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HR 3550 EAS 
not exceed 5 percent of the volume of such alcohol (in-
cluding denaturants).’’. 
(3) Section 40(e)(1) is amended— 
(A) by striking ‘‘2007’’ in subparagraph 
(A) and inserting ‘‘2010’’, and 
(B) by striking ‘‘2008’’ in subparagraph 
(B) and inserting ‘‘2011’’. 
(4) Section 40(h) is amended— 
(A) by striking ‘‘2007’’ in paragraph (1) 
and inserting ‘‘2010’’, and 
(B) by striking ‘‘, 2006, or 2007’’ in the 
table contained in paragraph (2) and inserting 
‘‘through 2010’’. 
(5) Section 4041(b)(2)(B) is amended by striking 
‘‘a substance other than petroleum or natural gas’’ 
and inserting ‘‘coal (including peat)’’. 
(6) Section 4041 is amended by striking sub-
section (k). 
(7) Section 4081 is amended by striking sub-
section (c). 
(8) Paragraph (2) of section 4083(a) is amended 
to read as follows: 
‘‘(2) GASOLINE.—The term ‘gasoline’— 
‘‘(A) includes any gasoline blend, other than 
qualified methanol or ethanol fuel (as defined in
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HR 3550 EAS 
section 4041(b)(2)(B)), partially exempt meth-
anol or ethanol fuel (as defined in section 
4041(m)(2)), or a denatured alcohol, and 
‘‘(B) includes, to the extent prescribed in 
regulations— 
‘‘(i) any gasoline blend stock, and 
‘‘(ii) any product commonly used as 
an additive in gasoline (other than alcohol). 
For purposes of subparagraph (B)(i), the term ‘gaso-
line blend stock’ means any petroleum product compo-
nent of gasoline.’’. 
(9) Section 6427 is amended by inserting after 
subsection (d) the following new subsection: 
‘‘(e) ALCOHOL OR BIODIESEL USED TO PRODUCE AL-
COHOL FUEL AND BIODIESEL MIXTURES OR USED AS 
FUELS.—Except as provided in subsection (k)— 
‘‘(1) USED TO PRODUCE A MIXTURE.—If any 
person produces a mixture described in section 6426 
in such person’s trade or business, the Secretary shall 
pay (without interest) to such person an amount 
equal to the alcohol fuel mixture credit or the biodiesel 
mixture credit with respect to such mixture. 
‘‘(2) USED AS FUEL.—If alcohol (as defined in 
section 40(d)(1)) or biodiesel (as defined in section 
40A(d)(1)) or agri-biodiesel (as defined in section
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HR 3550 EAS 
40A(d)(2)) which is not in a mixture described in sec-
tion 6426— 
‘‘(A) is used by any person as a fuel in a 
trade or business, or 
‘‘(B) is sold by any person at retail to an-
other person and placed in the fuel tank of such 
person’s vehicle, 
the Secretary shall pay (without interest) to such per-
son an amount equal to the alcohol credit (as deter-
mined under section 40(b)(2)) or the biodiesel credit 
(as determined under section 40A(b)(2)) with respect 
to such fuel. 
‘‘(3) COORDINATION
WITH
OTHER
REPAYMENT 
PROVISIONS.—No amount shall be payable under 
paragraph (1) with respect to any mixture with re-
spect to which an amount is allowed as a credit 
under section 6426. 
‘‘(4) TERMINATION.—This subsection shall not 
apply with respect to— 
‘‘(A) any alcohol fuel mixture (as defined in 
section 6426(b)(3)) or alcohol (as so defined) sold 
or used after December 31, 2010, and 
‘‘(B) any biodiesel mixture (as defined in 
section 6426(c)(3)) or biodiesel (as so defined) or
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HR 3550 EAS 
agri-biodiesel (as so defined) sold or used after 
December 31, 2006.’’. 
