4.24.13  Overview of Excise Fuel Compliance Program

Manual Transmittal

November 27, 2015


(1) Updated IRM 4.24.13, Excise Tax, Overview of Excise Fuel Compliance Program.


IRM 4.24.13, version August 1, 2013, has been updated to reflect minimal changes. This section provides a general overview of the Excise Fuel Compliance Program.

Material Changes

(1) Updated 4.24.13 material changes listed below:

IRM Description (3) Structure of Fuel Compliance Program Deleted reference to employees being placed geographically to ensure voluntary compliance with fuel tax laws. Excise Fuel Compliance Work Plan Updated content to include references pertaining to Fuel Inspection Data Gathering and Analysis Project (FIDGAP). Fuel Compliance Manager Work Assignment Responsibilities Updated content to define managers' responsibilities in regards to FIDGAP work planning efforts. Fuel Compliance Work Planning Responsibilities Edited content to include planning and execution of FIDGAP-identified inspection sites. Anchor Points Updated content to include utilizing FIDGAP-identified inspections as a potential anchor point source. Time Reporting Removed activity code 613 for reporting computer issues. Computer breakdowns are now reported under activity code 730. Content edited to reflect this change. Taxpayer Outreach and Education Edited content to include the requirement to notify the group manager when an outreach effort has occurred and the details needed for each notification. Glossary Edited commuting definition for clarity.

Effect on Other Documents

This IRM section incorporates Interim Guidance Memorandum SB/SE-04-0315-0011, Interim Guidance for Introducing FIDGAP into work plan, dated March 6, 2015.


This section is primarily to provide direction to supervisory Fuel Compliance Officers, Fuel Group Managers, Fuel Compliance Officers and Fuel Compliance Agents. Information in this section may also support coordination with SBSE excise groups.

Effective Date


/s/Barbara J. Fiebich
Director, Specialty Examination Policy
Small Business/Self Employed  (11-27-2015)
Structure of Fuel Compliance Program

  1. This section discusses basic procedures, guidelines and requirements for use by employees and fuel compliance managers in administering Fuel Compliance Program operations.

  2. The Fuel compliance IRM consists of the following sections:

    IRM Title
    4.24.13 Overview of Excise Fuel Compliance Program
    4.24.14 Excise Fuel Compliance Safety, Uniform, and Motor Vehicle Requirements
    4.24.15 Excise Fuel Compliance Inspection, Sampling and Shipping
    4.24.16 Excise Fuel Compliance Report Writing, Case Closing, and Appeals Procedures
  3. The Fuel Compliance Program follows a three pronged approach to compliance activities:

    1. Activities pertaining to dyed diesel fuel

    2. Activities pertaining to other taxable fuels

    3. Activities pertaining to taxpayer education and outreach

  4. Employees use a variety of tools and techniques to ensure taxable fuel in the fuel distribution system is properly taxed and dyed. Employees are directly responsible for assertion of tax and penalties when instances of non-compliance are identified.

  5. Employees are also responsible for supporting excise fuel tax compliance by considering excise tax registration procedures found in IRM 4.24.2, Excise Tax Registrations, excise fuel tax examination procedures found in IRM 4.24.6, Excise Tax Examiner Responsibilities, and IRM 4.24.4, Excise Fuel Taxes Workload, Policies and Procedures, in every taxpayer contact.

  6. All compliance activities are structured around the Annual Excise Fiscal Year Work Plan.  (11-27-2015)
Organizational Structure and Responsibilities

  1. Responsibility for the delivery of the Excise Fuel Compliance Program is as follows:

    1. Workload Delivery is the responsibility of the Director, Exam Case Selection.

    2. Policies, guidance and procedures are the responsibility of the Director, Specialty Examination Policy.

    3. Field Examination Delivery is the responsibility of the Director, Specialty Examination.

  2. The Excise Fuel Policy Manager reports directly to the Director, Specialty Examination Policy and has responsibility for the development of Fuel Compliance Program policies, guidance, and procedures.

  3. The Fuel Territory Managers report directly to the Chief, Excise Tax Program, who is responsible for administering all Fuel Compliance Program field operations throughout the United States.

  4. There are two Fuel Territories; Fuel Territory East and Fuel Territory West. Each territory has responsibility for conducting the enforcement activities and meeting the goals of the Fuel Compliance Program.

  5. Group managers report directly to a fuel territory manager. Each group manager is responsible for operations within a specific geographic area of the United States. Responsibilities include directing and reviewing the activities of all group employees and controlling all day-to-day operations.

  6. Employees report to a group manager. There are Fuel Compliance Officer (FCO) groups and Fuel Compliance Agent (FCA) groups.

  7. The procedures found in this IRM section generally apply to both the FCO and FCA positions. The term "employees" is used throughout this section and refers to both the FCO and FCA positions. The duties are summarized below:

    1. FCO conduct inspections and outreach to promote compliance with the fuel tax laws. The inspections may result in the assertion of penalties if non-compliance is identified. The FCO also assists with the enforcement activities of other personnel within the Excise Tax Program. The assistance includes, but is not limited to, identifying potential excise tax issues and obtaining fuel samples.

