IB 

Union Calendar No. 257

108TH CONGRESS 

2D SESSION H. R. 3971

[Report No. 108–444] 

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 

MARCH 23, 2004

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on March 16, 2004] 

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,
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1 SECTION 1. SHORT TITLE, ETC. 

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

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

4 (b) AMENDMENT OF 1986 CODE.—Except as otherwise 

5 expressly provided, whenever in this Act an amendment or 

6 repeal is expressed in terms of an amendment to, or repeal 

7 of, a section or other provision, the reference shall be consid8 ered to be made to a section or other provision of the Inter9 nal Revenue Code of 1986. 

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

11 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 OTHER 

6 ALCOHOL-BASED FUEL INCENTIVES; ETC. 

7 (a) EXCISE TAX CREDIT FOR ALCOHOL FUEL MIX8 TURES.—

9 (1) IN GENERAL.—Subsection (f) of section 6427 

10 is amended to read as follows: 

11 ‘‘(f) ALCOHOL FUEL MIXTURES.—

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

13 would (but for section 40(c)) be determined under sec14 tion 40(a)(1) for any period—

15 ‘‘(A) shall, with respect to taxable events oc16 curring during such period, be treated—

17 ‘‘(i) as a payment of the taxpayer’s li18 ability for tax imposed by section 4081, and 

19 ‘‘(ii) as received at the time of the tax20 able event, and 

21 ‘‘(B) to the extent such amount of credit ex22 ceeds such liability for such period, shall (except 

23 as provided in subsection (k)) be paid subject to 

24 subsection (i)(3) by the Secretary without inter25 est. 
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1 ‘‘(2) SPECIAL RULES.—

2 ‘‘(A) ONLY CERTAIN ALCOHOL TAKEN INTO

3 ACCOUNT.—For purposes of paragraph (1), sec4 tion 40 shall be applied—

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

6 with a proof of less than 190, and 

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

8 gallon equivalent of ethyl tertiary butyl 

9 ether or other ethers produced from such al10 cohol. 

11 ‘‘(B) TREATMENT OF REFINERS.—For pur12 poses of paragraph (1), in the case of a mix13 ture—

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

15 in subparagraph (A)(ii), and 

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

17 at a refinery prior to any taxable event, 

18 section 40 shall be applied by treating such per19 son as having sold such mixture at the time of 

20 its removal from the refinery (and only at such 

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

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

23 similar to the rules of subparagraphs (A) and (D) of 

24 section 40(d)(3) shall apply for purposes of this sub25 section.
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1 ‘‘(4) TERMINATION.—This section shall apply 

2 only to periods to which section 40 applies, deter3 mined by substituting in section 40(e)—

4 ‘‘(A) ‘December 31, 2010’ for ‘December 31, 

5 2007’, and 

6 ‘‘(B) ‘January 1, 2011’ for ‘January 1, 

7 2008’.’’

8 (2) REVISION OF RULES FOR PAYMENT OF CRED9 IT.—Paragraph (3) of section 6427(i) is amended to 

10 read as follows: 

11 ‘‘(3) SPECIAL RULE FOR ALCOHOL MIXTURE

12 CREDIT.—

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

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

15 period—

16 ‘‘(i) for which $200 or more is payable 

17 under such subsection (f)(1)(B), and 

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

19 In the case of an electronic claim, this subpara20 graph shall be applied without regard to clause 

21 (i). 

22 ‘‘(B) PAYMENT OF CLAIM.—Notwith23 standing subsection (f)(1)(B), if the Secretary 

24 has not paid pursuant to a claim filed under 

25 this section within 45 days of the date of the fil-
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1 ing of such claim (20 days in the case of an elec2 tronic claim), the claim shall be paid with inter3 est from such date determined by using the over4 payment rate and method under section 6621. 

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

6 filed under this paragraph shall be allowed un7 less filed on or before the last day of the first 

8 quarter following the earliest quarter included in 

9 the claim.’’

10 (b) REPEAL OF OTHER INCENTIVES FOR FUEL MIX11 TURES.—

12 (1) Subsection (b) of section 4041 is amended to 

13 read as follows: 

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

15 USE.—

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

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

18 in an off-highway business use. 

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

20 which no tax was imposed by reason of paragraph (1) 

21 is used otherwise than in an off-highway business use, 

22 a tax shall be imposed by paragraph (1)(B), (2)(B), 

23 or (3)(A)(ii) of subsection (a) (whichever is appro24 priate) and by the corresponding provision of sub25 section (d)(1) (if any). 
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1 ‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—

2 For purposes of this subsection, the term ‘off-highway 

3 business use’ has the meaning given to such term by 

4 section 6421(e)(2); except that such term shall not, for 

5 purposes of subsection (a)(1), include use in a diesel6 powered train.’’

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

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

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

10 (c) TRANSFERS TO HIGHWAY TRUST FUND.—Para11 graph (4) of section 9503(b) is amended by adding ‘‘or’’ 

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

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

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

15 (d) CONFORMING AMENDMENTS.—

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

17 read as follows: 

18 ‘‘(c) COORDINATION WITH EXCISE TAX BENEFITS.—

19 The amount of the credit determined under this section with 

20 respect to any alcohol shall, under regulations prescribed 

21 by the Secretary, be properly reduced to take into account 

22 the benefit provided with respect to such alcohol under sec23 tion 6427(f).’’
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1 (2) Subparagraph (B) of section 40(d)(4) is 

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

3 4081(c)’’ and inserting ‘‘under section 6427(f)’’. 

4 (e) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as provided by para6 graph (2), the amendments made by this section shall 

7 apply to fuel sold or used after September 30, 2004. 

8 (2) SUBSECTION (c).—The amendments made by 

9 subsection (c) shall apply to taxes imposed after Sep10 tember 30, 2003. 