(10) Section 6427(i)(3) is amended— 
(A) by striking ‘‘subsection (f)’’ both places 
it appears in subparagraph (A) and inserting 
‘‘subsection (e)(1)’’, 
(B) by striking ‘‘gasoline, diesel fuel, or ker-
osene used to produce a qualified alcohol mixture 
(as defined in section 4081(c)(3))’’ in subpara-
graph (A) and inserting ‘‘a mixture described in 
section 6426’’, 
(C) by adding at the end of subparagraph 
(A) the following new flush sentence: 
‘‘In the case of an electronic claim, this subpara-
graph shall be applied without regard to clause 
(i).’’, 
(D) by striking ‘‘subsection (f)(1)’’ in sub-
paragraph (B) and inserting ‘‘subsection (e)(1)’’, 
(E) by striking ‘‘20 days of the date of the 
filing of such claim’’ in subparagraph (B) and 
inserting ‘‘45 days of the date of the filing of 
such claim (20 days in the case of an electronic 
claim)’’, and
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HR 3550 EAS 
(F) by striking ‘‘ALCOHOL MIXTURE’’ in the 
heading and inserting ‘‘ALCOHOL FUEL AND BIO-
DIESEL MIXTURE’’. 
(11) Section 9503(b)(1) is amended by adding at 
the end the following new flush sentence: 
‘‘For purposes of this paragraph, taxes received under 
sections 4041 and 4081 shall be determined without 
reduction for credits under section 6426.’’. 
(12) Section 9503(b)(4), as amended by section 
5101 of this Act, is amended— 
(A) by adding ‘‘or’’ at the end of subpara-
graph (C), 
(B) by striking the comma at the end of 
subparagraph (D)(iii) and inserting a period, 
and 
(C) by striking subparagraphs (E) and (F). 
(13) The table of sections for subchapter B of 
chapter 65 is amended by inserting after the item re-
lating to section 6425 the following new item: 
‘‘Sec. 6426. Credit for alcohol fuel and biodiesel mixtures.’’. 
(14) TARIFF SCHEDULE.—Headings 9901.00.50 
and 9901.00.52 of the Harmonized Tariff Schedule of 
the United States (19 U.S.C. 3007) are each amended 
in the effective period column by striking ‘‘10/1/2007’’ 
each place it appears and inserting ‘‘1/1/2011’’. 
(d) EFFECTIVE DATES.—
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HR 3550 EAS 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to fuel sold or used after September 
30, 2004. 
(2) REGISTRATION REQUIREMENT.—The amend-
ment made by subsection (b) shall take effect on April 
1, 2005. 
(3) EXTENSION OF ALCOHOL FUELS CREDIT.— 
The amendments made by paragraphs (3), (4), and 
(14) of subsection (c) shall take effect on the date of 
the enactment of this Act. 
(4) REPEAL OF GENERAL FUND RETENTION OF 
CERTAIN ALCOHOL FUELS TAXES.—The amendments 
made by subsection (c)(12) shall apply to fuel sold or 
used after September 30, 2003. 
(e) FORMAT FOR FILING.—The Secretary of the Treas-
ury shall describe the electronic format for filing claims de-
scribed in section 6427(i)(3)(B) of the Internal Revenue 
Code of 1986 (as amended by subsection (c)(10)(C)) not 
later than September 30, 2004. 
SEC. 5103. BIODIESEL INCOME TAX CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of subchapter 
A of chapter 1 (relating to business related credits) is 
amended by inserting after section 40 the following new sec-
tion:
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HR 3550 EAS 
‘‘SEC. 40A. BIODIESEL USED AS FUEL. 
‘‘(a) GENERAL RULE.—For purposes of section 38, the 
biodiesel fuels credit determined under this section for the 
taxable year is an amount equal to the sum of— 
‘‘(1) the biodiesel mixture credit, plus 
‘‘(2) the biodiesel credit. 
‘‘(b) DEFINITION
OF BIODIESEL MIXTURE CREDIT 
AND BIODIESEL CREDIT.—For purposes of this section— 
‘‘(1) BIODIESEL MIXTURE CREDIT.— 
‘‘(A) IN GENERAL.—The biodiesel mixture 
credit of any taxpayer for any taxable year is 50 
cents for each gallon of biodiesel used by the tax-
payer in the production of a qualified biodiesel 
mixture. 
