ez 2013 form and instructions Penalty. Irs 1040ez 2013 form and instructions   A penalty is imposed on a person if any of the following situations apply. Irs 1040ez 2013 form and instructions Any dyed fuel is sold or held for sale by the person for a use the person knows or has reason to know is not a nontaxable use of the fuel. Irs 1040ez 2013 form and instructions Any dyed fuel is held for use or used by the person for a use other than a nontaxable use and the person knew, or had reason to know, that the fuel was dyed. Irs 1040ez 2013 form and instructions The person willfully alters, chemically or otherwise, or attempts to so alter, the strength or composition of any dye in dyed fuel. Irs 1040ez 2013 form and instructions The person has knowledge that a dyed fuel that has been altered, as described in (3) above, sells or holds for sale such fuel for any use for which the person knows or has reason to know is not a nontaxable use of the fuel. Irs 1040ez 2013 form and instructions   The penalty is the greater of $1,000 or $10 per gallon of the dyed diesel fuel or dyed kerosene involved. Irs 1040ez 2013 form and instructions After the first violation, the $1,000 portion of the penalty increases depending on the number of violations. Irs 1040ez 2013 form and instructions   This penalty is in addition to any tax imposed on the fuel. Irs 1040ez 2013 form and instructions   If the penalty is imposed, each officer, employee, or agent of a business entity who willfully participated in any act giving rise to the penalty is jointly and severally liable with that entity for the penalty. Irs 1040ez 2013 form and instructions   There is no administrative appeal or review allowed for the third and subsequent penalty imposed by section 6715 on any person except for: Fraud or a mistake in the chemical analysis, or Mathematical calculation of the penalty. Irs 1040ez 2013 form and instructions   If you are liable for the penalty, you may also be liable for the back-up tax, discussed later. Irs 1040ez 2013 form and instructions However, the penalty applies only to dyed diesel fuel and dyed kerosene, while the back-up tax may apply to other fuels. Irs 1040ez 2013 form and instructions The penalty may apply if the fuel is held for sale or use for a taxable use while the back-up tax does not apply unless the fuel is delivered into a fuel supply tank. Irs 1040ez 2013 form and instructions Exception to penalty. Irs 1040ez 2013 form and instructions   The penalty under item (3) will not apply in any of the following situations. Irs 1040ez 2013 form and instructions Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any undyed liquid and the resulting product meets the dyeing requirements. Irs 1040ez 2013 form and instructions Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with any other liquid (other than diesel fuel or kerosene) that contains the type and amount of dye required to meet the dyeing requirements. Irs 1040ez 2013 form and instructions The alteration or attempted alteration occurs in an exempt area of Alaska. Irs 1040ez 2013 form and instructions See Removal for sale or use in Alaska, later. Irs 1040ez 2013 form and instructions Diesel fuel or kerosene meeting the dyeing requirements (described earlier) is blended with diesel fuel or kerosene not meeting the dyeing requirements and the blending occurs as part of a nontaxable use (other than export), discussed later. Irs 1040ez 2013 form and instructions Alaska and Feedstocks Tax of $. Irs 1040ez 2013 form and instructions 001 per gallon is imposed on: Undyed diesel fuel or undyed kerosene sold or used in Alaska for certain nontaxable uses (see Later sales on page 10). Irs 1040ez 2013 form and instructions Undyed kerosene used for feedstock purposes. Irs 1040ez 2013 form and instructions Removal for sale or use in Alaska. Irs 1040ez 2013 form and instructions   No tax is imposed on the removal, entry, or sale of diesel fuel or kerosene in Alaska for ultimate sale or use in certain areas of Alaska for certain nontaxable uses. Irs 1040ez 2013 form and instructions The removal or entry of any diesel fuel or kerosene is not taxed if all the following requirements are satisfied. Irs 1040ez 2013 form and instructions The person otherwise liable for the tax (position holder, refiner, or enterer): Is a registrant, Can show satisfactory evidence of the nontaxable nature of the transaction, and Has no reason to believe the evidence is false. Irs 1040ez 2013 form and instructions In the case of a removal from a terminal, the terminal is an approved terminal. Irs 1040ez 2013 form and instructions The owner of the fuel immediately after the removal or entry holds the fuel for its own use in a nontaxable use (discussed later) or is a qualified dealer. Irs 1040ez 2013 form and instructions   If all three of the requirements above are not met, then tax is imposed at $. Irs 1040ez 2013 form and instructions 244 per gallon. Irs 1040ez 2013 form and instructions   A qualified dealer is any person that holds a qualified dealer license from the state of Alaska or has been registered by the IRS as a qualified retailer. Irs 1040ez 2013 form and instructions Satisfactory evidence may include copies of qualified dealer licenses or exemption certificates obtained for state tax purposes. Irs 1040ez 2013 form and instructions Later sales. Irs 1040ez 2013 form and instructions   The excise tax applies to diesel fuel or kerosene sold by a qualified dealer after the removal or entry. Irs 1040ez 2013 form and instructions The tax is imposed at the time of the sale and the qualified dealer is liable for the tax. Irs 1040ez 2013 form and instructions However, the sale is not taxable (other than the LUST tax at $. Irs 1040ez 2013 form and instructions 001 per gallon) if all the following requirements are met. Irs 1040ez 2013 form and instructions The fuel is sold in Alaska for certain nontaxable uses. Irs 1040ez 2013 form and instructions The buyer buys the fuel for its own use in a nontaxable use or is a qualified dealer. Irs 1040ez 2013 form and instructions The seller can show satisfactory evidence of the nontaxable nature of the transaction and has no reason to believe the evidence is false. Irs 1040ez 2013 form and instructions Feedstock purposes. Irs 1040ez 2013 form and instructions   The $. Irs 1040ez 2013 form and instructions 001 per gallon LUST tax is imposed on the removal or entry of undyed kerosene if all the following conditions are met. Irs 1040ez 2013 form and instructions The person otherwise liable for tax (position holder, refiner, or enterer) is a registrant. Irs 1040ez 2013 form and instructions In the case of a removal from a terminal, the terminal is an approved terminal. Irs 1040ez 2013 form and instructions Either: The person otherwise liable for tax uses the kerosene for a feedstock purpose, or The kerosene is sold for use by the buyer for a feedstock purpose and, at the time of the sale, the person otherwise liable for tax has an unexpired certificate (described later) from the buyer and has no reason to believe any information on the certificate is false. Irs 1040ez 2013 form and instructions   If all of the requirements above are not met, then tax is imposed at $. Irs 1040ez 2013 form and instructions 244 per gallon. Irs 1040ez 2013 form and instructions   Kerosene is used for a feedstock purpose when it is used for nonfuel purposes in the manufacture or production of any substance other than gasoline, diesel fuel, or Other Fuels. Irs 1040ez 2013 form and instructions For example, kerosene is used for a feedstock purpose when it is used as an ingredient in the production of paint, but is not used for a feedstock purpose when it is used to power machinery at a factory where paint is produced. Irs 1040ez 2013 form and instructions A feedstock user is a person that uses kerosene for a feedstock purpose. Irs 1040ez 2013 form and instructions A registered feedstock user is a person that has been registered by the IRS as a feedstock user. Irs 1040ez 2013 form and instructions See Registration Requirements, earlier. Irs 1040ez 2013 form and instructions Later sales. Irs 1040ez 2013 form and instructions   The excise tax ($. Irs 1040ez 2013 form and instructions 244 per gallon) applies to kerosene sold for use by the buyer for a feedstock purpose (item (3)(b) above) if the buyer in that sale later sells the kerosene. Irs 1040ez 2013 form and instructions The tax is imposed at the time of the later sale and that seller is liable for the tax. Irs 1040ez 2013 form and instructions Certificate. Irs 1040ez 2013 form and instructions   The certificate from the buyer certifies the buyer is a registered feedstock user and the kerosene will be used by the buyer for a feedstock purpose. Irs 1040ez 2013 form and instructions The certificate may be included as part of any business records normally used for a sale. Irs 1040ez 2013 form and instructions A model certificate is shown in the Appendix as Model Certificate G. Irs 1040ez 2013 form and instructions Your certificate must contain all information necessary to complete the model. Irs 1040ez 2013 form and instructions   A certificate expires on the earliest of the following dates. Irs 1040ez 2013 form and instructions The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs 1040ez 2013 form and instructions The date the seller is provided a new certificate or notice that the current certificate is invalid. Irs 1040ez 2013 form and instructions The date the seller is notified the buyer's registration has been revoked or suspended. Irs 1040ez 2013 form and instructions   The buyer must provide a new certificate if any information on a certificate has changed. Irs 1040ez 2013 form and instructions Back-up Tax Tax is imposed on the delivery of any of the following into the fuel supply tank of a diesel-powered highway vehicle. Irs 1040ez 2013 form and instructions Any dyed diesel fuel or dyed kerosene for other than a nontaxable use. Irs 1040ez 2013 form and instructions Any undyed diesel fuel or undyed kerosene on which a credit or refund (for fuel used for a nontaxable purpose) has been allowed. Irs 1040ez 2013 form and instructions Any liquid other than gasoline, diesel fuel, or kerosene. Irs 1040ez 2013 form and instructions Generally, this back-up tax is imposed at a rate of $. Irs 1040ez 2013 form and instructions 244 per gallon. Irs 1040ez 2013 form and instructions Liability for tax. Irs 1040ez 2013 form and instructions   Generally, the operator of the vehicle into which the fuel is delivered is liable for the tax. Irs 1040ez 2013 form and instructions In addition, the seller of the diesel fuel or kerosene is jointly and severally liable for the tax if the seller knows or has reason to know that the fuel will be used for other than a nontaxable use. Irs 1040ez 2013 form and instructions Exemptions from the back-up tax. Irs 1040ez 2013 form and instructions   The back-up tax does not apply to a delivery of diesel fuel or kerosene for uses 1, 2, 6, 7, 12, 13, 14, and 15 listed under Definitions of Nontaxable Uses in chapter 2. Irs 1040ez 2013 form and instructions   In addition, since the back-up tax is imposed only on the delivery into the fuel supply tank of a diesel-powered vehicle or train, the tax does not apply to diesel fuel or kerosene used as heating oil or in stationary engines. Irs 1040ez 2013 form and instructions Diesel-Water Fuel Emulsion Diesel-water fuel emulsion means diesel fuel at least 14% of which is water and for which the emulsion additive is registered by a United States manufacturer with the EPA under section 211 of the Clean Air Act as in effect on March 31, 2003. Irs 1040ez 2013 form and instructions A reduced tax rate of $. Irs 1040ez 2013 form and instructions 198 per gallon is imposed on a diesel-water fuel emulsion. Irs 1040ez 2013 form and instructions To be eligible for the reduced rate, the person who sells, removes, or uses the diesel-water fuel emulsion must be registered by the IRS. Irs 1040ez 2013 form and instructions If the diesel-water fuel emulsion does not meet the requirements above, or if the person who sells, removes, or uses the fuel is not registered, the diesel-water fuel emulsion is taxed at $. Irs 1040ez 2013 form and instructions 244 per gallon. Irs 1040ez 2013 form and instructions Credits or refunds. Irs 1040ez 2013 form and instructions   The allowance for a credit or refund on a diesel-water fuel emulsion is discussed in chapter 2. Irs 1040ez 2013 form and instructions Kerosene for Use in Aviation Taxable Events Generally, kerosene is taxed at $. Irs 1040ez 2013 form and instructions 244 per gallon unless a reduced rate applies (see Diesel Fuel and Kerosene, earlier). Irs 1040ez 2013 form and instructions For kerosene removed directly from a terminal into the fuel tank of an aircraft for use in noncommercial aviation, the tax rate is $. Irs 1040ez 2013 form and instructions 219. Irs 1040ez 2013 form and instructions The rate of $. Irs 1040ez 2013 form and instructions 219 also applies if kerosene is removed into any aircraft from a qualified refueler truck, tanker, or tank wagon that is loaded with the kerosene from a terminal that is located within an airport. Irs 1040ez 2013 form and instructions The airport terminal does not need to be a secured airport terminal for this rate to apply. Irs 1040ez 2013 form and instructions However, the refueler truck, tanker, or tank wagon must meet the requirements discussed under Certain refueler trucks, tankers, and tank wagons, treated as terminals, later. Irs 1040ez 2013 form and instructions For kerosene removed directly into the fuel tank of an aircraft for use in commercial aviation, the rate of tax is $. Irs 1040ez 2013 form and instructions 044 per gallon. Irs 1040ez 2013 form and instructions For kerosene removed into an aircraft from a qualified refueler truck, tanker, or tank wagon, the $. Irs 