I 

109TH CONGRESS 

2D SESSION H. R. 5285 

To provide a highway fuel tax holiday funded by the repeal of certain 

production incentives, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 3, 2006 

Ms. LORETTA SANCHEZ of California introduced the following bill; which was 

referred to the Committee on Ways and Means, and in addition to the 

Committees on Resources and Science, for a period to be subsequently 

determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To provide a highway fuel tax holiday funded by the repeal 

of certain production incentives, and for other purposes. 

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. 

4 This Act may be cited as the ‘‘Gas Tax Equity Act 

5 of 2006’’. 

6 SEC. 2. HIGHWAY FUEL TAX HOLIDAY. 

7 (a) TEMPORARY ELIMINATION OF HIGHWAY FUEL

8 TAXES ON GASOLINE, DIESEL FUEL, AND KEROSENE.— 


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1 (1) IN GENERAL.—Section 4081 of the Internal 

2 Revenue Code of 1986 (relating to imposition of tax 

3 on gasoline, diesel fuel, and kerosene) is amended by 

4 adding at the end the following new subsection: 

5 ‘‘(f) TEMPORARY REDUCTION IN TAXES ON GASO6 LINE, DIESEL FUEL, AND KEROSENE.— 

7 ‘‘(1) IN GENERAL.—During the applicable pe8 riod, each rate of tax referred to in paragraph (2) 

9 shall be reduced to zero cents per gallon. 

10 ‘‘(2) RATES OF TAX.—The rates of tax referred 

11 to in this paragraph are the rates of tax otherwise 

12 applicable under— 

13 ‘‘(A) clauses (i) and (iii) of subsection 

14 (a)(2)(A) (relating to gasoline, diesel fuel, and 

15 kerosene), determined with regard to subsection 

16 (a)(2)(B) and without regard to subsection 

17 (a)(2)(C), and 

18 ‘‘(B) paragraph (1) of section 4041(a) (re19 lating to diesel fuel and kerosene) with respect 

20 to fuel sold for use or used in a diesel-powered 

21 highway vehicle. 

22 ‘‘(3) APPLICABLE PERIOD.—For purposes of 

23 this subsection, the term ‘applicable period’ means 

24 the 60-day period beginning with the day after the 

25 date of the enactment of this subsection. 


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1 ‘‘(4) MAINTENANCE OF TRUST FUND DEPOS2 ITS.—In determining the amounts to be appro3 priated to the Highway Trust Fund under section 

4 9503 and to the Leaking Underground Storage 

5 Tank Trust Fund under 9508, an amount equal to 

6 the reduction in revenues to the Treasury by reason 

7 of this subsection shall be treated as taxes received 

8 in the Treasury under this section or section 4041.’’. 

9 (2) EFFECTIVE DATE.—The amendment made 

10 by this subsection shall take effect on the date of the 

11 enactment of this Act. 

12 (b) FLOOR STOCK REFUNDS.— 

13 (1) IN GENERAL.—If— 

14 (A) before the tax reduction date, tax has 

15 been imposed under section 4081 of the Inter16 nal Revenue Code of 1986 on any liquid, and 

17 (B) on such date such liquid is held by a 

18 dealer and has not been used and is intended 

19 for sale, there shall be credited or refunded 

20 (without interest) to the person who paid such 

21 tax (hereafter in this subsection referred to as 

22 the ‘‘taxpayer’’) an amount equal to the excess 

23 of the tax paid by the taxpayer over the amount 

24 of such tax which would be imposed on such liqVerDate Aug 31 2005 18:27 May 07, 2006 Jkt 049200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5285.IH H5285

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1 uid had the taxable event occurred on the tax 

2 reduction date. 

3 (2) TIME FOR FILING CLAIMS.—No credit or re4 fund shall be allowed or made under this subsection 

5 unless— 

6 (A) claim therefor is filed with the Sec7 retary of the Treasury before the date which is 

8 6 months after the tax reduction date, and 

9 (B) in any case where liquid is held by a 

10 dealer (other than the taxpayer) on the tax re11 duction date— 

12 (i) the dealer submits a request for re13 fund or credit to the taxpayer before the 

14 date which is 3 months after the tax re15 duction date, and 

16 (ii) the taxpayer has repaid or agreed 

17 to repay the amount so claimed to such 

18 dealer or has obtained the written consent 

19 of such dealer to the allowance of the cred20 it or the making of the refund. 