‘‘(B) QUALIFIED BIODIESEL MIXTURE.—The 
term ‘qualified biodiesel mixture’ means a mix-
ture of biodiesel and diesel fuel (as defined in 
section 4083(a)(3)), determined without regard 
to any use of kerosene, which— 
‘‘(i) is sold by the taxpayer producing 
such mixture to any person for use as a 
fuel, or 
‘‘(ii) is used as a fuel by the taxpayer 
producing such mixture. 
‘‘(C) SALE OR USE MUST BE IN TRADE OR 
BUSINESS, ETC.—Biodiesel used in the produc-
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HR 3550 EAS 
tion of a qualified biodiesel mixture shall be 
taken into account— 
‘‘(i) only if the sale or use described in 
subparagraph (B) is in a trade or business 
of the taxpayer, and 
‘‘(ii) for the taxable year in which such 
sale or use occurs. 
‘‘(D) CASUAL OFF-FARM PRODUCTION NOT 
ELIGIBLE.—No credit shall be allowed under this 
section with respect to any casual off-farm pro-
duction of a qualified biodiesel mixture. 
‘‘(2) BIODIESEL CREDIT.— 
‘‘(A) IN GENERAL.—The biodiesel credit of 
any taxpayer for any taxable year is 50 cents for 
each gallon of biodiesel which is not in a mixture 
with diesel fuel and which during the taxable 
year— 
‘‘(i) is used by the taxpayer as a fuel 
in a trade or business, or 
‘‘(ii) is sold by the taxpayer at retail 
to a person and placed in the fuel tank of 
such person’s vehicle. 
‘‘(B) USER CREDIT NOT TO APPLY TO BIO-
DIESEL SOLD AT RETAIL.—No credit shall be al-
lowed under subparagraph (A)(i) with respect to
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HR 3550 EAS 
any biodiesel which was sold in a retail sale de-
scribed in subparagraph (A)(ii). 
‘‘(3) CREDIT FOR AGRI-BIODIESEL.—In the case 
of any biodiesel which is agri-biodiesel, paragraphs 
(1)(A) and (2)(A) shall be applied by substituting 
‘$1.00’ for ‘50 cents’. 
‘‘(4) CERTIFICATION FOR BIODIESEL.—No credit 
shall be allowed under this section unless the taxpayer 
obtains a certification (in such form and manner as 
prescribed by the Secretary) from the producer or im-
porter of the biodiesel which identifies the product 
produced and the percentage of biodiesel and agri-bio-
diesel in the product. 
‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE 
TAX.—The amount of the credit determined under this sec-
tion with respect to any biodiesel shall be properly reduced 
to take into account any benefit provided with respect to 
such biodiesel solely by reason of the application of section 
6426 or 6427(e). 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) BIODIESEL.—The term ‘biodiesel’ means the 
monoalkyl esters of long chain fatty acids derived 
from plant or animal matter which meet—
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HR 3550 EAS 
‘‘(A) the registration requirements for fuels 
and fuel additives established by the Environ-
mental Protection Agency under section 211 of 
the Clean Air Act (42 U.S.C. 7545), and 
‘‘(B) the requirements of the American Soci-
ety of Testing and Materials D6751. 
‘‘(2) AGRI-BIODIESEL.—The term ‘agri-biodiesel’ 
means biodiesel derived solely from virgin oils, in-
cluding esters derived from virgin vegetable oils from 
corn, soybeans, sunflower seeds, cottonseeds, canola, 
crambe, rapeseeds, safflowers, flaxseeds, rice bran, and 
mustard seeds, and from animal fats. 
‘‘(3) MIXTURE OR BIODIESEL NOT USED AS A 
FUEL, ETC.— 
‘‘(A) MIXTURES.—If— 
‘‘(i) any credit was determined under 
this section with respect to biodiesel used in 
the production of any qualified biodiesel 
mixture, and 
‘‘(ii) any person— 
‘‘(I) separates the biodiesel from 
the mixture, or 
‘‘(II) without separation, uses the 
mixture other than as a fuel,
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then there is hereby imposed on such person a 
tax equal to the product of the rate applicable 
under subsection (b)(1)(A) and the number of 
gallons of such biodiesel in such mixture. 
