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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1979 Introduced in Senate (IS)]

108th CONGRESS
  1st Session
                                S. 1979

 To amend the Internal Revenue Code of 1986 to prevent the fraudulent 
                        avoidance of fuel taxes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           November 25, 2003

  Mr. Grassley (for himself and Mr. Baucus) 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 prevent the fraudulent 
                        avoidance of fuel taxes.

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

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Fuel Fraud 
Prevention Act of 2003''.
    (b) Amendment of 1986 Code.--Except as otherwise provided, whenever 
in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
                       TITLE I--AVIATION JET FUEL

Sec. 101. Taxation of aviation fuel at the rack.
                          TITLE II--DYED FUEL

Sec. 201. Dye injection equipment.
Sec. 202. Elimination of administrative review for taxable use of dyed 
                            fuel. 
Sec. 203. Penalty on untaxed adulterated fuel mixtures.
      TITLE III--MODIFICATION OF INSPECTION OF RECORDS PROVISIONS

Sec. 301. Expanded disclosure of records.
Sec. 302. Authority to inspect on-site records.
Sec. 303. Assessable penalty for refusal of entry.
           TITLE IV--REGISTRATION AND REPORTING REQUIREMENTS

Sec. 401. Registration of pipeline or vessel operators required for 
                            exemption of bulk transfers to registered 
                            terminals or refineries.
Sec. 402. Display of registration.
Sec. 403. Certain reports filed electronically.
Sec. 404. Failure to register.
Sec. 405. Registration of persons within foreign trade zones.
Sec. 406. Information reporting for persons claiming certain tax 
                            benefits.
                            TITLE V--IMPORTS

Sec. 501. Tax at point of entry where importer not registered.
Sec. 502. Reconciliation of on-loaded cargo to entered cargo.
                   TITLE VI--MISCELLANEOUS PROVISIONS

Sec. 601. Tax on sale of diesel fuel whether suitable for use or not in 
                            a diesel-powered vehicle or train.
Sec. 602. Ultimate vendor refund claims.
Sec. 603. Taxable fuel refunds.
Sec. 604. Two-party exchanges.
Sec. 605. Modifications of tax on use of certain vehicles.
Sec. 606. Dedication of revenues from certain penalties to the Highway 
                            Trust Fund.

                       TITLE I--AVIATION JET FUEL

SEC. 101. TAXATION OF AVIATION FUEL AT THE RACK.

    (a) Tax on Removal, Entry, or Sale.--Section 4091(a) (related to 
tax on sale) is amended to read as follows:
    ``(a) Tax on Removal, Entry, or Sale.--
            ``(1) In general.--There is hereby imposed a tax at the 
        rate specified in subsection (b) on--
                    ``(A) the removal of aviation fuel from any 
                refinery,
                    ``(B) the removal of aviation fuel from any 
                terminal,
                    ``(C) the entry into the United States of any 
                aviation fuel for consumption, use, or warehousing,
                    ``(D) the sale of aviation fuel to any person who 
                is not registered under section 4101 unless there was a 
                prior taxable removal or entry of such fuel under 
                subparagraph (A), (B), or (C), and
                    ``(E) the sale or use of aviation fuel with respect 
                to which section 4092 applies by a commercial aviation 
                registrant.
            ``(2) Exemption for bulk transfers.--The tax imposed by 
        this subsection shall not apply to the removal or entry of 
        aviation fuel transferred in bulk by pipeline or vessel to a 
        terminal or refinery if the person removing or entering the 
        aviation fuel, the operator of such pipeline or vessel, and the 
        operator of such terminal or refinery are registered under 
        section 4101.''.
    (b) Rate of Tax.--Paragraph (1) of section 4091(b) is amended by 
striking ``shall be 21.8 cents per gallon.'' and inserting ``shall be--
                    ``(A) in the case of fuel delivered from a terminal 
                directly to the fuel tank of an aircraft for use in 
                commercial aviation or in the case of a sale or use 
                described in subsection (a)(1)(E), 4.3 cents per 
                gallon, and
                    ``(B) in any other case, 21.8 cents per gallon.''.
    (c) Nontaxable Use.--
            (1) In general.--Section 4092 is amended to read as 
        follows:

``SEC. 4092. EXEMPTIONS.

