4.24.23 Operational Procedures and Responsibilities for Form 637 Excise Tax Registrations and Secure Airport Terminals (SATs)

Manual Transmittal

August 25, 2021

Purpose

(1) This transmits new IRM 4.24.23, Excise Tax, Operational Procedures and Responsibilities for Form 637 Excise Tax Registrations and Secure Airport Terminals (SATs).

Material Changes

(1) As part of the reorganization and restructuring of IRM 4.24.2, Form 637 Excise Tax Registrations, selected subsections were incorporated into new IRM 4.24.23. Refer to the table below for a detailed list of guidance added.

New IRM Subsection Description of Change
4.24.23.1 Program Scope and Objectives Incorporated guidance that addressed:
  1. Operational roles, responsibilities and procedures relating to Form 637.

  2. Procedures pertaining to Secure Airport Terminal (SAT) Designation cases.

  3. Identification of Service employees directly impacted by this IRM Section (section).

  4. Identification of executives responsible for the administration, procedures and technical guidance specific to Form 637 applications, SAT Designation requests and follow-up compliance reviews.

  5. Identification of executive who owns Excise Tax.

  6. Identification of Business Operating Divisions that are primary stakeholders in section’s subject matter.

4.24.23.1.1 Background Incorporated guidance that discusses operational procedures and responsibilities for Form 637 excise tax registrations and SATs.
4.24.23.1.2 Authority Incorporated guidance that identifies the foundational support under IRM 4.24 series, specific statutory and regulatory authority, specific Policy Statements and Delegation Orders that authorizes operational procedures and responsibilities for Form 637 excise tax registrations. Furthermore, incorporated guidance from Notice 16-15 regarding SATs.
4.24.23.1.3 Roles and Responsibilities Incorporated guidance that identifies executives responsible for Excise Tax Examination policy and procedures, operational examination compliance activities, as well as policies communicated and carried out by excise examiners.
4.24.23.1.4 Program Management and Reviews Incorporated guidance that addresses Program Reports, Program Effectiveness and the Annual Review.
4.24.23.1.5 Acronyms Incorporated guidance listed in the table that itemizes acronyms used throughout this section.
4.24.23.1.6 Related Resources Incorporated guidance that includes the electronic links to statutory and regulatory authority for the Form 637 registration program and SATs, as well as the statutory authority for the Taxpayer Bill of Rights.
4.24.23.2 Use of Fax Machine or Enterprise Electronic Facsimile (EEFax) Moved guidance from 4.24.2.2.1.
4.24.23.3 Initial Contact Moved guidance from 4.24.2.2.2.
4.24.23.4 Responsibility of Excise Case Selection (ECS) and Workload Selection Delivery (WSD) Moved guidance from 4.24.2.5.
4.24.23.5 Responsibility of Centralized Specialty Tax Operations (CSTO) Moved guidance from 4.24.2.6. Electronically linked Form 637 Registration Group Contacts to the Excise Tax Knowledge Base.
4.24.23.6 Responsibilities of Form 637 Registration Group Moved guidance from 4.24.2.7 and clarified responsibilities for the Form 637 Registration Group.
4.24.23.6.1 Role and Responsibilities of the Form 637 Registration Group Manager Moved guidance from 4.24.2.7(1). Incorporated guidance that addresses information under SB/SE 04-0220-0002, Form 637 Initial Application Timeframes and Registration Indicators, dated February 21, 2020. Added guidance that the Form 637 Registration Group Manager must conduct an annual sample to ensure the Form 637 Indicators are accurately set.
4.24.23.6.2 Role and Responsibilities of the Lead Technicians (LTs) Moved guidance from 4.24.2.7(2).
4.24.23.6.3 Role and Responsibilities of Tax Examiners (TEs) Moved guidance from 4.24.2.7(3). Incorporated guidance from SB/SE 04-0220-0002, Form 637 Initial Application Timeframes and Registration Indicators, dated February 21, 2020, that extended the mailing of Letter 3681 from five to ten calendar days.
4.24.23.6.4 Form 637 Registration Group Correspondence Reviews Moved guidance from 4.24.2.7.1. Changed name for Coordinated Industry Case to Large Corporate Compliance.
4.24.23.7 Role and Responsibilities for Excise Groups Moved guidance from 4.24.2.8.
4.24.23.7.1 Excise Group Manager Responsibilities and Procedures Moved guidance from 4.24.2.8.1. Incorporated new guidance that the group manger will issue denial and revocation letters.
4.24.23.7.2 Excise Examiner Responsibilities and Procedures Moved guidance from 4.24.2.8.2.
4.24.23.7.3 Excise Group Procedures - Examinations Conducted on Approved Form 637 Registrants Moved guidance from 4.24.2.8.3.
4.24.23.7.4 Excise Group Procedures - Initial Application Reviews Moved guidance from 4.24.2.11. The group manager will issue denial letters, if applicable.
4.24.23.7.5 Excise Group Procedures - Compliance Reviews Moved guidance from 4.24.2.11.2. The group manager will issue revocation letters, if applicable.
4.24.23.8 - Procedures Relating to Approvals and Continuations of Registrations Moved guidance from 4.24.2.11.
4.24.23.9 Procedures Relating to Denials, Revocations and Suspensions of Registrations Moved guidance from 4.24.2.11.1. Incorporated new guidance that the excise examiner will prepare and fax Form 2363 to CCP, as well as the group manager will sign and issue denial and revocation letters.
4.23.10 - Recording Time Charged to Form 637 Registration Program Moved guidance from 4.24.2.16.
4.23.11 - Mandatory Administrative Forms for Excise Examiners Moved guidance from 4.24.2.8.4.
4.24.23.11.1 - Form 637 Information Document Requests (IDRs): New Applicant Language and Follow Up Requests Moved guidance from 4.24.2.8.4.2.
4.24.23.11.2 - A605 Administrative Check Sheet Moved guidance from 4.24.2.8.4.4. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.3 - A610 Form 637 Review Plan to Close Check Sheet Moved guidance from 4.24.2.8.4.5. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.4 - A615 Initial Appointment Agenda Moved guidance from 4.24.2.8.4.6. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.5 - A625 Initial Interview Questions and Notes Moved guidance from 4.24.2.8.4.7. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.6 - B700 Form 637 Required Filing Check Sheet Moved guidance from 4.24.2.8.4.8. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.7 - C800 Form 637 Financial Analysis Moved guidance from 4.24.2.8.4.9. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.8 - C805 Internal Controls Moved guidance from 4.24.2.8.4.10. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.9 - D900 Initial Contact Check Sheet Moved guidance from 4.24.2.8.4.11. Confirmed and/or re-keyed guidance to current IRM citations.
4.24.23.11.10 - Form 13499-C 637 Recommendation Moved guidance from 4.24.2.8.4.1. Electronically linked to current catalog version.
4.24.23.12 Request for Secure Airport Terminal (SAT) Designation Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that provides an overview of SATs.
4.24.23.12.1 Role and Responsibilities of Centralized Specialty Tax Operations (CSTO) Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the role and responsibilities of CSTO when a SAT Designation request is received.
4.24.23.12.2 Role and Responsibilities of the Form 637 Registration Group Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the role and responsibilities of the Form 637 Registration Group upon receipt of a SAT Designation request from CSTO.
4.24.23.12.3 Role and Responsibilities of the Excise Group Manager Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the role and responsibilities of the excise group manger when a SAT Designation request is received in his or her group from the Form 637 Registration Group.
4.24.23.12.4 Role and Responsibilities of the Excise Examiner Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the role and responsibilities of an excise examiner when a SAT Designation request is assigned by the group manager.
4.24.23.12.5 Approving a SAT Designation Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the procedures an excise examiner should follow if a SAT meets the designated criteria for approval.
4.24.23.12.6 Continuing a Secure SAT Designation Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the procedures an excise examiner should follow if a SAT continues to meet the designated criteria for approval.
4.24.23.12.7 Denying a SAT Designation Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the procedures an excise examiner should follow if a SAT fails to satisfy the requirements for approval.
4.24.23.12.8 Revoking a SAT Designation Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the procedures an excise examiner should follow if a SAT requires revocation.
4.24.23.12.9 Administrative Role and Responsibilities of the Facility Control Number (FCN) Coordinator Incorporated guidance from SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020, that explains the role and responsibilities of the FCN Coordinator when a SAT is approved, continued, denied or revoked.
4.24.23.13 - Forms, Letters and Publications Linked guidance to Knowledge Management site. Changed document titles to reflect current revisions shown in the catalog.
Exhibit 4.24.23-1 Business Operations and Transactions Flow Moved guidance from Exhibit 4.24.2-4.
Exhibit 4.24.23-2 Financial Analysis Techniques Moved guidance moved from Exhibit 4.24.2-5.

(2) Editorial changes and website corrections were made as necessary.

Effect on Other Documents

This material supersedes selected subsections that are identified in the Material Changes above from IRM 4.24.2, Form 637, Excise Tax Registrations, dated July 17, 2018. This includes SB/SE 04-0220-0002, Form 637 Initial Application Timeframes and Registration Indicators, dated February 21, 2020, and SB/SE 04-1020-0001, Approving, Continuing, Denying or Revoking Secure Airport Terminal (SAT) Designations, dated October 5, 2020.

Audience

SB/SE Specialty Examination, Excise Tax Examination employees and personnel at the Centralized Specialty Tax Operations (CSTO).

Effective Date

(08-25-2021)

Kellie L. McCann
Acting Director, Examination - Specialty Policy
Small Business/Self Employed

Program Scope and Objectives

  1. Purpose - This section explains the operational roles, responsibilities and procedures relating to Form 637, Application for Registration (For Certain Excise Tax Activities), (Form 637), as well as procedures pertaining to Secure Airport Terminal (SAT) Designation.

  2. Audience - The audience for this section includes the SB/SE Director, Examination - Specialty, Chief, Estate & Gift/ Excise Tax, Form 637 Registration Group employees, Excise Territory Managers, Excise Group Managers (hereinafter referred to as "Group Managers" throughout this section), Excise Revenue Agents (RAs), Fuel Compliance Agents (FCAs), Fuel Compliance Officers (FCOs) (collectively and hereinafter referred to as "excise examiners" throughout this section) and Centralized Specialty Tax Operations (CSTO) employees.

  3. Policy Owner - Director, Examination - Specialty Policy is responsible for the administration, procedures and updates related to processing Form 637 applications, SAT Designation requests and follow-up compliance reviews.

  4. Program Owner - Director, Examination - Specialty Examination owns Excise Tax Examination operations.

  5. Primary Stakeholders - Primary stakeholders include the Chief, Estate & Gift/Excise Tax, Excise Territory Managers, Form 637 Registration Group Manager, Excise Group Managers, CSTO and Excise Case Selection (ECS).

  6. Other Stakeholders - Other areas that follow these policies and procedures include Appeals, Agency Wide Shared Services, Counsel, SB/SE Examination, Large Business, International and Tax Exempt and Government Entities.

  7. Program Goals - The processes and procedures provided in this section are consistent with the objectives or goals for Excise Tax - Examination that are addressed in IRM 1.1.16.3.3.1, Organization and Staffing, Small Business and Self/Employed Division, Excise Tax Examination.

Background

  1. The Internal Revenue Code (IRC) requires each person who engages in certain activities subject to federal excise tax (FET) to be registered by the IRS as a taxpayer who engages in these activities. The taxpayer must register with the IRS before undertaking the activity. In other situations, a person must register with the IRS as a taxpayer who conducts certain activities to receive an excise tax benefit that may come with such activity, such as, buying or selling an article tax-free or filing a claim for refund or credit. The taxpayer must use Form 637 to apply for registration under IRC 4101, Registration and bond, IRC 4222, Registration, or IRC 4682, Definitions and special rules, for the specified activity.

