II 

110TH CONGRESS 

2D SESSION S. 3684 

To amend the Internal Revenue Code of 1986 to allow an above-the-line 

deduction against individual income tax for interest on indebtedness 

and for State sales and excise taxes with respect to the purchase of 

certain motor vehicles. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 17 (legislative day, SEPTEMBER 17), 2008 

Ms. MIKULSKI (for herself, Mr. BOND, Mr. LEVIN, and Ms. STABENOW) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to allow an 

above-the-line deduction against individual income tax 

for interest on indebtedness and for State sales and 

excise taxes with respect to the purchase of certain motor 

vehicles. 

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

3 SECTION 1. ABOVE-THE-LINE DEDUCTION FOR INTEREST 

4 ON INDEBTEDNESS WITH RESPECT TO THE 

5 PURCHASE OF CERTAIN MOTOR VEHICLES. 

6 (a) IN GENERAL.—Paragraph (2) of section 163(h) 

7 of the Internal Revenue Code of 1986 is amended— 


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1 (1) by striking ‘‘and’’ at the end of subpara2 graph (E), 

3 (2) by striking the period at the end of sub4 paragraph (F) and inserting ‘‘, and’’, and 

5 (3) by adding at the end the following new sub6 paragraph: 

7 ‘‘(G) any qualified motor vehicle interest 

8 (within the meaning of paragraph (5).’’. 

9 (b) QUALIFIED MOTOR VEHICLE INTEREST.—Sec10 tion 163(h) of the Internal Revenue Code of 1986 is 

11 amended by adding at the end the following new para12 graph: 

13 ‘‘(5) QUALIFIED MOTOR VEHICLE INTEREST.— 

14 For purposes of this subsection— 

15 ‘‘(A) IN GENERAL.—The term ‘qualified 

16 motor vehicle interest’ means any interest which 

17 is paid or accrued during the taxable year on 

18 any indebtedness which— 

19 ‘‘(i) is incurred after November 12, 

20 2008, and before January 1, 2010, in ac21 quiring any qualified motor vehicle of the 

22 taxpayer, and 

23 ‘‘(ii) is secured by such qualified 

24 motor vehicle. 


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1 Such term also includes any indebtedness se2 cured by such qualified motor vehicle resulting 

3 from the refinancing of indebtedness meeting 

4 the requirements of the preceding sentence (or 

5 this sentence); but only to the extent the 

6 amount of the indebtedness resulting from such 

7 refinancing does not exceed the amount of the 

8 refinanced indebtedness. 

9 ‘‘(B) DOLLAR LIMITATION.—The aggre10 gate amount of indebtedness treated as de11 scribed in subparagraph (A) for any period 

12 shall not exceed $49,500 ($24,750 in the case 

13 of a separate return by a married individual). 

14 ‘‘(C) INCOME LIMITATION.—The amount 

15 otherwise treated as interest under subpara16 graph (A) for any taxable year (after the appli17 cation of subparagraph (B)) shall be reduced 

18 (but not below zero) by the amount which bears 

19 the same ratio to the amount which is so treat20 ed as— 

21 ‘‘(i) the excess (if any) of— 

22 ‘‘(I) the taxpayer’s modified ad23 justed gross income for such taxable 

24 year, over 


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1 ‘‘(II) $125,000 ($250,000 in the 

2 case of a joint return), bears to 

3 ‘‘(ii) $10,000. 

4 For purposes of the preceding sentence, the 

5 term ‘modified adjusted gross income’ means 

6 the adjusted gross income of the taxpayer for 

7 the taxable year increased by any amount ex8 cluded from gross income under section 911, 

9 931, or 933. 

10 ‘‘(D) QUALIFIED MOTOR VEHICLE.—The 

11 term ‘qualified motor vehicle’ means a pas12 senger automobile (within the meaning of sec13 tion 30B(h)(3)) or a light truck (within the 

14 meaning of such section)— 

15 ‘‘(i) which is acquired for use by the 

16 taxpayer and not for resale after November 

17 12, 2008, and before January 1, 2010, 

18 ‘‘(ii) the original use of which com19 mences with the taxpayer, and 

20 ‘‘(iii) which has a gross vehicle weight 

21 rating of not more than 8,500 pounds.’’. 

22 (c) DEDUCTION ALLOWED ABOVE-THE-LINE.—Sec23 tion 62(a) of the Internal Revenue Code of 1986 is amend24 ed by inserting after paragraph (21) the following new 

25 paragraph: 


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1 ‘‘(22) QUALIFIED MOTOR VEHICLE INTER2 EST.—The deduction allowed under section 163 by 

3 reason of subsection (h)(2)(G) thereof.’’. 

