I 

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.

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

3 SECTION 1. SHORT TITLE, ETC. 

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

5 ‘‘Highway Reauthorization Tax Act of 2004’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents of 

4 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.
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1 TITLE I—RESTRUCTURING OF 

2 INCENTIVES FOR ALCOHOL 

3 FUELS, ETC. 

4 SEC. 101. REDUCED RATES OF TAX ON GASOHOL REPLACED 

5 WITH EXCISE TAX CREDIT; REPEAL OF 

6 OTHER ALCOHOL-BASED FUEL INCENTIVES; 

7 ETC. 

8 (a) EXCISE TAX CREDIT FOR ALCOHOL FUEL MIX9 TURES.—

10 (1) IN GENERAL.—Subsection (f) of section 

11 6427 is amended to read as follows: 

12 ‘‘(f) ALCOHOL FUEL MIXTURES.—

13 ‘‘(1) IN GENERAL.—The amount of credit 

14 which would (but for section 40(c)) be determined 

15 under section 40(a)(1) for any period—

16 ‘‘(A) shall, with respect to taxable events 

17 occurring during such period, be treated—

18 ‘‘(i) as a payment of the taxpayer’s li19 ability for tax imposed by section 4081, 

20 and 

21 ‘‘(ii) as received at the time of the 

22 taxable event, and 

23 ‘‘(B) to the extent such amount of credit 

24 exceeds such liability for such period, shall (ex25 cept as provided in subsection (k)) be paid sub-
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1 ject to subsection (i)(3) by the Secretary with2 out interest. 

3 ‘‘(2) SPECIAL RULES.—

4 ‘‘(A) ONLY CERTAIN ALCOHOL TAKEN

5 INTO ACCOUNT.—For purposes of paragraph 

6 (1), section 40 shall be applied—

7 ‘‘(i) by not taking into account alcohol 

8 with a proof of less than 190, and 

9 ‘‘(ii) by treating as alcohol the alcohol 

10 gallon equivalent of ethyl tertiary butyl 

11 ether or other ethers produced from such 

12 alcohol. 

13 ‘‘(B) TREATMENT OF REFINERS.—For 

14 purposes of paragraph (1), in the case of a mix15 ture—

16 ‘‘(i) the alcohol in which is described 

17 in subparagraph (A)(ii), and 

18 ‘‘(ii) which is produced by any person 

19 at a refinery prior to any taxable event, 

20 section 40 shall be applied by treating such per21 son as having sold such mixture at the time of 

22 its removal from the refinery (and only at such 

23 time) to another person for use as a fuel. 

24 ‘‘(3) MIXTURES NOT USED AS FUEL.—Rules 

25 similar to the rules of subparagraphs (A) and (D)
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1 of section 40(d)(3) shall apply for purposes of this 

2 subsection. 

3 ‘‘(4) TERMINATION.—This section shall apply 

4 only to periods to which section 40 applies, deter5 mined by substituting in section 40(e)—

6 ‘‘(A) ‘September 30, 2007’ for ‘December 

7 31, 2007’, and 

8 ‘‘(B) ‘October 1, 2007’ for ‘January 1, 

9 2008’.’’. 

10 (2) REVISION OF RULES FOR PAYMENT OF

11 CREDIT.—Paragraph (3) of section 6427(i) is 

12 amended to read as follows: 

13 ‘‘(3) SPECIAL RULE FOR ALCOHOL MIXTURE

14 CREDIT.—

15 ‘‘(A) IN GENERAL.—A claim may be filed 

16 under subsection (f)(1)(B) by any person for 

17 any period—

18 ‘‘(i) for which $200 or more is pay19 able under such subsection (f)(1)(B), and 

20 ‘‘(ii) which is not less than 1 week. 

21 In the case of an electronic claim, this subpara22 graph shall be applied without regard to clause 

23 (i). 

24 ‘‘(B) PAYMENT OF CLAIM.—Notwith25 standing subsection (f)(1)(B), if the Secretary 
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1 has not paid pursuant to a claim filed under 

2 this section within 45 days of the date of the 

3 filing of such claim (20 days in the case of an 

4 electronic claim), the claim shall be paid with 

5 interest from such date determined by using the 

6 overpayment rate and method under section 

7 6621. 

8 ‘‘(C) TIME FOR FILING CLAIM.—No claim 

9 filed under this paragraph shall be allowed un10 less filed on or before the last day of the first 

11 quarter following the earliest quarter included 

12 in the claim.’’. 

13 (b) REPEAL OF OTHER INCENTIVES FOR FUEL MIX14 TURES.—

15 (1) Subsection (b) of section 4041 is amended 

16 to read as follows: 

17 ‘‘(b) EXEMPTION FOR OFF-HIGHWAY BUSINESS

18 USE.—

19 ‘‘(1) IN GENERAL.—No tax shall be imposed by 

20 subsection (a) or (d)(1) on liquids sold for use or 

21 used in an off-highway business use. 

22 ‘‘(2) TAX WHERE OTHER USE.—If a liquid on 

23 which no tax was imposed by reason of paragraph 

24 (1) is used otherwise than in an off-highway busi25 ness use, a tax shall be imposed by paragraph 
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1 (1)(B), (2)(B), or (3)(A)(ii) of subsection (a) 

2 (whichever is appropriate) and by the corresponding 

3 provision of subsection (d)(1) (if any). 

4 ‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—

5 For purposes of this subsection, the term ‘off-high6 way business use’ has the meaning given to such 

7 term by section 6421(e)(2); except that such term 

8 shall not, for purposes of subsection (a)(1), include 

9 use in a diesel-powered train.’’. 

10 (2) Section 4041(k) is hereby repealed. 

11 (3) Section 4081(c) is hereby repealed. 

12 (4) Section 4091(c) is hereby repealed. 

13 (c) TRANSFERS TO HIGHWAY TRUST FUND.—Para14 graph (4) of section 9503(b) is amended by adding ‘‘or’’ 

15 at the end of subparagraph (B), by striking the comma 

16 at the end of subparagraph (C) and inserting a period, 

17 and by striking subparagraphs (D), (E), and (F). 

18 (d) CONFORMING AMENDMENTS.—

19 (1) Subsection (c) of section 40 is amended to 

20 read as follows: 

21 ‘‘(c) COORDINATION WITH EXCISE TAX BENE22 FITS.—The amount of the credit determined under this 

23 section with respect to any alcohol shall, under regulations 

24 prescribed by the Secretary, be properly reduced to take 
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1 into account the benefit provided with respect to such alco2 hol under section 6427(f).’’. 

3 (2) Subparagraph (B) of section 40(d)(4) is 

4 amended by striking ‘‘under section 4041(k) or 

5 4081(c)’’ and inserting ‘‘under section 6427(f)’’. 

6 (e) EFFECTIVE DATES.—

7 (1) IN GENERAL.—Except as provided by para8 graph (2), the amendments made by this section 

9 shall apply to fuel sold or used after September 30, 

10 2004. 