11 SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL 

12 FUND. 

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

14 amended by adding at the end the following new flush sen15 tence: 

16 ‘‘For purposes of this paragraph, the amount of taxes 

17 received under section 4081 shall include any amount 

18 treated as a payment under section 6427(f)(1)(A) and 

19 shall not be reduced by the amount paid under section 

20 6427(f)(1)(B).’’. 

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

22 section 9503(c)(2) is amended by adding at the end the fol23 lowing new sentence: ‘‘Clauses (i)(III) and (ii) shall not 

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

25 (c) EFFECTIVE DATE.—
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1 (1) SUBSECTION (a).—The amendment made by 

2 subsection (a) shall apply to taxes received after Sep3 tember 30, 2004. 

4 (2) SUBSECTION (b).—The amendment made by 

5 subsection (b) shall apply to amounts paid after Sep6 tember 30, 2004, and (to the extent related to section 

7 34 of the Internal Revenue Code of 1986) to fuel used 

8 after such date. 

9 TITLE II—REDUCTION OF FUEL 

10 TAX EVASION 

11 SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR 

12 MOBILE MACHINERY. 

13 (a) EXEMPTION FROM TAX ON HEAVY TRUCKS AND

14 TRAILERS SOLD AT RETAIL.—

15 (1) IN GENERAL.—Section 4053 (relating to ex16 emptions) is amended by adding at the end the fol17 lowing new paragraph: 

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

19 consists of a chassis—

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

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

22 means) machinery or equipment to perform a 

23 construction, manufacturing, processing, farm24 ing, mining, drilling, timbering, or similar oper25 ation if the operation of the machinery or equip-
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1 ment is unrelated to transportation on or off the 

2 public highways, 

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

4 serve only as a mobile carriage and mount (and 

5 a power source, where applicable) for the par6 ticular machinery or equipment involved, wheth7 er or not such machinery or equipment is in op8 eration, and 

9 ‘‘(C) which, by reason of such special de10 sign, could not, without substantial structural 

11 modification, be used as a component of a vehicle 

12 designed to perform a function of transporting 

13 any load other than that particular machinery 

14 or equipment or similar machinery or equipment 

15 requiring such a specially designed chassis.’’. 

16 (2) EFFECTIVE DATE.—The amendment made by 

17 this subsection shall take effect on the day after the 

18 date of the enactment of this Act. 

19 (b) EXEMPTION FROM TAX ON USE OF CERTAIN VEHI20 CLES.—

21 (1) IN GENERAL.—Section 4483 (relating to ex22 emptions) is amended by redesignating subsection (g) 

23 as subsection (h) and by inserting after subsection (f) 

24 the following new subsection: 
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1 ‘‘(g) EXEMPTION FOR MOBILE MACHINERY.—No tax 

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

3 described in section 4053(8).’’. 

4 (2) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall take effect on the day after the 

6 date of the enactment of this Act. 

7 (c) EXEMPTION FROM TAX ON TIRES.—

8 (1) IN GENERAL.—Section 4072(b)(2) is amend9 ed by adding at the end the following flush sentence: 

10 ‘‘Such term shall not include tires of a type used ex11 clusively on vehicles described in section 4053(8).’’. 

12 (2) EFFECTIVE DATE.—The amendment made by 

13 this subsection shall take effect on the day after the 

14 date of the enactment of this Act. 

15 (d) REFUND OF FUEL TAXES.—

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

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

18 the end the following new subparagraph: 

19 ‘‘(C) USES IN MOBILE MACHINERY.—

20 ‘‘(i) IN GENERAL.—The term ‘off-high21 way business use’ shall include any use in 

22 a vehicle which meets the requirements de23 scribed in clause (ii). 
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1 ‘‘(ii) REQUIREMENTS FOR MOBILE MA2 CHINERY.—The requirements described in 

3 this clause are—

4 ‘‘(I) the design-based test, and 

5 ‘‘(II) the use-based test. 

6 ‘‘(iii) DESIGN-BASED TEST.—For pur7 poses of clause (ii)(I), the design-based test 

8 is met if the vehicle consists of a chassis—

9 ‘‘(I) to which there has been per10 manently mounted (by welding, bolt11 ing, riveting, or other means) machin12 ery or equipment to perform a con13 struction, manufacturing, processing, 

14 farming, mining, drilling, timbering, 

15 or similar operation if the operation of 

16 the machinery or equipment is unre17 lated to transportation on or off the 

18 public highways, 

19 ‘‘(II) which has been specially de20 signed to serve only as a mobile car21 riage and mount (and a power source, 

22 where applicable) for the particular 

23 machinery or equipment involved, 

24 whether or not such machinery or 

25 equipment is in operation, and 
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1 ‘‘(III) which, by reason of such 

2 special design, could not, without sub3 stantial structural modification, be 

4 used as a component of a vehicle de5 signed to perform a function of trans6 porting any load other than that par7 ticular machinery or equipment or 

8 similar machinery or equipment re9 quiring such a specially designed chas10 sis. 

11 ‘‘(iv) USE-BASED TEST.—For purposes 

12 of clause (ii)(II), the use-based test is met if 

13 the use of the vehicle on public highways 

14 was less than 7,500 miles during the tax15 payer’s taxable year.’’. 

16 (2) NO TAX-FREE SALES.—Subsection (b) of sec17 tion 4082, as amended by section 202, is amended by 

18 inserting before the period at the end ‘‘and such term 

19 shall not include any use described in section 

20 6421(e)(2)(C)’’. 

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

22 6427(i)(2) (relating to exceptions) is amended by add23 ing at the end the following new subparagraph: 

24 ‘‘(C) NONAPPLICATION OF PARAGRAPH.—

25 This paragraph shall not apply to any fuel used
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1 solely in any off-highway business use described 

2 in section 6421(e)(2)(C).’’. 