1040ez 2013 form and instructions 044 rate applies only if the truck, tanker, or tank wagon is loaded at a terminal that is located in a secured area of the airport. Irs 1040ez 2013 form and instructions See Terminal located within a secured area of an airport, later. Irs 1040ez 2013 form and instructions In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Irs 1040ez 2013 form and instructions For kerosene removed directly into the fuel tank of an aircraft for a use exempt from tax under section 4041(c) (such as use in an aircraft for the exclusive use of a state or local government), the rate of tax is $. Irs 1040ez 2013 form and instructions 001. Irs 1040ez 2013 form and instructions There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Irs 1040ez 2013 form and instructions The kerosene must be removed from a qualifying refueler truck, tanker, or tank wagon loaded at a terminal located within a secured area of an airport. Irs 1040ez 2013 form and instructions See Terminal located within a secured area of an airport, later. Irs 1040ez 2013 form and instructions In addition, the operator must provide the position holder with a certificate similar to Model Certificate K in the Appendix. Irs 1040ez 2013 form and instructions The position holder is liable for the $. Irs 1040ez 2013 form and instructions 001 per gallon tax. Irs 1040ez 2013 form and instructions For kerosene removed directly from a terminal into the fuel tank of an fractional ownership program aircraft after March 31, 2012, a surtax of $. Irs 1040ez 2013 form and instructions 141 per gallon applies. Irs 1040ez 2013 form and instructions Certain refueler trucks, tankers, and tank wagons treated as terminals. Irs 1040ez 2013 form and instructions   For purposes of the tax imposed on kerosene for use in aviation removed directly into the fuel tank of an aircraft for use in commercial aviation, certain refueler trucks, tankers, and tank wagons are treated as part of a terminal if the following conditions are met. Irs 1040ez 2013 form and instructions Such terminal is located within an area of an airport. Irs 1040ez 2013 form and instructions Any kerosene for use in aviation that is loaded in a refueler truck, tanker, or tank wagon at a terminal is for delivery into aircraft at the airport in which the terminal is located. Irs 1040ez 2013 form and instructions Except in exigent circumstances, such as those identified in Notice 2005-80, no vehicle registered for highway use is loaded with kerosene for use in aviation at the terminal. Irs 1040ez 2013 form and instructions The refueler truck, tanker, or tank wagon meets the following requirements: Has storage tanks, hose, and coupling equipment designed and used for fueling aircraft, Is not registered for highway use, and Is operated by the terminal operator or a person that makes a daily accounting to the terminal operator of each delivery of fuel from the refueler truck, tanker, or tank wagon. Irs 1040ez 2013 form and instructions Information reporting will be required by terminal operators regarding this provision. Irs 1040ez 2013 form and instructions Until the format of this information reporting is issued, taxpayers are required to retain records regarding the daily accounting, but are not required to report such information. Irs 1040ez 2013 form and instructions Terminal located within a secured area of an airport. Irs 1040ez 2013 form and instructions   See Notice 2005-4 and Notice 2005-80 for the list of terminals located within a secured area of an airport. Irs 1040ez 2013 form and instructions This list refers to fueling operations at airport terminals as it applies to the federal excise tax on kerosene for use in aviation, and has nothing to do with the general security of airports either included or not included in the list. Irs 1040ez 2013 form and instructions Liability For Tax If the kerosene is removed directly into the fuel tank of an aircraft for use in commercial aviation, the operator of the aircraft in commercial aviation is liable for the tax on the removal at the rate of $. Irs 1040ez 2013 form and instructions 044 per gallon. Irs 1040ez 2013 form and instructions However, the position holder is liable for the LUST tax for kerosene for use in aviation removed directly into the fuel tank of an aircraft for use exempt from tax under section 4041(c) (except foreign trade). Irs 1040ez 2013 form and instructions For example, for kerosene removed directly into the aircraft for use in military aircraft, the position holder is liable for the tax. Irs 1040ez 2013 form and instructions For the aircraft operator to be liable for the tax $. Irs 1040ez 2013 form and instructions 044 rate, the position holder must meet the following requirements: Is a taxable fuel registrant, Has an unexpired certificate (a model certificate is shown in the Appendix as Model Certificate K) from the operator of the aircraft, and Has no reason to believe any of the information in the certificate is false. Irs 1040ez 2013 form and instructions Commercial aviation. Irs 1040ez 2013 form and instructions   Commercial aviation is any use of an aircraft in the business of transporting persons or property by air for pay. Irs 1040ez 2013 form and instructions However, commercial aviation does not include any of the following uses. Irs 1040ez 2013 form and instructions Any use exclusively for the purpose of skydiving. Irs 1040ez 2013 form and instructions Certain air transportation by seaplane. Irs 1040ez 2013 form and instructions See Seaplanes under Transportation of Persons by Air in chapter 4. Irs 1040ez 2013 form and instructions Any use of an aircraft owned or leased by a member of an affiliated group and unavailable for hire by nonmembers. Irs 1040ez 2013 form and instructions For more information, see Aircraft used by affiliated corporations under Special Rules on Transportation Taxes in chapter 4. Irs 1040ez 2013 form and instructions Any use of an aircraft that has a maximum certificated takeoff weight of 6,000 pounds or less, unless the aircraft is operated on an established line. Irs 1040ez 2013 form and instructions For more information, see Small aircraft under Special Rules on Transportation Taxes in chapter 4. Irs 1040ez 2013 form and instructions Any use where the surtax on fuel used in a fractional ownership program aircraft is imposed. Irs 1040ez 2013 form and instructions See Surtax on any liquid used in a fractional ownership program aircraft as fuel below. Irs 1040ez 2013 form and instructions Surtax on any liquid used in a fractional ownership program aircraft as fuel Fuel used in a fractional ownership program aircraft (as defined below) after March 31, 2012, is subject to a surtax of $. Irs 1040ez 2013 form and instructions 141 per gallon. Irs 1040ez 2013 form and instructions The fractional ownership program manager is liable for the tax. Irs 1040ez 2013 form and instructions The surtax applies in addition to any other taxes imposed on the removal, entry, use, or sale of the fuel. Irs 1040ez 2013 form and instructions If the surtax is imposed, the following air transportation taxes do not apply. Irs 1040ez 2013 form and instructions Transportation of persons by air. Irs 1040ez 2013 form and instructions Transportation of property by air. Irs 1040ez 2013 form and instructions Use of international air travel facilities. Irs 1040ez 2013 form and instructions These taxes are described under Air Transportation Taxes, later. Irs 1040ez 2013 form and instructions A fractional ownership program aircraft flight is considered noncommercial aviation, for the rules for kerosene used in noncommercial aviation, see Kerosene for Use in Aviation above. Irs 1040ez 2013 form and instructions Fractional ownership aircraft program    is a program under which:  A single fractional ownership program manager provides fractional ownership program management services on behalf of the fractional owners; There are one or more fractional owners per fractional program aircraft, with at least one fractional program aircraft having more than one owner; For at least two fractional program aircraft, none of the ownership interests in the aircraft are less than the minimum fractional ownership interest or held by the program manager; There exists a dry-lease aircraft exchange arrangement among all of the fractional owners; and There are multi-year program agreements covering the fractional ownership, fractional ownership program management services, and dry-lease aircraft exchange aspects of the program. Irs 1040ez 2013 form and instructions Fractional program aircraft. Irs 1040ez 2013 form and instructions   Any aircraft that, in any fractional ownership aircraft program, is listed as a fractional program aircraft in the management specifications issued to the manager of such program by Federal Aviation Administration under subpart K of part 91 title 14, Code of Federal Regulations, and is registered in the U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions   Fractional program aircraft are not considered used for transportation of a qualified fractional owner, or on account of such qualified fractional owner when they are used for flight demonstration, maintenance or crew training. Irs 1040ez 2013 form and instructions In such situations, the flight is not commercial aviation. Irs 1040ez 2013 form and instructions Instead, the tax on the fuel used in the flight is imposed at the non-commercial aviation rate. Irs 1040ez 2013 form and instructions Fractional owner. Irs 1040ez 2013 form and instructions   Any person owning any interest (including the entire interest) in a fractional program aircraft. Irs 1040ez 2013 form and instructions Dry lease aircraft exchange. Irs 1040ez 2013 form and instructions   An agreement, documented by the written program agreements, under which the fractional program aircraft are available, on an as-needed basis without crew, to each fractional owner. Irs 1040ez 2013 form and instructions Special rule relating to deadhead service. Irs 1040ez 2013 form and instructions   A fractional program aircraft will not be considered to be used on account of a qualified fractional owner when it is used in deadhead service and a person other than a qualified fractional owner is separately charged for such service. Irs 1040ez 2013 form and instructions More information. Irs 1040ez 2013 form and instructions   See section 4043 for more information on the surtax. Irs 1040ez 2013 form and instructions Certificate for Commercial Aviation and Exempt Uses A certificate is required from the aircraft operator: To support aircraft operator liability for tax on removal of kerosene for use in aviation directly into the fuel tank of an aircraft in commercial aviation, or For exempt uses. Irs 1040ez 2013 form and instructions Certificate. Irs 1040ez 2013 form and instructions   The certificate may be included as part of any business records normally used for a sale. Irs 1040ez 2013 form and instructions See Model Certificate K in the Appendix. Irs 1040ez 2013 form and instructions   A certificate expires on the earliest of the following dates. Irs 1040ez 2013 form and instructions The date 1 year after the effective date (not earlier than the date signed) of the certificate. Irs 1040ez 2013 form and instructions The date the buyer provides the seller a new certificate or notice that the current certificate is invalid. Irs 1040ez 2013 form and instructions The date the IRS or the buyer notifies the seller that the buyer's right to provide a certificate has been withdrawn. Irs 1040ez 2013 form and instructions   The buyer must provide a new certificate if any information on a certificate has changed. Irs 1040ez 2013 form and instructions   The IRS may withdraw the buyer's right to provide a certificate if the buyer uses the kerosene for use in aviation to which a certificate relates other than as stated in the certificate. Irs 1040ez 2013 form and instructions Exempt use. Irs 1040ez 2013 form and instructions   The rate on kerosene for use in aviation is $. Irs 1040ez 2013 form and instructions 001 (LUST tax) if it is removed from any refinery or terminal directly into the fuel tank of an aircraft for an exempt use. Irs 1040ez 2013 form and instructions An exempt use includes kerosene for the exclusive use of a state or local government. Irs 1040ez 2013 form and instructions There is no tax on kerosene removed directly into the fuel tank of an aircraft for use in foreign trade. Irs 1040ez 2013 form and instructions Flash title transaction. Irs 1040ez 2013 form and instructions   A position holder is not liable for tax if, among other conditions, it obtains a certificate (described above) from the operator of the aircraft into which the kerosene is delivered. Irs 1040ez 2013 form and instructions In a “flash title transaction” the position holder sells the kerosene to a wholesale distributor (reseller) that in turn sells the kerosene to the aircraft operator as the kerosene is being removed from a terminal into the fuel tank of an aircraft. Irs 1040ez 2013 form and instructions In this case, the position holder will be treated as having a certificate from the operator of the aircraft if: The aircraft operator puts the reseller's name, address, and EIN on the certificate in place of the position holder's information; and The reseller provides the position holder with a statement of the kerosene reseller. Irs 1040ez 2013 form and instructions Reseller statement. Irs 1040ez 2013 form and instructions   This is a statement that is signed under penalties of perjury by a person with authority to bind the reseller; is provided at the bottom or on the back of the certificate (or in an attached document); and contains: The reseller's name, address, and EIN; The position holder's name, address, and EIN; and A statement that the reseller has no reason to believe that any information in the accompanying