U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

63–427 2011 JCS–1–11 

[JOINT COMMITTEE PRINT] 

PRESENT LAW 

AND BACKGROUND INFORMATION 

ON FEDERAL EXCISE TAXES 

PREPARED BY THE STAFF

OF THE

JOINT COMMITTEE ON TAXATION 

JANUARY 2011 


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C O N T E N T S 

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INTRODUCTION .............................................................................. 1 

I. EXCISE TAXES DEDICATED TO TRUST FUNDS ...................... 2 

A. Excise Taxes Dedicated to Transportation Trust 

Funds ...................................................................... 2 

1. Highway Trust Fund Excise Taxes ................. 2 

2. Airport and Airway Trust Fund Excise 

Taxes ............................................................... 11 

3. Inland Waterways Trust Fund Excise Tax .... 16 

4. Harbor Maintenance Trust Fund Excise Tax . 17 

B. Excise Taxes Dedicated to Environmental Trust 

Funds or Designated Funds .................................. 18 

1. Leaking Underground Storage Tank Trust 

Fund Excise Taxes ......................................... 18 

2. Oil Spill Liability Trust Fund Excise Tax ...... 19 

3. Sport Fish Restoration and Boating Trust 

Fund Excise Taxes ......................................... 2 

4. Land and Water Conservation Fund (Federal 

Aid to Wildlife Restoration Program) and 

Dedicated Excise Taxes .................................. 22 

C. Excise Taxes Dedicated to Health-Related Trust 

Funds ...................................................................... 24 

1. Black Lung Disability Trust Fund Excise 

Taxes ............................................................... 24 

2. Vaccine Injury Compensation Trust Fund Excise Taxes ........................................................ 26 

3. Patient-Centered Outcomes Research Trust 

Fund Excise Taxes ......................................... 27 

4. Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers .... 29 

II. GENERAL FUND EXCISE TAXES ............................................ 31 

A. Principal General Fund Excise Taxes ................... 31 

1. Distilled Spirits, Wine and Beer Excise 

Taxes ............................................................... 31 

2. Tobacco Excise Taxes ....................................... 33 

3. Communications Excise Tax ............................ 35 


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IV 

4. Gas Guzzler Excise Tax ................................... 36 

5. Water Transportation Passenger Excise Tax . 37 

6. Ozone-Depleting Chemicals Excise Tax .......... 37 

B. Foreign Procurement Excise Tax ........................... 38 

C. General Fund Excise Taxes Related to Health 

Care ........................................................................ 38 

1. Excise Tax on Indoor Tanning Services .......... 38 

2. Excise Tax on Certain Medical Devices .......... 39 

3. Annual Fee on Health Insurance Providers ... 39 

4. Excise Tax on Individuals Without Essential 

Coverage .......................................................... 41 

5. Excise Tax on Large Employers Not Offering 

Health Care Coverage .................................... 43 

6. Failure To Satisfy Continuation Coverage 

Requirements of Group Health Plans ........... 44 

7. Failure to Meet Certain Group Health Plan 

Requirements .................................................. 45 

8. Failure of Employer to Make Comparable Archer MSA Contributions ................................ 46 

9. Failure By Employer to Make Comparable 

Health Savings Account Contributions ........ 47 

10. Excise Tax on Issuers of Qualified Long 

Term Care Contracts ...................................... 48 

11. Nonconforming Group Health Plans ............. 49 

12. Excise Tax on Insurers For High-Cost Employer-Sponsored Health Coverage ............... 50 

D. Miscellaneous Regulatory Excise Taxes ................ 51 

III. INFORMATION ON SELECTED TRUST FUND BALANCES AND

RELATED FEDERAL EXCISE TAX RECEIPTS ....................... 60 

A. Background .............................................................. 60 

B. Estimated Revenues and Outlays for Selected 

Federal Trust Funds (FY 2011–2020) .................. 62 

APPENDICES .................................................................................. 69 

A. Schedule of Present Federal Excise Tax Rates ..... 69 

B. Expired Hazardous Substance Superfund Excise 

Taxes ....................................................................... 85 


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1 Unless otherwise stated, all section references are to the Internal Revenue Code of 1986, as 

amended. 2This document may be cited as follows: Joint Committee on Taxation, Present Law and Background Information on Federal Excise Taxes (JCS–1–11), January 2011. This document is available at www.jct.gov. 3 Internal Revenue Service, Statistics of Income Bulletin, Historical Table 20, Federal Excise 

Taxes Reported to or Collected By the Internal Revenue Service, Alcohol and Tobacco Tax and 

Trade Bureau, and Customs Service, By Type of Excise Tax, Fiscal Years 1997–2009, http:// 

www.irs.gov/taxstats/bustaxstats/article/0,,id=97148,00.html (2010). 

INTRODUCTION 

The Internal Revenue Code (the ‘‘Code’’) imposes numerous excise taxes on goods and services.1 In addition to excise taxes the 

primary purpose of which is revenue production, excise taxes also 

are imposed to promote adherence to other policies (e.g., penalty 

excise taxes). Many trust funds established by the Federal Government are financed with dedicated excise tax receipts. This document 2 provides a description of present-law Federal excise taxes, 

and when applicable, background information on trust funds financed with excise tax revenues. 

Revenues from certain Federal excise taxes are dedicated to trust 

funds (e.g., the Highway Trust Fund) for designated expenditure 

programs, and revenues from other excise taxes (e.g., alcoholic beverages) go to the General Fund for general purpose expenditures. 

The largest excise taxes in terms of revenue (for fiscal year 2009) 

are those for gasoline motor fuels ($25.1 billion), domestic cigarettes ($11.0 billion), diesel motor fuel ($8.5 billion), and domestic 

air ticket ($7.3 billion).3

Part I of the document discusses excise taxes dedicated to trust 

funds. Part II discusses General Fund excise taxes. Part III provides background information, projected excise tax receipts, and information on the projected fiscal status of various trust funds. Appendix A includes a summary rate schedule for the principal excise 

taxes that are presently imposed, and Appendix B provides background information on the expired Hazardous Substance Superfund 

taxes and related trust fund. 


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4The 4.3-cents-per-gallon component of the taxes was enacted in 1993 as a General Fund deficit reduction measure. Provisions for transfer of these revenues to the Highway Trust Fund 

were enacted in 1997. Despite the statutory expiration dates, the full amount of the excise taxes 

is assumed to be permanent for Federal budget scorekeeping purposes. See, Part III.A., for a 

description of these Federal budget rules. 5Sec. 9503(b)(1). 

I. EXCISE TAXES DEDICATED TO TRUST FUNDS 

A. Excise Taxes Dedicated to Transportation Trust Funds 

1. Highway Trust Fund excise taxes 

In general 

Excise taxes are imposed on fuels, and heavy vehicles and tires 

used in highway transportation to fund the Highway Trust Fund. 

The Highway Trust Fund was established in 1956, with what were 

General Fund excise taxes being expanded and revenues transferred to the Highway Trust Fund. Since 1983, the Highway Trust 

Fund has financed certain mass transit programs as well as traditional highway construction and maintenance programs. Historically, the excise taxes have included statutory expiration dates that 

coordinate with the Highway Trust Fund expenditure authorization 

periods. Currently, the excise taxes (except for 4.3 cents per gallon 

of the motor fuels taxes which is permanent) are scheduled to expire after September 30, 2011.4

A majority of the revenue received from the highway transportation excise taxes is derived from taxes on highway motor fuels. 

Although the Code provides several refundable fuel excise tax credits, such as the alcohol, biodiesel, and alternative fuel mixture 

credits, the Highway Trust Fund is credited with the full amount 

of tax imposed, without reduction for the fuel excise tax credits.5

The present highway transportation excise taxes consist of: 


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Tax/credit (and Code section) 

Tax rates 6 and nonrefundable income tax/refundable 

excise tax credits 

Major highway motor fuels excise taxes and credits 

Taxable fuels: 

a. Gasoline and gasoline 

blendstocks (sec. 4081).7 ..... 18.3 cents per gallon 

b. Diesel fuel and kerosene 

(secs. 4081 and 4041) ......... 24.3 cents per gallon 

c. Diesel-water fuel emulsion 

(sec. 4081).8 .......................... 19.7 cents per gallon 

d. Alcohol fuels (sec. 4041) ..... 18.3 cents per gallon 

Alcohol credits: 

a. Ethanol and ethanol fuel 

mixtures (secs. 40, 6426 

and 6427(e)).

45 cents per gallon of ethanol (E–100 eligible for 

nonrefundable section 

40 income tax credit 

only) 

b. Alcohol or alcohol fuel mixtures (other than ethanol) 

(secs. 40, 6426 and 6427(e)).

60 cents per gallon of alcohol (100 percent alcohol fuel not in a mixture eligible for nonrefundable income tax 

credit only) 

c. Small ethanol producer 

credit (sec. 40).

10 cents per gallon (nonrefundable income tax 

credit only) 

d. Cellulosic biofuel producer 

credit (for alcohol fuel) (sec. 

40).

41 cents per gallon; 46 

cents per gallon for ethanol (nonrefundable income tax credit only) 

6With the exception of liquefied petroleum gas (propane), compressed natural 

gas (‘‘CNG’’), and liquefied natural gas (‘‘LNG’’), highway motor fuels are subject 

to an additional 0.1 cent-per-gallon tax to fund the Leaking Underground Storage 

Tank (‘‘LUST’’) Trust Fund (through September 30, 2011). See, Part I.B.1., for a 

description of this excise tax and Trust Fund. 7Gasoline blendstocks are defined in Treasury Department regulations as: alkylate, butane, catalytically cracked gasoline, coker gasoline, ethyl tertiary butyl 

ether (‘‘ETBE’’), hexane, hydrocrackate, isomerate, methyl tertiary butyl ether 

(‘‘MTBE’’), mixed xylene (including any separated isomer of xylene), natural gasoline, pentane, pentane mixture, polymer gasoline, raffinate, reformate, straight-run 

gasoline, straight-run naphtha, tertiary amyl methyl ether (‘‘TAME’’), tertiary 

butyl alcohol (gasoline grade), thermally cracked gasoline, and toluene. See, Treas. 

Reg. sec. 48.4081–1(c)(3). 8Diesel-water fuel emulsion consists of a mixture of diesel fuel and at least 14 

percent water combined with an emulsion additive that is registered by a U.S. 

manufacturer with the EPA pursuant to section 211 of the Clean Air Act (as in 

effect on March 31, 2003) (sec. 4081(a)(2)(D)). 


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Tax/credit (and Code section) 

Tax rates 6 and nonrefundable income tax/refundable 

excise tax credits 

Special motor fuel, alternative fuels, and biodiesel taxes 

and credits 

Tax on taxable fuels: 

a. Liquid fuel produced from 

coal (sec. 4041) .................... 24.3 cents per gallon 

b. Partially exempt ethanol 

produced from natural gas 

(sec. 4041(m)).9 .................... 11.3 cents per gallon 

c. Partially exempt methanol 

fuel produced from natural 

gas (sec. 4041(m) ................. 9.15 cents per gallon 

d. B–100 (100% biodiesel) and 

renewable diesel (sec. 

4081).10 ................................ 24.3 cents per gallon 

e. Biodiesel and renewable 

diesel fuel mixtures (sec. 

4081) .................................... 24.3 cents per gallon 

f. Compressed natural gas 

(‘‘CNG’’) (sec. 4041) .............. 18.3 cents per gasoline 

gallon equivalent 

(GGE = 126.67 c.f.) 

g. Liquefied petroleum gas 

(‘‘LPG’’) (sec. 4041) .............. 18.3 cents per gallon 

h. Liquefied natural gas 

(‘‘LNG’’) (sec. 4041) ............. 24.3 cents per gallon 

i. Liquid fuel derived from 

biomass (sec. 4041) .............. 24.3 cents per gallon 

j. ‘‘P Series’’ fuels (sec. 4041) .. 18.3 cents per gallon 

k. Liquefied hydrogen fuel 

(sec. 4041) ............................ 18.3 cents per gallon 

l. Qualified ethanol and methanol fuels produced from 

coal (sec. 4041) ..................... 18.3 cents per gallon 

9Partially exempt ethanol and methanol fuel means a liquid at least 85 percent 

of which consists of ethanol, methanol, or other alcohol produced from natural 

gas. After September 30, 2011, the tax rates on these fuels are scheduled to decline to 4.3 cents per gallon (ethanol) and 2.15 cents per gallon (methanol and 

other non-ethanol alcohol). 10 Biodiesel contains monoalkyl esters of long chain fatty acids derived from 

plant or animal matter which meet EPA requirements and ASTM D6751. Renewable diesel is defined as a liquid fuel meeting EPA requirements and ASTM D975 

and D396 (or other equivalent standards approved by the Treasury Department). 

Renewable diesel fuel does not include any fuel derived by co-processing biomass 

with a feedstock that is not biomass. 


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Tax/credit (and Code section) 

Tax rates 6 and nonrefundable income tax/refundable 

excise tax credits 

Tax credits: 

a. Biodiesel and biodiesel fuel 

mixtures (secs. 40A, 6426, 

and 6427(e)) ......................... $1.00 per gallon of biodiesel (B–100 eligible 

for nonrefundable income tax credit only) 

b. Renewable diesel and renewable fuel mixtures renewable diesel fuel eligible 

for (secs. 40A, 6426 and 

6427(e)) ................................ $1.00 per gallon of renewable diesel (100% nonrefundable income tax 

credit only) 

c. Small agri-biodiesel producer credit (sec. 40A) ........ 10 cents per gallon (nonrefundable income tax 

credit only) 

d. Cellulosic biofuel producer 

credit (sec. 40) ..................... $1.01 per gallon (nonrefundable income tax 

credit only) 

e. Alternative fuels and alternative fuel mixtures (LPG, 

‘‘P Series’’ fuels, CNG, 

LNG, liquefied hydrogen, 

liquid fuel derived from 

coal,11 and liquid fuel derived from biomass) (sec. 

6426 and 6427(e)) ................ 50 cents per gallon (refundable excise tax 

credit) 

11To be an alternative fuel, liquid fuel from coal (including peat) must be derived through the ‘‘Fischer-Tropsch’’ process, and certain carbon capture requirements applicable to the gasification facility also must be met. Sec. 6426(d)(2)(E) 

and 6426(d)(4). 


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12Weight is determined on ‘‘gross vehicle weight,’’ which is the fully-loaded, certificated 

weight for the vehicle. 13 Biasply tire means a pneumatic tire on which the ply cords that extend to the beads are 

laid at alternate angles substantially less than 90 degrees to the centerline of the tread (sec. 

4072(d)). Super single tires are single tires greater than 13 inches in cross section width designed to replace two tires in a dual fitment (other than for steering) (sec. 4072(c)). 14Weight is defined as ‘‘taxable gross weight,’’ which is the customary fully loaded weight. 15Deep-draft vessels are not required to be registered for the bulk transfer exception to apply. 

Tax/credit (and Code section) 

Tax rates 6 and nonrefundable income tax/refundable 

excise tax credits 

Non-fuels taxes imposed on heavy highway vehicles: 

a. Retail sales tax on highway 

tractors (over 19,500 lbs), 

heavy trucks (over 33,000 

lbs.), and trailers (over 

26,000 lbs.) (sec. 4051).12 ... 12 percent of retail price 

b. Manufacturers’ excise tax 

on tires for heavy vehicles 

(sec. 4071) ............................ 9.45 cents for each 10 lbs. 

in excess of 3,500 lbs. 

of maximum rated load 

capacity (4.725 cents 

for biasply tires and 

super single tires) 13

c. Annual heavy vehicle use 

tax (sec. 4481).14 .................. Under 55,000 lbs.—No 

tax 

55,000–75,000 lbs.—$100 

plus $22 per 1,000 lbs. 

over 55,000 lbs. 

Over 75,000 lbs.—$550 

Administration of taxes 

Fuels excise taxes.—The highway motor fuels excise taxes on 

fuels other than ‘‘alternative fuels’’ are imposed on removal of the 

fuel from a refinery or on importation, unless the fuel is transferred in bulk by pipeline or barge to a registered terminal facility. 

In such a case, tax is imposed upon removal from the terminal facility. The bulk removal exception to refinery or importation taxation applies only if the person removing or entering the fuel and 

the operator of the pipeline or barge also are registered with the 

Treasury Department.15


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16The dyeing requirement does not apply in rural areas of Alaska. A further exception applies 

to kerosene received by pipeline or vessel for use in the manufacture or production of non-fuel 

feedstocks. 17Sec. 4051(b). 18Sec. 4052(f). 19This use is exempt from the full 18.3-cents-per-gallon gasoline excise tax (sec. 6421(b)) and 

is subject to 7.3 cents per gallon of the 24.3-cents-per-gallon diesel fuel and kerosene excise 

taxes (sec. 6427(b)). 

Present law imposes tax on all gasoline (including gasoline 

blendstocks), diesel fuel, and kerosene that is removed, except diesel fuel and kerosene that is destined for a nontaxable use (including a partially taxable use in an intercity bus) and that is indelibly 

dyed in accordance with Treasury Department regulations.16 The 

refiner, importer, or person holding an inventory position in a terminal (the ‘‘position holder’’) generally is liable for payment of the 

tax. 

The taxes on alternative fuels are imposed at the retail or user 

level. 

Other taxes.—The sales tax on heavy highway vehicles is imposed at the retail level. To prevent sales of ‘‘stripped down’’ vehicles which subsequently are completed, special rules apply to sales 

of parts and accessories (in excess of $1,000) installed on a taxable 

vehicle within six months after the date the vehicle is first placed 

in service. This tax is primarily imposed on the truck owner, with 

installers secondarily liable for its payment.17 Similarly, special 

rules apply for determining whether repairs or other modifications 

to heavy highway vehicles constitute a taxable re-manufacture of 

a new vehicle.18

The excise tax on heavy vehicle tires is a manufacturers’ excise 

tax. 

The annual heavy vehicle use tax is imposed with respect to a 

taxable period of July 1–June 30. Tax liability is incurred as of the 

first month the vehicle is used during the taxable period (subject 

to proration rules). Tax also is prorated for vehicles sold, destroyed, 

or stolen (and not subsequently used) during the taxable period. 

Exemptions and reduced rates 

Fuels excise taxes.—Present law includes numerous exemptions 

(including partial exemptions) for specified uses (or users) of taxable fuels. Because most highway motor fuels excise taxes are imposed before the end use (or user) of the fuel is known, most of 

these exemptions are administered through refunds to end users of 

tax paid by a party that processed the fuel earlier in the distribution chain. The present exempt uses (and users) include: 

1. Use by State and local government; 

2. Use by nonprofit educational organizations; 

3. Use in private local mass transit buses having a seating 

capacity of at least 20 adults (not including the driver) when 

the buses operate under contract with (or are subsidized by) a 

State or local governmental unit to furnish transportation; 

4. Use in private intercity buses serving the general public 

along scheduled routes; 19 and, 

5. Use in an off-highway business use (gasoline), or an offhighway use (diesel fuel and kerosene). Examples of such uses 


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20 Alcohol is defined as methanol and ethanol that is not produced from petroleum, natural 

gas, or coal (including peat) and having a proof of at least 150. Alcohol having a proof or at 

least 150, but less than 190, receives a reduced credit. 

The credit is allowed for qualifying alcohol consumed in the production of ETBE and MTBE. 

21Secs. 6426 and 6427(e). 

include use for non-fuel feedstock purposes and the use of diesel fuel or kerosene as heating fuel. 

Other taxes.—The non-fuels excise taxes imposed on heavy highway vehicles include numerous partial and full exemptions and 

special rules for coordinating the taxes on vehicles that otherwise 

could be subject (in part) to more than one of these taxes. 

1. Tractors for use with a trailer or semi-trailer are not subject 

to the retail sales tax if the combination has a gross weight of 

33,000 pounds or less. 

2. The cost of idling reduction devices is not subject to the retail 

sales tax on tractors and trucks. 

3. A credit is allowed against the retail sales tax for tax previously imposed on tires sold in connection with a taxable tractor, 

trailer, or truck. 

4. Various vehicles and components are exempt from the retail 

sales tax: camper coaches for self-propelled mobile homes, certain 

agricultural vehicles, house trailers, ambulances and hearses, concrete mixers, rail/highway combination trailers and vans, trash 

containers that are not designed to be permanently mounted on a 

taxable vehicle, insulation having an ‘‘R value’’ of not less than R35 

per inch, and certain mobile machinery. 

5. State and local government vehicles, certain local transit 

buses, certain blood collector vehicles, and certain mobile machinery are exempt from the annual heavy vehicle use tax as are vehicles used fewer than 5,000 miles on public highways during a taxable period (7,500 miles in the case of farm vehicles). 

6. The annual heavy vehicle use tax is reduced by 25 percent for 

vehicles used exclusively in transporting harvested forest products 

to and from the forested site if the vehicles are under for such purpose in the State where the vehicle is required to be registered. 

Special rules for alcohol fuels, biodiesel, and alternative fuels 

Before 2005, alcohol fuels mixtures generally were subject to reduced rates of tax.20 Beginning on January 1, 2005, however, the 

full 18.3-cents-per-gallon and 24.3-cents-per-gallon highway fuels 

tax rates were nominally extended to these fuels. At that time, a 

new refundable excise tax credit also was enacted for alcohol fuel 

mixtures and new refundable excise tax credits were enacted for 

biodiesel mixtures as well.21 Later, refundable excise tax credits 

were enacted for alternative fuels and alternative fuel mixtures. 

The amount of the excise tax credits exceeds the amount of the excise tax imposed, resulting in a net Federal outlay for each gallon 

of these fuels. 

Through December 31, 2011, the refundable excise tax credit 

rates for these fuels are: 45 cents per gallon for ethanol mixtures; 

60 cents per gallon for methanol (or other non-ethanol alcohol) mixtures, $1.00 per gallon for biodiesel and renewable diesel mixtures; 

and 50 cents per gallon for alternative fuels (including compressed 


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22The scheduled expiration date for the alternative fuel credit for liquefied hydrogen is September 30, 2014. 23Secs. 40 and 40A. Adding a denaturants not exceeding two percent of the volume of alcohol 

is not treated as the creation of an alcohol fuels mixture (sec. 40(b)(5)). Denaturants in such 

amounts are disregarded in determining the volume of qualifying alcohol in an alcohol mixture 

(sec. 40(d)(4)). 24 Agri-biodiesel is defined as biodiesel derived solely from virgin oils, including esters derived 

from virgin vegetable oils from corn, soybeans, sunflower seeds, cottonseeds, canola, crambe, 

rapeseeds, safflowers, flaxseeds, rice bran, mustard seeds, and camelina, or from animal fats 

(sec. 40A(d)(2)). 25 42 U.S.C. 7545. 26Sec. 9503. 

gas derived from biomass).22 The alternative fuels credit is allowed 

without regard to whether the fuels are mixed with other taxable 

motor fuels but only if the fuel is used or sold for use in a motor 

vehicle, motorboat or for use as a fuel in aviation. 

The following illustrates the interaction of the taxes and credits. 

If one gallon of ethanol is blended with nine gallons of gasoline to 

make 10 gallons of gasoline, the tax is $1.83 (10 × .183) on the 10 

gallons of gasohol. However, the alcohol fuel mixture credit for the 

gallon of ethanol is 45 cents, so after the credit is taken into account, the tax on each gallon of gasohol is 13.8 cents per gallon 

(($1.83 ¥ .45)/10 = .138), rather than 18.3 cents per gallon. Nonetheless, the Highway Trust Fund is credited for the full amount of 

the tax, 18.3 cents per gallon, without regard to the credit. As another example, a gallon of liquified natural gas is taxed at 24.3 

cents per gallon. The alternative fuel credit, when it was in effect, 

was 50 cents per gallon, thus after taking into account the credit, 

the taxpayer received a refundable credit of 24.7 cents per gallon 

or the full 50 cents if the fuel was to be used for a nontaxable purpose, such as for use by a State or local government. 