3 (4) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to taxable years begin5 ning after the date of the enactment of this Act. 

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

7 (a) RATE OF TAX.—

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

9 4081(a)(2) is amended by striking ‘‘and’’ at the end 

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

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

12 the end the following new clause: 

13 ‘‘(iv) in the case of aviation-grade ker14 osene, 21.8 cents per gallon.’’. 

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

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

17 following new subparagraph: 

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

19 COMMERCIAL AVIATION.—In the case of aviation20 grade kerosene which is removed from any refin21 ery or terminal directly into the fuel tank of an 

22 aircraft for use in commercial aviation, the rate 

23 of tax under subparagraph (A)(iv) shall be 4.3 

24 cents per gallon.’’. 
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1 (3) CERTAIN REFUELER TRUCKS, TANKERS, AND

2 TANK WAGONS TREATED AS TERMINAL.—Subsection 

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

4 the following new paragraph: 

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

6 AND TANK WAGONS TREATED AS TERMINAL.—

7 ‘‘(A) IN GENERAL.—In the case of aviation8 grade kerosene which is removed from any ter9 minal directly into the fuel tank of an aircraft 

10 (determined without regard to any refueler truck, 

11 tanker, or tank wagon which meets the require12 ments of subparagraph (B)), a refueler truck, 

13 tanker, or tank wagon shall be treated as part of 

14 such terminal if—

15 ‘‘(i) such truck, tanker, or wagon meets 

16 the requirements of subparagraph (B) with 

17 respect to an airport, and 

18 ‘‘(ii) except in the case of exigent cir19 cumstances identified by the Secretary in 

20 regulations, no vehicle registered for high21 way use is loaded with aviation-grade ker22 osene at such terminal. 

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

24 tanker, or tank wagon meets the requirements of 
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1 this subparagraph with respect to an airport if 

2 such truck, tanker, or wagon—

3 ‘‘(i) is loaded with aviation-grade ker4 osene at such terminal located within such 

5 airport and delivers such kerosene only into 

6 aircraft at such airport, 

7 ‘‘(ii) has storage tanks, hose, and cou8 pling equipment designed and used for the 

9 purposes of fueling aircraft, 

10 ‘‘(iii) is not registered for highway use, 

11 and 

12 ‘‘(iv) is operated by—

13 ‘‘(I) the terminal operator of such 

14 terminal, or 

15 ‘‘(II) a person that makes a daily 

16 accounting to such terminal operator 

17 of each delivery of fuel from such truck, 

18 tanker, or wagon. 

19 ‘‘(C) REPORTING.—The Secretary shall re20 quire under section 4101(d) reporting by such 

21 terminal operator of—

22 ‘‘(i) any information obtained under 

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

24 ‘‘(ii) any similar information main25 tained by such terminal operator with re-
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1 spect to deliveries of fuel made by trucks, 

2 tankers, or wagons operated by such ter3 minal operator.’’. 

4 (4) LIABILITY FOR TAX ON AVIATION-GRADE

5 KEROSENE USED IN COMMERCIAL AVIATION.—Sub6 section (a) of section 4081 is amended by adding at 

7 the end the following new paragraph: 

8 ‘‘(4) LIABILITY FOR TAX ON AVIATION-GRADE

9 KEROSENE USED IN COMMERCIAL AVIATION.—For 

10 purposes of paragraph (2)(C), the person who uses the 

11 fuel for commercial aviation shall pay the tax im12 posed under such paragraph. For purposes of the pre13 ceding sentence, fuel shall be treated as used when 

14 such fuel is removed into the fuel tank.’’. 

15 (5) NONTAXABLE USES.—

16 (A) IN GENERAL.—Section 4082 is amended 

17 by redesignating subsections (e) and (f) as sub18 sections (f) and (g), respectively, and by insert19 ing after subsection (d) the following new sub20 section: 

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

22 aviation-grade kerosene which is exempt from the tax im23 posed by section 4041(c) (other than by reason of a prior 

24 imposition of tax) and which is removed from any refinery 
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1 or terminal directly into the fuel tank of an aircraft, the 

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

3 (B) CONFORMING AMENDMENTS.—

4 (i) Subsection (b) of section 4082 is 

5 amended by adding at the end the following 

6 new flush sentence: 

7 ‘‘The term ‘nontaxable use’ does not include the use of avia8 tion-grade kerosene in an aircraft.’’. 

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

10 striking paragraph (1) and by redesig11 nating paragraphs (2) and (3) as para12 graphs (1) and (2), respectively. 

13 (6) NONAIRCRAFT USE OF AVIATION-GRADE KER14 OSENE.—

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

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

17 end the following new sentence: ‘‘This subpara18 graph shall not apply to aviation-grade ker19 osene.’’. 

20 (B) CONFORMING AMENDMENT.—The head21 ing for paragraph (1) of section 4041(a) is 

22 amended by inserting ‘‘AND KEROSENE’’ after 

23 ‘‘DIESEL FUEL’’. 

24 (b) COMMERCIAL AVIATION.—Section 4083 is amended 

25 by redesignating subsections (b) and (c) as subsections (c)
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1 and (d), respectively, and by inserting after subsection (a) 

2 the following new subsection: 

3 ‘‘(b) COMMERCIAL AVIATION.—For purposes of this 

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

5 an aircraft in a business of transporting persons or prop6 erty for compensation or hire by air, unless properly allo7 cable to any transportation exempt from the taxes imposed 

8 by sections 4261 and 4271 by reason of section 4281 or 4282 

9 or by reason of section 4261(h).’’. 