11 (2) SUBSECTION (c).—The amendments made 

12 by subsection (c) shall apply to taxes imposed after 

13 September 30, 2003. 

14 SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL 

15 FUND. 

16 (a) TRANSFERS TO FUND.—Section 9503(b)(1) is 

17 amended by adding at the end the following new flush sen18 tence: 

19 ‘‘For purposes of this paragraph, the amount of 

20 taxes received under section 4081 shall include any 

21 amount treated as a payment under section 

22 6427(f)(1)(A) and shall not be reduced by the 

23 amount paid under section 6427(f)(1)(B).’’. 

24 (b) TRANSFERS FROM FUND.—Subparagraph (A) of 

25 section 9503(c)(2) is amended by adding at the end the 
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1 following new sentence: ‘‘Clauses (i)(III) and (ii) shall not 

2 apply to claims under section 6427(f)(1)(B).’’

3 (c) EFFECTIVE DATE.—

4 (1) SUBSECTION (a).—The amendment made 

5 by subsection (a) shall apply to taxes received after 

6 September 30, 2004. 

7 (2) SUBSECTION (b).—The amendment made 

8 by subsection (b) shall apply to amounts paid after 

9 September 30, 2004, and (to the extent related to 

10 section 34 of the Internal Revenue Code of 1986) to 

11 fuel used after such date. 

12 TITLE II—REDUCTION OF FUEL 

13 TAX EVASION 

14 SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR 

15 MOBILE MACHINERY. 

16 (a) EXEMPTION FROM TAX ON HEAVY TRUCKS AND

17 TRAILERS SOLD AT RETAIL.—

18 (1) IN GENERAL.—Section 4053 (relating to ex19 emptions) is amended by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(8) MOBILE MACHINERY.—Any vehicle which 

22 consists of a chassis—

23 ‘‘(A) to which there has been permanently 

24 mounted (by welding, bolting, riveting, or other 

25 means) machinery or equipment to perform a
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1 construction, manufacturing, processing, farm2 ing, mining, drilling, timbering, or similar oper3 ation if the operation of the machinery or 

4 equipment is unrelated to transportation on or 

5 off the public highways, 

6 ‘‘(B) which has been specially designed to 

7 serve only as a mobile carriage and mount (and 

8 a power source, where applicable) for the par9 ticular machinery or equipment involved, wheth10 er or not such machinery or equipment is in op11 eration, and 

12 ‘‘(C) which, by reason of such special de13 sign, could not, without substantial structural 

14 modification, be used as a component of a vehi15 cle designed to perform a function of trans16 porting any load other than that particular ma17 chinery or equipment or similar machinery or 

18 equipment requiring such a specially designed 

19 chassis.’’. 

20 (2) EFFECTIVE DATE.—The amendment made 

21 by this subsection shall take effect on the day after 

22 the date of the enactment of this Act. 

23 (b) EXEMPTION FROM TAX ON USE OF CERTAIN VE24 HICLES.—
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1 (1) IN GENERAL.—Section 4483 (relating to ex2 emptions) is amended by redesignating subsection 

3 (g) as subsection (h) and by inserting after sub4 section (f) the following new subsection: 

5 ‘‘(g) EXEMPTION FOR MOBILE MACHINERY.—No tax 

6 shall be imposed by section 4481 on the use of any vehicle 

7 described in section 4053(8).’’. 

8 (2) EFFECTIVE DATE.—The amendments made 

9 by this subsection shall take effect on the day after 

10 the date of the enactment of this Act. 

11 (c) REFUND OF FUEL TAXES.—

12 (1) IN GENERAL.—Section 6421(e)(2) (defining 

13 off-highway business use) is amended by adding at 

14 the end the following new subparagraph: 

15 ‘‘(C) USES IN MOBILE MACHINERY.—

16 ‘‘(i) IN GENERAL.—The term ‘off17 highway business use’ shall include any use 

18 in a vehicle which meets the requirements 

19 described in clause (ii). 

20 ‘‘(ii) REQUIREMENTS FOR MOBILE

21 MACHINERY.—The requirements described 

22 in this clause are—

23 ‘‘(I) the design-based test, and 

24 ‘‘(II) the use-based test. 
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1 ‘‘(iii) DESIGN-BASED TEST.—For pur2 poses of clause (ii)(I), the design-based 

3 test is met if the vehicle consists of a chas4 sis—

5 ‘‘(I) to which there has been per6 manently mounted (by welding, bolt7 ing, riveting, or other means) machin8 ery or equipment to perform a con9 struction, manufacturing, processing, 

10 farming, mining, drilling, timbering, 

11 or similar operation if the operation of 

12 the machinery or equipment is unre13 lated to transportation on or off the 

14 public highways, 

15 ‘‘(II) which has been specially de16 signed to serve only as a mobile car17 riage and mount (and a power source, 

18 where applicable) for the particular 

19 machinery or equipment involved, 

20 whether or not such machinery or 

21 equipment is in operation, and 

22 ‘‘(III) which, by reason of such 

23 special design, could not, without sub24 stantial structural modification, be 

25 used as a component of a vehicle de-
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1 signed to perform a function of trans2 porting any load other than that par3 ticular machinery or equipment or 

4 similar machinery or equipment re5 quiring such a specially designed chas6 sis. 

7 ‘‘(iv) USE-BASED TEST.—For pur8 poses of clause (ii)(II), the use-based test 

9 is met if the use of the vehicle on public 

10 highways was less than 5,000 miles during 

11 the taxpayer’s taxable year.’’. 

12 (2) NO TAX-FREE SALES.—Subsection (b) of 

13 section 4082, as amended by section 202, is amend14 ed by inserting before the period at the end ‘‘and 

15 such term shall not include any use described in sec16 tion 6421(e)(2)(C).’’

17 (3) ANNUAL REFUND OF TAX PAID.—Section 

18 6427(i)(2) (relating to exceptions) is amended by 

19 adding at the end the following new subparagraph: 

20 ‘‘(C) NONAPPLICATION OF PARAGRAPH.—

21 This paragraph shall not apply to any fuel used 

22 solely in any off-highway business use described 

23 in section 6421(e)(2)(C).’’.
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1 (4) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to taxable years begin3 ning after the date of the enactment of this Act. 

4 SEC. 202. TAXATION OF AVIATION-GRADE KEROSENE. 

5 (a) RATE OF TAX.—

6 (1) IN GENERAL.—Subparagraph (A) of section 

7 4081(a)(2) is amended by striking ‘‘and’’ at the end 

8 of clause (ii), by striking the period at the end of 

9 clause (iii) and inserting ‘‘, and’’, and by adding at 

10 the end the following new clause: 

11 ‘‘(iv) in the case of aviation-grade ker12 osene, 21.8 cents per gallon.’’. 