‘‘(B) BIODIESEL.—If— 
‘‘(i) any credit was determined under 
this section with respect to the retail sale of 
any biodiesel, and 
‘‘(ii) any person mixes such biodiesel 
or uses such biodiesel other than as a fuel, 
then there is hereby imposed on such person a 
tax equal to the product of the rate applicable 
under subsection (b)(2)(A) and the number of 
gallons of such biodiesel. 
‘‘(C) APPLICABLE LAWS.—All provisions of 
law, including penalties, shall, insofar as appli-
cable and not inconsistent with this section, 
apply in respect of any tax imposed under sub-
paragraph (A) or (B) as if such tax were im-
posed by section 4081 and not by this chapter. 
‘‘(4) PASS-THRU IN THE CASE OF ESTATES AND 
TRUSTS.—Under regulations prescribed by the Sec-
retary, rules similar to the rules of subsection (d) of 
section 52 shall apply.
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‘‘(e) TERMINATION.—This section shall not apply to 
any sale or use after December 31, 2006.’’. 
(b) CREDIT TREATED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (relating to current year 
business credit) is amended by striking ‘‘plus’’ at the end 
of paragraph (14), by striking the period at the end of para-
graph (15) and inserting ‘‘, plus’’, and by adding at the 
end the following new paragraph: 
‘‘(16) the biodiesel fuels credit determined under 
section 40A(a).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 39(d) is amended by adding at the 
end the following new paragraph: 
‘‘(11) NO
CARRYBACK
OF
BIODIESEL
FUELS 
CREDIT BEFORE EFFECTIVE DATE.—No portion of the 
unused business credit for any taxable year which is 
attributable to the biodiesel fuels credit determined 
under section 40A may be carried back to a taxable 
year ending on or before September 30, 2004.’’. 
(2)(A) Section 87 is amended to read as follows: 
‘‘SEC. 87. ALCOHOL AND BIODIESEL FUELS CREDITS. 
‘‘Gross income includes— 
‘‘(1) the amount of the alcohol fuels credit deter-
mined with respect to the taxpayer for the taxable 
year under section 40(a), and
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HR 3550 EAS 
‘‘(2) the biodiesel fuels credit determined with re-
spect to the taxpayer for the taxable year under sec-
tion 40A(a).’’. 
(B) The item relating to section 87 in the table 
of sections for part II of subchapter B of chapter 1 
is amended by striking ‘‘fuel credit’’ and inserting 
‘‘and biodiesel fuels credits’’. 
(3) Section 196(c) is amended by striking ‘‘and’’ 
at the end of paragraph (9), by striking the period at 
the end of paragraph (10) and inserting ‘‘, and’’, and 
by adding at the end the following new paragraph: 
‘‘(11) the biodiesel fuels credit determined under 
section 40A(a).’’. 
(4) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 is amended by adding 
after the item relating to section 40 the following new 
item: 
‘‘Sec. 40A. Biodiesel used as fuel.’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply to fuel produced, and sold or used, after 
September 30, 2004, in taxable years ending after such date. 
Subtitle C—Fuel Fraud Prevention 
SEC. 5200. SHORT TITLE. 
This subtitle may be cited as the ‘‘Fuel Fraud Preven-
tion Act of 2004’’.
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PART I—AVIATION JET FUEL 
SEC. 5211. TAXATION OF AVIATION-GRADE KEROSENE. 
(a) RATE OF TAX.— 
(1) IN GENERAL.—Subparagraph (A) of section 
4081(a)(2) is amended by striking ‘‘and’’ at the end 
of clause (ii), by striking the period at the end of 
clause (iii) and inserting ‘‘, and’’, and by adding at 
the end the following new clause: 
‘‘(iv) in the case of aviation-grade ker-
osene, 21.8 cents per gallon.’’. 
