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.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. REFERENCE, ETC. 
(a) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(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; re-
peal 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 farm-
ing. 
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 fa-
cility 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.
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.
TITLE 
I—RESTRUCTURING 
OF 
INCENTIVES 
FOR 
ALCOHOL 
FUELS, ETC. 
SEC. 101. REDUCED RATES OF TAX ON GASOHOL REPLACED 
WITH 
EXCISE 
TAX 
CREDIT; 
REPEAL 
OF 
OTHER ALCOHOL-BASED FUEL INCENTIVES; 
ETC. 
(a) EXCISE TAX CREDIT FOR ALCOHOL FUEL MIX-
TURES.—
(1) IN
GENERAL.—Subsection (f) of section 
6427 is amended to read as follows: 
‘‘(f) ALCOHOL FUEL MIXTURES.—
‘‘(1) IN
GENERAL.—The amount of credit 
which would (but for section 40(c)) be determined 
under section 40(a)(1) for any period—
‘‘(A) shall, with respect to taxable events 
occurring during such period, be treated—
‘‘(i) as a payment of the taxpayer’s li-
ability for tax imposed by section 4081, 
and 
‘‘(ii) as received at the time of the 
taxable event, and
‘‘(B) to the extent such amount of credit 
exceeds such liability for such period, shall (ex-
cept as provided in subsection (k)) be paid sub-
ject to subsection (i)(3) by the Secretary with-
out interest. 
‘‘(2) SPECIAL RULES.—
‘‘(A) ONLY
CERTAIN
ALCOHOL
TAKEN 
INTO
ACCOUNT.—For purposes of paragraph 
(1), section 40 shall be applied—
‘‘(i) by not taking into account alcohol 
with a proof of less than 190, and 
‘‘(ii) by treating as alcohol the alcohol 
gallon equivalent of ethyl tertiary butyl 
ether or other ethers produced from such 
alcohol. 
‘‘(B) TREATMENT
OF
REFINERS.—For 
purposes of paragraph (1), in the case of a mix-
ture—
‘‘(i) the alcohol in which is described 
in subparagraph (A)(ii), and 
‘‘(ii) which is produced by any person 
at a refinery prior to any taxable event, 
section 40 shall be applied by treating such per-
son as having sold such mixture at the time of
its removal from the refinery (and only at such 
time) to another person for use as a fuel. 
‘‘(3) MIXTURES
NOT
USED
AS
FUEL.—Rules 
similar to the rules of subparagraphs (A) and (D) 
of section 40(d)(3) shall apply for purposes of this 
subsection. 
‘‘(4) TERMINATION.—This section shall apply 
only to periods to which section 40 applies, deter-
mined by substituting in section 40(e)—
‘‘(A) ‘September 30, 2007’ for ‘December 
31, 2007’, and 
‘‘(B) ‘October 1, 2007’ for ‘January 1, 
2008’.’’. 
(2) REVISION
OF
RULES
FOR
PAYMENT
OF 
CREDIT.—Paragraph (3) of section 6427(i) is 
amended to read as follows: 
‘‘(3) SPECIAL
RULE
FOR
ALCOHOL
MIXTURE 
CREDIT.—
‘‘(A) IN GENERAL.—A claim may be filed 
under subsection (f)(1)(B) by any person for 
any period—
‘‘(i) for which $200 or more is pay-
able under such subsection (f)(1)(B), and
‘‘(ii) which is not less than 1 week.
‘‘(B) 
PAYMENT
OF
CLAIM.—Notwith-
standing subsection (f)(1)(B), if the Secretary 
has not paid pursuant to a claim filed under 
this section within 45 days of the date of the 
filing of such claim (20 days in the case of an 
electronic claim), the claim shall be paid with 
interest from such date determined by using the 
overpayment rate and method under section 
6621. 
‘‘(C) TIME FOR FILING CLAIM.—No claim 
filed under this paragraph shall be allowed un-
less filed on or before the last day of the first 
quarter following the earliest quarter included 
in the claim.’’. 
(b) REPEAL OF OTHER INCENTIVES FOR FUEL MIX-
TURES.—
(1) Subsection (b) of section 4041 is amended 
to read as follows: 
‘‘(b) EXEMPTION
FOR
OFF-HIGHWAY
BUSINESS 
USE.—
‘‘(1) IN GENERAL.—No tax shall be imposed by 
subsection (a) or (d)(1) on liquids sold for use or 
used in an off-highway business use. 
‘‘(2) TAX WHERE OTHER USE.—If a liquid on 
which no tax was imposed by reason of paragraph
(1) is used otherwise than in an off-highway busi-
ness use, a tax shall be imposed by paragraph 
(1)(B), (2)(B), or (3)(A)(ii) of subsection (a) 
(whichever is appropriate) and by the corresponding 
provision of subsection (d)(1) (if any). 
‘‘(3) OFF-HIGHWAY BUSINESS USE DEFINED.—
For purposes of this subsection, the term ‘off-high-
way business use’ has the meaning given to such 
term by section 6421(e)(2); except that such term 
shall not, for purposes of subsection (a)(1), include 
use in a diesel-powered train.’’. 
(2) Section 4041(k) is hereby repealed. 
(3) Section 4081(c) is hereby repealed. 
(4) Section 4091(c) is hereby repealed. 
(c) TRANSFERS TO HIGHWAY TRUST FUND.—Para-
graph (4) of section 9503(b) is amended by adding ‘‘or’’ 
at the end of subparagraph (B), by striking the comma 
at the end of subparagraph (C) and inserting a period, 
and by striking subparagraphs (D), (E), and (F). 
(d) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 40 is amended to 
read as follows: 
‘‘(c) COORDINATION
WITH
EXCISE
TAX
BENE-
FITS.—The amount of the credit determined under this 
section with respect to any alcohol shall, under regulations
prescribed by the Secretary, be properly reduced to take 
into account the benefit provided with respect to such alco-
hol under section 6427(f).’’. 
(2) Subparagraph (B) of section 40(d)(4) is 
amended by striking ‘‘under section 4041(k) or 
4081(c)’’ and inserting ‘‘under section 6427(f)’’. 
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section 
shall apply to fuel sold or used after September 30, 
2004. 
(2) SUBSECTION (c).—The amendments made 
by subsection (c) shall apply to taxes imposed after 
September 30, 2003. 
SEC. 102. ALCOHOL FUEL SUBSIDIES BORNE BY GENERAL 
FUND. 
(a) TRANSFERS TO FUND.—Section 9503(b)(1) is 
amended by adding at the end the following new flush sen-
tence: 
‘‘For purposes of this paragraph, the amount of 
taxes received under section 4081 shall include any 
amount treated as a payment under section 
6427(f)(1)(A) and shall not be reduced by the 
amount paid under section 6427(f)(1)(B).’’.
(b) TRANSFERS FROM FUND.—Subparagraph (A) of 
section 9503(c)(2) is amended by adding at the end the 
following new sentence: ‘‘Clauses (i)(III) and (ii) shall not 
apply to claims under section 6427(f)(1)(B).’’
(c) EFFECTIVE DATE.—
(1) SUBSECTION (a).—The amendment made 
by subsection (a) shall apply to taxes received after 
September 30, 2004. 
(2) SUBSECTION (b).—The amendment made 
by subsection (b) shall apply to amounts paid after 
September 30, 2004, and (to the extent related to 
section 34 of the Internal Revenue Code of 1986) to 
fuel used after such date. 
TITLE II—REDUCTION OF FUEL 
TAX EVASION 
SEC. 201. EXEMPTION FROM CERTAIN EXCISE TAXES FOR 
MOBILE MACHINERY. 
(a) EXEMPTION FROM TAX ON HEAVY TRUCKS AND 
TRAILERS SOLD AT RETAIL.—
(1) IN GENERAL.—Section 4053 (relating to ex-
emptions) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(8) MOBILE MACHINERY.—Any vehicle which 
consists of a chassis—
‘‘(A) to which there has been permanently 
mounted (by welding, bolting, riveting, or other 
means) machinery or equipment to perform a 
construction, manufacturing, processing, farm-
ing, mining, drilling, timbering, or similar oper-
ation if the operation of the machinery or 
equipment is unrelated to transportation on or 
off the public highways, 
‘‘(B) which has been specially designed to 
serve only as a mobile carriage and mount (and 
a power source, where applicable) for the par-
ticular machinery or equipment involved, wheth-
er or not such machinery or equipment is in op-
eration, and 
‘‘(C) which, by reason of such special de-
sign, could not, without substantial structural 
modification, be used as a component of a vehi-
cle designed to perform a function of trans-
porting any load other than that particular ma-
chinery or equipment or similar machinery or 
equipment requiring such a specially designed 
chassis.’’.
(2) EFFECTIVE DATE.—The amendment made 
by this subsection shall take effect on the day after 
the date of the enactment of this Act.
(b) EXEMPTION FROM TAX ON USE OF CERTAIN VE-
HICLES.—
(1) IN GENERAL.—Section 4483 (relating to ex-
emptions) is amended by redesignating subsection 
(g) as subsection (h) and by inserting after sub-
section (f) the following new subsection: 
‘‘(g) EXEMPTION FOR MOBILE MACHINERY.—No tax 
shall be imposed by section 4481 on the use of any vehicle 
described in section 4053(8).’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect on the day after 
the date of the enactment of this Act. 
(c) REFUND OF FUEL TAXES.—
(1) IN GENERAL.—Section 6421(e)(2) (defining 
off-highway business use) is amended by adding at 
the end the following new subparagraph: 
‘‘(C) USES IN MOBILE MACHINERY.—
‘‘(i) IN
GENERAL.—The term ‘off-
highway business use’ shall include any use 
in a vehicle which meets the requirements 
described in clause (ii). 
‘‘(ii) REQUIREMENTS
FOR
MOBILE 
MACHINERY.—The requirements described 
in this clause are—
‘‘(I) the design-based test, and
‘‘(II) the use-based test. 
‘‘(iii) DESIGN-BASED TEST.—For pur-
poses of clause (ii)(I), the design-based 
test is met if the vehicle consists of a chas-
sis—
‘‘(I) to which there has been per-
manently mounted (by welding, bolt-
ing, riveting, or other means) machin-
ery or equipment to perform a con-
struction, manufacturing, processing, 
farming, mining, drilling, timbering, 
or similar operation if the operation of 
the machinery or equipment is unre-
lated to transportation on or off the 
public highways, 
‘‘(II) which has been specially de-
signed to serve only as a mobile car-
riage and mount (and a power source, 
where applicable) for the particular 
machinery or equipment involved, 
whether or not such machinery or 
equipment is in operation, and 
‘‘(III) which, by reason of such 
special design, could not, without sub-
stantial structural modification, be
used as a component of a vehicle de-
signed to perform a function of trans-
porting any load other than that par-
ticular machinery or equipment or 
similar machinery or equipment re-
quiring such a specially designed chas-
sis. 
