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[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3971 Introduced in House (IH)]

108th CONGRESS
  2d Session
                                H. R. 3971

To amend the Internal Revenue Code of 1986 to credit the Highway Trust 
 Fund with the full amount of fuel taxes, to combat fuel tax evasion, 
                        and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 16, 2004

  Mr. Thomas 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 credit the Highway Trust 
 Fund with the full amount of fuel taxes, to combat fuel tax evasion, 
                        and for other purposes.

    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 ``Highway 
Reauthorization Tax Act of 2004''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
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 of this Act is as 
follows:

Sec. 1. Short title, etc.
      TITLE I--RESTRUCTURING OF INCENTIVES FOR ALCOHOL FUELS, ETC.

Sec. 101. Reduced rates of tax on gasohol replaced with excise tax 
                            credit; repeal of other alcohol-based fuel 
                            incentives; etc.
Sec. 102. Alcohol fuel subsidies borne by general fund.
                TITLE II--REDUCTION OF FUEL TAX EVASION

Sec. 201. Exemption from certain excise taxes for mobile machinery.
Sec. 202. Taxation of aviation-grade kerosene.
Sec. 203. Dye injection equipment.
Sec. 204. Authority to inspect on-site records.
Sec. 205. Registration of pipeline or vessel operators required for 
                            exemption of bulk transfers to registered 
                            terminals or refineries.
Sec. 206. Display of registration.
Sec. 207. Penalties for failure to register and failure to report.
Sec. 208. Collection from Customs bond where importer not registered.
Sec. 209. Modifications of tax on use of certain vehicles.
Sec. 210. Modification of ultimate vendor refund claims with respect to 
                            farming.
Sec. 211. Dedication of revenues from certain penalties to the Highway 
                            Trust Fund.
                 TITLE III--OTHER EXCISE TAX PROVISIONS

Sec. 301. Taxable fuel refunds for certain ultimate vendors.
Sec. 302. Two-party exchanges.
Sec. 303. Simplification of tax on tires.

      TITLE I--RESTRUCTURING OF INCENTIVES FOR ALCOHOL FUELS, ETC.

SEC. 101. REDUCED RATES OF TAX ON GASOHOL REPLACED WITH EXCISE TAX 
              CREDIT; REPEAL OF OTHER ALCOHOL-BASED FUEL INCENTIVES; 
              ETC.