Through December 31, 2011, nonrefundable income tax credits 

are allowed in the same amounts as described above for qualifying 

fuels mixtures, and for alcohol fuel, biodiesel, and renewable diesel.23

The income tax credits generally are available to the person selling the qualifying product for use as a fuel or using it as a fuel. 

In addition to the general excise tax and income tax credits, addon income tax credits of 10 cents per gallon are allowed to qualifying small producers of ethanol and agri-biodiesel producers 

(through December 31, 2011).24 A $1.01 per gallon income tax credit is allowed to producers of ‘‘cellulosic biofuel’’ through December 

31, 2012. Cellulosic biofuel is defined as a liquid fuel produced from 

any lignocellulosic or hemicellulosic matter that is available on a 

renewable or recurring basis and meets the registration requirements for fuels and fuel additives established under the Clean Air 

Act.25 Cellulosic biofuel does not include certain unprocessed fuels 

if more than four percent of such fuel (determined by weight) is 

any combination of water or sediment, or the ash content of such 

fuel is more than one percent (determined by weight). 

Overview of Highway Trust Fund expenditure provisions 

In general.—Dedication of highway excise tax revenues to the 

Highway Trust Fund and expenditures from the Highway Trust 

Fund are governed by provisions of the Code.26 The Code authorizes expenditures (subject to appropriations) from the Highway 


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27Pub. L. No. 111–322. 28Sec. 9503(c)(2). 29Sec. 9503(c)(4) and (5). See, Part I.B.3 relating to the Sport Fish Restoration and Boating 

Trust Fund. 30 Highway Trust Fund expenditures are subject to appropriations Acts. However, certain of 

the programs are classified as ‘‘contract spending’’, a category of Federal spending in which executive agencies are permitted to enter into contracts for spending with appropriations being enacted subsequently to liquidate the contracted expenditures. Highway Trust Fund spending further benefits from special Federal budget ‘‘firewalls’’ designed to ensure that the monies are 

spent as authorized rather than being subjected to obligations ceilings enacted as part of deficit 

reduction measures. 

Trust Fund through March 4, 2011, for the purposes provided in 

authorizing legislation in effect on the date of enactment of the 

Surface Transportation Extension Act of 2010, Part II.27

Revenues from the highway excise taxes, as imposed through 

September 30, 2011, generally are dedicated to the Highway Trust 

Fund. However, certain transfers are made from the Highway 

Trust Fund into the General Fund of the Treasury, relating to tax 

revenues on gasoline used on farms, gasoline used for certain nonhighway purposes or by local transit systems, fuels not used for 

taxable purposes, and income tax credits for certain uses of fuels.28

In addition, revenues attributable to the excise taxes imposed on 

motorboat gasoline and special motor fuels and on gasoline used as 

a fuel in the non-business use of small-engine outdoor power equipment are transferred to the Sport Fish Restoration and Boating 

Trust Fund through September 30, 2011, with the first $1,000,000 

per fiscal year of such monies going to the Land and Water Conservation Fund instead.29

Highway Trust Fund expenditures.—The Highway Trust Fund 

has two accounts: Mass Transit Account and Highway Account.30

Both accounts are funding sources for specific transit and highwayrelated programs. Neither account receives interest on unexpended 

balances. The Mass Transit Account receives revenues equivalent 

to 2.86 cents per gallon of highway motor fuels excise taxes generally, except 1.43 cents per gallon for any partially exempt methanol or ethanol, 1.86 cents per gallon for liquefied natural gas, 2.13 

cents per gallon for liquefied petroleum gas, and 9.71 cents per 

MCF for compressed natural gas. 

Highway Trust Fund expenditure purposes have been updated 

with each surface transportation Act enacted since establishment of 

the Highway Trust Fund in 1956. In general, expenditures authorized under those Acts (as the Acts were in effect on the date of enactment of the most recent such authorizing Act) are specifically 

approved by the Code as Highway Trust Fund expenditure purposes. No Highway Trust Fund monies may be spent for a purpose 

not approved by the Code. The Code provides that authority to 

make expenditures from the Highway Trust Fund expires after 

March 4, 2011. 

Anti-deficit provisions of the Highway Trust Fund.—Because 

some highway/mass transit projects can take multiple years to complete, the Highway Trust Fund generally has carried a positive unexpended balance—a large portion of which is reserved to cover existing Highway Trust Fund obligations. Highway Trust Fund 

spending is limited by the fund’s internal anti-deficit provisions— 

the so-called ‘‘Harry Byrd rule.’’ Generally, this rule is intended to 

prevent the further obligation of Federal highway/transit funds 


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31Sec. 9503(d). 32Sec. 9503(e)(4). 33Sec. 9503(b)(5). 34 All Airport and Airway Trust Fund excise taxes except for 4.3 cents per gallon of the taxes 

on aviation fuels are scheduled to expire after March 31, 2011. The 4.3-cents-per-gallon fuels 

tax rate is permanent. However, for Federal budget scorekeeping purposes, the statutory expiration date is disregarded and the full amount of the taxes is assumed to be permanent. See, Part 

III.A. 35 Air transportation through U.S. airspace that neither lands in nor takes off from a point 

in the United States (or the 225-mile zone, described below) is exempt from the aviation excise 

taxes, but the transportation provider is subject to certain ‘‘overflight fees’’ imposed by the Federal Aviation Administration pursuant to Congressional authorization. 

from the Highway Trust Fund if the current and expected balances 

of the fund are projected to fall below a certain level. The rule requires the Treasury Department to determine, on a quarterly basis, 

the amount (if any) by which unfunded highway authorizations exceed projected net fund tax receipts for the 48-month period beginning at the close of each fiscal year.31 If unfunded highway authorizations exceed projected 48-month trust fund receipts, apportionments to the States for programs are to be reduced proportionately. 

The Mass Transit Account has a 12-month receipts rule.32 For purposes of this rule, Highway Trust Fund excise taxes are assumed 

extended beyond their statutory expiration date. 

Limitations on transfers to the Highway Trust Fund.—The Code 

also contains a specific enforcement provision to prevent expenditure of Highway Trust Fund monies for purposes not authorized in 

the Code.33 Should such unapproved expenditures occur, no further 

excise tax receipts will be transferred to the Highway Trust Fund. 

Instead, the taxes will continue to be imposed with receipts being 

retained in the General Fund. This enforcement provision provides 

that it applies not only to unauthorized expenditures under the 

current Code provisions, but also to expenditures pursuant to future legislation that does not amend section 9503’s expenditure authorization provisions or otherwise authorize the expenditure as 

part of a revenue Act. 

2. Airport and Airway Trust Fund excise taxes 34

Excise taxes are imposed on amounts paid for commercial air 

passenger and freight transportation and on fuels used in commercial and noncommercial (i.e., transportation that is not ‘‘for hire’’) 

aviation to fund the Airport and Airway Trust Fund.35 The present 

aviation excise taxes are as follows: 


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36The domestic flight segment portion of the tax is adjusted annually (effective each January 

1) for inflation (adjustments based on the changes in the consumer price index (the ‘‘CPI’’)). 37The international arrival and departure tax rate is adjusted annually for inflation (measured by changes in the CPI). 38Like most other taxable motor fuels, aviation fuels are subject to an additional 0.1-cent-pergallon excise tax to fund the LUST Trust Fund. See, Part I.B.1. 

Tax (and Code section) Tax rates 

a. Domestic air passengers (sec. 4261) 7.5 percent of fare, plus $3.70 (2011) per domestic flight segment generally 36

a. International air passengers (sec. 4261) ................................................... $16.30 (2011) per arrival 

or departure 37

b. Amounts paid for right to award 

free or reduced rate passenger air 

transportation (sec. 4261) ................. 7.5 percent of amount 

paid 

c. Air cargo (freight) transportation 

(sec. 4271) ........................................... 6.25 percent of amount 

charged for domestic 

transportation; no tax 

on international cargo 

transportation 

d. Aviation fuels (sec. 4081): 38

i. Commercial aviation ................... 4.3 cents per gallon 

ii. Non-commercial (general) aviation: 

Aviation gasoline ..................... 19.3 cents per gallon 

Jet fuel ...................................... 21.8 cents per gallon 

Administration of taxes 

Air passenger and cargo taxes.—Persons purchasing air transportation are liable for the commercial air passenger excise taxes. 

Transportation providers are secondarily liable if they fail to collect 

tax from their passengers. The amount of tax must be separately 

disclosed on airline tickets. Like the air passenger excise taxes, the 

air cargo tax is imposed on the person paying for the service. 


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39When fuel is delivered directly into the fuel tanks of a commercial aircraft, commercial airlines may ‘‘self-certify’’ and become the direct payors of the jet fuel excise tax. 40The term ‘‘continental United States’’ includes the 48 contiguous States and the District of 

Columbia. 41The $8.20 amount is adjusted annually for inflation (measured by the CPI). 

Aviation fuels taxes.—The aviation fuels excise taxes are administered under rules similar to those that apply to the Highway 

Trust Fund fuels taxes. That is, the taxes generally are collected 

on removal of taxable fuels from a refinery (subject to the bulk 

transfer exception also applicable to the highway fuels excise 

taxes). Most aviation fuels excise tax is collected upon removal of 

the fuel from a registered terminal facility. Many airports include 

registered terminals within the secured area of the airport. Under 

a special rule, certain refueler trucks, tankers, or tank wagons are 

treated as part of such terminals, thereby allowing imposition of 

tax on jet fuel to be deferred until the kerosene is loaded into the 

fuel tank of an aircraft.39 Qualifying trucks and tankers may not 

be registered for highway use and must be operated by the owner 

of the registered terminal facility. Jet fuel that is not delivered directly into the fuel tank of an aircraft from a registered terminal 

is taxed at the higher general aviation rates. Commercial airlines 

and other commercial aircraft using jet fuel taxed at the general 

aviation tax rate may recover tax imposed at the higher rate 

through refund claims or credits against excise tax liability (including air passenger and cargo tax liability). 

Exemptions, reduced rates, and special rules 

Air passenger taxes.—The domestic air passenger taxes apply to 

transportation beginning and ending within the United States or to 

or from a point within the continental United States and a point 

within the ‘‘225-mile zone’’ of Canada or Mexico. The 225-mile zone 

includes the portions of those countries that are not more than 225 

miles from the nearest point in the continental United States. If 

passenger transportation is purchased outside the United States, it 

is subject to the domestic taxes only if the transportation both begins and ends in this country. 

Special rules apply to air transportation between the continental 

United States and Alaska or Hawaii and between Alaska and Hawaii.40 The portion of such transportation that is not within the 

United States (e.g., the portion over the Pacific Ocean) is not subject to the 7.5-percent domestic air passenger excise tax. In addition to this pro-rated ad valorem tax, an $8.20 (2011) international 

tax rate for the excluded portion of the travel is imposed.41 The domestic flight segment component of tax applies under the same 

rules as for flights within the continental United States. Further, 

transportation within Alaska or Hawaii is taxed in the same manner as domestic transportation within the continental United 

States. 

An additional special rule exempts domestic flight segments to or 

from qualified rural airports from the flight segment portion of the 

domestic air passenger excise tax. A qualified rural airport is an 

airport (1) from which there were fewer than 100,000 commercial 

passengers departing by air on flight segments of at least 100 miles 

during the second preceding calendar year, and (2) (a) which is not 


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42 A more liberal rule is provided for military personnel traveling in uniform while on leave 

in transportation that involves both international and domestic U.S. segments. 43PLR 20102004, 2010 WL 147820 (January 15, 2010). 

located within 75 miles of another airport that is not a qualified 

rural airport or (b) which is not connected by paved roads to another airport. 

The domestic air passenger excise tax does not apply to domestic 

segments (i.e., wholly within the United States) that are part of uninterrupted international air transportation. Uninterrupted international air transportation means travel (entirely by air) that does 

not both begin and end in the United States (or the 225-mile zone) 

and during which there is no more than a 12-hour scheduled period 

between arrival at and departure from any point in the United 

States.42

Both the domestic and international passenger taxes are imposed 

on ‘‘amounts paid’’ for air transportation. Therefore, no tax is imposed on transportation under airline frequent flyer programs for 

which no charge is made. Similarly, no excise tax is imposed on nocharge transportation provided to airline employees as a fringe 

benefit. Excise tax is imposed (determined by reference to actual 

amounts paid) for reduced-cost travel available under both frequent-flyer and airline employee and fringe-benefit programs. Further, the IRS has ruled in at least one instance that separatelystated charges for ‘‘checked’’ passenger baggage are not subject to 

the excise tax.43

Air cargo tax.—Based on legislative history accompanying the 

original enacting legislation, the air cargo excise tax has been interpreted to exclude amounts paid for ‘‘accessorial ground services.’’ 

This interpretation has allowed air cargo providers to reduce the 

effective rate of tax below the statutory 6.25 percent of price by allocating a portion of waybill charges to ground operations. Accessorial services charges are exempt from tax only if the service could 

be performed by a party other than the transportation provider and 

if the provider maintains in its records a separate accounting for 

the charge. 

Additional exemptions to air passenger and air cargo taxes.—Special rules classify certain for-hire (i.e., commercial) transportation 

as general aviation (thereby making the transportation subject to 

the higher-rate fuels excise tax rather than the air passenger and 

cargo excise taxes). Under these rules, flights for skydiving and 

flights on seaplanes generally are subject to the general aviation 

fuels excise taxes rather than the air passenger and air cargo excise taxes. 

An additional rule classifies all air transportation on aircraft 

having a maximum certificated takeoff weight of 6,000 pounds or 

less as general aviation when the aircraft are not operating on established lines. Aircraft operated for the sole purpose of sightseeing 

are not treated as operated on established lines, notwithstanding 

that such aircraft may operate on established schedules or routes. 

Certain transportation on air ambulances providing emergency 

services and on helicopters and fixed-wing aircraft operating engaged in hard mineral, oil, or gas exploration activities or as part 

of logging activities are exempt from tax. The exemption is limited 

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44Sec. 9502 and 49 U.S.C. sec. 48101, et. seq. 45Sec. 9502(d). 

ing at an airport eligible for Airport and Airway Trust Fund assistance in the case of the latter uses. 

Aviation fuels tax exemptions.—Fuels used in aircraft owned and 

operated by certain aircraft museums are exempt from the aviation 

fuels excise taxes. Qualifying museums are section 501(c)(3) organizations that are operated exclusively for the procurement, care, and 

exhibition of World War II combat and transport aircraft. 

Kerosene, gasoline, or diesel fuel blended with blended with alcohol and sold for use as aviation fuel by the person producing the 

mixture qualify for the refundable excise tax credit and the nonrefundable income tax credit described in Part I.A.1. 

Overview of Airport and Airway Trust Fund expenditure provisions 

In general.—Operation of the Airport and Airway Trust Fund is 

governed by parallel provisions of the Code and authorizing statutes.44 The Code provisions govern deposit of revenues into the 

trust fund and approve expenditure purposes in authorizing statutes as in effect on the date of enactment of the latest authorizing 

Act. The authorizing Acts provide for specific trust fund expenditure programs. The Airport and Airway Trust Fund was created in 

1970 to finance a major portion of Federal expenditures on national 

aviation programs. Prior to that time, these expenditures had been 

financed with General Fund monies. 

Authorized expenditures from the Airport and Airway Trust 

Fund include the following principal programs: 

1. Airport Improvement Program (‘‘AIP’’) (airport planning, 

construction, noise compatibility programs, and safety 

projects); 

2. Facilities and Equipment (‘‘F&E’’) program (costs of acquiring, establishing, and improving the air traffic control facilities); 

3. Research, Engineering, and Development (‘‘RED’’) program 

(FAA research and development activities); 

4. Federal Aviation Administration (‘‘FAA’’) Operations and 

Maintenance (‘‘O&M’’) programs; and 

5. Certain other aviation-related programs specified in authorizing Acts. 

Part of the O&M programs also is financed from General Fund 

monies. Of the total FAA appropriations each year, the General 

Fund has contributed about 24 to 25 percent. 

Limits on Airport and Airway Trust Fund expenditures.—No expenditures are currently permitted to be made from the Airport 

and Airway Trust Fund after March 31, 2011. Because the purposes for which Airport and Airway Trust Fund monies are permitted to be expended are fixed as of the date of enactment of the 

Airport and Airway Extension Act of 2010, Part IV, the Code must 

be amended in order to authorize new Airport and Airway Trust 

Fund expenditure purposes.45 In addition, the Code contains a specific enforcement provision to prevent expenditure of Airport and 

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46Sec. 9502(e)(1). 47Sec. 4042. Like other taxable motor fuels, inland waterway fuels are subject to an additional 

excise tax of 0.1 cents per gallon to fund the LUST Trust Fund. See Part 1.B.1. 48The term inland or intracoastal waterway of the United States means any inland or intracoastal waterway of the United States which is described in section 206 of the Inland Waterways Revenue Act of 1978 and includes the Mississippi River upstream from Baton Rouge, the 

Mississippi River’s tributaries, and specified waterways, including the Gulf of Mexico and Atlantic Intra-coastal Waterways, and the Tennessee-Tombigbee Waterway. 49Sec. 9506 and 33 U.S.C. sec. 2212. 

tion 9502.46 This provision provides that, should such unapproved 

expenditures occur, no further aviation excise tax receipts will be 

transferred to the Airport and Airway Trust Fund. Rather, the 

aviation taxes would continue to be imposed, but the receipts would 

be retained in the General Fund. 

3. Inland Waterways Trust Fund excise tax 

Tax and exemptions 

A 20-cents-per-gallon excise tax is imposed on fuel used in 

powering commercial cargo vessels on a designated system of inland or intra-coastal waterways.47 This tax is permanent. The tax 

applies to fuel used on any specified inland or intracoastal waterway of the United States in the business of transporting property 

for compensation or hire, or in transporting property in the business of the owner, lessee, or operator of the vessel (other than fish 

or other aquatic animal life caught on the voyage).48 The inland 

waterways excise tax is a use tax, imposed on the boat operator. 

Exemptions are provided for vessels designed primarily for use 

on the high seas which have a draft of more than 12 feet (‘‘deepdraft ocean-going vessels’’), for vessels used primarily for transportation of persons, for State or local government vessels engaged in 

governmental business, and for use in tugboat movement of LASH 

(‘‘lighter-aboard-ship’’) and SEABEE ocean-going barges used exclusively to ferry international cargoes to or from their carriers. 

Overview of Inland Waterways Trust Fund expenditure provisions 

Operation of the Inland Waterways Trust Fund is governed by 

parallel provisions of the Code and authorizing statutes.49 The 

Code provisions govern deposit of revenues from the fuel tax into 

the Inland Waterways Trust Fund and approve general expenditure programs. The authorizing statutes specify expenditure programs. 

Amounts in the Inland Waterways Trust Fund are available, as 

provided by appropriation Acts, for making construction and rehabilitation expenditures for navigation on the inland and coastal waterways of the United States described in section 206 of the Inland 

Waterways Revenue Act of 1978, as in effect on the date of the enactment of section 9506. There is a limit of 50 percent that can be 

paid from the Inland Waterways Trust Fund for the cost of any 

construction under section 102(a) of the Water Resources Development Act of 1986 (as in effect on the date of enactment of section 

9506). The remaining 50 percent is to be paid from the General 

Fund. 


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50Sec. 4461. 51Sec. 9505 and Pub. L. No. 104–303. 

4. Harbor Maintenance Trust Fund excise tax 

Tax and exemptions 

A 0.125-percent excise tax is imposed on the value of commercial 

cargo loaded or unloaded at taxable United States ports and on 

charges for transportation of passengers to or from such ports.50 No 

tax is imposed on cargo movements within a U.S. port. The tax is 

permanent. Unlike most Federal excise taxes, the harbor maintenance excise tax is administered by the U.S. Customs Service 

(rather than the Internal Revenue Service or the Treasury Department’s Tax and Trade Bureau). Administrative rules applicable to 

the tax are those applicable to customs duties. Shippers and importers are liable for the tax. 

The tax generally is imposed on all cargo (other than exports) 

and passengers that are loaded or unloaded at U.S. ports, defined 

as any channel or harbor in the United States that is open to public navigation. The tax does not apply to waterways where the inland waterways fuels excise tax is imposed or to ports with respect 

to which no Federal funds have been used since 1977 for construction, maintenance, or operation, or which were de-authorized by 

Federal law before 1985. Transportation at ports on the Columbia 

River is taxable only if the ports are downstream of the Bonneville 

lock and dam. 

In addition to exported cargo, the tax does not apply to cargo 

shipped between the continental United States and Alaska (except 

for crude oil), Hawaii, and/or U.S. possessions, or to cargo shipped 

between Alaska, Hawaii, and/or such possessions. This exemption 

includes passenger cruises within Alaska or Hawaii that also include travel in international waters, if the cruises do not include 

any stops at ports of call located outside the State from which the 

cruise begins. Transportation on regularly scheduled ferries transporting passengers (and their vehicles) that operate within the 

United States or between the U.S. and contiguous countries (e.g., 

Canada) are not subject to tax. There is an exemption for cargo 

owned by nonprofit organizations intended for use in humanitarian 

or development assistance overseas. Ships’ stores and fish (not previously loaded on shore) also are exempt. 

Overview of Harbor Maintenance Trust Fund expenditure 

provisions 

Operation of the Harbor Maintenance Trust Fund is governed by 

parallel provisions of the Code and authorizing statutes.51 The 

Code provisions govern deposit of revenues into the Harbor Maintenance Trust Fund and approve general expenditure programs. The 

authorizing statutes specify expenditure programs. 

The Harbor Maintenance Trust Fund generally is limited to financing the operations and maintenance costs for federally-authorized public harbors and channels for commercial navigation incurred by the U. S. Corps of Engineers under section 210 of the 

Water Resources Development Act of 1986 (as in effect on the date 

of the enactment of the Water Resources Development Act of 1996). 


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52See, 33 U.S.C. 2241(2). 53Secs. 4041, 4042, and 4081. 54For Federal budget scorekeeping purposes, the LUST Trust Fund tax, like other excise 

taxes dedicated to trust funds, is assumed to be permanent. See, Part III.A. for a description 

of these Federal budget rules. 

Harbor Maintenance Trust Fund expenditures have principally 

been for operations and maintenance costs of access channels to 

deep-draft harbors, i.e., dredging expenses and not channel deepening projects. 

Also, St. Lawrence Seaway Development Corporation operations 

and maintenance expenditures related to the seaway are financed 

from the Harbor Maintenance Trust Fund, as well as rebates of 

tolls or charges pursuant to section 13(b) of the Act of May 13, 

1954 (as in effect on April 1, 1987). 

Certain ancillary activities directly related to maintenance dredging or related to keeping a waterway unobstructed also are financed from the Harbor Maintenance Trust Fund.52 Further, the 

administrative costs of collecting the harbor maintenance tax (not 

to exceed $5 million for any fiscal year) are authorized to be paid 

from the Harbor Maintenance Trust Fund. 

B. Excise Taxes Dedicated to Environmental Trust Funds or 

Designated Funds 

1. Leaking Underground Storage Tank Trust Fund excise 

taxes 

Tax and exemptions 

Fuels of a type subject to other trust fund excise taxes generally 

are subject to an add-on excise tax of 0.1 cent per gallon to fund 

the Leaking Underground Storage Tank (‘‘LUST’’) Trust Fund.53

For example, the LUST excise tax applies, to gasoline, diesel fuel, 

kerosene, and most alternative fuels subject to highway and aviation fuels excise taxes, and to fuels subject to the inland waterways 

fuel excise tax. This excise tax is imposed on both uses and parties 

subject to the other taxes, and to situations (other than export) in 

which the fuel otherwise is tax-exempt. For example, off-highway 

business use of gasoline and off-highway use of diesel fuel and kerosene generally are exempt from highway motor fuels excise tax. 

Similarly, States and local governments and certain other parties 

are exempt from such tax. Nonetheless, all such uses and parties 

are subject to the 0.1-cent-per-gallon LUST excise tax. 

Liquefied natural gas, compressed natural gas, and liquefied petroleum gas are exempt from the LUST tax. Additionally, methanol 

and ethanol fuels produced from coal (including peat) are taxed at 

a reduce rate of 0.05 cents per gallon. 