    2. FCAs conduct the inspections and the other activities included in the description of the FCO duties. In addition, the FCAs perform examinations and compliance reviews related to fuel issues and assess any tax and penalties due as a result.  (11-27-2015)
Excise Fuel Compliance Work Plan

  1. An Excise Work Plan is developed to meet organizational planning needs and strategic objectives. The Excise Work Plan is the basis for most work assignments.

  2. The Fuel Inspection Data Gathering and Analysis Project (FIDGAP), directed by the Joint Operations Center (JOC), is an important tool to assist in delivery of the annual Excise Fuel Compliance work plan by identifying inspection sites for the FCOs and FCAs. FIDGAP sites are only one of the many instruments available to be used in the delivery of the annual work plan. Delivery of the overall work plan remains a management responsibility.  (11-27-2015)
Fuel Compliance Manager Work Assignment Responsibilities

  1. Fuel territory group managers are responsible for:

    1. Quarterly, providing the JOC with input on a suggested location and any other information pertinent developing the FIDGAP workload assignments.


      The managers suggested location may not always be the focal point if other compliance factors suggest a different focal point should apply. Managers will be made aware of any such variances by the JOC manager before the FIDGAP quarterly assignments are finalized and distributed.

    2. Assigning inspection work and outreach opportunities in addition to the FIDGAP directed sites in accordance with the fiscal year work plan.

    3. Ensuring that FCOs and FCAs provide feedback to the JOC as requested concerning sites inspected in an effort to continually improve the FIDGAP tool.

  2. Group managers are required to direct compliance activities and make assignments to employees that support the Excise Work Plan and meet any "ad hoc" needs that arise during the day-to-day operations. Managers will use a variety of work assignment methods and assist the employees in work planning, such as:

    1. Assignment of specific geographic counties/parishes to particular employees within the group

    2. Assignment of taxpayer specific locations to be inspected, such as identified terminals, wholesalers, retailers, end users, or others within the fuel distribution system

    3. Shifting resources and geographic assignments to ensure the same personnel do not consistently inspect the same taxpayers year after year

    4. Assignment of specific dates and locations for Blitz activities and other special projects

    5. Assignment of quarterly FIDGAP identified inspection sites

    6. Requiring the use of Anchor Points. See IRM

  3. The group manager will:

    1. Review and approve individual work plans prepared in advance

    2. Review updated work plans that reflect work conducted  (11-27-2015)
Fuel Compliance Work Planning Responsibilities

  1. The focus of the Fuel Compliance Program is:

    1. The planning and execution of the manager assigned inspections

    2. The planning and execution of FIDGAP-identified inspection sites

    3. Joint operations with state officers

    4. Taxpayer education and outreach activities (see IRM

  2. A listing of all FIDGAP-identified inspection sites are provided to employees on a quarterly basis.

  3. Employees and managers should work jointly to ensure the focus of work performed is primarily on manager assigned inspections and FIDGAP-identified inspection sites.

  4. Judgment, experience and observations will continue to be important for identifying, planning and carrying out the inspection work. Self-identified inspections should be conducted in the following instances:

    1. When no managerial assigned inspections are identified for geographic locations

    2. When the FCO or FCA arrives at a managerial or FIDGAP site and cannot conduct an inspection (i.e., out-of-business, closed)


      The employee should conduct other inspections in that area, if possible. The employee is not limited to sites with the same activity codes as the FIDGAP site.

    3. If while traveling to and from "anchor points" , "FIDGAP assigned inspections" , or "manager-assigned inspections," additional inspection locations are observed

  5. Employees are required to prepare and maintain a written work plan. The work plan will include managerial assignments, participation in special projects, self-identified inspections, and other assignments such as vehicle maintenance. The work plan will consider the priorities established by management.

  6. Employees and managers are required to use the "anchor points" (see IRM below for a definition of an anchor point) concept to achieve a balance between assigned work and work identified in the field.

  7. The work plan must be recorded in SharePoint for review by the group manager. Other supplemental written planning items are submitted to the manager for review and approval but do not replace the need for using SharePoint as the primary planning tool.

  8. If the plan for the entire day changed, the daily work plan will be updated to reflect what actually occurred. The "updated" work plan does not need to include specific taxpayer details but will identify the city, town, or county visited.

  9. At a minimum, work plans should reflect the following basic components:

    1. Prompt scheduling of all group manager assigned work

    2. At least one identified anchor point for each day the employee plans to work in the field

    3. A balance of all work assignment types in accordance with the excise fiscal year work plan

    4. Adequate geographic coverage within assigned areas

    5. Other elements such as whether overnight travel is required to efficiently complete assignments

    6. A minimum of two weeks of planned actions, updated weekly, including planned travel, specific inspection and examination sites, truck maintenance, leave, or any other pertinent information

    7. Updated information on what occurred, only if the plan for the entire day changed  (11-27-2015)
Anchor Points

  1. An anchor point is a specific location at which the employee plans to perform field work.


    General references are not acceptable such as counties, cities, towns or other non-specific locations.