    (a) Excise Tax Credit for Alcohol Fuel Mixtures.--
            (1) In general.--Subsection (f) of section 6427 is amended 
        to read as follows:
    ``(f) Alcohol Fuel Mixtures.--
            ``(1) In general.--The amount of credit which would (but 
        for section 40(c)) be determined under section 40(a)(1) for any 
        period--
                    ``(A) shall, with respect to taxable events 
                occurring during such period, be treated--
                            ``(i) as a payment of the taxpayer's 
                        liability for tax imposed by section 4081, and
                            ``(ii) as received at the time of the 
                        taxable event, and
                    ``(B) to the extent such amount of credit exceeds 
                such liability for such period, shall (except as 
                provided in subsection (k)) be paid subject to 
                subsection (i)(3) by the Secretary without interest.
            ``(2) Special rules.--
                    ``(A) Only certain alcohol taken into account.--For 
                purposes of paragraph (1), section 40 shall be 
                applied--
                            ``(i) by not taking into account alcohol 
                        with a proof of less than 190, and
                            ``(ii) by treating as alcohol the alcohol 
                        gallon equivalent of ethyl tertiary butyl ether 
                        or other ethers produced from such alcohol.
                    ``(B) Treatment of refiners.--For purposes of 
                paragraph (1), in the case of a mixture--
                            ``(i) the alcohol in which is described in 
                        subparagraph (A)(ii), and
                            ``(ii) which is produced by any person at a 
                        refinery prior to any taxable event,
                section 40 shall be applied by treating such person as 
                having sold such mixture at the time of its removal 
                from the refinery (and only at such time) to another 
                person for use as a fuel.
            ``(3) Mixtures not used as fuel.--Rules similar to the 
        rules of subparagraphs (A) and (D) of section 40(d)(3) shall 
apply for purposes of this subsection.
            ``(4) Termination.--This section shall apply only to 
        periods to which section 40 applies, determined by substituting 
        in section 40(e)--
                    ``(A) `September 30, 2007' for `December 31, 2007', 
                and
                    ``(B) `October 1, 2007' for `January 1, 2008'.''.
            (2) Revision of rules for payment of credit.--Paragraph (3) 
        of section 6427(i) is amended to read as follows:
            ``(3) Special rule for alcohol mixture credit.--
                    ``(A) In general.--A claim may be filed under 
                subsection (f)(1)(B) by any person for any period--
                            ``(i) for which $200 or more is payable 
                        under such subsection (f)(1)(B), and
                            ``(ii) which is not less than 1 week.
                In the case of an electronic claim, this subparagraph 
                shall be applied without regard to clause (i).
                    ``(B) Payment of claim.--Notwithstanding subsection 
                (f)(1)(B), if the Secretary has not paid pursuant to a 
                claim filed under this section within 45 days of the 
                date of the filing of such claim (20 days in the case 
                of an electronic claim), the claim shall be paid with 
                interest from such date determined by using the 
                overpayment rate and method under section 6621.
                    ``(C) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed on or 
                before the last day of the first quarter following the 
                earliest quarter included in the claim.''.
    (b) Repeal of Other Incentives for Fuel Mixtures.--
            (1) Subsection (b) of section 4041 is amended to read as 
        follows:
    ``(b) Exemption for Off-Highway Business Use.--
            ``(1) In general.--No tax shall be imposed by subsection 
        (a) or (d)(1) on liquids sold for use or used in an off-highway 
        business use.
            ``(2) Tax where other use.--If a liquid on which no tax was 
        imposed by reason of paragraph (1) is used otherwise than in an 
        off-highway business use, a tax shall be imposed by paragraph 
        (1)(B), (2)(B), or (3)(A)(ii) of subsection (a) (whichever is 
        appropriate) and by the corresponding provision of subsection 
        (d)(1) (if any).
            ``(3) Off-highway business use defined.--For purposes of 
        this subsection, the term `off-highway business use' has the 
        meaning given to such term by section 6421(e)(2); except that 
        such term shall not, for purposes of subsection (a)(1), include 
        use in a diesel-powered train.''.
            (2) Section 4041(k) is hereby repealed.
            (3) Section 4081(c) is hereby repealed.
            (4) Section 4091(c) is hereby repealed.
    (c) Transfers to Highway Trust Fund.--Paragraph (4) of section 
9503(b) is amended by adding ``or'' at the end of subparagraph (B), by 
striking the comma at the end of subparagraph (C) and inserting a 
period, and by striking subparagraphs (D), (E), and (F).
    (d) Conforming Amendments.--
            (1) Subsection (c) of section 40 is amended to read as 
        follows:
    ``(c) Coordination With Excise Tax Benefits.--The amount of the 
credit determined under this section with respect to any alcohol shall, 
under regulations prescribed by the Secretary, be properly reduced to 
take into account the benefit provided with respect to such alcohol 
under section 6427(f).''.
            (2) Subparagraph (B) of section 40(d)(4) is amended by 
        striking ``under section 4041(k) or 4081(c)'' and inserting 
        ``under section 6427(f)''.
    (e) Effective Dates.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to fuel sold or 
        used after September 30, 2004.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall apply to taxes imposed after September 30, 2003.

SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL FUND.

    (a) Transfers to Fund.--Section 9503(b)(1) is amended by adding at 
the end the following new flush sentence:
        ``For purposes of this paragraph, the amount of taxes received 
        under section 4081 shall include any amount treated as a 
        payment under section 6427(f)(1)(A) and shall not be reduced by 
        the amount paid under section 6427(f)(1)(B).''.
    (b) Transfers From Fund.--Subparagraph (A) of section 9503(c)(2) is 
amended by adding at the end the following new sentence: ``Clauses 
(i)(III) and (ii) shall not apply to claims under section 
6427(f)(1)(B).''
    (c) Effective Date.--
            (1) Subsection (a).--The amendment made by subsection (a) 
        shall apply to taxes received after September 30, 2004.
            (2) Subsection (b).--The amendment made by subsection (b) 
        shall apply to amounts paid after September 30, 2004, and (to 
        the extent related to section 34 of the Internal Revenue Code 
        of 1986) to fuel used after such date.

                TITLE II--REDUCTION OF FUEL TAX EVASION

SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR MOBILE MACHINERY.

