**CHAIRMAN'S AMENDMENT RELATING TO**

**EXTENSION OF HIGHWAY TRUST FUND EXCISE TAXES**

**AND RELATED TRUST FUND PROVISIONS**

**(REVENUE TITLE TO H.R. 2400)**

Scheduled for a Markup

By the

HOUSE COMMITTEE ON WAYS AND MEANS

on March 26, 1998

Prepared by the Staff

of the

JOINT COMMITTEE ON TAXATION

March 25, 1998

JCX-15R-98

----

**CONTENTS**

INTRODUCTION	
I.  PRESENT-LAW HIGHWAY TRUST FUND AND BOAT SAFETY	ACCOUNT EXCISE TAXES
II.  HIGHWAY TRUST FUND AND BOAT SAFETY ACCOUNT EXPENDITURE PROVISIONS
III.  SUMMARY OF H.R. 2400 TRUST FUND AUTHORIZATIONS
IV.  REVENUE TITLE AMENDMENT
**INTRODUCTION**

	H.R. 2400, as amended (the "Building Efficient Surface Transportation and Equity Act of1998"), was ordered reported by the House Committee on Transportation and Infrastructure onMarch 24, 1998.  H.R. 2400, as amended, would extend expenditure authorizations for theHighway Trust Fund (the "Highway Fund")  through September 30, 2003, and make variousmodifications to the highway and mass transit programs financed through the Highway Fund.(1) The Highway Fund is funded with amounts equivalent to revenues from certain excise taxes onmotor fuels and on heavy trucks and tires.  These excise taxes currently are scheduled to expireafter September 30, 1999.  The provisions dedicating revenues from these excise taxes to theHighway Fund, relevant expenditure provisions governing the purposes for which Highway Fundmonies may be spent, and the period when those expenditures may occur are contained in theInternal Revenue Code (the "Code").  The Highway Fund expenditure authority currently expiresafter September 30, 1998.  H.R. 2400, as amended, also would modify provisions relating to theBoat Safety Account of the Aquatic Resources Trust Fund ("Aquatic Fund").

	The Committee on Ways and Means has been requested to provide a revenue title toaccompany H.R. 2400. The Committee on Ways and Means has scheduled a markup on a possiblerevenue title to H.R. 2400 on March 26, 1998.

	This document,(2) prepared by the staff of the Joint Committee on Taxation, provides adescription of the present-law Highway Fund and Boat Safety Account excise taxes (Part I), thepresent-law Highway Fund and Boat Safety Account expenditure purposes (Part II), a summaryof H.R. 2400 Trust Fund authorization amounts and program changes (Part III), and theChairman's amendment for a revenue title for H.R. 2400 (Part IV).

**I.  PRESENT-LAW HIGHWAY TRUST FUND AND BOATSAFETY ACCOUNT EXCISE TAXES**

**Overview of Highway Excise Taxes**

	The current highway transportation excise taxes consist of:

	(1)  taxes on gasoline, diesel fuel, kerosene, and special motor fuels;

	(2)  a retail sales tax imposed on trucks and trailers having gross vehicle weights in excessof prescribed thresholds;

	(3)  a tax on manufacturers of tires designed for use on heavy highway vehicles; and

	(4)  an annual use tax imposed on trucks and tractors having taxable gross weights inexcess of prescribed thresholds.

Special motor fuels include liquefied natural gas ("LNG"), benzol, naphtha, liquefiedpetroleum gas (e.g., propane), natural gasoline, and any other liquid (e.g., ethanol and methanol)other than gasoline or diesel fuel.  Compressed natural gas ("CNG") also is subject to tax as aspecial motor fuel, but at a lower rate than other special motor fuels.

With the exception of 4.3 cents per gallon of the motor fuels excise tax rates, thesehighway taxes are scheduled to expire after September 30, 1999.  

**Highway Motor Fuels Taxes**

Highway motor fuels tax rates

	The current highway motor fuels excise tax rates are shown in Table 1.

**Table 1.--Federal Highway Trust Fund Motor Fuels Excise Tax Rates1(rates shown in cents per gallon)**
**Highway Fuel****Highway Trust Fund Tax Rate2**Gasoline18.3Diesel Fuel324.3Special Motor Fuels Generally18.34CNG4.351  The rates shown include the 4.3-cents-per-gallon tax rate as transferred to the Highway Fund beginning onOctober 1, 1997, pursuant to the Taxpayer Relief Act of 1997.
2  Effective on October 1, 1997, an additional 0.1-cent-per-gallon rate applies on these motor fuels to finance theLeaking Underground Storage Tank Trust Fund.