  2. When identifying anchor points employees must consider the following:

    1. FIDGAP sites and other assignments from the group manager

    2. Leads

    3. Self-identified potential inspection sites

    4. Geographic coverage

  3. At least one anchor point must be identified and entered into the employee's work plan for each day the employee plans to work in the field.  (11-27-2015)
Fuel Compliance Program Law and Regulations

  1. Imposition of federal excise tax on taxable fuel, see IRC 4041 and IRC 4081, and the applicable Treasury Regulations.

  2. Exemptions from federal excise tax on taxable fuels, see IRC 4082 and the applicable Treasury Regulations.

  3. Dyeing requirements, see Treas. Reg. 48.4082-1.

  4. Notice requirement for dyed fuel, including required language, see Treas. Reg. 48.4082-2.

  5. Back-up tax on diesel fuel and kerosene, see Treas. Reg. 48.4082-4.

  6. Definition of taxable fuel, see IRC 4083(a).

  7. Administrative authority, see IRC 4083(d) and Treas. Reg. 48.4083-1 which include:

    1. Authority to inspect

    2. Reasonableness

    3. Place of inspection

    4. Scope of inspection

    5. Penalty for refusal of entry or refusal to submit to inspection

  8. Registration, see IRC 4101 and Treas. Reg. 48.4101-1.

  9. Penalty on dyed fuel sold for use or used in taxable use, see IRC 6715(a)(1) & (2) and Treas. Reg. 48.6715-1.

  10. Penalty for the willful alteration of dye in dyed fuel, see IRC 6715(a)(3).

  11. Penalty for selling or holding for sale altered dyed fuel, see IRC 6715(a)(4).

  12. Assessable penalty for refusal of entry or refusal to submit to inspection (effective after October 22, 2004), see IRC 6717.

  13. Tampering with or failing to maintain security requirements for mechanical dye injections systems, see IRC 6715A.

  14. Definition of dyed fuel, see IRC 6715(c)(1).

  15. Penalty with respect to certain adulterated fuels, see IRC 6720A.

  16. Penalty for the failure to display tax registration on vessels, see IRC 6718.  (11-27-2015)
Issue Management System (IMS)

  1. IMS provides automated support for the Fuel Compliance Program.

  2. Employees and group managers should refer to the IMS guidance for specific instructional information pertaining to the use of IMS.

  3. All inspections must be input into IMS within four business days after the date of the inspection. See IRM 4.24.16 for exceptions to this time requirement.  (11-27-2015)
IMS - Employee Required Actions

  1. Employees must utilize IMS to:

    1. Upload a complete inspection case file including all forms and work papers, etc. as defined at IRM 4.24.16.

    2. Input time worked and associated leave taken into Form 3081, Employee Time Report.

    3. Input time charged to allowable activity codes into Form 4502, Exam Technical Time Report. See IRM  (11-27-2015)
IMS - Group Manager Required Actions

  1. Group managers must utilize IMS for the following required actions:

    1. Review inspection/examination cases

    2. Update inspections to include any group manager's involvement, as well as including comments pertaining to all contacts with taxpayers  (11-27-2015)
IMS Standard Audit Index Numbers (SAIN) for Inspections

  1. SAIN numbers (activity codes) are used in IMS to differentiate the types of inspection activities. Numerical Suffixes are used with certain SAIN to further distinguish the type of inspection.

  2. SAIN number 515 is used to record all terminal inspections. To record an inspection received from a state employee as part of a Fed-State agreement, use the suffix "Z" .

  3. SAIN number 516 is used to record all wholesaler and retailer inspections. When selecting and entering the inspection issue into IMS, the following list of alpha suffixes must be used to identify the type of inspection:

    1. "R" - to record a retailer inspection (including truck stops)

    2. "W" - to record a wholesaler inspection

    3. "Z" - to record an inspection received from a state employee as part of a Fed-State agreement

  4. SAIN number 517 is used to record all designated inspection site screenings and inspections. When selecting and entering the inspection issue into IMS, the following list of alpha suffixes must be used to identify the type of screening or inspection:

    1. "H" - to record fuel compliance inspections and screenings at any state highway inspection station, weigh station, mobile station, or other location designated by the IRS Commissioner to be used as a designated inspection site

    2. "O" - to record inspections and screenings at sale barns, livestock auctions, construction sites, and similar situations where vehicles operated by various entities are inspected at a single site and law enforcement officers are not needed to direct the vehicles

    3. "Z" - to record an inspection received from a state employee as part of a Fed-State agreement, if the state sample was secured as a result of an on road inspection (designated inspection site)

  5. SAIN number 518 is used to record all end user inspections. To record an inspection received from a state employee as part of a Fed-State agreement, use the alpha suffix "Z" , if the state sample was secured as a result of an end-user inspection (business/company inspection).


    See the table below to determine whether the inspection is an end user inspection or a designated inspection site inspection.