    (a) Exemption From Tax on Heavy Trucks and Trailers Sold at 
Retail.--
            (1) In general.--Section 4053 (relating to exemptions) is 
        amended by adding at the end the following new paragraph:
            ``(8) Mobile machinery.--Any vehicle which consists of a 
        chassis--
                    ``(A) to which there has been permanently mounted 
                (by welding, bolting, riveting, or other means) 
                machinery or equipment to perform a construction, 
manufacturing, processing, farming, mining, drilling, timbering, or 
similar operation if the operation of the machinery or equipment is 
unrelated to transportation on or off the public highways,
                    ``(B) which has been specially designed to serve 
                only as a mobile carriage and mount (and a power 
                source, where applicable) for the particular machinery 
                or equipment involved, whether or not such machinery or 
                equipment is in operation, and
                    ``(C) which, by reason of such special design, 
                could not, without substantial structural modification, 
                be used as a component of a vehicle designed to perform 
                a function of transporting any load other than that 
                particular machinery or equipment or similar machinery 
                or equipment requiring such a specially designed 
                chassis.''.
            (2) Effective date.--The amendment made by this subsection 
        shall take effect on the day after the date of the enactment of 
        this Act.
    (b) Exemption From Tax on Use of Certain Vehicles.--
            (1) In general.--Section 4483 (relating to exemptions) is 
        amended by redesignating subsection (g) as subsection (h) and 
        by inserting after subsection (f) the following new subsection:
    ``(g) Exemption for Mobile Machinery.--No tax shall be imposed by 
section 4481 on the use of any vehicle described in section 4053(8).''.
            (2) Effective date.--The amendments made by this subsection 
        shall take effect on the day after the date of the enactment of 
        this Act.
    (c) Refund of Fuel Taxes.--
            (1) In general.--Section 6421(e)(2) (defining off-highway 
        business use) is amended by adding at the end the following new 
        subparagraph:
                    ``(C) Uses in mobile machinery.--
                            ``(i) In general.--The term `off-highway 
                        business use' shall include any use in a 
                        vehicle which meets the requirements described 
                        in clause (ii).
                            ``(ii) Requirements for mobile machinery.--
                        The requirements described in this clause are--
                                    ``(I) the design-based test, and
                                    ``(II) the use-based test.
                            ``(iii) Design-based test.--For purposes of 
                        clause (ii)(I), the design-based test is met if 
                        the vehicle consists of a chassis--
                                    ``(I) to which there has been 
                                permanently mounted (by welding, 
                                bolting, riveting, or other means) 
                                machinery or equipment to perform a 
                                construction, manufacturing, 
                                processing, farming, mining, drilling, 
                                timbering, or similar operation if the 
                                operation of the machinery or equipment 
                                is unrelated to transportation on or 
                                off the public highways,
                                    ``(II) which has been specially 
                                designed to serve only as a mobile 
                                carriage and mount (and a power source, 
                                where applicable) for the particular 
                                machinery or equipment involved, 
                                whether or not such machinery or 
                                equipment is in operation, and
                                    ``(III) which, by reason of such 
                                special design, could not, without 
                                substantial structural modification, be 
                                used as a component of a vehicle 
                                designed to perform a function of 
                                transporting any load other than that 
                                particular machinery or equipment or 
                                similar machinery or equipment 
                                requiring such a specially designed 
                                chassis.
                            ``(iv) Use-based test.--For purposes of 
                        clause (ii)(II), the use-based test is met if 
                        the use of the vehicle on public highways was 
                        less than 5,000 miles during the taxpayer's 
                        taxable year.''.
            (2) No tax-free sales.--Subsection (b) of section 4082, as 
        amended by section 202, is amended by inserting before the 
        period at the end ``and such term shall not include any use 
        described in section 6421(e)(2)(C).''
            (3) Annual refund of tax paid.--Section 6427(i)(2) 
        (relating to exceptions) is amended by adding at the end the 
        following new subparagraph:
                    ``(C) Nonapplication of paragraph.--This paragraph 
                shall not apply to any fuel used solely in any off-
                highway business use described in section 
                6421(e)(2)(C).''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.

SEC. 202. TAXATION OF AVIATION-GRADE KEROSENE.

