I

103D CONGRESS

2D SESSION H. R. 5299

To amend the Internal Revenue Code of 1986 to phase out the tax subsidies

for alcohol fuels involving alcohol produced from feedstocks eligible to

receive Federal agricultural subsidies.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 29, 1994

Mr. FRANKS of New Jersey (for himself, Mr. FRANK of Massachusetts, Mr.

ZIMMER, Mr. TORRICELLI, Mr. PAYNE of New Jersey, Mr. SAXTON, and

Mr. PALLONE) introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to phase

out the tax subsidies for alcohol fuels involving alcohol

produced from feedstocks eligible to receive Federal agricultural subsidies.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. PHASE-OUT OF TAX SUBSIDIES FOR ALCOHOL

2 FUELS PRODUCED FROM FEEDSTOCKS ELIGI3 BLE TO RECEIVE FEDERAL AGRICULTURAL

4 SUBSIDIES.

5 (a) ALCOHOL FUELS CREDIT.—Section 40 of the In6 ternal Revenue Code of 1986 (relating to credit for alcohol

7 used as a fuel) is amended by adding at the end the follow8 ing new subsection:

9 ‘‘(g) PHASE-OUT OF CREDIT FOR ALCOHOL PRO10 DUCED FROM FEEDSTOCKS ELIGIBLE TO RECEIVE FED11 ERAL AGRICULTURAL SUBSIDIES.—

12 ‘‘(1) IN GENERAL.—No credit shall be allowed

13 under this section with respect to any alcohol, or

14 fuel containing alcohol, which is produced from any

15 feedstock which is a subsidized agricultural commod16 ity.

17 ‘‘(2) PHASE-IN OF DISALLOWANCE.—In the

18 case of taxable years beginning in 1995 and 1996,

19 paragraph (1) shall not apply and the credit deter20 mined under this section with respect to alcohol or

21 fuels described in paragraph (1) shall be equal to 67

22 percent (33 percent in the case of taxable years be23 ginning in 1996) of the credit determined without

24 regard to this subsection.

25 ‘‘(3) SUBSIDIZED AGRICULTURAL COMMOD26 ITY.—For purposes of this subsection, the term
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1 ‘subsidized agricultural commodity’ means any agri2 cultural commodity which is supported, or is eligible

3 to be supported, by a price support or production

4 adjustment program carried out by the Secretary of

5 Agriculture.’’.

6 (b) EXCISE TAX REDUCTION.—

7 (1) PETROLEUM PRODUCTS.—Section 4081(c)

8 of the Internal Revenue Code of 1986 (relating to

9 taxable fuels mixed with alcohol) is amended by re10 designating paragraph (8) as paragraph (9) and by

11 adding after paragraph (7) the following new para12 graph:

13 ‘‘(8) PHASE-OUT OF SUBSIDY FOR ALCOHOL

14 PRODUCED FROM FEEDSTOCKS ELIGIBLE TO RE15 CEIVE FEDERAL AGRICULTURAL SUBSIDIES.—

16 ‘‘(A) IN GENERAL.—This subsection shall

17 not apply to any qualified alcohol mixture con18 taining alcohol which is produced from any

19 feedstock which is a subsidized agricultural

20 commodity.

21 ‘‘(B) PHASE-IN OF DISALLOWANCE.—In

22 the case of calendar years 1995 and 1996, the

23 rate of tax under subsection (a) with respect to

24 any qualified alcohol mixture described in sub25 paragraph (A) shall be equal to the sum of—
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1 ‘‘(i) the rate of tax determined under

2 this subsection (without regard to this

3 paragraph), plus

4 ‘‘(ii) 33 percent (67 percent in the

5 case of 1996) of the difference between the

6 rate of tax under subsection (a) deter7 mined with and without regard to this sub8 section.

9 ‘‘(C) SUBSIDIZED AGRICULTURAL COM10 MODITY.—For purposes of this paragraph, the

11 term ‘subsidized agricultural commodity’ means

12 any agricultural commodity which is supported,

13 or is eligible to be supported, by a price support

14 or production adjustment program carried out

15 by the Secretary of Agriculture.’’.

