Department of Treasury October 25, 2006 – Federal Register Recent Federal Regulation Documents

This document cancels a public hearing on proposed regulations under section 7874 of the Internal Revenue Code relating to the determination of whether a foreign entity shall be treated as a surrogate foreign corporation under section 7874(a)(2)(B).

The Department of the Treasury and the Alcohol and Tobacco Tax and Trade Bureau are proposing changes to the regulations that govern the classification and labeling of cigars and cigarettes for Federal excise tax purposes under the Internal Revenue Code of 1986. The proposed regulatory changes contained in this document address concerns that TTB has regarding the adequacy of the current regulatory standards for distinguishing between cigars and cigarettes. The document also summarizes and responds to three petitions received by TTB requesting rulemaking action regarding the classification of cigars and cigarettes, with particular reference to the distinction between little cigars and cigarettes. The proposals contained in this document clarify the application of existing statutory definitions and update and codify administrative policy in order to provide clearer and more objective product classification criteria. These clarifications are intended to reduce possible revenue losses through the misclassification of cigarettes as little cigars. In addition, these clarifications should facilitate the determination of payments under the Master Settlement Agreement.