4 (d) REPORTING OF QUALIFIED MOTOR VEHICLE IN5 TEREST.— 

6 (1) IN GENERAL.—Subpart B of part III of 

7 subchapter A of chapter 61 of the Internal Revenue 

8 Code of 1986 is amended by adding at the end the 

9 following new section: 

10 ‘‘SEC. 6050X. RETURNS RELATING TO QUALIFIED MOTOR 

11 VEHICLE INTEREST RECEIVED IN TRADE OR 

12 BUSINESS FROM INDIVIDUALS. 

13 ‘‘(a) QUALIFIED MOTOR VEHICLE INTEREST.—Any 

14 person— 

15 ‘‘(1) who is engaged in a trade or business, and 

16 ‘‘(2) who, in the course of such trade or busi17 ness, receives from any individual interest aggre18 gating $600 or more for any calendar year on any 

19 indebtedness secured by a qualified motor vehicle (as 

20 defined in section 163(h)(5)(D)), 

21 shall make the return described in subsection (b) with re22 spect to each individual from whom such interest was re23 ceived at such time as the Secretary may by regulations 

24 prescribe. 


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1 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

2 is described in this subsection if such return— 

3 ‘‘(1) is in such form as the Secretary may pre4 scribe, 

5 ‘‘(2) contains— 

6 ‘‘(A) the name and address of the indi7 vidual from whom the interest described in sub8 section (a)(2) was received, 

9 ‘‘(B) the amount of such interest received 

10 for the calendar year, and 

11 ‘‘(C) such other information as the Sec12 retary may prescribe. 

13 ‘‘(c) APPLICATION TO GOVERNMENTAL UNITS.—For 

14 purposes of subsection (a)— 

15 ‘‘(1) TREATED AS PERSONS.—The term ‘per16 son’ includes any governmental unit (and any agency 

17 or instrumentality thereof). 

18 ‘‘(2) SPECIAL RULES.—In the case of a govern19 mental unit or any agency or instrumentality there20 of— 

21 ‘‘(A) subsection (a) shall be applied with22 out regard to the trade or business requirement 

23 contained therein, and 

24 ‘‘(B) any return required under subsection 

25 (a) shall be made by the officer or employee apVerDate Aug 31 2005 00:03 Nov 18, 2008 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3684.IS S3684

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1 propriately designated for the purpose of mak2 ing such return. 

3 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID4 UALS WITH RESPECT TO WHOM INFORMATION IS RE5 QUIRED.—Every person required to make a return under 

6 subsection (a) shall furnish to each individual whose name 

7 is required to be set forth in such return a written state8 ment showing— 

9 ‘‘(1) the name, address, and phone number of 

10 the information contact of the person required to 

11 make such return, and 

12 ‘‘(2) the aggregate amount of interest described 

13 in subsection (a)(2) received by the person required 

14 to make such return from the individual to whom 

15 the statement is required to be furnished. 

16 The written statement required under the preceding sen17 tence shall be furnished on or before January 31 of the 

18 year following the calendar year for which the return 

19 under subsection (a) was required to be made. 

20 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

21 MADE BY 2 OR MORE PERSONS.—Except to the extent 

22 provided in regulations prescribed by the Secretary, in the 

23 case of interest received by any person on behalf of an24 other person, only the person first receiving such interest 


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1 shall be required to make the return under subsection 

2 (a).’’. 

3 (2) AMENDMENTS RELATING TO PENALTIES.— 

4 (A) Section 6721(e)(2)(A) of such Code is 

5 amended by striking ‘‘or 6050L’’ and inserting 

6 ‘‘6050L, or 6050X’’. 

7 (B) Section 6722(c)(1)(A) of such Code is 

8 amended by striking ‘‘or 6050L(c)’’ and insert9 ing ‘‘6050L(c), or 6050X(d)’’. 

10 (C) Subparagraph (B) of section 

11 6724(d)(1) of such Code is amended by redesig12 nating clauses (xvi) through (xxii) as clauses 

13 (xvii) through (xxiii), respectively, and by in14 serting after clause (xii) the following new 

15 clause: 

16 ‘‘(xvi) section 6050X (relating to re17 turns relating to qualified motor vehicle in18 terest received in trade or business from 

19 individuals),’’. 