The LUST tax is scheduled to expire after September 30, 2011.54

Overview of Leaking Underground Storage Tank Trust Fund 

expenditure provisions 

Amounts in the LUST Trust Fund are available, as provided in 

appropriations Acts, for purposes of making expenditures to carry 

out sections 9003(h)–(j), 9004(f), 9005(c), and 9010–9013 of the 

Solid Waste Disposal Act, as in effect on the date of enactment of 

Public Law 109–168. Any claim filed against the LUST Trust Fund 


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55Pub. L. No. 109–58. 56 A barrel equals 42 gallons. 57Sec. 4611(a). Petroleum products include crude oil (sec. 4612(a)(3)). Statutorily, the tax also 

applies to domestic crude oil exported from the United States before being received at a U.S. 

refinery (sec. 4611(b)(1)). 58For Federal budget scorekeeping purposes, the oil spill excise tax is assumed to be permanent. See, Part III.A., for a description of these Federal budget rules. Under prior law, the tax 

was required to terminate if the trust fund balance were to reach $2.7 billion in a calendar quarter. That requirement was repealed in the Emergency Economic Stabilization Act of 2008 (Pub. 

L. No. 110–343, sec. 405(b)(1) Div. B). 59 Revenues from the tax imposed in Puerto Rico and the U.S. Virgin Islands are retained in 

the Federal Treasury, unlike revenues from the excise tax on rum imported or brought in to 

the United States (and certain tobacco products produced in those possessions), which are ‘‘covered over’’ to the two possessions. 

may be paid only out of such fund, and the liability of the United 

States for claims is limited to the amount in the fund. 

The monies in the LUST Trust Fund are used to pay expenses 

incurred by the Environmental Protection Agency (the ‘‘EPA’’) and 

the States for preventing, detecting, and cleaning up leaks from petroleum underground storage tanks, as well as programs to evaluate the compatibility of fuel storage tanks with alternative fuels, 

MTBE additives, and ethanol and biodiesel blends. 

The EPA makes grants to States to implement the program, and 

States use cleanup funds primarily to oversee and enforce corrective actions by responsible parties. States and EPA also use cleanup funds to conduct corrective actions where no responsible party 

has been identified, where a responsible party fails to comply with 

a cleanup order, in the event of an emergency, and to take cost recovery actions against parties. In 2005, Congress authorized EPA 

and States to use trust fund monies for non-cleanup purposes as 

well, specifically for administration and enforcement of the leak 

prevention requirements of the UST program.55 Although States 

report that trust fund allotments are insufficient to cover the costs 

of federal program mandates, annual appropriations have remained 

less than the annual amounts earned in interest on the LUST 

Trust Fund. 

2. Oil Spill Liability Trust Fund excise tax 

Tax and exemptions 

The Oil Spill Liability Trust Fund is financed with revenues from 

an eight-cents-per-barrel 56 excise tax on crude oil received at a 

United States refinery and on imported petroleum products.57 The 

tax rate is scheduled to increase to nine cents per barrel in calendar year 2017, after which it currently is scheduled to expire.58

A back-up ‘‘use tax’’ is imposed on crude oil that is used in or exported from the United States before being received at a refinery 

(sec. 4611(b)). Crude oil is defined to include oil condensates and 

natural gas. Under a special rule, natural gasoline produced from 

natural gas at a refinery is treated as received at the refinery at 

the time of its production and is subject to tax at that time. 

Unlike the excise taxes dedicated to transportation trust funds, 

the oil spill liability excise tax applies in Puerto Rico, all U.S. possessions, the Commonwealth of the Northern Mariana Islands, and 

the Trust Territory of the Pacific Islands as well as in the 50 

States and the District of Columbia.59 The term ‘‘United States’’ is 


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60Sec. 9509 and 33 U.S.C. secs. 2701–2761, et. seq. 61Formerly the ‘‘Aquatic Resources Trust Fund.’’ 62 In addition to the excise tax revenue sources, the Trust Fund receives revenue from import 

duties on fishing tackle and on yachts and pleasure craft. 

defined for purposes of this tax to include foreign trade zones and 

the U.S. continental shelf. 

Overview of the Oil Spill Liability Trust Fund provisions 

Operation of the Oil Spill Liability Trust Fund is governed by 

parallel provisions of the Code and authorizing statutes.60 The 

Code provisions govern deposit of revenues into the Oil Spill Liability Trust Fund and approve general Oil Spill Liability Trust Fund 

expenditure programs. The authorizing statutes specify expenditure programs. 

Amounts in the Oil Spill Liability Trust Fund are available, as 

provided in appropriation Acts or section 6002(b) of the Oil Pollution Act of 1990, for the following oil spill-related expenditures: 

1. Payment of removal costs and other costs, expenses, 

claims, and damages under section 1012 of the 1990 Act; 

2. Costs relating to oil pollution or the substantial threat of 

oil pollution (under sections 5 and 7 of the Intervention on the 

High Seas Act); 

3. Payment of liabilities incurred by the revolving fund 

under section 311(k) of the Federal Water Pollution Control 

Act; 

4. Payments for prevention, removal, and enforcement related to oil discharges (under section 311(b)–(d), (j), and (l) of 

the Federal Water Pollution Control Act); 

5. Payment of liabilities incurred by the Deepwater Port Liability Fund; and 

6. Payment of liabilities incurred by the Offshore Pollution 

Compensation Fund. 

There is a general limit of $1 billion per incident that may be 

paid out of the Oil Spill Liability Trust Fund, with costs of natural 

resource damage assessments and claims for any single incident 

limited to $500 million. Except in the case of payments of oil removal costs, payments may be made from the Trust Fund only if 

the Fund maintains a minimum balance of $30 million after such 

payment. Any claim filed against the Oil Spill Liability Trust Fund 

may be paid only out of the Fund. 

Under prior law, the Oil Spill Liability Trust Fund had the authority to borrow monies from the General Fund, as repayable advances, with a limit of $1 billion of repayable advances at any one 

time. Such advances were to be repaid to the General Fund with 

interest. The authority to make advances to the Oil Spill Liability 

Trust Fund expired after December 31, 1994. 

3. Sport Fish Restoration and Boating Trust Fund excise 

taxes 

In general 

The Sport Fish Restoration and Boating Trust Fund 61 is financed by revenues from three principal excise taxes.62 First, revenue equivalent to the highway excise taxes collected on gasoline 


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63The first $1 million of such revenues is transferred to the Land and Water Conservation 

Fund, discussed in Part I.A.4. Off-highway business use generally is exempt from the highway 

gasoline excise tax, and off-highway use generally is exempt from those taxes on diesel fuel and 

kerosene (sec. 4082, 4041, and 6421). 64The fuels subject from which tax revenues are transferred to the Trust Fund are subject 

to an additional 0.1-cent-per-gallon excise tax for the LUST Trust fund in the same manner as 

other highway motor fuels. 65Sec. 4161. 66The tax on fishing rods and poles is limited to a maximum of $10 per taxable article. 67Terminal tackle does not include natural bait or any item of terminal tackle designed for 

use and ordinarily used on fishing lines over 130 pounds test. 

and other motor fuels used in motorboats is transferred from the 

Highway Trust Fund to this trust fund in lieu of allowing refunds 

to consumers for this off-highway use.63 Second, the trust fund receives revenues (also transferred from the Highway Trust Fund) 

equivalent to excise taxes collected on ‘‘small engine fuel.’’ Smallengine fuel means gasoline used as a fuel in the nonbusiness use 

of small-engine outdoor power equipment (i.e., non-commercial offhighway vehicles such as snowmobiles and small-engine outdoor 

power equipment such as snow blowers and lawn mowers).64

The third excise tax revenue source for the trust fund is imposed 

on manufacturers and importers of ‘‘sport fishing equipment.’’ 65

The articles subject to tax, and the applicable tax rates, are shown 

in the following table. 

Articles subject to tax at 10 percent rate: 

Fishing rods and poles (and component parts therefor) 66

Fishing reels 

Fly fishing lines, and other fishing lines not over 130 pounds 

test 

Fishing spears, spear guns, and spear tips 

Items of terminal tackle, including leaders, artificial lures, 

artificial baits, and artificial flies, fishing hooks, bobbers, 

sinkers, snaps, drayles, and swivels 67

Fish stringers 

Creels 

Bags, baskets, or other containers designed to hold fish 

Portable bait containers 

Fishing vests 

Gaff hooks 

Fishing hook disgorgers 

Dressing for fishing lines and artificial flies 

Fishing rod belts, fishing rodholders, fishing harnesses, fish 

fighting chairs, fishing outriggers, and fishing downriggers 

Articles subject to tax at 3 percent rate: 

Tackle boxes 

Electric outboard motors 

Parts and accessories sold by manufacturers or importers in connection with the sale of any taxable article are included in the tax 

base for the article. 

Overview of Sport Fish Restoration and Boating Trust Fund 

expenditure provisions 

Operation of the Sport Fish Restoration and Boating Trust Fund 

is governed by parallel provisions of the Internal Revenue Code 


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68Sec. 9504. 16 U.S.C. sec. 777, 16 USC sec. 3951, et. seq., and Pub. L. No. 105–178, sec. 

7204. 69See, Ranger, The Sport Fish Restoration and Boating Trust Fund (CRS Report RS22060, 

January 25, 2010). 

and authorizing statutes.68 The Code provisions govern deposit of 

revenues into the trust fund and approve general expenditure programs. The authorizing statutes specify expenditure programs. 

Income received in this trust fund in any fiscal year is to be allocated to eligible programs in the following fiscal year. The following 

eight programs are funded from the trust fund: 69

1. Coastal wetlands conservation and restoration programs, 

the majority of which is for Corps of Engineers Louisiana 

Coastal Wetlands Restoration; 

2. Recreational boating safety grant program to the States, 

administered by the U.S. Coast Guard’s Office of Boating Safety; 

3. Grant program for states to construct sewage pump-out 

and dump stations for recreational boating sewage disposal; 

4. State grant programs for construction or upgrade of docking facilities for transient large recreational boats (26 feet or 

more in length); 

5. Grants for national aquatic resource outreach and communications programs to encourage participation in recreational 

boating and fishing and greater public involvement in aquatic 

stewardship and to improve communication with anglers, boaters, and the general public; 

6. State conservation grants for wildlife and sport fish restoration; 

7. Interstate fishery commissions and the Sport Fishing and 

Boating Partnership Council; and 

8. After the previously listed programs are funded, the remaining amounts are to be used for State grants for sport fish 

restoration programs, with 60% of the grants based on the 

number of anglers and 40 percent on its land and water area. 

4. Land and Water Conservation Fund (Federal Aid to Wildlife Restoration Program) and dedicated excise taxes 

In general 

The Federal Aid to Wildlife Program (the ‘‘Fund’’), although not 

a formal trust fund, receives revenues from three dedicated excise 

tax sources. First, the Fund receives $1 million per year of the excise taxes imposed on motorboat fuels. Second, revenues from an 

11-percent manufacturers’ or importers’ excise tax on certain bows 

and arrows and taxes on certain ‘‘regular’’ firearms are dedicated 

to the Fund. The latter two excise taxes are outlined in the following table. 


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70Taxable archery equipment is any part or accessory suitable for inclusion in or attachment to a taxable bow, and any quiver, broadhead, or point suitable for use with a taxable bow. 71The tax applies to shafts sold separately or as part of a finished arrow. 

Otherwise taxable shafts consisting of all natural wood with no laminations or artificial means 

of enhancing the spine, which are designed to be (or are) incorporated into a finished arrow 

measuring 5/16 of an inch or less in diameter and which are not suitable for use with a taxable 

bow are exempt from tax. 72The tax rate is adjusted annually for inflation (measured by the CPI). 73Otherwise taxable firearms manufactured by persons that manufacture or import fewer 

than 50 such articles during a calendar year are exempt from tax. Sales to the U.S. Department 

of Defense also are exempt. 74 ‘‘Other firearms’’ are firearms (other than pistols and revolvers) such as regular rifles and 

shotguns that are exempt from the ‘‘non-regular firearms’’ excise tax of sec. 5811 of the National 

Firearms Act. See, Part II.C. 75 16 U.S.C. 669–669i; 50 Stat. 917. 

Tax (and Code section) Tax rates 

Bows and arrows (sec. 4161) 

Bows having a peak draw weight 

of 30 pounds or more .................. 11 percent of price 

Archery equipment 70 ...................... 11 percent of price 

Arrow shafts for use as part of an 

arrow (a) that measures at least 

18 inches in length, or (b) if 

shorter, that is suitable for use 

with a taxable bow 71 .................. 45 cents per shaft 

(2011) 72

Regular firearms and ammunition 

(sec. 4181) 73

Pistols and revolvers ....................... 10 percent of price 

Other firearms 74 ............................. 11 percent of price 

Shells and cartridges ...................... 11 percent of price 

Overview of Federal Aid to Wildlife Restoration Fund provisions 

In general.—The Federal Aid to Wildlife Restoration Act of September 2, 1937, commonly referred to as the ‘‘Pittman-Robertson 

Act’’ 75 became effective on July 1, 1938. As amended by the Dingell-Johnson Act and other amendments, the program provides 

dedicated funds in the Treasury for Federal aid to States for management and restoration of fish and game wildlife (including acquisition and improvement of wildlife habitat), hunter education programs (including operation of target ranges), hunter safety programs, and development of fish and wildlife management plans. 

Specific Federal Wildlife Restoration Fund expenditure purposes.—The Federal Aid to Wildlife Restoration Act authorizes appropriations from the Fund attributable to revenues from Federal 

excises on regular firearms (rifles, shotguns, pistols and revolvers), 

ammunition, and bows and arrows received during the prior fiscal 

year to be made available until expended. Any State-apportioned 

amounts that are unspent or unobligated at the end of the following fiscal year may be used by the Secretary of the Interior to 

carry out the provisions of the Migratory Bird Conservation Act. 


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76 16 U.S.C. sec. 669c(a)(1)(B). 77Sec. 4121. 78Sec. 4121(e). 79Sec. 4121(c). 80See, Ranger Fuel Corp. v. U.S., 33 F.Supp.2d 466 (E.D. Va., 1998). 

Monies attributable to the excise tax on sporting firearms (rifles 

and shotguns) and ammunition are appropriated to the Secretary 

of the Interior and apportioned to States for paying up to 75 percent of the approved wildlife restoration projects (including acquisition and development of access facilities for public use) and hunter 

education programs. 

One-half of the monies accruing to the Fund from the excise 

taxes on pistols, revolvers, and bows and arrows are to be apportioned among the states based on population. One half of the other 

50 percent of the monies is apportioned among the States based on 

geographic size, and the balance is apportioned based on the number of paid hunting license holders in each State. The States may 

use such apportioned amounts to finance up to 75 percent of the 

costs of the approved plan or project (not to include law enforcement or public relation costs), i.e., 25 percent must come from 

State and local government sources. States may use funds apportioned on the basis of population for up to 75 percent of the costs 

of hunter safety programs and the construction and operation of 

public target ranges. 

Federal administrative expenses are allowed from the Fund monies. Limited monies are also available for such aid to U. S. territories and possessions. For fiscal year 2003, $8,212,000 of the monies in the Fund may be used for administering the Federal Aid in 

Wildlife Restoration Act and the Migratory Bird Conservation Act. 

This amount is indexed for inflation for fiscal years 2004 and thereafter.76 For fiscal year 2010, the administration cap amount was 

$9.798 million. 

C. Excise Taxes Dedicated to Health-Related Trust Funds 

1. Black Lung Disability Trust Fund excise taxes 

Coal excise tax 

To finance the Black Lung Disability Trust Fund, a producer 

(manufacturer) excise tax is imposed on coal (other than lignite) 

mined in the United States.77 The present tax rate is $1.10 per ton 

for coal from underground mines and 55 cents per ton for coal from 

surface mines. Both rates are limited to a maximum of 4.4 percent 

of the coal’s selling price. The coal excise tax rates are scheduled 

to decline to 50 cents per ton for underground mines and 25 cents 

per ton for surface mines (both limited to two percent of the coal’s 

selling price) on the earlier of January 1, 2019 or the first January 

1 after which there is no balance of repayable advances that have 

been made to the Trust Fund and no unpaid interest on previous 

such advances.78

The tax does not apply to lignite 79 or to coal mined in the United 

States that is to be exported.80


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81Sec. 501(c)(21). 82Self-dealing is defined as sale, leasing, etc. of real or personal property, lending of money 

or other extension of credit, furnishing of goods, services or facilities, and payment of compensation between a benefit trust and a disqualified person. A disqualified person is a contributor 

to the benefit trust, a trustee, or an owner of more than 10 percent of the combined voting 

power of a corporation, the profits interest of a partnership, or the beneficial interest of a trust 

or unincorporated entity that is a contributor to the benefit trust. Officers, directors, and employees of contributors to the benefit trust and spouses, family members, and certain related 

corporations and trusts also are disqualified persons. 83 A taxable expenditure is any expenditure other than for a purpose described in sec. 

501(c)(21). 84Sec. 9501 and 30 U.S.C. sec. 901 et seq. 

Black lung benefit trusts and penalty excise taxes 

Present law allows coal mine operators that are liable for paying 

black lung benefits to miners or their survivors to fund that liability through deductible contributions to a qualified tax-exempt 

trust.81 To qualify, the trust must be established for the sole purpose of satisfying the operator’s liability under Black Lung Acts, 

paying premiums for insurance exclusively covering such liability, 

and paying administrative expenses of the trust. 

The Code imposes three ‘‘penalty excise taxes’’ to regulate potential misuse of monies in these trusts. Revenues from the penalty 

excise taxes are dedicated to the Black Lung Disability Trust Fund. 

Because raising revenue is not the primary purpose of these taxes, 

revenues raised by the penalty excise taxes historically have been 

relatively small. The following table summarizes these penalty excise taxes. 

Tax (and Code section) Tax rates 

Self-dealing (sec. 4951) 82 Initial tax.—10 percent of the amount 

of self-dealing on the self dealer; 2.5 

percent of such amount on the trustee 

Additional tax.—If not corrected, additional tax of 100 percent of amount 

involved on the self dealer; 50 percent of such amount on the trustee 

Taxable expenditures (sec. 

4952) 83

Initial tax.—10 percent of taxable expenditure on the fund; 2.5 percent of 

such amount on the trustee 

Additional tax.—If not corrected, additional tax of 100 percent of amount 

of expenditure on the fund; 50 percent of such amount on the trustee 

Excess contributions to 

benefit trust (sec. 4953) 

Five percent of excess contribution on 

the contributor 

Overview of Black Lung Disability Trust Fund expenditure 

provisions 

In general.—Operation of the Black Lung Disability Trust Fund 

is governed by parallel provisions of the Code and authorizing statutes.84 The Code provisions govern deposit of revenues into the 

trust fund and approve general expenditure programs. The authorizing statutes specify expenditure programs. 


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85 Vaccines comprised of more than one taxable component vaccine are taxed as if the components were separate doses. 86Sec. 4131. 

Black Lung Disability Trust Fund expenditure purposes.— 

Amounts in the trust fund are available, as provided in appropriation Acts, for the following purposes: 

1. Payment of benefits under section 422 of the Black Lung 

Benefits Act in cases where the Secretary of Labor determines 

that (a) the coal mine operator liable for the payment of such 

benefits has not commenced payment of benefits within 30 

days after the date of an initial determination of eligibility or 

has not made a payment within 30 days after the payment is 

due, or (b) there is no operator who is liable for payment of 

such benefits; 

2. Payment of obligations incurred by the Secretary of Labor 

for claims of miners or their survivors where the miner’s last 

coal mine employment was before January 1, 1970; 

3. Repayment to the General Fund of amounts paid by the 

Secretary of Labor for claims under part C of the Black Lung 

Benefits Act that were attributable to eligibility between January 1, 1974–March 31, 1978; 

4. Repayment of advances (and interest on advances) to the 

General Fund; 

5. Payment of administrative expenses incurred on or after 

March 1, 1978, by the Department of Labor or Department of 

Health and Human Services under Part C of the Black Lung 

Benefits Act (other than sections 427(a) or 433), or by the Department of the Treasury in administering the excise tax and 

the Trust Fund; 

6. Reimbursement of operators for amounts paid (other than 

for penalties or interest) before April 1, 1978, in satisfaction of 

claims of miners employed before Payment January 1, 1970; 

and 

7. Reimbursement of operators and insurers for amounts 

paid (other than for penalties, interest, or attorney’s fees) for 

any claim denied before March 1, 1978, and which is or has 

been approved under section 435 of the Black Lung Benefits 

Act. 

2. Vaccine Injury Compensation Trust Fund excise taxes 

In general 

A 75-cents-per-dose 85 excise tax is imposed on the sale or use by 

a manufacturer or importer of listed vaccines to finance the Vaccine Injury Compensation Trust Fund program.86 The tax is imposed on sale or use by private parties and governmental entities, 

including the Federal, State, and local governments. The tax further is imposed within the 50 States and the District of Columbia 

and in Puerto Rico, the Commonwealth of the Northern Marianas, 

the Trust Territory of the Pacific, and all other U.S. possessions. 

The following table lists the currently taxable vaccines. 


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87Sec. 9510 and 42 U.S.C. sec. 300aa. 

Taxable vaccines: 

Any vaccine containing diphtheria toxoid 

Any vaccine containing tetanus toxoid 

Any vaccine containing pertussis bacteria, extracted or partial 

cell bacteria, or specific pertussis antigens 

Any vaccine against measles, mumps, or rubella 

Any vaccine containing polio virus 

Any vaccine against hepatitis A, hepatitis B, chicken pox, or 

rotavirus gastroenteritis 

Any conjugate vaccine against streptococcus pneumoniae 

Any trivalent vaccine against influenza 

Any meningococcal vaccine 

Any vaccine against the human papillomavirus 

Overview of Vaccine Injury Compensation Trust Fund provisions 

Operation of the Vaccine Injury Compensation Trust Fund is 

governed by parallel provisions of the Code and authorizing statutes.87 The Code provisions govern deposit of revenues into the 

trust fund and approve general expenditure programs. The authorizing statutes specify expenditure programs. 

Amounts in the Vaccine Injury Compensation Trust Fund are 

available, as provided in appropriations Acts, only for the following: 

1. Payment of compensation under subtitle 2 of Title XXI of 

the Public Health Service Act (as in effect on October 18, 2000) 

for vaccine-related injury or death with respect to any vaccine 

which is (a) administered after September 30, 1988, and (b) a 

taxable vaccine (defined in sec. 4132(a)(1)) at the time compensation is paid; or 

2. Payment of expenses of administration (not to exceed $9.5 

million for any fiscal year) incurred by the Federal Government in administering subtitle 2. 

Liability of the United States relating to vaccine injury compensation is limited to the amount in the Vaccine Injury Compensation Trust Fund, and any claim filed against the fund may 

be paid only out of the fund. 


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88Pub. L. No. 111–148 and Pub. L. No. 111–152 (2010). 89Secs. 4375 and 4376. 90 A specified health insurance policy does not include a policy substantially all of the benefits 

of which are excepted benefits under section 9832(c). Examples of excepted benefits are coverage 

for only accident or disability insurance, or any combination thereof, liability insurance, workers’ 

compensation or similar insurance, automobile medical payment insurance, coverage for on-site 

medical clinics, limited scope dental or vision benefits, benefits for long-term care, nursing home 

care, community-based care, coverage for only a specified disease or illness, hospital indemnity 

or other fixed indemnity insurance, and Medicare supplemental coverage. 

3. Patient-Centered Outcomes Research Trust Fund excise 

taxes 

In general 

The ‘‘Patient Protection and Affordable Care Act,’’ as amended by 

the ‘‘Health and Education Reconciliation Act of 2010’’ (the 

‘‘Health-Care Reform Act’’) 88 imposed two new excise taxes, or 

‘‘fees’’ on insured and self-insured health plans.89 Revenues from 

the taxes are dedicated to the Patient-Centered Outcomes Research 

Trust Fund. These excise taxes become effective for policy years 

ending after September 30, 2012. The tax rates are phased in, beginning at $1.00 for ‘‘specified health insurance policies’’ for insured plans in FY 2013 and $2.00 

for such policies in FY 2014. For self-insured plans, the tax rates 

are $1.00 for self-insured plans in FY 2013 and $2.00 in FY 2014. 