10 (c) REFUNDS.—

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

12 6427(l) is amended to read as follows: 

13 ‘‘(4) REFUNDS FOR AVIATION-GRADE KER14 OSENE.—

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

16 FUEL USED IN COMMERCIAL AVIATION.—In the 

17 case of aviation-grade kerosene used in commer18 cial aviation (as defined in section 4083(b)) 

19 (other than supplies for vessels or aircraft within 

20 the meaning of section 4221(d)(3)), paragraph 

21 (1) shall not apply to so much of the tax imposed 

22 by section 4081 as is attributable to—

23 ‘‘(i) the Leaking Underground Storage 

24 Tank Trust Fund financing rate imposed 

25 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 not 

3 exceed 4.3 cents per gallon. 

4 ‘‘(B) PAYMENT TO ULTIMATE, REGISTERED

5 VENDOR.—With respect to aviation-grade ker6 osene, if the ultimate purchaser of such kerosene 

7 waives (at such time and in such form and man8 ner as the Secretary shall prescribe) the right to 

9 payment under paragraph (1) and assigns such 

10 right to the ultimate vendor, then the Secretary 

11 shall pay the amount which would be paid under 

12 paragraph (1) to such ultimate vendor, but only 

13 if such ultimate vendor—

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

15 and 

16 ‘‘(ii) meets the requirements of sub17 paragraph (A), (B), or (D) of section 

18 6416(a)(1).’’. 

19 (2) TIME FOR FILING CLAIMS.—Subparagraph 

20 (A) of section 6427(i)(4) is amended—

21 (A) by striking ‘‘subsection (l)(5)’’ both 

22 places it appears and inserting ‘‘paragraph 

23 (4)(B) or (5) of subsection (l)’’, and 

24 (B) by striking ‘‘the preceding sentence’’ 

25 and inserting ‘‘subsection (l)(5)’’. 
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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, lessee, 

23 or other operator of an aircraft for use in such 

24 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 on 

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

7 was imposed on such liquid under section 4081 and 

8 the tax thereon was not credited or refunded. 

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

10 this subsection shall be the rate of tax specified in sec11 tion 4081(a)(2)(A)(iv) which is in effect at the time 

12 of such sale or use.’’. 

13 (B) Section 4041(d)(2) is amended by strik14 ing ‘‘section 4091’’ and inserting ‘‘section 4081’’. 

15 (C) Section 4041 is amended by striking 

16 subsection (e). 

17 (D) Section 4041 is amended by striking 

18 subsection (i). 

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

20 6206 are each amended by striking ‘‘, 4081, or 

21 4091’’ and inserting ‘‘or 4081’’. 

22 (F) Section 6416(b)(2) is amended by strik23 ing ‘‘4091 or’’. 

24 (G) Section 6416(b)(3) is amended by strik25 ing ‘‘or 4091’’ each place it appears. 
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1 (H) Section 6416(d) is amended by striking 

2 ‘‘or to the tax imposed by section 4091 in the 

3 case of refunds described in section 4091(d)’’. 

4 (I) Section 6427(j)(1) is amended by strik5 ing ‘‘, 4081, and 4091’’ and inserting ‘‘and 

6 4081’’. 

7 (J)(i) Section 6427(l)(1) is amended to read 

8 as follows: 

9 ‘‘(1) IN GENERAL.—Except as otherwise provided 

10 in this subsection and in subsection (k), if any diesel 

11 fuel or kerosene on which tax has been imposed by 

12 section 4041 or 4081 is used by any person in a non13 taxable use, the Secretary shall pay (without interest) 

14 to the ultimate purchaser of such fuel an amount 

15 equal to the aggregate amount of tax imposed on such 

16 fuel under section 4041 or 4081, as the case may be, 

17 reduced by any payment made to the ultimate vendor 

18 under paragraph (4)(B).’’. 

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

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

21 not apply to kerosene’’ and inserting ‘‘Para22 graph (1) shall not apply to kerosene (other than 

23 aviation-grade kerosene)’’.
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1 (K) Subparagraph (B) of section 6724(d)(1) 

2 is amended by striking clause (xv) and by redes3 ignating the succeeding clauses accordingly. 

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

5 amended by striking subparagraph (W) and by 

6 redesignating the succeeding subparagraphs ac7 cordingly. 

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

9 amended by adding ‘‘and’’ at the end of subpara10 graph (B) and by striking subparagraphs (C) 

11 and (D) and inserting the following new sub12 paragraph: 

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

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

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

16 amended to read as follows: 

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

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

19 determined at the rate specified in section 4081(a)(2)(B).’’. 

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

21 amended by striking paragraph (3) and by re22 designating paragraphs (4) and (5) as para23 graphs (3) and (4), respectively. 
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1 (P) Section 9508(c)(2)(A) is amended by 

2 striking ‘‘sections 4081 and 4091’’ and inserting 

3 ‘‘section 4081’’. 

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

5 subchapter A of chapter 32 is amended to read 

6 as follows:

‘‘Subpart A. Motor and aviation fuels. 

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

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

8 of subchapter A of chapter 32 is amended to read 

9 as follows: 

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

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

12 of subchapter A of chapter 32, as redesignated by 

13 paragraph (1), is amended to read as follows: 

14 ‘‘Subpart B—Special Provisions Applicable to Fuels 

15 Tax’’.

16 (e) EFFECTIVE DATE.—The amendments made by this 

17 section shall apply to aviation-grade kerosene removed, en18 tered, or sold after September 30, 2004. 

19 (f) FLOOR STOCKS TAX.—

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

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

22 any person a tax equal to—

23 (A) the tax which would have been imposed 

24 before such date on such kerosene had the amend-
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1 ments made by this section been in effect at all 

2 times before such date, reduced by 

3 (B) the tax imposed before such date under 

4 section 4091 of the Internal Revenue Code of 

5 1986, as in effect on the day before the date of 

6 the enactment of this Act. 

