I 

108TH CONGRESS 

2D SESSION H. R. 3967

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 12, 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. REFERENCE, ETC. 

4 (a) AMENDMENT OF 1986 CODE.—Except as other5 wise expressly provided, whenever in this Act an amend6 ment or repeal is expressed in terms of an amendment 

7 to, or repeal of, a section or other provision, the reference 

8 shall be considered to be made to a section or other provi9 sion of the Internal Revenue Code of 1986. 
2

•HR 3967 IH 

1 (b) TABLE OF CONTENTS.—

TITLE I—RESTRUCTURING OF INCENTIVES FOR ALCOHOL 

FUELS, ETC. 

Sec. 101. Reduced rates of tax on gasohol replaced with excise tax credit; repeal of other alcohol-based fuel incentives; etc. 

Sec. 102. Alcohol fuel subsidies borne by general fund. 

TITLE II—REDUCTION OF FUEL TAX EVASION 

Sec. 201. Exemption from certain excise taxes for mobile machinery. 

Sec. 202. Taxation of aviation-grade kerosene. 

Sec. 203. Dye injection equipment. 

Sec. 204. Authority to inspect on-site records. 

Sec. 205. Registration of pipeline or vessel operators required for exemption of 

bulk transfers to registered terminals or refineries. 

Sec. 206. Display of registration. 

Sec. 207. Penalties for failure to register and failure to report. 

Sec. 208. Collection from Customs bond where importer not registered. 

Sec. 209. Modifications of tax on use of certain vehicles. 

Sec. 210. Modification of ultimate vendor refund claims with respect to farming. 

Sec. 211. Dedication of revenues from certain penalties to the Highway Trust 

Fund. 

TITLE III—OTHER EXCISE TAX PROVISIONS 

Sec. 301. Taxable fuel refunds for certain ultimate vendors. 

Sec. 302. Two-party exchanges. 

Sec. 303. Simplification of tax on tires. 

TITLE IV—PRIVATE ACTIVITY BONDS FOR MODERN 

TRANSPORTATION 

Sec. 401. Treatment of bonds for certain transportation facilities as exempt facility bonds. 

TITLE V—REVENUE PROVISIONS 

Subtitle A—Leasing 

Sec. 501. Reform of tax treatment of certain leasing arrangements. 

Sec. 502. Limitation on deductions allocable to property used by governments 

or other tax-exempt entities. 

Sec. 503. Effective date. 

Subtitle B—Charitable Giving 

Sec. 511. Donations of motor vehicles, boats, and aircraft. 

Sec. 512. Increased reporting for noncash charitable contributions. 

Sec. 513. Treatment of charitable contributions of patents and similar property. 

Subtitle C—Tax Collection Contracts 

Sec. 521. Qualified tax collection contracts. 
3

•HR 3967 IH 

Subtitle D—Other Provisions 

Sec. 531. Extension of amortization of intangibles to sports franchises. 

Sec. 532. Class lives for utility grading costs. 

Sec. 533. Modification of continuing levy on payments to Federal venders.

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 
4

•HR 3967 IH 

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

2 exceeds such liability for such period, shall (ex3 cept as provided in subsection (k)) be paid sub4 ject to subsection (i)(3) by the Secretary with5 out interest. 

6 ‘‘(2) SPECIAL RULES.—

7 ‘‘(A) ONLY CERTAIN ALCOHOL TAKEN

8 INTO ACCOUNT.—For purposes of paragraph 

9 (1), section 40 shall be applied—

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

11 with a proof of less than 190, and 

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

13 gallon equivalent of ethyl tertiary butyl 

14 ether or other ethers produced from such 

15 alcohol. 

16 ‘‘(B) TREATMENT OF REFINERS.—For 

17 purposes of paragraph (1), in the case of a mix18 ture—

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

20 in subparagraph (A)(ii), and 

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

22 at a refinery prior to any taxable event, 

23 section 40 shall be applied by treating such per24 son as having sold such mixture at the time of 
5

•HR 3967 IH 

1 its removal from the refinery (and only at such 

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

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

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

5 of section 40(d)(3) shall apply for purposes of this 

6 subsection. 

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

8 only to periods to which section 40 applies, deter9 mined by substituting in section 40(e)—

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

11 31, 2007’, and 

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

13 2008’.’’. 

14 (2) REVISION OF RULES FOR PAYMENT OF

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

16 amended to read as follows: 

17 ‘‘(3) SPECIAL RULE FOR ALCOHOL MIXTURE

18 CREDIT.—

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

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

21 any period—

22 ‘‘(i) for which $200 or more is pay23 able under such subsection (f)(1)(B), and

24 ‘‘(ii) which is not less than 1 week. 
6

•HR 3967 IH 

1 ‘‘(B) PAYMENT OF CLAIM.—Notwith2 standing subsection (f)(1)(B), if the Secretary 

3 has not paid pursuant to a claim filed under 

4 this section within 45 days of the date of the 

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

6 electronic claim), the claim shall be paid with 

7 interest from such date determined by using the 

8 overpayment rate and method under section 

9 6621. 

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

11 filed under this paragraph shall be allowed un12 less filed on or before the last day of the first 

13 quarter following the earliest quarter included 

14 in the claim.’’. 

15 (b) REPEAL OF OTHER INCENTIVES FOR FUEL MIX16 TURES.—

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

18 to read as follows: 

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

20 USE.—

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

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

23 used in an off-highway business use. 

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

25 which no tax was imposed by reason of paragraph 
7

•HR 3967 IH 

1 (1) is used otherwise than in an off-highway busi2 ness use, a tax shall be imposed by paragraph 

3 (1)(B), (2)(B), or (3)(A)(ii) of subsection (a) 

4 (whichever is appropriate) and by the corresponding 

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

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

7 For purposes of this subsection, the term ‘off-high8 way business use’ has the meaning given to such 

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

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

11 use in a diesel-powered train.’’. 

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

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

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

15 (c) TRANSFERS TO HIGHWAY TRUST FUND.—Para16 graph (4) of section 9503(b) is amended by adding ‘‘or’’ 

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

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

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

20 (d) CONFORMING AMENDMENTS.—

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

22 read as follows: 

23 ‘‘(c) COORDINATION WITH EXCISE TAX BENE24 FITS.—The amount of the credit determined under this 

25 section with respect to any alcohol shall, under regulations 
8

•HR 3967 IH 

1 prescribed by the Secretary, be properly reduced to take 

2 into account the benefit provided with respect to such alco3 hol under section 6427(f).’’. 

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

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

6 4081(c)’’ and inserting ‘‘under section 6427(f)’’. 

7 (e) EFFECTIVE DATES.—

8 (1) IN GENERAL.—Except as provided by para9 graph (2), the amendments made by this section 

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

11 2004. 

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

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

14 September 30, 2003. 

15 SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL 

16 FUND. 

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

18 amended by adding at the end the following new flush sen19 tence: 

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

21 taxes received under section 4081 shall include any 

22 amount treated as a payment under section 

23 6427(f)(1)(A) and shall not be reduced by the 

24 amount paid under section 6427(f)(1)(B).’’. 
9

•HR 3967 IH 

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

2 section 9503(c)(2) is amended by adding at the end the 

3 following new sentence: ‘‘Clauses (i)(III) and (ii) shall not 

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

5 (c) EFFECTIVE DATE.—

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

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

8 September 30, 2004. 

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

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

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

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

13 fuel used after such date. 