‘‘(iv) USE-BASED
TEST.—For pur-
poses of clause (ii)(II), the use-based test 
is met if the use of the vehicle on public 
highways was less than 7,500 miles during 
the taxpayer’s taxable year.’’. 
(2) NO
TAX-FREE
SALES.—Subsection (b) of 
section 4082, as amended by section 202, is amend-
ed by inserting before the period at the end ‘‘and 
such term shall not include any use described in sec-
tion 6421(e)(2)(C).’’. 
(3) ANNUAL REFUND OF TAX PAID.—Section 
6427(i)(2) (relating to exceptions) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) NONAPPLICATION OF PARAGRAPH.—
This paragraph shall not apply to any fuel used 
solely in any off-highway business use described 
in section 6421(e)(2)(C).’’.
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to taxable years begin-
ning after the date of the enactment of this Act. 
SEC. 202. TAXATION OF AVIATION-GRADE KEROSENE. 
(a) RATE OF TAX.—
(1) IN GENERAL.—Subparagraph (A) of section 
4081(a)(2) is amended by striking ‘‘and’’ at the end 
of clause (ii), by striking the period at the end of 
clause (iii) and inserting ‘‘, and’’, and by adding at 
the end the following new clause: 
‘‘(iv) in the case of aviation-grade 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 avia-
tion-grade kerosene which is removed from any 
refinery or terminal directly into the fuel tank 
of an aircraft for use in commercial aviation, 
the rate of tax under subparagraph (A)(iv) shall 
be 4.3 cents per gallon.’’. 
(3) CERTAIN
REFUELER
TRUCKS, TANKERS, 
AND TANK WAGONS TREATED AS TERMINAL.—Sub-
section (a) of section 4081 is amended by adding at 
the end the following new paragraph: 
‘‘(3) CERTAIN
REFUELER
TRUCKS, TANKERS, 
AND TANK WAGONS TREATED AS TERMINAL.—
‘‘(A) IN
GENERAL.—A refueler truck, 
tanker, or tank wagon shall be treated as part 
of the terminal referred to in paragraph (2)(C) 
if—
‘‘(i) such truck, tanker, or wagon 
meets the requirements of subparagraph 
(B) with respect to an airport, and 
‘‘(ii) no vehicle registered for highway 
use is loaded with aviation-grade kerosene 
at such terminal. 
‘‘(B) REQUIREMENTS.—A refueler truck, 
tanker, or tank wagon meets the requirements 
of this subparagraph with respect to an airport 
if such truck, tanker, or wagon—
‘‘(i) is loaded with aviation-grade ker-
osene at such terminal located within such 
airport and delivers such kerosene only 
into aircraft at such airport for use in 
commercial aviation,
‘‘(ii) has storage tanks, hose, and cou-
pling equipment designed and used for the 
purposes of fueling aircraft, 
‘‘(iii) is not registered for highway 
use, and 
‘‘(iv) is operated by—
‘‘(I) the terminal operator of 
such terminal, or 
‘‘(II) a person that makes a daily 
accounting to such terminal operator 
of each delivery of fuel from such 
truck, tanker, or wagon. 
‘‘(C) REPORTING.—The Secretary shall re-
quire under section 4101(d) reporting by such 
terminal operator of—
‘‘(i) any information obtained under 
subparagraph (B)(iv)(II), and 
‘‘(ii) any similar information main-
tained by such terminal operator with re-
spect to deliveries of fuel made by trucks, 
tankers, or wagons operated by such ter-
minal operator.’’.
(4) LIABILITY
FOR
TAX
ON
AVIATION-GRADE 
KEROSENE USED IN COMMERCIAL AVIATION.—Sub-
section (a) of section 4081 is amended by adding at 
the end the following new paragraph: 
‘‘(4) LIABILITY
FOR
TAX.—For purposes of 
paragraph (2)(C), the person who uses the fuel for 
commercial aviation shall pay the tax imposed under 
such paragraph. For purposes of the preceding sen-
tence, fuel shall be treated as used when such fuel 
is removed into the fuel tank.’’. 
(5) NONTAXABLE USES.—
(A) IN GENERAL.—Section 4082 is amend-
ed by redesignating subsections (e) and (f) as 
subsections (f) and (g), respectively, and by in-
serting after subsection (d) the following new 
subsection: 
‘‘(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. 
For purposes of the preceding sentence, rules similar to 
the rules of section 4081(a)(3) shall apply.’’. 
(B) CONFORMING AMENDMENTS.—
(i) Subsection (b) of section 4082 is 
amended by adding at the end the fol-
lowing 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. 
(6) NONAIRCRAFT
USE
OF
AVIATION-GRADE 
KEROSENE.—
(A) IN GENERAL.—Subparagraph (B) of 
section 4041(a)(1) is amended by adding at the 
end the following new sentence: ‘‘This subpara-
graph shall not apply to aviation-grade ker-
osene.’’. 
(B) 
CONFORMING
AMENDMENT.—The 
heading for paragraph (1) of section 4041(a) is 
amended by inserting ‘‘AND KEROSENE’’ after 
‘‘DIESEL FUEL’’. 
(b) 
COMMERCIAL
AVIATION.—Section 
4083 
is 
amended by redesignating subsections (b) and (c) as sub-
sections (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 sections 4261 and 4271 by reason of section 4281 or 
4282 or by reason of section 4261(h).’’. 
(c) REFUNDS.—
(1) IN
GENERAL.—Paragraph (4) of section 
6427(l) is amended to read as follows: 
‘‘(4) REFUNDS
FOR
AVIATION-GRADE
KER-
OSENE.—
‘‘(A) NO REFUND OF CERTAIN TAXES ON 
FUEL USED IN COMMERCIAL AVIATION.—In the 
case of aviation-grade kerosene used in com-
mercial aviation (as defined in section 4083(b)) 
(other than supplies for vessels or aircraft with-
in the meaning of section 4221(d)(3)), para-
graph (1) shall not apply to so much of the tax 
imposed by section 4081 as is attributable to—
‘‘(i) the Leaking Underground Stor-
age Tank Trust Fund financing rate im-
posed 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, 
REG-
ISTERED
VENDOR.—With respect to aviation-
grade kerosene, if the ultimate purchaser of 
such kerosene waives (at such time and in such 
form and manner as the Secretary shall pre-
scribe) the right to payment under paragraph 
(1) and assigns such right to the ultimate ven-
dor, 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 ‘‘sub-
section (l)(5)’’ and inserting ‘‘paragraph (4)(B) or 
(5) of subsection (l)’’.
(3) CONFORMING AMENDMENT.—Subparagraph 
(B) of section 6427(l)(2) is amended to read as 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—
‘‘(A) sold by any person to an owner, les-
see, 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 section 4081(a)(2)(A)(iv) which is in effect at the 
time of such sale or use.’’. 
(B) Section 4041(d)(2) is amended by 
striking ‘‘section 4091’’ and inserting ‘‘section 
4081’’. 
(C) Section 4041 is amended by striking 
subsection (e). 
(D) Section 4041 is amended by striking 
subsection (i). 
(E) Sections 4101(a), 4103, 4221(a), and 
6206 are each amended by striking ‘‘, 4081, or 
4091’’ and inserting ‘‘or 4081’’. 
(F) Section 6416(b)(2) is amended by 
striking ‘‘4091 or’’.
(G) Section 6416(b)(3) is amended by 
striking ‘‘or 4091’’ each place it appears. 
(H) Section 6416(d) is amended by strik-
ing ‘‘or to the tax imposed by section 4091 in 
the case of refunds described in section 
4091(d)’’. 
(I) Section 6427(j)(1) is amended by strik-
ing ‘‘, 4081, and 4091’’ and inserting ‘‘and 
4081’’. 
(J)(i) Section 6427(l)(1) is amended to 
read as follows: 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection and in subsection (k), if any 
diesel fuel or kerosene on which tax has been im-
posed by section 4041 or 4081 is used by any person 
in a nontaxable use, the Secretary shall pay (without 
interest) to the ultimate purchaser of such fuel an 
amount equal to the aggregate amount of tax im-
posed on such fuel under section 4041 or 4081, as 
the case may be, reduced by any payment made to 
the ultimate vendor under paragraph (4)(B).’’. 
(ii) Paragraph (5)(B) of section 6427(l) is 
amended by striking ‘‘Paragraph (1)(A) shall 
not apply to kerosene’’ and inserting ‘‘Para-
graph (1) shall not apply to kerosene (other 
than aviation-grade kerosene)’’. 
(K) 
Subparagraph 
(B) 
of 
section 
6724(d)(1) is amended by striking clause (xv) 
and by redesignating the succeeding clauses ac-
cordingly. 
(L) Paragraph (2) of section 6724(d) is 
amended by striking subparagraph (W) and by 
redesignating the succeeding subparagraphs ac-
cordingly. 
(M) Paragraph (1) of section 9502(b) is 
amended by adding ‘‘and’’ at the end of sub-
paragraph (B) and by striking subparagraphs 
(C) and (D) and inserting the following new 
subparagraph: 
‘‘(C) section 4081 with respect to aviation 
gasoline and aviation-grade kerosene, and’’. 
(N) The last sentence of section 9502(b) is 
amended to read as follows: 
‘‘There shall not be taken into account under paragraph 
(1) so much of the taxes imposed by section 4081 as are 
determined 
at 
the 
rate 
specified 
in 
section 
4081(a)(2)(B).’’. 
(O) Subsection (b) of section 9508 is 
amended by striking paragraph (3) and by re-
designating paragraphs (4) and (5) as para-
graphs (3) and (4), respectively. 
(P) Section 9508(c)(2)(A) is amended by 
striking ‘‘sections 4081 and 4091’’ and insert-
ing ‘‘section 4081’’. 
(Q) The table of subparts for part III of 
subchapter A of chapter 32 is amended to read 
as follows:
‘‘Subpart A. Motor and aviation fuels. 
‘‘Subpart B. Special provisions applicable to fuels tax.’’.
(R) The heading for subpart A of part III 
of subchapter A of chapter 32 is amended to 
read as follows: 
‘‘Subpart A—Motor and Aviation Fuels’’.
(S) The heading for subpart B of part III 
of subchapter A of chapter 32 is amended to 
read as follows: 
‘‘Subpart B—Special Provisions Applicable to Fuels 
Tax’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to aviation-grade kerosene re-
moved, entered, or sold after September 30, 2004. 