    If ... And ... Then ...
    Employee arrives at a company’s office or yard Conducts an inspection It is an end-user inspection. Input on IMS under SAIN 518
    Employee arrives at a site (such as a construction site) Travels throughout the site inspecting diesel trucks The contacts are end-user inspections. Input on IMS under SAIN 518
    Employee arrives at a construction site Sets up a designated inspection site and screens trucks that come to the field person The contacts are designated inspection site inspections. Input on IMS under SAIN 517O  (11-27-2015)
Time Reporting

  1. All time (direct and indirect) must be entered into the time sheet application on IMS.

  2. Direct inspection time is entered in the section entitled "Misc. Direct Exam Time" .

  3. Fuel inspections residing on IMS will not have time applied to them directly.

  4. Activity code 515 is used to report time related to terminal inspections.

  5. Activity code 516 is used to report time related to wholesaler and retailer inspections.

  6. Activity code 517 is used to report time related to designated inspection site inspections.

  7. Activity code 518 is used to report time related to end-user inspections.

  8. Activity codes 610 and 730 are used to report indirect and administrative time respectively.

    1. Activity code 610 - Time spent on technical duties that cannot be charged to a specific case or activity. Generally this includes attending group meetings, reading procedural/technical material, preparing and attending technical/procedural conferences, completing forms, working on committees, managing records, preparing time reports/travel vouchers, general housekeeping (e.g., moving, ordering supplies and surveying space), truck maintenance, and e-mail/Voice Messaging System.

    2. Activity code 730 - The time reported in this item pertains to duties such as Combined Federal Campaign, time spent for physicals, Commissioner Representative duties, participation in attitude surveys (survey and meetings), NTEU (bank and official which includes time spent by designated union representatives as provided for in the union contract), Special Emphasis Program Time, mandatory briefings (e.g. Unauthorized Access (UNAX), Privacy Information Protection and Disclosure, etc.), and performance discussions with managers (e.g., time and workload reviews, etc.). Activity code 730 is also used to record computer breakdowns and when the employee experiences problems with hardware or software that results in a loss of productivity.

  9. When you are experiencing computer, hardware or software issues, both requirements must be met to charge time to activity code 730:

    1. A help desk ticket has been submitted and remains open, and

    2. The employee is actively engaged in the fix. This includes troubleshooting with someone to fix the system, resolving equipment and software problems, server time-outs or outages, computer problems, and participating in phone testing.  (11-27-2015)
Taxpayer Outreach and Education

  1. Customer service includes appropriate educational and outreach efforts. This supports an overall strategy to promote voluntary compliance.

  2. Employees shall engage in various outreach activities such as, but not limited to:

    1. Formal meetings with trade organizations and associations

    2. Participation in trade shows

    3. Meetings with state fuel inspection employees

    4. One-on-one discussions during inspections/examinations

    5. Calls from fuel industry stakeholders requesting information

  3. Employees need to ensure that the group manager is aware of and has approved the first three activities listed in (2) above.

  4. When possible, employees should document their educational/outreach efforts on IMS. This occurs when an inspection has taken place.

  5. At the conclusion of the outreach effort the group manager should be notified. The notification should include:

    1. How the outreach was identified

    2. The audience

    3. The date it occurred

    4. Location

    5. Length of time

  6. Time associated with educational/outreach activities should be recorded under Activity Code 521, unless it was done at the time of the inspection.

  7. The group manager should monitor Activity Code 521 time and obtain explanations or details, as warranted.  (11-27-2015)

  1. Employees are exposed to a variety of situations where direct penalty enforcement is not the only issue. Significant fuel tax issues, other excise tax issues, or other tax issues may be apparent or be developed during an inspection. It is the responsibility of employees to not only recognize potential situations that require referral to other IRS units, but also to promptly prepare and submit written referrals.  (11-27-2015)
Referral Procedures

  1. Employees shall complete an electronic Form 5346, Examination Information Report. If necessary, employees will also attach a document explaining the nature of the referral. A copy of Form 5346 will also be included in the closed case file.

  2. See IRM for instructions on referring issues related to investigative samples.

  3. Form 5346 and the supporting information shall be attached to a secured e-mail and sent to the group manager for approval. See IRM, Standards for using e-mail.

  4. The group manager shall send all approved referrals, Form 5346 and the supporting information if any, via a secured message, to the Excise Operations Support (EOS) mailbox at sbse.excise.eos@irs.gov with subject line, "Lead/Information Report Request" .  (11-27-2015)
Fed/State and Fed/Fed Agreements

  1. A variety of written agreements may be developed to coordinate tax administration with other federal or state agencies. Development of these agreements is a primary responsibility of Excise Policy in conjunction with Privacy, Government Liaison and Disclosure (PGLD). Group managers are directly responsible for administering all the provisions of the federal-federal and federal-state fuel sampling and information sharing agreements within their assigned geographical territory. To accomplish this responsibility, the group managers must:

    1. Obtain copies of all current written agreements between any federal and state agencies within the geographically-assigned territory.

    2. Review and familiarize themselves with all the provisions of the written agreements within their assigned geographic territory.

    3. Meet the IRS obligations stated in existing agreements and work with their state counterparts to ensure the states fulfill their obligations.

    4. Make authorized disclosures of federal information as provided in the written agreements. Disclosures typically include making authorized disclosures of federal penalties to state taxing agencies. See IRM Record Keeping and Accounting for Authorized State Disclosures.