aircraft operator's certificate is false. Irs 1040ez 2013 form and instructions Credits or Refunds. Irs 1040ez 2013 form and instructions   A claim may be made by the ultimate purchaser (the operator) for taxed kerosene for use in aviation used in commercial aviation (other than foreign trade) and noncommercial aviation (other than nonexempt, noncommercial aviation and exclusive use by a state, political subdivision of a state, or the District of Columbia). Irs 1040ez 2013 form and instructions A claim may be made by a registered ultimate vendor for certain sales. Irs 1040ez 2013 form and instructions For more information, see chapter 2. Irs 1040ez 2013 form and instructions Other Fuels (Including Alternative Fuels) Other Fuels means any liquid except gas oil, fuel oil, or any product taxable under section 4081. Irs 1040ez 2013 form and instructions Other Fuels include alternative fuels. Irs 1040ez 2013 form and instructions Alternative fuels are: Liquefied petroleum gas (LPG), “P Series” fuels, Compressed natural gas (CNG) (discussed later), Liquefied hydrogen, Any liquid fuel derived from coal (including peat) through the Fischer-Tropsch process, Liquid fuel derived from biomass, Liquefied natural gas (LNG), and Liquefied gas derived from biomass. Irs 1040ez 2013 form and instructions Liquefied petroleum gas includes propane, butane, pentane, or mixtures of those products. Irs 1040ez 2013 form and instructions Qualified methanol and ethanol fuels. Irs 1040ez 2013 form and instructions   Qualified ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from coal, including peat. Irs 1040ez 2013 form and instructions The tax rates are listed in the Instructions for Form 720. Irs 1040ez 2013 form and instructions Partially exempt methanol and ethanol fuels. Irs 1040ez 2013 form and instructions   A reduced tax rate applies to these fuels. Irs 1040ez 2013 form and instructions Partially exempt ethanol and methanol means any liquid at least 85 percent of which consists of alcohol produced from natural gas. Irs 1040ez 2013 form and instructions The tax rates are listed in the Instructions for Form 720. Irs 1040ez 2013 form and instructions Motor vehicles. Irs 1040ez 2013 form and instructions   Motor vehicles include all types of vehicles, whether or not registered (or required to be registered) for highway use, that have both the following characteristics. Irs 1040ez 2013 form and instructions They are propelled by a motor. Irs 1040ez 2013 form and instructions They are designed for carrying or towing loads from one place to another, regardless of the type of material or load carried or t
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The Irs 1040ez 2013 Form And Instructions

Irs 1040ez 2013 form and instructions 4. Irs 1040ez 2013 form and instructions   Unrelated Business Taxable Income Table of Contents IncomeExclusions Dues of Agricultural Organizations and Business Leagues DeductionsDirectly Connected Exploitation of Exempt Activity—Advertising Sales Modifications Partnership Income or Loss S Corporation Income or Loss Special Rules for Foreign Organizations Special Rules for Social Clubs, VEBAs, SUBs, and GLSOsIncome that is set aside. Irs 1040ez 2013 form and instructions Special Rules for Veterans' Organizations Income From Controlled OrganizationsAddition to tax for valuation misstatements. Irs 1040ez 2013 form and instructions Net unrelated income. Irs 1040ez 2013 form and instructions Net unrelated loss. Irs 1040ez 2013 form and instructions Control. Irs 1040ez 2013 form and instructions Income from property financed with qualified 501(c)(3) bonds. Irs 1040ez 2013 form and instructions Disposition of property received from taxable subsidiary and used in unrelated business. Irs 1040ez 2013 form and instructions Income From Debt-Financed Property Debt-Financed PropertyAcquisition Indebtedness Computation of Debt-Financed Income Deductions for Debt-Financed Property Allocation Rules How to Get Tax Help The term “unrelated business taxable income” generally means the gross income derived from any unrelated trade or business regularly conducted by the exempt organization, less the deductions directly connected with carrying on the trade or business. Irs 1040ez 2013 form and instructions If an organization regularly carries on two or more unrelated business activities, its unrelated business taxable income is the total of gross income from all such activities less the total allowable deductions attributable to all the activities. Irs 1040ez 2013 form and instructions In computing unrelated business taxable income, gross income and deductions are subject to the modifications and special rules explained in this chapter. Irs 1040ez 2013 form and instructions Whether a particular item of income or expense falls within any of these modifications or special rules must be determined by all the facts and circumstances in each specific case. Irs 1040ez 2013 form and instructions For example, if the organization received a payment termed rent that is in fact a return of profits by a person operating the property for the benefit of the organization, or that is a share of the profits retained by the organization as a partner or joint venturer, the payment is not within the income exclusion for rents, discussed later under Exclusions. Irs 1040ez 2013 form and instructions Income Generally, unrelated business income is taxable, but there are exclusions and special rules that must be considered when figuring the income. Irs 1040ez 2013 form and instructions Exclusions The following types of income (and deductions directly connected with the income) are generally excluded when figuring unrelated business taxable income. Irs 1040ez 2013 form and instructions Dividends, interest, annuities and other investment income. Irs 1040ez 2013 form and instructions   All dividends, interest, annuities, payments with respect to securities loans, income from notional principal contracts, and other income from an exempt organization's ordinary and routine investments that the IRS determines are substantially similar to these types of income are excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions Exception for insurance activity income of a controlled foreign corporation. Irs 1040ez 2013 form and instructions   This exclusion does not apply to income from certain insurance activities of an exempt organization's controlled foreign corporation. Irs 1040ez 2013 form and instructions The income is not excludable dividend income, but instead is unrelated business taxable income to the extent it would be so treated if the exempt organization had earned it directly. Irs 1040ez 2013 form and instructions Certain exceptions to this rule apply. Irs 1040ez 2013 form and instructions For more information, see section 512(b)(17). Irs 1040ez 2013 form and instructions Other exceptions. Irs 1040ez 2013 form and instructions   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), to interest or annuities received from a controlled corporation (discussed under Income From Controlled Organizations, later). Irs 1040ez 2013 form and instructions Income from lending securities. Irs 1040ez 2013 form and instructions   Payments received with respect to a security loan are excluded in computing unrelated business taxable income only if the loan is made under an agreement that:    Provides for the return to the exempt organization of securities identical to the securities loaned, Requires payments to the organization of amounts equivalent to all interest, dividends, and other distributions that the owner of the securities is entitled to receive during the period of the loan, Does not reduce the organization's risk of loss or opportunity for gain on the securities, Contains reasonable procedures to implement the obligation of the borrower to furnish collateral to the organization with a fair market value each business day during the period of the loan in an amount not less than the fair market value of the securities at the close of the preceding business day, and Permits the organization to terminate the loan upon notice of not more than 5 business days. Irs 1040ez 2013 form and instructions   Payments with respect to securities loans include: Amounts in respect of dividends, interest, and other distributions, Fees based on the period of time the loan is in effect and the fair market value of the security during that period, Income from collateral security for the loan, and Income from the investment of collateral security. Irs 1040ez 2013 form and instructions The payments are considered to be from the securities loaned and not from collateral security or the investment of collateral security from the loans. Irs 1040ez 2013 form and instructions Any deductions that are directly connected with collateral security for the loan, or with the investment of collateral security, are considered deductions that are directly connected with the securities loaned. Irs 1040ez 2013 form and instructions Royalties. Irs 1040ez 2013 form and instructions   Royalties, including overriding royalties, are excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions   To be considered a royalty, a payment must relate to the use of a valuable right. Irs 1040ez 2013 form and instructions Payments for trademarks, trade names, or copyrights are ordinarily considered royalties. Irs 1040ez 2013 form and instructions Similarly, payments for the use of a professional athlete's name, photograph, likeness, or facsimile signature are ordinarily considered royalties. Irs 1040ez 2013 form and instructions However, royalties do not include payments for personal services. Irs 1040ez 2013 form and instructions Therefore, payments for personal appearances and interviews are not excluded as royalties and must be included in figuring unrelated business taxable income. Irs 1040ez 2013 form and instructions   Unrelated business taxable income does not include royalty income received from licensees by an exempt organization that is the legal and beneficial owner of patents assigned to it by inventors for specified percentages of future royalties. Irs 1040ez 2013 form and instructions   Mineral royalties are excluded whether measured by production or by gross or taxable income from the mineral property. Irs 1040ez 2013 form and instructions However, the exclusion does not apply to royalties that stem from an arrangement whereby the organization owns a working interest in a mineral property and is liable for its share of the development and operating costs under the terms of its agreement with the operator of the property. Irs 1040ez 2013 form and instructions To the extent they are not treated as loans under section 636 (relating to income tax treatment of mineral production payments), payments for mineral production are treated in the same manner as royalty payments for the purpose of computing unrelated business taxable income. Irs 1040ez 2013 form and instructions To the extent they are treated as loans, any payments for production that are the equivalent of interest are treated as interest and are excluded. Irs 1040ez 2013 form and instructions Exceptions. Irs 1040ez 2013 form and instructions   This exclusion does not apply to debt-financed income (discussed under Income From Debt-Financed Property, later) or to royalties received from a controlled corporation (discussed under Income From Controlled Organizations, later). Irs 1040ez 2013 form and instructions Rents. Irs 1040ez 2013 form and instructions   Rents from real property, including elevators and escalators, are excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions Rents from personal property are not excluded. Irs 1040ez 2013 form and instructions However, special rules apply to “mixed leases” of both real and personal property. Irs 1040ez 2013 form and instructions Mixed leases. Irs 1040ez 2013 form and instructions   In a mixed lease, all of the rents are excluded if the rents attributable to the personal property are not more than 10% of the total rents under the lease, as determined when the personal property is first placed in service by the lessee. Irs 1040ez 2013 form and instructions If the rents attributable to personal property are more than 10% but not more than 50% of the total rents, only the rents attributable to the real property are excluded. Irs 1040ez 2013 form and instructions If the rents attributable to the personal property are more than 50% of the total rents, none of the rents are excludable. Irs 1040ez 2013 form and instructions   Property is placed in service when the lessee first may use it under the terms of a lease. Irs 1040ez 2013 form and instructions For example, property subject to a lease entered into on November 1, for a term starting on January 1 of the next year, is considered placed in service on January 1, regardless of when the lessee first actually uses it. Irs 1040ez 2013 form and instructions   If separate leases are entered into for real and personal property and the properties have an integrated use (for example, one or more leases for real property and another lease or leases for personal property to be used on the real property), all the leases will be considered as one lease. Irs 1040ez 2013 form and instructions   The rent attributable to the personal property must be recomputed, and the treatment of the rents must be redetermined, if: The rent attributable to all the leased personal property increases by 100% or more because additional or substitute personal property is placed in service, or The lease is modified to change the rent charged (whether or not the amount of rented personal property changes). Irs 1040ez 2013 form and instructions Any change in the treatment of rents resulting from the recomputation is effective only for the period beginning with the event that caused the recomputation. Irs 1040ez 2013 form and instructions