(f) FLOOR STOCKS TAX.—
(1) IN GENERAL.—There is hereby imposed on 
aviation-grade kerosene held on October 1, 2004, by 
any person a tax equal to—
(A) the tax which would have been imposed 
before such date on such kerosene had the 
amendments made by this section been in effect 
at all times before such date, reduced by 
(B) the tax imposed before such date 
under section 4091 of the Internal Revenue 
Code of 1986, as in effect on the day before the 
date of the enactment of this Act. 
(2) LIABILITY FOR TAX AND METHOD OF PAY-
MENT.—
(A) LIABILITY
FOR
TAX.—The person 
holding the kerosene on October 1, 2004, to 
which the tax imposed by paragraph (1) applies 
shall be liable for such tax. 
(B) METHOD AND TIME FOR PAYMENT.—
The tax imposed by paragraph (1) shall be paid 
at such time and in such manner as the Sec-
retary of the Treasury (or the Secretary’s dele-
gate) shall prescribe, including the nonapplica-
tion of such tax on de minimus amounts of ker-
osene. 
(3) TRANSFER
OF
FLOOR
STOCK
TAX
REVE-
NUES TO TRUST FUNDS.—For purposes of deter-
mining the amount transferred to any trust fund, 
the tax imposed by this subsection shall be treated
as imposed by section 4081 of the Internal Revenue 
Code of 1986—
(A) at the Leaking Underground Storage 
Tank Trust Fund financing rate under such 
section to the extent of 0.1 cents per gallon, 
and 
(B) 
at 
the 
rate 
under 
section 
4081(a)(2)(A)(iv) to the extent of the remain-
der. 
(4) HELD BY A PERSON.—For purposes of this 
section, kerosene shall be considered as held by a 
person if title thereto has passed to such person 
(whether or not delivery to the person has been 
made). 
(5) OTHER LAWS APPLICABLE.—All provisions 
of law, including penalties, applicable with respect to 
the tax imposed by section 4081 of such Code shall, 
insofar as applicable and not inconsistent with the 
provisions of this subsection, apply with respect to 
the floor stock tax imposed by paragraph (1) to the 
same extent as if such tax were imposed by such 
section.
SEC. 203. DYE INJECTION EQUIPMENT. 
(a) IN GENERAL.—Section 4082(a)(2) (relating to 
exemptions for diesel fuel and kerosene) is amended by 
inserting ‘‘by mechanical injection’’ after ‘‘indelibly dyed’’. 
(b) DYE INJECTOR SECURITY.—Not later than 180 
days after the date of the enactment of this Act, the Sec-
retary of the Treasury shall issue regulations regarding 
mechanical dye injection systems described in the amend-
ment made by subsection (a), and such regulations shall 
include standards for making such systems tamper resist-
ant. 
(c) PENALTY FOR TAMPERING WITH OR FAILING TO 
MAINTAIN SECURITY REQUIREMENTS FOR MECHANICAL 
DYE INJECTION SYSTEMS.—
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by adding after section 6715 the following 
new section: 
‘‘SEC. 6715A. TAMPERING WITH OR FAILING TO MAINTAIN 
SECURITY 
REQUIREMENTS 
FOR 
MECHAN-
ICAL DYE INJECTION SYSTEMS. 
‘‘(a) IMPOSITION OF PENALTY—
‘‘(1) TAMPERING.—If any person tampers with 
a mechanical dye injection system used to indelibly 
dye fuel for purposes of section 4082, such person 
shall pay a penalty in addition to the tax (if any).
‘‘(2) FAILURE
TO
MAINTAIN
SECURITY
RE-
QUIREMENTS.—If any operator of a mechanical dye 
injection system used to indelibly dye fuel for pur-
poses of section 4082 fails to maintain the security 
standards for such system as established by the Sec-
retary, then such operator shall pay a penalty in ad-
dition to the tax (if any).
‘‘(b) AMOUNT OF PENALTY.—The amount of the 
penalty under subsection (a) shall be—
‘‘(1) for each violation described in paragraph 
(1), the greater of—
‘‘(A) $25,000, or 
‘‘(B) $10 for each gallon of fuel involved, 
and 
‘‘(2) for each—
‘‘(A) failure to maintain security standards 
described in paragraph (2), $1,000, and 
‘‘(B) failure to correct a violation described 
in paragraph (2), $1,000 per day for each day 
after which such violation was discovered or 
such person should have reasonably known of 
such violation. 
‘‘(c) JOINT AND SEVERAL LIABILITY.—
‘‘(1) IN
GENERAL.—If a penalty is imposed 
under this section on any business entity, each offi-
cer, employee, or agent of such entity or other con-
tracting party who willfully participated in any act 
giving rise to such penalty shall be jointly and sever-
ally liable with such entity for such penalty. 
‘‘(2) AFFILIATED GROUPS.—If a business entity 
described in paragraph (1) is part of an affiliated 
group (as defined in section 1504(a)), the parent 
corporation of such entity shall be jointly and sever-
ally liable with such entity for the penalty imposed 
under this section.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by adding after the item related to section 
6715 the following new item:
‘‘Sec. 6715A. Tampering with or failing to maintain security re-
quirements for mechanical dye injection systems.’’.
(d) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (c) shall take effect on the 180th day 
after the date on which the Secretary issues the regula-
tions described in subsection (b). 
SEC. 204. AUTHORITY TO INSPECT ON-SITE RECORDS. 
(a) IN GENERAL.—Section 4083(d)(1)(A) (relating 
to administrative authority), as previously amended by 
this Act, is amended by striking ‘‘and’’ at the end of clause 
(i) and by inserting after clause (ii) the following new 
clause:
‘‘(iii) 
inspecting 
any 
books 
and 
records and any shipping papers pertaining 
to such fuel, and’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 205. REGISTRATION OF PIPELINE OR VESSEL OPERA-
TORS REQUIRED FOR EXEMPTION OF BULK 
TRANSFERS TO REGISTERED TERMINALS OR 
REFINERIES. 
(a) IN GENERAL.—Section 4081(a)(1)(B) (relating 
to exemption for bulk transfers to registered terminals or 
refineries) is amended—
(1) by inserting ‘‘by pipeline or vessel’’ after 
‘‘transferred in bulk’’, and 
(2) by inserting ‘‘, the operator of such pipeline 
or vessel,’’ after ‘‘the taxable fuel’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on October 1, 2004. 
(c) PUBLICATION OF REGISTERED PERSONS.—Be-
ginning on July 1, 2004, the Secretary of the Treasury 
(or the Secretary’s delegate) shall periodically publish a 
current list of persons registered under section 4101 of 
the Internal Revenue Code of 1986 who are required to 
register under such section.
SEC. 206. DISPLAY OF REGISTRATION. 
(a) IN GENERAL.—Subsection (a) of section 4101 
(relating to registration) is amended—
(1) by striking ‘‘Every’’ and inserting the fol-
lowing: 
‘‘(1) IN GENERAL.—Every’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) DISPLAY OF REGISTRATION.—Every oper-
ator of a vessel required by the Secretary to register 
under this section shall display proof of registration 
through an electronic identification device prescribed 
by the Secretary on each vessel used by such oper-
ator to transport any taxable fuel.’’. 
(b) CIVIL PENALTY FOR FAILURE TO DISPLAY REG-
ISTRATION.—
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by inserting after section 6716 the fol-
lowing new section: 
‘‘SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON 
VESSELS. 
‘‘(a) FAILURE TO DISPLAY REGISTRATION.—Every 
operator of a vessel who fails to display proof of registra-
tion pursuant to section 4101(a)(2) shall pay a penalty 
of $500 for each such failure. With respect to any vessel,
only one penalty shall be imposed by this section during 
any calendar month. 
‘‘(b) MULTIPLE VIOLATIONS.—In determining the 
penalty under subsection (a) on any person, subsection (a) 
shall be applied by increasing the amount in subsection 
(a) by the product of such amount and the aggregate num-
ber of penalties (if any) imposed with respect to prior 
months by this section on such person (or a related person 
or any predecessor of such person or related person). 
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by inserting after the item relating to sec-
tion 6716 the following new item:
‘‘Sec. 6717. Failure to display tax registration on vessels.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made 
by subsection (a) shall take effect on October 1, 
2004. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to penalties imposed 
after September 30, 2004.
SEC. 207. PENALTIES FOR FAILURE TO REGISTER AND 
FAILURE TO REPORT. 
(a) INCREASED PENALTY.—Subsection (a) of section 
7272 (relating to penalty for failure to register) is amend-
ed by inserting ‘‘($10,000 in the case of a failure to reg-
ister under section 4101)’’ after ‘‘$50’’. 
(b) INCREASED CRIMINAL PENALTY.—Section 7232 
(relating to failure to register under section 4101, false 
representations of registration status, etc.) is amended by 
striking ‘‘$5,000’’ and inserting ‘‘$10,000’’. 
(c) ASSESSABLE PENALTY FOR FAILURE TO REG-
ISTER.—
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by inserting after section 6717 the fol-
lowing new section: 
‘‘SEC. 6718. FAILURE TO REGISTER. 
‘‘(a) FAILURE TO REGISTER.—Every person who is 
required to register under section 4101 and fails to do 
so shall pay a penalty in addition to the tax (if any). 
‘‘(b) AMOUNT OF PENALTY.—The amount of the 
penalty under subsection (a) shall be—
‘‘(1) $10,000 for each initial failure to register, 
and 
‘‘(2) $1,000 for each day thereafter such person 
fails to register.
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by inserting after the item relating to sec-
tion 6717 the following new item:
‘‘Sec. 6718. Failure to register.’’.
(d) ASSESSABLE PENALTY FOR FAILURE TO RE-
PORT.—
(1) IN GENERAL.—Part II of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by adding at the end the following new sec-
tion: 
‘‘SEC. 6725. FAILURE TO REPORT INFORMATION UNDER 
SECTION 4101. 
‘‘(a) IN GENERAL.—In the case of each failure de-
scribed in subsection (b) by any person with respect to 
a vessel or facility, such person shall pay a penalty of 
$10,000 in addition to the tax (if any). 
‘‘(b) FAILURES SUBJECT TO PENALTY.—For pur-
poses of subsection (a), the failures described in this sub-
section are—
‘‘(1) any failure to make a report under section 
4101(d) on or before the date prescribed therefor, 
and 
‘‘(2) any failure to include all of the informa-
tion required to be shown on such report or the in-
clusion of incorrect information. 