14 TITLE II—REDUCTION OF FUEL 

15 TAX EVASION 

16 SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR 

17 MOBILE MACHINERY. 

18 (a) EXEMPTION FROM TAX ON HEAVY TRUCKS AND

19 TRAILERS SOLD AT RETAIL.—

20 (1) IN GENERAL.—Section 4053 (relating to ex21 emptions) is amended by adding at the end the fol22 lowing new paragraph: 

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

24 consists of a chassis—
10

•HR 3967 IH 

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

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

3 means) machinery or equipment to perform a 

4 construction, manufacturing, processing, farm5 ing, mining, drilling, timbering, or similar oper6 ation if the operation of the machinery or 

7 equipment is unrelated to transportation on or 

8 off the public highways, 

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

10 serve only as a mobile carriage and mount (and 

11 a power source, where applicable) for the par12 ticular machinery or equipment involved, wheth13 er or not such machinery or equipment is in op14 eration, and 

15 ‘‘(C) which, by reason of such special de16 sign, could not, without substantial structural 

17 modification, be used as a component of a vehi18 cle designed to perform a function of trans19 porting any load other than that particular ma20 chinery or equipment or similar machinery or 

21 equipment requiring such a specially designed 

22 chassis.’’.

23 (2) EFFECTIVE DATE.—The amendment made 

24 by this subsection shall take effect on the day after 

25 the date of the enactment of this Act. 
11

•HR 3967 IH 

1 (b) EXEMPTION FROM TAX ON USE OF CERTAIN VE2 HICLES.—

3 (1) IN GENERAL.—Section 4483 (relating to ex4 emptions) is amended by redesignating subsection 

5 (g) as subsection (h) and by inserting after sub6 section (f) the following new subsection: 

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

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

9 described in section 4053(8).’’. 

10 (2) EFFECTIVE DATE.—The amendments made 

11 by this subsection shall take effect on the day after 

12 the date of the enactment of this Act. 

13 (c) REFUND OF FUEL TAXES.—

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

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

16 the end the following new subparagraph: 

17 ‘‘(C) USES IN MOBILE MACHINERY.—

18 ‘‘(i) IN GENERAL.—The term ‘off19 highway business use’ shall include any use 

20 in a vehicle which meets the requirements 

21 described in clause (ii). 

22 ‘‘(ii) REQUIREMENTS FOR MOBILE

23 MACHINERY.—The requirements described 

24 in this clause are—

25 ‘‘(I) the design-based test, and 
12

•HR 3967 IH 

1 ‘‘(II) the use-based test. 

2 ‘‘(iii) DESIGN-BASED TEST.—For pur3 poses of clause (ii)(I), the design-based 

4 test is met if the vehicle consists of a chas5 sis—

6 ‘‘(I) to which there has been per7 manently mounted (by welding, bolt8 ing, riveting, or other means) machin9 ery or equipment to perform a con10 struction, manufacturing, processing, 

11 farming, mining, drilling, timbering, 

12 or similar operation if the operation of 

13 the machinery or equipment is unre14 lated to transportation on or off the 

15 public highways, 

16 ‘‘(II) which has been specially de17 signed to serve only as a mobile car18 riage and mount (and a power source, 

19 where applicable) for the particular 

20 machinery or equipment involved, 

21 whether or not such machinery or 

22 equipment is in operation, and 

23 ‘‘(III) which, by reason of such 

24 special design, could not, without sub25 stantial structural modification, be 
13

•HR 3967 IH 

1 used as a component of a vehicle de2 signed to perform a function of trans3 porting any load other than that par4 ticular machinery or equipment or 

5 similar machinery or equipment re6 quiring such a specially designed chas7 sis. 

8 ‘‘(iv) USE-BASED TEST.—For pur9 poses of clause (ii)(II), the use-based test 

10 is met if the use of the vehicle on public 

11 highways was less than 7,500 miles during 

12 the taxpayer’s taxable year.’’. 

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

14 section 4082, as amended by section 202, is amend15 ed by inserting before the period at the end ‘‘and 

16 such term shall not include any use described in sec17 tion 6421(e)(2)(C).’’. 

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

19 6427(i)(2) (relating to exceptions) is amended by 

20 adding at the end the following new subparagraph: 

21 ‘‘(C) NONAPPLICATION OF PARAGRAPH.—

22 This paragraph shall not apply to any fuel used 

23 solely in any off-highway business use described 

24 in section 6421(e)(2)(C).’’. 
14

•HR 3967 IH 

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-
15

•HR 3967 IH 

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, 
16

•HR 3967 IH 

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-
17

•HR 3967 IH 

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.—
18

•HR 3967 IH 

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: 
19

•HR 3967 IH 

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 
20

•HR 3967 IH 

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)’’. 
21

•HR 3967 IH 

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
22

•HR 3967 IH 

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’’. 
23

•HR 3967 IH 

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-
24

•HR 3967 IH 

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-
25

•HR 3967 IH 

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—
26

•HR 3967 IH 

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 minimus 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
27

•HR 3967 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. 
28

•HR 3967 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). 
29

•HR 3967 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-
30

•HR 3967 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: 
31

•HR 3967 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.
32

•HR 3967 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, 
33

•HR 3967 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. 
34

•HR 3967 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 failure to 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. 
35

•HR 3967 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—
36

•HR 3967 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:
37

•HR 3967 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:
38

•HR 3967 IH 

‘‘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. 
39

•HR 3967 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 
40

•HR 3967 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—
41

•HR 3967 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’’.
42

•HR 3967 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’’. 
43

•HR 3967 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 
44

•HR 3967 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. 
45

•HR 3967 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. 
46

•HR 3967 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
47

•HR 3967 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.
48

•HR 3967 IH 

1 TITLE IV—PRIVATE ACTIVITY 

2 BONDS FOR MODERN TRANS3 PORTATION 

4 SEC. 401. TREATMENT OF BONDS FOR CERTAIN TRANSPOR5 TATION FACILITIES AS EXEMPT FACILITY 

6 BONDS. 

7 (a) TREATMENT AS EXEMPT FACILITY BONDS.—

8 Subsection (a) of section 142 (relating to exempt facility 

9 bond) is amended by striking ‘‘or’’ at the end of paragraph 

10 (12), by striking the period at the end of paragraph (13) 

11 and inserting ‘‘, or’’, and by adding at the end the fol12 lowing new paragraph: 

13 ‘‘(14) qualified transportation facilities.’’. 

14 (b) QUALIFIED TRANSPORTATION FACILITIES.—Sec15 tion 142 is amended by adding at the end the following 

16 new subsection: 

17 ‘‘(l) QUALIFIED TRANSPORTATION FACILITIES.—

18 ‘‘(1) IN GENERAL.—For purposes of subsection 

19 (a)(14), the term ‘qualified transportation facilities’ 

20 means—

21 ‘‘(A) any surface transportation project 

22 which is eligible to receive Federal assistance 

23 under title 23, United States Code (as in effect 

24 on the date of the enactment of this sub25 section), 
49

•HR 3967 IH 

1 ‘‘(B) any project for an international 

2 bridge or tunnel—

3 ‘‘(i) for which an international entity 

4 authorized under Federal or State law is 

5 responsible, and 

6 ‘‘(ii) which is eligible to receive Fed7 eral assistance under title 23, United 

8 States Code (as in effect on the date of the 

9 enactment of this subsection), 

10 ‘‘(C) any facility for the transfer of freight 

11 from truck to rail or rail to truck (including 

12 any temporary storage facility directly related 

13 to such transfer) which is eligible to receive 

14 Federal assistance under—

15 ‘‘(i) title 23, United States Code (as 

16 in effect on the date of the enactment of 

17 this subsection), or 

18 ‘‘(ii) title 49, United States Code (as 

19 in effect on the date of the enactment of 

20 this subsection), and 

21 ‘‘(D) any facility described in subsection 

22 (a)(3) (as modified and limited by subsections 

23 (b) and (c)). 