(2) COMMERCIAL AVIATION.—Paragraph (2) of 
section 4081(a) is amended by adding at the end the 
following new subparagraph: 
‘‘(C) TAXES
IMPOSED
ON
FUEL
USED
IN 
COMMERCIAL AVIATION.—In the case of aviation- 
grade kerosene which is removed from any refin-
ery or terminal directly into the fuel tank of an 
aircraft for use in commercial aviation, the rate 
of tax under subparagraph (A)(iv) shall be 4.3 
cents per gallon.’’. 
(3) NONTAXABLE USES.— 
(A) IN GENERAL.—Section 4082 is amended 
by redesignating subsections (e) and (f) as sub-
sections (f) and (g), respectively, and by insert-
ing after subsection (d) the following new sub-
section:
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HR 3550 EAS 
‘‘(e) AVIATION-GRADE KEROSENE.—In the case of 
aviation-grade kerosene which is exempt from the tax im-
posed by section 4041(c) (other than by reason of a prior 
imposition of tax) and which is removed from any refinery 
or terminal directly into the fuel tank of an aircraft, the 
rate of tax under section 4081(a)(2)(A)(iv) shall be zero.’’. 
(B) CONFORMING AMENDMENTS.— 
(i) Subsection (b) of section 4082 is 
amended by adding at the end the following 
new flush sentence: ‘‘The term ‘nontaxable 
use’ does not include the use of aviation- 
grade kerosene in an aircraft.’’. 
(ii) Section 4082(d) is amended by 
striking paragraph (1) and by redesig-
nating paragraphs (2) and (3) as para-
graphs (1) and (2), respectively. 
(4) NONAIRCRAFT USE OF AVIATION-GRADE KER-
OSENE.— 
(A) IN
GENERAL.—Subparagraph (B) of 
section 4041(a)(1) is amended by adding at the 
end the following new sentence: ‘‘This subpara-
graph shall not apply to aviation-grade ker-
osene.’’. 
(B) CONFORMING AMENDMENT.—The head-
ing for paragraph (1) of section 4041(a) is
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HR 3550 EAS 
amended by inserting ‘‘AND
KEROSENE’’ after 
‘‘DIESEL FUEL’’. 
(b) COMMERCIAL AVIATION.—Section 4083 is amended 
redesignating subsections (b) and (c) as subsections (c) and 
(d), respectively, and by inserting after subsection (a) the 
following new subsection: 
‘‘(b) COMMERCIAL AVIATION.—For purposes of this 
subpart, the term ‘commercial aviation’ means any use of 
an aircraft in a business of transporting persons or prop-
erty for compensation or hire by air, unless properly allo-
cable to any transportation exempt from the taxes imposed 
by section 4261 and 4271 by reason of section 4281 or 4282 
or by reason of section 4261(h).’’. 
(c) REFUNDS.— 
(1) IN
GENERAL.—Paragraph (4) of section 
6427(l) is amended to read as follows: 
‘‘(4) 
REFUNDS
FOR
AVIATION-GRADE
KER-
OSENE.— 
‘‘(A) NO REFUND OF CERTAIN TAXES ON 
FUEL USED IN COMMERCIAL AVIATION.—In the 
case of aviation-grade kerosene used in commer-
cial aviation (as defined in section 4083(b)) 
(other than supplies for vessels or aircraft within 
the meaning of section 4221(d)(3)), paragraph
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HR 3550 EAS 
(1) shall not apply to so much of the tax imposed 
by section 4081 as is attributable to— 
‘‘(i) the Leaking Underground Storage 
Tank Trust Fund financing rate imposed 
by such section, and 
‘‘(ii) so much of the rate of tax speci-
fied in section 4081(a)(2)(A)(iv) as does not 
exceed 4.3 cents per gallon. 