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part II of subchapter B of chapter 68 is 
amended by adding at the end the following new 
item:
‘‘Sec. 6725. Failure to report information under section 4101.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to penalties imposed after Sep-
tember 30, 2004. 
SEC. 208. COLLECTION FROM CUSTOMS BOND WHERE IM-
PORTER NOT REGISTERED. 
(a) TAX AT POINT OF ENTRY WHERE IMPORTER 
NOT REGISTERED.—Subpart C of part III of subchapter 
A of chapter 31 is amended by adding after section 4103 
the following new section:
‘‘SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IM-
PORTER NOT REGISTERED. 
‘‘(a) IN GENERAL.—The importer of record shall be 
jointly and severally liable for the tax imposed by section 
4081(a)(1)(A)(iii) if, under regulations prescribed by the 
Secretary, any other person that is not a person who is 
registered under section 4101 is liable for such tax. 
‘‘(b) COLLECTION FROM CUSTOMS BOND.—If any 
tax for which any importer of record is liable under sub-
section (a), or for which any importer of record that is 
not a person registered under section 4101 is otherwise 
liable, is not paid on or before the last date prescribed 
for payment, the Secretary may collect such tax from the 
Customs bond posted with respect to the importation of 
the taxable fuel to which the tax relates. For purposes of 
determining the jurisdiction of any court of the United 
States or any agency of the United States, any action by 
the Secretary described in the preceding sentence shall be 
treated as an action to collect the tax from a bond de-
scribed in section 4101(b)(1) and not as an action to col-
lect from a bond relating to the importation of merchan-
dise.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart C of part III of subchapter A of chapter 
31 is amended by adding after the item related to section 
4103 the following new item:
‘‘Sec. 4104. Collection from Customs bond where importer not 
registered.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to fuel entered after 
September 30, 2004. 
SEC. 209. MODIFICATIONS OF TAX ON USE OF CERTAIN VE-
HICLES. 
(a) PRORATION OF TAX WHERE VEHICLE SOLD.—
(1) IN
GENERAL.—Paragraph (2) of section 
4481(c) (relating to where vehicle destroyed or sto-
len) is amended by striking ‘‘destroyed or stolen’’ 
both places it appears and inserting ‘‘sold, de-
stroyed, or stolen’’. 
(2) CONFORMING AMENDMENT.—The heading 
for section 4481(c)(2) is amended by striking ‘‘DE-
STROYED
OR
STOLEN’’ and inserting ‘‘SOLD, DE-
STROYED, OR STOLEN’’. 
(b) REPEAL OF INSTALLMENT PAYMENT.—
(1) Section 6156 (relating to installment pay-
ment of tax on use of highway motor vehicles) is re-
pealed. 
(2) The table of sections for subchapter A of 
chapter 62 is amended by striking the item relating 
to section 6156.
(c) ELECTRONIC FILING.—Section 4481 is amended 
by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection: 
‘‘(e) ELECTRONIC FILING.—Any taxpayer who files 
a return under this section with respect to 25 or more 
vehicles for any taxable period shall file such return elec-
tronically.’’. 
(d) REPEAL OF REDUCTION IN TAX FOR CERTAIN 
TRUCKS.—Section 4483 is amended by striking subsection 
(f). 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable periods beginning after 
the date of the enactment of this Act.
SEC. 210. MODIFICATION OF ULTIMATE VENDOR REFUND 
CLAIMS WITH RESPECT TO FARMING. 
(a) IN GENERAL.—
(1) REFUNDS.—Section 6427(l) is amended by 
adding at the end the following new paragraph: 
‘‘(6) REGISTERED VENDORS PERMITTED TO AD-
MINISTER CERTAIN CLAIMS FOR REFUND OF DIESEL 
FUEL AND KEROSENE SOLD TO FARMERS.—
‘‘(A) IN GENERAL.—In the case of diesel 
fuel or kerosene used on a farm for farming 
purposes (within the meaning of section 
6420(c)), paragraph (1) shall not apply to the
aggregate amount of such diesel fuel or ker-
osene if such amount does not exceed 250 gal-
lons 
(as 
determined 
under 
subsection 
(i)(5)(A)(iii)). 
‘‘(B) PAYMENT TO ULTIMATE VENDOR.—
The amount which would (but for subparagraph 
(A)) have been paid under paragraph (1) with 
respect to any fuel shall be paid to the ultimate 
vendor of such fuel, if such vendor—
‘‘(i) is registered under section 4101, 
and 
‘‘(ii) meets the requirements of sub-
paragraph (A), (B), or (D) of section 
6416(a)(1).’’. 
(2) FILING
OF
CLAIMS.—Section 6427(i) is 
amended by inserting at the end the following new 
paragraph: 
‘‘(5) SPECIAL
RULE
FOR
VENDOR
REFUNDS 
WITH RESPECT TO FARMERS.—
‘‘(A) IN GENERAL.—A claim may be filed 
under subsection (l)(6) by any person with re-
spect to fuel sold by such person for any pe-
riod—
‘‘(i) for which $200 or more ($100 or 
more in the case of kerosene) is payable 
under subsection (l)(6), 
‘‘(ii) which is not less than 1 week, 
and 
‘‘(iii) which is for not more than 250 
gallons for each farmer for which there is 
a claim. 
Notwithstanding subsection (l)(1), paragraph 
(3)(B) shall apply to claims filed under the pre-
ceding sentence. 
‘‘(B) TIME FOR FILING CLAIM.—No claim 
filed under this paragraph shall be allowed un-
less filed on or before the last day of the first 
quarter following the earliest quarter included 
in the claim.’’. 
(3) CONFORMING AMENDMENTS.—
(A) Section 6427(l)(5)(A) is amended to 
read as follows: 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to diesel fuel or kerosene used by a 
State or local government.’’. 
(B) The heading for section 6427(l)(5) is 
amended by striking ‘‘FARMERS AND’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to fuels sold for nontaxable use 
after the date of the enactment of this Act. 
SEC. 211. DEDICATION OF REVENUES FROM CERTAIN PEN-
ALTIES TO THE HIGHWAY TRUST FUND. 
(a) IN GENERAL.—Subsection (b) of section 9503 
(relating to transfer to Highway Trust Fund of amounts 
equivalent to certain taxes) is amended by redesignating 
paragraph (5) as paragraph (6) and inserting after para-
graph (4) the following new paragraph: 
‘‘(5) CERTAIN PENALTIES.—There are hereby 
appropriated to the Highway Trust Fund amounts 
equivalent to the penalties paid under sections 6715, 
6715A, 6717, 6718, 6725, 7232, and 7272 (but only 
with regard to penalties under such section related 
to failure to register under section 4101).’’. 
(b) CONFORMING AMENDMENTS.—
(1) The heading of subsection (b) of section 
9503 is amended by inserting ‘‘AND PENALTIES’’ 
after ‘‘TAXES’’. 
(2) The heading of paragraph (1) of section 
9503(b) is amended by striking ‘‘IN GENERAL’’ and 
inserting ‘‘CERTAIN TAXES’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to penalties assessed after October 
1, 2004.
TITLE III—OTHER EXCISE TAX 
PROVISIONS 
SEC. 301. TAXABLE FUEL REFUNDS FOR CERTAIN ULTI-
MATE VENDORS. 
(a) IN GENERAL.—Paragraph (4) of section 6416(a) 
(relating to abatements, credits, and refunds) is amended 
to read as follows: 
‘‘(4) REGISTERED ULTIMATE VENDOR TO AD-
MINISTER
CREDITS
AND
REFUNDS
OF
GASOLINE 
TAX.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, if an ultimate vendor purchases any 
gasoline on which tax imposed by section 4081 
has been paid and sells such gasoline to an ulti-
mate purchaser described in subparagraph (C) 
or (D) of subsection (b)(2) (and such gasoline 
is for a use described in such subparagraph), 
such ultimate vendor shall be treated as the 
person (and the only person) who paid such tax, 
but only if such ultimate vendor is registered 
under section 4101. For purposes of this sub-
paragraph, if the sale of gasoline is made by
means of a credit card, the person extending 
the credit to the ultimate purchaser shall be 
deemed to be the ultimate vendor. 
‘‘(B) TIMING OF CLAIMS.—The procedure 
and timing of any claim under subparagraph 
(A) shall be the same as for claims under sec-
tion 6427(i)(4), except that the rules of section 
6427(i)(3)(B) regarding electronic claims shall 
not apply unless the ultimate vendor has cer-
tified to the Secretary for the most recent quar-
ter of the taxable year that all ultimate pur-
chasers of the vendor covered by such claim are 
certified and entitled to a refund under sub-
paragraph (C) or (D) of subsection (b)(2).’’. 
(b) CREDIT CARD PURCHASES OF DIESEL FUEL OR 
KEROSENE BY STATE AND LOCAL GOVERNMENTS.—Sec-
tion 6427(l)(5)(C) (relating to nontaxable uses of diesel 
fuel, kerosene, and aviation fuel) is amended by adding 
at the end the following new sentence: ‘‘For purposes of 
this subparagraph, if the sale of diesel fuel or kerosene 
is made by means of a credit card, the person extending 
the credit to the ultimate purchaser shall be deemed to 
be the ultimate vendor.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on October 1, 2004.
SEC. 302. TWO-PARTY EXCHANGES. 
(a) IN GENERAL.—Subpart C of part III of sub-
chapter A of chapter 32 is amended by adding after sec-
tion 4104 the following new section: 
‘‘SEC. 4105. TWO-PARTY EXCHANGES. 
‘‘(a) IN GENERAL.—In a two-party exchange, the de-
livering person shall not be liable for the tax imposed 
under section 4081(a)(1)(A)(ii). 
‘‘(b) TWO-PARTY EXCHANGE.—The term ‘two-party 
exchange’ means a transaction, other than a sale, in which 
taxable fuel is transferred from a delivering person reg-
istered under section 4101 as a taxable fuel registrant fuel 
to a receiving person who is so registered where all of the 
following occur: 
‘‘(1) The transaction includes a transfer from 
the delivering person, who holds the inventory posi-
tion for taxable fuel in the terminal as reflected in 
the records of the terminal operator. 
‘‘(2) The exchange transaction occurs before or 
contemporaneous with completion of removal across 
the rack from the terminal by the receiving person. 
‘‘(3) The terminal operator in its books and 
records treats the receiving person as the person 
that removes the taxable fuel across the terminal 
rack for purposes of reporting the transaction to the 
Secretary.
‘‘(4) The transaction is the subject of a written 
contract.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart C of part III of subchapter A of chapter 
32 is amended by adding after the item relating to section 
4104 the following new item:
‘‘Sec. 4105. Two-party exchanges.’’.
