To amend the Internal Revenue Code of 1986 to allow a nonrefundable credit against income tax liability for gasoline and diesel fuel used in highway vehicles for nonbusiness purposes.

Summary: Working Families Gas Tax Credit Act of 2005 - Amends the Internal Revenue Code to allow a nonrefundable tax credit for gasoline, diesel fuel, or kerosene used in highway vehicles for nonbusiness purposes. Limits the amount of such credit to $250 annually ($500 for joint returns). Reduces the allowable credit amount for taxpayers with modified adjusted gross incomes over $25,000 ($50,000 for joint returns).

Allows the credit only in taxable years when the Secretary of the Treasury determines that the percentage change in the price of a gallon of gasoline is at least 200 percent of the change in the inflation rate for such year.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Working Families Gas Tax Credit Act 
of 2005''.

SEC. 2. CREDIT FOR GASOLINE AND DIESEL FUEL USED IN HIGHWAY VEHICLES 
              FOR NONBUSINESS PURPOSES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by adding after section 25B the following 
new section:

``SEC. 25C. CREDIT FOR GASOLINE AND DIESEL FUEL USED IN HIGHWAY 
              VEHICLES FOR NONBUSINESS PURPOSES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the aggregate qualified taxable 
fuel expenditures made by the taxpayer during such year.
    ``(b) Limitation.--The credit allowed under subsection (a) for a 
taxable year shall not exceed $250 ($500 in the case of a joint 
return).
    ``(c) Qualified Taxable Fuel Expenditures.--For purposes of this 
section--
            ``(1) In general.--The term `qualified taxable fuel 
        expenditures' means amounts paid for a taxable fuel (as defined 
        by section 4083(a) (without regard to paragraph (1)(C) thereof) 
        for a nonbusiness use in a highway vehicle.
            ``(2) Exception.--Such term does not include amounts paid 
        for any fuel with respect to which a credit is allowed under 
        section 34 or a refund allowed under section 6420, 6421, or 
        6427.
    ``(d) Limitation Based on Modified Adjusted Gross Income.--
            ``(1) In general.--The amount which would (but for this 
        subsection) be taken into account under subsection (a) for the 
        taxable year shall be reduced (but not below zero) by the 
        amount determined under paragraph (2).
            ``(2) Amount of reduction.--The amount determined under 
        this paragraph is the amount which bears the same ratio to the 
        amount which would be so taken into account as--
                    ``(A) the excess of--
                            ``(i) the taxpayer's modified adjusted 
                        gross income for such taxable year, over
                            ``(ii) $25,000 ($50,000 in the case of a 
                        joint return), bears to
                    ``(B) $2,500 ($5,000 in the case of a joint 
                return).
            ``(3) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means the adjusted gross income of the 
        taxpayer for the taxable year increased by any amount excluded 
        from gross income under section 911, 931, or 933.
    ``(e) Rate of Increase in Price of a Gallon of Gasoline Must Exceed 
Rate of Inflation by not Less Than 200 Percent.--
            ``(1) General rule.--Subsection (a) shall not apply for any 
        taxable year unless the Secretary determines that the 
        percentage change in the price of a gallon of gasoline for the 
        taxable year is not less than 200 percent of the change in the 
        inflation rate for such taxable year.
            ``(2) Percentage change in the price of a gallon of 
        gasoline.--For purposes of paragraph (1), the percentage change 
        in the price of a gallon of gasoline for a taxable year is the 
        percentage (if any) by which--
                    ``(A) the average price of a gallon of gasoline as 
                of the close of the taxable year, exceeds
                    ``(B) the average price of a gallon gasoline as of 
                the beginning of the taxable year.
            ``(3) Inflation rate.--For purposes of paragraph (1), the 
        inflation rate for the determination period is the percentage 
        (if any) by which--
                    ``(A) the average of the Consumer Price Index as of 
                the close of the taxable year, exceeds
                    ``(B) the average of the Consumer Price Index as of 
                the beginning of the taxable year.
            ``(4) Price of a gallon of gasoline.--For purposes of this 
        subsection, the price of a gallon of gasoline shall be as 
        determined under the U.S. Regular All Formulations Retail 
        Gasoline Prices by the Energy Information Administration of the 
        Department of Energy.
            ``(5) Consumer price index.--For the purposes of this 
        subsection, the term `Consumer Price Index' means the last 
        Consumer Price Index for all-urban consumers published by the 
        Department of Labor. For purposes of the preceding sentence, 
        the revision of the Consumer Price Index which is most 
        consistent with the Consumer Price Index for calendar year 1986 
        shall be used.
    ``(f) Adjustments for Inflation.--In the case of a taxable year 
beginning after December 31, 2005, each of the dollar amounts in 
subsection (b) and subsection (d)(2)(A)(ii) shall be increased by an 
amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 2004' for 
        `calendar year 1992' in subparagraph (B) thereof. If any amount 
        as increased under the preceding sentence is not a multiple of 
        $50, such amount shall be rounded to the nearest multiple of 
        $50.
If, in the case of any amount in subsection (b) as increased under the 
preceding sentence, is not a multiple of $10, such amount shall be 
rounded to the nearest multiple of $10, and if, in the case of any 
amount in subsection (d) as increased under the preceding sentence, is 
not a multiple of $100, such amount shall be rounded to the nearest 
multiple of $100.
    ``(g) Guidance.--Not later than January 31 of each year, the 
Secretary shall promulgate such guidance as may be necessary or 
appropriate to carry out the provisions of this section with respect to 
the preceding taxable year.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
such part IV is amended by inserting after the item relating to section 
25B the following new item:

``Sec. 25C. Credit for gasoline and diesel fuel used in highway 
                            vehicles for nonbusiness purposes.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.