  2. Form 637 includes a listing of activities for which registration is required or allowed. Refer to the tables found in new IRM 4.24.2.3, Introduction to Form 637, Excise Tax Application for Registration (for Certain Excise Tax Activities, Applications under IRC 4101, and IRM 4.24.2.4, Applications under IRC 4222 and IRC 4682, that list all applicable activity letters.

  3. Letter 3689, Approval of Excise Tax Registration, is issued when an application is approved. A copy of the Form 637 application is not considered proof of registration. Letter 3689 should be retained as proof of registration.

  4. Letter 3689 does not constitute a determination letter. For example, an approval of an AB, NB or AL registration does not mean all future product produced unequivocally qualifies for the biodiesel mixture credit/alternative fuel mixture credit.

  5. If an application for registration is denied or an approved registration is revoked or suspended, then the applicant or registrant will be notified in writing and the reason for the denial, revocation or suspension will be provided.

  6. An approved registration remains valid until revoked or suspended. Registration status can be found at Confirm Online Form 637 Registration Status.

  7. All Form 637 registration numbers issued after February 1, 2004, are comprised of 10 digits. For registration numbers issued prior to the preceding date:

    1. The non-UV/UP registration number has eight digits.

    2. The activity letters UP and UV registration numbers are comprised of nine digits.

Authority

  1. Form 637 registrations are processed under the following authorities:

    • IRC 4101 - Registration and bond with respect to the tax imposed by IRC 4041(a)(1), Tax on diesel fuel and kerosene in certain cases, or IRC 4081, Imposition of tax, every person producing or importing biodiesel (as defined in IRC 40A(d)(1), Biodiesel and renewable diesel used as fuel; biodiesel), or alcohol (as defined in IRC 6426(b)(4)(A), Credit for alcohol fuel, biodiesel, and alternative fuel mixtures: alcohol), and every person producing second generation biofuel (as defined in IRC 40(b)(6)(E), Alcohol, etc. used as fuel; second generation biodiesel).

    • Treas. Reg. 48.4082-5 - Registration relating to diesel fuel or kerosene removed, entered or sold in Alaska for ultimate sale or use in an exempt area of Alaska.

    • IRC 4222 - Registration for certain tax-free sales under IRC 4221, Certain tax-free sales.

    • Treas. Reg. 52.4682-5(d) - Exports; registration relating to the tax imposed, under IRC 4681, Imposition of tax, on ozone-depleting chemicals (ODC's) that are exported.

  2. Notice 16-15, Treatment of Kerosene for Use in Aviation, (Notice 16-15) provides guidance regarding the criteria for designation of a terminal located within a secure area of an airport as a SAT for purposes of IRC 4081 and IRC 4082, Exemptions for diesel fuel and kerosene.

  3. Delegation Order SB/SE-1-23-7 (formerly SB/SE DO 4.36, Rev. 3), Approval or Rejection/Disapproval or Revocation of Form 637, delegates the authorities for approving, denying, revoking and/or suspending Form 637 registrations.

  4. Delegation Order 4-6 ( Rev. 1), Taxable Fuel Bond, delegates the authority to make the final determination as to the amount of bond required to be given by an applicant or existing registrant, to satisfy certain registration requirements under IRC 4101 with respect to the tax imposed by IRC 4041(a)(1) or IRC 4081. This delegation order also delegates the authority to require the posting of a bond to satisfy certain registration requirements under IRC 4101 for Form 637 registration and to set the value of such bond.

  5. Delegation Order SB/SE-1-23-47, Approval or Denial/Revocation of SAT Designations, delegates the authorities for approving, denying and revoking SAT designations.

  6. This section is tailored for the operational roles, responsibilities and procedures for Form 637 Registrations and SATs. Refer to IRM 4.24.2 for a general overview of Form 637 Registrations, including applications under IRC 4101, IRC 4222 and IRC 4682, as well as for general guidance. Refer to IRM 4.24.24, Administrative Procedures for Initial Applications and Case Reviews, for guidance regarding Form 637 initial applications and case reviews.

Roles and Responsibilities

  1. Director, Examination - Specialty Policy is responsible for the procedures and policies addressed in this section.

  2. Program Manager, Excise Tax Policy is responsible for ensuring the procedures are accurate and updated regularly as needed.

  3. The Chief, Estate & Gift/Excise Tax is responsible for ensuring the procedures within this section are adhered to by employees in Excise Tax Examination.

  4. Form 637 registration case work and SAT designations are processed by the following areas:

    • Centralized Specialty Tax Operations (CSTO) - All initial Form 637 applications and SAT Designation requests are received by the Cincinnati IRS Center (CIRSC), date stamped and forwarded to CSTO for initial processing. Refer to IRM 4.24.23.5 and IRM 4.24.23.12.1.

    • Excise Case Selection (ECS) and Workload Selection and Delivery (WSD) - The selection of sample review cases and monitoring the Annual Form 637 Registration Workplan is conducted by ECS/WSD. Refer to IRM 4.24.23.4.

    • Form 637 Registration Group - The Form 637 Registration Group administers and maintains Form 637 Registrations. The Form 637 Registration Group consists of Lead Technicians (LTs), Tax Examiners (TEs), an Exam Technician and a Management and Program Assistant. Refer to IRM 4.24.23.6.

    • Excise Groups - Form 637 compliance reviews assigned to excise tax groups are conducted by excise examiners. Group managers are responsible for concurring with the excise examiner's compliance review recommendation and approving penalty determinations, if applicable. Refer to IRM 4.24.23.7.

    • Facility Control Number (FCN) Coordinator – FCN Coordinator is responsible for updating Terminal Control Number (TCN) files and the SAT list on the FCN location directory. Refer to IRM 4.24.23.12.9.

Program Management and Reviews

  1. Program Reports - Information regarding the reporting of program objectives are included on, but not limited to:

    • Examination Headquarters Monthly Briefing.

    • Program Manager Monthly Briefing.

    • SB/SE and Examination Operational Reviews and Business Performance Review.

  2. Program Effectiveness - Excise Embedded Quality Performance Reports measure whether quality attributes are applied uniformly and consistently.

  3. Annual Review - Excise Tax Policy - Program Manager is responsible for reviewing the information in this section annually to ensure accuracy and promote consistent tax administration.

Acronyms

  1. Below are the acronyms and their definitions used throughout this section.

    Acronym Definition
    AIMS Audit Information Management System
    BMF Business Master File
    CLA Case Level Activities
    CIRSC Cincinnati IRS Center
    CSTO Centralized Specialty Tax Operations
    EEFax Enterprise e-Fax
    EIN Employer Identification Number
    ERCS Examination Returns Control System
    ETE Excise Tax Examination
    FCA Fuel Compliance Agents
    FCO Fuel Compliance Officer
    FET Federal Excise Tax
    IDRS Integrated Data Retrieval System
    IMS Issue Management System
    IRC Internal Revenue Code
    LT Lead Technician
    SAT Secure Airport Terminal
    TE Tax Examiner

Related Resources

  1. Refer to IRM 4.24.23.1.2 for the most significant statutes and regulations affecting Form 637 Registrations.

  2. Refer to Notice 16-15 for guidance regarding the criteria for designation of a terminal located within a secure area of an airport as a SAT for purposes of IRC 4081 and IRC 4082, Exemptions for diesel fuel and kerosene.

  3. Refer to IRM 4.24.4 , Excise Fuel Taxes Workload, Policies and Procedures, for general information about basic excise examiner responsibilities, excise IRM Sections, primary excise returns and claims forms, as well as materials about excise fuel abstracts and issues.

  4. For general guidance, procedures, tax law and regulations on a wide variety of excise issues, refer to Excise Tax Knowledge Base.

  5. The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. Refer to IRC 7803(a)(3), Commissioner of Internal Revenue; other officials, execution of duties in accord with taxpayer rights. For additional information about the TBOR, refer to Taxpayer Bill of Rights.

  6. For information relating to identity theft, refer to IRM 25.23, Special Topics, Identity Protection and Victim Assistance.

Use of Fax Machine or Enterprise Electronic Facsimile (EEFax)

  1. In May 2003, the Tax Administration Council approved the use of faxes for receiving information and documents from taxpayers and practitioners when contact with the taxpayer has been made and documented on Form 9984, Examining Officer’s Activity Record, or in the Case Level Activity Records (CLA). Documentation on Form 9984 or CLA must include the date of the contact and a notation indicating the taxpayer wanted to send information by fax.

  2. Documents, forms, letters and interactions can be allowed via fax unless there is a specific prohibition. Faxes received via Enterprise Electronic Facsimile (EEFax) origin must be documented. To document the origin of an EEFax, upload the incoming e-mail that identifies the origin into the Form 637 IMS case file.

  3. Refer to IRM 11.3.1.14, Disclosure of Official Information, Introduction to Disclosure, Facsimile (FAX), Electronic Facsimile (E-FAX), and IRS Internal Enterprise Electronic Facsimile (EEFAX) Transmission of Tax Information, for additional information.

Initial Contact

  1. The initial contact is the first contact with the applicant or registrant. ALL initial contacts on a Form 637 compliance review must be made by mail using the appropriate initial contact letter.

  2. RAs and FCAs use Letter 5708, Initial Contact - Form 637 Reviews, for all initial contacts related to Form 637 compliance reviews.

  3. FCOs use Letter 3687, Verification of Excise Tax Registration, for a sample or discretionary review and Letter 5708 for an initial application review.

  4. The following documents must be enclosed with Letter 3687 and/or Letter 5708:

    • Pub 5170, Taxpayer Bill of Rights (Brochure).

    • Notice 609, Privacy Act Notice.

    Note:

    Pub 5170 and Notice 609 should not be sent to a representative.

  5. TEs in the Form 637 Registration Group use one of the following letters to make initial contact on Form 637 compliance reviews:

    • Letter 3681, Notification for Form 637- Initial application reviews.

      Note:

      Pub 5170 and Notice 609 do not need to be included if the Form 637 review is designated as an excise group case.

    • Letter 3687, Verification of Excise Tax Registration - Sample and discretionary reviews.

  6. Excise examiners and TEs must allow the applicant or registrant 14 calendar days to respond (includes time for mailing) to the initial contact letter before making an attempt to contact the applicant or registrant by telephone.

  7. If a valid Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, is on file for the applicant or registrant, then the initial contact letter will be mailed to the applicant or registrant and a copy of the letter will be mailed to the representative with Letter 937, Transmittal for Power of Attorney.

    Note:

    Form 2848 or Form 8821 that reflects Form 637 cannot be forwarded to the Central Authorization File (CAF) unit as there is no master file for Form 637. Form 2848 or Form 8821 must be scanned and uploaded into the Form 637 IMS file. However, if Form 2848 or Form 8821 contains tax returns, e.g., a Form 720, or Form 1120, then it must be forwarded to the CAF unit for processing. Refer to IRM 4.11.55, Examining Officer’s Guide (EOG), Power of Attorney Rights and Responsibilities, for additional information.

Responsibility of Excise Case Selection (ECS) and Workload Selection Delivery (WSD)

  1. Examination Operations Performance Planning and Analysis is responsible for developing the Workplan in coordination with WSD and Excise Tax Examination (ETE).

