26 U.S.C. § 4217 — Leases

Page 2932 TITLE 26—INTERNAL REVENUE CODE § 4217 section (a) [amending this section] shall apply with re- spect to articles sold after December 31, 1969.’’ EFFECTIVE DATE OF 1965 AMENDMENT Amendment by section 207(a), (b) of Pub. L. 89–44 ef- fective June 22, 1965, and amendment by section 208 of Pub. L. 89–44 applicable with respect to articles sold on or after June 22, 1965, except insofar as such amend- ments related to the taxes imposed by sections 4061(b), 4091, or 4131 and, as to such taxes, applicable with re- spect to articles sold on or after January 1, 1966, see section 701(a) of Pub. L. 89–44, set out as a note under section 4161 of this title. Pub. L. 89–44, title VIII, § 801(e), June 21, 1965, 79 Stat. 158, provided that: ‘‘The amendments made by sub- sections (a), (b), and (d) [amending this section and sec- tions 4063, 4221, and 6416 of this title] shall apply with respect to articles sold on or after the day after the date of the enactment of this Act [June 21, 1965]. The amendment made by subsection (c) [amending section 4221 of this title] shall apply with respect to articles sold on or after January 1, 1965.’’ EFFECTIVE DATE OF 1962 AMENDMENTS Pub. L. 87–858, § 1(b), Oct. 23, 1962, 76 Stat. 1134, pro- vided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply with respect to ar- ticles sold by the manufacturer, producer, or importer on or after October 1, 1962.’’ Pub. L. 87–770, § 2(b), Oct. 9, 1962, 76 Stat. 768, provided that: ‘‘The amendment made by subsection (a) [amend- ing this section] shall apply with respect to articles sold on or after the first day of the first calendar quar- ter beginning more than 20 days after the date of the enactment of this Act [Oct. 9, 1962].’’ EFFECTIVE DATE OF 1960 AMENDMENT Pub. L. 86–781, § 3, Sept. 14, 1960, 74 Stat. 1018, provided that: ‘‘The amendments made by this Act [amending this section and section 6416 of this title] shall apply with respect to articles sold on or after the first day of the first calendar quarter beginning more than twenty days after the date of the enactment of this Act [Sept. 14, 1960].’’ EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–859 effective on first day of first calendar quarter which begins more than 60 days after Sept. 2, 1958, see section 1(c) of Pub. L. 85–859, Sept. 2, 1958, 72 Stat. 1275. EFFECTIVE DATE OF 1955 AMENDMENT Act Aug. 9, 1955, ch. 677, § 4, 69 Stat. 614, as amended by act Oct. 22, 1986, Pub. L. 99–514, § 2, 100 Stat. 2095, provided that: ‘‘The amendments made by subsection (a) [probably should refer to amendments made by sec- tions 1 to 3 of act Aug. 9, 1955, amending this section and section 4217 of this title] shall take effect on the first day of the first month which begins more than 10 days after the date of the enactment of this act [Aug. 9, 1955]. In the application of section 4216(d) of the In- ternal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this Act) to any article which has been leased before the effective date specified in the preceding sen- tence, under regulations prescribed by the Secretary of the Treasury or his delegate— ‘‘(1) the fair market value of such article shall be the fair market value determined as of such effective date; ‘‘(2) only payments under a lease received on or after such effective date shall be considered in deter- mining when the total tax (as defined in such section 4216(d)) has been paid; ‘‘(3) any lease existing on such effective date, or if there is none, the first lease entered into after such effective date, shall be considered an initial lease (ex- cept that fair market value shall be determined as provided in paragraph (1) of this sentence); and ‘‘(4) any lease existing on such effective date shall be considered as having been entered into on such date.’’ § 4217. Leases (a) Lease considered as sale For purposes of this chapter, the lease of an article (including any renewal or any extension of a lease or any subsequent lease of such arti- cle) by the manufacturer, producer, or importer shall be considered a sale of such article. (b) Limitation on tax In the case of any lease described in sub- section (a) of an article taxable under this chap- ter, if the tax under this chapter is based on the price for which such articles are sold, there shall be paid on each lease payment with respect to such article a percentage of such payment equal to the rate of tax in effect on the date of such payment, until the total of the tax payments under such lease and any prior lease to which this subsection applies equals the total tax. (c) Definition of total tax For purposes of this section, the term ‘‘total tax’’ means— (1) except as provided in paragraph (2), the tax computed on the constructive sale price for such article which would be determined under section 4216(b) if such article were sold at retail on the date of the first lease to which subsection (b) applies; or (2) if the first lease to which subsection (b) applies is not the first lease of the article, the tax computed on the fair market value of such article on the date of the first lease to which subsection (b) applies. Any such computation of tax shall be made at the applicable rate specified in this chapter in effect on the date of the first lease to which sub- section (b) applies. (d) Special rules (1) Lessor must also be engaged in selling Subsection (b) shall not apply to any lease of an article unless at the time of making the lease, or any prior lease of such article to which subsection (b) applies, the person mak- ing the lease or prior lease was also engaged in the business of selling in arm’s length trans- actions the same type and model of article. (2) Sale before total tax becomes payable If the taxpayer sells an article before the total tax has become payable, then the tax payable on such sale shall be whichever of the following is the smaller: (A) the difference between (i) the tax im- posed on lease payments