In both cases, the tax is determined by applying the applicable rate 

to the average number of lives covered under the policy or plan. 

After FY 2014, the tax rate is indexed to reflect projected annual 

increases in the per capita amount of national health expenditures. 

The taxes are imposed on all persons issuing taxable insurance 

policies or providing self-insured plans, including governmental entities (other than Medicare, Medicaid, the State Children’s Health 

Insurance Program (‘‘SCHIP’’), and Federal programs for providing 

medical care (other than through insurance policies) to members of 

the Armed Forces, veterans, or members of Indian tribes). The 

taxes further are imposed both within the 50 States and the District of Columbia, and in all U.S. possessions (including Puerto 

Rico, the Commonwealth of the Northern Marianas, and the Trust 

Territory of the Pacific). 

A ‘‘specified health insurance policy’’ is an accident or health insurance policy that is issued with respect to individuals residing in 

the United States.90

A taxable self-insured plan is any plan providing accident or 

health coverage if any portion of the coverage is provided other 

than through an insurance policy and such plan is established or 

maintained by (1) an employer for benefit of its employees, (2) an 

employee organization for the benefit of its members (or former 

members), (3) a Voluntary Employee Beneficiary Association 

(‘‘VEBA’’) under section 501(c)(9), (4) any section 501(c)(6) organization, or (5) a multiple employer welfare arrangement or rural electric or telephone cooperative. 

Overview of Patient-Centered Outcomes Research Trust Fund 

provisions 

The Health-Care Reform Act establishes the Patient-Centered 

Outcomes Research Institute, a non-government, non-profit corporation to support research, evidence synthesis, and dissemination 


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91Sec. 9512. 

of research findings on ‘‘the manner in which diseases, disorders, 

and other health conditions can effectively and appropriately be 

prevented, diagnosed, treated, monitored and managed.’’ The Patient-Centered Outcomes Research Institute is funded through a 

newly established Patient-Centered Outcomes Research Trust 

Fund.91

4. Annual fee on branded prescription pharmaceutical manufacturers and importers 

An annual fee is imposed on certain manufacturers and importers of branded prescription drugs for sale to any specified government program or pursuant to coverage under any such program. 

Fees collected are credited to the Medicare Part B trust fund. 

The aggregate annual fee imposed on all covered manufacturers and importers is $2.5 billion for calendar year 2011, $2.8 billion for 

calendar years 2012 and 2013, $3 billion for calendar years 2014 

through 2016, $4 billion for calendar year 2017, $4.1 billion for calendar year 2018, and $2.8 billion for calendar year 2019 and thereafter. The aggregate fee is apportioned among the covered manufacturers and importers each year based on their relative share of 

branded prescription drug sales taken into account during the previous calendar year. 

A covered manufacturer’s or importer’s relative market share for 

a calendar year is the manufacturer’s or importer’s branded prescription drug sales taken into account during the preceding calendar year as a percentage of the aggregate branded prescription 

drug sales of all manufacturers and importers taken into account 

during the preceding calendar year. Sales taken into account during any calendar year with respect to a manufacturer or importer 

is: (1) zero percent of sales not more than $5 million; (2) 10 percent 

of sales over $5 million but not more than $125 million; (3) 40 percent of sales over $125 million but not more than $225 million; (4) 

75 percent of sales over $225 million but not more than $400 million; and (5) 100 percent of sales over $400 million. 

Branded prescription drug sales are sales of branded prescription 

drugs made to any specified government program, or pursuant to 

coverage under any such program. The term ‘‘branded prescription 

drug’’ includes any drug which is subject to section 503(b) of the 

Federal Food, Drug, and Cosmetic Act and for which an application 

was submitted under section 505(b) of such Act. Branded prescription drugs also include any biological product the license for which 

was submitted under section 351(a) of the Public Health Service 

Act. Branded prescription drug sales does not include sales of any 

drug or biological product with respect to which an orphan drug tax 

credit was allowed for any taxable year under section 45C. The exception for orphan drug sales does not apply to any drug or biological product after such drug or biological product is approved by the 

Food and Drug Administration for marketing for any indication 

other than the rare disease or condition with respect to which the 

section 45C credit was allowed. 

Specified government programs include: (1) the Medicare Part D 

program under part D of title XVIII of the Social Security Act; (2) 


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the Medicare Part B program under part B of title XVIII of the Social Security Act; (3) the Medicaid program under title XIX of the 

Social Security Act; (4) any program under which branded prescription drugs are procured by the Department of Veterans Affairs; (5) 

any program under which branded prescription drugs are procured 

by the Department of Defense; or (6) the TRICARE retail pharmacy 

program under section 1074g of title 10, United States Code. 

For purposes of procedure and administration under the rules of 

Subtitle F of the Code, the fee under this provision is treated as 

an excise tax with respect to which only civil actions for refund 

under Subtitle F apply. The Secretary of the Treasury may redetermine the amount of a covered entity’s fee for any calendar year for 

which the statute of limitations remains open. 

For purposes of section 275, relating to the nondeductibility of 

specified taxes, the fee is considered to be a nondeductible tax described in section 275(a)(6). 

The fees apply to covered manufacturers and importers for calendar years beginning after December 31, 2010. 


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II. GENERAL FUND EXCISE TAXES 

A. Principal General Fund Excise Taxes 

1. Distilled spirits, wine and beer excise taxes 

In general 

Federal excise taxes on alcohol were first imposed by the Distilled Spirits Tax Act of 1791, but the origins of most of the excise 

taxes on distilled spirits, wine, and beer dates from the 1860s when 

they were enacted to fund the Federal Government’s costs of the 

Civil War. Under present law, taxes are imposed at different rates 

for distilled spirits, wine, and beer and are imposed on these products when produced or imported. Generally, these excise taxes are 

administered and enforced by the Alcohol and Tobacco Tax and 

Trade Bureau (TTB), Department of the Treasury, except these 

taxes on imported bottled distilled spirits, wine, and beer are collected by the Customs and Border Protection Bureau (CBP), Department of Homeland Security, under delegation by the Secretary 

of the Treasury. 

The following table outlines the present rates of tax on distilled 

spirits, wine, and beer: 


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92 A proof gallon is a U.S. liquid gallon consisting of 50 percent alcohol. 93 A ‘‘still wine’’ is a non-carbonated wine. Most common table wines are still wines. 94 A wine gallon is a U.S. liquid gallon. 95 Hard apple cider is defined as apple cider otherwise classified as a still wine, the alcohol 

content of which is at least one-half of one percent but less than seven percent by volume. 

Tax (and Code section) Tax rates 

Distilled spirits (sec. 5001) ............... $13.50 per proof gallon 92

Wines (sec. 5041) 

‘‘Still wines’’ 93 not more than 14 

percent alcohol ............................. $1.07 per wine gallon 94

‘‘Still wines’’ more than 14 percent, 

but not more than 21 percent, 

alcohol .......................................... $1.57 per wine gallon 

‘‘Still wines’’ more than 21 percent, 

but not more than 24 percent, 

alcohol .......................................... $3.15 per wine gallon 

‘‘Still wines’’ more than 24 percent alcohol .......................................... $13.50 per proof gallon 

(taxed as distilled spirits) 

Champagne and other sparkling wines ............................................ $3.40 per wine gallon Artificially carbonated wines ......... $3.30 per wine gallon 

Hard apple cider 95 .......................... $0.226 per wine gallon 

Beer (sec. 5051) .................................... $18 per barrel (31 gallons) generally 

The liability for the excise tax on distilled spirits comes into existence at the moment the alcohol is produced but is not determined and payable until the bottled distilled spirits are removed 

from the bonded premises of the distilled spirits plant. The liability 

for the excise taxes on wine and beer also come into existence when 

the alcohol is produced but is not payable until the wine or beer 

is removed from the bonded wine cellar or winery or brewery for 

consumption or sale. Generally, bulk distilled spirits and bulk and 

bottled wine may be transferred in bond between bonded premises 

and beer may be transferred between commonly owned breweries 

without payment of the tax; however, the tax liability follows these 

products. Imported bulk distilled spirits, bulk natural wine, and 

bulk beer may be released from customs custody without payment 

of the tax and transferred in bond to a distillery, winery, or brewery. Distilled spirits, wine, and beer may be exported without payment of the tax and these products may be withdrawn without payment of tax or free of tax from the production facility for certain 

authorized uses, including industrial uses and non-beverage uses. 


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96 Because Puerto Rico is inside U.S. customs territory, articles entering the United States 

from that commonwealth are ‘‘brought into’’ rather than ‘‘imported into’’ the U.S. 97Sec. 7652. 98Sec. 5011. Section 5011 is administered and enforced by the Internal Revenue Service. 99Sec. 5041(c). 100Sec. 5051(a)(2). 

A portion of the revenues from the distilled spirits excise tax imposed on rum imported or brought into 96 the United States (less 

certain administrative costs) is transferred (‘‘covered over’’) to Puerto Rico and the U.S. Virgin Islands.97 The amount covered over is 

$10.50 per proof gallon ($13.25 per proof gallon during the period 

from July 1, 1999, through December 31, 2011). 

Eligible distilled spirits wholesale distributors and distillers receive an income tax credit for the average cost of carrying previously imposed excise tax on beverages stored in their warehouses.98

Reduced rates and exemptions for certain wine and beer producers 

Domestic wineries having aggregate annual production not exceeding 250,000 gallons receive a credit against the wine excise tax 

equal to 90 cents per gallon (the amount of a wine tax increase enacted in 1990) on the first 100,000 gallons of wine removed during 

a calendar year.99 The credit is reduced by one percent for each 

1,000 gallons produced in excess of 150,000 gallons. The credit does 

not apply to champagne and other sparkling wines. The credit rate 

is 5.6 cents per gallon for hard apple cider. Production of hard cider 

and other wines produced by a qualifying winery are aggregated in 

applying the per-winery volume limits of the credit. Small domestic brewers are subject to a reduced tax rate of $7 

per barrel on the first 60,000 barrels of beer removed each year.100

Small brewers are defined as brewers producing fewer than two 

million barrels of beer during a calendar year. The credit reduces 

the effective per-gallon tax rate from approximately 58 cents per 

gallon to approximately 22.6 cents per gallon for this beer. 

Individuals may produce limited quantities of wine and beer for 

personal or family use without payment of tax during each calendar year. The limits for each beverage are 200 gallons per calendar year for households of two or more adults and 100 gallons 

per calendar year for single-adult households. 

2. Tobacco excise taxes 

In general 

Excise taxes are imposed on tobacco products and cigarette papers and tubes that are manufactured or imported into the United 

States. ‘‘Tobacco products’’ means cigars, cigarettes, smokeless tobacco (snuff and chewing tobacco), pipe tobacco, and roll your own 

tobacco. Processed tobacco is regulated under the internal revenue 

laws but no excise tax is imposed on it. The tax liability comes into 

existence when the domestic tobacco products are manufactured 

and is determined and payable when the tobacco products or cigarette papers and tubes are removed in packages from the bonded 

premises of the manufacturer. Manufacturers and export warehouse proprietors are subject to an annual special (occupational) 


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tax. These excise taxes are administered and enforced by TTB, except that the taxes on imported tobacco products and cigarette papers and tubes are collected by CBP, under a delegation from the 

Secretary of the Treasury, except where such imported products 

are transferred in bond to the bonded premises of a manufacturer 

of tobacco products or cigarette papers and tubes or export warehouse proprietor. Tobacco products and cigarette papers and tubes 

may be exported from the United States without payment of tax. 


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101The tax rate equals $1.0066 per pack of 20 cigarettes. 102Large cigarettes more than 6.5 inches long are taxed as small cigarettes, counting each 

2.75 inches in length (or fraction) as one cigarette. 103The price of large cigars on which tax is based is inclusive of any charge for putting the 

cigar into a condition ready for sale, and is exclusive of (1) Federal excise tax and (2) separately 

stated retail sales taxes imposed by any State or local government (regardless of whether the 

vendor or purchaser is liable for the tax). 104 Cigarette papers measuring more than 6.5 inches in length are taxed at the rate prescribed, counting each 2.75 inches (or fraction thereof) as one cigarette paper. An identical rule 

applies to cigarette tubes more than 6.5 inches in length. 105The taxable year is July 1 through June 30. 

Tax (and Code section) Tax rates 

Tobacco products (sec. 5701) 

‘‘Small cigarettes’’ (weighing 

three pounds or less per 

thousand) .......................... $50.33 per thousand 101

‘‘Large cigarettes’’ (weighing 

more than three pounds 

per thousand) .................... $105.69 per thousand 102

‘‘Small cigars’’ (weighing 

three pounds or less per 

thousand) .......................... $50.33 per thousand 

‘‘Large cigars’’ (weighing 

more than three pounds 

per thousand).

52.75 percent of manufacturer’s 

sales price, but not more than 

40.26 cents per cigar 103

Snuff ..................................... $1.51 per pound (proportionate 

rate on fractional parts of a 

pound) 

Chewing tobacco .................. 50.33 cents per pound (proportionate rate on fractional 

parts of a pound) 

Pipe tobacco .......................... $2.8311 per pound (proportionate rate on fractional 

parts of a pound) 

‘‘Roll-your-own’’ tobacco ....... $24.78 per pound (proportionate 

rate on fractional parts of a 

pound) 

Cigarette papers 104 ............. 3.15 cents for each 50 papers (or 

fractional part thereof) 

Cigarette tubes ..................... 6.30 cents for each 50 tubes (or 

fractional part thereof) 

Manufacturers and export warehouse proprietors occupational 

tax (sec. 5731).

$1,000 per taxable year, per 

premise ($500 per year, per 

premise for businesses having 

gross receipts of less than 

$500,000 in the preceding taxable year) 105

3. Communications excise tax 

Local telephone service, teletypewriter service, and prepaid telephone cards (that are expressly for local-only service) are subject 

to a three-percent excise tax.106 The taxes on local telephone service and teletypewriter service are imposed on the amount billed to 

consumers. The consumer is liable for the tax, with service proVerDate Mar 15 2010 00:35 Jan 19, 2011 Jkt 063427 PO 00000 Frm 00039 Fmt 6602 Sfmt 6602 E:\HR\OC\A427.XXX A427

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106Sec. 4251. 107 Notice 2006–50, 2006 I.R.B. 25, and Notice 2007–11, 2007 I.R.B. 261. 

viders being responsible for collecting and remitting tax to the Government. The tax on prepaid telephone cards is based on the face 

amount of the card and is imposed when the cards are transferred 

from a telecommunications carrier to any person who is not such 

a carrier. 

Statutorily, the tax applies to ‘‘toll,’’ or long distance, telephone 

service as well. However, toll service is defined in the Code as service for which charges vary based on both distance and elapsed time. 

Present long distance service typically does not vary based on both 

of these elements; therefore, tax is not imposed on such service. 

After July 31, 2006, collectors stopped collecting and paying over 

the tax on long distance service. The Internal Revenue Service allowed taxpayers to claim income tax credits for past excise tax collected on non-taxable service that was billed after February 28, 

2003, and before August 1, 2006, on their 2006 Federal income tax 

returns.107

4. Gas Guzzler excise tax 

Automobiles with a fuel efficiency rating less than 22.5 miles per gallon (‘‘mpg’’) are subject to an excise tax ranging from $1,000 to 

$7,700.108 The tax is imposed on manufacturers and importers. 

Taxable automobiles include four-wheeled highway vehicles rated 

at 6,000 pounds unloaded gross vehicle weight or less. The following table outlines the rates imposed on vehicles at different fuel 

efficiency levels. 

Fuel economy rating (in mpg) Tax per vehicle 

At least 22.5 ......................................................... No tax 

At least 21.5, but less than 22.5 ........................ $1,000 

At least 20.5 but less than 21.5 ......................... $1,300 

At least 19.5 but less than 20.5 ......................... $1,700 

At least 18.5 but less than 19.5 ......................... $2,100 

At least 17.5 but less than 18.5 ......................... $2,600 

At least 16.5 but less than 17.5 ......................... $3,000 

At least 15.5 but less than 16.5 ......................... $3,700 

At least 14.5 but less than 15.5 ......................... $4,500 

At least 13.5 but less than 14.5 ......................... $5,400 

At least 12.5 but less than 13.5 ......................... $6,400 

Less than 12.5 ..................................................... $7,700 

Fuel economy ratings are determined by the Environmental Protection Agency based upon the average number of miles traveled by 

the automobile per gallon of gasoline. 

Exemptions are provided for automobiles classified as non-passenger vehicles under rules prescribed by the Department of Transportation for purposes of section 501 of the Motor Vehicles Information and Cost Savings Act (as in effect on November 9, 1978), emergency vehicles used as ambulances or ambulance/hearses, police 

and law-enforcement vehicles, and other emergency-use vehicles 

specified in Treasury Department regulations. The Treasury Department further has excluded certain sport utility vehicles (and 


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109Sec. 4471. 110Sec. 4681. 

trucks) from the term ‘‘automobile’’ as defined for purposes of the 

tax. 

5. Water Transportation Passenger excise tax 

A $3 per passenger retail excise tax is imposed on ‘‘covered voyages’’ on commercial vessels.109 The ship operator is liable for payment of the tax. A covered voyage is defined generally as any voyage during which passengers embark or disembark the vessel in 

the United States, and (1) which extends for one or more nights on 

a passenger vessel having berth or stateroom accommodations for 

more than 16 passengers, or (2) on which passengers may engage 

in gambling aboard the vessel while beyond the territorial waters 

of the United States (i.e., more than three nautical miles from 

shore). The tax does not apply to voyages on any vessel owned or 

operated by the United States or a State or any agency or political 

subdivision, nor does it apply to a voyage of fewer than 12 hours 

between two U.S. ports. 

6. Ozone-Depleting Chemicals excise tax 

Chemicals 

A manufacturers and importers excise tax is imposed on listed 

ozone-depleting chemicals sold or used in the United States.110 The 

tax rate per pound of listed chemicals is determined as the product 

of a base tax amount and each chemical’s statutorily prescribed 

‘‘ozone depleting factor.’’ The base tax amount is $12.55 for calendar year 2011; this amount increases by $0.45 each year. The following table outlines the chemicals subject to tax, their statutorily 

prescribed ozone-depleting factors, and the 2011 tax applicable to 

those chemicals. 

Chemicals 

Ozonedepleting 

factor 

2011 Tax per 

pound 

CFC–11, CFC–12, CFC–13, CFC–111, 

CFC–112, CFC–114, and CFC–211 

through CFC–217 ............................... 1.0 $12.55 

CFC–113 ................................................. 0.8 $10.04 

CFC–115 ................................................. 0.6 $7.53 

Halon–1211 ............................................. 3.0 $37.65 

Halon–1301 ............................................. 10.0 $125.50 

Halon–2402 ............................................. 6.0 $75.30 

Carbon tetrachloride .............................. 1.1 $13.80 

Methyl chloroform .................................. 0.1 $1.25 

Ozone-depleting chemicals that are diverted or recovered in the 

United States as part of a recycling process (and not as part of an 

original manufacturing or production process) and certain exported 

chemicals are exempt from tax. Chemicals used as propellants in 

metered-dose inhalers are exempt from tax. 


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111Sec. 5000C. 112The provision was enacted as section 301 of the James Zadroga 9/11 Health and Compensation Act of 2010, Pub. L. No. 111–347. The President signed the bill on January 2, 2011. 113For purposes of this pamphlet, Pub. L. No. 111–148 (2010), the ‘‘Patient Protection and 

Affordable Care Act’’ and Pub. L. No. 111–152 (2010), the ‘‘Healthcare and Education Reconciliation Act of 2010’’ are collectively referred to as the ‘‘Health-Care Reform Act.’’ The annual fee 

on branded prescription pharmaceutical manufacturers and importers, added by the HealthCare Reform Act, is discussed, supra, in I.C.4, relating to excise taxes dedicated to health-related trust funds. 114Sec. 5000B. 115This structure is like that of the communications excise tax on local telephone service and 

the domestic air passenger excise tax. 

Imported taxable products 

Imported products manufactured or produced using taxable 

ozone-depleting chemicals as materials are subject to tax at a rate 

that would have been imposed on the ozone-depleting chemicals 

had those chemicals used been sold in the United States. If an importer does not furnish adequate information to the Treasury Department to determine a tax rate for a product, the assumed rate 

is one percent of the value of the imported product. 

B. Foreign Procurement Excise Tax 

Foreign persons are subject to an excise tax of two percent on 

any specified procurement payment.111 A specified procurement 

payment is a payment made by the United States government or 

its agents, pursuant to a contract under which the United States 

purchases goods or services from a source in a country that is not 

party to an international government procurement agreement 

(‘‘GPA’’) with the United States. Goods are from such a source if 

produced or manufactured in such country. Payments for services 

are subject to the tax if the services are provided in a country that 

is not a party to such an agreement with the United States. If the 

origin of the goods or services is in a country that is not a member 

of the GPA, payments made to a foreign parent located in a country that is a member of the GPA are subject to the excise tax. 

The excise tax is imposed on the gross amount of the payment 

under contracts entered into on or after January 2, 2011.112 It is 

treated as an income tax solely for purposes of subtitle F of the Internal Revenue Code, permitting assessment and collection of the 

amounts in a manner similar to the withholding taxes under chapter 3. 

C. General Fund Excise Taxes Related to Health Care 113

1. Excise Tax on Indoor Tanning Services 

A retail sales tax is imposed on indoor tanning services.114 The 

tax rate is 10 percent of the amount paid for such services. Consumers are liable for the tax, with service providers being responsible for collecting and remitting the tax to the Federal Government.115 The tax applies to tanning services provided after June 

30, 2010. 

Indoor tanning services are services employing any electronic 

product designed to induce skin tanning and which incorporate one 

or more ultraviolet lamps with wavelengths in air between 200 and 

400 nanometers. Taxable services do not include phototherapy 

service performed by a licensed medical professional. 


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116Sec. 4191; 21 U.S.C. sec. 321. 

2. Excise Tax on Certain Medical Devices 

A 2.3-percent excise tax is imposed on the sale of medical devices 

by the manufacturer of importer. ‘‘Medical device’’ is defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act.116 Section 

201(h) defines ‘‘device’’ as an instrument, apparatus, implement, 

machine, contrivance, implant, in vitro reagent, or other similar or 

related article, including any component part or accessory which is 

(1) recognized in the official National Formulary, or the United 

States Pharmacopeia, or any supplement to them, (2) intended for 

use in the diagnosis of disease or other conditions, or in the cure, 

mitigation, treatment, or prevention of disease, in man or other 

animals, or (3) intended to affect the structure or any function of 

the body of man or other animals, and which does not achieve its 

primary intended purposes through chemical action within or on 

the body of man or other animals and which is not dependent upon 

being metabolized for the achievement of its primary intended purposes. 

The tax does not apply to eyeglasses, contact lenses, hearing 

aids, or to other medical devices specified by the Treasury Department to be generally sold in retail establishments or over the Internet to individuals for their personal use. Examples of such items 

could be pregnancy test kits, diabetes testing supplies, denture adhesives, and certain bandages and tipped applicators. 

The tax, which takes effect after December 31, 2012, applies to 

sales to State or local governments, nonprofit organizations, and 

qualified blood collectors as well to sales to private parties. 

3. Annual Fee on Health Insurance Providers 

An annual fee is imposed on any covered entity engaged in the 

business of providing health insurance with respect to United 

States health risks. The aggregate annual fee for all covered entities is $8 billion for calendar year 2014, $11.3 billion for calendar 

years 2015 and 2016, $13.9 billion for calendar year 2017, and 

$14.3 billion for calendar year 2018. For calendar years after 2018, 

the fee is the amount for the preceding calendar year indexed to 

the rate of premium growth. 