  2. The SB/SE Specialty Excise Tax Examination Workplan will contain a component Form 637 Registration Workplan.

  3. WSD is responsible for monitoring the annual ETE Workplan including the Form 637 Registration Program accomplishments.

  4. WSD is responsible for identifying and selecting sample review cases to be assigned to excise examiners.

  5. The sample selection criteria may exclude certain activity letters, which will be worked by the Form 637 Registration Group.

  6. The Form 637 Registration Group may also identify sample review cases to be assigned to excise examiners. The following cases may be identified for a sample review:

    • Notice CP 241.

    • Change in business ownership.

    • Bonds (invalid bonds, bond changes, notice of cancellations, etc.).

    • Correspondence reviews that cannot be resolved by the Form 637 Registration Group.

  7. Form 637 sample reviews identified by WSD will be started on a pro-rata basis to ensure the delivery of the Form 637 Registration Workplan.

Responsibility of Centralized Specialty Tax Operations (CSTO)

  1. CSTO creates the Form 637 IMS case file and scans all Form 637 applications and attachments received at CIRSC. CSTO maintains the original application request for 45 calendar days. After 45 calendar days expire, the original application is mailed to the 637 Registration Group via Form 3210, Document Transmittal. For the current mailing address of the Form 637 Registration Group, refer to Form 637 Registration Shelf, Registration Information Book at Excise Tax Knowledge Base.

  2. Scanning and uploading the Form 637 application and the creation of the Form 637 IMS case file places the case in IMS Status 10. This electronically transmits the Form 637 IMS case file to Queue Manager "Queue 1."

  3. Form 637 applications that cannot be processed by CSTO include the following:

    • Missing or incorrect EIN.

    • Missing activity letter.

    • Duplicate filing.

    • Missing name in signature section.

  4. When an application cannot be processed, CSTO will take the following actions:

    1. Scan and forward the application to the Form 637 Registration Group Manager via secure e-mail for follow-up action. Refer to IRM 4.24.23.6.

    2. Mail the application to the Form 637 Registration Group via Form 3210.

  5. If a registrant contacts CSTO regarding a change in its Form 637 Registration, such as a change in business location or ownership, then CSTO will, via secure e-mail, forward the updated information to the Form 637 Registration Group Manager for follow-up action. Refer to IRM 4.24.23.6.

Responsibility of Form 637 Registration Group

  1. The Form 637 Registration Group is responsible for maintaining the electronic Form 637 files, conducting correspondence reviews and assigning applications and registrations to excise groups.

Role and Responsibilities of the Form 637 Registration Group Manager

  1. The Form 637 Registration Group Manager is responsible for:

    1. Overseeing the Form 637 Registration Program.

    2. Overseeing the Form 637 Registration workflow process.

    3. Making the final determination for his or her group in IMS for applications that have been denied, as well as registrations that have been revoked or suspended.

    4. Ensuring the Form 637 Registration Indicator is added to registrations that are approved, as well as removed from revoked or suspended registrations.

    5. Conducting an annual statistically valid sample review of registrations to ensure the Form 637 Registration Indicator is accurately set.

    6. Releasing authorized registration information to update the Form 637 Portal.

    7. Resolving issues with applications, which cannot be processed by CSTO.

    8. Addressing correspondence from Form 637 registrants who raise questions or concerns relating to the Form 637 Registration program.

    9. Addressing issues, concerns or questions raised by CSTO and senior leadership.

    10. Conducting reviews of cases processed by LTs.

    11. Conferring with Chief, Estate & Gift/Excise Tax about contested denials, revocations and suspensions.

    12. Ensuring appropriate actions are taken on information generated by Notice CP 241. Refer to IRM 4.24.24.5.2, Notice CP 241 Procedures.

Role and Responsibilities of Lead Technicians (LTs)

  1. The Form 637 Registration Group LT is responsible for maintaining the Form 637 IMS case files in his or her assigned territory. However, due to workflow of applications and registrations, the LT may also assist other territories.

  2. The LT is responsible for:

    1. Assigning Form 637 Registration Group cases to TEs.

    2. Creating discretionary or sample reviews in IMS.

    3. Adding new applications received from excise examiners to IMS and creating the applicable Form 637 IMS case file.

    4. Uploading historical data into the Form 637 IMS case file.

    5. Requesting ERCS controls on sample reviews assigned to excise examiners.

    6. Reviewing Form 637 Registration Group cases completed by TEs and making the final determination in IMS to approve or continue the registration.

    7. Preparing and issuing Form 637 Registration letters.

    8. Further processing Form 637 IMS case files after Group Manager closures.

    9. Updating Form 637 IMS case files, to reflect changes such as, name, ownership, address, etc.

    10. Ensuring the Form 637 Registration Indicator is input on initial applications approved for registration.

Role and Responsibilities of Tax Examiners (TEs)

  1. The TE in the Form 637 Registration Group is responsible for:

    1. Performing Integrated Data Retrieval System (IDRS) research on all initial applications in Status 20, Compliance Check.

    2. Performing Accurint searches on all initial applications in Status 20.

    3. Performing correspondence compliance reviews.

    4. Making recommendations on Form 637 Registration Group cases to approve, deny, continue or revoke a registration.

    5. Preparing Form 637 Registration letters.

    6. Preparing and mailing Letter 3681, Notification for Form 637, to all initial applicants assigned to the TE within 10 calendar days from the assignment of the Form 637 IMS case.

Form 637 Registration Group Correspondence Reviews

  1. Based on the needs of the Excise Tax Program, various activity letters will be worked as correspondence compliance reviews by the Form 637 Registration Group.

  2. An Annual Form 637 Registration Workplan will be distributed to the Form 637 Registration Group before the beginning of the fiscal year. Correspondence Form 637 compliance reviews will be started on a pro rata basis based on the Annual Form 637 Registration Workplan to ensure timely completion of the reviews by fiscal year end.

  3. Approved registrants under the Large Corporate Compliance Program will not be selected for correspondence compliance reviews and will be referred to the excise examiner groups.

  4. Correspondence reviews that cannot be resolved by the Form 637 Registration Group will be sent to the appropriate excise examiner group for completion.

  5. Refer to IRM 4.24.24.4.3.2, Status 20 - Initial Compliance Review Procedures Specific to Form 637 Registration Group Cases, for additional information.

Role and Responsibilities for Excise Groups

  1. All technical analyses and determinations of Form 637 excise group compliance reviews will be performed by an excise examiner.

  2. Form 637 excise group compliance reviews will consist of:

    • New applications that meet excise group criteria.

    • Sample reviews selected by WSD.

    • Discretionary reviews requested by excise groups.

    • Applications or registrations that could not be resolved by the Form 637 Registration Group.

  3. All initial Form 637 applications must be completed on ERCS within 60 calendar days from assignment to the Group Manager. Any delays in meeting the 60 day requirement should be discussed with the Group Manager, documented by the excise examiner in the IMS activity record or Form 9984 and uploaded into the Form 637 IMS case file. Group Managers must document any managerial delays in the IMS case file CLA.

  4. All Form 637 cases are subject to Embedded Quality (EQ) review.

Excise Group Manager Responsibilities and Procedures

  1. The Group Manager is responsible for:

    1. Ensuring all initial application reviews are completed on ERCS within 60 calendar days of assignment from the LT.

    2. Ensuring all sample reviews are completed on a pro-rata basis during the fiscal year.

    3. Assigning Form 637 IMS case files to excise examiners and updating the IMS case file to Status 50, RA Compliance Review.

    4. Ensuring the excise examiner's recommendation to approve, continue, deny, revoke or suspend a registration is adequately supported.

    5. Offering to confer with the applicant or registrant about unagreed issues when there is non-concurrence with a denial or revocation recommendation.

    6. Documenting the IMS activity record, Form 9984 or the Form 637 IMS case file CLA to record observations about the case review and whether there is concurrence with the excise examiner's recommendation.

    7. Making the final determination to approve, continue, deny, revoke or suspend a registration and documenting that decision using IMS.

    8. Signing and issuing the appropriate registration letter to the applicant or registrant based on the excise examiner's recommendation.

      Note:

      The Form 637 Registration Group Manager does not issue letters for excise group cases unless the determination is contested.

    9. Prepare and issue Letter 5023, Change in Form 637 Registration Number, when applicable.

    10. Confirming the excise examiner prepared and faxed Form 2363, Master File Entity Change, to Centralized Case Processing on approved, as well as revoked registrations.

    11. Inputting, as warranted, the appropriate date for the Form 637 IMS case file follow-up compliance review.

    12. Updating the IMS case file to Status 90 (Complete) for approved, continued, denied, revoked or suspended registrations.

    13. Updating the IMS case file to Status 70 (LT Review from Field) when a change in ownership occurs or when a contested denial or revocation case is appealed and the excise examiner recommends denying the appeal.

    14. Ensuring all excise group compliance reviews are closed off ERCS (Status 90).

  2. If the initial application contains a combination of recommendations, then the Group Manager will sign and issue all appropriate letters.

  3. If the Group Manager elects to use an electronic signature, then a graphic digital signature must be used.

Excise Examiner Responsibilities and Procedures

  1. The excise examiner must utilize IMS and the appropriate Form 637 mandatory administrative forms, activity letter job aids and Form 637 Registration letters currently found in the Notebook Job Aid. Refer to IRM 4.24.23.11 for more detailed guidance.

  2. Form 637 reviews completed by the excise examiner must include a complete analysis of the applicant's or registrant’s business operations. Refer to Exhibit 4.24.23-1 for more information regarding business operations and transactions flow. At a minimum, the review will consist of the following:

    1. A plan on what to inspect.

    2. How the inspection will be conducted.

    3. The actual inspection, complete with applicant or registrant interview, business review and review of necessary books and records.

    4. A recommendation whether the application or registration should be approved, continued, denied, revoked or suspended and the reason for the recommendation.

  3. All Form 637 IMS case files must include documentation for the appropriate registration tests for each activity letter for which the applicant applied and/or for which the registrant is registered. Refer to IRM 4.24.2.3.1, Registration Tests for IRC 4101 Activities, and/or IRM 4.24.2.4.1, Registration Tests for Activities Under IRC 4222 and IRC 4682, for more detailed guidance about registration tests.

  4. The excise examiner will also review transcripts, other IDRS research, Accurint, Currency and Banking Retrieval System (WebCBRS) research and any other internal IRS documents to determine compliance with registration tests (e.g., the satisfactory tax history test).

  5. Prior to recommending a registration be approved or continued, the excise examiner will resolve all deficiencies and/or delinquencies. This includes items notated on the 637 Recommendation Sheet prepared by the Form 637 Registration Group.

  6. The excise examiner will explain to the new registrant:

    • The purpose of the registration and how to use it.

    • The requirement to comply with the terms and conditions of registration described in Pub 5039.

      Note:

      Noncompliance may result in revocation or suspension of the registration. Refer to IRM 4.24.2.3.3, Mandatory Revocation or Suspension Rules (IRC 4101 activities), and IRM 4.24.2.4.3, Mandatory Revocation or Suspension Rules (IRC 4222 and IRC 4682 activities), for more detailed guidance.

    • The requirement to use and maintain exemption certificates, if applicable.

      Note:

      Exemption certificates must be accepted in good faith and secured prior to the transaction occurring and/or filing a claim. Noncompliance may result in taxation or disallowance.

    • The format of the exemption certificate must include all information required by the pertinent sections of the applicable tax law.

    • Examples of exemption certificate(s) may be found in the Treasury Regulations, IRS Notices and Pub 510.

  7. The excise examiner will explain to the new registrant the filing, payment and deposit requirements for:

    • Form 720, Quarterly Federal Excise Tax Return.