    ``(a) Nontaxable Uses.--No tax shall be imposed by section 4091 on 
aviation fuel for use by the purchaser in a nontaxable use (as defined 
in section 6427(l)(2)(B)) other than for use in commercial aviation.
    ``(b) Use of Fuel as Supplies for Vessels or Aircraft.--
Notwithstanding subsection (a), no tax shall be imposed by section 4091 
on aviation fuel for use by a commercial aviation registrant as 
supplies for vessels or aircraft (within the meaning of section 
4221(d)(3)).''.
            (2) Refunds.--Paragraph (4) of section 6427(l) is amended 
        to read as follows:
            ``(4) Certain taxes on fuel used in commercial aviation.--
                    ``(A) No refund in certain cases.--In the case of 
                fuel used in commercial aviation (as defined in section 
                4093(c)) (other than supplies for vessels or aircraft 
                within the meaning of section 4221(d)(3)), paragraph 
                (1) shall not apply to so much of the tax imposed by 
                section 4091 as is attributable to--
                            ``(i) the Leaking Underground Storage Tank 
                        Trust Fund financing rate imposed by such 
                        section, and
                            ``(ii) in the case of fuel purchased after 
                        September 30, 1995, so much of the rate of tax 
                        specified in section 4091(b)(1) as does not 
                        exceed 4.3 cents per gallon.
                    ``(B) Payment to registered vendor.--The amount 
                which would be paid under paragraph (1) after the 
application of this paragraph with respect to any fuel shall be paid to 
the vendor of such fuel, if such vendor--
                            ``(i) is registered under section 4101, and
                            ``(ii) meets the requirements of 
                        subparagraph (A), (B), or (D) of section 
                        6416(a)(1).''.
    (d) Definitions.--
            (1) Aviation fuel.--Subsection (a) of section 4093 is 
        amended to read as follows:
    ``(a) Aviation Fuel.--For purposes of this subpart, the term 
`aviation fuel' means any fuel, other than aviation-grade gasoline, 
which is destined for use in an aircraft.''.
            (2) Commercial aviation registrant.--Subsection (b) of 
        section 4093 is amended to read as follows:
    ``(b) Commercial Aviation Registrant.--
            ``(1) In general.--The term `commercial aviation 
        registrant' means any person who is--
                    ``(A) a wholesale distributor,
                    ``(B) registered under section 4101 with respect to 
                the tax imposed by section 4091, and
                    ``(C) in the business of commercial aviation.
            ``(2) Certain persons treated as commercial aviation 
        registrants.--Any person to whom aviation fuel is sold at a 
        reduced rate under this subpart shall be treated as a 
        commercial aviation registrant with respect to such fuel.
            ``(3) Wholesale distributor.--For purposes of paragraph 
        (1), the term `wholesale distributor' includes any person who 
        sells aviation fuel to commercial registrants, retailers, or to 
        users who purchase in bulk quantities and accept delivery into 
        bulk storage tanks. Such term does not include any person who 
        is a producer or importer.''.
            (3) Commercial aviation.--Section 4093 is amended by adding 
        at the end the following new subsection:
    ``(c) Commercial Aviation.--For purposes of this subpart, the term 
`commercial aviation' means any use of an aircraft other than in 
noncommercial aviation (as defined in section 4041(c)(2)).''.
    (e) Non-Aircraft Use of Aviation Fuel.--
            (1) In general.--Section 4041 (relating to tax on special 
        fuels) is amended by adding at the end the following new 
        subsection:
    ``(n) Non-Aircraft Use of Aviation Fuel.--
            ``(1) In general.--If any fuel on which a tax was imposed 
        under section 4091 is used other than for fuel in an aircraft, 
        there is hereby imposed a tax in an amount equal to the rate 
        specified in section 4081(a)(2)(A)(iii).
            ``(2) Refund of initial tax.--For refund of initial tax 
        paid, see section 6429.''.
            (2) Refunds.--
                    (A) In general.--Subchapter B of chapter 65 is 
                amended by adding at the end the following new section:

``SEC. 6429. AVIATION FUEL USED ON HIGHWAYS.

    ``(a) In General.--If any fuel on which a tax was imposed under 
section 4091 is also taxed under section 4041(n), the Secretary shall 
pay (without interest) to the ultimate purchaser of such fuel an amount 
equal to the tax imposed on the fuel under section 4091.
    ``(b) Time for Filing of Claims.--Rules similar to the rules of 
paragraphs (1) and (2) of section 6427(i) shall apply with respect to 
this section.
    ``(c) Applicable Laws.--Rules similar to the rules of section 
6427(j) shall apply with respect to this section.''.
                    (B) Conforming amendment.--The table of sections 
                for subchapter B of chapter 65 is amended by inserting 
                at the end the following new item:

                              ``Sec. 6429. Aviation fuel used on 
                                        highways.''.
    (f) Floor Stock Taxes.--
            (1) In general.--On aviation fuel subject to tax under 
        section 4091 of the Internal Revenue Code of 1986 which, on 
        January 1, 2004, is held by a producer for sale or use, with 
        respect to which no tax has been imposed under such section, 
        and with respect to which tax would have been imposed under 
        such section if such section, as amended by this Act, were 
        applied to such fuel at the time of a prior removal, entry, or 
        sale, there is hereby imposed a tax at the rate of--
                    (A) in the case of fuel held for use or sale for 
                use in commercial aviation (within the meaning of 
                section 4093(c) of the Internal Revenue Code of 1986), 
                4.4 cents a gallon, and
                    (B) in any other case, 21.9 cents a gallon..
            (2) Due date of taxes.--The taxes imposed by this 
        subsection shall be paid before February 16, 2004.
            (3) Transfer of floor stock tax revenues to trust funds.--
        For purposes of determining the amount transferred to any trust 
        fund, the tax imposed by this section shall be treated as 
        imposed by section 4091 of the Internal Revenue Code of 1986--
                    (A) at the Highway Trust Fund financing rate under 
                such section--
                            (i) in the case of fuel taxed under 
                        paragraph (1)(A), to the extent of 4.3 cents 
                        per gallon, and
                            (ii) in any other case, to the extent of 
                        21.8 cents per gallon, and
                    (B) at the Leaking Underground Storage Tank Trust 
                Fund financing rate under such section to the extent of 
                0.1 cents per gallon.
            (4) Definitions.--For purposes of this subsection--
                    (A) Producer.--
                            (i) In general.--The term `producer' 
                        includes any person described in clause (ii) 
                        and registered under section 4101 of the 
                        Internal Revenue Code of 1986 with respect to 
                        the tax imposed by section 4091 of such Code.
                            (ii) Persons described.--A person is 
                        described in this clause if such person is--
                                    (I) a refiner, blender, or 
                                wholesale distributor (as defined in 
                                section 6416(a)(4)(B) of the Internal 
                                Revenue Code of 1986) of aviation fuel, 
                                or
                                    (II) a dealer selling aviation fuel 
                                exclusively to producers of aviation 
                                fuel.
                            (iii) Reduced rate purchasers treated as 
                        producers.--Any person to whom aviation fuel is 
                        sold at a reduced rate under subpart B of part 
                        III of chapter 32 of such Code shall be treated 
                        as the producer of such fuel.
                            (iv) Wholesale distributor.--For purposes 
                        of clause (ii), the term `wholesale 
                        distributor' includes any person who sells 
                        aviation fuel to producers, retailers, or to 
                        users who purchase in bulk quantities and 
                        accept delivery into bulk storage tanks. Such 
                        term does not include any person who (excluding 
                        the term `wholesale distributor' from clause 
                        (ii)) is a producer or importer.''.
                    (B) Held by a producer.--Aviation fuel shall be 
                considered as `held by a producer' if title thereto has 
                passed to such producer (whether or not delivery to the 
                producer has been made).
                    (C) Aviation fuel.--The term aviation fuel has the 
                same meaning given such term by section 4093(a) of the 
                Internal Revenue Code of 1986.
    (g) Conforming Amendments.--
            (1) Section 4041(c)(1) is amended by striking ``if there 
        was a taxable sale of such liquid'' and inserting ``if tax was 
        imposed on such liquid''.
            (2) Section 4041(d) is amended by striking ``if there was a 
        taxable sale of such liquid'' and inserting ``if tax was 
        imposed on such liquid''.
            (3) Section 4082(d)(1) is amended by striking ``determines 
        is destined for use as a fuel in an aircraft'' and inserting 
        ``determines is subject to the provisions of section 4091''.
            (4) Section 4091(c) is amended--
                    (A) by striking ``The rate'' in paragraph (1), and 
                inserting ``Except in the case of aviation fuel to 
                which subsection (b)(1)(A) applies, the rate'',
                    (B) by striking ``sale'' each place it appears in 
                paragraphs (1), (2), and (5) and inserting ``removal or 
                entry'', and
                    (C) by striking ``producer'' in paragraph (3) and 
                inserting ``refiner''.
            (5) Section 4091 is amended by striking subsection (d).
            (6) Section 6416(a)(4)(B) is amended to read as follows:
                    ``(B) Wholesale distributor.--For purposes of 
                subparagraph (A), the term `wholesale distributor' 
                includes any person who sells any gasoline taxable 
                under section 4081 to producers, retailers, or to users 
                who purchase in bulk quantities and accept delivery 
                into bulk storage tanks. Such term does not include any 
                person who is a producer or importer. Such term 
                includes any person who makes retail sales of gasoline 
                at 10 or more retail motor fuel outlets.''.
            (7) Section 6724(d)(1)(B) is amended by striking clause 
        (xv) and by redesignating clauses (xvi) through (xviii) as 
        clauses (xv) through (xvii), respectively.
            (8)(A) Section 6724(d)(2) is amended by striking clause (W) 
        and by redesignating clauses (X) through (BB) as clauses (W) 
        through (AA), respectively.
          (B) Section 6652(e) is amended by striking ``section 
        6724(d)(2)(Y)'' and inserting ``section 6724(d)(2)(X)''.
          (C) Section 6693 (a)(2) is amended by striking ``section 
        6724(d)(2)(X)'' and inserting ``section 6724(d)(2)(W)''.
    (h) Effective Date.--The amendments made by this section shall 
apply to aviation fuel removed, entered into the United States, or sold 
after December 31, 2003.

                          TITLE II--DYED FUEL

SEC. 201. DYE INJECTION EQUIPMENT.