The aggregate annual fee is apportioned among the providers 

based on a ratio designed to reflect relative market share of U.S. 

health insurance business. For each covered entity, the fee for a 

calendar year is an amount that bears the same ration to the aggregate annual fee as (1) the covered entity’s net premiums written 

during the preceding calendar year with respect to health insurance for any United States health risk, bears to (2) the aggregate 

net written premiums of all covered entities during such preceding 

calendar year with respect to such health insurance. 

Net written premiums means premiums written, including reinsurance premiums written, reduced by reinsurance ceded, and reduced by ceding commissions. Net written premiums do not include 

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117See Helvering v. Le Gierse, 312 U.S. 531 (1941). 118The exempt activities for this purpose are activities other than activities of an unrelated 

trade or business defined in section 513 of the Code. 119Section 501(m) of the Code provides that an organization described in section 501(c)(3) or 

(4) is exempt from Federal income tax only if no substantial part of its activities consists of providing commercial-type insurance. Thus, an organization otherwise described in section 501(c)(3) 

or (4) that is taxable (under the Federal income tax rules) by reason of section 501(m) is not 

eligible for the 50-percent exclusion under the insurance fee. 

ance (i.e., in the absence of sufficient risk shifting and risk distribution for the arrangement to constitute insurance).117

The amount of net premiums written that are taken into account 

for purposes of determining a covered entity’s market share is subject to dollar thresholds. A covered entity’s net premiums written 

during the calendar year that are not more than $25 million are 

not taken into account for this purpose. With respect to a covered 

entity’s net premiums written during the calendar year that are 

more than $25 million but not more than $50 million, 50 percent 

are taken into account, and 100 percent of net premiums written 

in excess of $50 million are taken into account. 

After application of the above dollar thresholds, a special rule 

provides an exclusion, for purposes of determining an otherwise 

covered entity’s market share, of 50 percent of net premiums written that are attributable to the exempt activities 118 of a health insurance organization that is exempt from Federal income tax 119 by 

reason of being described in section 501(c)(3) (generally, a public 

charity), section 501(c)(4) (generally, a social welfare organization), 

section 501(c)(26) (generally, a high-risk health insurance pool), or 

section 501(c)(29) (a consumer operated and oriented plan (‘‘COOP’’) health insurance issuer). 

A covered entity generally is an entity that provides health insurance with respect to United States health risks during the calendar year in which the fee under this section is due. Thus for example, an insurance company subject to tax under part I or II of 

subchapter L, an organization exempt from tax under section 

501(a), a foreign insurer that provides health insurance with respect to United States health risks, or an insurer that provides 

health insurance with respect to United States health risks under 

Medicare Advantage, Medicare Part D, or Medicaid, is a covered 

entity except as provided in specific exceptions. 

Specific exceptions are provided to the definition of a covered entity. A covered entity does not include an employer to the extent 

that the employer self-insures the health risks of its employees. A 

covered entity does not include any governmental entity, or an entity that (1) qualifies as nonprofit under applicable State law, (2) 

meets the private inurement and limitation on lobbying provisions 

described in section 501(c)(3), and (3) receives more than 80 percent of its gross revenue from government programs that target 

low-income, elderly, or disabled populations (including Medicare, 

Medicaid, the State Children’s Health Insurance Plan (‘‘SCHIP’’), 

and dual-eligible plans). 

A covered entity does not include an organization that qualifies 

as a VEBA under section 501(c)(9) that is established by an entity 

other than the employer (i.e., a union) for the purpose of providing 

health care benefits. This exclusion does not apply to multi-employer welfare arrangements (‘‘MEWAs’’). 


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120Sec. 5000A. 

A United States heath risk means the health risk of an individual who is a U.S. citizen, is a U.S. resident within the meaning 

of section 7701(b)(1)(A) (whether or not located in the United 

States), or is located in the United States, with respect to the period that the individual is located there. 

Health insurance does not include coverage only for accident, or 

disability income insurance, or a combination thereof. Health insurance does not include coverage only for a specified disease or illness, nor does health insurance include hospital indemnity or other 

fixed indemnity insurance. Health insurance does not include any 

insurance for long-term care or any Medicare supplemental health 

insurance (as defined in section 1882(g)(1) of the Social Security 

Act). 

For purposes of procedure and administration under the rules of 

Subtitle F of the Code, the fee is treated as an excise tax with respect to which only civil actions for refund under Subtitle F apply. 

The Secretary of the Treasury may redetermine the amount of a 

covered entity’s fee for any calendar year for which the statute of 

limitations remains open. 

For purposes of section 275, relating to the nondeductibility of 

specified taxes, the fee is considered to be a nondeductible tax described in section 275(a)(6). 

The annual fee is required to be paid in each calendar year beginning after December 31, 2013. The fee is determined with respect to net premiums written after December 31, 2012, with respect to health insurance for any United States health risk. 

4. Excise Tax on Individuals Without Essential Coverage 

Effective after December 31, 2013, most United States citizens 

and legal residents will be required to maintain a minimum level 

of health insurance coverage (‘‘minimum essential coverage’’ or 

‘‘MEC’’). Minimum essential coverage includes government-sponsored programs, eligible employer-sponsored plans, certain plans in 

the individual market, grandfathered group health plans, or other 

coverage recognized by the Departments of Treasury and Health 

and Human Services. Individuals who fail to maintain minimum 

essential coverage may be subject to an excise tax.120

The amount of the excise tax is the lesser of (1) the sum of the 

monthly penalty amounts for months during a taxable year when 

an applicable individual is not covered under MEC, or (2) the national average premium for ‘‘bronze level’’ coverage applicable to 

the taxpayer’s family size under qualified health plans offered 

through the applicable local insurance exchange established under 

the Health-Care Reform Act for the taxable year in issue. The 

monthly penalty amount for any taxpayer for any month is 1⁄12 of 

the greater of (1) the flat dollar amount or (2) a percentage (set at 

one percent for 2014, two percent for 2015, and 2.5 percent for 

2016 and all subsequent taxable years) of the excess of the taxpayer’s household income for the taxable year over the income tax 

return filing threshold (under section 6012) for that taxpayer for 

that taxable year. The flat dollar amount is the lesser of (1) the 

sum of the applicable dollar amounts for all applicable individuals 


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121The eight percent affordability measure is subject to indexing for tax years after 2014. 122The eight percent amount is increased annually after 2014 by the amount by which health 

insurance premium growth exceeds income growth. 123 IRS authority to assess and collect taxes is generally provided in subtitle F, ‘‘Procedure 

and Administration’’ in the Code. That subtitle establishes the rules governing both how taxpayers are required to report information to the IRS and pay their taxes as well as their rights. 

It also establishes the duties and authority of the IRS to enforce the Code, including civil and 

criminal penalties. 

who do not have MEC in that month, or (2) 300 percent of the applicable dollar amount. The applicable dollar amount is phased in 

for 2014 and for 2015 at $95 and $325 respectively, and reaches 

$695 for 2016. For subsequent taxable years, the applicable dollar 

amount is indexed. For an applicable individual under the age of 

18, the applicable dollar amount is 50 percent of that for an adult. 

Exemptions are provided for the following classes of taxpayers: 

(1) those who cannot afford coverage because of the required contribution for MEC would exceed eight percent of their household incomes,121 (2) those whose household incomes fall below the income 

tax return filing threshold, (3) members of Indian tribes, (4) those 

whose coverage gaps last for a continuous period of less than three 

months, and (5) those for whom obtaining coverage under a qualified health plan would cause hardships as certified by the Secretary of Health and Human Services.122

For employees, and individuals who are eligible for minimum essential coverage through an employer by reason of a relationship 

to an employee, the determination of whether coverage is affordable to the employee and any such individual is made by reference 

to the required contribution of the employee for self-only coverage. 

For individuals not eligible for employer sponsored minimum essential coverage the determination will be made by reference to the 

cost of a bronze plan in the applicable exchange. Individuals are 

liable for penalties imposed with respect to their dependents (as defined in section 152). An individual filing a joint return with a 

spouse is jointly liable for any penalty imposed with respect to the 

spouse. 

No tax is imposed on individuals if the failure to maintain minimum coverage lasts for a continuous period of less than three 

months (determined without regard to the calendar year in which 

the months in the period occur). If a continuous period is greater 

than three months the penalty will be applied to the entire time 

of the failure. 

Subject to the exception for brief coverage gaps, the excise tax 

applies to any period the individual does not maintain minimum 

essential coverage and is determined on a monthly basis. The excise tax is assessed in the same manner as an assessable penalty 

under the enforcement provisions of subtitle F of the Code.123 As 

a result, it is assessable without regard to the restrictions of section 6213(b). Although assessable and collectible under the Code, 

the IRS authority to use certain collection methods is limited. Specifically, the filing of notices of liens and levies otherwise authorized for collection of taxes does not apply to the collection of this 

penalty. In addition, the statute waives criminal penalties for noncompliance with the requirement to maintain minimum essential 

coverage. However, the authority to offset refunds or credits is not 

limited by this provision. 


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124 Health insurance coverage is considered to be unaffordable if the coverage has an employee-paid premium that is more than 9.5 percent of the employee’s household income. This 

percentage is indexed to the per capita growth in premiums for the insurance market after 2014. 125 An employer is not treated as being below this threshold if (1) its workforce exceeds 50 

for 120 days or fewer during the calendar year or (2) the employees who cause the workforce 

to exceed 50 are seasonal workers. 126 An employee who is offered minimum essential coverage by his or her employer is only 

eligible for a premium tax credit and cost sharing reduction if the coverage is either 

unaffordable or consists of a plan under which the plan’s share of the total allowed cost of benefits is less than 60 percent, and the employee declines to enroll in the coverage and purchases 

coverage through the exchange instead. Unaffordable is defined as coverage with a premium required to be paid by the employee that is more than 9.5 percent of the employee’s household 

income. The percentage of the employee’s income is indexed to the per capita growth in premiums for the insured market as determined by the Secretary of Health and Human Services. 

Also, an employee is not eligible for a premium tax credit for any month in which the employee 

has a ‘‘free choice voucher’’ (an employer-provided voucher for certain lower-income employees 

allowed to secure insurance coverage through a local exchange). 127Only one 30-employee threshold is allowed when a group of employers are aggregated and 

treated as a single employer, such as for a controlled group of employers. 

5. Excise Tax on Large Employers Not Offering Health Care 

Coverage 

Effective after December 31, 2013, large employers who fail to 

offer minimum affordable health care coverage to all full-time employees under the Health-Care Reform Act may be subject to a penalty excise tax.124 A large employer is defined as an employer having an average of at least 50 full-time employees during the preceding calendar year.125 A large employer that does not offer coverage for all of its full-time employees, offers minimum coverage 

that is unaffordable, or offers minimum coverage that consists of 

a plan under which the plan’s share of the total allowed cost of 

benefits is less than 60 percent, is subject to a penalty excise tax 

if any full-time employee is certified to the employer as having purchased health insurance through an exchange established pursuant 

to the Health-Care Reform Act and a tax credit or cost-sharing reduction provided under that Act is allowed or paid to the employee.126

Tax for not offering coverage.—The tax for not offering coverage 

is imposed monthly. The tax is equal to the total number of fulltime employees of the employer in excess of 30 during the applicable month (regardless of how many employees receive tax credits 

or cost-sharing reductions) multiplied by one-twelfth of $2,000.127

For calendar years after 2014, the $2,000 amount is increased by 

the percentage by which the average per capita premium for health 

insurance coverage in the United States for the preceding calendar 

year exceeds the average per capita premium for calendar year 

2013. 

Penalty tax if employer offers coverage.—The tax on employers offering coverage any of whose full-time employees are certified as 

having enrolled in health insurance plans under an exchange and 

who are allowed either tax credits or cost-sharing reductions on 

such plans is imposed monthly at a rate of one-twelfth of $3,000 

for each such employee. The tax on employers offering coverage is 

limited to the amount of the tax that would apply if the employer 

was not offering coverage. For calendar years after 2014, the 

$3,000 amount is increased by the percentage by which the average 

per capita premium for health insurance coverage in the United 

States for the preceding calendar year exceeds the average per capita premium for calendar year 2013. 


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128Sec. 4980B. 129The COBRA rules were added to the Code by the Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99–272. The rules were originally added as Code sections 162(i) 

and (k). The rules were later restated as Code section 4980B, pursuant to the Technical and 

Miscellaneous Revenue Act of 1988, Pub. L. No. 100–647. 130Sec. 4980B. 131 A person that provides coverage under a group health plan may be liable for the penalty 

if requested in writing to provide COBRA continuation coverage to a qualified beneficiary. Sec. 

4908B(e)(2)(B). In such a case, the noncompliance period does not begin until 45 days after the 

written request is provided to the person. Sec. 4980B(b)(2). 132Sec. 4980B(c)(1). 133Sec. 4980B(c)(2). 

6. Failure To Satisfy Continuation Coverage Requirements of 

Group Health Plans 

The Code contains rules that require certain group health plans 

to offer certain individuals (‘‘qualified beneficiaries’’) the opportunity to continue to participate for a specified period of time in the 

group health plan (‘‘continuation coverage’’) after the occurrence of 

certain events that otherwise would have terminated such participation (‘‘qualifying events’’).128 These continuation coverage rules 

are often referred to as ‘‘COBRA continuation coverage’’ or 

‘‘COBRA,’’ which is a reference to the acronym for the law that 

added the continuation coverage rules to the Code.129

The Code imposes excise tax penalties on group health plans that 

violate COBRA continuation coverage rules.130 Generally, the excise tax is $100 per qualified beneficiary per day in the ‘‘noncompliance period’’ ($200 per day when the failure relates to two or more 

qualified beneficiaries). The ‘‘noncompliance period’’ begins on the 

date the failure to comply with COBRA occurs, and ends when the 

failure is corrected, or if earlier, six months after the last date on 

which the employer could have been required to provide COBRA 

coverage, without regard to the payment of premiums.131 A failure 

to satisfy COBRA continuation coverage requirements is corrected 

if the failure is retroactively undone to the extent possible, and the 

qualified beneficiary is placed in a financial position which is as 

good as if the failure had not occurred. 

The Code provides for various limitations on the amount of excise 

tax imposed on noncompliant plans. First, if none of the persons 

who could be liable for the tax knew, or exercising reasonable diligence would have known, of the plan’s failure to comply, the noncompliance period does not begin until the first date on which the 

individual knew or should have known of the failure.132 This is 

widely known as the ‘‘inadvertent failure rule.’’ Second, the excise 

tax does not apply to failures due to reasonable cause (and not to 

willful neglect) that are corrected within 30 days after any person 

liable for the tax knew, or exercising reasonable diligence would 

have known, of the plan’s failure to comply.133 This is widely 

known as the ‘‘self correction rule.’’ Both the inadvertent failure 

rule and the self correction rule are overridden if the relevant failure is not corrected before the IRS sends the employer maintaining 

the plan an audit letter and the failure occurred or continued during the period under examination. In such a case, the excise tax 

may not be less than the lesser of (1) $2,500 ($15,000 if the failures 

for any year are more than de minimis), or (2) the excise tax deterVerDate Mar 15 2010 00:35 Jan 19, 2011 Jkt 063427 PO 00000 Frm 00048 Fmt 6602 Sfmt 6602 E:\HR\OC\A427.XXX A427

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134Sec. 4980B(c)(3). 135Sec. 4980B(c)(4). 136Treas. Reg. sec. 54.4980B–2. 137Sec. 4980B(e). 138Pub. L. No. 104–191. 139Sec. 4980D. 140The excise tax does not apply to group health insurance issuers because the requirements 

imposed on such issuers are not contained in the Code. 

mined without regard to the inadvertent failure rule and the self 

correction rule.134

There is an overall limitation on the penalty tax liability for failures during the taxable year, which are due to reasonable cause 

(and not willful neglect).135 For single employer plans the overall limit is $500,000, or if less, 10% of the amount the employer paid 

or incurred during the preceding taxable year for group health 

plans. For multiemployer plans the limit is $500,000, or if less, 

10% of the amount paid or incurred by the trust to provide medical 

care during the taxable year in which the failure occurred. Coverage providers who may become liable for the penalty tax on receipt of a written request to provide COBRA continuation coverage 

have an overall limitation of $2,000,000 for a taxable year with respect to all plans for which they provide coverage. There are no 

overall limitations in cases of willful neglect. 

The Secretary of the Treasury may waive part or all of the penalty tax if it is excessive relative to the failure involved. There is 

no waiver allowed in cases of willful neglect. 

In general, the penalty tax is imposed on the employer maintaining the plan for single employer plans, and on the plan itself for 

multiemployer plans. The employer includes any entity that is a 

member of a controlled group of corporations, a group of trade or 

businesses under common control, and an affiliated service group 

under Code section 414(b), (c), (m) or (o), and any successor employer.136 Under certain conditions, however, other persons (e.g., 

insurer, third party administrators) may be liable for the penalty 

tax.137

7. Failure to Meet Certain Group Health Plan Requirements 

The Health Insurance Portability and Accountability Act of 1996 

(‘‘HIPAA’’) 138 created a new chapter 100 to the Code, which, among 

other things, provides for increased portability of coverage through 

limitations on preexisting condition exclusions and prohibits discrimination against individual participants and beneficiaries based 

on health status. Chapter 100 has been expanded in the wake of 

HIPAA, notably, the Genetic Information Nondiscrimination Act of 

2008 (‘‘GINA’’) 139 amended HIPAA portability rules in the Code 

and added new provisions regarding genetic information. 

An excise tax is imposed on group health plans for failure to 

comply Chapter 100 of the Code. Generally, the amount of the excise tax is $100 per day of noncompliance for each individual to 

whom the failure relates.140 The excise tax is imposed on the plan 

sponsor for noncompliance by single employer plans, and on plan 

for noncompliance by multiple employer plans. There are, however, 

certain exceptions to the imposition of the tax. First, the tax may 

not apply if the noncompliant group health plan can demonstrate 

that it did not know—and in exercising reasonable diligence would 


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141Sec. 4980D(c)(1). 142Sec. 4980D(c)(2). 143Sec. 4980D(b). 144For this purpose a small employer is one that employed an average of at least two, but 

no more than 50, employees in the preceding calendar year and that employs at least two employees on the first day of the plan year. Entities treated as a single employer for purposes of 

the controlled group rules of section 414 are treated as one employer. Sec. 4980D(d)(2). 145Sec. 4980D(d). 146Sec. 220. After 2007, no new contributions can be made to Archer MSA, except by or for 

individuals who previously had Archer MSA contributions and employees who are employed by 

a participating employer. 147Sec. 4980E(a). 148Sec. 4980E(b). 149Sec. 4980E(c). 

not have known—that it was noncompliant.141 The tax may also 

not apply if the failure was due to reasonable cause (and not willful 

neglect) and was corrected within 30 days after the plan first knew 

(or in exercising reasonable diligence should have known) of the 

failure.142

The minimum tax imposed on a plan which has uncorrected com- pliance issues and to which an audit letter has been sent is $2,500, 

increased to $15,000 if violations are more than de minimis.143 The 

maximum tax imposed for unintentional failures is the lesser of 

10% of the amount paid during the preceding tax year by the employer for group health plans, or $500,000. The excise tax does not 

apply to certain small employers 144 providing health coverage only 

through a fully insured plan through a contract with a health insurance issuer if the failure is only due to the health insurance coverage offered by the issuer.145 The Secretary of the Treasury may 

waive part or all of the tax if it is excessive relative to the failure 

involved. There is, however, no waiver allowed in cases of willful 

neglect. 

8. Failure of Employer to Make Comparable Archer MSA 

Contributions 

An Archer medical savings account (‘‘Archer MSA’’) 146 is a taxexempt trust or custodial account established for the purpose of 

paying medical expenses. Within limits, contributions to an Archer 

MSA are deductible if made by an eligible individual (or excludable 

if made by an employer on behalf of an eligible individual). Earnings on amounts in an Archer MSA, and distributions from an Archer MSA for medical expenses, are generally not taxable. Generally, an individual is eligible to make tax-free contributions to an 

Archer MSA if he or she is covered under a high deductible health 

plan (‘‘HDHP’’) sponsored by a small employer (or is self employed 

and covered by a HDHP), and is not covered under any other plan. 

A tax is imposed on the failure of an employer to meet the ‘‘comparability rule’’ for the calendar year in which the employer makes 

a contribution to the Archer MSA of any employee with respect to 

coverage under a high HDHP of the employer.147 Generally, the 

amount of the tax imposed on any failure for any calendar year is 

equal to 35 percent of the aggregate amount contributed by the employer to Archer MSAs of employees for tax years of the employees 

ending with or within the calendar year.148 If, however, the failure 

is due to reasonable cause and not to willful neglect, part or all of 

the tax may be waived, to the extent that the payment of the tax 

would be excessive relative to the failure involved.149


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150 Conf. Rept. No. 104–736 (Pub. L. No. 104–191). 151Sec. 4980E(d)(1). 152Sec. 4980E(e). 153Sec. 4980E(d)(2)(A). 154Sec. 4980E(d)(3). 155 Ibid. 156For 2011, a qualifying HDFP must have a deduction of at least $1,200 for self only cov- erage or $2,400 for family coverage and must limit annual out-of-pocket expenses beneficiary 

to $5,950 for self only coverage and $11,900 for family coverage. 157For 2011, the maximum aggregate annual contribution that can be made to an HSA is 

$3,050 in the case of self-only coverage and $6,150 in the case of family coverage. The annual 

contribution limits are increased by $1,000 for individuals who have attained age 55 by the end 

of the taxable year (referred to as ‘‘catch-up contributions’’). Contributions, including catch-up 

contributions, cannot be made once an individual is enrolled in Medicare. 

A comparability rule provides that if an employer provides 

HDHP coverage coupled with an Archer MSA to employees, and 

makes employer contributions to the Archer MSAs, the employer 

must make available a comparable contribution on behalf of all employees with comparable coverage during the same period.150 An 

employer meets the requirements of the comparability rule for any 

calendar year if the employer makes available ‘‘comparable contributions’’ to the Archer MSAs of all ‘‘comparable participating employees’’ for each coverage period during the calendar year.151 For 

purposes of the comparability rule, all persons treated as a single 

employer for employee benefit plan purposes are treated as one 

employer.152

‘‘Comparable contributions’’ means contributions that are the 

same amount or the same percentage of the annual deductible limit 

under the HDHP covering the employees.153 ‘‘Comparable participating employees’’ means all employees who (1) are eligible individuals covered under any HDHP of the employer, and (2) have the 

same category of coverage (that is, self-only or family coverage).154

The provision with respect to ‘‘comparable participating employees’’ 

is applied separately to part-time employees and other employees. 

For this purpose, ‘‘part-time employee’’ means any employee who is 

customarily employed for fewer than 30 hours per week.155

9. Failure By Employer To Make Comparable Health Savings 

Account Contributions 

A health savings account (‘‘HSA’’) is a tax-exempt trust or custodial account established for the purpose of paying qualified medical 

expenses. An individual who is covered under a qualifying 

HDHP 156 (purchased either through the individual market or 

through an employer) is permitted to establish and make contributions (or have contribution made on his or her behalf) to an HSA. 

Subject to certain limitations,157 contributions made to an HSA by 

an employer, including contributions made through a cafeteria plan 

through salary reduction, are excluded from income (and from 

wages for payroll tax purposes). Contributions made by individuals 

are deductible for income tax purposes, regardless of whether the 

individuals itemize their tax deductions. Distributions from HSAs 

that are used for qualified medical expenses are excludible from 

gross income. 