3  Kerosene is taxed at the same rate as diesel fuel (as of July 1, 1998).

4  The rate is 13.6 cents per gallon for propane, 11.9 cents per gallon for liquefied natural gas, and 9.15 cents pergallon for methanol fuel from natural gas, in each case based on the relative energy equivalence of the fuel togasoline.

5  The statutory rate is 48.54 cents per thousand cubic feet ("MCF").

Administration of highway motor fuels excise taxes

The gasoline, diesel fuel, and kerosene excise taxes are imposed on removal of the fuelfrom a refinery or on importation, unless the fuel is transferred by pipeline or barge to a registeredterminal facility.  In such a case, tax is imposed on removal of the fuel from the terminal facility(i.e., at the "terminal rack").(3)  A large majority of these taxes are imposed at the terminal rack. The special motor fuels tax, which accounts for a relatively small portion of motor fuels taxrevenues, is imposed at the retail level.  Present law imposes tax on *all*gasoline, diesel fuel, andkerosene that is removed from a terminal facility, except diesel fuel that is destined for nontaxableuse (including a partially taxable use in an intercity bus or a train) and that is indelibly dyed inaccordance with Treasury Department regulations.  Effective July 1, 1998, as a condition ofholding untaxed fuel, terminals that sell diesel fuels must offer both dyed and undyed fuel to theircustomers and terminals that sell kerosene must offer both dyed and undyed kerosene.  Theperson holding an inventory position in the terminal at the time the fuel is removed from thatfacility (the "position holder") is liable for payment of the tax.

Highway fuels tax exemptions

	Present law includes numerous exemptions (including partial exemptions for specified usesof taxable fuels or for specified fuels) typically for governments or for uses not involving use ofthe highway system.  Because the gasoline and diesel fuel taxes generally are imposed before theend use of the fuel is known, many of these exemptions are realized through refunds to end usersof tax paid by a party that processed the fuel earlier in the distribution chain.  These exempt usesand fuels include:

	(1)  use in State and local government and nonprofit educational organization vehicles;

	(2)  use in buses engaged in transporting students and employees of schools;

	(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) aState or local governmental unit;

	(4) use in private intercity buses serving the general public along scheduled routes (totallyexempt from the gasoline tax and exempt from 17 cents per gallon of the diesel tax); and

	(5)  use in off-highway uses such as farming.

	LNG, propane, and methanol derived from natural gas are subject to reduced tax ratesbased on the energy equivalence of these fuels to gasoline.

	Ethanol and methanol derived from renewable sources (e.g., biomass) are eligible forincome tax benefits (the "alcohol fuels credit") equal to 54 cents per gallon (ethanol) and 60 centsper gallon (methanol).(4)  In addition, small ethanol producers are eligible for a separate 10-cents-per-gallon credit.(5)  The 54-cents-per-gallon ethanol and 60-cents-per-gallon renewable sourcemethanol tax credits may be claimed through reduced excise taxes paid on gasoline and specialmotor fuels as well as through credits against income tax.(6)

**Non-fuel Highway Fund Excise Taxes**

In addition to the highway motor fuels excise tax revenues, the Highway Fund receivesrevenues produced by three excise taxes imposed exclusively on heavy highway vehicles or tires. These taxes are:

	(1) A 12-percent excise tax imposed on the first retail sale of highway vehicles, tractors,and trailers (generally, trucks having a gross vehicle weight in excess of 33,000 pounds andtrailers having such a weight in excess of 26,000 pounds);

	(2) An excise tax imposed at graduated rates on highway tires weighing more than 40pounds; and

	(3) An annual use tax imposed on highway vehicles having a taxable gross weight of55,000 pounds or more.  (The maximum rate for this tax is $550 per year, imposed on vehicleshaving a taxable gross weight over 75,000 pounds.)