    5. Provide copies of the current agreements between any federal and state agency to the FCO or FCA assigned that geographical territory.

    6. Notify Excise Fuel Policy when states show interest in entering into a Fed/State agreement or when existing agreements need updating.

    7. Monitor employees' compliance with authorized disclosure and contract provisions of the agreements.

  2. If a group manager has questions about a particular agreement or experiences problems with a state, the manager should contact Excise Fuel Policy. An analyst will work with the manager and the Government Liaison Office to answer questions and resolve issues.

  3. Employees will work directly with federal and state officers. Maintaining a balance between making only authorized disclosures to those state officers and keeping a solid working relationship is essential. Disclosures authorized in current agreements are written to comply with the restrictions contained within IRC 6103. Employees must at a minimum:

    1. Obtain copies of all current agreements between any federal and state agency within their geographically assigned territory.

    2. Review and familiarize themselves with all provisions of the written agreements, including the limitations of authorized disclosures.

    3. Elevate to the manager any issues or changes that should be considered.

    4. Promptly process samples received from state officers.

    5. Work cooperatively with federal and state officials within the parameters of written agreements.  (11-27-2015)
Recordkeeping and Accounting for Authorized State Disclosures

  1. Subsection (c), Privacy Act of 1974 and IRC 6103(p)(3)(A) require the IRS to keep an accurate accounting of each disclosure of information from tax or non-tax systems of records.

  2. Though there are important differences in the various state agreements, there are generally two types of Federal Tax Information (FTI) shared with the state agencies:

    1. Lab results for state secured samples

    2. Lab results and taxpayer information for IRS secured samples found within the state

  3. Group managers must keep records for both types of FTI shared with a state.

  4. Group managers must report the disclosures using Form 5466-B, Multiple Records of Disclosure. The Form 5466-B is submitted on the last business day of each month in which FTI was shared with the state. The completed form should be sent to the local campus Disclosure Office having jurisdiction and also to the designated Excise Fuel Policy Analyst. The form may be submitted electronically.

  5. The requirement to report information and instructions for completing and submitting the Form 5466-B is detailed in IRM 11.3.37, Recordkeeping and Accounting for Disclosure.

  6. Form 5466-B should be completed, as follows:

    1. Name Control - self explanatory

    2. SSN/EIN - self explanatory

    3. Tax Period - self explanatory

    4. Disclosure date - date the information was shared with the State agency

    5. Nature of Disclosure Code - Code 4

    6. Stage Agency Code - See Exhibit 4, IRM 11.3.37,Recordkeeping and Accounting for Disclosure, for a listing of State agency codes

    7. Purpose Code - Code 11

    8. Accounts Desk Procedures (ADP) Source Code - Code 120

  7. Excise Fuel Policy will monitor compliance with this reporting requirement to ensure FTI is shared accordingly with state counterparts, as stipulated in the agreements.

  8. For more information on disclosures, see also IRM 4.2.5, Disclosure of Official Information.  (11-27-2015)
Third Party Contacts

  1. Section 3417, IRS Restructuring and Reform Act of 1998 (RRA 98), IRS to provide reasonable notice to a taxpayer before contacting third parties with respect to the determination or collection of that taxpayer’s tax liability. Section 3417 was incorporated into IRC 7602(c) Notice of Contact of Third Parties.

  2. See IRC 7602(c) and Treas. Reg. 301.7602-2 ,Third Party Contacts.

  3. If the determination is made to contact third parties to obtain information relevant to a taxpayer's liability, employees are required to give the taxpayer notice that these contacts are planned. Publication 1, Your RIghts as a Taxpayer, which contains the general notice of third party contact must be used to give advance notice of third party contacts to the taxpayer.

  4. After issuing Publication 1, the employee must document the IMS file with the method and date of delivery.

  5. Form 12175, Third Party Contact Report Form, is used to report third party contacts.

  6. The taxpayer can waive the rights under IRC 7602(c) and authorize the IRS to contact a specific third party by signing Form 12180, Third Party Contact Authorization Form. If a taxpayer signs, then Form 12175 does not need to be completed. See IRM,Third Party Contacts.

  7. See IRM and IRM,Overview and Basic Examiner Responsibilities, for guidance on making and recording third party contacts in compliance with IRC 7602(c).

  8. Guidance specific to the FCO/FCA position is included in the table below:

    If an FCO/FCA... And ... Then a Third Party Contact...
    Obtains information during an inspection Makes a referral to an excise tax group Has not been made
    Conducts a terminal inspection Wants to obtain a sample of fuel from a transport not owned by the terminal and will initiate the contact with the driver of the transport Will be made. A Publication 1 must be issued to the taxpayer prior to the contact with the third party
    Finds a violation of IRC 6715 The taxpayer states it was someone else's fault Will be made. A Publication 1 must be issued to the taxpayer prior to contact with the third party
    Conducts an inspection at a fuel wholesaler Asks to look at a list of customers who have purchased dyed product Has not been made
    Conducts a Blitz compliance inspection Obtains information on the source of the fuel Has not been made
    Arrives at a site to conduct an inspection Talks with employees to locate the owner Has not been made
    Obtains samples from a state or information regarding potential inspection candidates Employee uses the information to propose an IRC 6715 penalty or conduct an inspection Has not been made
    Receives an unsolicited tip Uses the information to plan and conduct an inspection Has not been made  (11-27-2015)
Fraud Development

  1. Employees must be alert to indicators of fuel tax evasion. See IRM 25.1, Fraud Handbook, for guidance on recognizing and developing a fraud case.