    • Form 8849, Claim for Refund of Excise Taxes.

    • Form 4136, Credit for Federal Tax Paid on Fuels.

    • Form 720-TO, Terminal Operator Report.

    • Form 720-CS, Carrier Summary Report.

    • Form 2290, Heavy Highway Vehicle Use Tax Return.

  8. The excise examiner will explain to the new applicant or registrant a compliance review may be conducted in the future to verify compliance with the registration tests. A compliance review includes, but is not limited to:

    1. Inspecting exemption certificates.

    2. Inspecting filed returns.

    3. Analyzing internal controls.

    4. Performing a current financial analysis.

    5. Obtaining and/or reviewing other pertinent information related to the business and its operations.

  9. The excise examiner will direct the applicant or registrant to the IRS web site for obtaining a copy of Pub 510 and discuss the applicable section(s) including any excise tax law updates that apply. The excise examiner shall fully answer any relevant questions posed by the applicant or registrant.

Excise Group Procedures - Examinations Conducted on Approved Form 637 Registrants

  1. If an excise examiner conducts an examination on a current Form 637 registrant, then the Form 637 Registration must be given due consideration, regardless of when the last compliance review was conducted.

  2. The excise examiner must select the appropriate box on the A105, Administrative Check Sheet, and comment on the actions taken at the conclusion of the examination to verify the registrant’s registration status.

  3. If the examination results in a no-change or a refund, then the excise examiner will conduct a limited scope discretionary review. He or she must ensure the registrant’s registration status should be "Continued," if all registration criteria is met. If a limited scope discretionary review is conducted, then the excise examiner will follow the procedures in (6) thru (11) below.

  4. If the examination results in a change, then the excise examiner must conduct a discretionary review. Refer to IRM 4.24.23.7.5 for detailed guidance for compliance review procedures. The excise examiner will discuss initiating the discretionary review with the Group Manager and secure approval before proceeding.

  5. If a discretionary review is approved, then the Group Manager will establish ERCS controls and request the LT assign the Form 637 IMS case file to the group.

    Note:

    A Form 637 IMS case is not to be created locally by the excise examiner but must be assigned by the Form 637 Registration Group.

  6. If a limited scope discretionary review is conducted, then the excise examiner must comment on the A105 the actions taken to verify the status of the registration. For example, the registrant’s status was considered in a limited scope discretionary review. Furthermore, it was determined the registrant:

    • Is engaged in the registered activity or activities.

    • Has a satisfactory tax history, including any related person of the registrant.

    • Has adequate security, if applicable.

    • Is an acceptable risk, if applicable.

  7. If the registration activity should be continued, then the excise examiner will prepare Letter 3696, Form 637 Compliance Review Summary, for issuance by the group manager upon case closure. Excise examiner contact information should be included. Upload the letter into the examination case file.

  8. If the registration activity should be revoked or suspended, then the procedures in IRM 4.24.23.9 apply.

  9. If the registrant has a registration number that was issued prior to February 1, 2004, then the excise examiner will inform the registrant that a national registration number will be issued. Document all actions taken on Form 9984 or in the IMS activity record.

  10. Upon completion, review and acceptance of the examination case file by the Group Manager, he or she will sign, date and mail Letter 3696. In addition, the Group Manager will forward, via secure e-mail, to the LT the following documents so that the Form 637 IMS case file can be updated:

    1. A copy of the A105.

    2. A copy of the signed Letter 3696.

    3. Registrant’s concurrence to revocation/suspension, if applicable.

    4. A copy of the IMS activity record or Form 9984 that documents all actions taken in the examination case file by the excise examiner and the group manager.

  11. The LT will:

    1. Create a discretionary review in IMS.

    2. Upload attachments in the secure e-mail into Form 637 IMS case file, i.e., the A105 and the signed copy of Letter 3696, etc.

    3. Continue the registration in IMS.

    4. If applicable, prepare and issue Letter 5023, Notification of Change in Form 637 Registration Number, with Pub 5039, for the national registration number and then upload a signed copy into the Form 637 IMS case file.

    5. If the registration is to be revoked or suspended, then update the Form 637 IMS case file to Status 65 - "Deny and Revoke" queue.

    6. If applicable, forward the request to have the Form 637 Indicator removed from IDRS.

    7. Document the Form 637 IMS Case Level Activities (CLA) about all actions taken.

  12. Form 637 compliance reviews, including limited scope discretionary reviews documented on the A105, are subject to EQ reviews.

Excise Group Procedures - Initial Application Reviews

  1. The excise examiner will review an initial application for registration, make an on-site visit, if necessary, and then recommend approval or denial of the application. All Mandatory Administrative Forms must be completed to support the recommendation and uploaded into the Form 637 IMS case file.

  2. Initial contacts with an applicant must be made by mail using the appropriate initial contact letter. The excise examiner will not make initial contact by telephone.

  3. Excise examiners must use Letter 5708 to notify the applicant of their initial application review. Refer to IRM 4.24.23.3 for additional information.

  4. Following the initial telephone conversation with the applicant and scheduling the appointment, the excise examiner will prepare and issue Letter 3686, Appointment Scheduled - Form 637 Reviews, to confirm the initial appointment. A copy of the signed Letter 3686 will be uploaded into the Form 637 IMS case file.

  5. If the applicant fails to respond to the initial contact letter after 14 calendar days, and it was not returned as "undeliverable," then the excise examiner must determine why the applicant is not responding. Follow-up attempts must be made to contact the applicant, including telephone inquiries. Refer to IRM 4.10.2.8.3, No Response/No Show Procedures, for additional information.

  6. If follow-up attempts are unsuccessful and the excise examiner exhausted all available avenues to locate the applicant to conduct the review, e.g., Accurint, IDRS, WebCBRS and telephone directories, then the excise examiner should recommend denying the application. Refer to IRM 4.24.23.9 for additional information.

  7. If the initial contact letter is returned "undeliverable," then the excise examiner must take steps to determine if a more current address or contact information can be obtained, as well as document the actions taken in the Form 637 IMS case file. Refer to IRM 4.10.2.8.4, Undeliverable Initial Contact Letters, for additional information about obtaining a current address. If the applicant cannot be located, then the excise examiner will scan and upload a copy of the returned envelope into the Form 637 IMS case file, complete Form 13499-C, 637 Recommendation, and recommend denying the registration. Refer to IRM 4.24.23.9 for additional information.

  8. If an applicant meets all the applicable registration tests, then the excise examiner will:

    1. Complete Form 13499-C with a recommendation, summary of registration tests performed, reason for the recommendation and any follow-up actions, if applicable.

    2. Upload Form 13499-C along with mandatory administrative forms and workpapers to support the recommendation into the Form 637 IMS case file. Refer to IRM 4.24.23.11 for additional information.

    3. Prepare and upload Form 2363, Master File Entity Change, to post the Form 637 Indicator to BMF. Refer to IRM 4.24.24.5.1, Procedures to Post or Delete the Form 637 Indicator on Business Master File (BMF), for additional information.

    4. Recommend approval of registration in IMS and send the Form 637 IMS case file to the Group Manager for his or her review and concurrence with the recommendation.

    Note:

    If a bond is required and a surety bond is used, then a registration will not be issued before receipt of a letter from the surety company certifying a bond has been issued to the applicant.

  9. The Group Manager will document on Form 9984, the IMS activity record or on the Form 637 IMS case file CLA he or she completed a review of the file and concurs with the excise examiner’s recommendation. If Form 9984 is used, then the group manager will upload it into the Form 637 IMS case file.

  10. The Group Manager will also:

    1. Make the final determination in IMS to approve the registration.

    2. Prepare, sign and mail or direct the excise examiner to mail Letter 3689 to the applicant. The Letter 3689 will include excise examiner contact information.

    3. Upload a signed copy of letter into the Form 637 IMS case file.

    4. Forward the Form 2363 to have the Form 637 Indicator added to IDRS. Refer to IRM 4.24.24.5.1, Procedures to Post or Delete the Form 637 Indicator on BMF, for procedures on posting or deleting the Form 637 Indicator on BMF.

    5. Document all actions taken on Form 9984, the IMS activity record or on the Form 637 IMS case file CLA.

  11. A national registration number with approved activity letter(s) will be issued to each registrant. Multiple registration numbers will not be issued.

    1. If the applicant is already registered for other activities and has a registration number issued prior to February 1, 2004, then the excise examiner must inform the registrant that a new national registration number will be issued. The excise examiner will inform the registrant to discontinue the use of any previously "approved" registration number(s) once the national registration number is received. The Group Manager will prepare and issue the registrant Letter 3689 and Letter 5023 with Pub 5039, Terms and Conditions of Registration for Form 637.

    2. If a registrant already has a national registration number, then any additional activity letter(s) approved will be added to the end of the approved national registration number.

    3. If the registrant has two valid registration numbers, i.e., an old registration number, as well as a national registration number, then IMS will look to the oldest approved status date for both numbers and may generate a new national registration number. If this occurs, then a HELP ticket must be created to remove the newly-issued national registration number. The Group Manager will issue the letter of registration using the existing national registration number and approved activity letter(s). The Group Manager will document Form 9984, the IMS activity record or the Form 637 IMS case file CLA for all actions taken.

  12. If a person or entity later qualifies for registration for activities not covered by the current approved registration number, then a Form 637 application must be submitted with the additional activity letter(s) for approval. An updated Letter 3689 will be issued to reflect the additional activity letter(s).

  13. If a determination is made that an applicant did not apply for the correct activity letter, but qualifies for a different activity letter listed on the Form 637 application, then the excise examiner will:

    1. Secure a signed Form 637 application with the correct activity letter and scan it into the Form 637 IMS case file.

    2. Obtain a withdrawal statement from the applicant regarding the incorrect activity letter.

    3. Forward the new application to the designated Form 637 Registration Group LT via secure e-mail. The LT will upload the application and add the correct activity letter into the Form 637 IMS case file. Once the Form 637 IMS case file is updated with the correct activity letter, the excise examiner should close the case.

    Note:

    If a withdrawal statement is not secured, then Form 9984 or the IMS activity record should be documented showing the date the withdrawal statement was solicited.

Excise Group Procedures - Compliance Reviews

  1. The Chief, Estate & Gift/Excise Tax, is responsible for ensuring the registrant is:

    1. Using the registration properly.

    2. Meeting all the applicable registration tests.

      Note:

      Refer to IRM 4.24.2.3.1, Registration Tests for IRC 4101 Activities, and IRM 4.24.2.4.1, Registration Activities Under IRC 4222 and IRC 4682, for more information.

    3. Complying with the terms and conditions of the registration.

  2. Terms and conditions for registrants may be found at:

    • Treas. Reg. 48.4101-1(h),Taxable fuel; registration, for registrants for activities governed by IRC 4101.

    • Treas. Reg. 48.4222(a)-1, Treas. Reg. 48.4222(b)-1, and Treas. Reg. 48.4222-(c)-1, Tax free sale of articles to be used for, or resold for further manufacture, for registrants for activities that are governed by IRC 4222.

    • Treas. Reg. 52.4682-5(d) for activities that are governed under IRC 4681.

  3. The Group Manager will be responsible to ensure all sample compliance reviews are completed by fiscal year end.

  4. The Territory Manager and/or Group Manager may request a discretionary review on a Form 637 registrant derived from a lead, if facts and circumstances warrant.

  5. If a registrant is selected for a discretionary review, then the Group Manager will request the LT update the Form 637 IMS case file to the excise group. The excise group must establish ERCS controls for all discretionary reviews.