(c) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 303. SIMPLIFICATION OF TAX ON TIRES. 
(a) IN GENERAL.—Subsection (a) of section 4071 is 
amended to read as follows: 
‘‘(a) IMPOSITION AND RATE OF TAX.—There is here-
by imposed on taxable tires sold by the manufacturer, pro-
ducer, or importer thereof a tax at the rate of 9.4 cents 
(4.7 cents in the case of a biasply tire) for each 10 pounds 
so much of the maximum rated load capacity thereof as 
exceeds 3,500 pounds.’’
(b) TAXABLE TIRE.—Section 4072 is amended by re-
designating subsections (a) and (b) as subsections (b) and 
(c), respectively, and by inserting before subsection (b) (as 
so redesignated) the following new subsection: 
‘‘(a) TAXABLE TIRE.—For purposes of this chapter, 
the term ‘taxable tire’ means any tire of the type used 
on highway vehicles if wholly or in part made of rubber
and if marked pursuant to Federal regulations for high-
way use.’’. 
(c) EXEMPTION FOR TIRES SOLD TO DEPARTMENT 
OF DEFENSE.—Section 4073 is amended to read as fol-
lows: 
‘‘SEC. 4073. EXEMPTIONS. 
‘‘The tax imposed by section 4071 shall not apply to 
tires sold for the exclusive use of the Department of De-
fense or the Coast Guard.’’. 
(d) CONFORMING AMENDMENTS.—
(1) Section 4071 is amended by striking sub-
section (c) and by moving subsection (e) after sub-
section (b) and redesignating subsection (e) as sub-
section (c). 
(2) The item relating to section 4073 in the 
table of sections for part II of subchapter A of chap-
ter 32 is amended to read as follows:
‘‘Sec. 4073. Exemptions.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales in calendar years begin-
ning more than 30 days after the date of the enactment 
of this Act.
TITLE 
IV—PRIVATE 
ACTIVITY 
BONDS FOR MODERN TRANS-
PORTATION 
SEC. 401. TREATMENT OF BONDS FOR CERTAIN TRANSPOR-
TATION FACILITIES AS EXEMPT FACILITY 
BONDS. 
(a) TREATMENT AS EXEMPT FACILITY BONDS.—
Subsection (a) of section 142 (relating to exempt facility 
bond) is amended by striking ‘‘or’’ at the end of paragraph 
(12), by striking the period at the end of paragraph (13) 
and inserting ‘‘, or’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(14) qualified transportation facilities.’’. 
(b) QUALIFIED TRANSPORTATION FACILITIES.—Sec-
tion 142 is amended by adding at the end the following 
new subsection: 
‘‘(l) QUALIFIED TRANSPORTATION FACILITIES.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(a)(14), the term ‘qualified transportation facilities’ 
means—
‘‘(A) any surface transportation project 
which is eligible to receive Federal assistance 
under title 23, United States Code (as in effect 
on the date of the enactment of this sub-
section),
‘‘(B) any project for an international 
bridge or tunnel—
‘‘(i) for which an international entity 
authorized under Federal or State law is 
responsible, and 
‘‘(ii) which is eligible to receive Fed-
eral assistance under title 23, United 
States Code (as in effect on the date of the 
enactment of this subsection), 
‘‘(C) any facility for the transfer of freight 
from truck to rail or rail to truck (including 
any temporary storage facility directly related 
to such transfer) which is eligible to receive 
Federal assistance under—
‘‘(i) title 23, United States Code (as 
in effect on the date of the enactment of 
this subsection), or 
‘‘(ii) title 49, United States Code (as 
in effect on the date of the enactment of 
this subsection), and 
‘‘(D) any facility described in subsection 
(a)(3) (as modified and limited by subsections 
(b) and (c)). 
‘‘(2) 
LIMITATION
ON
AGGREGATE
FACE 
AMOUNT OF TAX-EXEMPT FINANCING.—
‘‘(A) IN GENERAL.—An issue shall not be 
treated as an issue described in subsection 
(a)(14) unless—
‘‘(i) the Secretary has allocated an 
amount to such issue under this para-
graph, and 
‘‘(ii) the aggregate face amount of 
bonds issued pursuant to such issue does 
not exceed such amount. 
‘‘(B) 
ALLOCATION.—The 
Secretary 
of 
Transportation, after consultation with the Sec-
retary, may allocate amounts to issues under 
this paragraph in such manner as the Secretary 
of Transportation (after so consulting) deter-
mines appropriate, except that the aggregate 
amount 
so 
allocated 
shall 
not 
exceed 
$15,000,000,000. 
‘‘(C) REFUNDING BONDS.—Subparagraph 
(A) shall not apply with respect to any bond the 
proceeds of which are used exclusively to refund 
a bond issued pursuant to subsection (a)(14) 
(or a bond which is a part of a series of 
refundings of a bond so issued) if the amount 
of the refunding bond does not exceed the out-
standing amount of the refunded bond.’’.
(c) EXEMPTION FROM GENERAL STATE VOLUME 
CAPS.—Paragraph (3) of section 146(g) (relating to ex-
ception for certain bonds) is amended—
(1) by striking ‘‘or (13)’’ and inserting ‘‘(13), 
or (14)’’, and 
(2) by striking ‘‘and qualified public educational 
facilities’’ and inserting ‘‘qualified public educational 
facilities, and qualified transportation facilities’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
TITLE V—REVENUE PROVISIONS
Subtitle A—Leasing 
SEC. 501. REFORM OF TAX TREATMENT OF CERTAIN LEAS-
ING ARRANGEMENTS. 
(a) CLARIFICATION OF RECOVERY PERIOD FOR TAX-
EXEMPT USE PROPERTY SUBJECT TO LEASE.—Subpara-
graph (A) of section 168(g)(3) (relating to special rules 
for determining class life) is amended by inserting ‘‘(not-
withstanding any other subparagraph of this paragraph)’’ 
after ‘‘shall’’. 
(b) LIMITATION
ON DEPRECIATION PERIOD
FOR 
SOFTWARE LEASED
TO TAX-EXEMPT ENTITY.—Para-
graph (1) of section 167(f) is amended by adding at the 
end the following new subparagraph:
‘‘(C) TAX-EXEMPT
USE
PROPERTY
SUB-
JECT TO LEASE.—In the case of computer soft-
ware which would be tax-exempt use property 
as defined in subsection (h) of section 168 if 
such section applied to computer software, the 
useful life under subparagraph (A) shall not be 
less than 125 percent of the lease term (within 
the meaning of section 168(i)(3)).’’. 
(c) LEASE TERM TO INCLUDE RELATED SERVICE 
CONTRACTS.—Subparagraph (A) of section 168(i)(3) (re-
lating to lease term) is amended by striking ‘‘and’’ at the 
end of clause (i), by redesignating clause (ii) as clause 
(iii), and by inserting after clause (i) the following new 
clause: 
‘‘(ii) the term of a lease shall include 
the term of any service contract or similar 
arrangement (whether or not treated as a 
lease under section 7701(e))—
‘‘(I) which is part of the same 
transaction (or series of related trans-
actions) which includes the lease, and 
‘‘(II) which is with respect to the 
property subject to the lease or sub-
stantially similar property, and’’.
SEC. 502. LIMITATION ON DEDUCTIONS ALLOCABLE TO 
PROPERTY 
USED 
BY 
GOVERNMENTS 
OR 
OTHER TAX-EXEMPT ENTITIES. 
(a) IN GENERAL.—Subpart C of part II of sub-
chapter E of chapter 1 (relating to taxable year for which 
deductions taken) is amended by adding at the end the 
following new section: 
‘‘SEC. 470. LIMITATION ON DEDUCTIONS ALLOCABLE TO 
PROPERTY 
USED 
BY 
GOVERNMENTS 
OR 
OTHER TAX-EXEMPT ENTITIES. 
‘‘(a) LIMITATION ON LOSSES.—Except as otherwise 
provided in this section, a tax-exempt use loss for any tax-
able year shall not be allowed. 
‘‘(b) DISALLOWED LOSS CARRIED TO NEXT YEAR.—
Any tax-exempt use loss with respect to any tax-exempt 
use property which is disallowed under subsection (a) for 
any taxable year shall be treated as a deduction with re-
spect to such property in the next taxable year. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) TAX-EXEMPT USE LOSS.—The term ‘tax-
exempt use loss’ means, with respect to any taxable 
year, the amount (if any) by which— 
‘‘(A) the sum of— 
‘‘(i) the aggregate deductions (other 
than interest) directly allocable to a tax-ex-
empt use property, plus
‘‘(ii) the aggregate deductions for in-
terest properly allocable to such property, 
exceed 
‘‘(B) the aggregate income from such 
property. 
‘‘(2) TAX-EXEMPT USE PROPERTY.—The term 
‘tax-exempt use property’ has the meaning given to 
such term by section 168(h) (without regard to 
paragraphs (1)(C) and (3) thereof and determined 
as if property described in section 167(f)(1)(B) were 
tangible property). 
‘‘(d) EXCEPTION FOR CERTAIN LEASES.—This sec-
tion shall not apply to any lease of property which meets 
the requirements of all of the following paragraphs: 
‘‘(1) PROPERTY NOT FINANCED WITH TAX-EX-
EMPT BONDS.—A lease of property meets the re-
quirements of this paragraph if no part of the prop-
erty was (at any time) financed (directly or indi-
rectly) from the proceeds of an obligation the inter-
est on which is exempt from tax under section 
103(a) and which (or any refunding bond of which) 
is outstanding when the lease is entered into. The 
Secretary shall by regulations provide a de minimis 
exception from the preceding sentence. 
‘‘(2) AVAILABILITY OF FUNDS.—
‘‘(A) IN
GENERAL.—A lease of property 
meets the requirements of this paragraph if (at 
all times during the lease term) not more than 
an allowable amount of funds are— 
‘‘(i) subject to any arrangement re-
ferred to in subparagraph (B), or 
‘‘(ii) set aside or expected to be set 
aside, 
to or for the benefit of the lessor or any lender, 
or to or for the benefit of the lessee to satisfy 
the lessee’s obligations or options under the 
lease. For purposes of clause (ii), funds shall be 
treated as set aside or expected to be set aside 
if a reasonable person would conclude, based on 
the facts and circumstances, that such funds 
are set aside or expected to be set aside. 
‘‘(B) ARRANGEMENTS.—The arrangements 
referred to in this subparagraph include a de-
feasance arrangement, a loan by the lessee to 
the lessor or any lender, a deposit arrangement, 
a letter of credit collateralized with cash or cash 
equivalents, a payment undertaking agreement, 
a lease prepayment, a sinking fund arrange-
ment, and any similar arrangement (whether or 
not such arrangement provides credit support).