16 (2) SPECIAL FUELS.—Section 4041 of such

17 Code (relating to tax on special fuels) is amended by

18 adding at the end the following new subsection:

19 ‘‘(n) PHASE-OUT OF SUBSIDY FOR ALCOHOL PRO20 DUCED FROM FEEDSTOCKS ELIGIBLE TO RECEIVE FED21 ERAL AGRICULTURAL SUBSIDIES.—

22 ‘‘(1) IN GENERAL.—Subsections (b)(2), (k),

23 and (m) shall not apply to any alcohol fuel contain24 ing alcohol which is produced from any feedstock

25 which is a subsidized agricultural commodity.
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1 ‘‘(2) PHASE-IN OF DISALLOWANCE.—In the

2 case of calendar years 1995 and 1996, the rate of

3 tax determined under subsection (b)(2), (k), or (m)

4 with respect to any alcohol fuel described in para5 graph (1) shall be equal to the sum of—

6 ‘‘(A) the rate of tax determined under such

7 subsection (without regard to this subsection),

8 plus

9 ‘‘(B) 33 percent (67 percent in the case of

10 1996) of the difference between the rate of tax

11 under this section determined with and without

12 regard to subsection (b)(2), (k), or (m), which13 ever is applicable.

14 ‘‘(3) SUBSIDIZED AGRICULTURAL COMMOD15 ITY.—For purposes of this subsection, the term

16 ‘subsidized agricultural commodity’ means any agri17 cultural commodity which is supported, or is eligible

18 to be supported, by a price support or production

19 adjustment program carried out by the Secretary of

20 Agriculture.’’.

21 (3) AVIATION FUEL.—Section 4091(c) of such

22 Code (relating to reduced rate of tax for aviation

23 fuel in alcohol mixture) is amended by redesignating

24 paragraph (5) as paragraph (6) and by inserting

25 after paragraph (4) the following new paragraph:
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1 ‘‘(5) PHASE-OUT OF SUBSIDY FOR ALCOHOL

2 PRODUCED FROM FEEDSTOCKS ELIGIBLE TO RE3 CEIVE FEDERAL AGRICULTURAL SUBSIDIES.—

4 ‘‘(A) IN GENERAL.—This subsection shall

5 not apply to any mixture of aviation fuel con6 taining alcohol which is produced from any

7 feedstock which is a subsidized agricultural

8 commodity.

9 ‘‘(B) PHASE-IN OF DISALLOWANCE.—In

10 the case of calendar years 1995 and 1996, the

11 rate of tax under subsection (a) with respect to

12 any mixture of aviation fuel described in sub13 paragraph (A) shall be equal to the sum of—

14 ‘‘(i) the rate of tax determined under

15 this subsection (without regard to this

16 paragraph), plus

17 ‘‘(ii) 33 percent (67 percent in the

18 case of 1996) of the difference between the

19 rate of tax under subsection (a) deter20 mined with and without regard to this sub21 section.

22 ‘‘(C) SUBSIDIZED AGRICULTURAL COM23 MODITY.—For purposes of this paragraph, the

24 term ‘subsidized agricultural commodity’ means

25 any agricultural commodity which is supported,
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1 or is eligible to be supported, by a price support

2 or production adjustment program carried out

3 by the Secretary of Agriculture.’’.

4 (c) EFFECTIVE DATES.—

5 (1) CREDIT.—The amendment made by sub6 section (a) shall apply to taxable years beginning

7 after December 31, 1994.

8 (2) EXCISE TAXES.—

9 (A) IN GENERAL.—The amendments made

10 by subsection (b) shall take effect on January

11 1, 1995.

12 (B) FLOOR STOCK TAX.—

13 (i) IN GENERAL.—In the case of any

14 alcohol fuel in which tax was imposed

15 under section 4041, 4081, or 4091 of the

16 Internal Revenue Code of 1986 before any

17 tax-increase date, and which is held on

18 such date by any person, then there is

19 hereby imposed a floor stock tax on such

20 fuel equal to the difference between the tax

21 imposed under such section on such date

22 and the tax so imposed.

