I 

111TH CONGRESS 

1ST SESSION H. R. 3595 

To amend the Internal Revenue Code of 1986 to reduce the Federal tax 

on fuels by the amount of any increase in the rate of tax on such 

fuel by the States. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 17, 2009 

Mr. GARRETT of New Jersey 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 reduce 

the Federal tax on fuels by the amount of any increase 

in the rate of tax on such fuel by the States. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Surface Transportation and Taxation Equity Act’’ or as 

6 the ‘‘STATE Act’’. 

7 (b) FINDINGS.—The Congress finds the following: 

8 (1) Today’s surface transportation problems are 

9 largely local and regional in nature. 


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1 (2) The original Federal goal of creating an 

2 interstate system was met in the early 1980s. 

3 (3) State and local governments are out4 spending the Federal Government on transportation 

5 by a ratio of 2 to 1. 

6 (4) The amount of traffic experiencing con7 gested conditions in the peak travel periods has 

8 more than doubled in 25 years from 29 percent in 

9 1982 to 63 percent in 2007. 

10 (5) The percentage of the major road system 

11 that is congested has grown from 29 percent in 

12 1982 to 48 percent in 2007. 

13 (6) More than $87,200,000,000 is wasted each 

14 year due to road congestion. 

15 (c) PURPOSES.—The purposes of this Act are to— 

16 (1) return primary transportation program re17 sponsibility and taxing authority to the States, 

18 (2) free States’ transportation dollars from 

19 Federal micromanagement, earmarking, and budg20 etary pressures, 

21 (3) enable decisions regarding which infrastruc22 ture projects will be built, how they will be financed, 

23 and how they will be regulated to be made by per24 sons best able to make those decisions, 


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1 (4) eliminate the current system in which a 

2 Federal gasoline tax is sent to Washington and 

3 through a cumbersome Department of Transpor4 tation bureaucracy, 

5 (5) prohibit the Federal Government from forc6 ing unwanted mandates on States by threatening to 

7 withhold transportation money, and 

8 (6) achieve measurable congestion mitigation 

9 and infrastructure preservation and safety in a cost 

10 effective way subject to available resources. 

11 SEC. 2. FEDERAL TAX ON FUELS DECREASED BY AMOUNT 

12 OF INCREASE IN STATE TAX ON FUEL. 

13 (a) IN GENERAL.—Subpart B of part III of sub14 chapter A of chapter 32 of the Internal Revenue Code of 

15 1986 (relating to special provisions applicable to fuels tax) 

16 is amended by adding at the end the following new section: 

17 ‘‘SEC. 4106. REDUCTION IN RATES OF TAX BASED ON IN18 CREASE IN STATE TAX RATE. 

19 ‘‘(a) IN GENERAL.—Under regulations prescribed by 

20 the Secretary, the rate of tax imposed under section 4081 

21 with respect to any fuel and the rate of tax imposed under 

22 section 4041 with respect to any liquid shall be decreased, 

23 but not below 2 cents per gallon, by the applicable State 

24 tax rate increase with respect to such fuel or liquid. 


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1 ‘‘(b) APPLICABLE STATE TAX RATE INCREASE.— 

2 For purposes of this section, the term ‘applicable State 

3 tax rate increase’ means, with respect to any fuel or liquid, 

4 the excess, as periodically determined under tables pre5 scribed by the Secretary, of— 

6 ‘‘(1) the rate of tax imposed by the applicable 

7 State on the sale or use of such fuel or liquid, over 

8 ‘‘(2) the rate of tax imposed by the applicable 

9 State on the sale or use of such fuel or liquid as of 

10 March 17, 2009. 

11 Any increase in the rate of tax imposed by any applicable 

12 State on the sale or use of any fuel or liquid shall be taken 

13 into account under this subsection only if State law pro14 vides that such increase is to be taken into account under 

15 this subsection. 

16 ‘‘(c) APPLICABLE STATE.—For purposes of this sec17 tion, the term ‘applicable State’ means the State which 

18 is determined under regulations prescribed by the Sec19 retary as— 

20 ‘‘(1) in the case of a liquid to which section 

21 4041 applies, the State in which such liquid is sold 

22 or used, or 

23 ‘‘(2) in the case of a fuel to which section 4081 

24 applies, the State in which such fuel is most likely 

25 to be sold or used. 


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1 ‘‘(d) REQUIREMENT TO MAINTAIN INTERSTATE

2 HIGHWAY SYSTEM.—Subsection (a) shall not apply with 

3 respect to any fuel or liquid if the applicable State with 

4 respect to such fuel or liquid has not entered into an 

5 agreement with the Secretary of Transportation under 

6 which such State has agreed to provide for the proper 

7 maintenance of that portion of the interstate highway sys8 tem which is within such State.’’. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Section 9503 of such Code is amended by 

11 striking subsection (d). 

12 (2)(A) Paragraph (4) of section 9503(e) of such 

13 Code is amended to read as follows: 

14 ‘‘(4) REDUCTION IN RATE OF TRANSFER BASED

15 ON REDUCTION IN STATE TAX RATES.— 

16 ‘‘(A) IN GENERAL.—There shall be sub17 stituted for each amount in paragraph (2) an 

18 amount which bears the same ratio to such 

19 amount as the aggregate reduced tax rate bears 

20 to the aggregate unreduced tax rate. 

21 ‘‘(B) AGGREGATE REDUCED TAX RATE.— 

22 For purposes of subparagraph (A), the term 

23 ‘aggregate reduced tax rate’ means, with re24 spect to any amount for any calendar year, the 

25 amount of tax that the Secretary estimates will 


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1 be imposed with respect to the liquid or fuel to 

2 which such amount relates for such year after 

3 application of section 4106. 

4 ‘‘(C) AGGREGATE UNREDUCED TAX

5 RATE.—For purposes of subparagraph (A), the 

6 term ‘aggregate unreduced tax rate’ means, 

7 with respect to any amount for any calendar 

8 year, the amount of tax that the Secretary esti9 mates would have been imposed with respect to 

10 the liquid or fuel to which such amount relates 

11 for such year if section 4106 did not apply for 

12 such year.’’. 

13 (B) Subparagraph (A) of section 9503(e)(2) of 

14 such Code is amended by striking ‘‘sentence’’ and 

15 inserting ‘‘subsection’’. 

16 (3) The table for section for subpart B of part 

17 III of subchapter A of chapter 32 of such Code is 

18 amended by adding at the end the following new 

19 item: 

‘‘Sec. 4106. Reduction in rates of tax based on increase in State tax rate.’’. 

20 (c) EFFECTIVE DATE.—The amendment made by 

21 this section shall apply to liquid or fuel removed, entered, 

22 sold, or used after the date of the enactment of this Act. 

Æ 


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