7 (2) LIABILITY FOR TAX AND METHOD OF PAY8 MENT.—

9 (A) LIABILITY FOR TAX.—The person hold10 ing the kerosene on October 1, 2004, to which the 

11 tax imposed by paragraph (1) applies shall be 

12 liable for such tax. 

13 (B) METHOD AND TIME FOR PAYMENT.—

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

15 at such time and in such manner as the Sec16 retary of the Treasury (or the Secretary’s dele17 gate) shall prescribe, including the nonapplica18 tion of such tax on de minimis amounts of ker19 osene. 

20 (3) TRANSFER OF FLOOR STOCK TAX REVENUES

21 TO TRUST FUNDS.—For purposes of determining the 

22 amount transferred to any trust fund, the tax im23 posed by this subsection shall be treated as imposed 

24 by section 4081 of the Internal Revenue Code of 

25 1986—
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1 (A) at the Leaking Underground Storage 

2 Tank Trust Fund financing rate under such sec3 tion to the extent of 0.1 cents per gallon, and 

4 (B) at the rate under section 

5 4081(a)(2)(A)(iv) to the extent of the remainder. 

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

7 section, kerosene shall be considered as held by a per8 son if title thereto has passed to such person (whether 

9 or not delivery to the person has been made). 

10 (5) OTHER LAWS APPLICABLE.—All provisions of 

11 law, including penalties, applicable with respect to 

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

13 insofar as applicable and not inconsistent with the 

14 provisions of this subsection, apply with respect to the 

15 floor stock tax imposed by paragraph (1) to the same 

16 extent as if such tax were imposed by such section. 

17 SEC. 203. DYE INJECTION EQUIPMENT. 

18 (a) IN GENERAL.—Section 4082(a)(2) (relating to ex19 emptions for diesel fuel and kerosene) is amended by insert20 ing ‘‘by mechanical injection’’ after ‘‘indelibly dyed’’. 

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

22 days after the date of the enactment of this Act, the Sec23 retary of the Treasury shall issue regulations regarding me24 chanical dye injection systems described in the amendment 
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1 made by subsection (a), and such regulations shall include 

2 standards for making such systems tamper resistant. 

3 (c) PENALTY FOR TAMPERING WITH OR FAILING TO

4 MAINTAIN SECURITY REQUIREMENTS FOR MECHANICAL

5 DYE INJECTION SYSTEMS.—

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

7 chapter 68 (relating to assessable penalties) is amend8 ed by adding after section 6715 the following new sec9 tion: 

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

11 SECURITY REQUIREMENTS FOR MECHANICAL 

12 DYE INJECTION SYSTEMS. 

13 ‘‘(a) IMPOSITION OF PENALTY—

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

15 mechanical dye injection system used to indelibly dye 

16 fuel for purposes of section 4082, such person shall 

17 pay a penalty in addition to the tax (if any). 

18 ‘‘(2) FAILURE TO MAINTAIN SECURITY REQUIRE19 MENTS.—If any operator of a mechanical dye injec20 tion system used to indelibly dye fuel for purposes of 

21 section 4082 fails to maintain the security standards 

22 for such system as established by the Secretary, then 

23 such operator shall pay a penalty in addition to the 

24 tax (if any).
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1 ‘‘(b) AMOUNT OF PENALTY.—The amount of the pen2 alty under subsection (a) shall be—

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

4 (1), the greater of—

5 ‘‘(A) $25,000, or 

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

7 and 

8 ‘‘(2) for each—

9 ‘‘(A) failure to maintain security standards 

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

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

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

13 after which such violation was discovered or such 

14 person should have reasonably known of such 

15 violation. 

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

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

18 under this section on any business entity, each officer, 

19 employee, or agent of such entity or other contracting 

20 party who willfully participated in any act giving 

21 rise to such penalty shall be jointly and severally lia22 ble with such entity for such penalty. 

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

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

25 group (as defined in section 1504(a)), the parent cor-
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1 poration of such entity shall be jointly and severally 

2 liable with such entity for the penalty imposed under 

3 this section.’’. 

4 (2) CLERICAL AMENDMENT.—The table of sec5 tions for part I of subchapter B of chapter 68 is 

6 amended by adding after the item related to section 

7 6715 the following new item:

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

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

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

10 after the date on which the Secretary issues the regulations 

11 described in subsection (b). 

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

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

14 administrative authority), as previously amended by this 

15 Act, is amended by striking ‘‘and’’ at the end of clause (i) 

16 and by inserting after clause (ii) the following new clause: 

17 ‘‘(iii) inspecting any books and records 

18 and any shipping papers pertaining to such 

19 fuel, and’’. 

20 (b) EFFECTIVE DATE.—The amendments made by this 

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

22 Act. 
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1 SEC. 205. REGISTRATION OF PIPELINE OR VESSEL OPERA2 TORS REQUIRED FOR EXEMPTION OF BULK 

3 TRANSFERS TO REGISTERED TERMINALS OR 

4 REFINERIES. 

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

6 exemption for bulk transfers to registered terminals or refin7 eries) is amended—

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

9 ‘‘transferred in bulk’’, and 

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

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

12 (b) EFFECTIVE DATE.—The amendments made by this 

13 section shall take effect on October 1, 2004. 

14 (c) PUBLICATION OF REGISTERED PERSONS.—Begin15 ning on July 1, 2004, the Secretary of the Treasury (or 

16 the Secretary’s delegate) shall periodically publish a current 

17 list of persons registered under section 4101 of the Internal 

18 Revenue Code of 1986 who are required to register under 

19 such section. 

20 SEC. 206. DISPLAY OF REGISTRATION. 

21 (a) IN GENERAL.—Subsection (a) of section 4101 (re22 lating to registration) is amended—

23 (1) by striking ‘‘Every’’ and inserting the fol24 lowing: 

25 ‘‘(1) IN GENERAL.—Every’’, and 
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1 (2) by adding at the end the following new para2 graph: 

3 ‘‘(2) DISPLAY OF REGISTRATION.—Every oper4 ator of a vessel required by the Secretary to register 

5 under this section shall display proof of registration 

6 through an electronic identification device prescribed 

7 by the Secretary on each vessel used by such operator 

8 to transport any taxable fuel.’’. 