  6. Each sample compliance review may require an on-site visitation.

  7. All initial contacts with a registrant on a sample or discretionary review must be made by mail. Refer to IRM 4.24.23.3 for additional information.

  8. Following the initial telephone conversation with the registrant and scheduling of the appointment, the excise examiner will prepare and issue Letter 3686 to confirm the initial appointment.

  9. If the registrant fails to respond to the initial contact letter after 14 calendar days and it is not returned as "undeliverable," then the excise examiner will follow the procedures in IRM 4.24.23.7.4(5) and (6).

  10. If the initial contact letter is returned "undeliverable" and the address in IMS matches the address on IDRS, then no further actions will be taken to locate the registrant. Refer to IRM 4.24.2.7, Changes in the Information Submitted in Connection with Application for Registration, and Pub 5039 for additional information. The excise examiner will scan and upload a copy of the returned envelope into the Form 637 IMS case file and recommend revoking the registration.

  11. The Form 637 IMS case file will be documented sufficiently to establish what was done during the review. Refer to IRM 4.24.23.11 for information on mandatory workpapers.

  12. The excise examiner will review the Form 637 IMS case file, perform Accurint, IDRS and WebCBRS research, as well as review any other relevant internal documents. Exemption certificates, if applicable, must be inspected to ensure the registrant is compliant with the registration requirements.

  13. At the conclusion of the review, the excise examiner will prepare Letter 3696, Form 637 Compliance Review Summary, using their contact information and indicate if problems were identified.

  14. If no problems were identified, then the excise examiner will make a recommendation to continue the registration and close the Form 637 IMS case file to the Group Manager. Refer to IRM 4.24.23.8 for additional information on continuing a registration.

  15. If problems were identified, then the excise examiner will clearly and concisely document deficiencies in the body of Letter 3696. The description should be specific to the registrant's situation. Examples of deficiency statements include, but are not limited to, the following:

    • You failed to make timely Federal Tax Deposits on your Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, and Form 941, Employer's Quarterly Federal Tax Return.

    • You failed to secure and maintain exemption certificates for your exempt sales to state and local governments.

    • You failed to properly report your Federal Excise Taxes for the following periods (list periods).

  16. The excise examiner must include a follow-up date on the Letter 3696 by which time the registrant must correct the stated deficiencies.

    Note:

    The length of the response date will depend on the underlying deficiencies and be determined by the excise examiner after consulting with the group manager.

  17. The excise examiner will upload the Letter 3696 and all mandatory workpapers into the Form 637 IMS case file, recommend continuation of the registration and close the Form 637 IMS case file to the Group Manager.

    Note:

    The Group Manager will indicate the follow-up date in IMS when closing the case.

  18. On the follow-up date indicated on the Letter 3696, the excise examiner is to request the Form 637 IMS case file as a discretionary review from the Group Manager.

  19. If after the follow-up review the registrant has corrected the deficiencies, then a new Letter 3696 should be prepared and the registration continued. Refer to IRM 4.24.23.8 for information on continuing a registration.

  20. If after the follow-up review the registrant has not corrected the deficiencies, then the excise examiner should discuss revocation or suspension with the Group Manager and take the appropriate actions. Refer to IRM 4.24.23.9 for information on revoking or suspending a registration.

Procedures Relating to Approvals and Continuations of Registrations

  1. An applicant for registration should be approved if the excise examiner determines the applicant:

    1. Meets the applicable registration tests for the activity applied. Refer to IRM 4.24.2.3.1, Registration Tests for IRC 4101 Activities, and/or IRM 4.24.2.4.1, Registration Tests for Activities Under IRC 4222 and IRC 4682, for more detailed guidance about registration tests.

    2. Addressed and resolved deficiencies notated by the Form 637 Registration Group, if applicable.

  2. For approved applications, the excise examiner will:

    1. Complete Form 13499-C with a recommendation, summary of registration tests performed, reason for the recommendation and any follow-up actions, if applicable.

    2. Upload Form 13499-C along with mandatory administrative forms and workpapers into the Form 637 IMS case file. Refer to IRM 4.24.23.11 for additional information.

    3. Prepare and upload Form 2363, Master File Entity Change, to post the Form 637 Indicator to BMF. Refer to IRM 4.24.24.5.1, Procedures to Post or Delete the Form 637 Indicator on Business Master File (BMF), for additional information.

    4. Recommend approval of registration in IMS, check the box for a bond, if applicable, and send the Form 637 IMS case file to the Group Manager for his or her review and concurrence with the recommendation.

      Note:

      If a bond is required and a surety bond is used, then a registration will not be issued before receipt of a letter from the surety company certifying a bond has been issued to the applicant.

  3. The Group Manager will:

    1. Review the Form 637 IMS case file and concur with excise examiner’s recommendation or return the file to the excise examiner for additional consideration.

    2. Prepare, sign and mail Letter 3689 to the applicant. The Letter 3689 will include the excise examiner’s contact information.

    3. Upload a copy of the signed letter into the Form 637 IMS case file.

    4. Forward to Cincinnati Exam CCP the Form 2363 so the Form 637 Indicator may be added to IDRS. Refer to IRM 4.24.24.5.1, Procedures to Post or Delete the Form 637 Indicator on BMF, for additional guidance.

    5. Document all actions taken on Form 9984 or into the Form 637 IMS case file CLA.

    6. Make the final determination in IMS to approve the registration and update Form 637 IMS case file to Status 90.

    7. Close the case off ERCS.

  4. A Form 637 registration should be continued if the excise examiner determines the registrant:

    1. Meets all of the applicable registration tests. Refer to IRM 4.24.2.3.1 and IRM 4.24.2.4.1 for more detailed guidance.

    2. Complies with the terms and conditions of registration under Treas. Reg. 48.4101-1(h).

    3. Addressed and resolved deficiencies notated by the Form 637 Registration Group, if applicable.

  5. For continued registrations, the excise examiner will:

    1. Complete Form 13499-C with recommendation, summary of registration tests performed, reason for recommendation and any follow-up actions, if applicable.

    2. Upload Form 13499-C along with mandatory administrative forms and workpapers to support recommendation into the Form 637 IMS case file. Refer to IRM 4.24.23.11 for additional information.

    3. Prepare and upload Letter 3696, including a follow up date, if applicable.

    4. Recommend continuation of registration in IMS and update the Form 637 IMS case file to the Group Manager for review and concurrence.

  6. The Group Manager will:

    1. Review Form 637 IMS case file and concur with excise examiner’s recommendation or return the file to the excise examiner for additional consideration.

    2. Prepare, sign and mail or direct the excise examiner to mail Letter 3696 to the registrant. The Letter 3696 will include the excise examiner’s contact information.

    3. Upload a copy of the signed letter into the Form 637 IMS case file.

    4. Document all actions taken on Form 9984 or into the Form 637 IMS case file CLA.

    5. Make the final determination in IMS to continue the registration, include a follow-up date, if applicable, and update the Form 637 IMS case file to Status 90.

    6. Close the case off ERCS.

Procedures Relating to Denials, Revocations and Suspensions of Registrations

  1. When it is determined that an application for registration should be denied or an existing registration revoked or suspended, the applicant or registrant will be notified in writing stating the basis for the denial, revocation or suspension.

  2. An application for registration should be denied, if the excise examiner determines that the applicant:

    • Does not meet all of the applicable registration tests, which are described in (4) below.

    • Has not responded within 30 calendar days to a request for additional information relating to its application.

  3. An existing registration should be revoked or suspended, if the excise examiner determines the registrant:

    • Does not meet all of the applicable registration tests for its registration, which are described in (4) below.

    • Has not responded within 30 calendar days to a request for additional information relating to its approved registration.

    • Has failed, at any time, to comply with the terms and conditions of registration under Treas. Reg. 48.4101-1 (h).

    • Has used its registration to evade, or attempt to evade, the payment of any tax imposed by IRC 4041(a)(1) or IRC 4081; or to postpone, or in any manner to interfere with the collection of any such tax; or to make a fraudulent claim for a credit or payment; or has aided or abetted another person in evading, or attempting to evade, payment of any tax imposed by IRC 4041(a)(1) or IRC 4081; or in making a fraudulent claim for a credit or payment; or has, at any time, failed to comply with the terms and conditions of registration.

  4. The applicant or registrant does not meet the registration test if:

    1. Activity Test - The applicant or registrant is not engaged in the trade or business for the activity letter for which the applicant applied or registrant is registered. Refer to Treas. Reg. 48.4101-1(f)(2) for further guidance.

      Note:

      Treas. Reg. 48.4101-1(f)(2)(ii) permits registration of an entity that is likely to become engaged in the activity within a "reasonable" amount of time after becoming registered.

    2. Acceptable Risk Test - The applicant, registrant or related person has been penalized for a wrongful act or creates a significant risk of nonpayment or late payment of the tax imposed by IRC 4041(a)(1) and IRC 4081 or the applicant or registrant did not post a bond. Refer to Treas. Reg. 48.4101-1(f)(3) for further guidance.

    3. Adequate Security Test - The applicant or registrant does not have adequate financial resources and/or a satisfactory tax history in their filing, deposit, payment reporting and claim history for all federal taxes and/or a related person did not have satisfactory tax history or the applicant or registrant did not post a bond. Refer to Treas. Reg. 48.4101-1(f)(4) for further guidance.

  5. An application should be denied or an approved registration revoked when an applicant or registrant fails to respond to the initial contact letter after 14 calendar days and it was not returned as "undeliverable." The same applies if an initial contact letter was returned as "undeliverable" and the excise examiner exhausted all avenues to locate the applicant or registrant. Then the excise examiner will:

    1. Complete Form 13499-C , document the actions taken to locate the applicant or registrant and include the reason for the denial or revocation. Upload Form 13499-C into the Form 637 IMS case file.

    2. Complete Form 1900-B, document the actions taken to locate the applicant or registrant and upload Form 1900-B into the Form 637 IMS case file.

    3. Document his or her actions on Form 9984 or in the IMS activity record.

  6. The procedures listed in (7) will apply in cases where the applicant or registrant:

    1. Concurs with the excise examiner’s determination to deny the application, revoke or suspend the approved registration.

    2. Requests a withdrawal of an application.

    3. Requests a revocation of an approved registration.

  7. The excise examiner will:

    1. Obtain applicant’s or registrant’s written concurrence. An e-mail from the applicant or registrant is sufficient.

    2. Complete Form 13499-C and include the reason for the denial, revocation or suspension. Upload both the written concurrence from the applicant or registrant and Form 13499-C into the Form 637 IMS case file.

      Note:

      If a statement cannot be secured, then document Form 9984 or the IMS activity record and Form 13499-C with the date the request was made and the applicant’s or registrant’s response.

    3. Prepare and upload Form 2363 to remove the Form 637 Indicator from the Business Master File (BMF). Refer to IRM 4.24.24.5.1 for additional information.

    4. Upload all mandatory administrative forms into the Form 637 IMS case file.

    5. Recommend the application be denied or registration revoked in IMS.

    6. Close the Form 637 IMS case file to the Group Manager.

  8. The Group Manager will:

    1. Review the Form 637 IMS case file and detail his or her concurrence and the basis for the denial, revocation or suspension on Form 9984 or into the Form 637 IMS case file CLA. If the Group Manager does not concur with the denial, revocation or suspension, then he or she will return the case file to the excise examiner for further action.

    2. Prepare, sign and mail Letter 3685, Denial of Excise Tax Registration, Letter 3691, Letter of Revocation, or Letter 3692, Suspension of Registration, to the applicant or registrant. The letters will include the Form 637 Registration Group Manager’s address and contact information.