An employer is not required to contribute to the HSAs of its employees. In general, however, if an employer makes contributions to 

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158Treas. Reg. sec. 54.4980G–1, A–1. 159Treas. Reg. sec. 54.4980G–1, A–4. In the case of a failure which is due to reasonable cause 

and not to willful neglect, all or a portion of the excise tax imposed under section 4980G may 

be waived to the extent that the payment of the tax would be excessive relative to the failure 

involved. See sections 4980G(b) and 4980E(c). See Treas. Reg. sec. 54.4980G–5, A–4. 160Treas. Reg. sec. 54.4980G–4, A–1. Employers may make larger HSA contributions for employees who are not highly compensated employees (as defined in section 414(q)) and who are 

comparable participating employees than for highly compensated employees who are comparable 

participating employees. See Treas. Reg. 54.4980G–6, A–1. The comparability rules do not apply 

to HSA contributions that an employer makes through a section 125 cafeteria plan. However, 

contributions to an HSA made through a cafeteria plan are subject to the section 125 nondiscrimination rules (eligibility rules, contributions and benefits tests and key employee concentration tests). See Treas. Reg. sec. 54.4980G–5, A–1. 161Treas. Reg. sec. 54.4980G–1, A–1. 162Treas. Reg. sec. 54.4980G–1, A–2. 163The is an exception for former employees with coverage under the employer’s HDHP because of an election under a COBRA continuation provision (as defined in section 9832(d)(1)). 164Sec. 7702B(g)(2)(B)(i). 165Sec. 4980C(b). In the case of a failure that is due to reasonable cause and not to willful 

neglect, the Secretary may waive part or all of the tax to the extent that payment of the tax 

would be excessive relative to the failure involved. 

ees.158 If employer contributions do not satisfy the comparability 

rules for a calendar year, the employer is subject to an excise tax 

equal to 35 percent of the aggregate amount contributed by the employer to HSAs for that period.159

Contributions are comparable if, for each month in a calendar 

year, the contributions are either the same amount or the same 

percentage of the deductible under the HDHP for employees who 

are eligible individuals with the same category of coverage on the 

first day of that month.160

Comparable participating employees are eligible individuals who 

are in the same category of employees and who have the same category of HDHP coverage.161 Generally, the categories of coverage 

are self-only coverage and family coverage.162 The categories of employees for comparability testing are generally (1) current full-time 

employees; (2) current part-time employees; and (3) former employees.163 For purposes of section 4980G, part-time employees are employees who are customarily employed for fewer than 30 hours per 

week. Collectively bargained employees are not comparable participating employees. 

10. Excise Tax on Issuers of Qualified Long Term Care Contracts 

Long term care contract terms, and issuers of such contracts, are 

required to satisfy certain consumer protection provisions of the 

long-term care insurance model Act and model regulations promulgated by the National Association of Insurance Commissioners 

(‘‘NAIC’’) (as adopted as of January 1993).164 The consumer protection provisions that apply with respect to the terms of the contract 

apply only for purposes of determining whether a contract is a 

qualified long-term care insurance contract. 

An excise tax is imposed on the issuers of a long term care insur- ance contract equal to $100 per insured per day for failure to satisfy the consumer protection requirements.165 The consumer protection requirements for issuers apply with respect to contracts 

that are qualified long-term care insurance contracts within the 

meaning of section 7702B. 

The issuers of long term care insurance contracts must meet the 

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166Sec. 7702B(g)(2)(B)(iii). 167 A group health plan for this purpose is a plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee organization to provide 

health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families. 168Sec. 1862(b) of the Social Security Act. 169The employer aggregation rules under section 414(b), (c), (m), and (o) apply for purposes 

of this provision. Under that rule, generally all employees of entities under common control (e.g., 

members of the same control group) are required to be aggregated and are treated as a single 

employer. 

lating to application forms and replacement coverage, reporting requirements, marketing, appropriateness of purchase, format, delivering a shopper’s guide, right to return, outline of coverage, group 

plans, policy summary, monthly reports on accelerated death benefits, and incontestability period. Further, under the consumer protection requirements for issuers, if an application for a qualified 

long term contract (or certificate under such contract) is approved, 

the issuer must deliver the applicant (or policyholder or certificate 

holder) the contract (or certificate) of the insurance not later than 

30 days after the date of approval. If a claim under a qualified 

long-term care contract is denied, the issuer must, within 60 days 

of a written request by the policy holder or certificate holder, provide a written explanation of the reasons for the denial and make 

available all information relating to the denial. Also, the issuer 

must disclose in the policy and outline of coverage that the policy 

is intended to be a qualified long term care insurance contract 

within the meaning of section 7702B. 

For purposes of both the requirements as to contract terms and 

the requirements relating to issuers of contracts, the determination 

of whether any requirement of a model regulation or model Act has 

been met is made by the Secretary.166

11. Nonconforming group health plans 

An excise tax is imposed on any employer (including a self-employed person) or employee organization that contributes to a nonconforming group health plan.167 The tax is equal to 25 percent of 

the employer’s, or employee organization’s, expenses incurred during the calendar year for each group health plan to which the employer (including a self-employed person), or employee organization, 

contributes. This tax does not apply to an employer that is a Federal or other governmental entity. 

A nonconforming group health plan is a group health plan that 

does not comply with the secondary payor requirements with respect to Medicare under the Social Security Act which, with certain 

exceptions, require a group health plan not to take into account entitlement to benefits under Medicare and provide that an individual subject to the secondary payor requirements be entitled to 

the same benefits under the plan under the same conditions as an 

individual not entitled to Medicare.168 Thus, the Social Security 

Act requires that Medicare be the secondary payor for items and 

services covered by a group health plan with respect to employees. 

The scope of this requirement generally depends on the size of the 

employer,169 and the basis upon which the individual qualifies for 

Medicare. Specifically, the secondary payor rules generally apply 

for any group health plan that covers an employee or dependent 

who qualifies for Medicare on the basis of end-stage renal disease 


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170Sec. 1862(b)(1)(A)(iii) of the Social Security Act. 171 A small employer is an employer that has 20 or more employees for each working day in 

each of 20 or more calendar weeks in the current calendar year or the preceding calendar year. 

See section 1862(b)(1)(A)(iv) of the Social Security Act. 172Generally a large group health plan is a group health plan of an employer with at least 

100 employees on a typical day in the previous calendar year. 173Sec. 1862(b)(1)(A). 174The tax also is imposed if the threshold amount is exceeded for any former employee, surviving spouse, or any other primary insured individual. 175 In general, the family threshold applies to employees enrolled in multi-employer plans regardless of whether the employees maintain family or individual coverage. 176 Unlike most Federal excise taxes, the amount of this tax is not deductible for Federal income tax purposes. 177For purposes of this calculation, the 2010 benefit package is to be priced in 2018 dollars. 

for the first 30 months of Medicare coverage.170 The secondary 

payor rules also apply to a group health plan (other than a group 

plan of a small employer) 171 that covers Medicare beneficiaries age 

65 and older by virtue of an individual’s current employment status, or the current employment status of a spouse of any age. Finally, for a large group health plan,172 the secondary payor rules 

also apply in the case of individuals under age 65 who are eligible 

for Medicare on the basis of disability, where the group health plan 

coverage is by virtue of the individual’s or a family member’s current employment status with the employer.173

12. Excise Tax on Insurers For High-Cost Employer-Sponsored Health Coverage 

Effective after December 31, 2017, an excise tax will be imposed 

on the aggregate value of employer-sponsored health insurance for 

an employee that exceeds a threshold amount.174 The tax equals 40 

percent of the aggregate value of the coverage in excess of $10,200 

for individual coverage and $27,500 for family coverage (both multiplied by a ‘‘health care cost adjustment percentage,’’ discussed 

below).175 This tax further is increased by an age and gender adjusted ‘‘excess premium amount.’’ 176

The value of health insurance coverage equals the sum of (1) the 

aggregate premiums for the coverage, (2) the amount of any salary 

reduction contributions to a Health FSA for the taxable year, and 

(3) the dollar amount of employer contributions to an HSA or an 

Archer MSA. 

The ‘‘health care adjustment percentage’’ is designed to account 

for possible increases in the cost of U.S. health care in excess of 

projected growth for the period 2010 through 2017. The adjustment 

percentage equals 100 percent of the excess, if any, of (1) the percentage by which the per employee costs of coverage under the 

Blue Cross/Blue Shield standard benefit option of the Federal Employees Health Benefits plan (‘‘standard FEHBP coverage’’) for plan 

year 2018 exceeds the per employee costs of that plan for 2010 over 

(2) 55 percent.177 Beginning in 2019, the threshold amounts will be 

indexed to the CPI-U plus one percentage point in 2019 and CPIU thereafter. 

In general, the age and gender adjustment equals the excess, if 

any, of (1) the premium costs of standard Federal Employee’s 

health coverage for the coverage provided to the individual (assuming age and gender characteristics of the employer’s workforce) 

over (2) premium costs for that coverage priced for age and gender 


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characteristics of the national workforce. Special rules apply for 

certain retirees and employees in high-risk professions. 

The excise tax is imposed on issuers of the insurance. In the case 

of self-insured group health insurance, a Health FSA or an HRA, 

the tax is paid by the entity that administers the benefits (or the 

employer, if the employer is the plan administrator). 

D. Miscellaneous Regulatory Excise Taxes 

In addition to the excise taxes imposed to raise revenues for trust 

fund programs and for the General Fund, the Code historically has 

included numerous excise taxes imposed primarily to regulate activities or products (e.g., wagering and ‘‘non-regular’’ firearms) or 

to promote adherence to other tax policies (e.g., penalty taxes on 

specified activities with respect to private foundations and retirement plans). 

Most of these regulatory excise taxes raise less than $50 million 

per year, with certain exceptions. For fiscal years 2011–2020, the 

excise tax on domestic private foundation net investment income 

(sec. 4940) is projected to raise $13.3 billion. The excise tax on insurance policies issued by foreign insurers (casualty insurance and 

indemnity bonds life insurance, sickness and accident policies, and 

annuity contracts; reinsurance) (sec. 4371) is projected to raise approximately $6.3 billion during fiscal years 2011–2020. The following table provides an overview of these excise taxes. 


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Tax (and Code section) Tax rates 

1. ‘‘Non-Regular’’ Firearms 178

a. Occupational taxes (sec. 

5801) 179

Manufacturers and importers ........................ $1,000 per year, per premise ($500 for businesses with 

gross receipts of less than 

$500,000 in the preceding taxable year). Dealers ........................... $500 per year, per premise. 

b. Transfer taxes for certain 

concealable weapons (sec. 

5811) .................................. $5.00 per transfer. 

c. Making tax (sec. 5821) ..... $200 per firearm. 

2. Wagering Excise Taxes 

a. Certain wagers (sec. 

4401) 180 ............................ Two percent of amount of 

wager, except tax is 0.25 percent in States where wagering 

is authorized by State law. 

b. Occupational taxes (sec. 4411) .................................. $500 per year on person engaged or employed in business 

of accepting wagers, except 

that the tax is $50 per year in 

States where wagering is authorized by State law.181

178The taxes on non-regular firearms are administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives in the Department of Justice. The chapter 

of the Code imposing these excise taxes is named the ‘‘National Firearms Act’’. 

The term ‘‘non-regular’’ firearm includes machine guns, destructive devices (e.g., 

explosive devices such as bombs, grenades, small rockets, and mines), sawed-off 

shotguns or rifles, silencers, and certain concealable weapons. 179 July 1–June 30 is the taxable year for the occupational taxes. There also are 

Federal licensing fees for manufacturers, importers, and dealers in destructive devices or ammunition for such devices. See, 18 U.S.C. sec. 923. 180The tax is imposed on any wager with respect to a sports event or a contest 

placed with a person engaged in the business of accepting such wagers, any wager 

placed in a wagering pool with respect to a sports event or contest (if such pool is 

conducted for profit), and certain lottery-type wagers (including numbers games 

and similar types of wagering). No tax is imposed on pari-mutuel wagering licensed under State law, coin-operated wagers, State-conducted lotteries, games 

where wagers are placed and winners are determined and prizes are distributed 

with all persons placing wagers present, or drawings by tax-exempt organizations 

where no part of the proceeds inures to the benefit of any private shareholder or 

individual. The person accepting the wager is liable for the tax. 181The taxable year is July 1–June 30. 


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Tax (and Code section) Tax rates 

3. Excise Tax on Domestic Private Foundation Net Investment Income (sec. 4940) 

Tax-exempt foundations.—Two 

percent of net investment income in general (one percent 

where foundation meets certain distribution requirements). 

Taxable foundations.—Excess of 

section 4940 excuse tax that 

would be imposed if foundation were tax-exempt plus unrelated business tax that 

would have been imposed over 

regular income tax imposed 

on the foundation. 

4. Excise Tax on Foreign Private Foundation Net Investment Income (sec. 4948) 

Four percent of gross investment income from sources 

within the United States. 

5. Excise Tax on Insurance Policies Issued by Foreign Insurers (sec. 4371) 182

a. Casualty insurance and 

indemnity bonds ............... Four cents per dollar, or fractional part, of premium paid. 

b. Life insurance, sickness 

and accident policies, and 

annuity contracts ............. One cent per dollar, or fractional part, of premium paid. 

c. Reinsurance ...................... One cent per dollar, or fractional part, of premium paid 

on reinsurance of policies subject to tax under a. or b. 

6. Excise Tax on Lobbying Expenditures 

a. Public charities making 

an election under sec. 

501(h) (sec. 4911) ............. 25 percent of excess lobbying expenditures. 

b. Charitable organizations 

disqualified from tax-exempt status because of 

lobbying expenditures 

(sec. 4912) ......................... Five percent of lobbying expenditures on the organization; 

five percent of lobbying expenditures on the organization manager in certain cases. 

182The tax does not apply to insurance on exports. See, U.S. v. International 

Business Machines, 517 U.S. 843 (1996). 


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Tax (and Code section) Tax rates 

7. Excise Taxes on Certain Private Foundation Activities 

a. Self-dealing (sec. 4941) .... Initial tax.—Ten percent of the 

amount of self-dealing on the 

self-dealer; five percent on the 

foundation manager in certain 

cases (up to $20,000 including 

any additional tax). 

Additional tax.—If not corrected 

within specified period, 200- 

percent tax on self-dealer, 50- 

percent tax on foundation 

manager in certain cases (up 

to $20,000 including any additional tax). 

b. Failure to distribute income (sec. 4942) ................ Initial tax.—30-percent tax on 

foundation on amount of undistributed income remaining 

undistributed at beginning of 

succeeding taxable year. 

Additional tax.—If not corrected 

within specified period, tax of 

100 percent of amount not 

distributed. 

c. Excess business holdings 

(sec. 4943) ......................... Initial tax.—Ten percent tax on 

foundation on value of excess 

holdings. 

Additional tax.—If not corrected 

within specified period, tax of 

200 percent of excess holdings. 

d. Investments jeopardizing 

charitable purpose (sec. 

4944) .................................. Initial tax.—Ten-percent tax on 

foundation on amount of investment; ten-percent tax on 

foundation manager in certain 

cases (up to $10,000). 

Additional tax.—25-percent tax 

on foundation if not corrected 

within specified period; fivepercent tax on foundation 

manager in certain cases (up 

to $20,000). 

e. Taxable expenditures 

(sec. 4945) ......................... Initial tax.—20 percent of 

amount of expenditure on 

foundation; five-percent tax 

on foundation manager in certain cases (up to $10,000). 


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Tax (and Code section) Tax rates 

Additional tax.—If not corrected 

within specified period, tax of 

100 percent of taxable expenditure on foundation; 50- 

percent tax on foundation 

manager in certain cases (up 

to $10,000). 

8. Excise Tax on Political Expenditures of Section 501(c)(3) 

Organizations (sec. 4955) 

Initial tax.—20 percent of political expenditure on organization; 2.5-percent tax on organization manager in certain 

cases (up to $10,000). 

Additional tax.—If not corrected 

within specified period, tax of 

100 percent of expenditure on 

organization, 50-percent tax 

on organization manager in 

certain cases (up to $20,000). 

9. Excise Tax on Excess Benefit Transactions of Certain 

Section 501(c)(3) and 501(c)(4) Organizations (sec. 

4958) 183

Initial tax.—25 percent of 

amount of excess benefit on 

disqualified person who is the 

beneficiary of the transaction; 

10-percent tax on the organization manager in certain 

cases (up to $20,000). 

Additional tax.—If not corrected 

within specified period, tax of 

200 percent of excess benefit 

on the disqualified person. 

183Private foundations are not subject to the excise tax. 


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Tax (and Code section) Tax rates 

10. Excise Taxes Relating to Employee Pension and Benefit 

Plans 

a. Failure to meet minimum 

funding standards (sec. 

4971) .................................. Initial tax.—For simple-employer plan, 10 percent of unpaid required contributions on 

employer; for multiemployer 

plan of five percent accumulated funding deficiency on 

employer. 

Additional tax.—If not corrected 

within specified period, 100 

percent of unpaid required 

contributions on accumulated 

funding deficiency on employer. 

b. Nondeductible contributions to qualified employer plan (sec. 4972) ..... 10 percent of nondeductible contributions under plan on employer. 

c. Excess contributions to 

IRA’s, Archer MSA’s, etc. 

(sec. 4973) ......................... Six percent of excess contributions on account owner. 

d. Certain accumulations in 

IRA’s, etc. (sec. 4974) ....... 50 percent of amount by which 

minimum required to be distributed during year exceeds 

amount actually distributed 

on the payee. 

e. Prohibited transactions 

(sec. 4975) ......................... Initial tax.—15 percent of 

amount involved in prohibited 

transaction on disqualified 

person engaging in transaction. 

Additional tax.—If not corrected 

within specified period, 100 

percent of amount involved on 

disqualified person. 

f. Disqualified welfare benefits (sec. 4976) ................... 100 percent of disqualified benefit amount on the employer. 

g. Excess fringe benefits 

provided by an employer 

(sec. 4977) ......................... 30 percent of excess benefits on 

employer electing aggregation 

of lines of business. 


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Tax (and Code section) Tax rates 

h. Dispositions of sec. 1042 

securities by ESOP’s and 

worker-owned cooperatives (sec. 4978) ................ 10 percent of amount realized 

on disposition on employer or 

cooperative. 

i. Dispositions of sec. 133 

securities by ESOP’s (sec. 

4978B) ............................... 10 percent of amount realized 

on disposition on employer. 

j. Excess contributions 

under a cash or deferred 

arrangement (sec. 4979) .. 10 percent of sum of excess contributions and any excess aggregate contributions under 

the plan for plan year on employer. 

k. Prohibited allocations of 

qualified securities by 

ESOP’s and workerowned cooperatives (sec. 

4979A) ............................... 50 percent of amount involved 

in prohibited allocation or 

ownership on employer, cooperative or S corporation. 

l. Reversion of qualified 

plan assets to employer 

(sec. 4980) ......................... 20 percent of amount of employer reversion on employer 

(generally); 50 percent if employer does not maintain a 

qualified replacement plan or 

provide certain pro-rata benefit increases. 

m. Failure to provide of benefit accrual reduction (sec. 

3980F) ............................... $100 per day per failure, up to 

specified maximum. 

11. Excise Taxes on Real Estate Investment Trusts and 

Regulated Investment Companies 

a. Real estate investment 

trusts (sec. 4981) .............. Four percent of excess required 

distribution for calendar year 

over distributed amount. 

b. Regulated investment 

companies (sec. 4982) ....... Four percent of excess required 

distribution for calendar year 

over distributed amount. 


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Tax (and Code section) Tax rates 

12. Excise Tax on Issuers of ‘‘Registration-Required Obligations’’ Not in Registered Form (sec. 4701) 

One percent of principal amount 

of obligation multiplied by 

number of years in obligation 

term. 

13. Excise Tax on ‘‘Golden Parachute’’ Payments (sec. 4999) 

20 percent of excess payment as 

defined in sec. 280G(b). 

14. Excise Tax on ‘‘Greenmail’’ (sec. 5881) 

50 percent of ‘‘greenmail’’ 184

15. Excise Tax on Certain Tax-Exempt Entities Entering 

into Prohibited Tax Shelter Transactions (sec. 4965) 

Entity.—In general, highest corporate rate multiplied by 

greater of entity’s net income 

for taxable year of prohibited 

transaction attributable to 

transaction or 75 percent of 

proceeds received for taxable 

year (for subsequently listed 

transactions, amount allocable 

to period beginning on date 

transaction identified or first 

day of taxable year). 

For certain ‘‘knowing transactions,’’ tax equals greater of 

100 percent of income attributable to transaction or 75 

percent of proceeds received 

from transaction. 

Entity manager.—$20,000 for 

each approval (or other act 

causing participation). 


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Tax (and Code section) Tax rates 

16. Excise Taxes on Certain Donor Advised Fund Activities 

a. Taxable distributions 

(sec. 4966) ......................... 20 percent of taxable distribution on sponsoring organization; five percent of amount 

involved in fund management 

in certain cases (up to 

$10,000). 

b. Prohibited benefits (sec. 

4967) .................................. 125 percent of benefit on a person advising fund to make 

distribution or receiving benefit; 10 percent of benefit on 

fund management in certain 

cases (up to $10,000). 

c. Tax on failures by hospital organizations (sec. 

4959) .................................. $50,000 on hospital organization 

that fails to satisfy the community health needs assessment requirement of sec. 

501(c)(3) for any taxable year. 

184 ‘‘Greenmail’’ is defined as any consideration transferred by a corporation to 

acquire its stock if (1) the stock has been held by the shareholder for fewer than 

two years, (2) the shareholder (or any related person or other person acting in 

concert) made or threatened to make a public tender offer for stock during this 

period, and (3) such acquisition is pursuant to an offer which was not made on 

the same terms to all shareholders. 


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185Direct, or mandatory, spending likewise is considered to be permanent for budget 

scorekeeping purposes. On the other hand, while estimates of discretionary spending are included in the budget baseline, thate spending is not considered to be permanent for budget 

scorekeeping purposes. Thus, the entire amount of Federal discretionary spending provided for 

in annual appropriations Acts is scored. As described below, most spending from Federal Trust 

Funds described in this document is classified as discretionary. 

III. INFORMATION ON SELECTED TRUST FUND BALANCES AND RELATED FEDERAL EXCISE TAX RECEIPTS 

A. Background 

This Part contains background information on Federal excise tax 

receipts and projected expenditures from Trust Funds to which 

these receipts are dedicated. Interpretation of this information requires an understanding of several provisions of Federal budget 

law, including various budget scorekeeping rules adhered to in 

compliance with that law. 

Assumption that dedicated excise taxes are permanent 

Federal budget law provides that excise taxes that are dedicated 

to Trust Funds are assumed to be permanent for budget 

scorekeeping purposes.185 This means that revenues from the Trust 

Fund excise taxes automatically are included each year in the Congressional Budget Office (‘‘CBO’’) and Office of Management and 

Budget (‘‘OMB’’) forecasts of Government receipts (the ‘‘revenue 

baseline’’) as if there were no scheduled expirations. This occurs 

even if the taxes are statutorily scheduled to expire before the end 

of the baseline period. The CBO issues its annual baseline as part 

of its overall economic forecast each February; the forecast is used 

in developing the Congressional Budget Resolution. 

As a result of their inclusion in the revenue baseline on a permanent basis, extensions (without modifications) of Trust Fund excise 

taxes are not scored as raising revenues when extensions are enacted before their actual expiration and adoption of a new revenue 

baseline. On the other hand, increases in those excise taxes are 

scored as raising revenue. Similarly, reductions in dedicated excise 

taxes (even as part of an extension of the underlying taxes) are 

scored as losing revenue because the excise taxes are included in 

the revenue baseline at their present rates. 

The information in the excise tax receipts and Trust Fund balance tables, below, is presented consistent with these Federal budget rules. Thus, revenues for all currently imposed Trust Fund excise taxes are assumed to continue through the periods reflected, 

notwithstanding any earlier scheduled expiration of the underlying 

excise taxes. For example, the highway excise taxes (other than 4.3 

cents per gallon of the motor fuels rates) are scheduled to expire 

after September 30, 2011; however Table 1 assumes imposition of 

these taxes (and their present structure) on a permanent basis. 


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186 Joint Committee on Taxation, Overview of Revenue Estimating Procedures and Methodologies Used by the Staff of the Joint Committee on Taxation, (JCX–1–05), February 2, 2005 at pp. 

14–15. 187The Highway Trust Fund benefits from an additional General Fund subsidy in that the 

costs of refunds for certain tax overpayments and excise tax credits for alcohol fuels, biodiesel 

and renewable diesel, and alternative fuels are borne by the General Fund. 