9 (b) CIVIL PENALTY FOR FAILURE TO DISPLAY REG10 ISTRATION.—

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

12 chapter 68 (relating to assessable penalties) is amend13 ed by inserting after section 6716 the following new 

14 section: 

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

16 VESSELS. 

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

18 operator of a vessel who fails to display proof of registration 

19 pursuant to section 4101(a)(2) shall pay a penalty of $500 

20 for each such failure. With respect to any vessel, only one 

21 penalty shall be imposed by this section during any cal22 endar month. 

23 ‘‘(b) MULTIPLE VIOLATIONS.—In determining the pen24 alty under subsection (a) on any person, subsection (a) shall 

25 be applied by increasing the amount in subsection (a) by 
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1 the product of such amount and the aggregate number of 

2 penalties (if any) imposed with respect to prior months by 

3 this section on such person (or a related person or any pred4 ecessor of such person or related person). 

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

6 shall be imposed under this section with respect to any fail7 ure if it is shown that such failure is due to reasonable 

8 cause.’’. 

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for part I of subchapter B of chapter 68 is 

11 amended by inserting after the item relating to sec12 tion 6716 the following new item:

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

13 (c) EFFECTIVE DATES.—

14 (1) SUBSECTION (a).—The amendments made by 

15 subsection (a) shall take effect on October 1, 2004. 

16 (2) SUBSECTION (b).—The amendments made by 

17 subsection (b) shall apply to penalties imposed after 

18 September 30, 2004. 

19 SEC. 207. PENALTIES FOR FAILURE TO REGISTER AND FAIL20 URE TO REPORT. 

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

22 7272 (relating to penalty for failure to register) is amended 

23 by inserting ‘‘($10,000 in the case of a failure to register 

24 under section 4101)’’ after ‘‘$50’’.
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1 (b) INCREASED CRIMINAL PENALTY.—Section 7232 

2 (relating to failure to register under section 4101, false rep3 resentations of registration status, etc.) is amended by strik4 ing ‘‘$5,000’’ and inserting ‘‘$10,000’’. 

5 (c) ASSESSABLE PENALTY FOR FAILURE TO REG6 ISTER.—

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

8 chapter 68 (relating to assessable penalties) is amend9 ed by inserting after section 6717 the following new 

10 section: 

11 ‘‘SEC. 6718. FAILURE TO REGISTER. 

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

13 required to register under section 4101 and fails to do so 

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

15 ‘‘(b) AMOUNT OF PENALTY.—The amount of the pen16 alty under subsection (a) shall be—

17 ‘‘(1) $10,000 for each initial failure to register, 

18 and 

19 ‘‘(2) $1,000 for each day thereafter such person 

20 fails to register. 

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

22 shall be imposed under this section with respect to any fail23 ure if it is shown that such failure is due to reasonable 

24 cause.’’. 
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1 (2) CLERICAL AMENDMENT.—The table of sec2 tions for part I of subchapter B of chapter 68 is 

3 amended by inserting after the item relating to sec4 tion 6717 the following new item:

‘‘Sec. 6718. Failure to register.’’.

5 (d) ASSESSABLE PENALTY FOR FAILURE TO RE6 PORT.—

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

8 chapter 68 (relating to assessable penalties) is amend9 ed by adding at the end the following new section: 

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

11 SECTION 4101. 

12 ‘‘(a) IN GENERAL.—In the case of each failure de13 scribed in subsection (b) by any person with respect to a 

14 vessel or facility, such person shall pay a penalty of $10,000 

15 in addition to the tax (if any). 

16 ‘‘(b) FAILURES SUBJECT TO PENALTY.—For purposes 

17 of subsection (a), the failures described in this subsection 

18 are—

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

20 4101(d) on or before the date prescribed therefor, and 

21 ‘‘(2) any failure to include all of the information 

22 required to be shown on such report or the inclusion 

23 of incorrect information. 

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

25 shall be imposed under this section with respect to any fail-
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1 ure if it is shown that such failure is due to reasonable 

2 cause.’’. 

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for part II of subchapter B of chapter 68 is 

5 amended by adding at the end the following new item:

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

6 (e) EFFECTIVE DATE.—The amendments made by this 

7 section shall apply to penalties imposed after September 30, 

8 2004. 

9 SEC. 208. COLLECTION FROM CUSTOMS BOND WHERE IM10 PORTER NOT REGISTERED. 

11 (a) TAX AT POINT OF ENTRY WHERE IMPORTER NOT

12 REGISTERED.—Subpart B of part III of subchapter A of 

13 chapter 32, as redesignated by section 202(d), is amended 

14 by adding after section 4103 the following new section:

15 ‘‘SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IM16 PORTER NOT REGISTERED. 

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

18 jointly and severally liable for the tax imposed by section 

19 4081(a)(1)(A)(iii) if, under regulations prescribed by the 

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

21 registered under section 4101 is liable for such tax. 

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

23 for which any importer of record is liable under subsection 

24 (a), or for which any importer of record that is not a person 

25 registered under section 4101 is otherwise liable, is not paid 
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1 on or before the last date prescribed for payment, the Sec2 retary may collect such tax from the Customs bond posted 

3 with respect to the importation of the taxable fuel to which 

4 the tax relates. For purposes of determining the jurisdiction 

5 of any court of the United States or any agency of the 

6 United States, any action by the Secretary described in the 

7 preceding sentence shall be treated as an action to collect 

8 the tax from a bond described in section 4101(b)(1) and 

9 not as an action to collect from a bond relating to the im10 portation of merchandise.’’. 