23 (ii) LIABILITY FOR TAX AND METHOD

24 OF PAYMENT.—A person holding an alco25 hol fuel on any tax-increase date shall be
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1 liable for such tax, shall pay such tax no

2 later than 90 days after such date, and

3 shall pay such tax in such manner as the

4 Secretary may prescribe.

5 (iii) EXCEPTIONS.—The tax imposed

6 by clause (i) shall not apply—

7 (I) to any fuel held in the tank of

8 a motor vehicle or motorboat, or

9 (II) to any fuel held by a person

10 if, on the tax-increase date, the aggre11 gate amount of fuel held by such per12 son and any related persons does not

13 exceed 2,000 gallons.

14 (iv) TAX-INCREASE DATE.—For pur15 poses of this subparagraph, the term ‘‘tax16 increase date’’ means January 1, 1995,

17 and January 1, 1996.

18 (v) OTHER LAWS APPLICABLE.—All

19 provisions of law, including penalties appli20 cable with respect to the taxes imposed by

21 sections 4041, 4081, and 4091 of such

22 Code shall, insofar as applicable and not

23 inconsistent with the provisions of this

24 subparagraph, apply with respect to the

25 floor stock taxes imposed by clause (i).
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1 SEC. 2. PORTION OF INCREASED REVENUES DEPOSITED

2 INTO HARBOR MAINTENANCE TRUST FUND.

3 (a) DREDGING MATERIAL ACCOUNT.—Section 9505

4 of the Internal Revenue Code of 1986 (relating to Harbor

5 Maintenance Trust Fund) is amended by adding at the

6 end the following new subsection:

7 ‘‘(d) DREDGING MATERIAL ACCOUNT.—

8 ‘‘(1) CREATION OF ACCOUNT.—There is estab9 lished in the Harbor Maintenance Trust Fund a sep10 arate account to be known as the ‘Dredging Material

11 Account’ consisting of such amounts as may be ap12 propriated or credited to the Dredging Material Ac13 count as provided in this subsection or 9602(b).

14 ‘‘(2) TRANSFERS TO ACCOUNT.—There is here15 by appropriated to the Dredging Material Account

16 amounts equivalent to 50 percent of the sum of—

17 ‘‘(A) the aggregate increase in tax liabil18 ities under chapter 1 which is attributable to

19 section 40(g), and

20 ‘‘(B) the aggregate increase in taxes re21 ceived in the Treasury which is attributable to

22 sections 4041(n), 4081(c)(8), and 4091(c)(5).

23 ‘‘(3) EXPENDITURES.—Amounts in the Dredg24 ing Material Account shall be available, as provided

25 in appropriation Acts, for—
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1 ‘‘(A) research and development of dredged

2 material decontamination technologies, and

3 ‘‘(B) research, development, and construc4 tion of facilities for dredged material contain5 ment or disposal (other than open water dis6 posal).’’

7 (b) NO TRANSFERS TO OTHER TRUST FUNDS.—

8 (1) Subsection (e) of section 9502 of such Code

9 (relating to special rules for transfers to Airport and

10 Airway Trust Fund) is amended by adding at the

11 end the following new paragraph:

12 ‘‘(3) CERTAIN ADDITIONAL TAXES TO REMAIN

13 IN GENERAL FUND.—The amount required to be ap14 propriated by subsection (b) shall be determined

15 without regard to any increase in taxes by reason of

16 sections 4041(n), 4081(c)(8), and 4091(c)(5).’’

17 (2) Paragraph (4) of section 9503(b) of such

18 Code (relating to certain additional taxes not trans19 ferred to Highway Trust Fund) is amended by strik20 ing ‘‘and’’ at the end of subparagraph (A), by strik21 ing the period at the end of subparagraph (B) and

22 inserting ‘‘, and’’, and by adding at the end the fol23 lowing new subparagraph:
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1 ‘‘(C) there shall not be taken into account

2 any increase in taxes by reason of sections

3 4041(n) and 4081(c)(8).’’

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