    (a) In General.--Section 4082(a)(2) (relating to exemptions for 
diesel fuel and kerosene) is amended by inserting ``by mechanical 
injection'' after ``indelibly dyed''.
    (b) Dye Injector Security.--Not later than 1 year after the date of 
the enactment of this Act, the Secretary of the Treasury shall issue 
regulations regarding mechanical dye injection systems described in the 
amendment made by subsection (a), and such regulations shall include 
standards for making such systems tamper resistant.
    (c) Penalty for Tampering With or Failing To Maintain Security 
Requirements for Mechanical Dye Injection Systems.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by adding after 
        section 6715 the following new section:

``SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN SECURITY 
              REQUIREMENTS FOR MECHANICAL DYE INJECTION SYSTEMS.

    ``(a) Imposition of Penalty--
            ``(1) Tampering.--If any person tampers with a mechanical 
        dye injection system used to indelibly dye fuel for purposes of 
        section 4082, such person shall pay a penalty.
            ``(2) Failure to maintain security requirements.--If any 
        operator of a mechanical dye injection system used to indelibly 
        dye fuel which is destined for a nontaxable use under section 
        4082 fails to maintain the security standards for such system 
        as established by the Secretary, then such operator shall pay a 
        penalty.
    ``(b) Amount of Penalty.--The amount of the penalty under 
subsection (a) shall be--
            ``(1) for each violation described in paragraph (1), the 
        greater of--
                    ``(A) $25,000, or
                    ``(B) $10 for each gallon of fuel involved, and
            ``(2) for each--
                    ``(A) failure to maintain security standards 
                described in paragraph (2), $1,000, and
                    ``(B) failure to correct a violation described in 
                paragraph (2), $1,000 per day.
    ``(c) Joint and Several Liability.--
            ``(1) In general.--If a penalty is imposed under this 
        section on any business entity, each officer, employee, or 
        agent of such entity or other contracting party who willfully 
        participated in any act giving rise to such penalty shall be 
        jointly and severally liable with such entity for such penalty.
            ``(2) Affiliated groups.--If a business entity described in 
        paragraph (1) is part of an affiliated group (as defined in 
        section 1504(a)), the parent corporation of such entity shall 
        be jointly and severally liable with such entity for the 
        penalty imposed under this section.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68 is amended by adding after the 
        item related to section 6715 the following new item:

                              ``Sec. 6715A. Tampering with or failing 
                                        to maintain security 
                                        requirements for mechanical dye 
                                        injection systems.''.
    (d) Effective Date.--The amendments made by subsections (a) and (c) 
shall take effect 1 year after the date on which the Secretary issues 
the regulations described in subsection (b).

SEC. 202. ELIMINATION OF ADMINISTRATIVE REVIEW FOR TAXABLE USE OF DYED 
              FUEL.

    (a) In General.--Section 6715 is amended by inserting at the end 
the following new subsection:
    ``(e) No Administrative Appeal for Third and Subsequent 
Violations.--In the case of any person who is subject to the penalty 
under this section after a chemical analysis of such fuel and who has 
been penalized under this section at least twice after the date of the 
enactment of this subsection, no administrative appeal or review shall 
be allowed with respect to such finding except in the case of a claim 
regarding--
            ``(1) fraud or mistake in the chemical analysis, or
            ``(2) mathematical calculation of the amount of the 
        penalty.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to penalties assessed after the date of the enactment of this Act.

SEC. 203. PENALTY ON UNTAXED ADULTERATED FUEL MIXTURES.

    (a) In General.--Section 6715(a) (relating to dyed fuel sold for 
use or used in taxable use, etc.) is amended by striking ``or'' in 
paragraph (2), by inserting ``or'' at the end of paragraph (3), and by 
inserting after paragraph (3) the following new paragraph:
            ``(4) any person who has knowledge that a dyed fuel which 
        has not been previously taxed or has only been partially taxed 
        has been chemically altered in an attempt to remove the dye 
        sells or holds for sale such fuel for any use which the person 
        knows or has reason to know is not a nontaxable use of such 
        fuel,''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

      TITLE III--MODIFICATION OF INSPECTION OF RECORDS PROVISIONS

SEC. 301. EXPANDED DISCLOSURE OF RECORDS.

    (a) Inspection by Other Enforcement Agencies.--Section 4102 is 
amended by striking ``by such officers'' and all that follows and 
inserting ``by--
            ``(1) such officers of a State, or a political subdivision 
        of any such State, as shall be charged with the enforcement or 
        collection of any tax on any taxable fuel (as defined in 
        section 4083), and
            ``(2) such officers and employees of the Department of 
        Transportation of the Federal Government and of the State 
        equivalent of such department as shall be charged with such 
        enforcement or collection.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 302. AUTHORITY TO INSPECT ON-SITE RECORDS.

    (a) In General.--Section 4083(c)(1)(A) (relating to administrative 
authority) is amended by striking ``and'' at the end of clause (i) and 
by inserting after clause (ii) the following new clause:
                            ``(iii) inspecting any books and records 
                        and any shipping papers pertaining to such 
                        fuel, and''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 303. ASSESSABLE PENALTY FOR REFUSAL OF ENTRY.