‘‘(B) PAYMENT TO ULTIMATE, REGISTERED 
VENDOR.—With respect to aviation-grade ker-
osene, if the ultimate purchaser of such kerosene 
waives (at such time and in such form and man-
ner as the Secretary shall prescribe) the right to 
payment under paragraph (1) and assigns such 
right to the ultimate vendor, then the Secretary 
shall pay the amount which would be paid under 
paragraph (1) to such ultimate vendor, but only 
if such ultimate vendor— 
‘‘(i) is registered under section 4101, 
and 
‘‘(ii) meets the requirements of sub-
paragraph (A), (B), or (D) of section 
6416(a)(1).’’. 
(2) TIME FOR FILING CLAIMS.—Paragraph (4) of 
section 6427(i) is amended by striking ‘‘subsection
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HR 3550 EAS 
(l)(5)’’ and inserting ‘‘paragraph (4)(B) or (5) of sub-
section (l)’’. 
(3) CONFORMING
AMENDMENT.—Subparagraph 
(B) of section 6427(l)(2) is amended to read as fol-
lows: 
‘‘(B) in the case of aviation-grade ker-
osene— 
‘‘(i) any use which is exempt from the 
tax imposed by section 4041(c) other than 
by reason of a prior imposition of tax, or 
‘‘(ii) any use in commercial aviation 
(within the meaning of section 4083(b)).’’. 
(d) REPEAL
OF
PRIOR
TAXATION
OF
AVIATION 
FUEL.— 
(1) IN GENERAL.—Part III of subchapter A of 
chapter 32 is amended by striking subpart B and by 
redesignating subpart C as subpart B. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 4041(c) is amended to read as 
follows: 
‘‘(c) AVIATION-GRADE KEROSENE.— 
‘‘(1) IN GENERAL.—There is hereby imposed a 
tax upon aviation-grade kerosene—
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HR 3550 EAS 
‘‘(A) sold by any person to an owner, lessee, 
or other operator of an aircraft for use in such 
aircraft, or 
‘‘(B) used by any person in an aircraft un-
less there was a taxable sale of such fuel under 
subparagraph (A). 
‘‘(2) 
EXEMPTION
FOR
PREVIOUSLY
TAXED 
FUEL.—No tax shall be imposed by this subsection on 
the sale or use of any aviation-grade kerosene if tax 
was imposed on such liquid under section 4081 and 
the tax thereon was not credited or refunded. 
‘‘(3) RATE OF TAX.—The rate of tax imposed by 
this subsection shall be the rate of tax specified in sec-
tion 4081(a)(2)(A)(iv) which is in effect at the time 
of such sale or use.’’. 
(B) Section 4041(d)(2) is amended by strik-
ing ‘‘section 4091’’ and inserting ‘‘section 4081’’. 
(C) Section 4041 is amended by striking 
subsection (e). 
(D) Section 4041 is amended by striking 
subsection (i). 
(E) Section 4041(m)(1) is amended to read 
as follows:
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HR 3550 EAS 
‘‘(1) IN GENERAL.—In the case of the sale or use 
of any partially exempt methanol or ethanol fuel, the 
rate of the tax imposed by subsection (a)(2) shall be— 
‘‘(A) after September 30, 1997, and before 
September 30, 2009— 
‘‘(i) in the case of fuel none of the alco-
hol in which consists of ethanol, 9.15 cents 
per gallon, and 
‘‘(ii) in any other case, 11.3 cents per 
gallon, and 
‘‘(B) after September 30, 2009— 
‘‘(i) in the case of fuel none of the alco-
hol in which consists of ethanol, 2.15 cents 
per gallon, and 
‘‘(ii) in any other case, 4.3 cents per 
gallon.’’. 
(F) Sections 4101(a), 4103, 4221(a), and 
6206 are each amended by striking ‘‘, 4081, or 
4091’’ and inserting ‘‘or 4081’’. 
(G) Section 6416(b)(2) is amended by strik-
ing ‘‘4091 or’’. 
(H) Section 6416(b)(3) is amended by strik-
ing ‘‘or 4091’’ each place it appears.
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HR 3550 EAS 
(I) Section 6416(d) is amended by striking 
‘‘or to the tax imposed by section 4091 in the 
case of refunds described in section 4091(d)’’. 