    (a) Rate of Tax.--
            (1) In general.--Subparagraph (A) of section 4081(a)(2) is 
        amended by striking ``and'' at the end of clause (ii), by 
        striking the period at the end of clause (iii) and inserting 
        ``, and'', and by adding at the end the following new clause:
                            ``(iv) in the case of aviation-grade 
                        kerosene, 21.8 cents per gallon.''.
            (2) Commercial aviation.--Paragraph (2) of section 4081(a) 
        is amended by adding at the end the following new subparagraph:
                    ``(C) Taxes imposed on fuel used in commercial 
                aviation.--In the case of aviation-grade kerosene which 
                is removed from any refinery or terminal directly into 
                the fuel tank of an aircraft for use in commercial 
                aviation, the rate of tax under subparagraph (A)(iv) 
                shall be 4.3 cents per gallon.''.
            (3) Certain refueler trucks, tankers, and tank wagons 
        treated as terminal.--Subsection (a) of section 4081 is amended 
        by adding at the end the following new paragraph:
            ``(3) Certain refueler trucks, tankers, and tank wagons 
        treated as terminal.--
                    ``(A) In general.--A refueler truck, tanker, or 
                tank wagon shall be treated as part of the terminal 
                referred to in paragraph (2)(C) if--
                            ``(i) such truck, tanker, or wagon meets 
                        the requirements of subparagraph (B) with 
                        respect to an airport, and
                            ``(ii) no vehicle registered for highway 
                        use is loaded with aviation-grade kerosene at 
                        such terminal.
                    ``(B) Requirements.--A refueler truck, tanker, or 
                tank wagon meets the requirements of this subparagraph 
                with respect to an airport if such truck, tanker, or 
                wagon--
                            ``(i) is loaded with aviation-grade 
                        kerosene at such terminal located within such 
                        airport and delivers such kerosene only into 
                        aircraft at such airport for use in commercial 
                        aviation,
                            ``(ii) has storage tanks, hose, and 
                        coupling equipment designed and used for the 
                        purposes of fueling aircraft,
                            ``(iii) is not registered for highway use, 
                        and
                            ``(iv) is operated by--
                                    ``(I) the terminal operator of such 
                                terminal, or
                                    ``(II) a person that makes a daily 
                                accounting to such terminal operator of 
                                each delivery of fuel from such truck, 
                                tanker, or wagon.
                    ``(C) Reporting.--The Secretary shall require under 
                section 4101(d) reporting by such terminal operator 
                of--
                            ``(i) any information obtained under 
                        subparagraph (B)(iv)(II), and
                            ``(ii) any similar information maintained 
                        by such terminal operator with respect to 
                        deliveries of fuel made by trucks, tankers, or 
                        wagons operated by such terminal operator.''.
            (4) Liability for tax on aviation-grade kerosene used in 
        commercial aviation.--Subsection (a) of section 4081 is amended 
        by adding at the end the following new paragraph:
            ``(4) Liability for tax.--For purposes of paragraph (2)(C), 
        the person who uses the fuel for commercial aviation shall pay 
        the tax imposed under such paragraph. For purposes of the 
        preceding sentence, fuel shall be treated as used when such 
        fuel is removed into the fuel tank.''.
            (5) Nontaxable uses.--
                    (A) In general.--Section 4082 is amended by 
                redesignating subsections (e) and (f) as subsections 
                (f) and (g), respectively, and by inserting after 
                subsection (d) the following new subsection:
    ``(e) Aviation-Grade Kerosene.--In the case of aviation-grade 
kerosene which is exempt from the tax imposed by section 4041(c) (other 
than by reason of a prior imposition of tax) and which is removed from 
any refinery or terminal directly into the fuel tank of an aircraft, 
the rate of tax under section 4081(a)(2)(A)(iv) shall be zero. For 
purposes of the preceding sentence, rules similar to the rules of 
section 4081(a)(3) shall apply.''.
                    (B) Conforming amendments.--
                            (i) Subsection (b) of section 4082 is 
                        amended by adding at the end the following new 
                        flush sentence:
``The term `nontaxable use' does not include the use of aviation-grade 
kerosene in an aircraft.''.
                            (ii) Section 4082(d) is amended by striking 
                        paragraph (1) and by redesignating paragraphs 
                        (2) and (3) as paragraphs (1) and (2), 
                        respectively.
            (6) Nonaircraft use of aviation-grade kerosene.--
                    (A) In general.--Subparagraph (B) of section 
                4041(a)(1) is amended by adding at the end the 
                following new sentence: ``This subparagraph shall not 
                apply to aviation-grade kerosene.''.
                    (B) Conforming amendment.--The heading for 
                paragraph (1) of section 4041(a) is amended by 
                inserting ``and kerosene'' after ``diesel fuel''.
    (b) Commercial Aviation.--Section 4083 is amended by redesignating 
subsections (b) and (c) as subsections (c) and (d), respectively, and 
by inserting after subsection (a) the following new subsection:
    ``(b) Commercial Aviation.--For purposes of this subpart, the term 
`commercial aviation' means any use of an aircraft in a business of 
transporting persons or property for compensation or hire by air, 
unless properly allocable to any transportation exempt from the taxes 
imposed by sections 4261 and 4271 by reason of section 4281 or 4282 or 
by reason of section 4261(h).''.
    (c) Refunds.--
            (1) In general.--Paragraph (4) of section 6427(l) is 
        amended to read as follows:
            ``(4) Refunds for aviation-grade kerosene.--
                    ``(A) No refund of certain taxes on fuel used in 
                commercial aviation.--In the case of aviation-grade 