    (a) In General.--Part I of subchapter B of chapter 68 (relating to 
assessable penalties) is amended by adding at the end the following new 
section:

``SEC. 6717. REFUSAL OF ENTRY.

    ``(a) In General.--In addition to any criminal penalty provided by 
law, any person who refuses to admit entry or refuses to permit any 
other action by the Secretary authorized by section 4083(c)(1) shall 
pay a penalty of $1,000 for such refusal.
    ``(b) Joint and Several Liability.--
            ``(1) In general.--If a penalty is imposed under this 
        section on any business entity, each officer, employee, or 
        agent of such entity or other contracting party who willfully 
        participated in any act giving rise to such penalty shall be 
        jointly and severally liable with such entity for such penalty.
            ``(2) Affiliated groups.--If a business entity described in 
        paragraph (1) is part of an affiliated group (as defined in 
section 1504(a)), the parent corporation of such entity shall be 
jointly and severally liable with such entity for the penalty imposed 
under this section.
    ``(c) Reasonable Cause Exception.--No penalty shall be imposed 
under this section with respect to any failure if it is shown that such 
failure is due to reasonable cause.''.
    (b) Conforming Amendments.--
            (1) Section 4083(c)(3) is amended--
                    (A) by striking ``entry.--The penalty'' and 
                inserting: ``entry.--
                    ``(A) Forfeiture.--The penalty'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) Assessable penalty.--For additional civil 
                penalty for the refusal to admit entry or other refusal 
                to permit an action by the Secretary authorized by 
                paragraph (1), see section 6717.''.
            (2) The table of sections for part I of subchapter B of 
        chapter 68, as amended by this Act, is amended by adding at the 
        end the following new item:

                              ``Sec. 6717. Refusal of entry.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2004.

           TITLE IV--REGISTRATION AND REPORTING REQUIREMENTS

SEC. 401. REGISTRATION OF PIPELINE OR VESSEL OPERATORS REQUIRED FOR 
              EXEMPTION OF BULK TRANSFERS TO REGISTERED TERMINALS OR 
              REFINERIES.

    (a) In General.--Section 4081(a)(1)(B) (relating to exemption for 
bulk transfers to registered terminals or refineries) is amended--
            (1) by inserting ``by pipeline or vessel'' after 
        ``transferred in bulk'', and
            (2) by inserting ``, the operator of such pipeline or 
        vessel,'' after ``the taxable fuel''.
    (b) Civil Penalty for Carrying Taxable Fuels by Nonregistered 
Pipelines or Vessels.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties), as amended by this Act, is 
        amended by adding at the end the following new section:

``SEC. 6718. CARRYING TAXABLE FUELS BY NONREGISTERED PIPELINES OR 
              VESSELS.

    ``(a) Imposition of Penalty.--If any taxable fuel (as defined in 
section 4083(a)(1)) is transferred in bulk by a person registered under 
section 4101, any person who knowingly transfers such fuel to an 
unregistered person shall pay a penalty in addition to the tax (if 
any).
    ``(b) Amount of Penalty.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amount of the penalty under subsection (a) on each act shall be 
        an amount equal to the greater of--
                    ``(A) $10,000, or
                    ``(B) $1 per gallon.
            ``(2) Multiple violations.--In determining the penalty 
        under subsection (a) on any person, paragraph (1) shall be 
        applied by increasing the amount in paragraph (1) by the 
        product of such amount and the number of prior penalties (if 
        any) imposed by this section on such person (or a related 
        person or any predecessor of such person or related person).
    ``(c) Joint and Several Liability.--
            ``(1) In general.--If a penalty is imposed under this 
        section on any business entity, each officer, employee, or 
        agent of such entity or other contracting party who willfully 
        participated in any act giving rise to such penalty shall be 
        jointly and severally liable with such entity for such penalty.
            ``(2) Affiliated groups.--If a business entity described in 
        paragraph (1) is part of an affiliated group (as defined in 
        section 1504(a)), the parent corporation of such entity shall 
        be jointly and severally liable with such entity for the 
        penalty imposed under this section.
    ``(d) Reasonable Cause Exception.--No penalty shall be imposed 
under this section with respect to any failure if it is shown that such 
failure is due to reasonable cause.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68, as amended by this Act, is 
        amended by adding at the end the following new item:

                              ``Sec. 6718. Carrying taxable fuels by 
                                        nonregistered pipelines or 
                                        vessels.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2004.

SEC. 402. DISPLAY OF REGISTRATION.

    (a) In General.--Subsection (a) of section 4101 (relating to 
registration) is amended--
            (1) by striking ``Every'' and inserting the following:
            ``(1) In general.--Every'', and
            (2) by adding at the end the following new paragraph:
            ``(2) Display of registration.--Every operator of a vessel 
        required by the Secretary to register under this section shall 
        display proof of registration through an electronic 
        identification device prescribed by the Secretary on each 
        vessel used by such operator to transport any taxable fuel.''.
    (b) Civil Penalty for Failure To Display Registration.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by adding at the 
        end the following new section:

``SEC. 6719. FAILURE TO DISPLAY REGISTRATION OF VESSELS.