21 (3) DEFINITIONS.—For purposes of this sub22 section— 

23 (A) the terms ‘‘dealer’’ and ‘‘held by a 

24 dealer’’ have the respective meanings given to 

25 such terms by section 6412 of such Code; exVerDate Aug 31 2005 18:27 May 07, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5285.IH H5285

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1 cept that the term ‘‘dealer’’ includes a pro2 ducer, and 

3 (B) the term ‘‘tax reduction date’’ means 

4 the day after the date of the enactment of this 

5 Act. 

6 (4) CERTAIN RULES TO APPLY.—Rules similar 

7 to the rules of subsections (b) and (c) of section 

8 6412 of such Code shall apply for purposes of this 

9 subsection. 

10 (c) FLOOR STOCKS TAX.— 

11 (1) IMPOSITION OF TAX.—In the case of any 

12 liquid on which tax would have been imposed under 

13 section 4081 of the Internal Revenue Code of 1986 

14 during the applicable period but for the amendments 

15 made by subsection (a), and which is held on the 

16 floor stocks tax date by any person, there is hereby 

17 imposed a floor stocks tax in an amount equal to the 

18 tax which would be imposed on such liquid had the 

19 taxable event occurred on the floor stocks tax date. 

20 (2) LIABILITY FOR TAX AND METHOD OF PAY21 MENT.— 

22 (A) LIABILITY FOR TAX.—A person hold23 ing a liquid on the floor stocks tax date to 

24 which the tax imposed by paragraph (1) applies 

25 shall be liable for such tax. 


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1 (B) METHOD OF PAYMENT.—The tax im2 posed by paragraph (1) shall be paid in such 

3 manner as the Secretary shall prescribe. 

4 (C) TIME FOR PAYMENT.—The tax im5 posed by paragraph (1) shall be paid on or be6 fore the date which is 6 months after the floor 

7 stocks tax date. 

8 (3) DEFINITIONS.—For purposes of this sub9 section— 

10 (A) HELD BY A PERSON.—A liquid shall 

11 be considered as ‘‘held by a person’’ if title 

12 thereto has passed to such person (whether or 

13 not delivery to the person has been made). 

14 (B) GASOLINE AND DIESEL FUEL.—The 

15 terms ‘‘gasoline’’ and ‘‘diesel fuel’’ have the re16 spective meanings given such terms by section 

17 4083 of such Code. 

18 (C) FLOOR STOCKS TAX DATE.—The term 

19 ‘‘floor stocks tax date’’ means the day after the 

20 date determined by the Secretary under section 

21 4081(f)(3) of such Code. 

22 (D) APPLICABLE PERIOD.—The term ‘‘ap23 plicable period’’ means the period described in 

24 section 4081(f)(3) of such Code. 


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1 (E) SECRETARY.—The term ‘‘Secretary’’ 

2 means the Secretary of the Treasury or the 

3 Secretary’s delegate. 

4 (4) EXCEPTION FOR EXEMPT USES.—The tax 

5 imposed by paragraph (1) shall not apply to gaso6 line, diesel fuel, or kerosene held by any person ex7 clusively for any use to the extent a credit or refund 

8 of the tax imposed by section 4081 of such Code is 

9 allowable for such use. 

10 (5) EXCEPTION FOR FUEL HELD IN VEHICLE

11 TANK.—No tax shall be imposed by paragraph (1) 

12 on gasoline, diesel fuel, or kerosene held in the tank 

13 of a motor vehicle. 