    3. Upload a signed copy of the letter into the Form 637 IMS case file.

    4. Forward the Form 2363 to have the Form 637 Indicator removed from IDRS. Refer to IRM 4.24.24.5.1 for additional information.

    5. Document all actions taken on Form 9984, the IMS activity record or into the Form 637 IMS case file CLA.

    6. Update the Form 637 IMS case file to Status 90.

    7. Close the case on ERCS.

  9. In cases where the excise examiner proposes to deny an application or revoke or suspend an approved registration, and the applicant or registrant does not agree with the denial, revocation or suspension, the excise examiner will:

    1. Complete Form 886-A, Explanation of Items, including the facts, why the registration is being denied, revoked or suspended, tax law and argument, applicant’s or registrant’s position and conclusion. Form 886-A will be enclosed with the denial, revocation or suspension letter.

    2. Upload Form 13499-C, Form 886-A and mandatory administrative forms into the Form 637 IMS case file.

    3. Recommend the application be denied or registration revoked in IMS.

    4. Close the Form 637 IMS case file to the Group Manager.

  10. The Group Manager will:

    1. Review the Form 637 IMS case file and detail his or her concurrence and the basis for the denial, revocation or suspension on Form 9984 or into the Form 637 IMS case file CLA. If the Group Manager does not concur with the denial, revocation or suspension, then he or she will return the case file to the excise examiner for further action.

    2. Offer a conference with the applicant or registrant to discuss the unagreed issues.

    3. Document Form 9984 or the Form 637 IMS case file CLA that a conference was offered to the applicant or registrant, the outcome of the conference, if applicable, and concurrence with the excise examiner’s recommendation.

    4. Prepare, sign and mail Letter 3685, Letter 3691, or Letter 3692 to the applicant or registrant and include the Form 886-A prepared by the excise examiner. The Letter will include the Form 637 Registration Group Manager’s address and contact information.

    5. Upload a signed copy of letter into the Form 637 IMS case file.

    6. Forward Form 2363 to have the Form 637 Indicator removed from IDRS. Refer to IRM 4.24.24.5.1 for additional information.

    7. Document all actions taken on Form 9984, the IMS activity record or into the Form 637 IMS case file CLA.

    8. Update the Form 637 IMS case file to Status 90.

    9. Close the case file on ERCS.

  11. The registrant will have 10 calendar days from the date of the denial, revocation or suspension to submit a written appeal. After the 10 calendar days expire, the registrant will have to re-apply for registration.

  12. Contested denials, revocations and suspensions are those where the registrant objects in writing to the denial of their application or the revocation or suspension of the registration and has provided a written appeal within 10 calendar days from the date the Letter 3685, Letter 3691, or Letter 3692 was issued.

  13. The Chief, Estate & Gift/Excise Tax is authorized to sign Letter 3684, Final Denial of Appeal for Registration, Letter 3690, Final Denial of Appeal for Revocation of Excise Tax Registration, or Letter 3693, Final Denial of Appeal for Suspension of Excise Tax Registration.

  14. If an applicant or registrant appeals a denial, revocation or suspension, then the designated LT will document the receipt of the applicant’s or registrant’s appeal into the Form 637 IMS case file. Upload the appeal into the Form 637 IMS case file. The Form 637 IMS case file will be forwarded to the Form 637 Registration Group Manager to review prior to meeting with the Chief, Estate & Gift/Excise Tax.

  15. The Form 637 Registration Group Manager or LT will review the case. If there is enough information to consider the appeal, then he or she will:

    1. Concur with the appeal and have the registration approved.

    2. Alternatively, deny the appeal and prepare the package to be forwarded to the Chief, Estate & Gift/Excise Tax for consideration and final ruling.

  16. If there is not enough information to consider the appeal, then the Form 637 Registration Group Manager or designee will return the case to the group manager for consideration. The group manager will:

    1. Concur with the appeal and follow the steps to have the registration approved.

    2. Alternatively, deny the appeal and update the IMS Case file with pertinent information to support their position and return the Form 637 IMS file to the LT in Status 70.

  17. The Form 637 IMS case file will be forwarded to the Form 637 Registration Group Manager to review prior to meeting with the Chief, Estate & Gift/Excise Tax.

  18. If the Chief, Estate & Gift/Excise Tax concurs with the denial, revocation or suspension, then the applicant or registrant will be issued Letter 3684, Letter 3690 or Letter 3693 accordingly. Once the appropriate letter has been signed by the Chief, Estate & Gift/Excise Tax, the letter will be forwarded to the Form 637 Registration Group Manager to be issued and uploaded into the Form 637 IMS case file.

  19. If the Chief, Estate & Gift/Excise Tax determines the registration should be granted or reinstated, then the Form 637 IMS case file will be updated to the designated LT who will update the IMS Form 637 Registration status to "approved." The designated LT will issue Letter 3689 and ensure the Form 637 Indicator is updated. The designated LT will document Form 637 IMS case file CLA and upload Letter 3689 into the Form 637 IMS case file.

  20. The Form 637 Registration Group Manager will maintain a list of all applicants or registrants that contest the denial, revocation or suspension of their registration.

  21. In both non-contested and contested revocations or suspensions, Form 2363 will be used to remove the Form 637 Registration Indicator from Master File. This action shall be documented in Form 637 IMS case file CLA.

  22. For registrations that have been revoked and approved upon appeal, a new registration number will be issued.

  23. For registrations that have been suspended and subsequently continued, the same registration number will be re-issued to the registrant and continued in IMS, if it is a national registration number.

  24. For registrations that have been suspended and subsequently continued, a new registration number will be issued, if the previous registration number was issued prior to February 1, 2004.

  25. For registrations that have been previously suspended and are now considered revoked, follow the guidance in this section above, starting at paragraph 3.

Recording Time Charged to Form 637 Registration Program

  1. Time spent reviewing applications and registrations should be charged to Compliance Activity Code 588. ERCS must be used to control applicants and registrants using MFT BO. The appropriate mandatory tracking codes listed below will be input on ERCS for monitoring purposes.

    • 7640 - Initial Review.

    • 7641 - Sample Review.

    • 7642 - Discretionary Review.

  2. All Form 637 compliance reviews will use the current fiscal year and show a period of "01."

  3. If a Form 637 compliance review results in an examination, then the time recorded once the examination begins will be charged to the examination abstract. The excise examiner will request examination case controls using Form 5345-D showing Project Code 0637. Refer to IRM 4.24.2.9, Examinations Resulting from Form 637 Compliance Reviews, for additional information.

    Note:

    No time should be charged to the Form 637 compliance review once the examination has started other than to close out the Form 637 compliance review.

Mandatory Administrative Forms for Excise Examiners

  1. The Notebook-generated forms and templates in the Form 637 Registration Program are accessed from the Mandatory Admin Forms tab on the Case Details page. One or more sets of Mandatory Admin Forms may be added to a Taxpayer Case. These Mandatory Admin Forms include information pre-populated with the Common Fields captured during the setup of a Taxpayer Case and User Details in the Notebook.

    Note:

    The Form 637 Program Admin Forms are similar in nature to the excise examination mandatory administrative forms. Refer to IRM 4.24.6, Technical Guidance and Procedures for Excise Issues, for more information.

    Note:

    Form 637 questionnaires for each activity letter, which are not mandatory but strongly encouraged because they assist with issue identification, are identified and discussed at Knowledge Management under the Form 637 Registrations Shelf at the Registration Reviews Book.

  2. Mandatory Admin Forms deployed are:

    Name Title
    Form 637 New Applicant IDR Language for Form 637 New Applicant
    Form 637 Follow Up IDR IDR Language for Form 637 Follow-Up
    A605 Administrative Check Sheet
    A610 Form 637 Registration Plan to Close Check Sheet
    A615 Initial Appointment Agenda
    A625 Initial Interview Questions and Notes
    B700 Form 637 Filing Check Sheet
    C800 Form 637 Financial Analysis
    C805 Internal Controls
    D900 Initial Contact Check Sheet
    Form 13499-C 637 Recommendation

Form 637 Information Document Requests (IDRs): New Applicant Language and Follow Up Reviews

  1. IMS Notebook files contain general language for new applicants and follow up reviews for registrants to assist with completing Form 4564, Information Document Request.

A605 Administrative Check Sheet

  1. The purpose of the A605 is to provide a set of administrative guidelines for tasks that may arise during the compliance review. It is similar in nature to the A105 employed for excise examinations.

    Note:

    Penalties under IRC 6719, Failure to register or re-register, and IRC 6725, Failure to report information under section 4101, should be considered.

  2. Form 2848 or Form 8821 that reflects Form 637 representation only cannot be forwarded to the CAF unit as there is no master file for Form 637. Form 2848 or Form 8821 must be scanned and uploaded into the Form 637 IMS file. However, if Form 2848 or Form 8821 representation contains tax returns, e.g., a Form 720, Form 1120, etc., then it must be forwarded to the CAF unit for processing. For additional information regarding a power of attorney, refer to IRM 4.11.55, Power of Attorney Rights and Responsibilities.

A610 Form 637 Review Plan to Close Check Sheet

  1. The A610 is a guide for planning the Form 637 compliance review. It is similar in nature to the A110 employed for excise examinations.

A615 Initial Appointment Agenda

  1. The A615 provides guidance for conducting the initial contact with the applicant or registrant. It is similar in nature to the A120 employed for excise examinations.

A625 Initial Interview Questions and Notes

  1. Interviews will be documented using the A625. It is similar in nature to the A125 employed for excise examinations.

  2. Completion of A625 does not constitute a comprehensive interview. Additional questions should be tailored to the activity letter, which the applicant is seeking or the registrant is registered.

B700 Form 637 Required Filing Check Sheet

  1. The purpose of the B700 is to document the tax history of the applicant or registrant, owners, officers and any related entities. It is similar in nature to the B200-1 and B200-2 employed for excise examinations.

  2. To meet the satisfactory tax history, an applicant or registrant must not have outstanding unaddressed federal tax liabilities of any type and demonstrate to the excise examiner compliance with the filing, deposit, and payment histories for all federal taxes, including those for any related person or persons.

  3. Compliance issues including, but not limited to Notice CP 241 information and items noted on the 637 Recommendation Sheet, completed by the TE in the Form 637 Registration group should be addressed, if applicable. Refer to IRM 4.24.24.5.2, Notice CP 241 Procedures, for additional information.

C800 Form 637 Financial Analysis

  1. The C800 documents a financial analysis of the applicant or registrant. A financial analysis is a picture of the business in dollars and cents. It shows levels of risk, measures business performance and enables the excise examiner to make informed decisions about the health of the business.

  2. Excise examiners may select financial ratios they feel best demonstrate financial health of the business and document the methods employed. Refer to Exhibit 4.24.23-2 for Financial Analysis Techniques.

  3. A decision on the results of the financial analysis must consider an analysis of internal controls. Refer to IRM 4.24.23.11.8 for additional information on Internal Controls.

  4. Excise examiners must consider and evaluate the applicant or registrant’s past payment history for tax liabilities with special attention to past treatment of employment tax liabilities.

  5. Approval of an application or continuation of a registration will not be allowed, if there are outstanding federal tax liabilities, which are unaddressed.

  6. If the applicant or registrant is experiencing financial difficulty, then the excise examiner should protect the government’s interests by ensuring the applicant or registrant is not using FET deposits to pay other liabilities or is filing excise tax claims to increase cash flow.