  2. Tax fraud is an intentional wrongdoing on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owed. Tax fraud requires both a tax due and owed, fraudulent intent. See IRM,Overview/Definitions.

  3. When employees encounter behavior or indicators of fraud, they shall immediately consult with their group manager to determine the proper course of action.

  4. The employee and group manager will ensure jointly that they have sufficiently documented the appropriate fraud factors or information and consult with a Fraud Technical Advisor (FTA) and the Excise Tax Policy Fraud Coordinator.

  5. Based on these consultations and any development of a plan of action, the employee and group manager will determine whether to recommend a referral to Criminal Investigation (CI).

  6. If the referral to CI is initiated, further participation by the employee may still be required. The CI request for employee assistance is made through the group manager.

  7. Managers should ensure employees' participation and that they receive feedback on the outcome of the referral.  (11-27-2015)
Bribery Awareness

  1. The Treasury Inspector General for Tax Administration (TIGTA) is primarily responsible for investigating all attempted bribery cases. See IRM 4.2.4.  (11-27-2015)

  1. Definitions of terms common to the Fuel Compliance Program are included below. For more definition of terms related to the taxable fuels, see Treasury Regulations 48.4081-1(b).

    • Abnormal Sample Results - Abnormal sample results are when the Chromatogram (fuel test results) differs from the chromatogram of fuel from the stated source of fuel. Abnormal sample results are assigned to an FCA or Excise Tax Revenue Agent for resolution.

    • ASTM - American Society for Testing Materials.

    • Aviation Gasoline - All special grades of gasoline that are suitable for use in aviation reciprocating engines and covered by ASTM specification D 910 or military specification MIL-G-5572.

    • Barrel- A barrel is 42 US Gallons at 60 degrees F.

    • Bill of Lading (BOL) - Business paper showing the product type, number of gallons, purchaser, carrier, date, destination of product, and driver information. Each BOL should be sequentially numbered.

    • Biodiesel- A fuel derived from plant or animal matter which meets the Environmental Protection Agency (EPA) registration requirements for fuels and fuel additives and the requirements of the American Society of Testing and Materials (ASTM). See IRC 40A(d) for a more detailed definition.

    • Blender - Any person that produces a blended taxable fuel outside the bulk transfer/terminal system.

    • Blitz Activity – A planned compliance activity conducted to uncover adulterants in taxable fuel. There are two types of blitzes; a retail blitz and an end-user blitz. A retail blitz focuses on retailers, wholesalers, and some terminals. An end-user blitz focuses on end-users with priority placed on taxpayers with storage tanks.

    • Blocked Pump - A pump used to dispense undyed kerosene that is sold at retail for use by the buyer in any nontaxable use. A blocked pump is at a fixed location, contains a legible and conspicuous notice stating "Undyed, Untaxed Kerosene - Non-Taxable Use Only," and cannot (because, for example, of its distance from a road surface or train track, or the length of its delivery hose) reasonably be used to dispense fuel directly into the fuel supply tank of a diesel-powered highway vehicle or train or is locked by the vendor after each sale and unlocked by the vendor only in response to a buyer's request for undyed kerosene for use other than as a fuel in a diesel-powered highway vehicle or diesel-powered train.

    • Card Lock Fuel Pumps - Fuel pumps that are operated with the use of a card, similar to a credit card. The card has information encoded such as the owner's name and address. Card lock fuel pumps are normally operated at an unattended location with the cardholder pumping his/her own fuel.

    • Chromatogram - The result of a testing procedure in which the components of a product are separated and identified.

    • Commercial Motor Vehicle - Defined by 49 CFR 390.5 in the Department of Transportation Federal Motor Carrier Safety Regulations as having a minimum gross vehicle weight (GVW) of 10,001 pounds or capable of carrying eight passengers for compensation or capable of carrying 15 passengers not for compensation or considered Hazardous Material Transporters.

    • Common Carrier - A party holding itself out to the public as engaged in the business of transportation, storage, and/or distribution for compensation. A common carrier usually will not own the goods that it transports, stores, and/or distributes.

    • Commuting - Commuting is a direct trip between the employee's residence and post of duty. A trip with no intervening core business activity conducted between the commuting points is considered a direct trip. A core business activity is fuel inspections, picking up fuel samples, and transporting samples to the shipping company.

    • Concentration Sample - A dyed fuel sample collected and analyzed to ensure the concentration of dye is in accordance with Treas. Regs. 48.4082-1(b). Normally, concentration samples are obtained from terminals and fractionators but may also be collected from wholesalers, retailers and end-users. Penalties under IRC 6715(a)(3) or IRC 6715(a)(4) may apply if concentration samples from wholesalers, retailers and end-users are found to contain less than the required level of dye.