(J) Section 6427 is amended by striking 
subsection (f). 
(K) Section 6427(j)(1) is amended by strik-
ing ‘‘, 4081, and 4091’’ and inserting ‘‘and 
4081’’. 
(L)(i) Section 6427(l)(1) is amended to 
read as follows: 
‘‘(1) IN GENERAL.—Except as otherwise provided 
in this subsection and in subsection (k), if any diesel 
fuel or kerosene on which tax has been imposed by 
section 4041 or 4081 is used by any person in a non-
taxable use, the Secretary shall pay (without interest) 
to the ultimate purchaser of such fuel an amount 
equal to the aggregate amount of tax imposed on such 
fuel under section 4041 or 4081, as the case may be, 
reduced by any refund paid to the ultimate vendor 
under paragraph (4)(B).’’. 
(ii) Paragraph (5)(B) of section 6427(l) is 
amended by striking ‘‘Paragraph (1)(A) shall 
not apply to kerosene’’ and inserting ‘‘Para-
graph (1) shall not apply to kerosene (other than 
aviation-grade kerosene)’’.
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HR 3550 EAS 
(M) Subparagraph (B) of section 6724(d)(1) 
is amended by striking clause (xv) and by redes-
ignating the succeeding clauses accordingly. 
(N) Paragraph (2) of section 6724(d) is 
amended by striking subparagraph (W) and by 
redesignating the succeeding subparagraphs ac-
cordingly. 
(O) Paragraph (1) of section 9502(b) is 
amended by adding ‘‘and’’ at the end of subpara-
graph (B) and by striking subparagraphs (C) 
and (D) and inserting the following new sub-
paragraph: 
‘‘(C) section 4081 with respect to aviation 
gasoline and aviation-grade kerosene, and’’. 
(P) The last sentence of section 9502(b) is 
amended to read as follows: 
‘‘There shall not be taken into account under paragraph 
(1) so much of the taxes imposed by section 4081 as are 
determined at the rate specified in section 4081(a)(2)(B).’’. 
(Q) Subsection (b) of section 9508 is 
amended by striking paragraph (3) and by re-
designating paragraphs (4) and (5) as para-
graphs (3) and (4), respectively.
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HR 3550 EAS 
(R) Section 9508(c)(2)(A) is amended by 
striking ‘‘sections 4081 and 4091’’ and inserting 
‘‘section 4081’’. 
(S) The table of subparts for part III of 
subchapter A of chapter 32 is amended to read 
as follows: 
‘‘Subpart A. Motor and aviation fuels. 
‘‘Subpart B. Special provisions applicable to fuels tax.’’. 
(T) The heading for subpart A of part III 
of subchapter A of chapter 32 is amended to read 
as follows: 
‘‘Subpart A—Motor and Aviation Fuels’’. 
(U) The heading for subpart B of part III 
of subchapter A of chapter 32 is amended to read 
as follows: 
‘‘Subpart B—Special Provisions Applicable to Fuels 
Tax’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall apply to aviation-grade kerosene removed, en-
tered, or sold after September 30, 2004. 
(f) FLOOR STOCKS TAX.— 
(1) IN GENERAL.—There is hereby imposed on 
aviation-grade kerosene held on October 1, 2004, by 
any person a tax equal to— 
(A) the tax which would have been imposed 
before such date on such kerosene had the amend-
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HR 3550 EAS 
ments made by this section been in effect at all 
times before such date, reduced by 
(B) the tax imposed before such date under 
section 4091 of the Internal Revenue Code of 
1986, as in effect on the day before the date of 
the enactment of this Act. 
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.— 
(A) LIABILITY FOR TAX.—The person hold-
ing the kerosene on October 1, 2004, to which the 
tax imposed by paragraph (1) applies shall be 
liable for such tax. 
(B) METHOD AND TIME FOR PAYMENT.— 
The tax imposed by paragraph (1) shall be paid 
at such time and in such manner as the Sec-
retary of the Treasury shall prescribe, including 
the nonapplication of such tax on de minimis 
amounts of kerosene. 