20 (D) Paragraph (2) of section 6724(d) of 

21 such Code is amended by striking the period at 

22 the end of subparagraph (DD) and inserting ‘‘, 

23 or’’ and by inserting after subparagraph (DD) 

24 the following new subparagraph: 


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1 ‘‘(EE) section 6050X(d) (relating to re2 turns relating to qualified motor vehicle interest 

3 received in trade or business from individ4 uals).’’. 

5 (3) CLERICAL AMENDMENT.—The table of sec6 tions for subpart B of part III of subchapter A of 

7 chapter 61 of such Code is amended by inserting 

8 after the item relating to section 6050W the fol9 lowing new item: 

‘‘Sec. 6050X. Returns relating to qualified motor vehicle interest received in 

trade or business from individuals.’’. 

10 SEC. 2. ABOVE-THE-LINE DEDUCTION FOR STATE SALES 

11 TAX AND EXCISE TAX ON THE PURCHASE OF 

12 CERTAIN MOTOR VEHICLES. 

13 (a) IN GENERAL.—Subsection (a) of section 164 of 

14 the Internal Revenue Code of 1986 is amended by insert15 ing after paragraph (5) the following new paragraph: 

16 ‘‘(6) Qualified motor vehicle taxes.’’. 

17 (b) QUALIFIED MOTOR VEHICLE TAXES.—Sub18 section (b) of section 164 of the Internal Revenue Code 

19 of 1986 is amended by adding at the end the following 

20 new paragraph: 

21 ‘‘(6) QUALIFIED MOTOR VEHICLE TAXES.— 

22 ‘‘(A) IN GENERAL.—For purposes of this 

23 section, the term ‘qualified motor vehicle taxes’ 

24 means any State or local sales or excise tax imVerDate Aug 31 2005 00:03 Nov 18, 2008 Jkt 079200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3684.IS S3684

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1 posed on the purchase of a qualified motor vehi2 cle (as defined in section 163(h)(5)(D)). 

3 ‘‘(B) INCOME LIMITATION.—The amount 

4 otherwise taken into account under subpara5 graph (A) for any taxable year shall be reduced 

6 (but not below zero) by the amount which bears 

7 the same ratio to the amount which is so treat8 ed as— 

9 ‘‘(i) the excess (if any) of— 

10 ‘‘(I) the taxpayer’s modified ad11 justed gross income for such taxable 

12 year, over 

13 ‘‘(II) $125,000 ($250,000 in the 

14 case of a joint return), bears to 

15 ‘‘(ii) $10,000. 

16 For purposes of the preceding sentence, the 

17 term ‘modified adjusted gross income’ means 

18 the adjusted gross income of the taxpayer for 

19 the taxable year increased by any amount ex20 cluded from gross income under section 911, 

21 931, or 933. 

22 ‘‘(C) QUALIFIED MOTOR VEHICLE TAXES

23 NOT INCLUDED IN COST OF ACQUIRED PROP24 ERTY.—The last sentence of subsection (a) 


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1 shall not apply to any qualified motor vehicle 

2 taxes. 

3 ‘‘(D) COORDINATION WITH GENERAL

4 SALES TAX.—This paragraph shall not apply in 

5 the case of a taxpayer who makes an election 

6 under paragraph (5) for the taxable year.’’. 

7 (c) CONFORMING AMENDMENTS.—Paragraph (5) of 

8 section 163(h) of the Internal Revenue Code of 1986, as 

9 added by section 1, is amended— 

10 (1) by adding at the end the following new sub11 paragraph: 

12 ‘‘(E) EXCLUSION.—If the indebtedness de13 scribed in subparagraph (A) includes the 

14 amounts of any State or local sales or excise 

15 taxes paid or accrued by the taxpayer in con16 nection with the acquisition of a qualified motor 

17 vehicle, the aggregate amount of such indebted18 ness taken into account under such subpara19 graph shall be reduced, but not below zero, by 

20 the amount of any such taxes for which a de21 duction is allowed under section 164(a) by rea22 son of paragraph (6) thereof.’’, and 

23 (2) by inserting ‘‘, after the application of sub24 paragraph (E),’’ after ‘‘for any period’’ in subpara25 graph (B). 


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1 (d) DEDUCTION ALLOWED ABOVE-THE-LINE.—Sec2 tion 62(a) of the Internal Revenue Code of 1986, as 

3 amended by section 1, is amended by inserting after para4 graph (22) the following new paragraph: 

5 ‘‘(23) QUALIFIED MOTOR VEHICLE TAXES.— 

6 The deduction allowed under section 164 by reason 

7 of subsection (a)(6) thereof.’’. 

Æ 


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