    ``(a) Failure To Display Registration.--Every operator of a vessel 
who fails to display proof of registration pursuant to section 
4101(a)(2) shall pay a penalty of $500 for each such failure. With 
respect to any vessel, only one penalty shall be imposed by this 
section during any calendar month.
    ``(b) Multiple Violations.--In determining the penalty under 
subsection (a) on any person, subsection (a) shall be applied by 
increasing the amount in subsection (a) by the product of such amount 
and the number of prior penalties (if any) imposed by this section on 
such person (or a related person or any predecessor of such person or 
related person).''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68, as amended by this Act, is 
        amended by adding at the end the following new item:

                              ``Sec. 6719. Failure to display 
                                        registration of vessels.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2004.

SEC. 403. CERTAIN REPORTS FILED ELECTRONICALLY.

    (a) In General.--Subpart D of part II of subchapter A of chapter 61 
(relating to information and returns) is amended by adding the 
following new section:

``SEC. 6022. REPORTS REQUIRED TO BE FILED ELECTRONICALLY.

    ``Any person required to file a report under section 4101 shall 
file such report in electronic format.''.
    (b) Format for Filing.--The Secretary of the Treasury shall 
prescribe regulations describing the format for electronic filing of 
reports under section 6022 of the Internal Revenue Code of 1986 (as 
added by subsection (a)), including a simplified procedure for small 
terminal operators, not later than 30 days after the date of the 
enactment of this Act.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part II of subchapter A of chapter 61 is amended by adding at the end 
the following item:

                              ``Sec. 6022. Reports required to be filed 
                                        electronically.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to reports due 30 days after the day the Secretary of the 
Treasury issues the regulations described under subsection (b).

SEC. 404. FAILURE TO REGISTER.

    (a) Increased Penalty.--Subsection (a) of section 7272 (relating to 
penalty for failure to register) is amended by inserting ``($10,000 in 
the case of a failure to register under section 4101)'' after ``$50''.
    (b) Increased Criminal Penalty.--Section 7232 (relating to failure 
to register under section 4101, false representations of registration 
status, etc.) is amended by striking ``$5,000'' and inserting 
``$10,000''.
    (c) Assessable Penalty for Failure To Register.--
            (1) In general.--Part I of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by adding at the 
        end the following new section:

``SEC. 6720. FAILURE TO REGISTER.

    ``(a) Failure To Register.--Every person who is required to 
register under section 4101 and fails to do so shall pay a penalty in 
addition to the tax (if any).
    ``(b) Amount of Penalty.--The amount of the penalty under 
subsection (a) shall be--
                    ``(A) $10,000 for each initial failure to register 
                after the date of the enactment of this section, and
                    ``(B) $1,000 for each day such person fails to 
                register.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68, as amended by this Act, is 
        amended by adding at the end the following new item:

                              ``Sec. 6720. Failure to register.''.
    (d) Assessable Penalty for Failure To Report.--
            (1) In general.--Part II of subchapter B of chapter 68 
        (relating to assessable penalties) is amended by adding at the 
        end the following new section:

``SEC. 6725. FAILURE TO REPORT INFORMATION UNDER SECTION 4101.

    ``Every person who is required to make a report and furnish 
information with respect to a terminal, vessel, or pipeline under 
section 4101(d) and fails to do so shall pay a penalty of $10,000 with 
respect to each such terminal, vessel, or pipeline for which 
information is required to be furnished in addition to the tax (if 
any).''.
            (2) Clerical amendment.--The table of sections for part II 
        of subchapter B of chapter 68, as amended by this Act, is 
        amended by adding at the end the following new item:

                              ``Sec. 6725. Failure to report 
                                        information related to the 
                                        transfer of taxable fuels.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to penalties imposed after the date of the enactment of this Act.

SEC. 405. REGISTRATION OF PERSONS WITHIN FOREIGN TRADE ZONES.

    Section 4101(a), as amended by this Act, is amended by 
redesignating paragraph (2) as paragraph (3), and by inserting after 
paragraph (1) the following new paragraph:
            ``(2) Registration of persons within foreign trade zones.--
        The Secretary shall require registration by any person which 
        operates a terminal or refinery within a foreign trade zone the 
        registration of which the Secretary determines is necessary to 
        carry out this part.''.

SEC. 406. INFORMATION REPORTING FOR PERSONS CLAIMING CERTAIN TAX 
              BENEFITS.

    (a) In General.--Subpart C of part III of subchapter A of chapter 
32 is amended by adding at the end the following new section:

``SEC. 4104. INFORMATION REPORTING FOR PERSONS CLAIMING CERTAIN TAX 
              BENEFITS.