13 (2) COMMERCIAL AVIATION.—Paragraph (2) of 

14 section 4081(a) is amended by adding at the end the 

15 following new subparagraph: 

16 ‘‘(C) TAXES IMPOSED ON FUEL USED IN

17 COMMERCIAL AVIATION.—In the case of avia18 tion-grade kerosene which is removed from any 

19 refinery or terminal directly into the fuel tank 

20 of an aircraft for use in commercial aviation, 

21 the rate of tax under subparagraph (A)(iv) shall 

22 be 4.3 cents per gallon.’’. 

23 (3) CERTAIN REFUELER TRUCKS, TANKERS, 

24 AND TANK WAGONS TREATED AS TERMINAL.—Sub-
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1 section (a) of section 4081 is amended by adding at 

2 the end the following new paragraph: 

3 ‘‘(3) CERTAIN REFUELER TRUCKS, TANKERS, 

4 AND TANK WAGONS TREATED AS TERMINAL.—

5 ‘‘(A) IN GENERAL.—A refueler truck, 

6 tanker, or tank wagon shall be treated as part 

7 of the terminal referred to in paragraph (2)(C) 

8 if—

9 ‘‘(i) such truck, tanker, or wagon 

10 meets the requirements of subparagraph 

11 (B) with respect to an airport, and 

12 ‘‘(ii) no vehicle registered for highway 

13 use is loaded with aviation-grade kerosene 

14 at such terminal. 

15 ‘‘(B) REQUIREMENTS.—A refueler truck, 

16 tanker, or tank wagon meets the requirements 

17 of this subparagraph with respect to an airport 

18 if such truck, tanker, or wagon—

19 ‘‘(i) is loaded with aviation-grade ker20 osene at such terminal located within such 

21 airport and delivers such kerosene only 

22 into aircraft at such airport for use in 

23 commercial aviation, 
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1 ‘‘(ii) has storage tanks, hose, and cou2 pling equipment designed and used for the 

3 purposes of fueling aircraft, 

4 ‘‘(iii) is not registered for highway 

5 use, and 

6 ‘‘(iv) is operated by—

7 ‘‘(I) the terminal operator of 

8 such terminal, or 

9 ‘‘(II) a person that makes a daily 

10 accounting to such terminal operator 

11 of each delivery of fuel from such 

12 truck, tanker, or wagon. 

13 ‘‘(C) REPORTING.—The Secretary shall re14 quire under section 4101(d) reporting by such 

15 terminal operator of—

16 ‘‘(i) any information obtained under 

17 subparagraph (B)(iv)(II), and 

18 ‘‘(ii) any similar information main19 tained by such terminal operator with re20 spect to deliveries of fuel made by trucks, 

21 tankers, or wagons operated by such ter22 minal operator.’’. 

23 (4) LIABILITY FOR TAX ON AVIATION-GRADE

24 KEROSENE USED IN COMMERCIAL AVIATION.—Sub-
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1 section (a) of section 4081 is amended by adding at 

2 the end the following new paragraph: 

3 ‘‘(4) LIABILITY FOR TAX.—For purposes of 

4 paragraph (2)(C), the person who uses the fuel for 

5 commercial aviation shall pay the tax imposed under 

6 such paragraph. For purposes of the preceding sen7 tence, fuel shall be treated as used when such fuel 

8 is removed into the fuel tank.’’. 

9 (5) NONTAXABLE USES.—

10 (A) IN GENERAL.—Section 4082 is amend11 ed by redesignating subsections (e) and (f) as 

12 subsections (f) and (g), respectively, and by in13 serting after subsection (d) the following new 

14 subsection: 

15 ‘‘(e) AVIATION-GRADE KEROSENE.—In the case of 

16 aviation-grade kerosene which is exempt from the tax im17 posed by section 4041(c) (other than by reason of a prior 

18 imposition of tax) and which is removed from any refinery 

19 or terminal directly into the fuel tank of an aircraft, the 

20 rate of tax under section 4081(a)(2)(A)(iv) shall be zero. 

21 For purposes of the preceding sentence, rules similar to 

22 the rules of section 4081(a)(3) shall apply.’’. 

23 (B) CONFORMING AMENDMENTS.—
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1 (i) Subsection (b) of section 4082 is 

2 amended by adding at the end the fol3 lowing new flush sentence: 

4 ‘‘The term ‘nontaxable use’ does not include the use of 

5 aviation-grade kerosene in an aircraft.’’. 

6 (ii) Section 4082(d) is amended by 

7 striking paragraph (1) and by redesig8 nating paragraphs (2) and (3) as para9 graphs (1) and (2), respectively. 

10 (6) NONAIRCRAFT USE OF AVIATION-GRADE

11 KEROSENE.—

12 (A) IN GENERAL.—Subparagraph (B) of 

13 section 4041(a)(1) is amended by adding at the 

14 end the following new sentence: ‘‘This subpara15 graph shall not apply to aviation-grade ker16 osene.’’. 

17 (B) CONFORMING AMENDMENT.—The 

18 heading for paragraph (1) of section 4041(a) is 

19 amended by inserting ‘‘AND KEROSENE’’ after 

20 ‘‘DIESEL FUEL’’. 

21 (b) COMMERCIAL AVIATION.—Section 4083 is 

22 amended by redesignating subsections (b) and (c) as sub23 sections (c) and (d), respectively, and by inserting after 

24 subsection (a) the following new subsection:
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1 ‘‘(b) COMMERCIAL AVIATION.—For purposes of this 

2 subpart, the term ‘commercial aviation’ means any use of 

3 an aircraft in a business of transporting persons or prop4 erty for compensation or hire by air, unless properly allo5 cable to any transportation exempt from the taxes imposed 

6 by sections 4261 and 4271 by reason of section 4281 or 

7 4282 or by reason of section 4261(h).’’. 

8 (c) REFUNDS.—

9 (1) IN GENERAL.—Paragraph (4) of section 

10 6427(l) is amended to read as follows: 

11 ‘‘(4) REFUNDS FOR AVIATION-GRADE KER12 OSENE.—

13 ‘‘(A) NO REFUND OF CERTAIN TAXES ON

14 FUEL USED IN COMMERCIAL AVIATION.—In the 

15 case of aviation-grade kerosene used in com16 mercial aviation (as defined in section 4083(b)) 

17 (other than supplies for vessels or aircraft with18 in the meaning of section 4221(d)(3)), para19 graph (1) shall not apply to so much of the tax 

20 imposed by section 4081 as is attributable to—

21 ‘‘(i) the Leaking Underground Stor22 age Tank Trust Fund financing rate im23 posed by such section, and 
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1 ‘‘(ii) so much of the rate of tax speci2 fied in section 4081(a)(2)(A)(iv) as does 

3 not exceed 4.3 cents per gallon. 