Gross receipts versus net revenues 

In general, the relevant provisions of the Code transfer ‘‘gross receipts’’ to Trust Funds financed with proceeds of dedicated excise 

taxes, rather than the ‘‘net revenues’’ to the Federal Government 

produced by those taxes.186 One exception is that net revenues 

from the excise tax on certain vaccines are transferred to the Vaccine Injury Compensation Trust Fund. The concept of net revenues 

reflects budget scorekeeping conventions that reduce excise tax revenues by the amount that income tax receipts are expected to decrease as a result of monies being removed from the private economy for payment of excise taxes. Under this concept, net revenues 

equal approximately 75 percent of gross receipts. 

Federal budget law divides non-defense Federal spending into 

two major categories: direct spending and discretionary spending. 

Direct spending is spending for which no appropriation is required 

(e.g., entitlements such as Social Security old age benefits). Discretionary spending may occur only when funds are appropriated. Discretionary spending for various Federal Government programs 

competes for a fixed pool of dollars under aggregate annual limits 

included in the annual Congressional Budget Resolution. Thus, 

amounts in excess of net revenues to the Federal Government (i.e., 

gross receipts) may be deposited in the Trust Funds without creating a budgetary shortfall because Trust Fund spending is discretionary.187

The excise tax receipts shown in the tables in this Part represent 

gross receipts to the Federal Government (and to any relevant 

Trust Fund) except in the case of the Vaccine Injury Compensation 

Trust Fund, for which net revenues are reflected. 

Differences between available balances and cash balances 

Many Trust Fund programs involve capital projects. Financing 

for these projects may involve contracts providing for cash disbursements that will continue for a period of several years. Pending actual disbursement, the monies continue to be reflected in the 

cash balance of the Trust Funds where they are held on deposit. 

However, the funds are not ‘‘available’’ to finance additional 

projects. Rather, they are classified as part of the Trust Fund’s ‘‘obligated balance.’’ An example of such capital expenditures are funds 

financing the Federal Government’s share of highway construction 

projects undertaken jointly with States or local governments when 

the Federal Government is contractually bound to pay the amounts 

as construction is completed. For Federal Trust Funds, the CBO 

baseline reports cash balances, and in relevant cases available balances. The trust fund tables in the Part reflect cash balances. 


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B. Estimated Revenues and Outlays for Selected Federal 

Trust Funds (FY 2011–2020) 

The following tables reflect projections of revenues and outlays 

for selected trust funds for fiscal years 2011 through 2020. The estimates were prepared by the Congressional Budget Office in August 2010 at the request of the staff of the Joint Committee on 

Taxation for purposes of this pamphlet. Table 1 relates to the 

Highway Trust Fund. Table 2 relates to the Airport and Airway 

Trust Fund. Table 3 relates to the Inland Waterways Trust Fund. 

Table 4 relates to Harbor Maintenance Trust Fund. Table 5 relates to the Leaking Underground Storage Tank Trust Fund. Table 

6 relates to the Oil Spill Liability Trust Fund. Table 7 relates to 

the Sport Fish Restoration and Boating Safety Trust Fund. Table 

8 relates to the Federal Aid in Wildlife Restoration Fund. Table 

9 relates to the Black Lung Disability Trust Fund. Table 10 relates to the Vaccine Injury Compensation Trust Fund. 


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Table 1.—Estimates of Revenue and Outlays for the Highway Trust Fund 

Fiscal Years 2011–2020 

[Billions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

Highway Account: Beginning of Year 

Balance** ................... 23 .0 18 .8 9 .7 0 .9 

¥7 .5 

¥15 .6 

¥23 .8 

¥31 .9 

¥40 .3 

¥48 .7 

Est. Flexing— 

Transfer of Cash* 

¥0 .8 

¥0 .9 

¥1 .0 

¥1 .0 

¥1 .0 

¥1 .0 

¥1 .0 

¥1 .0 

¥1 .0 

¥1 .0 

Revenues & Interest ..... 34 .0 34 .7 35 .5 36 .5 37 .1 37 .4 37 .7 37 .9 38 .2 38 .5 

General Fund Transfer 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 

(Outlays) ........................ (37 .4) (42 .9) (43 .3) (43 .9) (44 .2) (44 .6) (44 .9) (45 .2) (45 .7) (46 .6) 

End of Year Balance ** 18 .8 9 .7 0 .9 

¥7 .5 

¥15 .6 23 .8 

¥31 .9 

¥40 .3 

¥48 .7 

¥57 .8 

Transit Account: Beginning of Year Balance ** ........................ 8 .4 5 .8 3 .6 0 .6 

¥3 .1 

¥6 .8 

¥10 .3 

¥13 .7 

¥17 .2 

¥21 .0 

Est. Flexing— 

Transfer of Cash * 0 .8 0 .9 1 .0 1 .0 1 .0 1 .0 1 .0 1 .0 1 .0 1 .0 

Revenues & Interest ..... 5 .3 5 .4 5 .4 5 .5 5 .6 5 .6 5 .6 5 .7 5 .7 5 .7 

General Fund Transfer 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 0 .0 

(Outlays) ........................ (8 .7) (8 .4) (9 .4) (10 .1) (10 .3) (10 .1) (10 .0) (10 .2) (10 .4) (10 .6) 

End of Year Balance ** 5 .8 3 .6 0 .6 

¥3 .1 

¥6 .8 

¥10 .3 

¥13 .7 

¥17 .2 

¥21 .0 

¥24 .9 

* The law allows for States to request the transfer of certain amounts between the Federal Highways Administration (FHWA) and the Federal Transit Administration (FTA). Those amounts are ‘‘flexed.’’ Typically, on net, more is transferred from FHWA to FTA, and the net of those 

transfers is represented by this line. 

** Under current law, the Highway Trust Fund cannot incur negative balances. The negative balances shown in the above table illustrate the 

projected inability of the fund to pay obligations as they are incurred by the states. If the Highway Trust Fund’s resources became exhausted, spending on programs financed by the fund could continue at a slower pace as motor fuel taxes are collected. The Department of Transportation has stated that if the fund faced a shortfall, it would ration the amounts it reimburses states in order to maintain a positive balance in the fund. 


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Table 2.—Estimates of Revenue and Outlays for the Airport and Airway Trust Fund (AATF) 

Fiscal Years 2011–2020 

[Billions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 9,449 10,027 10,981 12,786 15,445 18,760 22,740 27,391 32,715 38,753 

Revenue .......................................................... 11,333 11,864 12,671 13,576 14,335 15,088 15,853 16,604 17,390 18,244 

Interest ........................................................... 191 234 329 461 606 763 912 1,081 1,269 1,480 

Total Income ....................................................... 11,524 12,098 13,000 14,037 14,941 15,851 16,765 17,685 18,659 19,724 

(Outlays) ............................................................... (10,947) (11,144) (11,194) (11,378) (11,625) (11,871) (12,114) (12,361) (12,621) (12,831) 

EOY Cash Balance ............................................. 10,027 10,981 12,786 15,445 18,760 22,740 27,391 32,715 38,753 45,646 

Table 3.—Estimates of Revenue and Outlays for the Inland Waterways Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 56 53 49 45 41 35 27 17 5 0 

Tax Revenue ................................................... 75 75 76 78 78 78 78 78 78 78 Interest ........................................................... 2 2 2 1 1 1 * * * * 

Total Income ....................................................... 77 77 78 79 79 79 78 78 78 78 

(Outlays) ............................................................... (80) (81) (82) (83) (85) (87) (88) (90) (92) (94) 

EOY Cash Balance ............................................. 53 49 45 41 35 27 17 5 0 0 

* Less than $500,000. 


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Table 4.—Estimates of Revenue and Outlays for the Harbor Maintenance Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 5,629 6,253 7,030 8,056 9,360 10,882 12,605 14,494 16,589 18,921 

Tax Revenue ................................................... 1,355 1,472 1,619 1,780 1,891 1,996 2,085 2,201 2,338 2,469 Interest ........................................................... 178 200 228 258 290 325 363 404 449 490 

Total Income ....................................................... 1,533 1,672 1,847 2,038 2,181 2,321 2,448 2,605 2,787 2,959 

(Outlays) ............................................................... (836) (845) (858) (873) (889) (908) (927) (945) (964) (963) 

EOY Cash Balance ............................................. 6,325 7,080 8,019 9,221 10,652 12,295 14,125 16,154 18,411 20,897 

Table 5.—Estimates of Revenue and Outlays for the Leaking Underground Storage Tank Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 3,543 3,745 3,962 4,187 4,419 4,658 4,900 5,145 5,393 5,645 

Tax Revenue ................................................... 196 211 216 222 225 227 228 229 230 231 Interest ........................................................... 116 119 123 127 132 136 140 145 150 155 

Total Income ....................................................... 312 330 339 349 357 363 368 374 380 386 

(Outlays) ............................................................... (110) (113) (115) (117) (118) (121) (123) (126) (128) (134) 

EOY Cash Balance ............................................. 3,745 3,962 4,187 4,419 4,658 4,900 5,145 5,393 5,645 5,897 


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Table 6.—Estimates of Revenue and Outlays for the Oil Spill Liability Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 1,601 1,970 2,392 2,777 3,239 3,845 4,518 5,271 6,051 6,853 

Tax Revenue ................................................... 458 453 457 465 469 470 530 534 534 535 Fines and Penalties ....................................... 5 5 5 34 135 152 152 152 152 152 Recoveries ....................................................... 6 6 6 6 30 59 59 59 59 59 Interest ........................................................... 52 65 78 121 138 159 182 206 231 256 

Total Income ....................................................... 1 529 546 626 772 840 923 951 976 1,002 

(Outlays) ............................................................... (152) (107) (161) (164) (166) (167) (170) (171) (174) (176) 

EOY Cash Balance ............................................. 1,970 2,392 2,777 3,239 3,845 4,518 5,271 6,051 6,853 7,679 

Table 7.—Estimates of Revenue and Outlays for the Sport Fish Restoration and Boating Safety 

Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 968 925 867 830 789 737 665 574 457 310 

Revenues ......................................................... 599 606 618 630 637 640 643 643 642 644 Interest ........................................................... 40 27 26 21 21 20 19 18 12 6 

Total Income ....................................................... 639 633 644 651 658 660 662 661 654 650 

(Outlays) 

Sport Fish ....................................................... (477) (473) (467) (478) (491) (506) (521) (538) (555) (574) Coastal ............................................................ (88) (90) (80) (78) (79) (82) (84) (87) (89) (92) Boat Safety ..................................................... (117) (128) (134) (136) (140) (144) (148) (153) (157) (162) 

(Total Outlays) .................................................... (682) (691) (681) (692) (710) (732) (753) (778) (801) (828) EOY Cash Balance ............................................. 925 867 830 789 737 665 574 457 310 132 


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Table 8.—Estimates of Revenue and Outlays for the Federal Aid in Wildlife Restoration Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 624 788 968 1,164 1,404 1,664 1,950 2,261 2,590 2,930 

Revenues ......................................................... 507 521 544 568 584 599 613 627 640 657 Interest ........................................................... 24 26 26 39 39 47 56 63 65 68 

Total Income ....................................................... 531 547 570 607 623 646 669 690 705 725 

(Outlays) ............................................................... (367) (367) (374) (367) (363) (360) (358) (361) (365) (368) 

EOY Cash Balance ............................................. 788 968 1,164 1,404 1,664 1,950 2,261 2,590 2,930 3,287 

Table 9.—Estimates of Revenue and Outlays for the Black Lung Disability Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Balance* .....................................................

Ø5,925 

Ø5,716 

Ø5,517 

Ø5,346 

Ø5,194 

Ø5,049 

Ø4,895 

Ø4,726 

Ø4,552 

Ø4,633 

Revenues ......................................................... 650 647 642 638 635 635 631 631 377 377 Interest Charges* ...........................................

¥170 

¥195 

¥234 

¥263 

¥281 

¥285 

¥276 

¥266 

¥264 

¥269 

Total Income ....................................................... 480 452 408 375 354 350 355 365 113 108 

(Outlays) ............................................................... (271) (253) (237) (222) (209) (197) (186) (190) (194) (199) 

EOY Cash Balance .............................................

Ø5,716 

Ø5,517 

Ø5,346 

Ø5,194 

Ø5,049 

Ø4,895 

Ø4,726 

Ø4,552 

Ø4,633 

Ø4,723 

* The Black Lung Disability Trust Fund has borrowed from the General Fund. Negative numbers represent interest expense. 


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Table 10.—Estimates of Revenue and Outlays for the Vaccine Injury Compensation Trust Fund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 3,022 3,229 3,462 3,732 4,043 4,390 4,767 5,166 5,588 6,034 

Net revenues .................................................. 228 231 236 243 247 250 252 254 257 259 Interest ........................................................... 103 130 163 201 235 265 288 311 336 362 

Total Income ....................................................... 331 361 399 444 481 515 540 566 593 621 

(Outlays) ............................................................... (125) (127) (130) (132) (135) (138) (141) (144) (146) (150) 

EOY Cash Balance ............................................. 3,229 3,462 3,732 4,043 4,390 4,767 5,166 5,588 6,034 6,506 


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APPENDICES 

Appendix A.—Schedule of Present Federal Excise Tax 

Rates 188

Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

1. Highway Trust Fund Excise Taxes 

Major highway motor 

fuels excise taxes and 

credits 

Taxable fuels: 

a. Gasoline and gasoline blendstocks (sec. 

4081) 190 ..................... 18.3 cents per gallon. 

b. Diesel fuel and kerosene (secs. 4081 and 

4041) ........................... 24.3 cents per gallon. 

c. Diesel-water fuel 

emulsion (sec. 

4081) 191 ..................... 19.7 cents per gallon. 

d. Alcohol fuels (sec. 

4041) ........................... 18.3 cents per gallon. 188This table includes rates for all excise taxes described in Parts I and II., except for the taxes listed in the table contained in Part II.C. (Miscellaneous Regulatory Excise Taxes). Tax rates are as in effect on January 1, 2011, except where 

noted. For more information on the excise taxes listed in the table, and the meaning of defined terms, see Parts I and II, above. 189With the exception of liquefied petroleum gas (propane), compressed natural 

gas (‘‘CNG’’), and liquefied natural gas (‘‘LNG’’), highway motor fuels are subject 

to an additional 0.1 cent-per-gallon tax to fund the Leaking Underground Storage 

Tank (‘‘LUST’’) Trust Fund (through September 30, 2011). See, Part I.B.1., for a 

description of this excise tax and Trust Fund. 190Gasoline blendstocks are defined in Treasury Department regulations as: alkylate, butane, catalytically cracked gasoline, coker gasoline, ethyl tertiary butyl 

ether (‘‘ETBE’’), hexane, hydrocrackate, isomerate, methyl tertiary butyl ether 

(‘‘MTBE’’), mixed xylene (including any separated isomer of xylene), natural gasoline, pentane, pentane mixture, polymer gasoline, raffinate, reformate, straight-run 

gasoline, straight-run naphtha, tertiary amyl methyl ether (‘‘TAME’’), tertiary 

butyl alcohol (gasoline grade), thermally cracked gasoline, and toluene. See, Treas. 

Reg. sec. 48.4081–1(c)(3). 191Diesel-water fuel emulsion consists of a mixture of diesel fuel and at least 14 

percent water combined with an emulsion additive that is registered by a U.S. 

manufacturer with the EPA pursuant to section 211 of the Clean Air Act (as in 

effect on March 31, 2003) (sec. 4081(a)(2)(D)). 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

Alcohol credits: 

a. Ethanol and ethanol 

fuel mixtures (secs. 

40, 6426 and 6427(e)) 45 cents per gallon of ethanol 

(E-100 is nonrefundable income tax credit only). 

b. Alcohol or alcohol 

fuel mixtures (other 

than ethanol) (secs. 

40, 6426 and 6427(e)) 60 cents per gallon of alcohol 

(100 percent alcohol fuel not 

in a mixture eligible for nonrefundable income tax credit 

only). 

c. Small ethanol producer credit (sec. 40) 10 cents per gallon (nonrefundable income tax credit only). 

d. Cellulosic biofuel producer credit (sec. 40) 41 cents per gallon; (46 cents 

per gallon for ethanol) (nonrefundable income tax credit 

only). 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

Special motor fuel, alternative fuels, and biodiesel taxes and credits 

Taxable fuels: 

a. Liquid fuel produced 

from coal (sec. 

4041) 192.

24.3 cents per gallon. 

b. Partially exempt ethanol produced from 

natural gas (sec. 

4041(m)) 193.

11.3 cents per gallon. 

c. Partially exempt 

methanol fuel produced from natural 

gas (sec. 4041(m)).

9.15 cents per gallon. 

d. B-100 (100% biodiesel) and renewable 

diesel (sec. 4081) 194.

24.3 cents per gallon. 

e. Biodiesel and renewable diesel fuel mixtures (sec. 4081).24.3 cents per gallon. 

f. Compressed natural 

gas (‘‘CNG’’) (sec. 

4041).

18.3 cents per gasoline gallon 

equivalent (‘‘GGE’’) (GGE = 

126.67 c.f.). 

g. Liquefied petroleum 

gas (‘‘LPG’’) (sec. 

4041).

18.3 cents per gallon. 

h. Liquefied natural gas 

(‘‘LNG’’) (sec. 4041).

24.3 cents per gallon. 

i. Liquid fuel derived 

from biomass (sec. 

4041).

24.3 cents per gallon. 

j. ‘‘P Series’’ fuels (sec. 

4041).

18.3 cents per gallon. 

k. Liquefied hydrogen 

fuel (sec. 4041).

18.3 cents per gallon. 

l. Qualified ethanol and 

methanol fuels produced from coal (sec. 

4041).

18.3 cents per gallon. 

192Taxable fuels are fuels derived from coal (including peat) through the ‘‘Fischer-Tropsch’’ process. 193Partially exempt ethanol and methanol fuel means a liquid at least 85 percent of which consists of ethanol, methanol, or other alcohol produced from natural gas. After September 30, 2011, the tax rates on these fuels are scheduled to 

decline to 4.3 cents per gallon (ethanol) and 2.15 cents per gallon (methanol and 

other non-ethanol alcohol). 194 Biodiesel contains monoalkyl esters of long chain fatty acids derived from 

plant or animal matter which meet EPA requirements and ASTM D6751. Renewable diesel is defined as a liquid fuel meeting EPA requirements and ASTM D975 

and D396 (or other equivalent standards approved by the Treasury Department). 

Renewable diesel fuel does include any fuel derived by co-processing biomass with 

a feedstock that is not biomass. 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

Tax credits: 

a. Biodiesel and biodiesel fuel mixtures 

(secs. 40A, 6426, and 

6427(e)) ...................... $1.00 per gallon of biodiesel (B100 eligible for nonrefundable 

income tax credit only). 

b. Renewable diesel and 

renewable fuel mixtures (secs. 40A, 

6426, 6427(e)) ............ $1.00 per gallon of renewable 

diesel (100% renewable diesel 

fuel eligible for nonrefundable 

income tax credit only). 

c. Small agri-biodiesel 

producer credit (sec. 

40A) ............................ 10 cents per gallon (nonrefundable income tax credit only). 

d. Cellulosic biofuel producer credit (sec. 40) $1.01 per gallon (nonrefundable 

income tax credit only). 

e. Alternative fuels and 

alternative fuel mixtures (LPG, ‘‘P Series’’ fuels, CNG, 

LNG, liquefied hydrogen, liquid fuel derived from coal, and 

liquid fuel derived 

from biomass) (secs. 

6426, 6427(e)) ............ 50 cents per gallon (refundable 

excise tax credit only). 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

Non-fuels taxes imposed 

on heavy highway vehicles: 

a. Retail sales tax on 

highway tractors 

(over 19,500 lbs), 

heavy trucks (over 

33,000 lbs.), and trailers (over 26,000 lbs.) 

(sec. 4051) 195 ............. 12 percent of retail price. 

b. Manufacturers excise 

tax on tires for heavy 

vehicles (sec. 4071) .... 9.45 cents for each 10 lbs. in excess of 3,500 lbs. of maximum 

rated load capacity (4.725 

cents for biasply tires and 

super single tires) 196

c. Annual heavy vehicle 

use tax (sec. 4481) 197 Under 55,000 lbs.—No tax 

55,000–75,000 lbs.—$100 plus $22 per 1,000 lbs. over 55,000 

lbs. Over 75,000 lbs.—$550. 

195Weight is determined on ‘‘gross vehicle weight,’’ which is the fully-loaded, 

certificated weight for the vehicle. 196 Biasply tire means a pneumatic tire on which the ply cords that extend to 

the beads are laid at alternate angles substantially less than 90 degrees to the 

centerline of the tread (sec. 4072(d)). Super single tires are single tires greater 

than 13 inches in cross section width designed to replace two tires in a dual 

fitment (other than for steering) (sec. 4072(c)). 197Weight is defined as ‘‘taxable gross weight,’’ which is the customary fully 

loaded weight. 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

2. Airport and Airway Trust Fund Excise Taxes 

a. Domestic air passengers (sec. 4261) .... 7.5 percent of fare, plus $3.70 

(2011) per domestic flight segment generally.198

b. International air passengers (sec. 4261) .... $16.30 (2011) per arrival or departure.199

c. Amounts paid for 

right to award free or 

reduced rate passenger air transportation (sec. 4261) ....... 7.5 percent of amount paid. 

d. Air cargo (freight) 

transportation (sec. 

4271) ........................... 6.25 percent of amount charged 

for domestic transportation; 

no tax on international cargo 

transportation. 

e. Aviation fuels (sec. 

4081): 200

i. Commercial aviation ...................... 4.3 cents per gallon. 

ii. Non-commercial 

(general) aviation: 

Aviation gasoline ............... 19.3 cents per gallon. 

Jet fuel ............ 21.8 cents per gallon. 

198The domestic flight segment portion of the tax is adjusted annually (effective 

each January 1) for inflation (adjustments based on the changes in the consumer 

price index (the ‘‘CPI’’)). 199The international arrival and departure tax rate is adjusted annually for inflation (measured by changes in the CPI). 200Like most other taxable motor fuels, aviation fuels are subject to an additional 0.1-cent-per-gallon excise tax to fund the LUST Trust Fund. See, Part I.B.1. 


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Tax (and Code Section) 

Tax Rates 189 and Nonrefundable 

Income Tax/Refundable Excise Tax 

Credits 

3. Inland Waterways Trust Fund Excise Tax 

Diesel fuel and other liquid fuels 

used by commercial cargo vessels on specified inland and 

intra-coastal waterways (sec. 

4041) ......................................... 20 cents per gallon. 

4. Harbor Maintenance Trust Fund Excise Tax (sec. 4461) 

0.125 percent of value of commercial cargo loaded or unloaded at taxable U.S. ports 

and of charges made for 

transportation of passengers 

traveling to or from such 

ports. 

5. Leaking Underground Storage Tank Trust Fund Excise 

Tax 

Fuels of a type subject to other 

excise taxes (e.g., gasoline, 

diesel fuel, kerosene, and inland waterways fuels, without 

regard to exemptions from the 

other excise taxes) (secs. 4041, 

4042, and 4081) ....................... 0.1 cent per gallon (LNG, CNG, 

and LPG exempt); methanol 

and ethanol fuels produced 

from coal subject to 0.05-centper-gallon rate. 

6. Oil Spill Liability Trust Fund Excise Tax 

Crude oil received at a U.S. refinery or exported and imported refined petroleum products (sec. 4611(a)) .................... Eight cents per barrel through 

December 31, 2016; nine cents 

per barrel in 2017. 


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Tax (and Code section) Tax rates 

7. Sport Fish Restoration and Boating Trust Fund Excise 

Taxes 

a. Sport fishing equipment 

(sec. 4161) ......................... Articles subject to tax at 10 percent rate: 

Fishing rods and poles (and 

component parts).201

Fishing reels. 

Fly fishing lines, and other fishing lines not over 130 pounds 

test. 

Fishing spears, spear guns, and 

spear tips. 