14 (6) EXCEPTION FOR CERTAIN AMOUNTS OF

15 FUEL.— 

16 (A) IN GENERAL.—No tax shall be im17 posed by paragraph (1)— 

18 (i) on gasoline (other than aviation 

19 gasoline) held on the floor stocks tax date 

20 by any person if the aggregate amount of 

21 gasoline held by such person on such date 

22 does not exceed 4,000 gallons, and 

23 (ii) on diesel fuel or kerosene held on 

24 such date by any person if the aggregate 

25 amount of diesel fuel or kerosene held by 


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1 such person on such date does not exceed 

2 2,000 gallons. 

3 The preceding sentence shall apply only if such 

4 person submits to the Secretary (at the time 

5 and in the manner required by the Secretary) 

6 such information as the Secretary shall require 

7 for purposes of this subparagraph. 

8 (B) EXEMPT FUEL.—For purposes of sub9 paragraph (A), there shall not be taken into ac10 count fuel held by any person which is exempt 

11 from the tax imposed by paragraph (1) by rea12 son of paragraph (4) or (5). 

13 (C) CONTROLLED GROUPS.—For purposes 

14 of this paragraph— 

15 (i) CORPORATIONS.— 

16 (I) IN GENERAL.—All persons 

17 treated as a controlled group shall be 

18 treated as 1 person. 

19 (II) CONTROLLED GROUP.—The 

20 term ‘‘controlled group’’ has the 

21 meaning given to such term by sub22 section (a) of section 1563 of such 

23 Code; except that for such purposes 

24 the phrase ‘‘more than 50 percent’’ 

25 shall be substituted for the phrase ‘‘at 


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1 least 80 percent’’ each place it ap2 pears in such subsection. 

3 (ii) NONINCORPORATED PERSONS

4 UNDER COMMON CONTROL.—Under regula5 tions prescribed by the Secretary, prin6 ciples similar to the principles of clause (i) 

7 shall apply to a group of persons under 

8 common control where 1 or more of such 

9 persons is not a corporation. 

10 (7) OTHER LAW APPLICABLE.—All provisions of 

11 law, including penalties, applicable with respect to 

12 the taxes imposed by section 4081 of such Code 

13 shall, insofar as applicable and not inconsistent with 

14 the provisions of this paragraph, apply with respect 

15 to the floor stock taxes imposed by paragraph (1) to 

16 the same extent as if such taxes were imposed by 

17 such section 4081. 

18 (d) BENEFITS OF TAX REDUCTION SHOULD BE

19 PASSED ON TO CONSUMERS.— 

20 (1) PASSTHROUGH TO CONSUMERS.— 

21 (A) SENSE OF CONGRESS.—It is the sense 

22 of Congress that— 

23 (i) consumers immediately receive the 

24 benefit of the reduction in taxes under this 

25 section, and 


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1 (ii) transportation motor fuels pro2 ducers and other dealers take such actions 

3 as necessary to reduce transportation 

4 motor fuels prices to reflect such reduc5 tion, including immediate credits to cus6 tomer accounts representing tax refunds 

7 allowed as credits against excise tax de8 posit payments under the floor stocks re9 fund provisions of this section. 

10 (B) STUDY.— 

11 (i) IN GENERAL.—The Comptroller 

12 General of the United States shall conduct 

13 a study of the reduction of taxes under 

14 this section to determine whether there has 

15 been a passthrough of such reduction. 

16 (ii) REPORT.—Not later than 30 days 

17 after the date of the enactment of this Act, 

18 the Comptroller General of the United 

19 States shall report to the Committee on 

20 Finance of the Senate and the Committee 

21 on Ways and Means of the House of Rep22 resentatives the results of the study con23 ducted under clause (i). 


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1 SEC. 3. ELIMINATION OF CERTAIN PRODUCTION INCEN2 TIVES. 

3 (a) IN GENERAL.—Sections 342, 344, 345, 346, 353, 

4 and 383 and subtitle J of title IX of the Energy Policy 

5 Act of 2005 and section 107(k) of the Naval Petroleum 

6 Reserves Production Act of 1976 (as added by section 347 

7 of the Energy Policy Act of 2005) are repealed. 

8 (b) EFFECTIVE DATE.—The repeals made by sub9 section (a) shall take effect on the date of the enactment 

10 of the Energy Policy Act of 2005. 