**Boat Safety Account and Trails Trust Fund Taxes**

	Gasoline and special motor fuels used in motorboats and in certain off-highwayrecreational vehicles and small engines are subject to tax in the same manner and at the same ratesas gasoline and special motor fuels used in highway vehicles.  Of the tax revenues from these uses,6.8 cents per gallon is retained in the General Fund; the remaining 11.5 cents per gallon isdeposited in the Aquatic Resources Trust Fund ("Aquatic Fund") (motorboats and small-enginegasoline), the Land and Water Conservation Fund ("Land and Water Fund") ($1 million ofmotorboat fuels tax revenues),  and the National Recreational Trails Trust Fund (the "TrailsFund") (fuels for off-highway recreational vehicles).(7)  Transfers to these Funds are scheduled toterminate after September 30, 1998.  Transfers to the Trails Fund are contingent onappropriations occurring from that Trust Fund; to date, no appropriations have been enacted.

**II.  HIGHWAY TRUST FUND AND BOAT SAFETY ACCOUNT EXPENDITURE PROVISIONS**

**In General**

Dedication of excise tax revenues to the Highway Fund and expenditures from theHighway Fund are governed by provisions of the Code (sec. 9503).(8)  Under present law, revenuesfrom the highway excise taxes, as imposed through September 30, 1999, are dedicated to theHighway Fund.  Also, the Highway Fund earns interest on its cash balances each year frominvestments in Treasury securities (sec. 9602).  Further, the Code authorizes expenditures (subjectto appropriations) from the Highway Fund through September 30, 1998, for the purposesprovided in authorizing legislation, as in effect on the date of enactment of Public Law 105-130.

	Highway Fund provisions also govern transfer of 11.5 cents per gallon of the revenuesfrom the tax imposed on gasoline used in motorboats, small engines, and off-highway recreationalvehicles.  Those revenues are transferred from the Highway Fund (after being received from theGeneral Fund) to the Aquatic Fund, the Land and Water Fund, and the Trails  Fund, respectively,through September 30, 1998.

**Present-law Highway Fund Expenditure Purposes**

Overview

	The Highway Fund is divided into two accounts:  a Highway Account and a Mass TransitAccount, each of which is the funding source for specific programs.

	Highway and Mass Transit Account expenditure purposes have been revised with passageof each authorization Act enacted since establishment of the Highway Fund in 1956.  In general,expenditures authorized under those Acts (as the Acts were in effect on the date of enactment ofthe most recent such authorizing Act) are approved Highway Fund expenditure purposes.(9) Authority to make expenditures from the Highway Fund is currently scheduled to expire afterSeptember 30, 1998.  Thus, no Highway Fund monies may be spent for a purpose not approvedby the tax-writing committees of Congress.  Further, no Highway Fund expenditures may occurafter September 30, 1998, without such approval.

	Highway Fund spending further is limited by two anti-deficit provisions, which are internalto the Highway Fund.  The first of these provisions limits the unfunded Highway Accountauthorizations at the end of any fiscal year to amounts not exceeding the unobligated balance plusrevenues projected to be collected for that Account by the dedicated excise taxes during the twofollowing fiscal years.  The second anti-deficit provision similarly limits unfunded Mass TransitAccount authorizations to the dedicated excise taxes expected to be collected during the nextfiscal year.  Because of these two provisions, the highway transportation excise taxes typically arescheduled to expire at least two years after current authorizing Acts.  If either of these provisionsis violated, spending for specified programs funded by the relevant Trust Fund Account is to bereduced proportionately, in much the same manner as would occur under a general Budget Actsequester.

Highway Account

	The Highway Fund's Highway Account receives revenues from all non-fuel highwaytransportation excise taxes and revenues from all but 2.85 cents per gallon(10) (2.0 cents prior toOctober 1, 1997) of the highway motor fuels excise taxes.  Programs financed from the HighwayAccount include expenditures for the following general purposes:

	(1)	Federal-aid highways, including the Interstate System, National Highway System,forest and public lands highways, scenic highways, and certain overseas highways(includes construction and planning and traffic control projects);

	(2)	Interstate highway resurfacing and repair;

	(3)	Bridge replacement and repair;

	(4)	Surface transportation programs;

	(5)	Congestion mitigation and air quality improvement;

	(6)	Highway safety programs and research and development, including a share of the costof National Highway Traffic Safety Administration ("NHTSA") programs anduniversity research centers;

	(7)	Transportation research, technology, and training;

	(8)	Intermodal urban projects and mass transit (including carpool and vanpool) grants;

	(9)	Intelligent transportation systems;

	(10)	Transportation enhancements (including transportation-related historic 			restoration, scenic beautification, removal of billboards);

	(11)	Construction of ferry boats and ferry terminal facilities; 

	(12)	Certain administrative costs of the Federal Highway Administration and NHTSA;

	(13)	Grants to the Internal Revenue Service for motor fuels tax and highway use taxenforcement activities; and

	(14)	Certain other highway and transit-related programs (including bicycle pathways andpedestrian walkways).