24 ‘‘(2) LIMITATION ON AGGREGATE FACE

25 AMOUNT OF TAX-EXEMPT FINANCING.—
50

•HR 3967 IH 

1 ‘‘(A) IN GENERAL.—An issue shall not be 

2 treated as an issue described in subsection 

3 (a)(14) unless—

4 ‘‘(i) the Secretary has allocated an 

5 amount to such issue under this para6 graph, and 

7 ‘‘(ii) the aggregate face amount of 

8 bonds issued pursuant to such issue does 

9 not exceed such amount. 

10 ‘‘(B) ALLOCATION.—The Secretary of 

11 Transportation, after consultation with the Sec12 retary, may allocate amounts to issues under 

13 this paragraph in such manner as the Secretary 

14 of Transportation (after so consulting) deter15 mines appropriate, except that the aggregate 

16 amount so allocated shall not exceed 

17 $15,000,000,000. 

18 ‘‘(C) REFUNDING BONDS.—Subparagraph 

19 (A) shall not apply with respect to any bond the 

20 proceeds of which are used exclusively to refund 

21 a bond issued pursuant to subsection (a)(14) 

22 (or a bond which is a part of a series of 

23 refundings of a bond so issued) if the amount 

24 of the refunding bond does not exceed the out25 standing amount of the refunded bond.’’. 
51

•HR 3967 IH 

1 (c) EXEMPTION FROM GENERAL STATE VOLUME

2 CAPS.—Paragraph (3) of section 146(g) (relating to ex3 ception for certain bonds) is amended—

4 (1) by striking ‘‘or (13)’’ and inserting ‘‘(13), 

5 or (14)’’, and 

6 (2) by striking ‘‘and qualified public educational 

7 facilities’’ and inserting ‘‘qualified public educational 

8 facilities, and qualified transportation facilities’’. 

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

10 this section shall apply to bonds issued after the date of 

11 the enactment of this Act. 

12 TITLE V—REVENUE PROVISIONS

13 Subtitle A—Leasing 

14 SEC. 501. REFORM OF TAX TREATMENT OF CERTAIN LEAS15 ING ARRANGEMENTS. 

16 (a) CLARIFICATION OF RECOVERY PERIOD FOR TAX17 EXEMPT USE PROPERTY SUBJECT TO LEASE.—Subpara18 graph (A) of section 168(g)(3) (relating to special rules 

19 for determining class life) is amended by inserting ‘‘(not20 withstanding any other subparagraph of this paragraph)’’ 

21 after ‘‘shall’’. 

22 (b) LIMITATION ON DEPRECIATION PERIOD FOR

23 SOFTWARE LEASED TO TAX-EXEMPT ENTITY.—Para24 graph (1) of section 167(f) is amended by adding at the 

25 end the following new subparagraph:
52

•HR 3967 IH 

1 ‘‘(C) TAX-EXEMPT USE PROPERTY SUB2 JECT TO LEASE.—In the case of computer soft3 ware which would be tax-exempt use property 

4 as defined in subsection (h) of section 168 if 

5 such section applied to computer software, the 

6 useful life under subparagraph (A) shall not be 

7 less than 125 percent of the lease term (within 

8 the meaning of section 168(i)(3)).’’. 

9 (c) LEASE TERM TO INCLUDE RELATED SERVICE

10 CONTRACTS.—Subparagraph (A) of section 168(i)(3) (re11 lating to lease term) is amended by striking ‘‘and’’ at the 

12 end of clause (i), by redesignating clause (ii) as clause 

13 (iii), and by inserting after clause (i) the following new 

14 clause: 

15 ‘‘(ii) the term of a lease shall include 

16 the term of any service contract or similar 

17 arrangement (whether or not treated as a 

18 lease under section 7701(e))—

19 ‘‘(I) which is part of the same 

20 transaction (or series of related trans21 actions) which includes the lease, and 

22 ‘‘(II) which is with respect to the 

23 property subject to the lease or sub24 stantially similar property, and’’. 
53

•HR 3967 IH 

1 SEC. 502. LIMITATION ON DEDUCTIONS ALLOCABLE TO 

2 PROPERTY USED BY GOVERNMENTS OR 

3 OTHER TAX-EXEMPT ENTITIES. 

4 (a) IN GENERAL.—Subpart C of part II of sub5 chapter E of chapter 1 (relating to taxable year for which 

6 deductions taken) is amended by adding at the end the 

7 following new section: 

8 ‘‘SEC. 470. LIMITATION ON DEDUCTIONS ALLOCABLE TO 

9 PROPERTY USED BY GOVERNMENTS OR 

10 OTHER TAX-EXEMPT ENTITIES. 

11 ‘‘(a) LIMITATION ON LOSSES.—Except as otherwise 

12 provided in this section, a tax-exempt use loss for any tax13 able year shall not be allowed. 

14 ‘‘(b) DISALLOWED LOSS CARRIED TO NEXT YEAR.—

15 Any tax-exempt use loss with respect to any tax-exempt 

16 use property which is disallowed under subsection (a) for 

17 any taxable year shall be treated as a deduction with re18 spect to such property in the next taxable year. 

19 ‘‘(c) DEFINITIONS.—For purposes of this section— 

20 ‘‘(1) TAX-EXEMPT USE LOSS.—The term ‘tax21 exempt use loss’ means, with respect to any taxable 

22 year, the amount (if any) by which— 

23 ‘‘(A) the sum of— 

24 ‘‘(i) the aggregate deductions (other 

25 than interest) directly allocable to a tax-ex26 empt use property, plus 
54

•HR 3967 IH 

1 ‘‘(ii) the aggregate deductions for in2 terest properly allocable to such property, 

3 exceed 

4 ‘‘(B) the aggregate income from such 

5 property. 

6 ‘‘(2) TAX-EXEMPT USE PROPERTY.—The term 

7 ‘tax-exempt use property’ has the meaning given to 

8 such term by section 168(h) (without regard to 

9 paragraphs (1)(C) and (3) thereof and determined 

10 as if property described in section 167(f)(1)(B) were 

11 tangible property). 

12 ‘‘(d) EXCEPTION FOR CERTAIN LEASES.—This sec13 tion shall not apply to any lease of property which meets 

14 the requirements of all of the following paragraphs: 

15 ‘‘(1) PROPERTY NOT FINANCED WITH TAX-EX16 EMPT BONDS.—A lease of property meets the re17 quirements of this paragraph if no part of the prop18 erty was (at any time) financed (directly or indi19 rectly) from the proceeds of an obligation the inter20 est on which is exempt from tax under section 

21 103(a) and which (or any refunding bond of which) 

22 is outstanding when the lease is entered into. The 

23 Secretary shall by regulations provide a de minimis 

24 exception from the preceding sentence. 