4 ‘‘(B) PAYMENT TO ULTIMATE, REG5 ISTERED VENDOR.—With respect to aviation6 grade kerosene, if the ultimate purchaser of 

7 such kerosene waives (at such time and in such 

8 form and manner as the Secretary shall pre9 scribe) the right to payment under paragraph 

10 (1) and assigns such right to the ultimate ven11 dor, then the Secretary shall pay the amount 

12 which would be paid under paragraph (1) to 

13 such ultimate vendor, but only if such ultimate 

14 vendor—

15 ‘‘(i) is registered under section 4101, 

16 and 

17 ‘‘(ii) meets the requirements of sub18 paragraph (A), (B), or (D) of section 

19 6416(a)(1).’’. 

20 (2) TIME FOR FILING CLAIMS.—Paragraph (4) 

21 of section 6427(i) is amended by striking ‘‘sub22 section (l)(5)’’ and inserting ‘‘paragraph (4)(B) or 

23 (5) of subsection (l)’’. 
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1 (3) CONFORMING AMENDMENT.—Subparagraph 

2 (B) of section 6427(l)(2) is amended to read as fol3 lows: 

4 ‘‘(B) in the case of aviation-grade ker5 osene—

6 ‘‘(i) any use which is exempt from the 

7 tax imposed by section 4041(c) other than 

8 by reason of a prior imposition of tax, or 

9 ‘‘(ii) any use in commercial aviation 

10 (within the meaning of section 4083(b)).’’. 

11 (d) REPEAL OF PRIOR TAXATION OF AVIATION

12 FUEL.—

13 (1) IN GENERAL.—Part III of subchapter A of 

14 chapter 32 is amended by striking subpart B and by 

15 redesignating subpart C as subpart B. 

16 (2) CONFORMING AMENDMENTS.—

17 (A) Section 4041(c) is amended to read as 

18 follows: 

19 ‘‘(c) AVIATION-GRADE KEROSENE.—

20 ‘‘(1) IN GENERAL.—There is hereby imposed a 

21 tax upon aviation-grade kerosene—

22 ‘‘(A) sold by any person to an owner, les23 see, or other operator of an aircraft for use in 

24 such aircraft, or 
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1 ‘‘(B) used by any person in an aircraft un2 less there was a taxable sale of such fuel under 

3 subparagraph (A). 

4 ‘‘(2) EXEMPTION FOR PREVIOUSLY TAXED

5 FUEL.—No tax shall be imposed by this subsection 

6 on the sale or use of any aviation-grade kerosene if 

7 tax was imposed on such liquid under section 4081 

8 and the tax thereon was not credited or refunded. 

9 ‘‘(3) RATE OF TAX.—The rate of tax imposed 

10 by this subsection shall be the rate of tax specified 

11 in section 4081(a)(2)(A)(iv) which is in effect at the 

12 time of such sale or use.’’. 

13 (B) Section 4041(d)(2) is amended by 

14 striking ‘‘section 4091’’ and inserting ‘‘section 

15 4081’’. 

16 (C) Section 4041 is amended by striking 

17 subsection (e). 

18 (D) Section 4041 is amended by striking 

19 subsection (i). 

20 (E) Sections 4101(a), 4103, 4221(a), and 

21 6206 are each amended by striking ‘‘, 4081, or 

22 4091’’ and inserting ‘‘or 4081’’. 

23 (F) Section 6416(b)(2) is amended by 

24 striking ‘‘4091 or’’.
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1 (G) Section 6416(b)(3) is amended by 

2 striking ‘‘or 4091’’ each place it appears. 

3 (H) Section 6416(d) is amended by strik4 ing ‘‘or to the tax imposed by section 4091 in 

5 the case of refunds described in section 

6 4091(d)’’. 

7 (I) Section 6427(j)(1) is amended by strik8 ing ‘‘, 4081, and 4091’’ and inserting ‘‘and 

9 4081’’. 

10 (J)(i) Section 6427(l)(1) is amended to 

11 read as follows: 

12 ‘‘(1) IN GENERAL.—Except as otherwise pro13 vided in this subsection and in subsection (k), if any 

14 diesel fuel or kerosene on which tax has been im15 posed by section 4041 or 4081 is used by any person 

16 in a nontaxable use, the Secretary shall pay (without 

17 interest) to the ultimate purchaser of such fuel an 

18 amount equal to the aggregate amount of tax im19 posed on such fuel under section 4041 or 4081, as 

20 the case may be, reduced by any payment made to 

21 the ultimate vendor under paragraph (4)(B).’’. 

22 (ii) Paragraph (5)(B) of section 6427(l) is 

23 amended by striking ‘‘Paragraph (1)(A) shall 

24 not apply to kerosene’’ and inserting ‘‘Para-
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1 graph (1) shall not apply to kerosene (other 

2 than aviation-grade kerosene)’’. 

3 (K) Subparagraph (B) of section 

4 6724(d)(1) is amended by striking clause (xv) 

5 and by redesignating the succeeding clauses ac6 cordingly. 

7 (L) Paragraph (2) of section 6724(d) is 

8 amended by striking subparagraph (W) and by 

9 redesignating the succeeding subparagraphs ac10 cordingly. 

11 (M) Paragraph (1) of section 9502(b) is 

12 amended by adding ‘‘and’’ at the end of sub13 paragraph (B) and by striking subparagraphs 

14 (C) and (D) and inserting the following new 

15 subparagraph: 

16 ‘‘(C) section 4081 with respect to aviation 

17 gasoline and aviation-grade kerosene, and’’. 

18 (N) The last sentence of section 9502(b) is 

19 amended to read as follows: 

20 ‘‘There shall not be taken into account under paragraph 

21 (1) so much of the taxes imposed by section 4081 as are 

22 determined at the rate specified in section 

23 4081(a)(2)(B).’’. 

24 (O) Subsection (b) of section 9508 is 

25 amended by striking paragraph (3) and by re-
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1 designating paragraphs (4) and (5) as para2 graphs (3) and (4), respectively. 

3 (P) Section 9508(c)(2)(A) is amended by 

4 striking ‘‘sections 4081 and 4091’’ and insert5 ing ‘‘section 4081’’. 

6 (Q) The table of subparts for part III of 

7 subchapter A of chapter 32 is amended to read 

8 as follows:

‘‘Subpart A. Motor and aviation fuels. 

‘‘Subpart B. Special provisions applicable to fuels tax.’’.

9 (R) The heading for subpart A of part III 

10 of subchapter A of chapter 32 is amended to 

11 read as follows: 

12 ‘‘Subpart A—Motor and Aviation Fuels’’.

13 (S) The heading for subpart B of part III 

14 of subchapter A of chapter 32 is amended to 

15 read as follows: 

16 ‘‘Subpart B—Special Provisions Applicable to Fuels 

17 Tax’’.

18 (e) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to aviation-grade kerosene re20 moved, entered, or sold after September 30, 2004. 

21 (f) FLOOR STOCKS TAX.—

22 (1) IN GENERAL.—There is hereby imposed on 

23 aviation-grade kerosene held on October 1, 2004, by 

24 any person a tax equal to—
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1 (A) the tax which would have been imposed 

2 before such date on such kerosene had the 

3 amendments made by this section been in effect 

4 at all times before such date, reduced by 

5 (B) the tax imposed before such date 

6 under section 4091 of the Internal Revenue 

7 Code of 1986, as in effect on the day before the 

8 date of the enactment of this Act. 

