Excise Tax - Obligations Not in Registered Form: Audit Techniques Guide (ATG)

IRC section 4701(a) imposes a tax on the principal amount of a registered required obligation not in registered form issued by any United States person.

The tax was implemented by the Tax Equity and Fiscal Responsibility Act of 1982, P.L. 97-248, x310(b)(4)(A). It applies to most public offered debt obligations issued after 1982 unless they are issued in registered form.

The tax does not apply to obligations issued in bearer form pursuant to warrants or convertible bonds before August 10, 1982 if they are under arrangements reasonably designed to ensure that they will be sold or resold only to foreign persons.

The purpose of IRC section 4701, along with its companion IRC section 163(f), is to stop the issuance of bearer bonds to citizens and residents of the United States.

While IRC section 4701 imposes an excise tax as a penalty to the issuer of the bearer bond, IRC section 163(f) disallows the deduction for the interest on the bearer bond.

Since bearer bonds made it difficult...