25 ‘‘(2) AVAILABILITY OF FUNDS.— 
55

•HR 3967 IH 

1 ‘‘(A) IN GENERAL.—A lease of property 

2 meets the requirements of this paragraph if (at 

3 all times during the lease term) not more than 

4 an allowable amount of funds are— 

5 ‘‘(i) subject to any arrangement re6 ferred to in subparagraph (B), or 

7 ‘‘(ii) set aside or expected to be set 

8 aside, 

9 to or for the benefit of the lessor or any lender, 

10 or to or for the benefit of the lessee to satisfy 

11 the lessee’s obligations or options under the 

12 lease. For purposes of clause (ii), funds shall be 

13 treated as set aside or expected to be set aside 

14 if a reasonable person would conclude, based on 

15 the facts and circumstances, that such funds 

16 are set aside or expected to be set aside. 

17 ‘‘(B) ARRANGEMENTS.—The arrangements 

18 referred to in this subparagraph include a de19 feasance arrangement, a loan by the lessee to 

20 the lessor or any lender, a deposit arrangement, 

21 a letter of credit collateralized with cash or cash 

22 equivalents, a payment undertaking agreement, 

23 a lease prepayment, a sinking fund arrange24 ment, and any similar arrangement (whether or 

25 not such arrangement provides credit support). 
56

•HR 3967 IH 

1 ‘‘(C) ALLOWABLE AMOUNT.— 

2 ‘‘(i) IN GENERAL.—Except as other3 wise provided in this subparagraph, the 

4 term ‘allowable amount’ means an amount 

5 equal to 20 percent of the lessor’s adjusted 

6 basis in the property at the time the lease 

7 is entered into. 

8 ‘‘(ii) HIGHER AMOUNT PERMITTED IN

9 CERTAIN CASES.—To the extent provided 

10 in regulations, a higher percentage shall be 

11 permitted under clause (i) where necessary 

12 because of the credit-worthiness of the les13 see. In no event may such regulations per14 mit a percentage of more than 50 percent. 

15 ‘‘(iii) OPTION TO PURCHASE.—If 

16 under the lease the lessee has the option to 

17 purchase the property for a fixed price or 

18 for other than the fair market value of the 

19 property (determined at the time of exer20 cise), the allowable amount at the time 

21 such option may be exercised may not ex22 ceed 50 percent of the price at which such 

23 option may be exercised. 

24 ‘‘(iv) NO ALLOWABLE AMOUNT FOR

25 CERTAIN ARRANGEMENTS.—The allowable
57

•HR 3967 IH 

1 amount shall be zero with respect to any 

2 arrangement which involves— 

3 ‘‘(I) a loan from the lessee to the 

4 lessor or a lender, 

5 ‘‘(II) any deposit, letter of credit, 

6 or payment undertaking agreement 

7 involving a lender, or 

8 ‘‘(III) in the case of an arrange9 ment which involves a lender, any 

10 credit support made available to the 

11 lessor in which any such lender does 

12 not have a claim that is senior to the 

13 lessor. 

14 For purposes of subclause (I), the term 

15 ‘loan’ shall not include any amount treated 

16 as a loan under section 467 with respect to 

17 a section 467 rental agreement. 

18 ‘‘(3) LESSOR MUST MAKE SUBSTANTIAL EQUITY

19 INVESTMENT.—A lease of property meets the re20 quirements of this paragraph if— 

21 ‘‘(A) the lessor— 

22 ‘‘(i) has at the time the lease is en23 tered into an unconditional at-risk equity 

24 investment (as determined by the Sec25 retary) in the property of at least 20 per-
58

•HR 3967 IH 

1 cent of the lessor’s adjusted basis in the 

2 property as of that time, and 

3 ‘‘(ii) maintains such investment 

4 throughout the term of the lease, and 

5 ‘‘(B) the fair market value of the property 

6 at the end of the lease term is reasonably ex7 pected to be equal to at least 20 percent of such 

8 basis. 

9 Subparagraphs (A)(ii) and (B) shall not apply to a 

10 short-term lease (as defined in paragraphs (1)(C) 

11 and (3) of section 168(h)). For purposes of subpara12 graph (B), the lessor’s at-risk position reflected in 

13 the fair market value of the property at the end of 

14 the lease term shall be considered to be reduced to 

15 the extent of any potential payment from an ar16 rangement described in paragraph (4). 

17 ‘‘(4) LESSEE MAY NOT BEAR MORE THAN MINI18 MAL RISK OF LOSS.— 

19 ‘‘(A) IN GENERAL.—A lease of property 

20 meets the requirements of this paragraph if 

21 there is no arrangement under which more than 

22 a minimal risk of loss (as determined under 

23 regulations) in the value of the property is 

24 borne by the lessee. 
59

•HR 3967 IH 

1 ‘‘(B) CERTAIN ARRANGEMENTS FAIL RE2 QUIREMENT.—Except as provided in regula3 tions, the property does not meet the require4 ments of this paragraph if there is any arrange5 ment under which the lessee bears— 

6 ‘‘(i) any portion of the loss that would 

7 occur if the fair market value of the leased 

8 property at the time the lease is termi9 nated were 25 percent less than its reason10 ably expected fair market value at the end 

11 of the lease term, or 

12 ‘‘(ii) more than 50 percent of the loss 

13 that would occur if the fair market value 

14 of the leased property at the time the lease 

15 is terminated were zero. 

16 ‘‘(e) SPECIAL RULES.— 

17 ‘‘(1) TREATMENT OF FORMER TAX-EXEMPT

18 USE PROPERTY.— 

19 ‘‘(A) IN GENERAL.—In the case of any 

20 former tax-exempt use property— 

21 ‘‘(i) any deduction allowable under 

22 subsection (b) with respect to such prop23 erty for any taxable year shall be allowed 

24 only to the extent of any net income (with-
60

•HR 3967 IH 

1 out regard to such deduction) from such 

2 property for such taxable year, and 

3 ‘‘(ii) any portion of such unused de4 duction remaining after application of 

5 clause (i) shall be treated as a deduction 

6 allowable under subsection (b) with respect 

7 to such property in the next taxable year. 

8 ‘‘(B) FORMER TAX-EXEMPT USE PROP9 ERTY.—For purposes of this subsection, the 

10 term ‘former tax-exempt use property’ means 

11 any property which— 

12 ‘‘(i) is not tax-exempt use property for 

13 the taxable year, but 

14 ‘‘(ii) was tax-exempt use property for 

15 any prior taxable year. 

16 ‘‘(2) DISPOSITION OF ENTIRE INTEREST IN

17 PROPERTY.—If during the taxable year a taxpayer 

18 disposes of the taxpayer’s entire interest in tax-ex19 empt use property (or former tax-exempt use prop20 erty), rules similar to the rules of section 469(g) 

21 shall apply for purposes of this section. 

22 ‘‘(3) COORDINATION WITH SECTION 469.—This 

23 section shall be applied before the application of sec24 tion 469. 
61

•HR 3967 IH 

1 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec2 tion— 

3 ‘‘(1) RELATED PARTIES.—The terms ‘lessor’, 

4 ‘lessee’, and ‘lender’ each include any related party 

5 (within the meaning of section 197(f)(9)(C)(i)). 

6 ‘‘(2) LEASE TERM.—The term ‘lease term’ has 

7 the meaning given to such term by section 168(i)(3). 

8 ‘‘(3) LENDER.—The term ‘lender’ means, with 

9 respect to any lease, a person that makes a loan to 

10 the lessor which is secured (or economically similar 

11 to being secured) by the lease or the leased property. 

12 ‘‘(4) LOAN.—The term ‘loan’ includes any simi13 lar arrangement. 