    ``(a) In General.--The Secretary shall require any person claiming 
tax benefits under the provisions of section 34, 40, 4041(b)(2), 
4041(k), 4081(c), 4091(c), or 6427(f) to file a quarterly return (in 
such manner as the Secretary may prescribe) providing such information 
relating to such benefits and the coordination of such benefits as the 
Secretary may require to ensure the proper administration and use of 
such benefits.
    ``(b) Enforcement.--With respect to any person described in 
subsection (a) and subject to registration requirements under this 
title, rules similar to rules of section 4222(c) shall apply with 
respect to any requirement under this section.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part III of subchapter A of chapter 32 is amended by adding at the end 
the following new item:

        ``Sec. 4104. Information reporting for persons claiming certain 
                            tax benefits.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                            TITLE V--IMPORTS

SEC. 501. TAX AT POINT OF ENTRY WHERE IMPORTER NOT REGISTERED.

    (a) Tax at Point of Entry Where Importer Not Registered.--
            (1) In general.--Subpart C of part III of subchapter A of 
        chapter 31, as amended by this Act, is amended by adding at the 
        end the following new section:

``SEC. 4105. TAX AT ENTRY WHERE IMPORTER NOT REGISTERED.

    ``(a) In General.--Any tax imposed under this part on any person 
not registered under section 4101 for the entry of a fuel into the 
United States shall be imposed at the time and point of entry.
    ``(b) Enforcement of Assessment.--If any person liable for any tax 
described under subsection (a) has not paid the tax or posted a bond, 
the Secretary may--
            ``(1) seize the fuel on which the tax is due, or
            ``(2) detain any vehicle transporting such fuel,
until such tax is paid or such bond is filed.
    ``(c) Levy of Fuel.--If no tax has been paid or no bond has been 
filed within 5 days from the date the Secretary seized fuel pursuant to 
subsection (b), the Secretary may sell such fuel as provided under 
section 6336.''.
            (2) Conforming amendment.--The table of sections for 
        subpart C of part III of subchapter A of chapter 31 of the 
        Internal Revenue Code of 1986, as amended by this Act, is 
        amended by adding after the last item the following new item:

                              ``Sec. 4105. Tax at entry where importer 
                                        not registered.''.
    (b) Authorization To Deny Entry Where Tax Not Paid.--The Secretary 
of Homeland Security shall deny entry into the United States of any 
shipment of a fuel which is taxable under section 4041(a)(1), 4081, or 
4091 of the Internal Revenue Code of 1986 if the person entering such 
shipment fails to pay the tax imposed under such section or post a bond 
in accordance with the provisions of section 4105 of such Code.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 502. RECONCILIATION OF ON-LOADED CARGO TO ENTERED CARGO.

    (a) In General.--Subsection (a) of section 343 of the Trade Act of 
2002 is amended by inserting at the end the following new paragraph:
            ``(4) In general.--Subject to paragraphs (2) and (3), not 
        later than 1 year after the enactment of this paragraph, the 
        Secretary of Homeland Security, together with the Secretary of 
        the Treasury, shall promulgate regulations providing for the 
        transmission to the Internal Revenue Service, through an 
        electronic data interchange system, of information pertaining 
        to cargo of taxable fuels destined for importation into the 
        United States prior to such importation.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

                   TITLE VI--MISCELLANEOUS PROVISIONS

SEC. 601. TAX ON SALE OF DIESEL FUEL WHETHER SUITABLE FOR USE OR NOT IN 
              A DIESEL-POWERED VEHICLE OR TRAIN.

    (a) In General.--Section 4083(a)(3) (defining diesel fuel) is 
amended by inserting ``sold as, offered for sale as, or'' after 
``(other than gasoline) which is''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 602. ULTIMATE VENDOR REFUND CLAIMS

    (a) In General.--Clause (i) of section 6427(l)(5)(A) is amended by 
inserting ``in quantities of less than 500 gallons'' after ``section 
6420(c))''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels used for nontaxable use after the date of the enactment of 
this Act.

SEC. 603. TAXABLE FUEL REFUNDS.

    (a) In General.--Paragraph (4) of section 6416(a) (relating to 
abatements, credits, and refunds) is amended to read as follows:
            ``(4) Registered ultimate vendor to administer credits and 
        refunds of gasoline tax.--For purposes of this subsection, if 
        an ultimate vendor (within the meaning of section 
        6427(l)(5)(C)) purchases any gasoline on which tax imposed by 
        section 4081 has been paid and sells such gasoline to an 
        ultimate purchaser described in subparagraph (C) or (D) of 
        subsection (b)(2) (and such gasoline is for a use described in 
        such subparagraph), such ultimate vendor shall be treated as 
        the person (and the only person) who paid such tax. The 
        procedure and timing of the claim shall be the same as refunds 
        of diesel fuel under section 6427(i)(4).''.
    (b) Timing of Refund.--Subparagraph (B) of section 6427(i)(3) 
(relating to time for filing claims) is amended by--
            (1) striking ``20 days'' and inserting ``45 days'', and
            (2) inserting at the end the following sentence: ``If the 
        claim filed under this subsection is filed by electronic means, 
        the preceding sentence shall apply by substituting `20 days' 
        for `45 days'.''.
    (c) Fleet Fuel Credit Cards.--Section 6427(l)(5)(C) (relating to 
nontaxable uses of diesel fuel, kerosene, and aviation fuel) is amended 
by adding at the end the following new sentence: ``For purposes of this 
subparagraph, if the sale of taxable fuel is made by means of a fleet 
fueling credit card, the person extending the credit to the ultimate 
purchaser shall be deemed to be the ultimate vendor.''.
    (d) Rules for Electronic Claims.--Not later than 6 months after the 
date of the enactment of this Act, the Secretary of the Treasury shall 
prescribe regulations for filing electronic claims under this section.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 604. TWO-PARTY EXCHANGES.

