P.M. BRIEFING : Chrysler Accused of Avoiding Tax

A government document alleges that Chrysler Corp. avoided paying $29 million in “gas-guzzler” taxes last year by overestimating projected sales of certain low gas-mileage models, it was reported today.

An internal Environmental Protection Agency memo obtained by the Detroit News said the EPA has informed the Internal Revenue Service that the nation’s No. 3 auto maker exploited an “apparent loophole” that allowed it to avoid the tax. The EPA memo said the IRS may consider changes to close the loophole, which is the difference between the sales estimated by a maker of a certain model and how many cars it actually sells.

The memo said Chrysler overestimated the sales of certain rear-drive 1988-model Chrysler New Yorker, Chrysler Fifth Avenue, Plymouth Gran Fury and Dodge Diplomat cars that met or exceeded the 22.5-mpg minimum standard set by the EPA. However, less fuel-efficient versions of those cars actually sold better, making Chrysler liable for the tax.

Chrysler executives said they followed both EPA rules and industry practice in determining that the company owed no gas-guzzler tax for the 1988-model year.