Exception for rents based on net profit. Irs 1040ez 2013 form and instructions   The exclusion for rents does not apply if the amount of the rent depends on the income or profits derived by any person from the leased property, other than an amount based on a fixed percentage of the gross receipts or sales. Irs 1040ez 2013 form and instructions Exception for income from personal services. Irs 1040ez 2013 form and instructions   Payment for occupying space when personal services are also rendered to the occupant does not constitute rent from real property. Irs 1040ez 2013 form and instructions Therefore, the exclusion does not apply to transactions such as renting hotel rooms, rooms in boarding houses or tourist homes, and space in parking lots or warehouses. Irs 1040ez 2013 form and instructions Other exceptions. Irs 1040ez 2013 form and instructions   This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later), or to interest, annuities, royalties and rents received from a controlled corporation (discussed under Income From Controlled Organizations, later), investment income (dividends, interest, rents, etc. Irs 1040ez 2013 form and instructions ) received by organizations described in sections 501(c)(7), 501(c)(9), 501(c)(17), and 501(c)(20). Irs 1040ez 2013 form and instructions See Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs, discussed later for more information. Irs 1040ez 2013 form and instructions Income from research. Irs 1040ez 2013 form and instructions   A tax-exempt organization may exclude income from research grants or contracts from unrelated business taxable income. Irs 1040ez 2013 form and instructions However, the extent of the exclusion depends on the nature of the organization and the type of research. Irs 1040ez 2013 form and instructions   Income from research for the United States, any of its agencies or instrumentalities, or a state or any of its political subdivisions is excluded when computing unrelated business taxable income. Irs 1040ez 2013 form and instructions   For a college, university, or hospital, all income from research, whether fundamental or applied, is excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions   When an organization is operated primarily to conduct fundamental research (as distinguished from applied research) and the results are freely available to the general public, all income from research performed for any person is excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions   The term research, for this purpose, does not include activities of a type normally conducted as an incident to commercial or industrial operations, such as testing or inspecting materials or products, or designing or constructing equipment, buildings, etc. Irs 1040ez 2013 form and instructions In addition, the term fundamental research does not include research conducted for the primary purpose of commercial or industrial application. Irs 1040ez 2013 form and instructions Gains and losses from disposition of property. Irs 1040ez 2013 form and instructions   Also excluded from unrelated business taxable income are gains or losses from the sale, exchange, or other disposition of property other than: Stock in trade or other property of a kind that would properly be includable in inventory if on hand at the close of the tax year, Property held primarily for sale to customers in the ordinary course of a trade or business, or Cutting of timber that an organization has elected to consider as a sale or exchange of the timber. Irs 1040ez 2013 form and instructions   It should be noted that the last exception relates only to cut timber. Irs 1040ez 2013 form and instructions The sale, exchange, or other disposition of standing timber is excluded from the computation of unrelated business income, unless it constitutes property held for sale to customers in the ordinary course of business. Irs 1040ez 2013 form and instructions Lapse or termination of options. Irs 1040ez 2013 form and instructions   Any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. Irs 1040ez 2013 form and instructions The exclusion applies only if the option is written in connection with the exempt organization's investment activities. Irs 1040ez 2013 form and instructions Therefore, this exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   This exclusion does not apply to unrelated debt-financed income, discussed later under Income From Debt-Financed Property. Irs 1040ez 2013 form and instructions Gain or loss on disposition of certain brownfield property. Irs 1040ez 2013 form and instructions   Gain or loss from the qualifying sale, exchange, or other disposition of a qualifying brownfield property (as defined in section 512(b)(19)(C)), which was acquired by the organization after December 31, 2005 and before January 1, 2011, is excluded from unrelated business taxable income and is excepted from the debt-financed rules for such property. Irs 1040ez 2013 form and instructions See sections 512(b)(19) and 514(b)(1)(E). Irs 1040ez 2013 form and instructions Income from services provided under federal license. Irs 1040ez 2013 form and instructions   There is a further exclusion from unrelated business taxable income of income from a trade or business conducted by a religious order or by an educational organization maintained by the order. Irs 1040ez 2013 form and instructions   This exclusion applies only if the following requirements are met. Irs 1040ez 2013 form and instructions The trade or business must have been operated by the order or by the institution before May 27, 1959. Irs 1040ez 2013 form and instructions The trade or business must provide services under a license issued by a federal regulatory agency. Irs 1040ez 2013 form and instructions More than 90% of the net income from the business for the tax year must be devoted to religious, charitable, or educational purposes that constitute the basis for the religious order's exemption. Irs 1040ez 2013 form and instructions The rates or other charges for these services must be fully competitive with the rates or other charges of similar taxable businesses. Irs 1040ez 2013 form and instructions Rates or other charges for these services will be considered as fully competitive if they are neither materially higher nor materially lower than the rates charged by similar businesses operating in the same general area. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions    This exclusion does not apply to unrelated debt-financed income (discussed under Income From Debt-Financed Property, later). Irs 1040ez 2013 form and instructions Member income of mutual or cooperative electric companies. Irs 1040ez 2013 form and instructions   Income of a mutual or cooperative electric company described in section 501(c)(12) which is treated as member income under subparagraph (H) of that section is excluded from unrelated business taxable income. Irs 1040ez 2013 form and instructions Dues of Agricultural Organizations and Business Leagues Dues received from associate members by organizations exempt under section 501(c)(5) or section 501(c)(6) may be treated as gross income from an unrelated trade or business if the associate member category exists for the principal purpose of producing unrelated business income. Irs 1040ez 2013 form and instructions For example, if an organization creates an associate member category solely to allow associate members to purchase insurance through the organization, the associate member dues may be unrelated business income. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   Associate member dues received by an agricultural or horticultural organization are not treated as gross income from an unrelated trade or business, regardless of their purpose, if they are not more than the annual limit. Irs 1040ez 2013 form and instructions The limit on dues paid by an associate member is $148 for 2011. Irs 1040ez 2013 form and instructions   If the required annual dues are more than the limit, the entire amount is treated as income from an unrelated business unless the associate member category was formed or availed of for the principal purpose of furthering the organization's exempt purposes. Irs 1040ez 2013 form and instructions Deductions To qualify as allowable deductions in computing unrelated business taxable income, the expenses, depreciation, and similar items generally must be allowable income tax deductions that are directly connected with carrying on an unrelated trade or business. Irs 1040ez 2013 form and instructions They cannot be directly connected with excluded income. Irs 1040ez 2013 form and instructions For an exception to the “directly connected” requirement, see Charitable contributions deduction, under Modifications, later. Irs 1040ez 2013 form and instructions Directly Connected To be directly connected with the conduct of an unrelated business, deductions must have a proximate and primary relationship to carrying on that business. Irs 1040ez 2013 form and instructions For an exception, see Expenses attributable to exploitation of exempt activities, later. Irs 1040ez 2013 form and instructions Expenses attributable solely to unrelated business. Irs 1040ez 2013 form and instructions   Expenses, depreciation, and similar items attributable solely to the conduct of an unrelated business are proximately and primarily related to that business and qualify for deduction to the extent that they are otherwise allowable income tax deductions. Irs 1040ez 2013 form and instructions   For example, salaries of personnel employed full-time to conduct the unrelated business and depreciation of a building used entirely in the conduct of that business are deductible to the extent otherwise allowable. Irs 1040ez 2013 form and instructions Expenses attributable to dual use of facilities or personnel. Irs 1040ez 2013 form and instructions   When facilities or personnel are used both to conduct exempt functions and to conduct an unrelated trade or business, expenses, depreciation, and similar items attributable to the facilities or personnel must be allocated between the two uses on a reasonable basis. Irs 1040ez 2013 form and instructions The part of an item allocated to the unrelated trade or business is proximately and primarily related to that business and is allowable as a deduction in computing unrelated business taxable income if the expense is otherwise an allowable income tax deduction. Irs 1040ez 2013 form and instructions Example 1. Irs 1040ez 2013 form and instructions A school recognized as a tax-exempt organization contracts with an individual to conduct a summer tennis camp. Irs 1040ez 2013 form and instructions The school provides the tennis courts, housing, and dining facilities. Irs 1040ez 2013 form and instructions The contracted individual hires the instructors, recruits campers, and provides supervision. Irs 1040ez 2013 form and instructions The income the school receives from this activity is from a dual use of the facilities and personnel. Irs 1040ez 2013 form and instructions The school, in computing its unrelated business taxable income, may deduct an allocable part of the expenses attributable to the facilities and personnel. Irs 1040ez 2013 form and instructions Example 2. Irs 1040ez 2013 form and instructions An exempt organization with gross income from an unrelated trade or business pays its president $90,000 a year. Irs 1040ez 2013 form and instructions The president devotes approximately 10% of his time to the unrelated business. Irs 1040ez 2013 form and instructions To figure the organization's unrelated business taxable income, a deduction of $9,000 ($90,000 × 10%) is allowed for the salary paid to its president. Irs 1040ez 2013 form and instructions Expenses attributable to exploitation of exempt activities. Irs 1040ez 2013 form and instructions   Generally, expenses, depreciation, and similar items attributable to the conduct of an exempt activity are not deductible in computing unrelated business taxable income from an unrelated trade or business that exploits the exempt activity. Irs 1040ez 2013 form and instructions (See Exploitation of exempt functions under Not substantially related in chapter 3. Irs 1040ez 2013 form and instructions ) This is because they do not have a proximate and primary relationship to the unrelated trade or business, and therefore, they do not qualify as directly connected with that business. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   Expenses, depreciation, and similar items may be treated as directly connected with the conduct of the unrelated business if all the following statements are true. Irs 1040ez 2013 form and instructions The unrelated business exploits the exempt activity. Irs 1040ez 2013 form and instructions The unrelated business is a type normally conducted for profit by taxable organizations. Irs 1040ez 2013 form and instructions The exempt activity is a type normally conducted by taxable organizations in carrying on that type of business. Irs 1040ez 2013 form and instructions The amount treated as directly connected is the smaller of: The excess of these expenses, depreciation, and similar items over the income from, or attributable to, the exempt activity; or The gross unrelated business income reduced by all other expenses, depreciation, and other items that are actually directly connected. Irs 1040ez 2013 form and instructions   The application of these rules to an advertising activity that exploits an exempt publishing activity is explained next. Irs 1040ez 2013 form and instructions Exploitation of Exempt Activity—Advertising Sales The sale of advertising in a periodical of an exempt organization that contains editorial material related to the accomplishment of the organization's exempt purpose is an unrelated business that exploits an exempt activity, the circulation and readership of the periodical. Irs 1040ez 2013 form and instructions Therefore, in addition to direct advertising costs, exempt activity costs (expenses, depreciation, and similar expenses attributable to the production and distribution of the editorial or readership content) can be treated as directly connected with the conduct of the advertising activity. Irs 1040ez 2013 form and instructions (See Expenses attributable to exploitation of exempt activities under Directly Connected, earlier. Irs 1040ez 2013 form and instructions ) Figuring unrelated business taxable income (UBTI). Irs 1040ez 2013 form and instructions   The UBTI of an advertising activity is the amount shown in the following chart. Irs 1040ez 2013 form and instructions IF gross advertising income is . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions THEN UBTI is . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions More than direct advertising costs The excess advertising income, reduced (but not below zero) by the excess, if any, of readership costs over circulation income. Irs 1040ez 2013 form and instructions Equal to or less than direct advertising costs Zero. Irs 1040ez 2013 form and instructions   • Circulation income and readership costs are not taken into account. Irs 1040ez 2013 form and instructions   • Any excess advertising costs reduce (but not below zero) UBTI from any other unrelated business activity. Irs 1040ez 2013 form and instructions   The terms used in the chart are explained in the following discussions. Irs 1040ez 2013 form and instructions Periodical Income Gross advertising income. Irs 1040ez 2013 form and instructions   This is all the income from the unrelated advertising activities of an exempt organization periodical. Irs 1040ez 2013 form and instructions Circulation income. Irs 1040ez 2013 form and instructions   This is all the income from the production, distribution, or circulation of an exempt organization's periodical (other than gross advertising income). Irs 1040ez 2013 form and instructions It includes all amounts from the sale or distribution of the readership content of the periodical, such as income from subscriptions. Irs 1040ez 2013 form and instructions It also includes allocable membership receipts if the right to receive the periodical is associated with a membership or similar status in the organization. Irs 1040ez 2013 form and instructions Allocable membership receipts. Irs 1040ez 2013 form and instructions   This is the part of membership receipts (dues, fees, or other charges associated with membership) equal to the amount that would have been charged and paid for the periodical if: The periodical was published by a taxable organization, The periodical was published for profit, and The member was an unrelated party dealing with the taxable organization at arm's length. Irs 1040ez 2013 form and instructions   The amount used to allocate membership receipts is the amount shown in the following chart. Irs 1040ez 2013 form and instructions   For this purpose, the total periodical costs are the sum of the direct advertising costs and the readership costs, explained under Periodical Costs, later. Irs 1040ez 2013 form and instructions The cost of other exempt activities means the total expenses incurred by the organization in connection with its other exempt activities, not offset by any income earned by the organization from those activities. Irs 1040ez 2013 form and instructions IF . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions THEN the amount used to allocate membership receipts is . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions . Irs 1040ez 2013 form and instructions 20% or more of the total circulation consists of sales to nonmembers The subscription price charged nonmembers. Irs 1040ez 2013 form and instructions The above condition does not apply, and 20% or more of the members pay reduced dues because they do not receive the periodical The reduction in dues for a member not receiving the periodical. Irs 1040ez 2013 form and instructions Neither of the above conditions applies The membership receipts multiplied by this fraction:   Total periodical costs Total periodical costs Plus Cost of other exempt activities Example 1. Irs 1040ez 2013 form and instructions U is an exempt scientific organization with 10,000 members who pay annual dues of $15. Irs 1040ez 2013 form and instructions One of U's activities is publishing a monthly periodical distributed to all of its members. Irs 1040ez 2013 form and instructions U also distributes 5,000 additional copies of its periodical to nonmembers, who subscribe for $10 a year. Irs 1040ez 2013 form and instructions Since the nonmember circulation of U's periodical represents one-third (more than 20%) of its total circulation, the subscription price charged to nonmembers is used to determine the part of U's membership receipts allocable to the periodical. Irs 1040ez 2013 form and instructions Thus, U's allocable membership receipts are $100,000 ($10 times 10,000 members), and U's total circulation income for the periodical is $150,000 ($100,000 from members plus $50,000 from sales to nonmembers). Irs 1040ez 2013 form and instructions Example 2. Irs 1040ez 2013 form and instructions Assume the same facts except that U sells only 500 copies of its periodical to nonmembers, at a price of $10 a year. Irs 1040ez 2013 form and instructions Assume also that U's members may elect not to receive the periodical, in which case their dues are reduced from $15 a year to $6 a year, and that only 3,000 members elect to receive the periodical and pay the full dues of $15 a year. Irs 1040ez 2013 form and instructions U's stated subscription price of $9 to members consistently results in an excess of total income (including gross advertising income) attributable to the periodical over total costs of the periodical. Irs 1040ez 2013 form and instructions Since the 500 copies of the periodical distributed to nonmembers represent only 14% of the 3,500 copies distributed, the $10 subscription price charged to nonmembers is not used to determine the part of membership receipts allocable to the periodical. Irs 1040ez 2013 form and instructions Instead, since 70% of the members elect not to receive the periodical and pay $9 less per year in dues, the $9 price is used to determine the subscription price charged to members. Irs 1040ez 2013 form and instructions Thus, the allocable membership receipts will be $9 a member, or $27,000 ($9 times 3,000 copies). Irs 1040ez 2013 form and instructions U's total circulation income is $32,000 ($27,000 plus the $5,000 from nonmember subscriptions). Irs 1040ez 2013 form and instructions Periodical Costs Direct advertising costs. Irs 1040ez 2013 form and instructions   These are expenses, depreciation, and similar items of deduction directly connected with selling and publishing advertising in the periodical. Irs 1040ez 2013 form and instructions   Examples of allowable deductions under this classification include agency commissions and other direct selling costs, such as transportation and travel expenses, office salaries, promotion and research expenses, and office overhead directly connected with the sale of advertising lineage in the periodical. Irs 1040ez 2013 form and instructions Also included are other deductions commonly classified as advertising costs under standard account classifications, such as artwork and copy preparation, telephone, telegraph, postage, and similar costs directly connected with advertising. Irs 1040ez 2013 form and instructions   In addition, direct advertising costs include the part of mechanical and distribution costs attributable to advertising lineage. Irs 1040ez 2013 form and instructions For this purpose, the general account classifications of items includable in mechanical and distribution costs ordinarily employed in business-paper and consumer-publication accounting provide a guide for the computation. Irs 1040ez 2013 form and instructions Accordingly, the mechanical and distribution costs include the part of the costs and other expenses of composition, press work, binding, mailing (including paper and wrappers used for mailing), and bulk postage attributable to the advertising lineage of the publication. Irs 1040ez 2013 form and instructions   In the absence of specific and detailed records, the part of mechanical and distribution costs attributable to the periodical's advertising lineage can be based on the ratio of advertising lineage to total lineage in the periodical, if this allocation is reasonable. Irs 1040ez 2013 form and instructions Readership costs. Irs 1040ez 2013 form and instructions   These are all expenses, depreciation, and similar items that are directly connected with the production and distribution of the readership content of the periodical. Irs 1040ez 2013 form and instructions Costs partly attributable to other activities. Irs 1040ez 2013 form and instructions   Deductions properly attributable to exempt activities other than publishing the periodical may not be allocated to the periodical. Irs 1040ez 2013 form and instructions When expenses are attributable both to the periodical and to the organization's other activities, an allocation must be made on a reasonable basis. Irs 1040ez 2013 form and instructions The method of allocation will vary with the nature of the item, but once adopted, should be used consistently. Irs 1040ez 2013 form and instructions Allocations based on dollar receipts from various exempt activities generally are not reasonable since receipts usually do not accurately reflect the costs associated with specific activities that an exempt organization conducts. Irs 1040ez 2013 form and instructions Consolidated Periodicals If an exempt organization publishes more than one periodical to produce income, it may treat all of them (but not less than all) as one in determining unrelated business taxable income from selling advertising. Irs 1040ez 2013 form and instructions It treats the gross income from all the periodicals, and the deductions directly connected with them, on a consolidated basis. Irs 1040ez 2013 form and instructions Consolidated treatment, once adopted, must be followed consistently and is binding. Irs 1040ez 2013 form and instructions This treatment can be changed only with the consent of the Internal Revenue Service. Irs 1040ez 2013 form and instructions An exempt organization's periodical is published to produce income if: The periodical generates gross advertising income to the organization equal to at least 25% of its readership costs, and Publishing the periodical is an activity engaged in for profit. Irs 1040ez 2013 form and instructions Whether the publication of a periodical is an activity engaged in for profit can be determined only by all the facts and circumstances in each case. Irs 1040ez 2013 form and instructions The facts and circumstances must show that the organization carries on the activity for economic profit, although there may not be a profit in a particular year. Irs 1040ez 2013 form and instructions For example, if an organization begins publishing a new periodical whose total costs exceed total income in the start-up years because of lack of advertising sales, that does not mean that the organization did not have as its objective an economic profit. Irs 1040ez 2013 form and instructions The organization may establish that it had this objective by showing it can reasonably expect advertising sales to increase, so that total income will exceed costs within a reasonable time. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions Y, an exempt trade association, publishes three periodicals that it distributes to its members: a weekly newsletter, a monthly magazine, and a quarterly journal. Irs 1040ez 2013 form and instructions Both the monthly magazine and the quarterly journal contain advertising that accounts for gross advertising income equal to more than 25% of their respective readership costs. Irs 1040ez 2013 form and instructions Similarly, the total income attributable to each periodical has exceeded the total deductions attributable to each periodical for substantially all the years they have been published. Irs 1040ez 2013 form and instructions The newsletter carries no advertising and its annual subscription price is not intended to cover the cost of publication. Irs 1040ez 2013 form and instructions The newsletter is a service that Y distributes to all of its members in an effort to keep them informed of changes occurring in the business world. Irs 1040ez 2013 form and instructions It is not engaged in for profit. Irs 1040ez 2013 form and instructions Under these circumstances, Y may consolidate the income and deductions from the monthly and quarterly journals in computing its unrelated business taxable income. Irs 1040ez 2013 form and instructions It may not consolidate the income and deductions from the newsletter with the income and deductions of its other periodicals, since the newsletter is not published for the production of income. Irs 1040ez 2013 form and instructions Modifications Net operating loss deduction. Irs 1040ez 2013 form and instructions   The net operating loss (NOL) deduction (as provided in section 172) is allowed in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions However, the NOL for any tax year, the carrybacks and carryovers of NOLs, and the NOL deduction are determined without taking into account any amount of income or deduction that has been specifically excluded in computing unrelated business taxable income. Irs 1040ez 2013 form and instructions For example, a loss from an unrelated trade or business is not diminished because dividend income was received. Irs 1040ez 2013 form and instructions   If this were not done, organizations would, in effect, be taxed on their exempt income, since unrelated business losses then would be offset