Items of terminal tackle, including leaders, artificial lures, 

artificial baits, and artificial 

flies, fishing hooks, bobbers, 

sinkers, snaps, drayles, and 

swivels. 

Fish stringers. 

Creels. 

Bags, baskets, or other containers designed to hold fish. 

Portable bait containers. 

Fishing vests. 

Gaff hooks. 

Fishing hook disgorgers. 

Dressing for fishing lines and 

artificial flies. 

Fishing rod belts, fishing 

rodholders, fishing harnesses, 

fish fighting chairs, fishing 

outriggers, and fishing 

downriggers. 

Articles subject to tax at 3 percent rate: 

Tackle boxes. 

Electric outboard motors. 

201The tax on fishing rods and poles is limited to a maximum of $10. 


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Tax (and Code Section) Tax Rates 

b. Gasoline and other motor 

fuels used in motorboats 

and certain small-engine 

equipment (secs. 4041 and 

4081) .................................. 18.3 cents per gallon or 24.3 

cents per gallon, depending on 

Highway Trust Fund tax rate 

applicable to such fuel. 

8. Federal Aid to Wildlife Program Excise Taxes 

a. Bows and arrows (sec. 

4161) 

i. Bows having a peak 

draw weight of 30 

pounds or more .......... 11 percent of price. 

ii. Archery equipment ... 11 percent of price. 

iii. Arrow shafts for use 

as part of an arrow 

(a) that measures at 

least 18 inches in 

length, or (b) if shorter, that is suitable for 

use with a taxable 

bow ............................. 45 cents per shaft (2011). 

b. Regular firearms and ammunition (sec. 4181) 

i. Pistols and revolvers 10 percent of price. 

ii. Other regular firearms 202 ...................... 11 percent of price. 

iii. Shells and cartridges.11 percent of price. 

202Other regular firearms are firearms (other than pistols and revolvers) like 

shotguns and rifles that are exempt from the non-regular firearms excise tax of 

sec. 5811 of the National Firearms Act. 


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Tax (and Code section) Tax rates 

9. Black Lung Disability Trust Fund Excise Taxes 

a. Coal (sec. 4121) ................ $1.10 per ton for coal from underground U.S. mines and 55 

cents per ton for coal from 

U.S. surface mines; both rates 

subject to a maximum of 4.4 

percent of the coal’s selling 

price. 

b. Black lung benefit trust 

penalty excises 

i. Self-dealing (sec. 

4951) ........................... Initial tax.—10 percent of the 

amount of self-dealing on the 

self-dealer; 2.5 percent of such 

amount on trustee. 

Additional tax.—If not corrected 

within specified time, additional tax of 100 percent of 

amount involved on self-dealer; 50 percent of such amount 

on trustee. 

ii. Taxable expenditures 

(sec. 4952) .................. Initial tax.—10 percent of taxable expenditure on fund; 2.5 

percent of such amount on 

trustee. 

Additional tax.—If not corrected 

within specified time, additional tax of 100 percent of 

amount of expenditure on 

fund; 50 percent of such 

amount on trustee. 

iii. Excess contributions 

to benefit trust (sec. 

4953) ........................... 5 percent of excess contribution 

on the contributor. 

10. Vaccine Injury Compensation Trust Fund Excise Tax 

(sec. 4131) 

Taxable vaccines: ................. 75 cents per dose of vaccine. 


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Tax (and Code section) Tax rates 

Any vaccine containing 

diphtheria toxoid 

Any vaccine containing tetanus toxoid 

Any vaccine containing pertussis bacteria, extracted 

or partial cell bacteria, or 

specific pertussis antigens 

Any vaccine against measles, mumps, or rubella 

Any vaccine containing polio 

virus 

Any vaccine against hepatitis A, hepatitis B, chicken pox, or rotavirus 

gastroenteritis 

Any conjugate vaccine 

against streptococcus 

pneumoniae 

Any trivalent vaccine 

against influenza 

Any meningococcal vaccine 

Any vaccine against the 

human papillomavirus 

11. Patient-Centered Outcomes Research Trust Fund Excise Taxes 

a. Insured and self-insured 

health plans (sec. 4375) ... $2.00 per ‘‘specified health insurance policy’’ times the average number of lives covered 

under the policy in 2014 

($1.00 in 2013; indexed after 

2014). 

b. Self-insured plans (sec. 4376) .................................. $2.00 per self-insured plan 

times the average number of 

lives covered under the plan 

in 2014 ($1.00 in 2013; indexed after 2014). 


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Tax (and Code section) Tax rates 

12. Annual fee on branded prescription pharmaceutical 

manufacturers and importers 

Aggregate annual fee for all covered manufacturers and importers: $2.5 billion for calendar year 2011, $2.8 billion 

for calendar years 2012 and 

2013, $3 billion for calendar 

years 2014 through 2016, $4 

billion for calendar year 2017, 

$4.1 billion for calendar year 

2018, and $2.8 billion for calendar year 2019 and thereafter. 

13. Alcoholic Beverage Excise Taxes 

a. Distilled spirits (sec. 5001) .................................. $13.50 per proof gallon. 

b. Wines (sec. 5041) 

i ‘‘Still wines’’ not more 

than 14 percent alcohol ............................... $1.07 per wine gallon. 

ii. ‘‘Still wines’’ more 

than 14 percent, but 

not more than 21 percent, alcohol ............... $1.57 per wine gallon. 

iii. ‘‘Still wines’’ more 

than 21 percent, but 

not more than 24 percent, alcohol ............... $3.15 per wine gallon. 

iv. ‘‘Still wines’’ more 

than 24 percent alcohol ............................... $13.50 per proof gallon (taxed 

as distilled spirits). 

v. Champagne and other sparkling wines $3.40 per wine gallon. 

vi. Artificially carbon- ated wines .................. $3.30 per wine gallon. 

vii. Hard apple cider Beer (sec. 5051) ......... $0.226 per wine gallon. 

c. Beer (sec. 5051) ................ $18 per barrel (31 gallons) generally. 

14. Tobacco Excise Taxes 

a. Tobacco products (sec. 

5701) 

i. ‘‘Small cigarettes’’ 

(weighing three 

pounds or less per 

thousand) ................... $50.33 per thousand ($1.0066 

per pack of 20 cigarettes). 


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Tax (and Code section) Tax rates 

ii. ‘‘Large cigarettes’’ 

(weighing more than 

three pounds per 

thousand) ................... $105.69 per thousand. 

iii. ‘‘Small cigars’’ 

(weighing three 

pounds or less per 

thousand) ................... $50.33 per thousand. 

iv. ‘‘Large cigars’’ 

(weighing more than 

three pounds per 

thousand) ................... 52.75 percent of manufacturer’s 

sales price, but not more than 

40.26 cents per cigar. 

v. Snuff .......................... $1.51 per pound (proportionate 

rate on fractional parts of a 

pound). 

vi. Chewing tobacco ...... 50.33 cents per pound (proportionate rate on fractional 

parts of a pound). 

vii. Pipe tobacco ............ $2.8311 per pound (proportionate rate on fractional 

parts of a pound). 

viii. ‘‘Roll-your-own’’ to- bacco ........................... $24.78 per pound (proportionate 

rate on fractional parts of a 

pound). 

ix. Cigarette papers ...... 3.15 cents for each 50 papers (or 

fractional part thereof). 

x. Cigarette tubes ......... 6.30 cents for each 50 tubes (or 

fractional part thereof). 

b. Manufacturers and export warehouse proprietors occupational tax 

(sec. 5731) ......................... $1,000 per taxable year, per 

premise ($500 per year, per 

premise for businesses having 

gross receipts of less than 

$500,000 in the preceding taxable year). 

15. Communications Excise Taxes (sec. 4251) 

a. Local telephone service 

and teletypewriter service Three percent of amount billed. 

b. Prepaid telephone cards .. Three percent of face amount. 

16. Gas Guzzler Excise Tax (sec. 4064) 

Vehicle fuel economy rating 

(mpgs): 

At least 22.5 ......................... No tax. 

At least 21.5, but less than 

22.5 .................................... $1,000 


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Tax (and Code section) Tax rates 

At least 20.5 but less than 

21.5 .................................... $1,300 

At least 19.5 but less than 

20.5 .................................... $1,700 

At least 18.5 but less than 

19.5 .................................... $2,100 

At least 17.5 but less than 

18.5 .................................... $2,600 

At least 16.5 but less than 

17.5 .................................... $3,000 

At least 15.5 but less than 

16.5 .................................... $3,700 

At least 14.5 but less than 

15.5 .................................... $4,500 

At least 13.5 but less than 

14.5 .................................... $5,400 

At least 12.5 but less than 

13.5 .................................... $6,400 Less than 12.5 ............... $7,700 

17. Water Transportation Passenger Excise Tax (sec. 4471) 

$3.00 per passenger per ‘‘covered voyage’’. 

18. Ozone-Depleting Chemicals Excise Tax (sec. 4681) 

Taxable chemicals: 2011 Tax Rates 

CFC–11, CFC–12, CFC–13, 

CFC–111, CFC–112, 

CFC–114, and CFC–211 

through CFC–217 ............. $12.55 CFC–113 ............................... $10.04 

CFC–115 ............................... $7.53 

Halon–1211 .......................... $37.65 

Halon–1301 .......................... $125.50 

Halon–2402 .......................... $75.30 

Carbon tetrachloride ............ $13.80 

Methyl chloroform ................ $1.25 

19. Foreign Procurement Excise Tax 

a. Specified Federal procurement payments for 

goods or services from 

countries not party to an 

international procurement 

agreement with the U.S.

2 percent tax withheld from 

specified Federal procurement 

payments received under contracts entered into on or after 

January 2, 2011. 

20. General Fund Excise Taxes Related to Health Care 

a. Indoor tanning services 

(sec. 5000B) ....................... 10 percent of amount paid (effective July 1, 2010). 

b. Certain medical devices 

(sec. 4191) ......................... 2.3 percent of manufacturers’ or 

importers’ sales price (effective January 1, 2013). 


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Tax (and Code section) Tax rates 

c. Annual fee on health insurance providers ............. Aggregate annual fee for all cov- ered entities: $8 billion for 

calendar year 2014, $11.3 billion for calendar years 2015 

and 2016, $13.9 billion for calendar year 2017, and $14.3 

billion for calendar year 2018. 

For calendar years after 2018, 

the fee is the amount for the 

preceding calendar year indexed to the rate of premium 

growth. 

d. Individuals not securing 

minimum coverage (sec. 

5000A) ............................... In general, greater of 2.5 percent of amount household’s income exceeds income tax filing threshold or per-adult 

amount of $95 (2014), $325 

(2015), and $695 (2016), with 

indexing thereafter; tax limited to 300 percent of peradult amount or national average premium for ‘‘bronze 

level’’ plan offered by applicable health care exchange. 

e. Large employers not offering affordable coverage 

to full-time employees and 

dependents (sec. 4980H).

Failure to offer coverage— 

1/12th of $2,000 in 2014 (indexed thereafter) times number of full-time employees 

over 30 during month. 

Employees receiving tax credits/ 

premium cost sharing— 

1/12th of $3,000 in 2014 (indexed thereafter) for each employee enrolling in health insurance from an applicable 

exchange and receiving tax 

credits/cost sharing payments 

on such insurance (limited to 

amount equal to number of 

full-time employees over 30 

during month). 

f. Violations of health care 

continuation (sec. 4980B).

$100 per day per failure, up to 

specified maximum. 

g. Failure to meet group 

health plan requirements 

(sec. 4980D) ...................... $100 per day per failure, up to 

specified maximum. 


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Tax (and Code section) Tax rates 

h. Failure by employer to 

make comparable medical 

savings account contributions (sec. 4780E) ............. 35 percent of employer’s contributions. 

i. Excise Tax on Issuers of 

Qualified Long-Term Care 

Insurance Contracts (sec. 

4980C) ............................... $100 per insured, per day for 

failure to meet requirements 

with respect to qualified longterm care insurance contracts. 

j. Excise Tax on Large 

Group Health Plans (sec. 

5000) .................................. 25 percent of expenses of ‘‘nonconforming large group health 

plan’’ (defined under sec. 

1862(b)(4)(A)(i) of the Social 

Security Act). 

k. High-cost employer-sponsored health coverage 

(sec. 4980I) ........................ 40 percent of aggregate value of 

coverage in excess of $10,200 

(individual coverage) or 

$27,500 (family coverage) 

times ‘‘health care cost adjustment percentage’’ and plus 

age and gender-adjusted ‘‘excess premium amount’’ (effective after December 31, 2017). 


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203Secs. 4611, 4661, and 4671. 204Sec. 59A. 205Sec. 4611. The tax base and operative rules for this tax are the same as those for the Oil 

Spill Liability Trust Fund excise tax, described in Part I.B.2. 206Sec 4661. 

Appendix B.—Expired Hazardous Substance Superfund 

Excise Taxes 

Prior-Law Hazardous Substance Superfund Excise Taxes 

Before 1996, three separate excise taxes were imposed to finance 

the Hazardous Substance Superfund (‘‘Superfund’’).203 The Superfund also received revenues from an environmental income tax imposed on corporations.204 The environmental income tax rate 

equaled 0.12 percent of the ‘‘modified alternative minimum taxable 

income’’ of the corporation in excess of $2 million. 

Crude oil excise tax.—The first Superfund excise tax was a tax 

on crude oil received at a U.S. refinery or imported into the United 

States and on imported refined petroleum products.205 When the 

excise tax expired, the tax rate was 9.7 cents per barrel. Crude oil 

or products used before receipt at a refinery were taxed upon use. 

The excise tax also applied to oil and refined products that were 

exported from the United States. 

Feedstock chemicals excise tax.—A second Superfund excise tax 

was imposed on the sale or use of 42 specified organic and inorganic substances if they were produced in or imported into the 

United States.206 The taxable chemicals generally were chemicals 

that were considered to be hazardous or chemicals the use of which 

could create hazardous products or wastes. The rates varied from 

22 cents per ton to $4.87 per ton. Exemptions were provided for 

methane or butane used as a fuel, certain substances used in the 

production of fertilizer, sulfuric acid produced as a byproduct of air 

pollution control, and substances derived from coal. The following 

table lists the 42 taxable chemicals and the rates at which they 

were subject to tax at the time the excise tax expired. 


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Feedstock chemical Tax per 

ton 

Acetylene .......................................................................... $4.87 

Benzene ............................................................................. 4.87 

Butane ............................................................................... 4.87 

Butylene ............................................................................ 4.87 

Butadiene .......................................................................... 4.87 

Ethylene ............................................................................ 4.87 

Methane ............................................................................ 3.44 

Naphthalene ..................................................................... 4.87 

Propylene .......................................................................... 4.87 

Toluene ............................................................................. 4.87 

Xylene ............................................................................... 4.87 

Ammonia ........................................................................... 2.64 

Antimony .......................................................................... 4.45 

Antimony trioxide ............................................................ 3.75 

Barium sulfide .................................................................. 2.30 

Bromine ............................................................................ 4.45 

Cadmium .......................................................................... 4.45 

Chlorine ............................................................................ 2.70 

Chromium ......................................................................... 4.45 

Chromite ........................................................................... 1.52 

Potassium dichromate ..................................................... 1.69 

Sodium dichromate .......................................................... 1.87 

Cobalt ................................................................................ 4.45 

Cupric sulfate ................................................................... 1.87 

Cupric oxide ...................................................................... 3.59 

Cuprous oxide ................................................................... 3.97 

Hydrochloric acid ............................................................. 0.29 

Hydrogen fluoride ............................................................ 4.23 

Lead oxide ......................................................................... 4.14 

Mercury ............................................................................. 4.45 

Nickel ................................................................................ 4.45 

Phosphorus ....................................................................... 4.45 

Stannous chloride ............................................................ 2.85 

Stannic chloride ............................................................... 2.12 

Zinc chloride ..................................................................... 2.22 

Zinc sulfate ....................................................................... 1.90 

Potassium hydroxide ........................................................ 0.22 

Sodium hydroxide ............................................................ 0.28 

Sulfuric acid ..................................................................... 0.26 

Nitric acid ......................................................................... 0.24 


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207Sec. 4671. 

Tax on certain imported substances.—The third excise tax that 

funded the Superfund was a tax on certain imported substances.207

The substances were comprised of materials that were produced or 

manufactured using chemicals subject to the tax on feedstock 

chemicals. The tax rate was that generally applicable to the chemicals used in the manufacture or production of the substance. If an 

importer failed to furnish adequate information to the Treasury 

Department on the amount of chemicals used, the tax rate was five 

percent of the value of the imported substance. 

An initial list of taxable imported substances was statutorily prescribed. The Treasury Department was authorized, and did, list additional taxable substances. The additional substances were those 

with respect to which Treasury determined that taxable chemicals 

constituted more than 50 percent of the weight or value of the materials used to produce the substances (determined on the basis of 

the predominate method of production). The Treasury Department 

also was authorized to remove imported substances from the list if 

the substances no longer satisfied both the weight and value tests. 

The following table lists the statutorily prescribed taxable imported substances. 

Statutorily Listed Taxable Substances: 

Cumene Ethyibenzene 

Styrene Methylene chloride 

Ammonium nitrate Polypropylene 

Nickel oxide Propylene glycol 

Isopropyl alcohol Formaldehyde 

Ethylene glycol Acetone 207 

Cumene Ethyibenzene 

Vinyl chloride Acrylonitrile 

Polyethylene resins, total Methanol 

Polybutadiene Propylene oxide 

Styrene-butadiene, latex Polypropylene resins 

Styrene-butadiene, snpf Ethylene oxide 

Synthetic rubber, not containing 

fillers 

Ethylene dichloride 

Urea Cyclohexand 

Ferronickel Maleic anhydride 

Ferrochromium nov 3 pct Phthalic anhydride 

Ferrochrome ov 3 pct carbon Ethyl methyl ketone 

Unwrought nickel Chloroform 

Nickel waste and scrap Carbon tetrachloride 

Wrought nickel rods and wire Chromic acid 

Nickel powders Hydrogen peroxide 

Phenolic resins olystyrene homopolymer resins 

Polyvinylchloride resins Melamine 

Polystyrene resins and copolymers Acrylic and metha-crylic acid 

resins 

Ethyl alcohol for nonbeverage 

use 

Vinyl resins 

Isophthalic acid Vinyl resins, NSPF 


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The following table lists the additional taxable substances listed 

by the Treasury Department as of the date the tax expired. 

Additional Listed Taxable Substances: 

1,3-butylene glycol Formic acid 

1,4-butanediol Glycerine 

1,5,9-cyclododecatriene Hexabromocyclododecane 

2,2,4-trimethyl-1,3-pentanediol 

diisobutyrate 

Hexamethylene diamine 

Isobutyl acetate 2,2,4-trimethyl-1,3-pentanediol 

monoisobutyrate 

Linear alpha olefins 2-ethyl hexanol 

Methyl acrylate 2-ethythexyl acrylate 

Methyl chloroform Methyl methacrylate 

Acetic acid Monochlorobenzene 

Adipic acid Monoethanolamine 

Adiponitrile Monoisopropanolamine 

Allyl chloride Alpha-methylstyrene 

Normal butyl acetate Aniline 

Nylon 6/6 Normal propyl acetate 

Benzaldehyde Ortho-Dichlorobenzene 

Benzoic acid Ortho-Nitrochlorobenzene 

Bisphenol-A Para-Dichlorobenzene 

Butanol Para-Nitrochlorobenzene 

Butyl acrylate Para-Nitrophenol 

Butyl benzyl phthalate Paraformaldehyde 

Chlorinated polyethylene Para-Dichlorobenzene 

Cyclododecanol Pentaerythritol 

Decarbromodiphenyl oxide Perchloroethylene 

Di-2-ethyl hexyl phthalate Phenol 

Diethanolamine Phosphorous pentasulfide 

Diisopropanolamine Phosphorous trichloride 

Diglycidyl ether of bisphenol-A Poly (60/31 ethylene/ 

cyclohexylenedimethylene 

terephthalate) 

Dimethyl terephthalate Dimethyl 1-2,6-naphthalene 

dicarboxylate 

Di-n-hexyl adipate Poly (97.5/3.5 ethylene/ 

cyclohexylenedimethylene 

terephthalate) 

Diphenyl oxide Diphenylamine 

Epichlorohydrin Poly (98.5/1.5 ethylene 

cyclohexylenedimethylene 

terephthalate) 

Ethyl acetate Ethyl acrylate 

Ethyl chloride Poly 1,4 butyleneterephthalate 

Ethylene dibromide Polyalphaolefins 

Ethylenebistetrabromophthalimide Polybutylene 

Polybutylene/ethylene Tetrahydrofuran 

Polycarbonate Texanol benzyl phthalate 

Polyethylene terrephthalate pellets Toluene diisocyanate 

Propanol Toluenediamine 


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208Sec. 9507 and U.S.C. sec. 9601 et. seq. 

Sodium nitriolotriacetate monohydrate Trichloroethylene 

Terephthalic acid Triisopropanolaimine 

Tetrabromobisphenol-A Trimethylolpropane 

Tetrachlorophthalic anhydride Vinyl acetate 

Overview of Hazardous Substance Superfund programs 

Under prior law, operation of the Hazardous Substance Superfund was governed by parallel provisions of the Code and authorizing statutes.208 The Code provisions governed deposit of specified 

revenues into the Superfund and general expenditure purposes. 

The authorizing statutes specified expenditure programs. 

The Comprehensive Environmental Response, Compensation and 

Liability Act of 1980 (‘‘CERCLA’’) was enacted to address abandoned hazardous waste sites in the United States and established 

the Superfund to pay for cleanup of such sites. Monies from the 

General Fund, fines and penalties, and recoveries from responsible 

parties have also helped finance hazardous waste cleanup expenditures. The law subsequently was amended by the Superfund 

Amendments and Reauthorization Act of 1986 and the Small Business Liability Relief and Brownfields Revitalization Act of 2002. 

Amounts in the Superfund were available, as provided in appropriations Acts, for making expenditures to carry out sections 

111(a)(1), (2), (5), and (6), 111(c), and 111(m) of CERCLA (as in effect on the date of enactment of the Superfund Amendments and 

Reauthorization Act of 1986). 

The Superfund had authority to borrow, as repayable advances, 

for purposes of the Superfund, limited to amounts that the Treasury Department estimated would be deposited in the Superfund 

from Superfund taxes during the following 24 months. No advances 

were allowed after December 31, 1995, and all advances were to be 

repaid by that date (i.e., when the Superfund taxes expired). 

Hazardous Substance Superfund Receipts 

Since expiration of the Superfund taxes after 1995, the Superfund program has been financed with previously collected taxes 

and General Fund contributions. The following table provides information on receipts and expenditures projected for the Superfund 

for fiscal years 2011 through 2020. 


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Table 11.—Estimates of Revenue and Outlays for the Hazardous Substance Superfund 

Fiscal Years 2011–2020 

[Millions of dollars] 

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

BOY Cash Balance ............................................. 3,926 3,960 4,100 4,342 4,654 4,981 5,331 5,693 6,067 6,455 

Revenues* ....................................................... 0 0 0 0 0 0 0 0 0 0 Interest ........................................................... 88 91 93 96 98 101 104 106 109 112 Recoveries ....................................................... 85 85 85 85 85 85 85 85 85 85 Fines/Penalties ............................................... 2 2 2 2 2 2 2 2 2 2 General Fund ................................................. 1,319 1,359 1,400 1,442 1,485 1,530 1,575 1,623 1,671 1,722 

Total Deposits/Receipts .................................... 1,494 1,537 1,580 1,625 1,670 1,718 1,766 1,816 1,867 1,921 (Outlays) ............................................................... (1,461) (1,386) (1,348) (1,313) (1,343) (1,368) (1,404) (1,442) (1,480) (1,518) EOY Cash Balance ............................................. 3,960 4,110 4,342 4,654 4,981 5,331 5,693 6,067 6,455 6,857 

* Taxes dedicated to the Hazardous Substance Superfund expired on December 31, 1995. 

Æ 


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