11 SEC. 4. REVALUATION OF LIFO INVENTORIES OF LARGE IN12 TEGRATED OIL COMPANIES. 

13 (a) GENERAL RULE.—Notwithstanding any other 

14 provision of law, if a taxpayer is an applicable integrated 

15 oil company for its last taxable year ending in calendar 

16 year 2005, the taxpayer shall— 

17 (1) increase, effective as of the close of such 

18 taxable year, the value of each historic LIFO layer 

19 of inventories of crude oil, natural gas, or any other 

20 petroleum product (within the meaning of section 

21 4611) by the layer adjustment amount, and 

22 (2) decrease its cost of goods sold for such tax23 able year by the aggregate amount of the increases 

24 under paragraph (1). 

25 If the aggregate amount of the increases under paragraph 

26 (1) exceed the taxpayer’s cost of goods sold for such taxVerDate Aug 31 2005 18:27 May 07, 2006 Jkt 049200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H5285.IH H5285

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1 able year, the taxpayer’s gross income for such taxable 

2 year shall be increased by the amount of such excess. 

3 (b) LAYER ADJUSTMENT AMOUNT.—For purposes of 

4 this section— 

5 (1) IN GENERAL.—The term ‘‘layer adjustment 

6 amount’’ means, with respect to any historic LIFO 

7 layer, the product of— 

8 (A) $18.75, and 

9 (B) the number of barrels of crude oil (or 

10 in the case of natural gas or other petroleum 

11 products, the number of barrel-of-oil equiva12 lents) represented by the layer. 

13 (2) BARREL-OF-OIL EQUIVALENT.—The term 

14 ‘‘barrel-of-oil equivalent’’ has the meaning given 

15 such term by section 29(d)(5) (as in effect before its 

16 redesignation by the Energy Tax Incentives Act of 

17 2005). 

18 (c) APPLICATION OF REQUIREMENT.— 

19 (1) NO CHANGE IN METHOD OF ACCOUNTING.— 

20 Any adjustment required by this section shall not be 

21 treated as a change in method of accounting. 

22 (2) UNDERPAYMENTS OF ESTIMATED TAX.—No 

23 addition to the tax shall be made under section 6655 

24 of the Internal Revenue Code of 1986 (relating to 

25 failure by corporation to pay estimated tax) with reVerDate Aug 31 2005 18:27 May 07, 2006 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H5285.IH H5285

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1 spect to any underpayment of an installment re2 quired to be paid with respect to the taxable year 

3 described in subsection (a) to the extent such under4 payment was created or increased by this section. 

5 (d) APPLICABLE INTEGRATED OIL COMPANY.—For 

6 purposes of this section, the term ‘‘applicable integrated 

7 oil company’’ means an integrated oil company (as defined 

8 in section 291(b)(4) of the Internal Revenue Code of 

9 1986) which has an average daily worldwide production 

10 of crude oil of at least 500,000 barrels for the taxable 

11 year and which had gross receipts in excess of 

12 $1,000,000,000 for its last taxable year ending during cal13 endar year 2005. For purposes of this subsection all per14 sons treated as a single employer under subsections (a) 

15 and (b) of section 52 of the Internal Revenue Code of 

16 1986 shall be treated as 1 person and, in the case of a 

17 short taxable year, the rule under section 448(c)(3)(B) 

18 shall apply. 

19 SEC. 5. ELIMINATION OF AMORTIZATION OF GEOLOGICAL 

20 AND GEOPHYSICAL EXPENDITURES FOR 

21 MAJOR INTEGRATED OIL COMPANIES. 

22 (a) IN GENERAL.—Section 167(h) of the Internal 

23 Revenue Code of 1986 is amended by adding at the end 

24 the following new paragraph: 


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1 ‘‘(5) NONAPPLICATION TO MAJOR INTEGRATED

2 OIL COMPANIES.—This subsection shall not apply 

3 with respect to any expenses paid or incurred for 

4 any taxable year by any integrated oil company (as 

5 defined in section 291(b)(4)) which has an average 

6 daily worldwide production of crude oil of at least 

7 500,000 barrels for such taxable year.’’. 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 this section shall take effect as if included in the amend10 ment made by section 1329(a) of the Energy Policy Act 

11 of 2005. 