                kerosene used in commercial aviation (as defined in 
                section 4083(b)) (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 4081 as is attributable to--
                            ``(i) the Leaking Underground Storage Tank 
                        Trust Fund financing rate imposed by such 
                        section, and
                            ``(ii) so much of the rate of tax specified 
                        in section 4081(a)(2)(A)(iv) as does not exceed 
                        4.3 cents per gallon.
                    ``(B) Payment to ultimate, registered vendor.--With 
                respect to aviation-grade kerosene, if the ultimate 
                purchaser of such kerosene waives (at such time and in 
                such form and manner as the Secretary shall prescribe) 
                the right to payment under paragraph (1) and assigns 
                such right to the ultimate vendor, then the Secretary 
                shall pay the amount which would be paid under 
                paragraph (1) to such ultimate vendor, but only if such 
                ultimate vendor--
                            ``(i) is registered under section 4101, and
                            ``(ii) meets the requirements of 
                        subparagraph (A), (B), or (D) of section 
                        6416(a)(1).''.
            (2) Time for filing claims.--Paragraph (4) of section 
        6427(i) is amended by striking ``subsection (l)(5)'' and 
        inserting ``paragraph (4)(B) or (5) of subsection (l)''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        6427(l)(2) is amended to read as follows:
                    ``(B) in the case of aviation-grade kerosene--
                            ``(i) any use which is exempt from the tax 
                        imposed by section 4041(c) other than by reason 
                        of a prior imposition of tax, or
                            ``(ii) any use in commercial aviation 
                        (within the meaning of section 4083(b)).''.
    (d) Repeal of Prior Taxation of Aviation Fuel.--
            (1) In general.--Part III of subchapter A of chapter 32 is 
        amended by striking subpart B and by redesignating subpart C as 
        subpart B.
            (2) Conforming amendments.--
                    (A) Section 4041(c) is amended to read as follows:
    ``(c) Aviation-Grade Kerosene.--
            ``(1) In general.--There is hereby imposed a tax upon 
        aviation-grade kerosene--
                    ``(A) sold by any person to an owner, lessee, or 
                other operator of an aircraft for use in such aircraft, 
                or
                    ``(B) used by any person in an aircraft unless 
                there was a taxable sale of such fuel under 
                subparagraph (A).
            ``(2) Exemption for previously taxed fuel.--No tax shall be 
        imposed by this subsection on the sale or use of any aviation-
        grade kerosene if tax was imposed on such liquid under section 
        4081 and the tax thereon was not credited or refunded.
            ``(3) Rate of tax.--The rate of tax imposed by this 
        subsection shall be the rate of tax specified in section 
        4081(a)(2)(A)(iv) which is in effect at the time of such sale 
        or use.''.
                    (B) Section 4041(d)(2) is amended by striking 
                ``section 4091'' and inserting ``section 4081''.
                    (C) Section 4041 is amended by striking subsection 
                (e).
                    (D) Section 4041 is amended by striking subsection 
                (i).
                    (E) Sections 4101(a), 4103, 4221(a), and 6206 are 
                each amended by striking ``, 4081, or 4091'' and 
                inserting ``or 4081''.
                    (F) Section 6416(b)(2) is amended by striking 
                ``4091 or''.
                    (G) Section 6416(b)(3) is amended by striking ``or 
                4091'' each place it appears.
                    (H) Section 6416(d) is amended by striking ``or to 
                the tax imposed by section 4091 in the case of refunds 
                described in section 4091(d)''.
                    (I) Section 6427(j)(1) is amended by striking ``, 
                4081, and 4091'' and inserting ``and 4081''.
                    (J)(i) Section 6427(l)(1) is amended to read as 
                follows:
            ``(1) In general.--Except as otherwise provided in this 
        subsection and in subsection (k), if any diesel fuel or 
        kerosene on which tax has been imposed by section 4041 or 4081 
        is used by any person in a nontaxable use, the Secretary shall 
        pay (without interest) to the ultimate purchaser of such fuel 
        an amount equal to the aggregate amount of tax imposed on such 
        fuel under section 4041 or 4081, as the case may be, reduced by 
        any payment made to the ultimate vendor under paragraph 
        (4)(B).''.
                    (ii) Paragraph (5)(B) of section 6427(l) is amended 
                by striking ``Paragraph (1)(A) shall not apply to 
                kerosene'' and inserting ``Paragraph (1) shall not 
                apply to kerosene (other than aviation-grade 
                kerosene)''.
                    (K) Subparagraph (B) of section 6724(d)(1) is 
                amended by striking clause (xv) and by redesignating 
                the succeeding clauses accordingly.
                    (L) Paragraph (2) of section 6724(d) is amended by 
                striking subparagraph (W) and by redesignating the 
                succeeding subparagraphs accordingly.
                    (M) Paragraph (1) of section 9502(b) is amended by 
                adding ``and'' at the end of subparagraph (B) and by 
                striking subparagraphs (C) and (D) and inserting the 
                following new subparagraph:
                    ``(C) section 4081 with respect to aviation 
                gasoline and aviation-grade kerosene, and''.
                    (N) The last sentence of section 9502(b) is amended 
                to read as follows:
``There shall not be taken into account under paragraph (1) so much of 
the taxes imposed by section 4081 as are determined at the rate 
specified in section 4081(a)(2)(B).''.
                    (O) Subsection (b) of section 9508 is amended by 
                striking paragraph (3) and by redesignating paragraphs 
                (4) and (5) as paragraphs (3) and (4), respectively.
                    (P) Section 9508(c)(2)(A) is amended by striking 
                ``sections 4081 and 4091'' and inserting ``section 
                4081''.
                    (Q) The table of subparts for part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