    (a) In General.--Subpart C of part III of subchapter A of chapter 
32, as amended by this Act, is amended by adding at the end the 
following new section:

``SEC. 4106. TWO-PARTY EXCHANGES.

    ``(a) In General.--In a two-party exchange, the delivering person 
shall not be liable for the tax imposed under clause (i) or (ii) of 
section 4081(a)(1)(A).
    ``(b) Two-Party Exchange.--The term `two-party exchange' means a 
transaction, other than a sale, in which taxable fuel is transferred 
from a delivering person registered under section 4101 for exempt bulk 
transfers of taxable fuel to a receiving person registered under 
section 4101 for exempt bulk transfers of taxable fuel where all of the 
following occur:
            ``(1) The transaction includes a transfer from the 
        delivering person, who holds the original inventory position 
        for taxable fuel in the terminal as reflected in the records of 
        the terminal operator.
            ``(2) The exchange transaction occurs before or 
        contemporaneous with completion of removal across the rack from 
        the terminal by the receiving person.
            ``(3) The terminal operator in its books and records treats 
        the receiving person as the person that removes the product 
        across the terminal rack for purposes of reporting the 
        transaction to the Secretary.
            ``(4) The transaction is the subject of a written 
        contract.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part III of subchapter A of chapter 32, as amended by this Act, is 
amended by adding after the last item the following new item:

                              ``Sec. 4106. Two-party exchanges.''.
    (c) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 605. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.

    (a) No Proration of Tax Unless Vehicle Is Destroyed or Stolen.--
            (1) In general.--Section 4481(c) (relating to proration of 
        tax) is amended to read as follows:
    ``(c) Proration of Tax Where Vehicle Sold, Destroyed, or Stolen.--
            ``(1) In general.--If in any taxable period a highway motor 
        vehicle is sold, destroyed, or stolen before the first day of 
        the last month in such period and not subsequently used during 
        such taxable period, the tax shall be reckoned proportionately 
        from the first day of the month in such period in which the 
        first use of such highway motor vehicle occurs to and including 
        the last day of the month in which such highway motor vehicle 
        was sold, destroyed, or stolen.
            ``(2) Destroyed.--For purposes of paragraph (1), a highway 
        motor vehicle is destroyed if such vehicle is damaged by reason 
        of an accident or other casualty to such an extent that it is 
        not economic to rebuild.''.
            (2) Display of tax certificate.--Paragraph (2) of section 
        4481(d) (relating to one tax liability for period) is amended 
        to read as follows:
            ``(2) Display of tax certificate.--Every person, agency, or 
        instrumentality which pays the tax imposed under this section 
        with respect to a highway motor vehicle shall, not later than 
        October 1 with respect to each taxable period, receive and 
        display on such vehicle an electronic identification device 
        prescribed by the Secretary.''.
            (3) Conforming amendments.--
                    (A) Section 6156 (relating to installment payment 
                of tax on use of highway motor vehicles) is repealed.
                    (B) The table of sections for subchapter A of 
                chapter 62 is amended by striking the item relating to 
                section 6156.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable periods beginning after the date of the enactment of 
this Act.

SEC. 606. DEDICATION OF REVENUES FROM CERTAIN PENALTIES TO THE HIGHWAY 
              TRUST FUND.

    (a) In General.--Subsection (b) of section 9503 (relating to 
transfer to Highway Trust Fund of amounts equivalent to certain taxes) 
is amended by redesignating paragraph (5) as paragraph (6) and 
inserting after paragraph (4) the following new paragraph:
            ``(5) Certain penalties.--There are hereby appropriated to 
        the Highway Trust Fund amounts equivalent to the penalties 
        assessed under sections 6715, 6715A, 6717, 6718, 6719, 6720, 
        6725, 7232, and 7272 (but only with regard to penalties under 
        such section related to failure to register under section 
        4101).''.
    (b) Conforming Amendments.--
            (1) The heading of subsection (b) of section 9503 is 
        amended by inserting ``and Penalties'' after ``Taxes''.
            (2) The heading of paragraph (1) of section 9503(b) is 
        amended by striking ``In general'' and inserting ``Certain 
        taxes''.
    (c) Effective Date.--The amendments made by this section shall 
apply to penalties assessed after the date of the enactment of this 
Act.
                                 <all>
```