9 (2) LIABILITY FOR TAX AND METHOD OF PAY10 MENT.—

11 (A) LIABILITY FOR TAX.—The person 

12 holding the kerosene on October 1, 2004, to 

13 which the tax imposed by paragraph (1) applies 

14 shall be liable for such tax. 

15 (B) METHOD AND TIME FOR PAYMENT.—

16 The tax imposed by paragraph (1) shall be paid 

17 at such time and in such manner as the Sec18 retary of the Treasury (or the Secretary’s dele19 gate) shall prescribe, including the nonapplica20 tion of such tax on de minimis amounts of ker21 osene. 

22 (3) TRANSFER OF FLOOR STOCK TAX REVE23 NUES TO TRUST FUNDS.—For purposes of deter24 mining the amount transferred to any trust fund, 

25 the tax imposed by this subsection shall be treated 
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•HR 3971 IH 

1 as imposed by section 4081 of the Internal Revenue 

2 Code of 1986—

3 (A) at the Leaking Underground Storage 

4 Tank Trust Fund financing rate under such 

5 section to the extent of 0.1 cents per gallon, 

6 and 

7 (B) at the rate under section 

8 4081(a)(2)(A)(iv) to the extent of the remain9 der. 

10 (4) HELD BY A PERSON.—For purposes of this 

11 section, kerosene shall be considered as held by a 

12 person if title thereto has passed to such person 

13 (whether or not delivery to the person has been 

14 made). 

15 (5) OTHER LAWS APPLICABLE.—All provisions 

16 of law, including penalties, applicable with respect to 

17 the tax imposed by section 4081 of such Code shall, 

18 insofar as applicable and not inconsistent with the 

19 provisions of this subsection, apply with respect to 

20 the floor stock tax imposed by paragraph (1) to the 

21 same extent as if such tax were imposed by such 

22 section.
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•HR 3971 IH 

1 SEC. 203. DYE INJECTION EQUIPMENT. 

2 (a) IN GENERAL.—Section 4082(a)(2) (relating to 

3 exemptions for diesel fuel and kerosene) is amended by 

4 inserting ‘‘by mechanical injection’’ after ‘‘indelibly dyed’’. 

5 (b) DYE INJECTOR SECURITY.—Not later than 180 

6 days after the date of the enactment of this Act, the Sec7 retary of the Treasury shall issue regulations regarding 

8 mechanical dye injection systems described in the amend9 ment made by subsection (a), and such regulations shall 

10 include standards for making such systems tamper resist11 ant. 

12 (c) PENALTY FOR TAMPERING WITH OR FAILING TO

13 MAINTAIN SECURITY REQUIREMENTS FOR MECHANICAL

14 DYE INJECTION SYSTEMS.—

15 (1) IN GENERAL.—Part I of subchapter B of 

16 chapter 68 (relating to assessable penalties) is 

17 amended by adding after section 6715 the following 

18 new section: 

19 ‘‘SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN 

20 SECURITY REQUIREMENTS FOR MECHAN21 ICAL DYE INJECTION SYSTEMS. 

22 ‘‘(a) IMPOSITION OF PENALTY—

23 ‘‘(1) TAMPERING.—If any person tampers with 

24 a mechanical dye injection system used to indelibly 

25 dye fuel for purposes of section 4082, such person 

26 shall pay a penalty in addition to the tax (if any). 
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•HR 3971 IH 

1 ‘‘(2) FAILURE TO MAINTAIN SECURITY RE2 QUIREMENTS.—If any operator of a mechanical dye 

3 injection system used to indelibly dye fuel for pur4 poses of section 4082 fails to maintain the security 

5 standards for such system as established by the Sec6 retary, then such operator shall pay a penalty in ad7 dition to the tax (if any).

8 ‘‘(b) AMOUNT OF PENALTY.—The amount of the 

9 penalty under subsection (a) shall be—

10 ‘‘(1) for each violation described in paragraph 

11 (1), the greater of—

12 ‘‘(A) $25,000, or 

13 ‘‘(B) $10 for each gallon of fuel involved, 

14 and 

15 ‘‘(2) for each—

16 ‘‘(A) failure to maintain security standards 

17 described in paragraph (2), $1,000, and 

18 ‘‘(B) failure to correct a violation described 

19 in paragraph (2), $1,000 per day for each day 

20 after which such violation was discovered or 

21 such person should have reasonably known of 

22 such violation. 

23 ‘‘(c) JOINT AND SEVERAL LIABILITY.—

24 ‘‘(1) IN GENERAL.—If a penalty is imposed 

25 under this section on any business entity, each offi-
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•HR 3971 IH 

1 cer, employee, or agent of such entity or other con2 tracting party who willfully participated in any act 

3 giving rise to such penalty shall be jointly and sever4 ally liable with such entity for such penalty. 

5 ‘‘(2) AFFILIATED GROUPS.—If a business entity 

6 described in paragraph (1) is part of an affiliated 

7 group (as defined in section 1504(a)), the parent 

8 corporation of such entity shall be jointly and sever9 ally liable with such entity for the penalty imposed 

10 under this section.’’. 

11 (2) CLERICAL AMENDMENT.—The table of sec12 tions for part I of subchapter B of chapter 68 is 

13 amended by adding after the item related to section 

14 6715 the following new item:

‘‘Sec. 6715A. Tampering with or failing to maintain security requirements for mechanical dye injection systems.’’.

15 (d) EFFECTIVE DATE.—The amendments made by 

16 subsections (a) and (c) shall take effect on the 180th day 

17 after the date on which the Secretary issues the regula18 tions described in subsection (b). 

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

20 (a) IN GENERAL.—Section 4083(d)(1)(A) (relating 

21 to administrative authority), as previously amended by 

22 this Act, is amended by striking ‘‘and’’ at the end of clause 

23 (i) and by inserting after clause (ii) the following new 

24 clause: 
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•HR 3971 IH 

1 ‘‘(iii) inspecting any books and 

2 records and any shipping papers pertaining 

3 to such fuel, and’’. 

4 (b) EFFECTIVE DATE.—The amendments made by 

5 this section shall take effect on the date of the enactment 

6 of this Act. 

7 SEC. 205. REGISTRATION OF PIPELINE OR VESSEL OPERA8 TORS REQUIRED FOR EXEMPTION OF BULK 

9 TRANSFERS TO REGISTERED TERMINALS OR 

10 REFINERIES. 

11 (a) IN GENERAL.—Section 4081(a)(1)(B) (relating 

12 to exemption for bulk transfers to registered terminals or 

13 refineries) is amended—

14 (1) by inserting ‘‘by pipeline or vessel’’ after 

15 ‘‘transferred in bulk’’, and 

16 (2) by inserting ‘‘, the operator of such pipeline 

17 or vessel,’’ after ‘‘the taxable fuel’’. 