  7. In certain instances, a financial analysis should be utilized in determining if taxpayer will be required to post a bond to meet the adequate security test.

C805 Internal Controls

  1. The C805 documents the analysis of internal controls and the business operations of the applicant or registrant. It is similar in nature to the C305 employed for excise examinations.

  2. Internal controls must be analyzed and documented to demonstrate:

    • The effectiveness and efficiency of the business operations.

    • The strengths, weaknesses and reliability of the applicant or registrant’s financial reporting.

  3. The excise examiner must verify the applicant or registrant has adequate resources and internal controls to ensure the collection and payment of tax. This can be documented by:

    1. Flowcharting key business operations.

    2. Documenting in narrative form.

      Note:

      Identify the name and title of each person making decisions or taking actions that affect the financial and tax position of the applicant or registrant. The names and types of documents that support the key business operations process should also be identified.

D900 Initial Contact Checksheet

  1. The D900 contains action items to consider at the time initial contact occurs. It is similar in nature to the D400 employed for excise examinations. The D900 documents that the excise examiner:

    1. Provided identification and contact information.

    2. Discussed compliance review process.

    3. Discussed applicant’s or registrant's role in the compliance review.

    4. Addressed any questions with the applicant or registrant.

Form 13499-C 637 Recommendation

  1. Form 13499-C is a summary sheet that documents the following:

    • Recommendation and letter to be issued.

    • Summary of the registration tests performed. Refer to IRM 4.24.2.3.1, Registration Tests for IRC 4101 Activities, and IRM 4.24.2.4.1, Registration Tests for Activities Under IRC 4222 and IRC 4682, for more detailed guidance.

    • Reason for the recommendation.

    • Any follow up actions required.

Request for Secure Airport Terminal (SAT) Designation

  1. All SAT Designation cases will be worked together with a Form 637 terminal review.

    Note:

    To qualify for a SAT Designation, the terminal must be registered with a Form 637 activity letter "S." A SAT Designation may be approved simultaneously with a valid Form 637 activity letter "S" registration.

  2. Notice 16-15 provides guidance regarding the criteria for designation by IRS of a terminal located within a secure area of an airport as a SAT for purposes of IRC 4081 and IRC 4082. Additionally, this notice specifies steps and procedures for a terminal operator to successfully request a terminal be placed on the SAT Designation list. For detailed guidance, refer to the notice located at Treatment of Kerosene for Use in Aviation.

  3. The American Jobs Creation Act of 2004 (Pub. L. 108-357) and the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (Pub. L. 109-59), provides a new system for imposing excise tax on kerosene used in aviation. Under this system, kerosene generally is taxed at a rate of 24.3 cents per gallon (excluding the 0.1 cent per gallon imposed for the Leaking Underground Storage Tank Trust Fund (LUST) tax). However, if the kerosene is removed directly from a terminal or refinery into the fuel tank of an aircraft, then it will be taxed at lower aviation rates. Furthermore, if nontaxable use kerosene is removed directly from a terminal into the fuel tank of an aircraft, then the general rate of tax is reduced to zero. For purposes of these exceptions, refueler trucks, tankers and tank wagons that meet certain conditions (“refuelers”) are treated as part of a terminal, if the terminal is located within a secure area of an airport, such as a SAT.

  4. To add a terminal to the SAT Designation list, a terminal operator must submit a written request to the Excise Operations Unit at Cincinnati, OH.

  5. Excise examiners are responsible for reviewing requests for a SAT Designation, as well as the continuance or revocation of an existing SAT Designation to comply with the procedures specified in Notice 16-15. An excise examiner recommends to the Group Manager a SAT Designation be approved or denied, as well as an existing SAT Designation be continued or revoked.

  6. The Group Manager concurs or does not concur with the recommendations made by the excise examiner. If the Group Manager does not concur with the recommendation, then the case file is returned to the excise examiner for further development. If a denial or revocation is not contested, then the Group Manager signs and issues the appropriate letter. If a denial or revocation is contested and the Group Manager concurs with the recommendation to deny or revoke, then the case will be forwarded to the Form 637 Group Manager for concurrence or non-concurrence.

  7. If the Form 637 Group Manager does not concur with the recommendation, then the case file is returned for further development. If the Form 637 Group Manager concurs with the recommendation, then the case file is forwarded to the Chief, Estate & Gift/Excise Tax for a final decision.

Role and Responsibilities of Centralized Specialty Tax Operations (CSTO)

  1. CSTO is comprised of the Excise Operations Unit, the Classification Team and the Audit Information Management System/Examination Returns Control System (AIMS/ERCS) Team, which are independent of one another.

  2. Upon receipt of a SAT Designation request, the Excise Operations Unit date-stamps the SAT Designation request and expeditiously routes it to the Classification Team.

  3. Upon receipt, the Classification Team ensures the request is complete. If not complete, then the requestor should be contacted for any missing information. Required information includes:

    • Name of the entity making the request.

    • Employer identification number.

    • Mailing address.

    • Terminal Control Number (TCN).

    • Contact person.

  4. The Classification Team conducts research to determine if an open compliance activity is in process for the designated requestor. Research should include both AIMS and ERCS review (i.e., MFT - "BO," "PH," "P9," ...).

  5. If an open compliance activity applies to the designated requestor, then the Classification Team scans the original request letter and forwards it to the appropriate excise group.

  6. If an open compliance activity does not apply to the designated requestor, then the Classification Team must prepare a classification check sheet, which includes the following:

    • Case Action = I-ERCS & IMS.

    • Form Number = Form 637.

    • Abstract = 588 Registration and Exemptions.

    • Project Code = 0637 - Form 637 Registration.

    • Tracking Code = 7641 - Form 637 Sample Review.

    • MFT = "BO."

  7. The scanned original request and completed check sheet must be forwarded to the AIMS/ERCS Team.

  8. Upon receipt, the AIMS/ERCS Team establishes the request on ERCS using the information from the classification check sheet.

  9. The AIMS/ERCS Team assigns the request to the excise group where the terminal is geographically located regardless of the area in which the entity is registered.

  10. The AIMS/ERCS Team forwards the excise group assignment information and the SAT Designation request letter to the Form 637 Registration Group Manager via secure e-mail.

  11. If a SAT Designation requestor provides the Excise Operations Unit new information about the changes in business operations, which may include but is not limited to, changes in refueling equipment, security measures, owners/operators or any other change to the SAT Designation criteria specified in Notice 16-15, Section 4 then that updated information will be forwarded to the Form 637 Registration Group Manager via secure e-mail for follow-up actions.

  12. If a SAT Designation denial or revocation is contested, then the Chief, Estate & Gift/Excise Tax is the only person authorized to address and propose a remedy. For this reason, if the Excise Operations Unit receives a written appeal, then they must forward it to the Form 637 Registration Group Manager for consideration via secure e-mail and have no contact with the requestor or designee.

Role and Responsibilities of the Form 637 Registration Group

  1. Upon receipt of the SAT Designation request letter and excise group assignment information from the AIMS/ERCS Team, the Form 637 Registration Group Manager will assign the Form 637 case file to the Lead Technician (LT) responsible for the territory where the terminal requesting SAT Designation is located.

  2. The LT will prepare and issue Letter 3681-A, Secure Airport Terminal (SAT) Notification Letter, to the SAT Designation requestor and provide his or her contact information.

  3. The LT will upload Letter 3681-A and SAT Designation request letter in IMS and assign the related Form 637 case to the group indicated by the AIMS/ERCS Team.

  4. The Form 637 Registration Group has no further duties in processing the designation request unless a contested denial or revocation occurs.

  5. If a SAT Designation requestor objects in writing to a denial or revocation, then it is contested. In this situation, a written appeal must be provided by the SAT Designation requestor to the Form 637 Registration Group Manager within 10 calendar days from the date the Letter 3685-A, Denial of Secure Airport Terminal (SAT) Designation, or Letter 3691-A, Revocation of Secure Airport Terminal (SAT) Designation, was issued.

  6. If a SAT Designation requestor or designee contests a denial or revocation, then the designated LT documents this on the case activity record and uploads the written appeal into the Form 637 IMS case file.

  7. The LT forwards the Form 637 case file to the Form 637 Registration Group Manager prior to a scheduled meeting between the Chief, Estate & Gift/Excise Tax and the Form 637 Registration Group Manager.

  8. If the Chief, Estate & Gift/Excise Tax determines a SAT Designation should be granted or continued, then the Form 637 IMS case file will be updated to the designated LT who will issue Letter 3689-A, Approval of Secure Airport Terminal (SAT) Designation, to the requestor or designee. The LT will also contact the FCN Coordinator to update the designation.

  9. If the Chief, Estate & Gift/Excise Tax concurs a SAT Designation should be denied or revoked, then he or she signs Letter 3684-A, Final Denial of Appeal for Secure Airport Terminal (SAT) Designation, or Letter 3690-A, Final Denial of Appeal for Secure Airport Terminal (SAT) Designation Revocation.

  10. After the Chief, Estate & Gift/Excise Tax signs the applicable denial or revocation letter, it will be forwarded to the Form 637 Registration Group Manager for issuance to the SAT Designation requestor and uploaded into the Form 637 IMS case file. Once the appropriate letter is issued, the Form 637 Group Manager or designee will contact the FCN Coordinator to update the designation.

  11. The SAT Designation requestor has no administrative recourse if he or she disagrees with a denial or revocation following appeal. At this time, the SAT Designation requestor may independently submit a new request for a SAT Designation, which must comply with the procedures described in Notice 16-15, Section 5.01.

Role and Responsibilities of the Excise Group Manager

  1. A completed Form 637 compliance review of the Form 637 activity letter "S" registration is required to make a SAT Designation determination.

  2. Refer to IRM 4.24.23.7.1 for detailed guidance about the Group Manager’s responsibilities. Additionally, the Group Manager must take the following actions:

    1. Ensure all initial SAT Designation request cases are completed by excise examiners within 60 calendar days of assignment to the Group Manager.

    2. Review a SAT Designation, if applicable, when a Form 637 case file for an activity letter "S" registrant is completed.

      Note:

      It is the responsibility of the excise examiner to consider a SAT Designation when completing a review of a Form 637 activity letter "S" registrant and document his or her findings in the case file.

    3. Determine whether the excise examiner’s recommendation to approve, continue, deny or revoke a SAT Designation is warranted following a review of the Form 637 IMS case file. If the Group Manger concurs, then he or she takes appropriate action and documents the Form 637 IMS case file. If the Group Manager does not concur, then he or she should confer with the excise examiner and document the decision reached, which may include returning the Form 637 IMS case file for further development.

    4. Offer to confer with the requestor or designee about unagreed issues.

    5. Sign and issue the appropriate SAT Designation letter, if applicable, which was prepared by the excise examiner, and then upload it in the Form 637 IMS case file.

    6. Confirm the excise examiner forwarded the initial SAT Designation request, SAT Designation questionnaire and Form 13499-E, Secure Airport Terminal (SAT) Designation Recommendation, to the FCN Coordinator prior to closing the Form 637 IMS case file.

Role and Responsibilities of the Excise Examiner

  1. An excise examiner recommends approving, continuing, denying or revoking SAT Designations. An excise examiner assigned a Form 637 activity letter "S" review that includes a SAT Designation must address whether it should be continued or revoked. To confirm a terminal is designated as a SAT, refer to Terminal Control Number (TCN) Terminal Locations Directory.

    Note:

    An "X" in the last column on the right of the "TCN Database - Adobe PDF file format" or "TCN Database - Microsoft Excel file format" link indicates a SAT Designation.