‘‘(C) ALLOWABLE AMOUNT.— 
‘‘(i) IN GENERAL.—Except as other-
wise provided in this subparagraph, the 
term ‘allowable amount’ means an amount 
equal to 20 percent of the lessor’s adjusted 
basis in the property at the time the lease 
is entered into. 
‘‘(ii) HIGHER AMOUNT PERMITTED IN 
CERTAIN CASES.—To the extent provided 
in regulations, a higher percentage shall be 
permitted under clause (i) where necessary 
because of the credit-worthiness of the les-
see. In no event may such regulations per-
mit a percentage of more than 50 percent. 
‘‘(iii) 
OPTION
TO
PURCHASE.—If 
under the lease the lessee has the option to 
purchase the property for a fixed price or 
for other than the fair market value of the 
property (determined at the time of exer-
cise), the allowable amount at the time 
such option may be exercised may not ex-
ceed 50 percent of the price at which such 
option may be exercised. 
‘‘(iv) NO
ALLOWABLE
AMOUNT
FOR 
CERTAIN ARRANGEMENTS.—The allowable
amount shall be zero with respect to any 
arrangement which involves— 
‘‘(I) a loan from the lessee to the 
lessor or a lender, 
‘‘(II) any deposit, letter of credit, 
or payment undertaking agreement 
involving a lender, or 
‘‘(III) in the case of an arrange-
ment which involves a lender, any 
credit support made available to the 
lessor in which any such lender does 
not have a claim that is senior to the 
lessor. 
For purposes of subclause (I), the term 
‘loan’ shall not include any amount treated 
as a loan under section 467 with respect to 
a section 467 rental agreement. 
‘‘(3) LESSOR MUST MAKE SUBSTANTIAL EQUITY 
INVESTMENT.—A lease of property meets the re-
quirements of this paragraph if— 
‘‘(A) the lessor— 
‘‘(i) has at the time the lease is en-
tered into an unconditional at-risk equity 
investment (as determined by the Sec-
retary) in the property of at least 20 per-
cent of the lessor’s adjusted basis in the 
property as of that time, and 
‘‘(ii) 
maintains 
such 
investment 
throughout the term of the lease, and 
‘‘(B) the fair market value of the property 
at the end of the lease term is reasonably ex-
pected to be equal to at least 20 percent of such 
basis. 
Subparagraphs (A)(ii) and (B) shall not apply to a 
short-term lease (as defined in paragraphs (1)(C) 
and (3) of section 168(h)). For purposes of subpara-
graph (B), the lessor’s at-risk position reflected in 
the fair market value of the property at the end of 
the lease term shall be considered to be reduced to 
the extent of any potential payment from an ar-
rangement described in paragraph (4). 
‘‘(4) LESSEE MAY NOT BEAR MORE THAN MINI-
MAL RISK OF LOSS.— 
‘‘(A) IN
GENERAL.—A lease of property 
meets the requirements of this paragraph if 
there is no arrangement under which more than 
a minimal risk of loss (as determined under 
regulations) in the value of the property is 
borne by the lessee.
‘‘(B) CERTAIN ARRANGEMENTS FAIL RE-
QUIREMENT.—Except as provided in regula-
tions, the property does not meet the require-
ments of this paragraph if there is any arrange-
ment under which the lessee bears— 
‘‘(i) any portion of the loss that would 
occur if the fair market value of the leased 
property at the time the lease is termi-
nated were 25 percent less than its reason-
ably expected fair market value at the end 
of the lease term, or 
‘‘(ii) more than 50 percent of the loss 
that would occur if the fair market value 
of the leased property at the time the lease 
is terminated were zero. 
‘‘(e) SPECIAL RULES.— 
‘‘(1) TREATMENT
OF
FORMER
TAX-EXEMPT 
USE PROPERTY.— 
‘‘(A) IN
GENERAL.—In the case of any 
former tax-exempt use property— 
‘‘(i) any deduction allowable under 
subsection (b) with respect to such prop-
erty for any taxable year shall be allowed 
only to the extent of any net income (with-
out regard to such deduction) from such 
property for such taxable year, and 
‘‘(ii) any portion of such unused de-
duction remaining after application of 
clause (i) shall be treated as a deduction 
allowable under subsection (b) with respect 
to such property in the next taxable year. 
‘‘(B) FORMER
TAX-EXEMPT
USE
PROP-
ERTY.—For purposes of this subsection, the 
term ‘former tax-exempt use property’ means 
any property which— 
‘‘(i) is not tax-exempt use property for 
the taxable year, but 
‘‘(ii) was tax-exempt use property for 
any prior taxable year. 
‘‘(2) DISPOSITION
OF
ENTIRE
INTEREST
IN 
PROPERTY.—If during the taxable year a taxpayer 
disposes of the taxpayer’s entire interest in tax-ex-
empt use property (or former tax-exempt use prop-
erty), rules similar to the rules of section 469(g) 
shall apply for purposes of this section. 
‘‘(3) COORDINATION WITH SECTION 469.—This 
section shall be applied before the application of sec-
tion 469.
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion— 
‘‘(1) RELATED
PARTIES.—The terms ‘lessor’, 
‘lessee’, and ‘lender’ each include any related party 
(within the meaning of section 197(f)(9)(C)(i)). 
‘‘(2) LEASE TERM.—The term ‘lease term’ has 
the meaning given to such term by section 168(i)(3). 
‘‘(3) LENDER.—The term ‘lender’ means, with 
respect to any lease, a person that makes a loan to 
the lessor which is secured (or economically similar 
to being secured) by the lease or the leased property. 
‘‘(4) LOAN.—The term ‘loan’ includes any simi-
lar arrangement. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the provisions of this section, including regula-
tion which— 
‘‘(1) allow in appropriate cases the aggregation 
of property subject to the same lease, and 
‘‘(2) provide for the determination of the alloca-
tion of interest expense for purposes of this sec-
tion.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart C of part II of subchapter E of chapter 
1 is amended by adding at the end the following new item:
‘‘Sec. 470. Limitation on deductions allocable to property used by 
governments or other tax-exempt entities.’’.
SEC. 503. EFFECTIVE DATE. 
(a) IN GENERAL.—Except as provided by subsection 
(b), the amendments made by this subtitle shall apply to 
leases entered into after February 11, 2004. 
(b) EXCEPTION.—
(1) IN GENERAL.—The amendments made by 
this subtitle shall not apply to qualified transpor-
tation property. 
(2) QUALIFIED TRANSPORTATION PROPERTY.—
For purposes of paragraph (1), the term ‘‘qualified 
transportation property’’ means domestic property 
subject to a lease with respect to which a formal ap-
plication—
(A) was submitted for approval to the Fed-
eral Transit Administration (an agency of the 
Department of Transportation) after June 30, 
2003, and before February 12, 2004, 
(B) is approved by the Federal Transit Ad-
ministration before January 1, 2005, and 
(C) includes a description of such property 
and the value of such property.
Subtitle B—Charitable Giving 
SEC. 511. DONATIONS OF MOTOR VEHICLES, BOATS, AND 
AIRCRAFT. 
(a) IN GENERAL.—Subsection (f) of section 170 (re-
lating to disallowance of deduction in certain cases and 
special rules) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(11) CONTRIBUTIONS
OF
MOTOR
VEHICLES, 
BOATS, AND AIRCRAFT.—
‘‘(A) IN GENERAL.—Except as provided in 
regulations or other guidance, in the case of a 
contribution of a specified vehicle to which 
paragraph (8) applies, no deduction shall be al-
lowed under subsection (a) for such contribu-
tion unless the taxpayer obtains a qualified ap-
praisal of the specified vehicle on or before the 
date of such contribution. 
‘‘(B) EXCEPTION FOR INVENTORY PROP-
ERTY.—Subparagraph (A) shall not apply to 
property 
which 
is 
described 
in 
section 
1221(a)(1). 
‘‘(C) SPECIFIED VEHICLE.—For purposes 
of this paragraph, the term ‘specified vehicle’ 
means any—
‘‘(i) motor vehicle manufactured pri-
marily for use on public streets, roads, and 
highways, 
‘‘(ii) boat, or 
‘‘(iii) aircraft. 
‘‘(D) QUALIFIED
APPRAISAL.—For pur-
poses of this paragraph, the term ‘qualified ap-
praisal’ means any appraisal which is treated 
for purposes of this paragraph as a qualified 
appraisal under regulations or other guidance 
prescribed by the Secretary. 
‘‘(E) REGULATIONS
OR
OTHER
GUID-
ANCE.—The Secretary shall prescribe such reg-
ulations or other guidance as may be necessary 
to carry out the purposes of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contributions made after 
March 12, 2004. 
SEC. 512. INCREASED REPORTING FOR NONCASH CHARI-
TABLE CONTRIBUTIONS. 
(a) IN GENERAL.—Subsection (f) of section 170 (re-
lating to disallowance of deduction in certain cases and 
special rules), as amended by section 511, is further 
amended by adding at the end the following new para-
graph:
‘‘(12) QUALIFIED APPRAISAL AND OTHER DOC-
UMENTATION FOR CERTAIN CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—
‘‘(i) DENIAL OF DEDUCTION.—In the 
case of an individual, partnership, or cor-
poration, no deduction shall be allowed 
under subsection (a) for any contribution 
of property for which a deduction of more 
than $500 is claimed unless such person 
meets the requirements of subparagraphs 
(B), (C), and (D), as the case may be, 
with respect to such contribution. 
‘‘(ii) EXCEPTIONS.—
‘‘(I) READILY
VALUED
PROP-
ERTY.—Subparagraphs (C) and (D) 
shall not apply to cash, property de-
scribed in section 1221(a)(1), and 
publicly traded securities (as defined 
in section 6050L(a)(2)(B)). 
‘‘(II) 
REASONABLE
CAUSE.—
Clause (i) shall not apply if it is 
shown that the failure to meet such 
requirements is due to reasonable 
cause and not to willful neglect.
‘‘(B) PROPERTY
DESCRIPTION
FOR
CON-
TRIBUTIONS OF MORE THAN $500.—In the case 
of contributions of property for which a deduc-
tion of more than $500 is claimed, the require-
ments of this subparagraph are met if the indi-
vidual, partnership or corporation includes with 
the return for the taxable year in which the 
contribution is made a description of such prop-
erty and such other information as the Sec-
retary may require. The requirements of this 
subparagraph shall not apply to a C corporation 
which is not a personal service corporation or a 
closely held C corporation. 