(3) TRANSFER OF FLOOR STOCK TAX REVENUES 
TO TRUST FUNDS.—For purposes of determining the 
amount transferred to any trust fund, the tax im-
posed by this subsection shall be treated as imposed 
by section 4081 of the Internal Revenue Code of 
1986—
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(A) at the Leaking Underground Storage 
Tank Trust Fund financing rate under such sec-
tion to the extent of 0.1 cents per gallon, and 
(B) 
at 
the 
rate 
under 
section 
4081(a)(2)(A)(iv) to the extent of the remainder. 
(4) HELD BY A PERSON.—For purposes of this 
section, kerosene shall be considered as held by a per-
son if title thereto has passed to such person (whether 
or not delivery to the person has been made). 
(5) OTHER LAWS APPLICABLE.—All provisions of 
law, including penalties, applicable with respect to 
the tax imposed by section 4081 of such Code shall, 
insofar as applicable and not inconsistent with the 
provisions of this subsection, apply with respect to the 
floor stock tax imposed by paragraph (1) to the same 
extent as if such tax were imposed by such section. 
SEC. 5212. TRANSFER OF CERTAIN AMOUNTS FROM THE 
AIRPORT AND AIRWAY TRUST FUND TO THE 
HIGHWAY TRUST FUND TO REFLECT HIGH-
WAY USE OF JET FUEL. 
(a) IN GENERAL.—Section 9502(d) is amended by 
adding at the end the following new paragraph: 
‘‘(7) TRANSFERS
FROM
THE
TRUST
FUND
TO 
THE HIGHWAY TRUST FUND.—
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‘‘(A) IN GENERAL.—The Secretary shall pay 
annually from the Airport and Airway Trust 
Fund into the Highway Trust Fund an amount 
(as determined by him) equivalent to amounts 
received in the Airport and Airway Trust Fund 
which are attributable to fuel that is used pri-
marily for highway transportation purposes. 
‘‘(B) AMOUNTS
TRANSFERRED
TO
MASS 
TRANSIT ACCOUNT.—The Secretary shall transfer 
11 percent of the amounts paid into the High-
way Trust Fund under subparagraph (A) to the 
Mass Transit Account established under section 
9503(e).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Subsection (a) of section 9503 is amended— 
(A) by striking ‘‘appropriated or credited’’ 
and inserting ‘‘paid, appropriated, or credited’’, 
and 
(B) by striking ‘‘or section 9602(b)’’ and in-
serting ‘‘, section 9502(d)(7), or section 9602(b)’’. 
(2) Subsection (e)(1) of section 9503 is amended 
by striking ‘‘or section 9602(b)’’ and inserting ‘‘, sec-
tion 9502(d)(7), or section 9602(b)’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall take effect on October 1, 2004.
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PART II—DYED FUEL 
SEC. 5221. DYE INJECTION EQUIPMENT. 
(a) IN GENERAL.—Section 4082(a)(2) (relating to ex-
emptions for diesel fuel and kerosene) is amended by insert-
ing ‘‘by mechanical injection’’ after ‘‘indelibly dyed’’. 
(b) DYE INJECTOR SECURITY.—Not later than June 
30, 2004, the Secretary of the Treasury shall issue regula-
tions regarding mechanical dye injection systems described 
in the amendment made by subsection (a), and such regula-
tions shall include standards for making such systems tam-
per resistant. 
(c) PENALTY FOR TAMPERING WITH OR FAILING TO 
MAINTAIN SECURITY REQUIREMENTS
FOR MECHANICAL 
DYE INJECTION SYSTEMS.— 
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is amend-
ed by adding after section 6715 the following new sec-
tion: 
‘‘SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN 
SECURITY REQUIREMENTS FOR MECHANICAL 
DYE INJECTION SYSTEMS. 
‘‘(a) IMPOSITION OF PENALTY— 
‘‘(1) TAMPERING.—If any person tampers with a 
mechanical dye injection system used to indelibly dye 
fuel for purposes of section 4082, then such person 
shall pay a penalty in addition to the tax (if any).