                              ``Subpart A. Motor and aviation fuels.
                              ``Subpart B. Special provisions 
                                        applicable to fuels tax.''.
                    (R) The heading for subpart A of part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

                ``Subpart A--Motor and Aviation Fuels''.

                    (S) The heading for subpart B of part III of 
                subchapter A of chapter 32 is amended to read as 
                follows:

       ``Subpart B--Special Provisions Applicable to Fuels Tax''.

    (e) Effective Date.--The amendments made by this section shall 
apply to aviation-grade kerosene removed, entered, or sold after 
September 30, 2004.
    (f) Floor Stocks Tax.--
            (1) In general.--There is hereby imposed on aviation-grade 
        kerosene held on October 1, 2004, by any person a tax equal 
        to--
                    (A) the tax which would have been imposed before 
                such date on such kerosene had the amendments made by 
                this section been in effect at all times before such 
                date, reduced by
                    (B) the tax imposed before such date under section 
                4091 of the Internal Revenue Code of 1986, as in effect 
                on the day before the date of the enactment of this 
                Act.
            (2) Liability for tax and method of payment.--
                    (A) Liability for tax.--The person holding the 
                kerosene on October 1, 2004, to which the tax imposed 
                by paragraph (1) applies shall be liable for such tax.
                    (B) Method and time for payment.--The tax imposed 
                by paragraph (1) shall be paid at such time and in such 
                manner as the Secretary of the Treasury (or the 
                Secretary's delegate) shall prescribe, including the 
                nonapplication of such tax on de minimis amounts of 
                kerosene.
            (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 subsection shall be treated as 
        imposed by section 4081 of the Internal Revenue Code of 1986--
                    (A) at the Leaking Underground Storage Tank Trust 
                Fund financing rate under such section to the extent of 
                0.1 cents per gallon, and
                    (B) at the rate under section 4081(a)(2)(A)(iv) to 
                the extent of the remainder.
            (4) Held by a person.--For purposes of this section, 
        kerosene shall be considered as held by a person if title 
        thereto has passed to such person (whether or not delivery to 
        the person has been made).
            (5) Other laws applicable.--All provisions of law, 
        including penalties, applicable with respect to the tax imposed 
        by section 4081 of such Code shall, insofar as applicable and 
        not inconsistent with the provisions of this subsection, apply 
        with respect to the floor stock tax imposed by paragraph (1) to 
        the same extent as if such tax were imposed by such section.

SEC. 203. 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 180 days 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 in addition to 
        the tax (if any).
            ``(2) Failure to maintain security requirements.--If any 
        operator of a mechanical dye injection system used to indelibly 
        dye fuel for purposes of section 4082 fails to maintain the 
        security standards for such system as established by the 
        Secretary, then such operator 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--
            ``(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 for each day after which 
                such violation was discovered or such person should 
                have reasonably known of such violation.
    ``(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 on the 180th day after the date on which the 
Secretary issues the regulations described in subsection (b).

SEC. 204. AUTHORITY TO INSPECT ON-SITE RECORDS.

    (a) In General.--Section 4083(d)(1)(A) (relating to administrative 
authority), as previously amended by this Act, 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. 205. 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) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2004.
    (c) Publication of Registered Persons.--Beginning on July 1, 2004, 
the Secretary of the Treasury (or the Secretary's delegate) shall 
periodically publish a current list of persons registered under section 
4101 of the Internal Revenue Code of 1986 who are required to register 
under such section.

SEC. 206. 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 inserting 
        after section 6716 the following new section:

``SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON 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 aggregate number of penalties (if any) imposed with respect to 
prior months by this section on such person (or a related person or any 
predecessor of such person or related person).
    ``(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.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68 is amended by inserting after the 
        item relating to section 6716 the following new item:

                              ``Sec. 6717. Failure to display tax 
                                        registration on vessels.''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall take effect on October 1, 2004.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to penalties imposed after September 30, 2004.

SEC. 207. PENALTIES FOR FAILURE TO REGISTER AND FAILURE TO REPORT.

    (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 
failureto 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 inserting 
        after section 6717 the following new section:

``SEC. 6718. 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--
            ``(1) $10,000 for each initial failure to register, and
            ``(2) $1,000 for each day thereafter such person fails to 
        register.
    ``(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.''.
            (2) Clerical amendment.--The table of sections for part I 
        of subchapter B of chapter 68 is amended by inserting after the 
        item relating to section 6717 the following new item:

                              ``Sec. 6718. 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.