Mass Transit Account

	The Highway Fund's Mass Transit Account receives revenues equivalent to 2.85 cents pergallon(11) (2.0 cents prior to October 1, 1997) of the highway motor fuels excise taxes.  MassTransit Account monies are available through September 30, 1998, for capital and capital-relatedexpenditures under sections 5338(a)(1) and (b)(1) of Title 49, United States Code, or theIntermodal Surface Transportation Efficiency Act of 1991.

	The capital and capital-related mass transit programs include new rail or busway facilities,rail rolling stock, buses, improvement and maintenance of existing rail and other fixed guidewaysystems, and upgrading of bus systems.

**Transfers from Highway Fund to National Recreational Trails Trust Fund**

		The National Recreational Trails Trust Fund ("Trails Fund") was established in theIntermodal Surface Transportation Act of 1991 ("1991 Act").  Amounts are authorized to betransferred from the Highway Fund into the Trails Fund equivalent to revenues received from"nonhighway recreational fuel taxes" (not to exceed $30 million per year under an obligationalceiling set in the 1991 Act), subject to amounts actually being appropriated to the Trails Fund. No monies have been transferred to date, since no amounts have been appropriated to the TrailsFund.  The authority to transfer revenues to the Trails Fund is scheduled to expire afterSeptember 30, 1998.

	Nonhighway recreational fuels taxes are the taxes imposed (to the extent attributable tothe 11.5 cents per gallon rate) on (1) fuel used in vehicles and equipment on recreational trails orback country terrain, or (2) fuel used in camp stoves and other outdoor recreational equipment. Such revenues do not include small-engine gasoline tax revenues which are transferred to theAquatic Fund.

	Expenditures are authorized from the Trails Fund, subject to appropriations, forallocations to States for use on trails and trail-related projects as set forth in the 1991 Act. Authorized uses include (1) acquisition of new trails and access areas, (2) maintenance andrestoration of existing trails, (3) State environmental protection education programs, and (4)program administrative costs.

**Transfers from Highway Fund to Aquatic Fund and to Land and Water Fund**

	Transfers of recreational motorboat gasoline and special fuels tax revenues from theHighway Fund to the Boat Safety Account of the Aquatic Fund currently are limited to amaximum of $70 million per fiscal year.  Any excess motorboat fuels tax revenues are transferredto the Land and Water Fund ($1 million per year) and to the Sport Fish Restoration Account ofthe Aquatic Fund.(12)  The authority to transfer revenues to the Aquatic Fund is scheduled to expireafter September 30, 1998.

	Expenditures from the Boat Safety Account and Land and Water Fund are subject toappropriation Acts.  The Sport Fish Restoration Account has a permanent appropriation, and allmoneys transferred to that Account are automatically appropriated in the fiscal year following thefiscal year of receipt.

	Expenditures are authorized from the Boat Safety Account, as follows:

	(1)	One-half of the amount allocated to the Account are for State boating safetyprograms; and

	(2)	One-half of the amount allocated to the Account are for operating expenses of theCoast Guard to defray the cost of services provided for recreational boating safety.  

**III.  SUMMARY OF H.R. 2400 TRUST FUND AUTHORIZATIONS**

	H.R. 2400 would extend authorizations for Highway Fund expenditures for fiscal years1998-2003.  H.R. 2400 also would modify the expenditure purposes of the Highway Fund and theBoat Safety Account as described below.  As ordered reported by the Committee onTransportation and Infrastructure ("Transportation and Infrastructure"), H.R. 2400 contains norevenue provisions or other Code amendments.(13)

**Highway Account Authorizations Under H.R. 2400**

	H.R. 2400, as ordered reported by Transportation and Infrastructure, would provideauthorizations totaling $181 billion for the fiscal year period 1998-2003 from the HighwayAccount of the Highway Fund.

	New Highway Account expenditure programs in the bill include the following:
Program1998-2003 total ($millions)Recreational trails program(14)270Automated motor fuel reporting system((15))Highway safety data incentive grants76
	The bill would extend for fiscal years 1998-2003 the current authorization from theHighway Account for funds to the Internal Revenue Service and the States for highway use taxevasion projects.  In addition, the bill would fund an automated motor fuels reporting system fromthe Highway Account.