    • Consent Search - Where the party whose person or premises is to be searched freely and voluntarily agrees to and consents to the search. Per IRS Chief Counsel, the terms search and inspect are synonymous.

    • Designated Inspection Site - Treas. Regs. 48.4083-1(b)(2) defines a designated inspection site as: A designated inspection site is any State highway inspection station, weigh station, agricultural inspection site, mobile station or other location designated by the Commissioner to be used as a fuel inspection site. A designated inspection site is identified as a fuel inspection site. In accordance with IRS policy, these sites are designated with a free standing and/or magnetized vehicle sign displaying "IRS DYED FUEL INSPECTION SITE" .

    • Diesel Fuel - Any liquid that, without further processing or blending, is suitable for use as a fuel in a diesel-powered highway vehicle or diesel-powered train. See Treas. Regs. 48.4081-1(c)(2)(i) and (ii) for a more detailed definition and exclusions.

    • Diesel-Powered Highway Vehicle - A highway vehicle, as defined in Treas. Regs. 48.4061(a)-1(d), as a vehicle propelled by a diesel-powered engine.

    • End User - A person that purchases diesel fuel in either bulk or non-bulk quantities for use, not resale.

    • Enterer - Generally applies to the importer of record (under custom laws). However, if the importer of record is acting as an agent, the person for whom the agent is acting is the enterer. If there is no importer of record, the owner at the time it is brought into the United States is the enterer. See Treas. Regs. 48.4081-1(b).

    • Facility Control Number (FCN)- A number that designates a storage location within the motor fuel, or renewable fuel production, or the bulk transfer / terminal system. Facilities include refineries (RCN), and approved terminals (TCN). The list of facilities can be found at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Refinery-Control-Number-(RCN)-Refinery-Location-Directory andhttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Terminal-Control-Number-(TCN)-Terminal-Locations-Directory.

    • Excise Forensics Laboratory (EFL)- The laboratory contracted by the IRS to test fuel and other products with potential excise tax consequences. This facility is located at the Pacific Northwest National Laboratory (PNNL) in Richland, Washington.

    • Fleet Operator/Trucking Company- The operator of a fleet of highway trucks and/or tractor trailers. May store dyed diesel fuel for non-taxable use.

    • Fuel Thief - A device used for taking fuel samples, and consisting of a bottle with a cork lid and an apparatus to lower and raise the bottle in the tank.

    • Fuel Transport- A highway-type vehicle used to transport fuel over the highway. Normally, fuel transports are tractor-trailer combinations capable of carrying approximately 7,000 gallons of fuel as cargo.

    • Heating Oil- Trade term for the group of distillate fuel oils used in heating homes and buildings as distinguished from residual fuel oils used in heating and power installations. Heating oil may be referred to as #2 diesel fuel. If the fuel is dyed to IRS specification it is exempt from the IRC 4081 tax.

    • Highway Vehicle - The term "highway vehicle" means any self-propelled vehicle, or any trailer or semi-trailer, designed to perform a function of transporting a load over highways, whether or not also designed to perform other functions, but does not include a vehicle described under Treas. Regs. 48.4041-8(b)(2).

    • Intercity Bus - Any automobile bus used predominantly in furnishing (for compensation), passenger land transportation available to the general public if: a) such transportation is scheduled and along regular routes; or b) the seating capacity of such bus is at least 20 adults (not including the driver).

    • Investigative Sample - A fuel sample collected because the nature and composition of the fuel is questionable. Investigative samples are fingerprinted and subjected to other analytical procedures to identify unusual components and the percentage of each component in the sample.

    • Key Lock Fuel Pumps - Fuel pumps that are operated with the use of a key. The key lock fuel pumps are normally operated at an unmanned location with the keyholder pumping his/her own fuel.

    • Mechanical Dye Injection System - Mechanical addition of the proper amount of dye to taxable fuel.

    • Middle-Distillate Fuels - Kerosene, jet fuel, diesel, and heating oil are all middle distillate fuels. During the distillation process, the lighter products such as gasoline and the gasoline blendstocks vaporize first. They are collected at the top of the distillation column. The heavier products, No. 4 oil to asphalt, are found at the lower end of the column. The middle of the column yields No. 1 through No. 3 oils. No. 1 and No. 2 oils, are also called kerosene, K-1, K-2, jet fuel, Jet-A, JP-5, JP-8, diesel fuel, D-1, D-2, stove oil, heating oil, etc. The No.1 and No. 2 oils make up the non-gasoline taxable fuels.

    • Normal Sample Results - Sample results in which the chromatogram agrees with the chromatogram of the stated source of the fuel. Normal sample results are not reported to the field.

    • Omnibus Budget Reconciliation Act of 1993 (OBRA '93) - The Act (Pub. Law 103-66, 8-10-93), (the 1993 Act) changed the point of taxation for diesel fuel from sale by a registered wholesale distributor to the removal from the "bulk transfer/terminal system" , effective January 1, 1994.

    • PNNL - Pacific Northwest National Laboratory

    • Pending Sample Result - A lab result requiring further development or data perfection. The pending sample result is normally assigned to field personnel. The additional information is provided to the EFL.

