Statutory change revoked earlier vehicle excise tax advice for later years

Plain-English summary

A taxpayer argued that a 2004 technical advice memorandum exempting certain vehicle sales from section 4051 excise tax continued to bind the IRS for sales in 2017 through 2019. Chief Counsel advised that the memorandum covered only 2001 and 2002 and was operatively revoked for later periods when Congress added section 7701(a)(48), which redefined the exempt vehicle sales. The result did not change merely because the IRS issued the memorandum eleven days after the new statute's effective date, since the memorandum applied the law governing the earlier periods. The advice also distinguished NetJets because that taxpayer repeatedly obtained confirmation from the IRS and no legal change supported revocation there. Here, the taxpayer sought no clarification and the statutory change provided the basis for revocation, so the earlier memorandum did not govern the later excise tax periods.

Ruling snapshot

• Question: Does a 2004 technical advice memorandum bind the IRS on section 4051 vehicle excise tax treatment for 2017 through 2019?
• Outcome: Advice given, the memorandum was revoked by the statutory change and does not apply
• Key authorities: IRC §§ 4051(a), 7701(a)(48); Rev. Proc. 2004-2 § 15.04; Rev. Proc. 2023-2 § 13.03

Full text (IRS public release)

ID: CCA_2024070114051348 [Third Party Communication:

UILC: 9999.00-00 Date of Communication: Month DD, YYYY]

Number: 202444008
Release Date: 11/1/2024
From: --------------------
Sent: Friday, January 27, 2023 12:02:41 PM
To: --------------------------------
Cc:
Bcc:
Subject: POSTF-119732-22 - RESPONSE TO TAM INQUIRY

Hi -------,

You asked whether the Technical Advice Memorandum 200504034 (“TAM”) issued to -------------
----------------------------- on November 1, 2004, binds the Service to allowing exemptions from the
excise tax imposed under I.R.C. § 4051(a) for the sales of its so-called -----------------within tax
periods in 2017, 2018, and 2019. The TAM addressed whether -----’s sales of its ----------------
were subject to excise tax under § 4051(a) for periods in 2001 and 2002, and no other periods. The
Service is not bound by the TAM because it was operatively revoked by the enactment of I.R.C. §
7701(a)(48), which statutorily redefined which vehicle sales were exempt from § 4051(a). Section
7701(a)(48) was added to the Code by the American Jobs Creation Act of 2004 (Pub. L. 108-357)
(the “Act”) on October 22, 2004.

------maintains that the manner of reporting and paying its excise taxes constitutes a continuing
action, and thus continued to be covered by the TAM for the tax periods after the ones for which
the TAM was issued. Under the pertinent revenue procedure, a TAM applies to a ‘continuing
action’ until it is specifically withdrawn, modified, or revoked (including by the enactment of
legislation). Rev. Proc. 2004-2 § 15.04. ------asserts that its TAM was not operatively revoked by
the Act becoming law because the Service issued the TAM on November 1, 2004, eleven days
after the Act’s effective date. Consequently, ------believes it correctly relied on the TAM for
purposes of not paying excise taxes on the sale of its -----------------under § 4051(a) in periods
following October 2004.

As we understand it, the parties do not dispute that the reporting and paying of excise taxes, as
prescribed by the TAM, constitute a continuing action for purpose of the revenue procedures.
Nevertheless, as noted above, Revenue Procedure 2004-2 clearly states that, with respect to a
continuing action, a TAM will no longer apply if it is revoked by the enactment of legislation. Rev.
Proc. 2004-2 § 15.04 (the current Revenue Procedure, Rev. Proc. 2023-2 § 13.03 contains similar
language). Even though the Service issued the TAM after the effective date of the Act, the TAM
addressed periods only in 2001 and 2002. As such, the Service applied the law and regulations
applicable only to those periods. Section 7701(a)(48) would not have applied. Further, despite -----
-----’s assertion that the enactment of legislation must occur prior to the issuance of technical
advice for a revocation to occur, neither the revenue procedures nor the Treasury regulation cited
by -----, including Treas. Reg. § 601.201(1)(7), set forth this requirement.

                                                        2

To support the claim that the Service is bound the TAM, ----- cites NetJets Large Aircraft, Inc. v.
United States, 80 F. Supp. 3d 743, 756-59 (S.D. Ohio 2015). NetJets held that a taxpayer was
entitled to rely on a TAM providing favorable but ambiguous instruction regarding its collection
and payment of excise tax liabilities. 80 F. Supp. 3d at 757. The court held that the taxpayer was
entitled to rely on the technical advice, including in instances of a continuing action, until that
advice was “withdrawn, revoked, or modified.” Id. at 758-59.

NetJets is distinct from the instant case for two reasons. First, the taxpayer in NetJets immediately
sought clarification from the Service on whether it could rely on the TAM and received
confirmation on several occasions; the Service later attempted to contradict its instruction. 80 F.
Supp. 3d at 758. In this case, ----- made no attempt to clarify whether the TAM was applicable
following the change in law and the IRS made no representations that the TAM applied
notwithstanding the change in law. Second, the court in NetJets found there was no legal basis to
revoke the previously-issued advice. Here, as discussed above, a change in the law occurred that
revoked the TAM for purposes of a continuing action.

For all the reasons stated here, the TAM does not apply to the tax imposed under § 4051(a) for the
sale of -----’s -----------------in tax periods in 2017, 2018, or 2019.

Sincerely,

----------------------

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