    ``(a) In General.--In the case of each failure described in 
subsection (b) by any person with respect to a vessel or facility, such 
person shall pay a penalty of $10,000 in addition to the tax (if any).
    ``(b) Failures Subject to Penalty.--For purposes of subsection (a), 
the failures described in this subsection are--
            ``(1) any failure to make a report under section 4101(d) on 
        or before the date prescribed therefor, and
            ``(2) any failure to include all of the information 
        required to be shown on such report or the inclusion of 
        incorrect information.
    ``(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.''.
            (2) Clerical amendment.--The table of sections for part II 
        of subchapter B of chapter 68 is amended by adding at the end 
        the following new item:

                              ``Sec. 6725. Failure to report 
                                        information under section 
                                        4101.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to penalties imposed after September 30, 2004.

SEC. 208. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT REGISTERED.

    (a) Tax at Point of Entry Where Importer Not Registered.--Subpart C 
of part III of subchapter A of chapter 31 is amended by adding after 
section 4103 the following new section:

``SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IMPORTER NOT 
              REGISTERED.

    ``(a) In General.--The importer of record shall be jointly and 
severally liable for the tax imposed by section 4081(a)(1)(A)(iii) if, 
under regulations prescribed by the Secretary, any other person that is 
not a person who is registered under section 4101 is liable for such 
tax.
    ``(b) Collection From Customs Bond.--If any tax for which any 
importer of record is liable under subsection (a), or for which any 
importer of record that is not a person registered under section 4101 
is otherwise liable, is not paid on or before the last date prescribed 
for payment, the Secretary may collect such tax from the Customs bond 
posted with respect to the importation of the taxable fuel to which the 
tax relates. For purposes of determining the jurisdiction of any court 
of the United States or any agency of the United States, any action by 
the Secretary described in the preceding sentence shall be treated as 
an action to collect the tax from a bond described in section 
4101(b)(1) and not as an action to collect from a bond relating to the 
importation of merchandise.''.
    (b) Conforming Amendment.--The table of sections for subpart C of 
part III of subchapter A of chapter 31 is amended by adding after the 
item related to section 4103 the following new item:

                              ``Sec. 4104. Collection from Customs bond 
                                        where importer not 
                                        registered.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to fuel entered after September 30, 2004.

SEC. 209. MODIFICATIONS OF TAX ON USE OF CERTAIN VEHICLES.

    (a) Proration of Tax Where Vehicle Sold.--
            (1) In general.--Paragraph (2) of section 4481(c) (relating 
        to where vehicle destroyed or stolen) is amended by striking 
        ``destroyed or stolen'' both places it appears and inserting 
        ``sold, destroyed, or stolen''.
            (2) Conforming amendment.--The heading for section 
        4481(c)(2) is amended by striking ``destroyed or stolen'' and 
        inserting ``sold, destroyed, or stolen''.
    (b) Repeal of Installment Payment.--
            (1) Section 6156 (relating to installment payment of tax on 
        use of highway motor vehicles) is repealed.
            (2) The table of sections for subchapter A of chapter 62 is 
        amended by striking the item relating to section 6156.
    (c) Electronic Filing.--Section 4481 is amended by redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following new subsection:
    ``(e) Electronic Filing.--Any taxpayer who files a return under 
this section with respect to 25 or more vehicles for any taxable period 
shall file such return electronically.''.
    (d) Repeal of Reduction in Tax for Certain Trucks.--Section 4483 is 
amended by striking subsection (f).
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable periods beginning after the date of the enactment of 
this Act.

SEC. 210. MODIFICATION OF ULTIMATE VENDOR REFUND CLAIMS WITH RESPECT TO 
              FARMING.

    (a) In General.--
            (1) Refunds.--Section 6427(l) is amended by adding at the 
        end the following new paragraph:
            ``(6) Registered vendors permitted to administer certain 
        claims for refund of diesel fuel and kerosene sold to 
        farmers.--
                    ``(A) In general.--In the case of diesel fuel or 
                kerosene used on a farm for farming purposes (within 
                the meaning of section 6420(c)), paragraph (1) shall 
                not apply to the aggregate amount of such diesel fuel 
                or kerosene if such amount does not exceed 250 gallons 
                (as determined under subsection (i)(5)(A)(iii)).
                    ``(B) Payment to ultimate vendor.--The amount which 
                would (but for subparagraph (A)) have been paid under 
                paragraph (1) with respect to any fuel shall be paid to 
                the ultimate 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).''.
            (2) Filing of claims.--Section 6427(i) is amended by 
        inserting at the end the following new paragraph:
            ``(5) Special rule for vendor refunds with respect to 
        farmers.--
                    ``(A) In general.--A claim may be filed under 
                subsection (l)(6) by any person with respect to fuel 
                sold by such person for any period--
                            ``(i) for which $200 or more ($100 or more 
                        in the case of kerosene) is payable under 
                        subsection (l)(6),
                            ``(ii) which is not less than 1 week, and
                            ``(iii) which is for not more than 250 
                        gallons for each farmer for which there is a 
                        claim.
                Notwithstanding subsection (l)(1), paragraph (3)(B) 
                shall apply to claims filed under the preceding 
                sentence.
                    ``(B) Time for filing claim.--No claim filed under 
                this paragraph shall be allowed unless filed on or 
                before the last day of the first quarter following the 
                earliest quarter included in the claim.''.
            (3) Conforming amendments.--
                    (A) Section 6427(l)(5)(A) is amended to read as 
                follows:
                    ``(A) In general.--Paragraph (1) shall not apply to 
                diesel fuel or kerosene used by a State or local 
                government.''.
                    (B) The heading for section 6427(l)(5) is amended 
                by striking ``farmers and''.
    (b) Effective Date.--The amendment made by this section shall apply 
to fuels sold for nontaxable use after the date of the enactment of 
this Act.