    • Position Holder - A position holder, with respect to taxable fuel in a terminal, is the person that holds the inventory position in the fuel, as reflected on the records of the terminal operator. A person holds the inventory position in taxable fuel when that person has a contractual agreement with the terminal operator for the use of storage facilities and terminaling services at a terminal with respect to the taxable fuel. The term also includes a terminal operator that owns taxable fuel in its terminal.

    • Post-Terminal Source - Fuel in the system after it breaks bulk at the terminal rack. Examples are wholesale distributor, retail outlet, and end-user.

    • Refinery Control Number (RCN) - An approved refinery facility located within the motor fuel or renewable fuel production, bulk transfer, or terminal system that has a Facility Control Number (FCN) and is operated by an IRS 637 Registrant.

    • Refrigeration Unit (Reefer Unit) - A unit mounted on a truck or trailer that cools the storage area of the truck or the trailer. Units that use the fuel from the propulsion tank (saddle tank) for their fuel must use undyed, taxed fuel. Refrigeration units operating from a separate fuel tank may use dyed fuel.

    • Retailer- Sells product to end-users. May sell motor fuel and/or heating fuel. A typical retailer has bulk storage.

    • Safety Data Sheet (SDS) - Provide the following information: product identification, physical properties, fire and explosion hazard data, product composition and exposure limits, potential health effects, special protection information, spill or leak procedures, handling and storage precautions, hazard warning, and regulatory information.

    • 637 Registration Test- One of the options within the "Type of Test" section. Form 9667. Samples are tested to determine whether the fuel qualifies the taxpayer to receive renewable or biodiesel credits.

    • Splash Dyeing - Method of dyeing a product, whereby dye is manually introduced into the transport compartment. The intermixing of the fuel and dye is aided by movement of the tank such as a transport traveling down a road..

    • Sulfur Sample - A fuel sample collected and analyzed to ensure the concentration of sulfur is in accordance with applicable EPA regulations. Sulfur samples are obtained from terminals, wholesalers and retailers. A penalty under IRC 6720A may apply if the concentration of sulfur exceeds the allowable level.

    • Tankwagon - Small trucks used to carry fuel. They usually have a capacity of 3,000 gallons or less.

    • Terminal - A taxable fuel storage and distribution facility supplied by pipeline or vessel and from which taxable fuel may be removed at a rack. However, the term does not include any facility at which gasoline blendstocks are used in the manufacture of products other than finished gasoline and from which no gasoline is removed. Also, effective January 2, 1998, the term does not include any facility where finished gasoline, undyed diesel fuel, or undyed kerosene is stored if the facility is operated by a taxable fuel registrant and all such taxable fuel stored at the facility has been previously taxed under IRC 4081 upon removal from a refinery or terminal.

    • Terminal Control Number (TCN)- A number identififying an approved terminal in the bulk transfer/terminal system that has a Facility Control Number (FCN).

    • Throughputter - In industry practice, the term generally means any person that stores fuel in a terminal. Under the taxable fuel regulations, however, the term is expanded to mean a person that (1) owns taxable fuel within the bulk transfer/terminal system (other than in a terminal), or (2) is a position holder. See Treas. Regs. 48.4081-1(b).

    • Transmix - A by-product of refined products pipeline operations created by the mixing of different specification products during pipeline transportation. Transmix is considered diesel fuel under IRC 4083(a)(3)(A).

    • Transmix Fractionator - An entity specializing in reprocessing "transmix" to recover separate saleable products such as gasoline and distillate fuels. A fractionation facility separates (fractions) the products in a distillation column. Many fractionators have a combination of mobile equipment and fixed facilities with the truck-based technical equipment moving between tank farms and storage sites, as business requires. Fractionators receive their raw material, transmix, in non-bulk shipments by rail car and/or by transport truck. Their finished product is dispensed either through a pipeline in bulk or across a rack, in a non-bulk distribution. If a fractionator produces taxable fuel it must have a Form 637"S" registration as a refiner. If it dispenses taxable fuel over a rack, it must have a Form 637"S" , Application for Registration (for Certain Excise Tax Activities), registration as a terminal.

    • Ultimate Vendor - An ultimate vendor (registered under IRC 4101) sells undyed diesel fuel or undyed kerosene tax free to a state or local government for its exclusive use, or (b) gasoline (including aviation gasoline) to a state or local government for its exclusive use, or to a nonprofit educational organization for its exclusive use..

    • Usage Sample - A dyed fuel sample collected and analyzed to determine whether the seller or user is subject to a penalty under IRC 6715.

    • Wholesale Distributor - Fuel dealer who sells to retailers and end-users. Wholesale distributors may or may not have bulk storage. A wholesale distributor may merely buy fuel from a terminal and transport it to the retailer. A wholesale distributor may also engage in retailing.

    • Winter Blend- A blend of #2 diesel with #1 diesel or kerosene. The resultant mixture is more suitable for use in cold weather. The percentage of #1 diesel added to the #2 is typically around 20%-30%.

    • Writ of Entry - A writ of entry is a court-issued order that allows legal entry to otherwise constitutionally-protected private property for official purposes.

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