11 (b) CONFORMING AMENDMENT.—The table of sections 

12 for subpart B of part III of subchapter A of chapter 32, 

13 as redesignated by section 202(d), is amended by adding 

14 after the item related to section 4103 the following new 

15 item:

‘‘Sec. 4104. Collection from Customs bond where importer not registered.’’.

16 (c) EFFECTIVE DATE.—The amendments made by this 

17 section shall apply with respect to fuel entered after Sep18 tember 30, 2004. 

19 SEC. 209. MODIFICATIONS OF TAX ON USE OF CERTAIN VE20 HICLES. 

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

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

23 4481(c)(2) (relating to where vehicle destroyed or sto24 len) is amended by striking ‘‘destroyed or stolen’’ both 
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1 places it appears and inserting ‘‘sold, destroyed, or 

2 stolen’’. 

3 (2) CONFORMING AMENDMENT.—The heading for 

4 section 4481(c)(2) is amended by striking ‘‘DE5 STROYED OR STOLEN’’ and inserting ‘‘SOLD, DE6 STROYED, OR STOLEN’’. 

7 (b) REPEAL OF INSTALLMENT PAYMENT.—

8 (1) Section 6156 (relating to installment pay9 ment of tax on use of highway motor vehicles) is re10 pealed. 

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

12 chapter 62 is amended by striking the item relating 

13 to section 6156. 

14 (c) ELECTRONIC FILING.—Section 4481 is amended by 

15 redesignating subsection (e) as subsection (f) and by insert16 ing after subsection (d) the following new subsection: 

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

18 return under this section with respect to 25 or more vehicles 

19 for any taxable period shall file such return electronically.’’. 

20 (d) REPEAL OF REDUCTION IN TAX FOR CERTAIN

21 TRUCKS.—Section 4483 is amended by striking subsection 

22 (f). 

23 (e) EFFECTIVE DATE.—The amendments made by this 

24 section shall apply to taxable periods beginning after the 

25 date of the enactment of this Act.
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1 SEC. 210. MODIFICATION OF ULTIMATE VENDOR REFUND 

2 CLAIMS WITH RESPECT TO FARMING. 

3 (a) IN GENERAL.—

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

5 adding at the end the following new paragraph: 

6 ‘‘(6) REGISTERED VENDORS PERMITTED TO AD7 MINISTER CERTAIN CLAIMS FOR REFUND OF DIESEL

8 FUEL AND KEROSENE SOLD TO FARMERS.—

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

10 or kerosene used on a farm for farming purposes 

11 (within the meaning of section 6420(c)), para12 graph (1) shall not apply to the aggregate 

13 amount of such diesel fuel or kerosene if such 

14 amount does not exceed 250 gallons (as deter15 mined under subsection (i)(5)(A)(iii)). 

16 ‘‘(B) PAYMENT TO ULTIMATE VENDOR.—The 

17 amount which would (but for subparagraph (A)) 

18 have been paid under paragraph (1) with respect 

19 to any fuel shall be paid to the ultimate vendor 

20 of such fuel, if such vendor—

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

22 and 

23 ‘‘(ii) meets the requirements of sub24 paragraph (A), (B), or (D) of section 

25 6416(a)(1).’’. 
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1 (2) FILING OF CLAIMS.—Section 6427(i) is 

2 amended by inserting at the end the following new 

3 paragraph: 

4 ‘‘(5) SPECIAL RULE FOR VENDOR REFUNDS WITH

5 RESPECT TO FARMERS.—

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

7 under subsection (l)(6) by any person with re8 spect to fuel sold by such person for any pe9 riod—

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

11 more in the case of kerosene) is payable 

12 under subsection (l)(6), 

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

14 and 

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

16 gallons for each farmer for which there is a 

17 claim. 

18 Notwithstanding subsection (l)(1), paragraph 

19 (3)(B) shall apply to claims filed under the pre20 ceding sentence. 

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

22 filed under this paragraph shall be allowed un23 less filed on or before the last day of the first 

24 quarter following the earliest quarter included in 

25 the claim.’’. 
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1 (3) CONFORMING AMENDMENTS.—

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

3 read as follows: 

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

5 not apply to diesel fuel or kerosene used by a 

6 State or local government.’’. 

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

8 amended by striking ‘‘FARMERS AND’’. 

9 (b) EFFECTIVE DATE.—The amendment made by this 

10 section shall apply to fuels sold for nontaxable use after the 

11 date of the enactment of this Act. 

12 SEC. 211. DEDICATION OF REVENUES FROM CERTAIN PEN13 ALTIES TO THE HIGHWAY TRUST FUND. 

14 (a) IN GENERAL.—Subsection (b) of section 9503 (re15 lating to transfer to Highway Trust Fund of amounts 

16 equivalent to certain taxes) is amended by redesignating 

17 paragraph (5) as paragraph (6) and inserting after para18 graph (4) the following new paragraph: 

19 ‘‘(5) CERTAIN PENALTIES.—There are hereby ap20 propriated to the Highway Trust Fund amounts 

21 equivalent to the penalties paid under sections 6715, 

22 6715A, 6717, 6718, 6725, 7232, and 7272 (but only 

23 with regard to penalties under such section related to 

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

25 (b) CONFORMING AMENDMENTS.—
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1 (1) The heading of subsection (b) of section 9503 

2 is amended by inserting ‘‘AND PENALTIES’’ after 

3 ‘‘TAXES’’. 

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

5 9503(b) is amended by striking ‘‘IN GENERAL’’ and 

6 inserting ‘‘CERTAIN TAXES’’. 

7 (c) EFFECTIVE DATE.—The amendments made by this 

8 section shall apply to penalties assessed after October 1, 

9 2004.