‘‘(C) QUALIFIED
APPRAISAL
FOR
CON-
TRIBUTIONS
OF
MORE
THAN
$5,000.—In the 
case of contributions of property for which a 
deduction of more than $5,000 is claimed, the 
requirements of this subparagraph are met if 
the individual, partnership, or corporation ob-
tains a qualified appraisal of such property and 
attaches to the return for the taxable year in 
which such contribution is made such informa-
tion regarding such property and such appraisal 
as the Secretary may require.
‘‘(D) SUBSTANTIATION
FOR
CONTRIBU-
TIONS OF MORE THAN $500,000.—In the case of 
contributions of property for which a deduction 
of more than $500,000 is claimed, the require-
ments of this subparagraph are met if the indi-
vidual, partnership, or corporation attaches to
the return for the taxable year a qualified ap-
praisal of such property. 
‘‘(E) QUALIFIED
APPRAISAL.—For pur-
poses of this paragraph, the term ‘qualified ap-
praisal’ means, with respect to any property, an 
appraisal of such property which is treated for 
purposes of this paragraph as a qualified ap-
praisal under regulations or other guidance pre-
scribed by the Secretary. 
‘‘(F) AGGREGATION OF SIMILAR ITEMS OF 
PROPERTY.—For 
purposes 
of 
determining 
thresholds under this paragraph, property and 
all similar items of property donated to 1 or 
more donees shall be treated as 1 property. 
‘‘(G) SPECIAL RULE FOR PASS-THRU ENTI-
TIES.—In the case of a partnership or S cor-
poration, this paragraph shall be applied at the 
entity level, except that the deduction shall be 
denied at the partner or shareholder level.
‘‘(H) REGULATIONS.—The Secretary may 
prescribe such regulations as may be necessary 
or appropriate to carry out the purposes of this 
paragraph, including regulations that may pro-
vide that some or all of the requirements of this 
paragraph do not apply in appropriate cases.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after March 
12, 2004.
SEC. 513. TREATMENT OF CHARITABLE CONTRIBUTIONS OF 
PATENTS AND SIMILAR PROPERTY. 
(a) IN GENERAL.—Subparagraph (B) of section 
170(e)(1) is amended by striking ‘‘or’’ at the end of clause 
(i), by adding ‘‘or’’ at the end of clause (ii), and by insert-
ing after clause (ii) the following new clause: 
‘‘(iii) of any patent, copyright (other 
than a copyright described in section 
1221(a)(3) or 1231(b)(1)(C)), trademark, 
trade name, trade secret, know-how, soft-
ware (other than software described in sec-
tion 197(e)(3)(A)(i)), or similar property, 
or applications or registrations of such 
property,’’. 
(b) CERTAIN DONEE INCOME FROM INTELLECTUAL 
PROPERTY TREATED AS AN ADDITIONAL CHARITABLE
CONTRIBUTION.—Section 170 is amended by redesig-
nating subsection (m) as subsection (n) and by inserting 
after subsection (l) the following new subsection: 
‘‘(m) CERTAIN DONEE INCOME FROM INTELLEC-
TUAL PROPERTY TREATED AS AN ADDITIONAL CHARI-
TABLE CONTRIBUTION.—
‘‘(1) TREATMENT
AS
ADDITIONAL
CONTRIBU-
TION.—In the case of a taxpayer who makes a quali-
fied intellectual property contribution, the deduction 
allowed under subsection (a) for each taxable year of 
the taxpayer ending on or after the date of such con-
tribution shall be increased (subject to the limita-
tions under subsection (b)) by the applicable per-
centage of qualified donee income with respect to 
such contribution which is properly allocable to such 
year under this subsection. 
‘‘(2) QUALIFIED
DONEE
INCOME.—For pur-
poses of this subsection, the term ‘qualified donee 
income’ means any net income received by or ac-
crued to the donee which is properly allocable to the 
qualified intellectual property. 
‘‘(3) ALLOCATION
OF
QUALIFIED
DONEE
IN-
COME
TO
TAXABLE
YEARS
OF
DONOR.—For pur-
poses of this subsection, qualified donee income shall 
be treated as properly allocable to a taxable year of
the donor if such income is received by or accrued 
to the donee for the taxable year of the donee which 
ends within or with such taxable year of the donor. 
‘‘(4) 10-YEAR LIMITATION.—Income shall not 
be treated as properly allocable to qualified intellec-
tual property for purposes of this subsection if such 
income is received by or accrued to the donee after 
the 10-year period beginning on the date of the con-
tribution of such property. 
‘‘(5) BENEFIT LIMITED TO LIFE OF INTELLEC-
TUAL PROPERTY.—Income shall not be treated as 
properly allocable to qualified intellectual property 
for purposes of this subsection if such income is re-
ceived by or accrued to the donee after the expira-
tion of the legal life of such property. 
‘‘(6) APPLICABLE PERCENTAGE.—For purposes 
of this subsection, the term ‘applicable percentage’ 
means the percentage determined under the fol-
lowing table which corresponds to a taxable year of 
the donor ending on or after the date of the quali-
fied intellectual property contribution:
‘‘Taxable Year of Donor 
Ending on or After 
Applicable 
Date of Contribution: 
Percentage: 
1st ......................................................................................................
100
2nd .....................................................................................................
100
3rd ......................................................................................................
4th ......................................................................................................
5th ......................................................................................................
6th ......................................................................................................
‘‘Taxable Year of Donor 
Ending on or After 
Applicable 
Date of Contribution: 
Percentage: 
7th ......................................................................................................
8th ......................................................................................................
9th ......................................................................................................
10th ....................................................................................................
11th ....................................................................................................
12th ....................................................................................................
10.
‘‘(7) QUALIFIED
INTELLECTUAL
PROPERTY 
CONTRIBUTION.—For purposes of this subsection, 
the term ‘qualified intellectual property contribution’ 
means any charitable contribution of qualified intel-
lectual property—
‘‘(A) the amount of which taken into ac-
count under this section is reduced by reason of 
subsection (e)(1), and 
‘‘(B) with respect to which the donor in-
forms the donee at the time of such contribu-
tion that the donor intends to treat such con-
tribution as a qualified intellectual property 
contribution for purposes of this subsection and 
section 6050L. 
‘‘(8) QUALIFIED INTELLECTUAL PROPERTY.—
For purposes of this subsection, the term ‘qualified 
intellectual property’ means property described in 
subsection (e)(1)(B)(iii) (other than property con-
tributed to or for the use of an organization de-
scribed in subsection (e)(1)(B)(ii)). 
‘‘(9) OTHER SPECIAL RULES.—
‘‘(A) APPLICATION
OF
LIMITATIONS
ON 
CHARITABLE
CONTRIBUTIONS.—Any increase 
under this subsection of the deduction provided 
under subsection (a) shall be treated for pur-
poses of subsection (b) as a deduction which is 
attributable to a charitable contribution to the 
donee to which such increase relates.
‘‘(B) 
NET
INCOME
DETERMINED
BY 
DONEE.—The net income taken into account 
under paragraph (2) shall not exceed the 
amount of such income reported under section 
6050L(b)(1). 
‘‘(C) DEDUCTION LIMITED TO 12 TAXABLE 
YEARS.—Except as may be provided under sub-
paragraph (D)(i), this subsection shall not 
apply with respect to any qualified intellectual 
property contribution for any taxable year of 
the donor after the 12th taxable year of the 
donor which ends on or after the date of such 
contribution. 
‘‘(D) REGULATIONS.—The Secretary may 
issue regulations or other guidance to carry out 
the purposes of this subsection, including regu-
lations or guidance—
‘‘(i) modifying the application of this 
subsection in the case of a donor or donee 
with a short taxable year, and 
‘‘(ii) providing for the determination 
of an amount to be treated as net income 
of the donee which is properly allocable to 
qualified intellectual property in the case 
of a donee who uses such property to fur-
ther a purpose or function constituting the 
basis of the donee’s exemption under sec-
tion 501 (or, in the case of a governmental 
unit, any purpose described in section 
170(c)) and does not possess a right to re-
ceive any payment from a third party with 
respect to such property.’’. 
(c) REPORTING REQUIREMENTS.—
(1) IN GENERAL.—Section 6050L (relating to 
returns relating to certain dispositions of donated 
property) is amended to read as follows: 
‘‘SEC. 6050L. RETURNS RELATING TO CERTAIN DONATED 
PROPERTY. 
‘‘(a) DISPOSITIONS OF DONATED PROPERTY.—
‘‘(1) IN GENERAL.—If the donee of any chari-
table deduction property sells, exchanges, or other-
wise disposes of such property within 2 years after
its receipt, the donee shall make a return (in accord-
ance with forms and regulations prescribed by the 
Secretary) showing—
‘‘(A) the name, address, and TIN of the 
donor, 
‘‘(B) a description of the property, 
‘‘(C) the date of the contribution, 
‘‘(D) the amount received on the disposi-
tion, and 
‘‘(E) the date of such disposition. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) 
CHARITABLE
DEDUCTION
PROP-
ERTY.—The term ‘charitable deduction prop-
erty’ means any property (other than publicly 
traded securities) contributed in a contribution 
for which a deduction was claimed under sec-
tion 170 if the claimed value of such property 
(plus the claimed value of all similar items of 
property donated by the donor to 1 or more 
donees) exceeds $5,000. 
‘‘(B) PUBLICLY
TRADED
SECURITIES.—
The term ‘publicly traded securities’ means se-
curities for which (as of the date of the con-
tribution) market quotations are readily avail-
able on an established securities market. 
‘‘(b) QUALIFIED INTELLECTUAL PROPERTY CON-
TRIBUTIONS.—
‘‘(1) IN GENERAL.—Each donee with respect to 
a qualified intellectual property contribution shall 
make a return (at such time and in such form and 
manner as the Secretary may by regulations pre-
scribe) with respect to each specified taxable year of 
the donee showing—
‘‘(A) the name, address, and TIN of the 
donor, 
‘‘(B) a description of the qualified intellec-
tual property contributed, 
‘‘(C) the date of the contribution, and 
‘‘(D) the amount of net income of the 
donee for the taxable year which is properly al-
locable to the qualified intellectual property (de-
termined without regard to paragraph (9)(B) of 
section 170(m) and with the modifications de-
scribed in paragraphs (4) and (5) of such sec-
tion). 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) IN
GENERAL.—Terms used in this 
subsection which are also used in section 
170(m) have the respective meanings given 
such terms in such section. 
‘‘(B) SPECIFIED
TAXABLE
YEAR.—The 
term ‘specified taxable year’ means, with re-
spect to any qualified intellectual property con-
tribution, any taxable year of the donee any 
portion of which is part of the 10-year period 
beginning on the date of such contribution. 
