August 13, 2002 CC:ITA:RU (REG-103829-99) Room 5226 Internal Revenue Service POB 7604 Ben Franklin Station Washington, DC 20044 Re: Request for a 90-day extension to the time to file comments on the Notice of Proposed Rulemaking: Excise Taxes; Definition of Highway Vehicle ( 67 Fed. Reg. 38,913; June 6, 2002) Dear Sir/Madam: The Office of Advocacy of the U.S. Small Business Administration (Advocacy) was established by Congress pursuant to Public Law 94- 305 to represent the views of small business before Federal agencies and Congress. Pursuant to our statutory authority, the Office of Advocacy monitors Federal agency compliance with the Regulatory Flexibility Act (RFA).(1) The Office of Advocacy works with the agencies to ensure that agency rulemakings affecting small business are supported by sound economic analyses. This office is also authorized to comment on the impact that any regulation proposed by the Internal Revenue Service (IRS) might have on small business.(2) 1 On June 6, 2002 the IRS published the above-referenced notice of proposed rulemaking (NPRM). I am writing to request a 90-day extension of the comment period, currently scheduled to close on September 4, 2002. 1 Based on our office's preliminary outreach to small business owners and their representatives in Washington, D.C., the changes proposed by the IRS will affect a significant number of small businesses that own vehicles which are currently exempt from the excise taxes under existing regulations, court precedents and letter rulings. Under the IRS proposal, a significant number of small businesses will lose the current benefit of these tax exemptions, and others will lose the presumption that equipment purchased in the future will be exempt from the excise taxes. The IRS proposal potentially impacts a widely dispersed and disparate variety of businesses all across the United States that could be required to pay any of four different taxes on their vehicles, fuels and tires. Effective outreach to encourage input that the IRS needs prior to making a final decision is a complex and time consuming process. A 90-day extension would help ensure that the affected small businesses have the opportunity to learn of the proposed rule, consider its impact on their businesses, and submit useful comments to assist the IRS's rulemaking process. A second issue that merits the immediate attention of the IRS is the overall 2quality of its analysis of thecost of the proposed rule. The Office of Advocacy believes that this is a significant regulatory action within the meaning of Executive Order 12866.We recommend that the IRS reassess its analysis and solicit comments on the cost of the NPRM to small businesses. In meetings and conversations we have had with small businesses and their According to industry representatives, initial industry representatives,costs estimates forecast a tax impact of the tax increase for four industry sectors alone would be in excess of $100 million dollars for three industry sectors alone (drilling, utilities and cranes). (CITE) 3If these estimates are correct, the IRS is required to would be required to perform an economic analysis under Executive Order 12866 or provide a full explanation of why the Executive Order does not apply. We believe this NPRM also triggers the requirement that the IRS comply with the Regulatory Flexibility Act, and we will address this important issue in Advocacy's further comments to the rulemaking re I appreciate the IRS's careful consideration of this request and hope that an extension will be granted shortly in order to provide small businesses with a meaningful opportunity to provide comments. Please feel free to contact us at 202-205-6533 if you have any questions or need additional information. If we may be of further assistance in the interim, or to assist the IRS with outreach to small entities, please do not hesitate to contact us at (202) 205-6533. 4 Sincerely, Thomas M. Sullivan Chief Counsel for Advocacy Russell Orban Assistant Chief Counsel for Advocacy cc: Charles Rossotti, Commissioner, Internal Revenue Service Pamela Olsen, Acting Assistant Secretary for Tax Policy, U.S. Department of the Treasury Dr. John Graham, Administrator, Office of Information and Regulatory 5Affairs ENDNOTES 1. 5 U.S.C 601 et.seq 2. 26 U.S.C. 7805f