12 SEC. 6. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 

13 APPLICABLE TO LARGE INTEGRATED OIL 

14 COMPANIES WHICH ARE DUAL CAPACITY 

15 TAXPAYERS. 

16 (a) IN GENERAL.—Section 901 of the Internal Rev17 enue Code of 1986 (relating to credit for taxes of foreign 

18 countries and of possessions of the United States) is 

19 amended by redesignating subsection (m) as subsection 

20 (n) and by inserting after subsection (l) the following new 

21 subsection: 

22 ‘‘(m) SPECIAL RULES RELATING TO LARGE INTE23 GRATED OIL COMPANIES WHICH ARE DUAL CAPACITY

24 TAXPAYERS.— 


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1 ‘‘(1) GENERAL RULE.—Notwithstanding any 

2 other provision of this chapter, any amount paid or 

3 accrued by a dual capacity taxpayer which is a large 

4 integrated oil company to a foreign country or pos5 session of the United States for any period shall not 

6 be considered a tax— 

7 ‘‘(A) if, for such period, the foreign coun8 try or possession does not impose a generally 

9 applicable income tax, or 

10 ‘‘(B) to the extent such amount exceeds 

11 the amount (determined in accordance with reg12 ulations) which— 

13 ‘‘(i) is paid by such dual capacity tax14 payer pursuant to the generally applicable 

15 income tax imposed by the country or pos16 session, or 

17 ‘‘(ii) would be paid if the generally ap18 plicable income tax imposed by the country 

19 or possession were applicable to such dual 

20 capacity taxpayer. 

21 Nothing in this paragraph shall be construed to 

22 imply the proper treatment of any such amount 

23 not in excess of the amount determined under 

24 subparagraph (B). 


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1 ‘‘(2) DUAL CAPACITY TAXPAYER.—For pur2 poses of this subsection, the term ‘dual capacity tax3 payer’ means, with respect to any foreign country or 

4 possession of the United States, a person who— 

5 ‘‘(A) is subject to a levy of such country or 

6 possession, and 

7 ‘‘(B) receives (or will receive) directly or 

8 indirectly a specific economic benefit (as deter9 mined in accordance with regulations) from 

10 such country or possession. 

11 ‘‘(3) GENERALLY APPLICABLE INCOME TAX.— 

12 For purposes of this subsection— 

13 ‘‘(A) IN GENERAL.—The term ‘generally 

14 applicable income tax’ means an income tax (or 

15 a series of income taxes) which is generally im16 posed under the laws of a foreign country or 

17 possession on income derived from the conduct 

18 of a trade or business within such country or 

19 possession. 

20 ‘‘(B) EXCEPTIONS.—Such term shall not 

21 include a tax unless it has substantial applica22 tion, by its terms and in practice, to— 

23 ‘‘(i) persons who are not dual capacity 

24 taxpayers, and 


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1 ‘‘(ii) persons who are citizens or resi2 dents of the foreign country or possession. 

3 ‘‘(4) LARGE INTEGRATED OIL COMPANY.—For 

4 purposes of this subsection, the term ‘large inte5 grated oil company’ means, with respect to any tax6 able year, an integrated oil company (as defined in 

7 section 291(b)(4)) which— 

8 ‘‘(A) had gross receipts in excess of 

9 $1,000,000,000 for such taxable year, and 

10 ‘‘(B) has an average daily worldwide pro11 duction of crude oil of at least 500,000 barrels 

12 for such taxable year.’’ 

13 (b) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—The amendments made by 

15 this section shall apply to taxes paid or accrued in 

16 taxable years beginning after the date of the enact17 ment of this Act. 

18 (2) CONTRARY TREATY OBLIGATIONS

19 UPHELD.—The amendments made by this section 

20 shall not apply to the extent contrary to any treaty 

21 obligation of the United States. 

Æ 


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