18 (b) EFFECTIVE DATE.—The amendments made by 

19 this section shall take effect on October 1, 2004. 

20 (c) PUBLICATION OF REGISTERED PERSONS.—Be21 ginning on July 1, 2004, the Secretary of the Treasury 

22 (or the Secretary’s delegate) shall periodically publish a 

23 current list of persons registered under section 4101 of 

24 the Internal Revenue Code of 1986 who are required to 

25 register under such section.
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•HR 3971 IH 

1 SEC. 206. DISPLAY OF REGISTRATION. 

2 (a) IN GENERAL.—Subsection (a) of section 4101 

3 (relating to registration) is amended—

4 (1) by striking ‘‘Every’’ and inserting the fol5 lowing: 

6 ‘‘(1) IN GENERAL.—Every’’, and 

7 (2) by adding at the end the following new 

8 paragraph: 

9 ‘‘(2) DISPLAY OF REGISTRATION.—Every oper10 ator of a vessel required by the Secretary to register 

11 under this section shall display proof of registration 

12 through an electronic identification device prescribed 

13 by the Secretary on each vessel used by such oper14 ator to transport any taxable fuel.’’. 

15 (b) CIVIL PENALTY FOR FAILURE TO DISPLAY REG16 ISTRATION.—

17 (1) IN GENERAL.—Part I of subchapter B of 

18 chapter 68 (relating to assessable penalties) is 

19 amended by inserting after section 6716 the fol20 lowing new section: 

21 ‘‘SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON 

22 VESSELS. 

23 ‘‘(a) FAILURE TO DISPLAY REGISTRATION.—Every 

24 operator of a vessel who fails to display proof of registra25 tion pursuant to section 4101(a)(2) shall pay a penalty 

26 of $500 for each such failure. With respect to any vessel, 
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•HR 3971 IH 

1 only one penalty shall be imposed by this section during 

2 any calendar month. 

3 ‘‘(b) MULTIPLE VIOLATIONS.—In determining the 

4 penalty under subsection (a) on any person, subsection (a) 

5 shall be applied by increasing the amount in subsection 

6 (a) by the product of such amount and the aggregate num7 ber of penalties (if any) imposed with respect to prior 

8 months by this section on such person (or a related person 

9 or any predecessor of such person or related person). 

10 ‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 

11 shall be imposed under this section with respect to any 

12 failure if it is shown that such failure is due to reasonable 

13 cause.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sec15 tions for part I of subchapter B of chapter 68 is 

16 amended by inserting after the item relating to sec17 tion 6716 the following new item:

‘‘Sec. 6717. Failure to display tax registration on vessels.’’.

18 (c) EFFECTIVE DATES.—

19 (1) SUBSECTION (a).—The amendments made 

20 by subsection (a) shall take effect on October 1, 

21 2004. 

22 (2) SUBSECTION (b).—The amendments made 

23 by subsection (b) shall apply to penalties imposed 

24 after September 30, 2004. 
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•HR 3971 IH 

1 SEC. 207. PENALTIES FOR FAILURE TO REGISTER AND 

2 FAILURE TO REPORT. 

3 (a) INCREASED PENALTY.—Subsection (a) of section 

4 7272 (relating to penalty for failure to register) is amend5 ed by inserting ‘‘($10,000 in the case of a failure to reg6 ister under section 4101)’’ after ‘‘$50’’. 

7 (b) INCREASED CRIMINAL PENALTY.—Section 7232 

8 (relating to failureto register under section 4101, false 

9 representations of registration status, etc.) is amended by 

10 striking ‘‘$5,000’’ and inserting ‘‘$10,000’’. 

11 (c) ASSESSABLE PENALTY FOR FAILURE TO REG12 ISTER.—

13 (1) IN GENERAL.—Part I of subchapter B of 

14 chapter 68 (relating to assessable penalties) is 

15 amended by inserting after section 6717 the fol16 lowing new section: 

17 ‘‘SEC. 6718. FAILURE TO REGISTER. 

18 ‘‘(a) FAILURE TO REGISTER.—Every person who is 

19 required to register under section 4101 and fails to do 

20 so shall pay a penalty in addition to the tax (if any). 

21 ‘‘(b) AMOUNT OF PENALTY.—The amount of the 

22 penalty under subsection (a) shall be—

23 ‘‘(1) $10,000 for each initial failure to register, 

24 and 

25 ‘‘(2) $1,000 for each day thereafter such person 

26 fails to register. 
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•HR 3971 IH 

1 ‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 

2 shall be imposed under this section with respect to any 

3 failure if it is shown that such failure is due to reasonable 

4 cause.’’. 

5 (2) CLERICAL AMENDMENT.—The table of sec6 tions for part I of subchapter B of chapter 68 is 

7 amended by inserting after the item relating to sec8 tion 6717 the following new item:

‘‘Sec. 6718. Failure to register.’’.

9 (d) ASSESSABLE PENALTY FOR FAILURE TO RE10 PORT.—

11 (1) IN GENERAL.—Part II of subchapter B of 

12 chapter 68 (relating to assessable penalties) is 

13 amended by adding at the end the following new sec14 tion: 

15 ‘‘SEC. 6725. FAILURE TO REPORT INFORMATION UNDER 

16 SECTION 4101. 

17 ‘‘(a) IN GENERAL.—In the case of each failure de18 scribed in subsection (b) by any person with respect to 

19 a vessel or facility, such person shall pay a penalty of 

20 $10,000 in addition to the tax (if any). 

21 ‘‘(b) FAILURES SUBJECT TO PENALTY.—For pur22 poses of subsection (a), the failures described in this sub23 section are—
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•HR 3971 IH 

1 ‘‘(1) any failure to make a report under section 

2 4101(d) on or before the date prescribed therefor, 

3 and 

4 ‘‘(2) any failure to include all of the informa5 tion required to be shown on such report or the in6 clusion of incorrect information. 

7 ‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 

8 shall be imposed under this section with respect to any 

9 failure if it is shown that such failure is due to reasonable 

10 cause.’’. 

11 (2) CLERICAL AMENDMENT.—The table of sec12 tions for part II of subchapter B of chapter 68 is 

13 amended by adding at the end the following new 

14 item:

‘‘Sec. 6725. Failure to report information under section 4101.’’.

15 (e) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to penalties imposed after Sep17 tember 30, 2004. 

18 SEC. 208. COLLECTION FROM CUSTOMS BOND WHERE IM19 PORTER NOT REGISTERED. 

20 (a) TAX AT POINT OF ENTRY WHERE IMPORTER

21 NOT REGISTERED.—Subpart C of part III of subchapter 

22 A of chapter 31 is amended by adding after section 4103 

23 the following new section:
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•HR 3971 IH 

1 ‘‘SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IM2 PORTER NOT REGISTERED. 