14 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

15 such regulations as may be necessary or appropriate to 

16 carry out the provisions of this section, including regula17 tion which— 

18 ‘‘(1) allow in appropriate cases the aggregation 

19 of property subject to the same lease, and 

20 ‘‘(2) provide for the determination of the alloca21 tion of interest expense for purposes of this sec22 tion.’’. 

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

25 1 is amended by adding at the end the following new item:
62

•HR 3967 IH 

‘‘Sec. 470. Limitation on deductions allocable to property used by 

governments or other tax-exempt entities.’’.

1 SEC. 503. EFFECTIVE DATE. 

2 (a) IN GENERAL.—Except as provided by subsection 

3 (b), the amendments made by this subtitle shall apply to 

4 leases entered into after February 11, 2004. 

5 (b) EXCEPTION.—

6 (1) IN GENERAL.—The amendments made by 

7 this subtitle shall not apply to qualified transpor8 tation property. 

9 (2) QUALIFIED TRANSPORTATION PROPERTY.—

10 For purposes of paragraph (1), the term ‘‘qualified 

11 transportation property’’ means domestic property 

12 subject to a lease with respect to which a formal ap13 plication—

14 (A) was submitted for approval to the Fed15 eral Transit Administration (an agency of the 

16 Department of Transportation) after June 30, 

17 2003, and before February 12, 2004, 

18 (B) is approved by the Federal Transit Ad19 ministration before January 1, 2005, and 

20 (C) includes a description of such property 

21 and the value of such property. 
63

•HR 3967 IH 

1 Subtitle B—Charitable Giving 

2 SEC. 511. DONATIONS OF MOTOR VEHICLES, BOATS, AND 

3 AIRCRAFT. 

4 (a) IN GENERAL.—Subsection (f) of section 170 (re5 lating to disallowance of deduction in certain cases and 

6 special rules) is amended by adding at the end the fol7 lowing new paragraph: 

8 ‘‘(11) CONTRIBUTIONS OF MOTOR VEHICLES, 

9 BOATS, AND AIRCRAFT.—

10 ‘‘(A) IN GENERAL.—Except as provided in 

11 regulations or other guidance, in the case of a 

12 contribution of a specified vehicle to which 

13 paragraph (8) applies, no deduction shall be al14 lowed under subsection (a) for such contribu15 tion unless the taxpayer obtains a qualified ap16 praisal of the specified vehicle on or before the 

17 date of such contribution. 

18 ‘‘(B) EXCEPTION FOR INVENTORY PROP19 ERTY.—Subparagraph (A) shall not apply to 

20 property which is described in section 

21 1221(a)(1). 

22 ‘‘(C) SPECIFIED VEHICLE.—For purposes 

23 of this paragraph, the term ‘specified vehicle’ 

24 means any—
64

•HR 3967 IH 

1 ‘‘(i) motor vehicle manufactured pri2 marily for use on public streets, roads, and 

3 highways, 

4 ‘‘(ii) boat, or 

5 ‘‘(iii) aircraft. 

6 ‘‘(D) QUALIFIED APPRAISAL.—For pur7 poses of this paragraph, the term ‘qualified ap8 praisal’ means any appraisal which is treated 

9 for purposes of this paragraph as a qualified 

10 appraisal under regulations or other guidance 

11 prescribed by the Secretary. 

12 ‘‘(E) REGULATIONS OR OTHER GUID13 ANCE.—The Secretary shall prescribe such reg14 ulations or other guidance as may be necessary 

15 to carry out the purposes of this paragraph.’’. 

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

17 subsection (a) shall apply to contributions made after 

18 March 12, 2004. 

19 SEC. 512. INCREASED REPORTING FOR NONCASH CHARI20 TABLE CONTRIBUTIONS. 

21 (a) IN GENERAL.—Subsection (f) of section 170 (re22 lating to disallowance of deduction in certain cases and 

23 special rules), as amended by section 511, is further 

24 amended by adding at the end the following new para25 graph: 
65

•HR 3967 IH 

1 ‘‘(12) QUALIFIED APPRAISAL AND OTHER DOC2 UMENTATION FOR CERTAIN CONTRIBUTIONS.—

3 ‘‘(A) IN GENERAL.—

4 ‘‘(i) DENIAL OF DEDUCTION.—In the 

5 case of an individual, partnership, or cor6 poration, no deduction shall be allowed 

7 under subsection (a) for any contribution 

8 of property for which a deduction of more 

9 than $500 is claimed unless such person 

10 meets the requirements of subparagraphs 

11 (B), (C), and (D), as the case may be, 

12 with respect to such contribution. 

13 ‘‘(ii) EXCEPTIONS.—

14 ‘‘(I) READILY VALUED PROP15 ERTY.—Subparagraphs (C) and (D) 

16 shall not apply to cash, property de17 scribed in section 1221(a)(1), and 

18 publicly traded securities (as defined 

19 in section 6050L(a)(2)(B)). 

20 ‘‘(II) REASONABLE CAUSE.—

21 Clause (i) shall not apply if it is 

22 shown that the failure to meet such 

23 requirements is due to reasonable 

24 cause and not to willful neglect. 
66

•HR 3967 IH 

1 ‘‘(B) PROPERTY DESCRIPTION FOR CON2 TRIBUTIONS OF MORE THAN $500.—In the case 

3 of contributions of property for which a deduc4 tion of more than $500 is claimed, the require5 ments of this subparagraph are met if the indi6 vidual, partnership or corporation includes with 

7 the return for the taxable year in which the 

8 contribution is made a description of such prop9 erty and such other information as the Sec10 retary may require. The requirements of this 

11 subparagraph shall not apply to a C corporation 

12 which is not a personal service corporation or a 

13 closely held C corporation. 

14 ‘‘(C) QUALIFIED APPRAISAL FOR CON15 TRIBUTIONS OF MORE THAN $5,000.—In the 

16 case of contributions of property for which a 

17 deduction of more than $5,000 is claimed, the 

18 requirements of this subparagraph are met if 

19 the individual, partnership, or corporation ob20 tains a qualified appraisal of such property and 

21 attaches to the return for the taxable year in 

22 which such contribution is made such informa23 tion regarding such property and such appraisal 

24 as the Secretary may require. 
67

•HR 3967 IH 

1 ‘‘(D) SUBSTANTIATION FOR CONTRIBU2 TIONS OF MORE THAN $500,000.—In the case of 

3 contributions of property for which a deduction 

4 of more than $500,000 is claimed, the require5 ments of this subparagraph are met if the indi6 vidual, partnership, or corporation attaches to

7 the return for the taxable year a qualified ap8 praisal of such property. 

9 ‘‘(E) QUALIFIED APPRAISAL.—For pur10 poses of this paragraph, the term ‘qualified ap11 praisal’ means, with respect to any property, an 

12 appraisal of such property which is treated for 

13 purposes of this paragraph as a qualified ap14 praisal under regulations or other guidance pre15 scribed by the Secretary. 

16 ‘‘(F) AGGREGATION OF SIMILAR ITEMS OF

17 PROPERTY.—For purposes of determining 

18 thresholds under this paragraph, property and 

19 all similar items of property donated to 1 or 

20 more donees shall be treated as 1 property. 

21 ‘‘(G) SPECIAL RULE FOR PASS-THRU ENTI22 TIES.—In the case of a partnership or S cor23 poration, this paragraph shall be applied at the 

24 entity level, except that the deduction shall be 

25 denied at the partner or shareholder level. 
68

•HR 3967 IH 

1 ‘‘(H) REGULATIONS.—The Secretary may 

2 prescribe such regulations as may be necessary 

3 or appropriate to carry out the purposes of this 

4 paragraph, including regulations that may pro5 vide that some or all of the requirements of this 

6 paragraph do not apply in appropriate cases.’’. 