by dividends, interest, and other excluded income. Irs 1040ez 2013 form and instructions This would reduce the loss that could be applied against unrelated business income of prior or future tax years. Irs 1040ez 2013 form and instructions Therefore, to preserve the immunity of exempt income, all NOL computations are limited to those items of income and deductions that affect the unrelated business taxable income. Irs 1040ez 2013 form and instructions   In line with this concept, an NOL carryback or carryover is allowed only from a tax year for which the organization is subject to tax on unrelated business income. Irs 1040ez 2013 form and instructions   For example, if an organization just became subject to the tax last year, its NOL for that year is not a carryback to a prior year when it had no unrelated business taxable income, nor is its NOL carryover to succeeding years reduced by the related income of those prior years. Irs 1040ez 2013 form and instructions   However, in determining the span of years for which an NOL may be carried back or forward, the tax years for which the organization is not subject to the tax on unrelated business income are counted. Irs 1040ez 2013 form and instructions For example, if an organization was subject to the tax for 2009 and had an NOL for that year, the last tax year to which any part of that loss may be carried over is 2029, regardless of whether the organization was subject to the unrelated business income tax in any of the intervening years. Irs 1040ez 2013 form and instructions   For more details on the NOL deduction, including property eligible for an extended carryback period, see sections 172 and 1400N, Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, and Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Irs 1040ez 2013 form and instructions Charitable contributions deduction. Irs 1040ez 2013 form and instructions   An exempt organization is allowed to deduct its charitable contributions in computing its unrelated business taxable income whether or not the contributions are directly connected with the unrelated business. Irs 1040ez 2013 form and instructions   To be deductible, the contribution must be paid to another qualified organization. Irs 1040ez 2013 form and instructions For example, an exempt university that operates an unrelated business may deduct a contribution made to another university for educational work, but may not claim a deduction for contributions of amounts spent for carrying out its own educational program. Irs 1040ez 2013 form and instructions   For purposes of the deduction, a distribution by a trust made under the trust instrument to a beneficiary, which itself is a qualified organization, is treated the same as a contribution. Irs 1040ez 2013 form and instructions Deduction limits. Irs 1040ez 2013 form and instructions   An exempt organization that is subject to the unrelated business income tax at corporate rates is allowed a deduction for charitable contributions up to 10% of its unrelated business taxable income computed without regard to the deduction for contributions. Irs 1040ez 2013 form and instructions See the Instructions for Form 990-T for more information. Irs 1040ez 2013 form and instructions    An exempt trust that is subject to the unrelated business income tax at trust rates generally is allowed a deduction for charitable contributions in the same amounts as allowed for individuals. Irs 1040ez 2013 form and instructions However, the limit on the deduction is determined in relation to the trust's unrelated business taxable income computed without regard to the deduction, rather than in relation to adjusted gross income. Irs 1040ez 2013 form and instructions   Contributions in excess of the limits just described may be carried over to the next 5 tax years. Irs 1040ez 2013 form and instructions A contribution carryover is not allowed, however, to the extent that it increases an NOL carryover. Irs 1040ez 2013 form and instructions Suspension of deduction limits for farmers and ranchers. Irs 1040ez 2013 form and instructions   The limitations discussed above are temporarily suspended for certain qualified conservation contributions of property used in agriculture or livestock production. Irs 1040ez 2013 form and instructions See the Instructions for Form 990-T for details. Irs 1040ez 2013 form and instructions Specific deduction. Irs 1040ez 2013 form and instructions   In computing unrelated business taxable income, a specific deduction of $1,000 is allowed. Irs 1040ez 2013 form and instructions However, the specific deduction is not allowed in computing an NOL or the NOL deduction. Irs 1040ez 2013 form and instructions   Generally, the deduction is limited to $1,000 regardless of the number of unrelated businesses in which the organization is engaged. Irs 1040ez 2013 form and instructions Exception. Irs 1040ez 2013 form and instructions   An exception is provided in the case of a diocese, province of a religious order, or a convention or association of churches that may claim a specific deduction for each parish, individual church, district, or other local unit. Irs 1040ez 2013 form and instructions In these cases, the specific deduction for each local unit is limited to the lower of: $1,000, or Gross income derived from an unrelated trade or business regularly conducted by the local unit. Irs 1040ez 2013 form and instructions   This exception applies only to parishes, districts, or other local units that are not separate legal entities, but are components of a larger entity (diocese, province, convention, or association) filing Form 990-T. Irs 1040ez 2013 form and instructions The parent organization must file a return reporting the unrelated business gross income and related deductions of all units that are not separate legal entities. Irs 1040ez 2013 form and instructions The local units cannot file separate returns. Irs 1040ez 2013 form and instructions However, each local unit that is separately incorporated must file its own return and cannot include, or be included with, any other entity. Irs 1040ez 2013 form and instructions See Title-holding corporations in chapter 1 for a discussion of the only situation in which more than one legal entity may be included on the same Form 990-T. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions X is an association of churches and is divided into local units A, B, C, and D. Irs 1040ez 2013 form and instructions Last year, A, B, C, and D derived gross income of, respectively, $1,200, $800, $1,500, and $700 from unrelated businesses that they regularly conduct. Irs 1040ez 2013 form and instructions X may claim a specific deduction of $1,000 with respect to A, $800 with respect to B, $1,000 with respect to C, and $700 with respect to D. Irs 1040ez 2013 form and instructions Partnership Income or Loss An organization may have unrelated business income or loss as a member of a partnership, rather than through direct business dealings with the public. Irs 1040ez 2013 form and instructions If so, it must treat its share of the partnership income or loss as if it had conducted the business activity in its own capacity as a corporation or trust. Irs 1040ez 2013 form and instructions No distinction is made between limited and general partners. Irs 1040ez 2013 form and instructions The organization is required to notify the partnership of its tax-exempt status. Irs 1040ez 2013 form and instructions Thus, if an organization is a member of a partnership regularly engaged in a trade or business that is an unrelated trade or business with respect to the organization, the organization must include in its unrelated business taxable income its share of the partnership's gross income from the unrelated trade or business (whether or not distributed), and the deductions attributable to it. Irs 1040ez 2013 form and instructions The partnership income and deductions to be included in the organization's unrelated business taxable income are figured the same way as any income and deductions from an unrelated trade or business conducted directly by the organization. Irs 1040ez 2013 form and instructions The partnership is required to provide the organization this information on Schedule K-1. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions An exempt educational organization is a partner in a partnership that operates a factory. Irs 1040ez 2013 form and instructions The partnership also holds stock in a corporation. Irs 1040ez 2013 form and instructions The exempt organization must include its share of the gross income from operating the factory in its unrelated business taxable income but may exclude its share of any dividends the partnership received from the corporation. Irs 1040ez 2013 form and instructions Different tax years. Irs 1040ez 2013 form and instructions   If the exempt organization and the partnership of which it is a member have different tax years, the partnership items that enter into the computation of the organization's unrelated business taxable income must be based on the income and deductions of the partnership for the partnership's tax year that ends within or with the organization's tax year. Irs 1040ez 2013 form and instructions S Corporation Income or Loss An organization that owns S corporation stock must take into account its share of the S corporation's income, deductions, or losses in figuring unrelated business taxable income, regardless of the actual source or nature of the income, deductions, and losses. Irs 1040ez 2013 form and instructions For example, the organization's share of the S corporation's interest and dividend income will be taxable, even though interest and dividends are normally excluded from unrelated business taxable income. Irs 1040ez 2013 form and instructions The organization must also take into account its gain or loss on the sale or other disposition of the S corporation stock in figuring unrelated business taxable income. Irs 1040ez 2013 form and instructions Special Rules for Foreign Organizations The unrelated business taxable income of a foreign organization exempt from tax under section 501(a) consists of the organization's: Unrelated business taxable income derived from sources within the United States but not effectively connected with the conduct of a trade or business within the United States, and Unrelated business taxable income effectively connected with the conduct of a trade or business within the United States, whether or not this income is derived from sources within the United States. Irs 1040ez 2013 form and instructions To determine whether income realized by a foreign organization is derived from sources within the United States or is effectively connected with the conduct of a trade or business within the United States, see sections 861 through 865 and the related regulations. Irs 1040ez 2013 form and instructions Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs The following discussion applies to: Social clubs described in section 501(c)(7), Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9), Supplemental unemployment compensation benefit trusts (SUBs) described in section 501(c)(17), and Group legal services organizations (GLSOs) described in section 501(c)(20). Irs 1040ez 2013 form and instructions These organizations must figure unrelated business taxable income under special rules. Irs 1040ez 2013 form and instructions Unlike other exempt organizations, they cannot exclude their investment income (dividends, interest, rents, etc. Irs 1040ez 2013 form and instructions ). Irs 1040ez 2013 form and instructions (See Exclusions under Income, earlier. Irs 1040ez 2013 form and instructions ) Therefore, they are generally subject to unrelated business income tax on this income. Irs 1040ez 2013 form and instructions The unrelated business taxable income of these organizations includes all gross income, less deductions directly connected with the production of that income, except that gross income for this purpose does not include exempt function income. Irs 1040ez 2013 form and instructions The dividends received by a corporation are not allowed in computing unrelated business taxable income because it is not an expense incurred in the production of income. Irs 1040ez 2013 form and instructions Losses from nonexempt activities. Irs 1040ez 2013 form and instructions   Losses from nonexempt activities of these organizations cannot be used to offset investment income unless the activities were undertaken with the intent to make a profit. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions A private golf and country club that is a qualified tax-exempt social club has nonexempt function income from interest and from the sale of food and beverages to nonmembers. Irs 1040ez 2013 form and instructions The club sells food and beverages as a service to members and their guests rather than for the purpose of making a profit. Irs 1040ez 2013 form and instructions Therefore, any loss resulting from sales to nonmembers cannot be used to offset the club's interest income. Irs 1040ez 2013 form and instructions Modifications. Irs 1040ez 2013 form and instructions   The unrelated business taxable income is modified by any NOL or charitable contributions deduction and by the specific deduction (described earlier under Deductions). Irs 1040ez 2013 form and instructions Exempt function income. Irs 1040ez 2013 form and instructions   This is gross income from dues, fees, charges or similar items paid by members for goods, facilities, or services to the members or their dependents or guests, to further the organization's exempt purposes. Irs 1040ez 2013 form and instructions Exempt function income also includes income set aside for qualified purposes. Irs 1040ez 2013 form and instructions Income that is set aside. Irs 1040ez 2013 form and instructions   This is income set aside to be used for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Irs 1040ez 2013 form and instructions In addition, for a VEBA, SUB, or GLSO, it is income set aside to provide for the payment of life, sick, accident, or other benefits. Irs 1040ez 2013 form and instructions   However, any amounts set aside by a VEBA or SUB that exceed the organization's qualified asset account limit (determined under section 419A) are unrelated business income. Irs 1040ez 2013 form and instructions Special rules apply to the treatment of existing reserves for post-retirement medical or life insurance benefits. Irs 1040ez 2013 form and instructions These rules are explained in section 512(a)(3)(E)(ii). Irs 1040ez 2013 form and instructions   Income derived from an unrelated trade or business may not be set aside and therefore cannot be exempt function income. Irs 1040ez 2013 form and instructions In addition, any income set aside and later spent for other purposes must be included in unrelated business taxable income. Irs 1040ez 2013 form and instructions   Set-aside income is generally excluded from gross income only if it is set aside in the tax year in which it is otherwise includible in gross income. Irs 1040ez 2013 form and instructions However, income set aside on or before the date for filing Form 990-T, including extensions of time, may, at the election of the organization, be treated as having been set aside in the tax year for which the return was filed. Irs 1040ez 2013 form and instructions The income set aside must have been includible in gross income for that earlier year. Irs 1040ez 2013 form and instructions Nonrecognition of gain. Irs 1040ez 2013 form and instructions   If the organization sells property used directly in performing an exempt function and purchases other property used directly in performing an exempt function, any gain on the sale is recognized only to the extent that the sales price of the old property exceeds the cost of the new property. Irs 1040ez 2013 form and instructions The purchase of the new property must be made within 1 year before the date of sale of the old property or within 3 years after the date of sale. Irs 1040ez 2013 form and instructions   This rule also applies to gain from an involuntary conversion of the property resulting from its destruction in whole or in part, theft, seizure, requisition, or condemnation. Irs 1040ez 2013 form and instructions Special Rules for Veterans' Organizations Unrelated business taxable income of a veterans' organization that is exempt under section 501(c)(19) does not include the net income from insurance business that is properly set aside. Irs 1040ez 2013 form and instructions The organization may set aside income from payments received for life, sick, accident, or health insurance for the organization's members or their dependents for the payment of insurance benefits or reasonable costs of insurance administration, or for use exclusively for religious, charitable, scientific, literary, or educational purposes, or the prevention of cruelty to children or animals. Irs 1040ez 2013 form and instructions For details, see section 512(a)(4) and the regulations under that section. Irs 1040ez 2013 form and instructions Income From Controlled Organizations The exclusions for interest, annuities, royalties, and rents, explained earlier in this chapter under Income, may not apply to a payment of these items received by a controlling organization from its controlled organization. Irs 1040ez 2013 form and instructions The payment is included in the controlling organization's unrelated business taxable income to the extent it reduced the net unrelated income (or increased the net unrelated loss) of the controlled organization. Irs 1040ez 2013 form and instructions All deductions of the controlling organization directly connected with the amount included in its unrelated business taxable income are allowed. Irs 1040ez 2013 form and instructions Excess qualifying specified payments. Irs 1040ez 2013 form and instructions   Excess qualifying specified payments received or accrued from a controlled entity are included in a controlling exempt organization's unrelated business taxable income only on the amount that exceeds that which would have been paid or accrued if the payments had been determined under section 482. Irs 1040ez 2013 form and instructions Qualifying specified payments means any payments of interest, annuities, royalties, or rents received or accrued from the controlled organization pursuant to a binding written contract in effect on August 17, 2006, or to a contract which is a renewal, under substantially similar terms of a binding written contract in effect on August 17, 2006, and the payments are received or accrued before January 1, 2012. Irs 1040ez 2013 form and instructions   If a controlled participant is not required to file a U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions income tax return, the participant must ensure that the copy or copies of the Regulations section 1. Irs 1040ez 2013 form and instructions 482-7 Cost Sharing Arrangement Statement and any updates are attached to Schedule M of any Form 5471, Information Return of U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions Persons With Respect To Certain Foreign Corporations, any Form 5472, Information Return of a 25% Foreign-Owned U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions Corporation or a Foreign Corporation Engaged in a U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions Trade or Business, or any Form 8865, Return of U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions Persons With Respect to Certain Foreign Partnerships, filed for that participant. Irs 1040ez 2013 form and instructions Addition to tax for valuation misstatements. Irs 1040ez 2013 form and instructions   Under section 512(b)(13)(E)(ii), the tax imposed on a controlling organization will be increased by 20 percent of the excess qualifying specified payments that are determined with or without any amendments or supplements, whichever is larger. Irs 1040ez 2013 form and instructions See section 512(b)(13)(E)(ii) for more information. Irs 1040ez 2013 form and instructions Net unrelated income. Irs 1040ez 2013 form and instructions   This is: For an exempt organization, its unrelated business taxable income, or For a nonexempt organization, the part of its taxable income that would be unrelated business taxable income if it were exempt and had the same exempt purposes as the controlling organization. Irs 1040ez 2013 form and instructions Net unrelated loss. Irs 1040ez 2013 form and instructions   This is: For an exempt organization, its NOL, or For a nonexempt organization, the part of its NOL that would be its NOL if it were exempt and had the same exempt purposes as the controlling organization. Irs 1040ez 2013 form and instructions Control. Irs 1040ez 2013 form and instructions   An organization is controlled if: For a corporation, the controlling organization owns (by vote or value) more than 50% of the stock, For a partnership, the controlling organization owns more than 50% of the profits or capital interests, or For any other organization, the controlling organization owns more than 50% of the beneficial interest. Irs 1040ez 2013 form and instructions For this purpose, constructive ownership of stock (determined under section 318) or other interests is taken into account. Irs 1040ez 2013 form and instructions   As a result, an exempt parent organization is treated as controlling any subsidiary in which it holds more than 50% of the voting power or value, whether directly (as in the case of a first-tier subsidiary) or indirectly (as in the case of a second-tier subsidiary). Irs 1040ez 2013 form and instructions Income from property financed with qualified 501(c)(3) bonds. Irs 1040ez 2013 form and instructions If any part of a 501(c)(3) organization's property financed with qualified 501(c)(3) bonds is used in a trade or business of any person other than a section 501(c)(3) organization or a governmental unit, and such use is not consistent with the requirements for qualified 501(c)(3) bonds under section 145, the section 501(c)(3) organization is considered to have received unrelated business income in the amount of the greater of the actual rental income or the fair rental value of the property for the period it is used. Irs 1040ez 2013 form and instructions No deduction is allowed for interest on the private activity bond. Irs 1040ez 2013 form and instructions See sections 150(b)(3) and (c) for more information. Irs 1040ez 2013 form and instructions Disposition of property received from taxable subsidiary and used in unrelated business. Irs 1040ez 2013 form and instructions A taxable 80%-owned subsidiary corporation of one or more tax-exempt entities is generally subject to tax on a distribution in liquidation of its assets to its exempt parent (or parents). Irs 1040ez 2013 form and instructions The assets are treated as if sold at fair market value. Irs 1040ez 2013 form and instructions Tax-exempt entities include organizations described in sections 501(a), 529, and 115, charitable remainder trusts, U. Irs 1040ez 2013 form and instructions S. Irs 1040ez 2013 form and instructions and foreign governments, Indian tribal governments, international organizations, and similar non-taxable organizations. Irs 1040ez 2013 form and instructions A taxable corporation that transfers substantially all of its assets to a tax-exempt entity in a transaction that otherwise qualifies for nonrecognition treatment must recognize gain on the transaction as if it sold the assets at fair market value. Irs 1040ez 2013 form and instructions However, such a transfer is not taxable if it qualifies as a like-kind exchange under section 1031 or an involuntary conversion under section 1033. Irs 1040ez 2013 form and instructions In such a case the built-in appreciation is preserved in the replacement property received in the transaction. Irs 1040ez 2013 form and instructions A corporation that changes status from taxable to tax-exempt is treated generally as if it transferred all of its assets to a tax-exempt entity immediately before the change in status (thus subjecting it to the tax on a deemed sale for fair market value). Irs 1040ez 2013 form and instructions This rule does not apply where the taxable corporation becomes exempt within 3 years of formation, or had previously been exempt and within several years (generally a period of 3 years) regains exemption, unless the principal purpose of the transactions is to avoid the tax on the change in status. Irs 1040ez 2013 form and instructions In the transactions described above, the taxable event is deferred for property that the tax-exempt entity immediately uses in an unrelated business. Irs 1040ez 2013 form and instructions If the parent later disposes of the property, then any gain (not in excess of the amount not recognized) is included in the parent's unrelated business taxable income. Irs 1040ez 2013 form and instructions If there is partial use of the assets in unrelated business, then there is partial recognition of gain or loss. Irs 1040ez 2013 form and instructions Property is treated as disposed if the tax-exempt entity no longer uses it in an unrelated business. Irs 1040ez 2013 form and instructions Losses on the transfer of assets to a tax-exempt entity are disallowed if part of a plan with a principal purpose of recognizing losses. Irs 1040ez 2013 form and instructions Income From Debt-Financed Property Investment income that would otherwise be excluded from an exempt organization's unrelated business taxable income (see Exclusions under Income earlier) must be included to the extent it is derived from debt-financed property. Irs 1040ez 2013 form and instructions The amount of income included is proportionate to the debt on the property. Irs 1040ez 2013 form and instructions Debt-Financed Property In general, the term “debt-financed property” means any property held to produce income (including gain from its disposition) for which there is an acquisition indebtedness at any time during the tax year (or during the 12-month period before the date of the property's disposal, if it was disposed of during the tax year). Irs 1040ez 2013 form and instructions It includes rental real estate, tangible personal property, and corporate stock. Irs 1040ez 2013 form and instructions Acquisition Indebtedness For any debt-financed property, acquisition indebtedness is the unpaid amount of debt incurred by an organization: When acquiring or improving the property, Before acquiring or improving the property if the debt would not have been incurred except for the acquisition or improvement, and After acquiring or improving the property if: The debt would not have been incurred except for the acquisition or improvement, and Incurring the debt was reasonably foreseeable when the property was acquired or improved. Irs 1040ez 2013 form and instructions The facts and circumstances of each situation determine whether incurring a debt was reasonably foreseeable. Irs 1040ez 2013 form and instructions That an organization may not have foreseen the need to incur a debt before acquiring or improving the property does not necessarily mean that incurring the debt later was not reasonably foreseeable. Irs 1040ez 2013 form and instructions Example 1. Irs 1040ez 2013 form and instructions Y, an exempt scientific organization, mortgages its laboratory to replace working capital used in remodeling an office building that Y rents to an insurance company for nonexempt purposes. Irs 1040ez 2013 form and instructions The debt is acquisition indebtedness since the debt, though incurred after the improvement of the office building, would not have been incurred without the improvement, and the debt was reasonably foreseeable when, to make the