SEC. 211. 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 paid 
        under sections 6715, 6715A, 6717, 6718, 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 October 1, 2004.

                 TITLE III--OTHER EXCISE TAX PROVISIONS

SEC. 301. TAXABLE FUEL REFUNDS FOR CERTAIN ULTIMATE VENDORS.

    (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.--
                    ``(A) In general.--For purposes of this subsection, 
                if an ultimate vendor 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, but only if 
                such ultimate vendor is registered under section 4101. 
                For purposes of this subparagraph, if the sale of 
                gasoline is made by means of a credit card, the person 
                extending the credit to the ultimate purchaser shall be 
                deemed to be the ultimate vendor.
                    ``(B) Timing of claims.--The procedure and timing 
                of any claim under subparagraph (A) shall be the same 
                as for claims under section 6427(i)(4), except that the 
                rules of section 6427(i)(3)(B) regarding electronic 
                claims shall not apply unless the ultimate vendor has 
                certified to the Secretary for the most recent quarter 
                of the taxable year that all ultimate purchasers of the 
                vendor covered by such claim are certified and entitled 
                to a refund under subparagraph (C) or (D) of subsection 
                (b)(2).''.
    (b) Credit Card Purchases of Diesel Fuel or Kerosene by State and 
Local Governments.--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 diesel fuel or kerosene is made by means 
of a credit card, the person extending the credit to the ultimate 
purchaser shall be deemed to be the ultimate vendor.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2004.

SEC. 302. TWO-PARTY EXCHANGES.

    (a) In General.--Subpart C of part III of subchapter A of chapter 
32 is amended by adding after section 4104 the following new section:

``SEC. 4105. TWO-PARTY EXCHANGES.

    ``(a) In General.--In a two-party exchange, the delivering person 
shall not be liable for the tax imposed under section 
4081(a)(1)(A)(ii).
    ``(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 as a taxable 
fuel registrant fuel to a receiving person who is so registered where 
all of the following occur:
            ``(1) The transaction includes a transfer from the 
        delivering person, who holds the 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 taxable 
        fuel 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 is amended by adding after the 
item relating to section 4104 the following new item:

                              ``Sec. 4105. 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. 303. SIMPLIFICATION OF TAX ON TIRES.

    (a) In General.--Subsection (a) of section 4071 is amended to read 
as follows:
    ``(a) Imposition and Rate of Tax.--There is hereby imposed on 
taxable tires sold by the manufacturer, producer, or importer thereof a 
tax at the rate of 9.4 cents (4.7 cents in the case of a biasply tire) 
for each 10 pounds so much of the maximum rated load capacity thereof 
as exceeds 3,500 pounds.''.
    (b) Taxable Tire.--Section 4072 is amended by redesignating 
subsections (a) and (b) as subsections (b) and (c), respectively, and 
by inserting before subsection (b) (as so redesignated) the following 
new subsection:
    ``(a) Taxable Tire.--For purposes of this chapter, the term 
`taxable tire' means any tire of the type used on highway vehicles if 
wholly or in part made of rubber and if marked pursuant to Federal 
regulations for highway use.''.
    (c) Exemption for Tires Sold to Department of Defense.--Section 
4073 is amended to read as follows:

``SEC. 4073. EXEMPTIONS.

    ``The tax imposed by section 4071 shall not apply to tires sold for 
the exclusive use of the Department of Defense or the Coast Guard.''.
    (d) Conforming Amendments.--
            (1) Section 4071 is amended by striking subsection (c) and 
        by moving subsection (e) after subsection (b) and redesignating 
        subsection (e) as subsection (c).
            (2) The item relating to section 4073 in the table of 
        sections for part II of subchapter A of chapter 32 is amended 
        to read as follows:

                              ``Sec. 4073. Exemptions.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to sales in calendar years beginning more than 30 days after the 
date of the enactment of this Act.
                                 <all>
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