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

8 this section shall apply to contributions made after March 

9 12, 2004.

10 SEC. 513. TREATMENT OF CHARITABLE CONTRIBUTIONS OF 

11 PATENTS AND SIMILAR PROPERTY. 

12 (a) IN GENERAL.—Subparagraph (B) of section 

13 170(e)(1) is amended by striking ‘‘or’’ at the end of clause 

14 (i), by adding ‘‘or’’ at the end of clause (ii), and by insert15 ing after clause (ii) the following new clause: 

16 ‘‘(iii) of any patent, copyright (other 

17 than a copyright described in section 

18 1221(a)(3) or 1231(b)(1)(C)), trademark, 

19 trade name, trade secret, know-how, soft20 ware (other than software described in sec21 tion 197(e)(3)(A)(i)), or similar property, 

22 or applications or registrations of such 

23 property,’’. 

24 (b) CERTAIN DONEE INCOME FROM INTELLECTUAL

25 PROPERTY TREATED AS AN ADDITIONAL CHARITABLE
69

•HR 3967 IH 

1 CONTRIBUTION.—Section 170 is amended by redesig2 nating subsection (m) as subsection (n) and by inserting 

3 after subsection (l) the following new subsection: 

4 ‘‘(m) CERTAIN DONEE INCOME FROM INTELLEC5 TUAL PROPERTY TREATED AS AN ADDITIONAL CHARI6 TABLE CONTRIBUTION.—

7 ‘‘(1) TREATMENT AS ADDITIONAL CONTRIBU8 TION.—In the case of a taxpayer who makes a quali9 fied intellectual property contribution, the deduction 

10 allowed under subsection (a) for each taxable year of 

11 the taxpayer ending on or after the date of such con12 tribution shall be increased (subject to the limita13 tions under subsection (b)) by the applicable per14 centage of qualified donee income with respect to 

15 such contribution which is properly allocable to such 

16 year under this subsection. 

17 ‘‘(2) QUALIFIED DONEE INCOME.—For pur18 poses of this subsection, the term ‘qualified donee 

19 income’ means any net income received by or ac20 crued to the donee which is properly allocable to the 

21 qualified intellectual property. 

22 ‘‘(3) ALLOCATION OF QUALIFIED DONEE IN23 COME TO TAXABLE YEARS OF DONOR.—For pur24 poses of this subsection, qualified donee income shall 

25 be treated as properly allocable to a taxable year of 
70

•HR 3967 IH 

1 the donor if such income is received by or accrued 

2 to the donee for the taxable year of the donee which 

3 ends within or with such taxable year of the donor. 

4 ‘‘(4) 10-YEAR LIMITATION.—Income shall not 

5 be treated as properly allocable to qualified intellec6 tual property for purposes of this subsection if such 

7 income is received by or accrued to the donee after 

8 the 10-year period beginning on the date of the con9 tribution of such property. 

10 ‘‘(5) BENEFIT LIMITED TO LIFE OF INTELLEC11 TUAL PROPERTY.—Income shall not be treated as 

12 properly allocable to qualified intellectual property 

13 for purposes of this subsection if such income is re14 ceived by or accrued to the donee after the expira15 tion of the legal life of such property. 

16 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes 

17 of this subsection, the term ‘applicable percentage’ 

18 means the percentage determined under the fol19 lowing table which corresponds to a taxable year of 

20 the donor ending on or after the date of the quali21 fied intellectual property contribution:

‘‘Taxable Year of Donor 

Ending on or After Applicable 

Date of Contribution: Percentage: 

1st ...................................................................................................... 100

2nd ..................................................................................................... 100

3rd ...................................................................................................... 90

4th ...................................................................................................... 80

5th ...................................................................................................... 70

6th ...................................................................................................... 60
71

•HR 3967 IH 

‘‘Taxable Year of Donor 

Ending on or After Applicable 

Date of Contribution: Percentage: 

7th ...................................................................................................... 50

8th ...................................................................................................... 40

9th ...................................................................................................... 30

10th .................................................................................................... 20

11th .................................................................................................... 10

12th .................................................................................................... 10.

1 ‘‘(7) QUALIFIED INTELLECTUAL PROPERTY

2 CONTRIBUTION.—For purposes of this subsection, 

3 the term ‘qualified intellectual property contribution’ 

4 means any charitable contribution of qualified intel5 lectual property—

6 ‘‘(A) the amount of which taken into ac7 count under this section is reduced by reason of 

8 subsection (e)(1), and 

9 ‘‘(B) with respect to which the donor in10 forms the donee at the time of such contribu11 tion that the donor intends to treat such con12 tribution as a qualified intellectual property 

13 contribution for purposes of this subsection and 

14 section 6050L. 

15 ‘‘(8) QUALIFIED INTELLECTUAL PROPERTY.—

16 For purposes of this subsection, the term ‘qualified 

17 intellectual property’ means property described in 

18 subsection (e)(1)(B)(iii) (other than property con19 tributed to or for the use of an organization de20 scribed in subsection (e)(1)(B)(ii)). 

21 ‘‘(9) OTHER SPECIAL RULES.—
72

•HR 3967 IH 

1 ‘‘(A) APPLICATION OF LIMITATIONS ON

2 CHARITABLE CONTRIBUTIONS.—Any increase 

3 under this subsection of the deduction provided 

4 under subsection (a) shall be treated for pur5 poses of subsection (b) as a deduction which is 

6 attributable to a charitable contribution to the 

7 donee to which such increase relates.

8 ‘‘(B) NET INCOME DETERMINED BY

9 DONEE.—The net income taken into account 

10 under paragraph (2) shall not exceed the 

11 amount of such income reported under section 

12 6050L(b)(1). 

13 ‘‘(C) DEDUCTION LIMITED TO 12 TAXABLE

14 YEARS.—Except as may be provided under sub15 paragraph (D)(i), this subsection shall not 

16 apply with respect to any qualified intellectual 

17 property contribution for any taxable year of 

18 the donor after the 12th taxable year of the 

19 donor which ends on or after the date of such 

20 contribution. 

21 ‘‘(D) REGULATIONS.—The Secretary may 

22 issue regulations or other guidance to carry out 

23 the purposes of this subsection, including regu24 lations or guidance—
73

•HR 3967 IH 

1 ‘‘(i) modifying the application of this 

2 subsection in the case of a donor or donee 

3 with a short taxable year, and 

4 ‘‘(ii) providing for the determination 

5 of an amount to be treated as net income 

6 of the donee which is properly allocable to 

7 qualified intellectual property in the case 

8 of a donee who uses such property to fur9 ther a purpose or function constituting the 

10 basis of the donee’s exemption under sec11 tion 501 (or, in the case of a governmental 

12 unit, any purpose described in section 

13 170(c)) and does not possess a right to re14 ceive any payment from a third party with 

15 respect to such property.’’. 