10 TITLE III—OTHER EXCISE TAX 

11 PROVISIONS 

12 SEC. 301. TAXABLE FUEL REFUNDS FOR CERTAIN ULTIMATE 

13 VENDORS. 

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

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

16 to read as follows: 

17 ‘‘(4) REGISTERED ULTIMATE VENDOR TO ADMIN18 ISTER CREDITS AND REFUNDS OF GASOLINE TAX.—

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

20 subsection, if an ultimate vendor purchases any 

21 gasoline on which tax imposed by section 4081 

22 has been paid and sells such gasoline to an ulti23 mate purchaser described in subparagraph (C) 

24 or (D) of subsection (b)(2) (and such gasoline is 

25 for a use described in such subparagraph), such
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1 ultimate vendor shall be treated as the person 

2 (and the only person) who paid such tax, but 

3 only if such ultimate vendor is registered under 

4 section 4101. For purposes of this subparagraph, 

5 if the sale of gasoline is made by means of a 

6 credit card, the person extending the credit to the 

7 ultimate purchaser shall be deemed to be the ulti8 mate vendor. 

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

10 and timing of any claim under subparagraph 

11 (A) shall be the same as for claims under section 

12 6427(i)(4), except that the rules of section 

13 6427(i)(3)(B) regarding electronic claims shall 

14 not apply unless the ultimate vendor has cer15 tified to the Secretary for the most recent quarter 

16 of the taxable year that all ultimate purchasers 

17 of the vendor covered by such claim are certified 

18 and entitled to a refund under subparagraph (C) 

19 or (D) of subsection (b)(2).’’. 

20 (b) CREDIT CARD PURCHASES OF DIESEL FUEL OR

21 KEROSENE BY STATE AND LOCAL GOVERNMENTS.—Section 

22 6427(l)(5)(C) (relating to nontaxable uses of diesel fuel, ker23 osene, and aviation fuel) is amended by adding at the end 

24 the following new flush sentence: ‘‘For purposes of this sub25 paragraph, if the sale of diesel fuel or kerosene is made by 
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1 means of a credit card, the person extending the credit to 

2 the ultimate purchaser shall be deemed to be the ultimate 

3 vendor.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by this 

5 section shall take effect on October 1, 2004. 

6 SEC. 302. TWO-PARTY EXCHANGES. 

7 (a) IN GENERAL.—Subpart B of part III of subchapter 

8 A of chapter 32, as amended by this Act, is amended by 

9 adding after section 4104 the following new section: 

10 ‘‘SEC. 4105. TWO-PARTY EXCHANGES. 

11 ‘‘(a) IN GENERAL.—In a two-party exchange, the de12 livering person shall not be liable for the tax imposed under 

13 section 4081(a)(1)(A)(ii). 

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

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

16 taxable fuel is transferred from a delivering person reg17 istered under section 4101 as a taxable fuel registrant fuel 

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

19 following occur: 

20 ‘‘(1) The transaction includes a transfer from the 

21 delivering person, who holds the inventory position 

22 for taxable fuel in the terminal as reflected in the 

23 records of the terminal operator. 
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1 ‘‘(2) The exchange transaction occurs before or 

2 contemporaneous with completion of removal across 

3 the rack from the terminal by the receiving person. 

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

5 records treats the receiving person as the person that 

6 removes the taxable fuel across the terminal rack for 

7 purposes of reporting the transaction to the Secretary. 

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

9 contract.’’. 

10 (b) CONFORMING AMENDMENT.—The table of sections 

11 for subpart B of part III of subchapter A of chapter 32, 

12 as amended by this Act, is amended by adding after the 

13 item relating to section 4104 the following new item:

‘‘Sec. 4105. Two-party exchanges.’’.

14 (c) EFFECTIVE DATE.—The amendment made by this 

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

16 Act. 

17 SEC. 303. SIMPLIFICATION OF TAX ON TIRES. 

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

19 amended to read as follows: 

20 ‘‘(a) IMPOSITION AND RATE OF TAX.—There is hereby 

21 imposed on taxable tires sold by the manufacturer, pro22 ducer, or importer thereof a tax at the rate of 9.4 cents (4.7 

23 cents in the case of a biasply tire) for each 10 pounds so 

24 much of the maximum rated load capacity thereof as ex25 ceeds 3,500 pounds.’’
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1 (b) TAXABLE TIRE.—Section 4072 is amended by re2 designating subsections (a) and (b) as subsections (b) and 

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

4 so redesignated) the following new subsection: 

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

6 the term ‘taxable tire’ means any tire of the type used on 

7 highway vehicles if wholly or in part made of rubber and 

8 if marked pursuant to Federal regulations for highway 

9 use.’’

10 (c) EXEMPTION FOR TIRES SOLD TO DEPARTMENT OF

11 DEFENSE.—Section 4073 is amended to read as follows: 

12 ‘‘SEC. 4073. EXEMPTIONS. 

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

14 tires sold for the exclusive use of the Department of Defense 

15 or the Coast Guard.’’ 

16 (d) CONFORMING AMENDMENTS.—

17 (1) Section 4071 is amended by striking sub18 section (c) and by moving subsection (e) after sub19 section (b) and redesignating subsection (e) as sub20 section (c). 

21 (2) The item relating to section 4073 in the table 

22 of sections for part II of subchapter A of chapter 32 

23 is amended to read as follows:

‘‘Sec. 4073. Exemptions.’’

24 (e) EFFECTIVE DATE.—The amendments made by this 

25 section shall apply to sales in calendar years beginning 
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1 more than 30 days after the date of the enactment of this 

2 Act.
Union Calendar No. 257

108TH CONGRESS 

2D SESSION H. R. 3971

[Report No. 108–444] 

A BILL

To amend the Internal Revenue Code of 1986 to 

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

MARCH 23, 2004

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union,