improvement, Y reduced its working capital below the amount necessary to continue current operations. Irs 1040ez 2013 form and instructions Example 2. Irs 1040ez 2013 form and instructions X, an exempt organization, forms a partnership with A and B. Irs 1040ez 2013 form and instructions The partnership agreement provides that all three partners will share equally in the profits of the partnership, each will invest $3 million, and X will be a limited partner. Irs 1040ez 2013 form and instructions X invests $1 million of its own funds in the partnership and $2 million of borrowed funds. Irs 1040ez 2013 form and instructions The partnership buys as its sole asset an office building that it leases to the public for nonexempt purposes. Irs 1040ez 2013 form and instructions The office building costs the partnership $24 million, of which $15 million is borrowed from Y bank. Irs 1040ez 2013 form and instructions The loan is secured by a mortgage on the entire office building. Irs 1040ez 2013 form and instructions By agreement with Y bank, X is not personally liable for payment of the mortgage. Irs 1040ez 2013 form and instructions X has acquisition indebtedness of $7 million. Irs 1040ez 2013 form and instructions This amount is the $2 million debt X incurred in acquiring the partnership interest, plus the $5 million that is X's allocable part of the partnership's debt incurred to buy the office building (one-third of $15 million). Irs 1040ez 2013 form and instructions Example 3. Irs 1040ez 2013 form and instructions A labor union advanced funds, from existing resources and without any borrowing, to its tax-exempt subsidiary title-holding company. Irs 1040ez 2013 form and instructions The subsidiary used the funds to pay a debt owed to a third party that was previously incurred in acquiring two income-producing office buildings. Irs 1040ez 2013 form and instructions Neither the union nor the subsidiary has incurred any further debt in acquiring or improving the property. Irs 1040ez 2013 form and instructions The union has no outstanding debt on the property. Irs 1040ez 2013 form and instructions The subsidiary's debt to the union is represented by a demand note on which the subsidiary makes payments whenever it has the available cash. Irs 1040ez 2013 form and instructions The books of the union and the subsidiary list the outstanding debt as interorganizational indebtedness. Irs 1040ez 2013 form and instructions Although the subsidiary's books show a debt to the union, it is not the type subject to the debt-financed property rules. Irs 1040ez 2013 form and instructions In this situation, the very nature of the title-holding company and the parent-subsidiary relationship shows this debt to be merely a matter of accounting between the two organizations. Irs 1040ez 2013 form and instructions Accordingly, the debt is not acquisition indebtedness. Irs 1040ez 2013 form and instructions Change in use of property. Irs 1040ez 2013 form and instructions   If an organization converts property that is not debt-financed property to a use that results in its treatment as debt-financed property, the outstanding principal debt on the property is thereafter treated as acquisition indebtedness. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions Four years ago a university borrowed funds to acquire an apartment building as housing for married students. Irs 1040ez 2013 form and instructions Last year, the university rented the apartment building to the public for nonexempt purposes. Irs 1040ez 2013 form and instructions The outstanding principal debt becomes acquisition indebtedness as of the time the building was first rented to the public. Irs 1040ez 2013 form and instructions Continued debt. Irs 1040ez 2013 form and instructions   If an organization sells property and, without paying off debt that would be acquisition indebtedness if the property were debt-financed property, buys property that is otherwise debt-financed property, the unpaid debt is acquisition indebtedness for the new property. Irs 1040ez 2013 form and instructions This is true even if the original property was not debt-financed property. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions To house its administration offices, an exempt organization bought a building using $600,000 of its own funds and $400,000 of borrowed funds secured by a pledge of its securities. Irs 1040ez 2013 form and instructions The office building was not debt-financed property. Irs 1040ez 2013 form and instructions The organization later sold the building for $1 million without repaying the $400,000 loan. Irs 1040ez 2013 form and instructions It used the sale proceeds to buy an apartment building it rents to the general public. Irs 1040ez 2013 form and instructions The unpaid debt of $400,000 is acquisition indebtedness with respect to the apartment building. Irs 1040ez 2013 form and instructions Property acquired subject to mortgage or lien. Irs 1040ez 2013 form and instructions   If property (other than certain gifts, bequests, and devises) is acquired subject to a mortgage, the outstanding principal debt secured by that mortgage is treated as acquisition indebtedness even if the organization did not assume or agree to pay the debt. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions An exempt organization paid $50,000 for real property valued at $150,000 and subject to a $100,000 mortgage. Irs 1040ez 2013 form and instructions The $100,000 of outstanding principal debt is acquisition indebtedness, as though the organization had borrowed $100,000 to buy the property. Irs 1040ez 2013 form and instructions Liens similar to a mortgage. Irs 1040ez 2013 form and instructions   In determining acquisition indebtedness, a lien similar to a mortgage is treated as a mortgage. Irs 1040ez 2013 form and instructions A lien is similar to a mortgage if title to property is encumbered by the lien for a creditor's benefit. Irs 1040ez 2013 form and instructions However, when state law provides that a lien for taxes or assessments attaches to property before the taxes or assessments become due and payable, the lien is not treated as a mortgage until after the taxes or assessments have become due and payable and the organization has had an opportunity to pay the lien in accordance with state law. Irs 1040ez 2013 form and instructions Liens similar to mortgages include (but are not limited to): Deeds of trust, Conditional sales contracts, Chattel mortgages, Security interests under the Uniform Commercial Code, Pledges, Agreements to hold title in escrow, and Liens for taxes or assessments (other than those discussed earlier in this paragraph). Irs 1040ez 2013 form and instructions Exception for property acquired by gift, bequest, or devise. Irs 1040ez 2013 form and instructions   If property subject to a mortgage is acquired by gift, bequest, or devise, the outstanding principal debt secured by the mortgage is not treated as acquisition indebtedness during the 10-year period following the date the organization receives the property. Irs 1040ez 2013 form and instructions However, this applies to a gift of property only if:    The mortgage was placed on the property more than 5 years before the date the organization received it, and The donor held the property for more than 5 years before the date the organization received it. Irs 1040ez 2013 form and instructions   This exception does not apply if an organization assumes and agrees to pay all or part of the debt secured by the mortgage or makes any payment for the equity in the property owned by the donor or decedent (other than a payment under an annuity obligation excluded from the definition of acquisition indebtedness, discussed under Debt That Is Not Acquisition Indebtedness, later). Irs 1040ez 2013 form and instructions   Whether an organization has assumed and agreed to pay all or part of a debt in order to acquire the property is determined by the facts and circumstances of each situation. Irs 1040ez 2013 form and instructions Modifying existing debt. Irs 1040ez 2013 form and instructions   Extending, renewing, or refinancing an existing debt is considered a continuation of that debt to the extent its outstanding principal does not increase. Irs 1040ez 2013 form and instructions When the principal of the modified debt is more than the outstanding principal of the old debt, the excess is treated as a separate debt. Irs 1040ez 2013 form and instructions Extension or renewal. Irs 1040ez 2013 form and instructions   In general, any modification or substitution of the terms of a debt by an organization is considered an extension or renewal of the original debt, rather than the start of a new one, to the extent that the outstanding principal of the debt does not increase. Irs 1040ez 2013 form and instructions   The following are examples of acts resulting in the extension or renewal of a debt: Substituting liens to secure the debt, Substituting obligees whether or not with the organization's consent, Renewing, extending, or accelerating the payment terms of the debt, and Adding, deleting, or substituting sureties or other primary or secondary obligors. Irs 1040ez 2013 form and instructions Debt increase. Irs 1040ez 2013 form and instructions   If the outstanding principal of a modified debt is more than that of the unmodified debt, and only part of the refinanced debt is acquisition indebtedness, the payments on the refinanced debt must be allocated between the old debt and the excess. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions An organization has an outstanding principal debt of $500,000 that is treated as acquisition indebtedness. Irs 1040ez 2013 form and instructions The organization borrows another $100,000, which is not acquisition indebtedness, from the same lender, resulting in a $600,000 note for the total obligation. Irs 1040ez 2013 form and instructions A payment of $60,000 on the total obligation would reduce the acquisition indebtedness by $50,000 ($60,000 x $500,000/$600,000) and the excess debt by $10,000. Irs 1040ez 2013 form and instructions Debt That Is Not Acquisition Indebtedness Certain debt and obligations are not acquisition indebtedness. Irs 1040ez 2013 form and instructions These include the following. Irs 1040ez 2013 form and instructions Debts incurred in performing an exempt purpose. Irs 1040ez 2013 form and instructions Annuity obligations. Irs 1040ez 2013 form and instructions Securities loans. Irs 1040ez 2013 form and instructions Real property debts of qualified organizations. Irs 1040ez 2013 form and instructions Certain Federal financing. Irs 1040ez 2013 form and instructions Debt incurred in performing exempt purpose. Irs 1040ez 2013 form and instructions   A debt incurred in performing an exempt purpose is not acquisition indebtedness. Irs 1040ez 2013 form and instructions For example, acquisition indebtedness does not include the debt an exempt credit union incurs in accepting deposits from its members or the debt an exempt organization incurs in accepting payments from its members to provide them with insurance, retirement, or other benefits. Irs 1040ez 2013 form and instructions Annuity obligation. Irs 1040ez 2013 form and instructions   The organization's obligation to pay an annuity is not acquisition indebtedness if the annuity meets all the following requirements. Irs 1040ez 2013 form and instructions It must be the sole consideration (other than a mortgage on property acquired by gift, bequest, or devise that meets the exception discussed under Property acquired subject to mortgage or lien, earlier in this chapter) issued in exchange for the property received. Irs 1040ez 2013 form and instructions Its present value, at the time of exchange, must be less than 90% of the value of the prior owner's equity in the property received. Irs 1040ez 2013 form and instructions It must be payable over the lives of either one or two individuals living when issued. Irs 1040ez 2013 form and instructions It must be payable under a contract that: Does not guarantee a minimum nor specify a maximum number of payments, and Does not provide for any adjustment of the amount of the annuity payments based on the income received from the transferred property or any other property. Irs 1040ez 2013 form and instructions Example. Irs 1040ez 2013 form and instructions X, an exempt organization, receives property valued at $100,000 from donor A, a male age 60. Irs 1040ez 2013 form and instructions In return X promises to pay A $6,000 a year for the rest of A's life, with neither a minimum nor maximum number of payments specified. Irs 1040ez 2013 form and instructions The amounts paid under the annuity are not dependent on the income derived from the property transferred to X. Irs 1040ez 2013 form and instructions The present value of this annuity is $81,156, determined from IRS valuation tables. Irs 1040ez 2013 form and instructions Since the value of the annuity is less than 90 percent of A's $100,000 equity in the property transferred and the annuity meets all the other requirements just discussed, the obligation to make annuity payments is not acquisition indebtedness. Irs 1040ez 2013 form and instructions Securities loans. Irs 1040ez 2013 form and instructions   Acquisition indebtedness does not include an obligation of the exempt organization to return collateral security provided by the borrower of the exempt organization's securities under a securities loan agreement (discussed under Exclusions earlier in this chapter). Irs 1040ez 2013 form and instructions This transaction is not treated as the borrowing by the exempt organization of the collateral furnished by the borrower (usually a broker) of the securities. Irs 1040ez 2013 form and instructions   However, if the exempt organization incurred debt to buy the loaned securities, any income from the securities (including income from