Approving a SAT Designation

  1. If an initial SAT Designation requestor satisfies the criteria for approval, then the excise examiner must take the following actions:

    1. Complete Form 13499-E and upload the document into the Form 637 IMS case file.

    2. Prepare Letter 3689-A and update the Form 637 IMS case file workpapers to reflect findings and recommendations.

    3. Send via secure e-mail an initial SAT Designation request letter, Letter 3689-A, Form 13499-E and SAT Designation Questionnaire to the FCN Coordinator after the Group Manager signs and issues Letter 3689-A.

      Note:

      The e-mail should be addressed to the ExSTARS mailbox at sbse.excise.exstars@irs.gov

      .

    4. Close the Form 637 case file.

Continuing a SAT Designation

  1. If the terminal operator continues to meet the criteria for a SAT Designation, then the excise examiner must take the following actions:

    1. Prepare and upload 13499-E and workpapers into the Form 637 IMS case file.

    2. Prepare and issue Letter 3696-A, Secure Airport Terminal (SAT) Compliance Review Summary, and update the Form 637 IMS case file workpapers to reflect findings and recommendations.

    3. Send via secure e-mail the SAT Designation questionnaire, a copy of signed Letter 3696-A and Form 13499-E to the FCN Coordinator using the ExSTARS mailbox at sbse.excise.exstars@irs.gov.

    4. Close the Form 637 IMS case file to the Group Manager.

Denying a SAT Designation

  1. If an initial SAT Designation requestor fails to satisfy the requirements for a SAT Designation, then the excise examiner must obtain written concurrence from the SAT Designation requestor. If this happens, then an e-mail from the SAT Designation requestor will satisfy the denial. Upon receipt of the concurrence, the excise examiner must take the following actions:

    1. Complete Form 13499-E, which must include the reason for the denial.

    2. Prepare Letter 3685-A, Denial of Secure Airport Terminal Designation.

    3. Update the IMS Form 637 case file workpapers to reflect findings and recommendations.

    4. Close the Form 637 IMS case file to the Group Manager who, in turn, will sign and issue Letter 3685-A to the requestor.

    5. Send via secure e-mail a copy of the initial SAT Designation request letter, Letter 3685-A, Form 13499-E and SAT Designation Questionnaire to the FCN Coordinator after the Group Manager signs and issues Letter 3685-A.

      Note:

      FCN Coordinator’s e-mail address is sbse.excise.exstars@irs.gov.

  2. If an initial SAT Designation requestor fails to satisfy the requirements for a SAT Designation and does not concur with the denial, then the excise examiner must take the following actions:

    1. Prepare an unagreed write-up using Form 886-A that includes the facts summarizing the reason(s) why the designation is being denied, supported with the controlling tax law, arguments, requestor’s adverse position and excise examiner’s conclusion.

    2. Complete Form 13499-E, which must include the reason for the denial.

    3. Update the Form 637 IMS case file workpapers to reflect findings and recommendations.

    4. Close the Form 637 IMS case file to the Group Manager who, in turn, will sign and issue Letter 3685-A, including the unagreed write-up, to the requestor.

Revoking a SAT Designation

  1. If the terminal operator no longer satisfies the requirements for a SAT Designation, then the excise examiner may obtain written concurrence from the SAT Designation requestor. If this happens, then an e-mail from the requestor will satisfy the revocation.

  2. Upon receipt of the concurrence, the excise examiner must take the following actions:

    1. Complete Form 13499-E, which must include the reason for the revocation.

    2. Prepare Letter 3691-A, Revocation of Secure Airport Terminal Designation.

    3. Update the Form 637 IMS case file workpapers to reflect findings and recommendations.

    4. Close the Form 637 IMS case file to the Group Manager who, in turn, will sign and issue Letter 3691-A to the requestor.

    5. Send via secure e-mail a copy of the initial SAT Designation request letter, Letter 3691-A, Form 13499-E and SAT Designation Questionnaire to the FCN Coordinator after the Group Manager signs and issues Letter 3691-A.

  3. If the designee does not concur with the revocation, then the excise examiner must take the following actions:

    1. Prepare an unagreed write-up, using Form 886-A, including the facts summarizing the reason(s) why the designation is being revoked, supported with the controlling tax law, arguments, requestor’s adverse position and excise examiner’s conclusion.

    2. Complete Form 13499-E, which must include the reason for the revocation.

    3. Update the Form 637 IMS case file workpapers to reflect findings and recommendations.

    4. Close the Form 637 IMS case file to the Group Manager who, in turn, will sign and issue Letter 3691-A, including the unagreed write-up, to the designee.

Administrative Role and Responsibilities of the Facility Control Number (FCN) Coordinator

  1. Once all of the steps and procedures described above have been completed, the excise examiner will forward the appropriate document (i.e., approval or denial letter) to the FCN Coordinator.

  2. To finalize the process for approving, continuing, denying or revoking a SAT Designation, the FCN Coordinator will take the following actions:

    1. Update the TCN file with the SAT Designation letter, SAT Designation Questionnaire and Form 13499-E received from the excise examiners.

    2. Update the applicable SAT Designation on the TCN location directory.

Forms, Letters and Publications

  1. Forms, Publications and Letters that are frequently utilized throughout this section are identified and discussed at Knowledge Management under the Form 637 Registrations Shelf, Registration Information Book, and Other Related Resources Page.

Business Operations and Transactions Flow

  1. The purpose for a Diagram of the Business Operations:

    • Allows the excise examiner to visualize business operations to easily identify specific areas of concern and develop examination techniques.

    • Allows a quick analysis of various points of taxation.

    • Provides a concise view of the business so a person reviewing the case file has a clear understanding of the business operations.

  2. The purpose for a Diagram of the Business Transaction Flow:

    • Allows analysis of processes so the excise examiner can follow the business transaction flow. This facilitates identification of specific areas warranting further consideration.

    • Expedites research for the excise examiner’s questions and helps to formulate audit techniques. A record of the name and telephone number of the person who prepared the report is helpful.

    • Provides the names of the reports and samples of documents discussed in the flow chart. This gives the excise examiner and reviewers a better understanding of documents that are specific to that business and prevents any misinterpretation.

    • Promotes efficiency of the audit process by allowing the excise examiner to identify the individual directly responsible for the report.

Financial Analysis Techniques

A financial analysis is mandatory and must be completed for all Form 637 compliance reviews where the excise examiner determines the applicant or registrant poses a risk to revenue by not paying a tax liability or by filing claims.

Note:

If the applicant or registrant is experiencing financial difficulty, then the excise examiner should protect the government’s interest by ensuring the applicant or registrant is not using Federal Excise Tax (FET) deposits to pay other liabilities and is not filing false claims to increase cash flow.

The minimum steps required to conduct a financial analysis are:

1. What is the expected excise tax liability for the applicant or registrant?

  • Each week?

  • Each month?

  • Each quarter?

2. What is the applicant's or registrant’s available cash position for the last 12 months?

3. What is the profit margin on the sale of the taxable product before consideration of the excise tax?

  • What is the profit margin after deducting all applicable direct expenses?

  • What is the profit margin after deducting the applicable excise tax?

4. What other expenses does the applicant or registrant have that will compete with applicant’s or registrant ability to pay excise tax? These may include:

  • Interest payments?

  • Salaries?

  • Equipment purchases?

  • Debt?

5. From the sale of taxable products, how much money will be left to pay the tax, if the expenses in (4) are paid first?

If a financial analysis reveals poor financial status of a fuel applicant or registrant, then the excise examiner should consider securing a bond to satisfy the adequate financial resources part of the adequate security test, if applicable. For all other applicants or registrants, the excise examiner should consult with the Group Manager to determine whether examination of Form 720 (or claim) and/or denial or revocation should be recommended.

The excise examiner may conduct one or more of the following analysis to determine the financial condition of an applicant or registrant. Other methods may be used and work papers must be documented with the analysis performed:

  • Quick Ratio (Current Assets-Inventory/Current Liabilities) - This calculates and measures the ability of the applicant or registrant to pay current liabilities and debts. If the quick ratio of applicant or registrant is 1.0 or greater, then it indicates that applicant or registrant should be able to meet its short-term liabilities. This check is more advantageous when reviewing applicants or registrants where the inventory might be hard to liquidate.

  • Current Ratio (Current Assets/Current Liabilities) - If the excise examiner determines that inventory should be easy to liquidate, then the current ratio should be considered. Fuel is normally a very liquid asset. The excise examiner may review listings of current ratios for several industries in a book published by Robert Morris & Associates (RMA Annual Statement Studies). If the current ratio drops below 1:1, then the excise examiner should discuss bonding or monitoring options with the Group Manager.

  • Retained Earnings - Retained Earnings should be positive. The greater the amount of retained earnings, the better the financial solvency of the company. Negative retained earnings indicate possible financial problems (i.e., the company may be using loans or shareholder equity to operate). If the company is new or does not maintain a balance sheet (Example: Schedule C operation), then the company will not have retained earnings. If there are no retained earnings, then other tests should be considered.

  • Cash Flow - (Income-Expenses, not including depreciation and amortization) should be positive. If the applicant or registrant is an existing company, then prior year tax returns should be reviewed for losses. If a new company, then the excise examiner should review existing contracts with suppliers and customers to determine projected income and expense items. This review and a thorough investigation of potential suppliers, customers and other income and expense items will provide an indication of applicant’s or registrant’s potential cash flow.

  • Bankruptcy - This includes reviewing information from bankruptcy courts in the states where the company or related person has lived or operated businesses, researching Accurint to determine if the company or related person declared bankruptcy anywhere in the country, as well as researching IDRS (Command code UNCLER) to determine whether a Trust Fund Recovery Penalty has been assessed against the company or related person.

  • Failure to Deposit or Pay Penalties - While occasional or de minimis failure to pay or failure to deposit penalties may not indicate poor financial condition, repeated or substantial penalties may mean the applicant or registrant is experiencing financial problems.

Example:

XYZ Oil Company applied for Form 637 "S" activity registration. The balance sheet of the company is below. A review of the tax returns for the past two years indicates that the applicant or registrant incurred losses of $13,827 in 2019 and $18,764 in 2020, after adding back depreciation expense.

Assets Dollar Amounts
Cash $34,302
Accounts Receivables $13,859
Inventories $97,019
Building & Equipment $175,000
Less Depreciation ($25,000)
Total Assets $295,180
Liabilities Dollar Amount
Accounts Payable $75,968
Current Notes Payable $70,207
Current Taxes Payable $29,875
Accrued Expenses $2,471
Long Term Loans $85,000
Loans from Stockholders $50,000
Common Stock $500
Retained Earnings ($18,841)
Total Liability & Equity $295,180

Financial Analysis:

Current Ratio: Current Assets ($145,180) / Current Liabilities ($178,521) = .81

Note:

Since the current ratio is less than one, it is cause for concern.

Retained Earnings: ($18,841)

Note:

The applicant has negative retained earnings.

Cash Flow: Taxpayer has negative cash flow for the past two years.

Conclusion:

The excise examiner reviewed applicant’s income tax return for the calendar years 2019 and 2020 and found losses in both years. The excise examiner researched IDRS and identified failure to deposit penalties were assessed for five quarters in the past two years. The excise examiner checked Accurint and found no record of bankruptcy for the company or any related person. The controller informed the excise examiner that the company experienced financial difficulty during the past several years and decided to operate above the rack in hopes of creating profitability. The excise examiner discussed findings with the Group Manager and a decision was made to bond the applicant.