**Mass Transit Account Authorizations Under H.R. 2400**

	H.R. 2400, as ordered reported by Transportation and Infrastructure, would provide atotal of $35.8 billion for fiscal years 1998-2003 in authorizations from the Mass Transit Accountof the Highway Fund for mass transit-related programs.

	New purposes that would be authorized from the Mass Transit Account under the billinclude: (1)  operating expenses for rural and small urban mass transit systems and (2)modification of the definition of capital-related expenses to include preventive maintenance.(16) There is a limit of $400 million authorized per year for these new expenditure purposes.

**Boat Safety Account Provisions Under H.R. 2400**

	H.R. 2400, as ordered reported by Transportation and Infrastructure, amends theauthorizing statute for the Boat Safety Account expenditure purposes to provide that: 

(1) up to 2 percent of the amount is available to pay the Department of Transportation costs ofadministering the State boating safety programs; (2) up to 2 percent is available to ensurecompliance with chapter 43, U.S.C. 46 (Coast Guard inspection and regulation of recreationalvessels); and (3) up to 3 percent is available to establish, operate, and maintain aids to navigationthat promote primarily recreational boating safety.  The Secretary of Transportation is to conductand report to the Congress the findings of a comprehensive survey of recreational boating in theUnited States, reporting by December 1, 1999 and every fifth year thereafter.  In addition, the billprovides that of the amount allocated for State recreational boating safety programs, 5 percent ofany amount over $35 million per year is to be used only for public access facilities for transientnontrailerable recreational vessels.  In effect, the bill provides that the balance of any amountstransferred to the Boat Safety Account is to go for State boating safety programs rather than tothe Coast Guard.  Further, the bill anticipates modification of the existing caps on transfers ofmotorboat fuels tax revenues to the Boat Safety Account.(17)

**Change in Trust Fund Budget Treatment**

	H.R. 2400, as ordered reported by Transportation and Infrastructure, includes language totreat expenditures from and receipts to the Highway Fund as "off-budget."  The language isessentially the same as the legislation to take the Social Security Trust Fund off-budget in 1990. 

**IV.  REVENUE TITLE AMENDMENT**
**1.  Extension of existing Highway Fund excise taxes and certain exemptions**

Extension of taxes and exemptions.--The scheduled expiration date of the currentHighway Fund motor fuels taxes and the retail sale and annual use taxes on heavy highwayvehicles, and most exemptions from those taxes, would be extended for six years, October 1,1999 through September 30, 2005.  The excise tax on tires would be extended through September30, 2000.  The present-law tax benefits for ethanol would not be extended.  Thus, those benefitswould expire as currently scheduled, after September 30, 2000, and December 31, 2000.

Dyed fuel mandate for registered terminals.--A present-law provision requiring motorfuels terminal facilities, as a condition of storing non-tax-paid fuel, to offer to their customersboth undyed and dyed fuel if they distribute diesel fuel or kerosene would be delayed for twoyears, to July 1, 2000.  This provision would not affect the general rules relating to imposition oftax on diesel fuel and kerosene. 

**2.  Extension and modification of Highway Fund expenditure provisions**

Transfer of revenues from extension; expenditure authority and purposes.--Revenues fromthe excise taxes and exemptions extended under the amendment would be transferred to theHighway Fund.

	The current September 30, 1998, expiration date of authority to spend monies from theHighway Fund would be extended through September 30, 2003, and the Code provisionsgoverning purposes for which monies in the Highway Fund may be spent would be updated toinclude the purposes provided in H.R. 2400, as enacted.

	Provisions would be incorporated into the Highway Fund clarifying that expenditures fromthe Highway Fund may occur only as provided in the Code.  Clarification further would beprovided that the expiration date for expenditures allowed from the Highway Fund does notpreclude disbursements to liquidate contracts which were validly entered into before that date. Expenditures for contracts entered into or for amounts otherwise obligated after that date (or forother non-contract authority purposes permitted by non-Code provisions) would not bepermitted, notwithstanding the provisions of any subsequently enacted authorization orappropriations legislation.  If any such subsequent non-tax legislation provided for expendituresnot provided for in the Code, or if any executive agency authorized such expenditures incontravention of the Code restrictions, excise tax revenues otherwise to be deposited in theHighway Fund would be retained in the General Fund beginning on the date of enactment of suchlegislation or the date of such executive agency action.