under leases of such article to which subsection (b) applies, and (ii) the total tax, or (B) a tax computed, at the rate in effect on the date of the sale, on the price for which the article is sold. For purposes of subparagraph (B), if the sale is at arm’s length, section 4216(b) shall not apply. (3) Sale after total tax has become payable If the taxpayer sells an article after the total tax has become payable, no tax shall be imposed under this chapter on such sale. Page 2933 TITLE 26—INTERNAL REVENUE CODE § 4218 (e) Leases of automobiles subject to gas guzzler tax (1) In general In the case of the lease of an automobile the sale of which by the manufacturer would be taxable under section 4064, the foregoing pro- visions of this section shall not apply, but, for purposes of this chapter— (A) the first lease of such automobile by the manufacturer shall be considered to be a sale, and (B) any lease of such automobile by the manufacturer after the first lease of such automobile shall not be considered to be a sale. (2) Payment of tax In the case of a lease described in paragraph (1)(A)— (A) there shall be paid by the manufac- turer on each lease payment that portion of the total gas guzzler tax which bears the same ratio to such total gas guzzler tax as such payment bears to the total amount to be paid under such lease, (B) if such lease is canceled, or the auto- mobile is sold or otherwise disposed of, be- fore the total gas guzzler tax is payable, there shall be paid by the manufacturer on such cancellation, sale, or disposition the difference between the tax imposed under subparagraph (A) on the lease payments and the total gas guzzler tax, and (C) if the automobile is sold or otherwise disposed of after the total gas guzzler tax is payable, no tax shall be imposed under sec- tion 4064 on such sale or disposition. (3) Definitions For purposes of this subsection— (A) Manufacturer The term ‘‘manufacturer’’ includes a pro- ducer or importer. (B) Total gas guzzler tax The term ‘‘total gas guzzler tax’’ means the tax imposed by section 4064, computed at the rate in effect on the date of the first lease. (Aug. 16, 1954, ch. 736, 68A Stat. 494; Aug. 9, 1955, ch. 677, § 3, 69 Stat. 614; Pub. L. 85–859, title I, § 117(a), Sept. 2, 1958, 72 Stat. 1280; Pub. L. 94–455, title XIX, § 1904 (a)(3), Oct. 4, 1976, 90 Stat. 1811; Pub. L. 95–618, title II, § 201(d), Nov. 9, 1978, 92 Stat. 3184.) Editorial Notes AMENDMENTS 1978—Subsec. (e). Pub. L. 95–618 added subsec. (e). 1976—Subsec. (d)(4). Pub. L. 94–455 struck out par. (4) relating to special transitional rules applicable to leases. 1958—Pub. L. 85–859 substituted ‘‘Leases’’ for ‘‘Lease considered as sale’’ in section catchline. Subsec. (a). Pub. L. 85–859 redesignated existing pro- visions as subsec. (a) and struck out provisions which made subsection inapplicable to the lease of an article upon which the tax has been paid in the manner pro- vided in section 4216(d)(1) or the total tax has been paid in the manner provided in section 4216(d)(2) of this title. Subsecs. (b) to (d). Pub. L. 85–859 added subsecs. (b) to (d). 1955—Act Aug. 9, 1955, exempted lease of an article upon which tax has been paid under section 4216(d)(1) or section 4216(d)(2) of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–618 applicable with respect to 1980 and later model year automobiles, see section 201(g) of Pub. L. 95–618, set out as an Effective Date note under section 4064 of this title. EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–455 effective on first day of first month which begins more than 90 days after Oct. 4, 1976, see section 1904(d) of Pub. L. 94–455, set out as a note under section 4041 of this title. EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–859 effective on first day of first calendar quarter which begins more than 60 days after Sept. 2, 1958, see section 1(c) of Pub. L. 85–859, Sept. 2, 1958, 72 Stat. 1275. EFFECTIVE DATE OF 1955 AMENDMENT Section effective on first day of first month which be- gins more than ten days after Aug. 9, 1955, see section 4 of act Aug. 9, 1955, set out as a note under section 4216 of this title. APPLICATION OF LEASES OF UTILITY TRAILERS Pub. L. 85–859, title I, § 117(c), Sept. 2, 1958, 72 Stat. 1281, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘The amendments made by subsections (a) and (b) [amending this section and sec- tion 4216 of this title] shall not apply to any lease of an article if section 4216(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954, prior subsec. (d) of section 4216 of this title] applied to any lease of such article be- fore the effective date specified in section 1(c) of this Act.’’ § 4218. Use by manufacturer or importer consid- ered sale (a) General rule If any person manufactures, produces, or im- ports an article (other than a tire taxable under section 4071) and uses it (otherwise than as ma- terial in the manufacture or production of, or as a component part of, another article taxable under this chapter to be manufactured or pro- duced by him), then he shall be liable for tax under this chapter in the same manner as if such article were sold by him. This subsection shall not apply in the case of gasoline used by any person, for nonfuel purposes, as a material in the manufacture or production of another arti- cle to be manufactured or produced by him. For the purpose of applying the first sentence of this subsection to coal taxable under section 4121, the words ‘‘(otherwise than as material in the manufacture or production of, or as a compo- nent part of, another article taxable under this chapter to be manufactured or produced by him)’’ shall be disregarded. (b) Tires If any person manufactures, produces, or im- ports a tire taxable under section 4071, and sells it on or in connection with the sale of any arti- cle, or uses it, then he shall be liable for tax under this chapter in the same manner as if such article were sold by him.