16 (c) REPORTING REQUIREMENTS.—

17 (1) IN GENERAL.—Section 6050L (relating to 

18 returns relating to certain dispositions of donated 

19 property) is amended to read as follows: 

20 ‘‘SEC. 6050L. RETURNS RELATING TO CERTAIN DONATED 

21 PROPERTY. 

22 ‘‘(a) DISPOSITIONS OF DONATED PROPERTY.—

23 ‘‘(1) IN GENERAL.—If the donee of any chari24 table deduction property sells, exchanges, or other25 wise disposes of such property within 2 years after 
74

•HR 3967 IH 

1 its receipt, the donee shall make a return (in accord2 ance with forms and regulations prescribed by the 

3 Secretary) showing—

4 ‘‘(A) the name, address, and TIN of the 

5 donor, 

6 ‘‘(B) a description of the property, 

7 ‘‘(C) the date of the contribution, 

8 ‘‘(D) the amount received on the disposi9 tion, and 

10 ‘‘(E) the date of such disposition. 

11 ‘‘(2) DEFINITIONS.—For purposes of this sub12 section—

13 ‘‘(A) CHARITABLE DEDUCTION PROP14 ERTY.—The term ‘charitable deduction prop15 erty’ means any property (other than publicly 

16 traded securities) contributed in a contribution 

17 for which a deduction was claimed under sec18 tion 170 if the claimed value of such property 

19 (plus the claimed value of all similar items of 

20 property donated by the donor to 1 or more 

21 donees) exceeds $5,000. 

22 ‘‘(B) PUBLICLY TRADED SECURITIES.—

23 The term ‘publicly traded securities’ means se24 curities for which (as of the date of the con-
75

•HR 3967 IH 

1 tribution) market quotations are readily avail2 able on an established securities market. 

3 ‘‘(b) QUALIFIED INTELLECTUAL PROPERTY CON4 TRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—Each donee with respect to 

6 a qualified intellectual property contribution shall 

7 make a return (at such time and in such form and 

8 manner as the Secretary may by regulations pre9 scribe) with respect to each specified taxable year of 

10 the donee showing—

11 ‘‘(A) the name, address, and TIN of the 

12 donor, 

13 ‘‘(B) a description of the qualified intellec14 tual property contributed, 

15 ‘‘(C) the date of the contribution, and 

16 ‘‘(D) the amount of net income of the 

17 donee for the taxable year which is properly al18 locable to the qualified intellectual property (de19 termined without regard to paragraph (9)(B) of 

20 section 170(m) and with the modifications de21 scribed in paragraphs (4) and (5) of such sec22 tion). 

23 ‘‘(2) DEFINITIONS.—For purposes of this sub24 section—
76

•HR 3967 IH 

1 ‘‘(A) IN GENERAL.—Terms used in this 

2 subsection which are also used in section 

3 170(m) have the respective meanings given 

4 such terms in such section. 

5 ‘‘(B) SPECIFIED TAXABLE YEAR.—The 

6 term ‘specified taxable year’ means, with re7 spect to any qualified intellectual property con8 tribution, any taxable year of the donee any 

9 portion of which is part of the 10-year period 

10 beginning on the date of such contribution. 

11 ‘‘(c) STATEMENT TO BE FURNISHED TO DONORS.—

12 Every person making a return under subsection (a) or (b) 

13 shall furnish a copy of such return to the donor at such 

14 time and in such manner as the Secretary may by regula15 tions prescribe.’’. 

16 (d) COORDINATION WITH APPRAISAL REQUIRE17 MENTS.—Subclause (I) of section 170(f)(12)(A)(ii), as 

18 added by 512, is amended by inserting ‘‘subsection 

19 (e)(1)(B)(iii) or’’ before ‘‘section 1221(a)(1)’’. 

20 (e) ANTI-ABUSE RULES.—The Secretary of the 

21 Treasury may prescribe such regulations or other guid22 ance as may be necessary or appropriate to prevent the 

23 avoidance of the purposes of section 170(e)(1)(B)(iii) of 

24 the Internal Revenue Code of 1986 (as added by sub25 section (a)), including preventing—
77

•HR 3967 IH 

1 (1) the circumvention of the reduction of the 

2 charitable deduction by embedding or bundling the 

3 patent or similar property as part of a charitable 

4 contribution of property that includes the patent or 

5 similar property, 

6 (2) the manipulation of the basis of the prop7 erty to increase the amount of the charitable deduc8 tion through the use of related persons, pass-thru

9 entities, or other intermediaries, or through the use 

10 of any provision of law or regulation (including the 

11 consolidated return regulations), and 

12 (3) a donor from changing the form of the pat13 ent or similar property to property of a form for 

14 which different deduction rules would apply. 

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

16 this section shall apply to contributions made after March 

17 12, 2004. 

18 Subtitle C—Tax Collection 

19 Contracts

20 SEC. 521. QUALIFIED TAX COLLECTION CONTRACTS. 

21 (a) CONTRACT REQUIREMENTS.—

22 (1) IN GENERAL.—Subchapter A of chapter 64 

23 (relating to collection) is amended by adding at the 

24 end the following new section: 
78

•HR 3967 IH 

1 ‘‘SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS. 

2 ‘‘(a) IN GENERAL.—Nothing in any provision of law 

3 shall be construed to prevent the Secretary from entering 

4 into a qualified tax collection contract. 

5 ‘‘(b) QUALIFIED TAX COLLECTION CONTRACT.—For 

6 purposes of this section, the term ‘qualified tax collection 

7 contract’ means any contract which—

8 ‘‘(1) is for the services of any person (other 

9 than an officer or employee of the Treasury Depart10 ment)—

11 ‘‘(A) to locate and contact any taxpayer 

12 specified by the Secretary, 

13 ‘‘(B) to request full payment from such 

14 taxpayer of an amount of Federal tax specified 

15 by the Secretary and, if such request cannot be 

16 met by the taxpayer, to offer the taxpayer an 

17 installment agreement providing for full pay18 ment of such amount during a period not to ex19 ceed 5 years, and 

20 ‘‘(C) to obtain financial information speci21 fied by the Secretary with respect to such tax22 payer, 

23 ‘‘(2) prohibits each person providing such serv24 ices under such contract from committing any act or 

25 omission which employees of the Internal Revenue 
79

•HR 3967 IH 

1 Service are prohibited from committing in the per2 formance of similar services, 

3 ‘‘(3) prohibits subcontractors from—

4 ‘‘(A) having contacts with taxpayers, 

5 ‘‘(B) providing quality assurance services, 

6 and 

7 ‘‘(C) composing debt collection notices, and 

8 ‘‘(4) permits subcontractors to perform other 

9 services only with the approval of the Secretary. 

10 ‘‘(c) FEES.—The Secretary may retain and use an 

11 amount not in excess of 25 percent of the amount collected 

12 under any qualified tax collection contract for the costs 

13 of services performed under such contract. The Secretary 

14 shall keep adequate records regarding amounts so retained 

15 and used. The amount credited as paid by any taxpayer 

16 shall be determined without regard to this subsection. 

17 ‘‘(d) NO FEDERAL LIABILITY.—The United States 

18 shall not be liable for any act or omission of any person 

19 performing services under a qualified tax collection con20 tract. 

21 ‘‘(e) APPLICATION OF FAIR DEBT COLLECTION

22 PRACTICES ACT.—The provisions of the Fair Debt Collec23 tion Practices Act (15 U.S.C. 1692 et seq.) shall apply 

24 to any qualified tax collection contract, except to the ex-
80

•HR 3967 IH 

1 tent superseded by section 6304, section 7602(c), or by 

2 any other provision of this title. 

3 ‘‘(f) CROSS REFERENCES.—

4 ‘‘(1) For damages for certain unauthorized col5 lection actions by persons performing services under 

6 a qualified tax collection contract, see section 

7 7433A. 