Provisions governing administration of the Highway Fund.--The Code rules providing forinvestment of Highway Fund balances in interest-bearing Treasury securities would be modified toprovide that no interest would be credited to the Highway Fund after September 30, 1998.Further, on October 1, 1998, the cash balance of the Highway Account in excess of $8 billion andthe cash balance of the Mass Transit Account in excess of $5.5 billion would be transferred fromthe Highway Fund to the General Fund.  

	The anti-deficit provisions of the Mass Transit Account would be conformed to those ofthe Highway Account so that permitted obligations would be determined by reference to twoyears of projected revenues.  

Highway Fund technical corrections and "deadwood" repeal.--Two technical correctionsto the Taxpayer Relief Act of 1997 (the "1997 Act") would be included:

	(1)  Clarification would be provided that excise tax revenues attributable to LNG, CNG,propane, and methanol from natural gas (all of which are subject to reduced energy equivalentrates, as indicated in Table 1) are divided between the Highway and Mass Transit Accounts of theHighway Fund in the same proportions as gasoline tax revenues are divided between those twoaccounts.

	(2)  Clarification would be provided that the amount of gasoline and diesel fuel taxrevenues deposited into the Mass Transit Account would be 2.86 cents per gallon (rather than2.85 cents per gallon as erroneously provided in the 1997 Act).

	A provision of the 1997 Act providing that (1) the transfer of additional motor fuels taxrevenues to the Highway Fund and (2) a one-time adjustment to fuels tax deposit requirementswould not affect the operation of certain provisions of the 1991 highway legislation would berepealed as deadwood.

**3.  Provisions affecting certain other Trust Funds receiving fuels tax revenues from the Highway Fund**

Trails Fund.--The Code provisions establishing the National Recreational Trails TrustFund (the "Trails Fund") and providing for transfer of revenues to the Trails Fund would berepealed, effective on the date of the amendment's enactment.  (As described above, no transfershave occurred to date because transfers are contingent on appropriations being enacted, and nofunds have been appropriated from the Trails Fund.)  Under H.R. 2400, Highway Fundexpenditures would be authorized for similar purposes to those of the Trails Fund.

Aquatic Fund.--Transfers of motorboat and small-engine gasoline tax revenues to theSport Fish Restoration and Boat Safety Accounts of the Aquatic Fund and expenditure authorityfor the Boat Safety Account of the Aquatic Fund would be extended through September 30,2003.  The expenditure purposes of the Aquatic Fund would be conformed to those in effect as ofthe date of enactment of H.R. 2400.  Also, the provisions governing amounts transferred to theBoat Safety Account would be modified to conform to expenditure levels anticipated in H.R.2400.  Transfers of motorboat fuels tax revenues to the Boat Safety Account would be changedto equal one-half of such revenues each fiscal year, with a limit on the balance in that Accountequal to no more than one-half of the prior fiscal year's motorboat fuels tax revenues.

	Provisions identical to those described above for the Highway Fund would beincorporated into the Aquatic Fund clarifying that expenditures from the Aquatic Fund may occuronly as provided in the Code.

**4.  Repeal tire excise tax**

	The excise tax on tires that exceed prescribed weight thresholds would be repealed,effective on October 1, 2000.

**5.  Simplify fuels tax refund procedures**

	Consumers that use previously taxed highway motor fuels in a nontaxable use may fileclaims for refunds with the Internal Revenue Service.  In general, claims for the first threecalendar quarters may be filed quarterly if the tax to be refunded exceeds prescribed thresholds.(18) Consumers not satisfying the prescribed dollar thresholds, and all fourth quarter refunds, areclaimed through income tax credits.

	The amendment would consolidate the fuels tax refund thresholds to allow quarterlyclaims to be filed once an aggregate year-to-date refund of $750 or more for all motor fuels isdue.  Additionally, fourth quarter refund claims would be allowed under the same rules as thoseapplicable to the first three calendar quarters.  The provision would be effective for claims filedafter September 30, 1998.

**6.	Transfer General Fund portion of taxes on motorboat gasoline and special motor fuels and small-engine gasoline to Aquatic Fund**

	     The 6.8-cents-per-gallon portion of the tax on gasoline and special motor fuels used inmotorboats and on small-engine gasoline that currently is retained in the General Fund would betransferred to the Aquatic Fund, effective generally for revenues from taxes imposed afterSeptember 30, 2000. This provision would be phased-in, with 3.4 cents per gallon of the revenuesfrom taxes imposed during the period October 1, 1999 through September 30, 2000.