3 ‘‘(a) IN GENERAL.—The importer of record shall be 

4 jointly and severally liable for the tax imposed by section 

5 4081(a)(1)(A)(iii) if, under regulations prescribed by the 

6 Secretary, any other person that is not a person who is 

7 registered under section 4101 is liable for such tax. 

8 ‘‘(b) COLLECTION FROM CUSTOMS BOND.—If any 

9 tax for which any importer of record is liable under sub10 section (a), or for which any importer of record that is 

11 not a person registered under section 4101 is otherwise 

12 liable, is not paid on or before the last date prescribed 

13 for payment, the Secretary may collect such tax from the 

14 Customs bond posted with respect to the importation of 

15 the taxable fuel to which the tax relates. For purposes of 

16 determining the jurisdiction of any court of the United 

17 States or any agency of the United States, any action by 

18 the Secretary described in the preceding sentence shall be 

19 treated as an action to collect the tax from a bond de20 scribed in section 4101(b)(1) and not as an action to col21 lect from a bond relating to the importation of merchan22 dise.’’. 

23 (b) CONFORMING AMENDMENT.—The table of sec24 tions for subpart C of part III of subchapter A of chapter 

25 31 is amended by adding after the item related to section 

26 4103 the following new item:
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‘‘Sec. 4104. Collection from Customs bond where importer not 

registered.’’.

1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply with respect to fuel entered after 

3 September 30, 2004. 

4 SEC. 209. MODIFICATIONS OF TAX ON USE OF CERTAIN VE5 HICLES. 

6 (a) PRORATION OF TAX WHERE VEHICLE SOLD.—

7 (1) IN GENERAL.—Paragraph (2) of section 

8 4481(c) (relating to where vehicle destroyed or sto9 len) is amended by striking ‘‘destroyed or stolen’’ 

10 both places it appears and inserting ‘‘sold, de11 stroyed, or stolen’’. 

12 (2) CONFORMING AMENDMENT.—The heading 

13 for section 4481(c)(2) is amended by striking ‘‘DE14 STROYED OR STOLEN’’ and inserting ‘‘SOLD, DE15 STROYED, OR STOLEN’’. 

16 (b) REPEAL OF INSTALLMENT PAYMENT.—

17 (1) Section 6156 (relating to installment pay18 ment of tax on use of highway motor vehicles) is re19 pealed. 

20 (2) The table of sections for subchapter A of 

21 chapter 62 is amended by striking the item relating 

22 to section 6156. 
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•HR 3971 IH 

1 (c) ELECTRONIC FILING.—Section 4481 is amended 

2 by redesignating subsection (e) as subsection (f) and by 

3 inserting after subsection (d) the following new subsection: 

4 ‘‘(e) ELECTRONIC FILING.—Any taxpayer who files 

5 a return under this section with respect to 25 or more 

6 vehicles for any taxable period shall file such return elec7 tronically.’’. 

8 (d) REPEAL OF REDUCTION IN TAX FOR CERTAIN

9 TRUCKS.—Section 4483 is amended by striking subsection 

10 (f). 

11 (e) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to taxable periods beginning after 

13 the date of the enactment of this Act.

14 SEC. 210. MODIFICATION OF ULTIMATE VENDOR REFUND 

15 CLAIMS WITH RESPECT TO FARMING. 

16 (a) IN GENERAL.—

17 (1) REFUNDS.—Section 6427(l) is amended by 

18 adding at the end the following new paragraph: 

19 ‘‘(6) REGISTERED VENDORS PERMITTED TO AD20 MINISTER CERTAIN CLAIMS FOR REFUND OF DIESEL

21 FUEL AND KEROSENE SOLD TO FARMERS.—

22 ‘‘(A) IN GENERAL.—In the case of diesel 

23 fuel or kerosene used on a farm for farming 

24 purposes (within the meaning of section 

25 6420(c)), paragraph (1) shall not apply to the 
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•HR 3971 IH 

1 aggregate amount of such diesel fuel or ker2 osene if such amount does not exceed 250 gal3 lons (as determined under subsection 

4 (i)(5)(A)(iii)). 

5 ‘‘(B) PAYMENT TO ULTIMATE VENDOR.—

6 The amount which would (but for subparagraph 

7 (A)) have been paid under paragraph (1) with 

8 respect to any fuel shall be paid to the ultimate 

9 vendor of such fuel, if such vendor—

10 ‘‘(i) is registered under section 4101, 

11 and 

12 ‘‘(ii) meets the requirements of sub13 paragraph (A), (B), or (D) of section 

14 6416(a)(1).’’. 

15 (2) FILING OF CLAIMS.—Section 6427(i) is 

16 amended by inserting at the end the following new 

17 paragraph: 

18 ‘‘(5) SPECIAL RULE FOR VENDOR REFUNDS

19 WITH RESPECT TO FARMERS.—

20 ‘‘(A) IN GENERAL.—A claim may be filed 

21 under subsection (l)(6) by any person with re22 spect to fuel sold by such person for any pe23 riod—
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•HR 3971 IH 

1 ‘‘(i) for which $200 or more ($100 or 

2 more in the case of kerosene) is payable 

3 under subsection (l)(6), 

4 ‘‘(ii) which is not less than 1 week, 

5 and 

6 ‘‘(iii) which is for not more than 250 

7 gallons for each farmer for which there is 

8 a claim. 

9 Notwithstanding subsection (l)(1), paragraph 

10 (3)(B) shall apply to claims filed under the pre11 ceding sentence. 

12 ‘‘(B) TIME FOR FILING CLAIM.—No claim 

13 filed under this paragraph shall be allowed un14 less filed on or before the last day of the first 

15 quarter following the earliest quarter included 

16 in the claim.’’. 

17 (3) CONFORMING AMENDMENTS.—

18 (A) Section 6427(l)(5)(A) is amended to 

19 read as follows: 

20 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

21 not apply to diesel fuel or kerosene used by a 

22 State or local government.’’. 

23 (B) The heading for section 6427(l)(5) is 

24 amended by striking ‘‘FARMERS AND’’.
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•HR 3971 IH 

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

2 this section shall apply to fuels sold for nontaxable use 

3 after the date of the enactment of this Act. 

4 SEC. 211. DEDICATION OF REVENUES FROM CERTAIN PEN5 ALTIES TO THE HIGHWAY TRUST FUND. 

6 (a) IN GENERAL.—Subsection (b) of section 9503 

7 (relating to transfer to Highway Trust Fund of amounts 

8 equivalent to certain taxes) is amended by redesignating 

9 paragraph (5) as paragraph (6) and inserting after para10 graph (4) the following new paragraph: 

11 ‘‘(5) CERTAIN PENALTIES.—There are hereby 

12 appropriated to the Highway Trust Fund amounts 

13 equivalent to the penalties paid under sections 6715, 

14 6715A, 6717, 6718, 6725, 7232, and 7272 (but only 

15 with regard to penalties under such section related 

16 to failure to register under section 4101).’’. 