‘‘(c) STATEMENT TO BE FURNISHED TO DONORS.—
Every person making a return under subsection (a) or (b) 
shall furnish a copy of such return to the donor at such 
time and in such manner as the Secretary may by regula-
tions prescribe.’’. 
(d) COORDINATION
WITH
APPRAISAL
REQUIRE-
MENTS.—Subclause (I) of section 170(f)(12)(A)(ii), as 
added by 512, is amended by inserting ‘‘subsection 
(e)(1)(B)(iii) or’’ before ‘‘section 1221(a)(1)’’. 
(e) ANTI-ABUSE RULES.—The Secretary of the 
Treasury may prescribe such regulations or other guid-
ance as may be necessary or appropriate to prevent the 
avoidance of the purposes of section 170(e)(1)(B)(iii) of 
the Internal Revenue Code of 1986 (as added by sub-
section (a)), including preventing—
(1) the circumvention of the reduction of the 
charitable deduction by embedding or bundling the 
patent or similar property as part of a charitable 
contribution of property that includes the patent or 
similar property, 
(2) the manipulation of the basis of the prop-
erty to increase the amount of the charitable deduc-
tion through the use of related persons, pass-thru
entities, or other intermediaries, or through the use 
of any provision of law or regulation (including the 
consolidated return regulations), and 
(3) a donor from changing the form of the pat-
ent or similar property to property of a form for 
which different deduction rules would apply. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made after March 
12, 2004. 
Subtitle C—Tax Collection 
Contracts
SEC. 521. QUALIFIED TAX COLLECTION CONTRACTS. 
(a) CONTRACT REQUIREMENTS.—
(1) IN GENERAL.—Subchapter A of chapter 64 
(relating to collection) is amended by adding at the 
end the following new section:
‘‘SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS. 
‘‘(a) IN GENERAL.—Nothing in any provision of law 
shall be construed to prevent the Secretary from entering 
into a qualified tax collection contract. 
‘‘(b) QUALIFIED TAX COLLECTION CONTRACT.—For 
purposes of this section, the term ‘qualified tax collection 
contract’ means any contract which—
‘‘(1) is for the services of any person (other 
than an officer or employee of the Treasury Depart-
ment)—
‘‘(A) to locate and contact any taxpayer 
specified by the Secretary, 
‘‘(B) to request full payment from such 
taxpayer of an amount of Federal tax specified 
by the Secretary and, if such request cannot be 
met by the taxpayer, to offer the taxpayer an 
installment agreement providing for full pay-
ment of such amount during a period not to ex-
ceed 5 years, and 
‘‘(C) to obtain financial information speci-
fied by the Secretary with respect to such tax-
payer, 
‘‘(2) prohibits each person providing such serv-
ices under such contract from committing any act or 
omission which employees of the Internal Revenue
Service are prohibited from committing in the per-
formance of similar services, 
‘‘(3) prohibits subcontractors from—
‘‘(A) having contacts with taxpayers, 
‘‘(B) providing quality assurance services, 
and 
‘‘(C) composing debt collection notices, and 
‘‘(4) permits subcontractors to perform other 
services only with the approval of the Secretary. 
‘‘(c) FEES.—The Secretary may retain and use an 
amount not in excess of 25 percent of the amount collected 
under any qualified tax collection contract for the costs 
of services performed under such contract. The Secretary 
shall keep adequate records regarding amounts so retained 
and used. The amount credited as paid by any taxpayer 
shall be determined without regard to this subsection. 
‘‘(d) NO FEDERAL LIABILITY.—The United States 
shall not be liable for any act or omission of any person 
performing services under a qualified tax collection con-
tract. 
‘‘(e) APPLICATION
OF FAIR DEBT COLLECTION 
PRACTICES ACT.—The provisions of the Fair Debt Collec-
tion Practices Act (15 U.S.C. 1692 et seq.) shall apply 
to any qualified tax collection contract, except to the ex-
tent superseded by section 6304, section 7602(c), or by 
any other provision of this title. 
‘‘(f) CROSS REFERENCES.—
‘‘(1) For damages for certain unauthorized col-
lection actions by persons performing services under 
a qualified tax collection contract, see section 
7433A. 
‘‘(2) For application of Taxpayer Assistance 
Orders to persons performing services under a quali-
fied tax collection contract, see section 7811(a)(4).’’. 
(2) CONFORMING AMENDMENTS.—
(A) Section 7809(a) is amended by insert-
ing ‘‘6306,’’ before ‘‘7651’’. 
(B) The table of sections for subchapter A 
of chapter 64 is amended by adding at the end 
the following new item:
‘‘Sec. 6306. Qualified Tax Collection Contracts.’’.
(b) CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED 
COLLECTION ACTIONS BY PERSONS PERFORMING SERV-
ICES
UNDER
QUALIFIED
TAX
COLLECTION
CON-
TRACTS.—
(1) In general.—Subchapter B of chapter 76 
(relating to proceedings by taxpayers and third par-
ties) is amended by inserting after section 7433 the 
following new section:
‘‘SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHOR-
IZED COLLECTION ACTIONS BY PERSONS 
PERFORMING SERVICES UNDER QUALIFIED 
TAX COLLECTION CONTRACTS. 
‘‘(a) IN GENERAL.—Subject to the modifications pro-
vided by subsection (b), section 7433 shall apply to the 
acts and omissions of any person performing services 
under a qualified tax collection contract (as defined in sec-
tion 6306(b)) to the same extent and in the same manner 
as if such person were an employee of the Internal Rev-
enue Service. 
‘‘(b) MODIFICATIONS.—For purposes of subsection 
(a)—
‘‘(1) Any civil action brought under section 
7433 by reason of this section shall be brought 
against the person who entered into the qualified tax 
collection contract with the Secretary and shall not 
be brought against the United States. 
‘‘(2) Such person and not the United States 
shall be liable for any damages and costs determined 
in such civil action. 
‘‘(3) Such civil action shall not be an exclusive 
remedy with respect to such person. 
‘‘(4) Subsections (c), (d)(1), and (e) of section 
7433 shall not apply.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter B of chapter 76 is amended by 
inserting after the item relating to section 7433 the 
following new item:
‘‘Sec. 7433A. Civil damages for certain unauthorized collection ac-
tions by persons performing services under a quali-
fied tax collection contract.’’.
(c) APPLICATION
OF TAXPAYER ASSISTANCE OR-
DERS
TO PERSONS PERFORMING SERVICES UNDER
A 
QUALIFIED TAX COLLECTION CONTRACT.—Section 7811
(relating to taxpayer assistance orders) is amended by 
adding at the end the following new subsection: 
‘‘(g) APPLICATION TO PERSONS PERFORMING SERV-
ICES UNDER
A QUALIFIED TAX COLLECTION CON-
TRACT.—Any order issued or action taken by the National 
Taxpayer Advocate pursuant to this section shall apply to 
persons performing services under a qualified tax collec-
tion contract (as defined in section 6306(b)) to the same 
extent and in the same manner as such order or action 
applies to the Secretary.’’. 
(d) INELIGIBILITY OF INDIVIDUALS WHO COMMIT 
MISCONDUCT TO PERFORM UNDER CONTRACT.—Section 
1203 of the Internal Revenue Service Restructuring Act 
of 1998 (relating to termination of employment for mis-
conduct) is amended by adding at the end the following 
new subsection:
‘‘(e) INDIVIDUALS PERFORMING SERVICES UNDER A 
QUALIFIED TAX COLLECTION CONTRACT.—An individual 
shall cease to be permitted to perform any services under 
any qualified tax collection contract (as defined in section 
6306(b) of the Internal Revenue Code of 1986) if there 
is a final determination by the Secretary of the Treasury 
under such contract that such individual committed any 
act or omission described under subsection (b) in connec-
tion with the performance of such services.’’. 
(e) EFFECTIVE DATE.—The amendments made to 
this section shall take effect on the date of the enactment 
of this Act. 
Subtitle D—Other Provisions 
SEC. 531. EXTENSION OF AMORTIZATION OF INTANGIBLES 
TO SPORTS FRANCHISES. 
(a) IN GENERAL.—Section 197(e) (relating to excep-
tions to definition of section 197 intangible) is amended 
by striking paragraph (6) and by redesignating para-
graphs (7) and (8) as paragraphs (6) and (7), respectively. 
(b) CONFORMING AMENDMENTS.—
(1)(A) Section 1056 (relating to basis limitation 
for player contracts transferred in connection with 
the sale of a franchise) is repealed.
(B) The table of sections for part IV of sub-
chapter O of chapter 1 is amended by striking the 
item relating to section 1056. 
(2) Section 1245(a) (relating to gain from dis-
position of certain depreciable property) is amended 
by striking paragraph (4). 
(3) Section 1253 (relating to transfers of fran-
chises, trademarks, and trade names) is amended by 
striking subsection (e). 
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to property acquired after the date of the 
enactment of this Act. 
(2) SECTION 1245.—The amendment made by 
subsection (b)(2) shall apply to franchises acquired 
after the date of the enactment of this Act. 
SEC. 532. CLASS LIVES FOR UTILITY GRADING COSTS. 
(a) GAS UTILITY PROPERTY.—Section 168(e)(3)(E) 
(defining 15-year property) 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) initial clearing and grading land 
improvements with respect to gas utility 
property.’’. 
(b) 
ELECTRIC
UTILITY
PROPERTY.—Section 
168(e)(3) is amended by adding at the end the following 
new subparagraph: 
‘‘(F) 20-YEAR PROPERTY.—The term ‘20-
year property’ means initial clearing and grad-
ing land improvements with respect to any elec-
tric 
utility 
transmission 
and 
distribution 
plant.’’. 
(c) CONFORMING AMENDMENTS.—The table con-
tained in section 168(g)(3)(B) is amended by adding at 
the end the following new items:
‘‘(E)(iv) .....................................................................................................
‘‘(F) ...........................................................................................................
25’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
the date of the enactment of this Act. 
SEC. 533. MODIFICATION OF CONTINUING LEVY ON PAY-
MENTS TO FEDERAL VENDERS. 
(a) IN GENERAL.—Section 6331(h) (relating to con-
tinuing levy on certain payments) is amended by adding 
at the end the following new paragraph: 
‘‘(3) INCREASE
IN
LEVY
FOR
CERTAIN
PAY-
MENTS.—Paragraph (1) shall be applied by sub-
stituting ‘100 percent’ for ‘15 percent’ in the case 
of any specified payment due to a vendor of goods 
or services sold or leased to the Federal Govern-
ment.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act.
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