**7.  Repeal the 4.3-cents-per-gallon excise tax on rail diesel fuel**

	The 4.3-cents-per-gallon excise tax imposed on diesel fuel used in trains would be repealed,effective on October 1, 2000.

1.   The Congress enacted a 6-month extension (through March 31, 1998) of the highwayand mass transit program authorizations in S. 1519 (P.L. 105-130).
2.   This document may be cited as follows:  Joint Committee on Taxation, *Chairman'sAmendment Relating to Extension of Highway Trust Fund Excise Taxes and Related Trust FundProvisions (Revenue Title to H.R. 2400)* (JCX-15R-98), March 25, 1998.
3.   Gasoline and diesel motor fuel may be removed from a refinery without payment of taxonly if the party removing the fuel and all subsequent parties before its removal from a terminalfacility are registered with the Internal Revenue Service.  If fuel is sold to an unregistered partybefore leaving the terminal facility, tax immediately is imposed.  This tax does not precludeimposition of a second tax at the terminal rack; however, the second tax may be refunded uponrequest.  This dual tax regime was enacted in 1990 in response to reports that fuel was beingremoved tax-free from terminals upon a claim that tax had already been paid, when in fact it hadnot been paid.
4.   The alcohol fuels credit is scheduled to expire after December 31, 2000, or earlier, if theHighway Fund excise taxes actually expire before that date.
5.   The small ethanol producer credit is available on up to 15 million gallons of ethanolproduced by persons whose annual production capacity does not exceed 30 million gallons.
6.   Authority to claim the ethanol and renewable source methanol tax benefits throughexcise tax reductions are scheduled to expire after September 30, 2000 (or earlier, if theunderlying excise taxes actually expire before September 30, 2000).
7.   Nonhighway recreational fuels taxes are the taxes imposed on (1) fuel used in vehiclesand equipment on recreational trails or back country terrain or (2) fuel used in camp stores andother outdoor recreational equipment.  Such revenues do not include small-engine gasoline taxrevenues, which are transferred to the Aquatic Fund.  "Small-engine" fuel means gasoline used asa fuel in the nonbusiness use of small-engine outdoor power equipment (to the extent of theHighway Fund tax rate).
8.   The Highway Fund statutory provisions were placed in the Internal Revenue Code in1982.
9.   The authorizing Acts which currently are referenced in the Highway Fund (for theHighway Account) are the Highway Revenue Act of 1956, Titles I and II of the SurfaceTransportation Assistance Act of 1982, the Surface Transportation and Uniform Relocation Actof 1987, the Intermodal Surface Transportation Efficiency Act of 1991, and Public Law 105-130.
10.   A technical correction (to 2.86 cents per gallon) is included in Title VI ("Tax TechnicalCorrections Act of 1997") of H.R. 2676 as passed by the House on November 5, 1997.
11.   See footnote 10, *supra*.
12.   The maximum balance that may accumulate in the Boat Safety Account is $70 million.
13.   See below for mention of the bill's authorization of amounts from the HighwayAccount for grants to the Internal Revenue Service for motor fuel tax evasion projects and anautomated motor fuel reporting system.
14.   A "recreational trail" is a thoroughfare or track across land or snow used forrecreational purposes, such as pedestrian activities (jogging, hiking, backpacking), skating orskateboarding, equestrian activities, cross-country skiing, bicycling, trail biking, snowmobiling,aquatic activities, and motorized vehicular activities (including all-terrain vehicles, motorcycles,snowmobiles, off-road vehicles).  Eligible expenses include costs of State administration of theprogram and educational programs to promote trail safety and environmental protection.  Someamounts were authorized for recreational trails under the National Highway Systems DesignationAct of 1995, which was subsequent to the 1991 Act authorizations.
15.   Such amounts as may be determined, which are included in the total of $55 million forthis program and the existing motor fuels tax enforcement program.
16.   "Preventive maintenance" is currently eligible under the Highway Account for highwaysand bridges.
17.   See proposed changes in Part IV (revenue amendment) to the Boat Safety Accounttransfers and balance limit.
18.   Under present law, gasoline refund claims may be filed quarterly for any of the firstthree calendar quarters if the quarterly refund claim equals or exceeds $1,000.  Diesel fuel refundclaims for the first three calendar quarters may be filed in any quarter in which the aggregatediesel fuel refund for the year equals $750 or more.