17 (b) CONFORMING AMENDMENTS.—

18 (1) The heading of subsection (b) of section 

19 9503 is amended by inserting ‘‘AND PENALTIES’’ 

20 after ‘‘TAXES’’. 

21 (2) The heading of paragraph (1) of section 

22 9503(b) is amended by striking ‘‘IN GENERAL’’ and 

23 inserting ‘‘CERTAIN TAXES’’. 
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•HR 3971 IH 

1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to penalties assessed after October 

3 1, 2004.

4 TITLE III—OTHER EXCISE TAX 

5 PROVISIONS 

6 SEC. 301. TAXABLE FUEL REFUNDS FOR CERTAIN ULTI7 MATE VENDORS. 

8 (a) IN GENERAL.—Paragraph (4) of section 6416(a) 

9 (relating to abatements, credits, and refunds) is amended 

10 to read as follows: 

11 ‘‘(4) REGISTERED ULTIMATE VENDOR TO AD12 MINISTER CREDITS AND REFUNDS OF GASOLINE

13 TAX.—

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

15 subsection, if an ultimate vendor purchases any 

16 gasoline on which tax imposed by section 4081 

17 has been paid and sells such gasoline to an ulti18 mate purchaser described in subparagraph (C) 

19 or (D) of subsection (b)(2) (and such gasoline 

20 is for a use described in such subparagraph), 

21 such ultimate vendor shall be treated as the 

22 person (and the only person) who paid such tax, 

23 but only if such ultimate vendor is registered 

24 under section 4101. For purposes of this sub25 paragraph, if the sale of gasoline is made by 
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•HR 3971 IH 

1 means of a credit card, the person extending 

2 the credit to the ultimate purchaser shall be 

3 deemed to be the ultimate vendor. 

4 ‘‘(B) TIMING OF CLAIMS.—The procedure 

5 and timing of any claim under subparagraph 

6 (A) shall be the same as for claims under sec7 tion 6427(i)(4), except that the rules of section 

8 6427(i)(3)(B) regarding electronic claims shall 

9 not apply unless the ultimate vendor has cer10 tified to the Secretary for the most recent quar11 ter of the taxable year that all ultimate pur12 chasers of the vendor covered by such claim are 

13 certified and entitled to a refund under sub14 paragraph (C) or (D) of subsection (b)(2).’’. 

15 (b) CREDIT CARD PURCHASES OF DIESEL FUEL OR

16 KEROSENE BY STATE AND LOCAL GOVERNMENTS.—Sec17 tion 6427(l)(5)(C) (relating to nontaxable uses of diesel 

18 fuel, kerosene, and aviation fuel) is amended by adding 

19 at the end the following new sentence: ‘‘For purposes of 

20 this subparagraph, if the sale of diesel fuel or kerosene 

21 is made by means of a credit card, the person extending 

22 the credit to the ultimate purchaser shall be deemed to 

23 be the ultimate vendor.’’. 

24 (c) EFFECTIVE DATE.—The amendments made by 

25 this section shall take effect on October 1, 2004. 
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•HR 3971 IH 

1 SEC. 302. TWO-PARTY EXCHANGES. 

2 (a) IN GENERAL.—Subpart C of part III of sub3 chapter A of chapter 32 is amended by adding after sec4 tion 4104 the following new section: 

5 ‘‘SEC. 4105. TWO-PARTY EXCHANGES. 

6 ‘‘(a) IN GENERAL.—In a two-party exchange, the de7 livering person shall not be liable for the tax imposed 

8 under section 4081(a)(1)(A)(ii). 

9 ‘‘(b) TWO-PARTY EXCHANGE.—The term ‘two-party 

10 exchange’ means a transaction, other than a sale, in which 

11 taxable fuel is transferred from a delivering person reg12 istered under section 4101 as a taxable fuel registrant fuel 

13 to a receiving person who is so registered where all of the 

14 following occur: 

15 ‘‘(1) The transaction includes a transfer from 

16 the delivering person, who holds the inventory posi17 tion for taxable fuel in the terminal as reflected in 

18 the records of the terminal operator. 

19 ‘‘(2) The exchange transaction occurs before or 

20 contemporaneous with completion of removal across 

21 the rack from the terminal by the receiving person. 

22 ‘‘(3) The terminal operator in its books and 

23 records treats the receiving person as the person 

24 that removes the taxable fuel across the terminal 

25 rack for purposes of reporting the transaction to the 

26 Secretary. 
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•HR 3971 IH 

1 ‘‘(4) The transaction is the subject of a written 

2 contract.’’. 

3 (b) CONFORMING AMENDMENT.—The table of sec4 tions for subpart C of part III of subchapter A of chapter 

5 32 is amended by adding after the item relating to section 

6 4104 the following new item:

‘‘Sec. 4105. Two-party exchanges.’’.

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

8 this section shall take effect on the date of the enactment 

9 of this Act. 

10 SEC. 303. SIMPLIFICATION OF TAX ON TIRES. 

11 (a) IN GENERAL.—Subsection (a) of section 4071 is 

12 amended to read as follows: 

13 ‘‘(a) IMPOSITION AND RATE OF TAX.—There is here14 by imposed on taxable tires sold by the manufacturer, pro15 ducer, or importer thereof a tax at the rate of 9.4 cents 

16 (4.7 cents in the case of a biasply tire) for each 10 pounds 

17 so much of the maximum rated load capacity thereof as 

18 exceeds 3,500 pounds.’’. 

19 (b) TAXABLE TIRE.—Section 4072 is amended by re20 designating subsections (a) and (b) as subsections (b) and 

21 (c), respectively, and by inserting before subsection (b) (as 

22 so redesignated) the following new subsection: 

23 ‘‘(a) TAXABLE TIRE.—For purposes of this chapter, 

24 the term ‘taxable tire’ means any tire of the type used 

25 on highway vehicles if wholly or in part made of rubber 
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•HR 3971 IH 

1 and if marked pursuant to Federal regulations for high2 way use.’’. 

3 (c) EXEMPTION FOR TIRES SOLD TO DEPARTMENT

4 OF DEFENSE.—Section 4073 is amended to read as fol5 lows: 

6 ‘‘SEC. 4073. EXEMPTIONS. 

7 ‘‘The tax imposed by section 4071 shall not apply to 

8 tires sold for the exclusive use of the Department of De9 fense or the Coast Guard.’’. 

10 (d) CONFORMING AMENDMENTS.—

11 (1) Section 4071 is amended by striking sub12 section (c) and by moving subsection (e) after sub13 section (b) and redesignating subsection (e) as sub14 section (c). 

15 (2) The item relating to section 4073 in the 

16 table of sections for part II of subchapter A of chap17 ter 32 is amended to read as follows:

‘‘Sec. 4073. Exemptions.’’.

18 (e) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to sales in calendar years begin20 ning more than 30 days after the date of the enactment 

21 of this Act.

Æ