8 ‘‘(2) For application of Taxpayer Assistance 

9 Orders to persons performing services under a quali10 fied tax collection contract, see section 7811(a)(4).’’. 

11 (2) CONFORMING AMENDMENTS.—

12 (A) Section 7809(a) is amended by insert13 ing ‘‘6306,’’ before ‘‘7651’’. 

14 (B) The table of sections for subchapter A 

15 of chapter 64 is amended by adding at the end 

16 the following new item:

‘‘Sec. 6306. Qualified Tax Collection Contracts.’’.

17 (b) CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED

18 COLLECTION ACTIONS BY PERSONS PERFORMING SERV19 ICES UNDER QUALIFIED TAX COLLECTION CON20 TRACTS.—

21 (1) In general.—Subchapter B of chapter 76 

22 (relating to proceedings by taxpayers and third par23 ties) is amended by inserting after section 7433 the 

24 following new section: 
81

•HR 3967 IH 

1 ‘‘SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHOR2 IZED COLLECTION ACTIONS BY PERSONS 

3 PERFORMING SERVICES UNDER QUALIFIED 

4 TAX COLLECTION CONTRACTS. 

5 ‘‘(a) IN GENERAL.—Subject to the modifications pro6 vided by subsection (b), section 7433 shall apply to the 

7 acts and omissions of any person performing services 

8 under a qualified tax collection contract (as defined in sec9 tion 6306(b)) to the same extent and in the same manner 

10 as if such person were an employee of the Internal Rev11 enue Service. 

12 ‘‘(b) MODIFICATIONS.—For purposes of subsection 

13 (a)—

14 ‘‘(1) Any civil action brought under section 

15 7433 by reason of this section shall be brought 

16 against the person who entered into the qualified tax 

17 collection contract with the Secretary and shall not 

18 be brought against the United States. 

19 ‘‘(2) Such person and not the United States 

20 shall be liable for any damages and costs determined 

21 in such civil action. 

22 ‘‘(3) Such civil action shall not be an exclusive 

23 remedy with respect to such person. 

24 ‘‘(4) Subsections (c), (d)(1), and (e) of section 

25 7433 shall not apply.’’. 
82

•HR 3967 IH 

1 (2) CLERICAL AMENDMENT.—The table of sec2 tions for subchapter B of chapter 76 is amended by 

3 inserting after the item relating to section 7433 the 

4 following new item:

‘‘Sec. 7433A. Civil damages for certain unauthorized collection actions by persons performing services under a qualified tax collection contract.’’.

5 (c) APPLICATION OF TAXPAYER ASSISTANCE OR6 DERS TO PERSONS PERFORMING SERVICES UNDER A

7 QUALIFIED TAX COLLECTION CONTRACT.—Section 7811

8 (relating to taxpayer assistance orders) is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(g) APPLICATION TO PERSONS PERFORMING SERV11 ICES UNDER A QUALIFIED TAX COLLECTION CON12 TRACT.—Any order issued or action taken by the National 

13 Taxpayer Advocate pursuant to this section shall apply to 

14 persons performing services under a qualified tax collec15 tion contract (as defined in section 6306(b)) to the same 

16 extent and in the same manner as such order or action 

17 applies to the Secretary.’’. 

18 (d) INELIGIBILITY OF INDIVIDUALS WHO COMMIT

19 MISCONDUCT TO PERFORM UNDER CONTRACT.—Section 

20 1203 of the Internal Revenue Service Restructuring Act 

21 of 1998 (relating to termination of employment for mis22 conduct) is amended by adding at the end the following 

23 new subsection: 
83

•HR 3967 IH 

1 ‘‘(e) INDIVIDUALS PERFORMING SERVICES UNDER A

2 QUALIFIED TAX COLLECTION CONTRACT.—An individual 

3 shall cease to be permitted to perform any services under 

4 any qualified tax collection contract (as defined in section 

5 6306(b) of the Internal Revenue Code of 1986) if there 

6 is a final determination by the Secretary of the Treasury 

7 under such contract that such individual committed any 

8 act or omission described under subsection (b) in connec9 tion with the performance of such services.’’. 

10 (e) EFFECTIVE DATE.—The amendments made to 

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

12 of this Act. 

13 Subtitle D—Other Provisions 

14 SEC. 531. EXTENSION OF AMORTIZATION OF INTANGIBLES 

15 TO SPORTS FRANCHISES. 

16 (a) IN GENERAL.—Section 197(e) (relating to excep17 tions to definition of section 197 intangible) is amended 

18 by striking paragraph (6) and by redesignating para19 graphs (7) and (8) as paragraphs (6) and (7), respectively. 

20 (b) CONFORMING AMENDMENTS.—

21 (1)(A) Section 1056 (relating to basis limitation 

22 for player contracts transferred in connection with 

23 the sale of a franchise) is repealed. 
84

•HR 3967 IH 

1 (B) The table of sections for part IV of sub2 chapter O of chapter 1 is amended by striking the 

3 item relating to section 1056. 

4 (2) Section 1245(a) (relating to gain from dis5 position of certain depreciable property) is amended 

6 by striking paragraph (4). 

7 (3) Section 1253 (relating to transfers of fran8 chises, trademarks, and trade names) is amended by 

9 striking subsection (e). 

10 (c) EFFECTIVE DATES.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section 

13 shall apply to property acquired after the date of the 

14 enactment of this Act. 

15 (2) SECTION 1245.—The amendment made by 

16 subsection (b)(2) shall apply to franchises acquired 

17 after the date of the enactment of this Act. 

18 SEC. 532. CLASS LIVES FOR UTILITY GRADING COSTS. 

19 (a) GAS UTILITY PROPERTY.—Section 168(e)(3)(E) 

20 (defining 15-year property) is amended by striking ‘‘and’’ 

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

22 of clause (iii) and inserting ‘‘, and’’, and by adding at the 

23 end the following new clause: 
85

•HR 3967 IH 

1 ‘‘(iv) initial clearing and grading land 

2 improvements with respect to gas utility 

3 property.’’. 

4 (b) ELECTRIC UTILITY PROPERTY.—Section 

5 168(e)(3) is amended by adding at the end the following 

6 new subparagraph: 

7 ‘‘(F) 20-YEAR PROPERTY.—The term ‘20-

8 year property’ means initial clearing and grad9 ing land improvements with respect to any elec10 tric utility transmission and distribution 

11 plant.’’. 

12 (c) CONFORMING AMENDMENTS.—The table con13 tained in section 168(g)(3)(B) is amended by adding at 

14 the end the following new items:

‘‘(E)(iv) ..................................................................................................... 20

‘‘(F) ........................................................................................................... 25’’.

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

16 this section shall apply to property placed in service after 

17 the date of the enactment of this Act. 

18 SEC. 533. MODIFICATION OF CONTINUING LEVY ON PAY19 MENTS TO FEDERAL VENDERS. 

20 (a) IN GENERAL.—Section 6331(h) (relating to con21 tinuing levy on certain payments) is amended by adding 

22 at the end the following new paragraph: 

23 ‘‘(3) INCREASE IN LEVY FOR CERTAIN PAY24 MENTS.—Paragraph (1) shall be applied by sub-
86

•HR 3967 IH 

1 stituting ‘100 percent’ for ‘15 percent’ in the case 

2 of any specified payment due to a vendor of goods 

3 or services sold or leased to the Federal Govern4 ment.’’. 

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

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

7 of this Act.

Æ